FOUNDRY SALE AGREEMENT

EXECUTION COPY



Foundry Sale Agreement



This Foundry Sale Agreement ("Agreement") is made and entered into this 13th day of April, 1999 (the "Effective Date") by and between Samsung Electronics Co., Ltd., a corporation organized under the laws of the Republic of Korea ("Samsung"), and Fairchild Korea Semiconductor Ltd., a corporation organized under the laws of the Republic of Korea ("Fairchild"). Either Samsung or Fairchild may be referred to herein as a "Party" or together as the "Parties," as the case may require.





WHEREAS, Samsung and Fairchild Semiconductor Corporation have entered into a certain business transfer agreement dated as of December 20, 1998 ("Business Transfer Agreement") and Fairchild Semiconductor Corporation has assigned its rights thereunder to Fairchild, pursuant to which Fairchild will acquire all of the Conveyed Assets and assume all of the Assumed Liabilities (each as defined in the Business Transfer Agreement) upon the terms and conditions set forth in the Business Transfer Agreement; and



WHEREAS, after the closing of the transactions contemplated by the Business Transfer Agreement (the "Closing"), Fairchild will own and operate the Facilities (as defined below); and



WHEREAS, Samsung and Fairchild desire to enter into an agreement as contemplated and required by the Business Transfer Agreement whereby Fairchild will provide certain foundry services, including fabrication services and sort and test services, to Samsung at the Facilities following the Closing, in accordance with the terms and conditions of this Agreement; and



WHEREAS, the execution and delivery of this Agreement is required by the Business Transfer Agreement and is a condition to the closing of the transactions contemplated thereunder.



NOW, THEREFORE, in consideration of the premises and the mutual covenants and undertakings contained herein, the Parties, intending to be legally bound hereby, do agree as follows:



1. DEFINITIONS



Unless otherwise defined herein, capitalized terms used herein shall have the meaning ascribed to such term in the Business Transfer Agreement.



1.1 "Acceptance Criteria" shall mean the electrical parameter testing, process control monitor ("PCM"), device parameters and characteristics related to product reliability and other inspections for each Product and/or Process as set forth in Schedule 1. 1, all of which are to be performed by Fairchild prior to shipment of Wafers hereunder.



1.2 "Facilities" shall mean the existing wafer fabrication and sort and test facilities located at Bucheon, Kyungki-Do, the Republic of Korea, transferred to Fairchild from Samsung pursuant to the Business Transfer Agreement.



1.3 "Multimedia Products" shall mean those Samsung proprietary semiconductor products designed, marketed, manufactured, under design or development or sold mainly for the purpose of utilizing for audio, video, communications devices, which are set forth in Schedule 1.3



1.4 "Past Practices" shall mean the practices of Samsung's foundry sales division at the Facilities and the Business occurring during calendar year 1998, including, without limitation, practices relating to SPC data, yield data, 8D reports, technical analysis, PQA support, failures analysis, quality surveys, customers, sort yields, sort yields and reliability data.



1.5 "Processes" shall mean those Samsung proprietary wafer manufacturing processes and associated unit processes to be used in the fabrication of Wafers hereunder, which are set forth in Schedule 1.6.



1.6 "Products" shall mean, among the Multimedia Products, such products as will be manufactured, sorted and tested by Fairchild in Wafer form for Samsung hereunder and identified by Samsung's part numbers listed in Schedule 1.6, which Schedule may be amended from time to time as the Parties may agree.



1.7 "Profits" means, with respect to any Product, the number of such Products ordered multiplied by the profit figure set forth opposite such Product in Schedule 6. 1.



1.8 "Quality and Reliability Criteria" shall mean Samsung's manufacturing process quality and reliability specifications, as set forth in the Samsung specifications which is in effect as of the Effective Date, and which are to be followed by Fairchild in manufacturing Wafers hereunder.



1.9 "Wafers" shall mean four-inch (4") and/or five-inch (5") silicon wafers for any of the Products to be manufactured, sorted and tested by Fairchild hereunder.



2. INTELLECTUAL PROPERTY/NON-COMPETE



2.1 Except as provided below, the provisions of the Intellectual Property License Agreement will govern all issues related to the respective Intellectual Property of the Parties hereunder.





2.2 All manufacturing and sorting and testing of Wafers shall take place at the Facilities. Fairchild shall not transfer any Samsung-owned Intellectual Property or technical information outside of the Facilities or to any other site, other than as may be permitted pursuant to the Intellectual Property License Agreement or by the prior written consent of Samsung.



2.3 During the term of this Agreement, including all extensions hereto, Fairchild will not develop, manufacture (except for Samsung hereunder), market or sell any integrated circuit that has substantially the same specifications as any Product.



2.4 Fairchild agrees that for a period of five (5) years after the Effective Date (the "Restricted Period"), (i) Fairchild and its directors, officers, employees or agents (whether individually or as a consultant, partner, owner or stockholder of an Entity) will not engage directly or indirectly in competition with the sales of the Products and (ii) no Affiliate of Fairchild, or any of their respective directors, officers, employees or agents (whether individually or as a consultant, partner, owner or stockholder of an Entity), will engage directly or indirectly in competition with the sales of the Products in Korea.



3. PROCESSES AND SORT AND TEST PROGRAMS



3.1 The Processes may be amended from time to time by mutual agreement in writing of the Parties, as new Processes are developed and older Processes become obsolete.



3.2 After qualification is successfully completed for any Product to be manufactured under this Agreement, if Fairchild desires to make material changes to any of the Processes affecting form, fit or function, Fairchild shall notify Samsung in writing of the intended changes prior to making such changes. If the proposed changes are unacceptable to Samsung, Samsung and Fairchild shall work together to resolve the problem and qualify the changed Process for making Wafers. If the Parties are unable to resolve the problem, Fairchild shall continue to run the unmodified Process to supply Wafers pursuant to this Agreement.



3.3 Should Fairchild elect to discontinue a Process, it must give Samsung written notice of no less than twelve (12) months prior to the date it intends to discontinue any Process, or its future amended form. In no event, however, shall Fairchild discontinue any Process during the first twenty-four (24) months of this Agreement unless Samsung agrees.





3.4 On initial production of new Products, Samsung shall provide to Fairchild sort and test programs, including probe cards, load cards, tester and test hardware and software, prepared, owned by and otherwise proprietary to Samsung in order that Fairchild may provide wafer sort and test services. Prior to the production of a Wafer type, Samsung shall at its expense develop and provide to Fairchild the probe cards, load cards and test software necessary to perform the sort and test services for such Wafer type. After the commencement of production of such Wafer type by Fairchild, Fairchild shall provide at its expense any supplemental probe cards, load cards or test software consistent with Samsung's technology required to complete the performance of the sort and test services for the Wafer type.





3.5 Samsung shall have the right, in its sole discretion, to establish an alternative source of foundry for any Process and/or sort and test; provided that it continues to satisfy its payment obligations hereunder. In support of any Process and/or sort and test transfer required to establish such alternate source, Fairchild shall make available to Samsung process characterization data, where such data exists at the time of such request, and all applicable manufacturing specifications, including run cards and complete unit process specifications for the Processes and all sort and test programs. In further support of such transfer, Samsung may contract with Fairchild, at a cost to be negotiated in good faith, for up to thirteen (13) man weeks of engineering services. If such services are required away from the Facilities, Samsung shall also pay reasonable travel and per diem expenses for the Fairchild engineers providing such services.



4. EXISTING PRODUCTS; SET UP AND QUALIFICATION OF NEW PRODUCTS; AND

MODIFICATION OF EXISTING PRODUCTS



4.1 For each new Product that Samsung proposes to have Fairchild manufacture, Samsung shall provide to Fairchild in advance the specifications and design layout of the Product for review and comment by Fairchild. The Parties shall also agree on the Acceptance Criteria and Quality and Reliability Criteria for the prototype Wafers to be manufactured for the new Product during the qualification process.



4.2 An initial data base for mask generation or pattern generation, or acceptable production masks will be provided by Samsung to Fairchild, at Samsung's expense, for each new Product to be fabricated for Samsung. In the alternative, Samsung may provide Fairchild with prime die design data, and Fairchild will provide the manufacturing data, such as test patterns and alignment keys, and procure the mask set at Samsung's expense. After receipt of the initial data base, or pattern generation tape, or master or sub-master mask set, copy and/or replacement mask sets shall be the responsibility and expense of Fairchild. All such data bases, pattern generation tapes and mask sets shall be the property of Samsung, regardless of whether they were initially supplied by Samsung or replaced by Fairchild.



4. 3 As soon as practicable following agreement on the items in Section 4.1 above, and following receipt of a written purchase order from Samsung, Fairchild will begin manufacture of twelve (12) prototype Wafers for such Product as is specified in the purchase order. Fairchild will perform the electrical testing specified in the initial Acceptance Criteria and supply the test data to Samsung with the prototype Wafers. Fairchild's obligation shall be limited to providing the prototype Wafers that meet the applicable PCM specifications and the associated test data. Samsung will promptly inspect the prototype Wafers and notify Fairchild in writing of the results. If the prototype Wafers do not meet the Acceptance Criteria and Quality and Reliability Criteria, the Parties will cooperate in good faith to determine the reason for such failure.



4.4 In connection with the completion of the qualification process for any new Product, Samsung will deliver to Fairchild final specifications for the Product incorporating any changes agreed in writing by the Parties during the qualification process. The Parties will also





negotiate for each Product the final Acceptance Criteria and Quality and Reliability Criteria to be used for the commercial production lots of Wafers.



4.5 Unless otherwise agreed in writing, production quantities of Wafers of a new Product will not be manufactured prior to completion of the qualification process under this Article 4. In the event that Samsung desires for Fairchild to manufacture production quantities, the Parties will agree in writing on the terms before Fairchild accepts the purchase order.



4.6 If either Samsung or Fairchild desires to make any changes to the final specifications, Acceptance Criteria or Quality and Reliability Criteria for any existing Product, that Party shall notify the other Party in writing and negotiate the changes in good faith, including any changes in prices required by such modifications. A modification to any of the foregoing will be binding only when a writing to which such modification is attached and has been signed by both Parties as provided in this Agreement. The Parties will separately negotiate the price and terms of any prototype Wafers required in connection with such changes.



4.7 Fairchild may, at its discretion, declare a Product or Process obsolete if such Product or Process has not been run in production for a minimum of six (6) months. Fairchild must provide Samsung with twelve (12) months prior written notice of an obsolescence declaration. Within thirty (30) days after completing production of Samsung's order for an obsoleted product, Fairchild shall return all data bases and masks for such Product to Samsung at Samsung's expense.



5. CAPACITY; PURCHASE ORDERS; FORECASTS; AND PRODUCTION PLANNING



5.1 Schedule 5.1 sets forth Fairchild's assured capacity by year for the foundry of the Products during the term of this Agreement (the "Fairchild's Assured Capacity"). Fairchild's Assured Capacity shall distinguish the difference in the volume of the Products to be fabricated, sorted and tested by Fairchild and the volume of the Products to be sorted and tested by Samsung at its Kiheung facilities pursuant to Section 6.1 hereof. To order the Products for each year beyond Fairchild's Assured Capacity, Samsung shall obtain the prior written consent from Fairchild. Additional Capacity shall be provided in such quantities and on terms mutually agreeable to the Parties.



5.2 If Fairchild is unable to fulfill any order for the Products given by Samsung within Fairchild's Assured Capacity, then the Profit that Fairchild would have received had Fairchild fulfilled such order, as calculated pursuant to Section 6. 1, shall be included in Fairchild's aggregate Profit for the purposes of determining the Committed Profit (as defined in Section 6.1) with respect to the applicable Annual Period.



5.3 To place orders for the Products, Samsung shall submit on or before the tenth (10th) day prior to the end of each month (i) written purchase orders with reasonable lead time to Fairchild describing the quantity and type of the Products and shipping and invoicing





instructions requested by Samsung for delivery the following month (the "Delivery Period"), and (ii) a rolling forecast of its expected Products quantity requirements by Wafer type and shipping and invoicing instructions for the next two (2) months after the Delivery Period (the "Forecast Period"). Purchase orders and forecasts shall be sent by registered mail or facsimile followed by mail. By written agreement of the Parties, purchase orders and forecasts may be sent and acknowledged by electronic data exchange or other mutually satisfactory system. Fairchild's acceptance of purchase orders shall be provided by a written or electronic form.



5.4 Within three (3) working days after receipt of Samsung's purchase orders and forecasts, Fairchild shall provide Samsung with a Product delivery schedule on a twice per week (Monday and Friday) basis for the Delivery Period and weekly basis for the Forecast Period. Should Fairchild not provide such a Product delivery schedule within three (3) working days after receipt of Samsung's purchase orders and forecasts, Fairchild shall be deemed to have accepted Samsung's delivery dates indicated on the purchase orders and forecasts.



5.5 Samsung, may, up to and including the last day prior to commencement of the manufacturing of the Wafers, change the mix of quantities of types described in the purchase orders for the Delivery Period within +/- 10% by written notice to the extent the whole volume is consistent with that of the purchase orders for the Delivery Period. So long as such revised purchase orders are within the permitted changes set forth in this Section 5.5, Fairchild shall be deemed to have accepted such revised purchase orders. Fairchild shall use its Best Efforts following commencement of the manufacturing of the Wafers to accommodate requests to change the mix among the mask options.



5.6 Samsung may change the forecast for any month in accordance with the following table, provided that the maximum request of Samsung shall not exceed Fairchild's Assured Capacity. Any changes outside of those permitted under the following table must be by written agreement of the Parties.



Monthly Period in

the Forecast Permitted Changes

------------ -----------------



First No change permitted

Second +/- 10%

Third +/- 15%



5.7 In the event of any conflict between the terms and conditions of this Agreement and a Party's purchase order, acknowledgment, or similar forms, the Parties shall attempt to resolve such conflict in good faith.



5.8 Consistent with standard practices of issuing specific device level details of part numbers to be fabricated on a weekly or periodic basis, Samsung may unilaterally change the part number to be manufactured, provided that Fairchild agrees that the change does not negatively impact Fairchild's loadings and provided further that there is no significant change in the Process flow to be used. All costs and expenses of such a change shall be borne by





Samsung. A change that will negatively impact loading or alter the Process flow may only be directed upon Fairchild's written agreement, which shall use its best efforts to comply with such requested change. The specific part number detail shall be submitted by registered mail or facsimile followed by mail. By written agreement of the Parties, specific part number detail may also be sent by electronic data exchange, or other mutually satisfactory system.



5.9 Subject to the business requirements of both Parties, the Parties agree to use their Best Efforts, consistent with Past Practices, to promptly accommodate requests for urgent services or deliveries hereunder.



5.10 Fairchild may manufacture lots of any size which satisfy the requirements of effective manufacturing. However, Samsung must place orders for full flow and prototype Products in increments of twelve (12) or twenty-four (24) Wafers.



6. PRICES AND PAYMENT



6.1 As part of the collateral transactions contemplated under the Business Transfer Agreement, the Parties have agreed that (i) the total price per Product (the "Total Price") payable by Samsung to Fairchild under this Agreement shall be the price (with respect to tested and untested Wafers) set forth under the heading Total Price in Schedule 6.1 and (ii) the Total Price shall be binding until the aggregate Profit of Fairchild received from Samsung (including amounts paid pursuant to Section 6.5(a)) has reached the aggregate Committed Profit for all annual periods (the "Expiration Date").



For purposes of this Agreement, subject to Section 6.5(b), the "Committed Profit" for (i) the period commencing on the Closing Date and ending on the first anniversary of the Closing Date (the "First Period") shall be 27.7 billion Korean Won, (ii) the period commencing on the day following the First Period and ending on the second anniversary of the Closing Date (the "Second Period") shall be 17.3 billion Korean Won and (iii) the period commencing on the day following the Second Period and ending on the third anniversary of the Closing Date (the "Third Period"; the First Period, the Second Period and the Third Period each being referred to as an "Annual Period") shall be 8.7 billion Korean Won.



After the Expiration Date, the new price per Wafer shall be agreed between the Parties.



In the event that Fairchild cannot complete each of the required foundry steps for any reason whatsoever, Fairchild may request Samsung to perform the unfinished steps at a Samsung facility. If Samsung, agrees to provide such services to Fairchild, all costs relating to such services, based on Schedule 6.1, shall be credited against the Total Price payable by Samsung. If Samsung does not agree to provide such services, Fairchild shall use it best efforts to perform the unfinished steps with a higher priority placed on Samsung's products than that placed on Fairchild's own products.



6.2 Prices are quoted and shall be paid in Korean Won. Payment terms are net 30 days from the date of tax invoice. Such prices shall be on a CIF Samsung's Onyang plant





basis.



6.3 Samsung shall pay, in addition to the prices quoted or invoiced, the amount of any special handling charges if such charges were paid by Samsung (but not by the Business) in Past Practices. Samsung shall also pay all sales, use, VAT, excise or other similar tax applicable to the sale of goods or provision of services covered by this Agreement, or Samsung shall supply Fairchild with an appropriate tax exemption certificate.



6.4 If Samsung fails to make any payment due hereunder by the date it is due, Samsung shall pay to Fairchild, in addition to the amount of such payment due, a late charge of one-twentieth of one percent (1/20%) of the outstanding amount per day from the due date of the payment until finally paid.



6.5 (a) In the event that the actual Profit realized by Fairchild during any Annual Period is less than the Committed Profit for such Annual Period, Samsung shall pay to Fairchild an amount equal to the Committed Profit for such Annual Period, less an amount equal to the actual Profit realized by Fairchild during such Annual Period. Any payment made under this Section 6.5 shall be made in a manner consistent with all other payments to be made by Samsung, hereunder.



(b) In the event that the actual Profit realized by Fairchild during any Annual Period exceeds the Committed Profit for such Annual Period (such difference being referred to as the "Excess Profit"), the Committed Profit for the subsequent Annual Period shall be reduced by an amount equal to such Excess Profit.



6.6 Should Samsung terminate any order prior to process completion, Samsung shall be charged a prorated portion of the full price of such Product subject to a negotiated adjustment, based on the process termination point, including handling incurred by Fairchild in processing the total quantity started in production. To the extent that any such prorated portion is comprised of Profit, such Profit shall be included for purposes of determining the Committed Profit with respect to the applicable Annual Period.



6.7 For Products not reflected in Schedule 6.1, terms shall be on an individual purchase order basis at prices to be negotiated by the Parties; provided, however, that for Products not reflected in Schedule 6.1 but which were provided in Past Practices, the Parties shall negotiate in good faith to determine prices for such Products using a methodology consistent with that used to determine the prices set forth in Schedule 6.1.



7. OTHER SERVICES



In support of the Processes and to the extent consistent with Past Practices, Fairchild shall make available design support information including the following items:



(a) Layout design rules.



(b) Industry standard models for active devices and passive devices and





parasitic elements, such as interconnect resistances and capacitances, sheet resistivities of all conducting layers, parasitic capacitances for diffused areas, and so forth, including additional elements or devices intended for mixed-signal applications.



(c) Process cross sections, if not already available at Samsung.



(d) Sufficient sizing and PCM information to assure the integrity of

Wafers ordered in support of Products to be manufactured.



(e) Yield models plus applicable current and forecast parameters such as

Ys and Do for those models.



This information should be in the form of at least one controlled paper copy or electronic access to a controlled copy. Samsung, at its discretion, may request a controlled electronic copy of the required information in lieu of the paper copy. Fairchild shall, to the extent consistent with Past Practices, provide the foregoing services at no charge to Samsung limited to those engineering services performed as of the Effective Date.



8. DELIVERY; RESCHEDULING AND CANCELLATION



8.1 Fairchild shall deliver Products on the delivery dates agreed to by the Parties. For each order, delivery of 90% or more of the volume of each Product published in such order, made within -3/+3 days of the delivery date(s) agreed to by the Parties, shall constitute timely delivery. Delivery will be CIF Samsung's Onyang Plant. Delivery shall be deemed to be made and risk of loss and title shall pass to Samsung when shipment is made to a carrier. In the event that late deliveries equal or exceed 10% of any weekly total of orders, Fairchild shall expedite its production, at its best cycle-turnaround time, to make such deliveries.



8.2 If Fairchild fails to timely deliver a Product in accordance with Section 8.1, Samsung shall have the right, in its sole discretion, to cancel all or any part of the purchase order pertaining to such Product. Any obligation of Samsung under any commitment to Fairchild under this Agreement associated with such cancelled purchase order shall be discharged in full and Samsung shall have no liability whatsoever to Fairchild therefor. Profit that would have been realized by Fairchild but for such late delivery and cancelled order shall be included for purposes of determining the Committed Profit with respect to the applicable Annual Period.



8.3 All Products delivered pursuant to the terms of this Agreement shall be suitable, packed for shipment in containers specified by Samsung, marked for shipment to Samsung's address set forth in the applicable purchase order and delivered to a carrier or forwarding agent chosen by Samsung. Should Samsung fail to designate a carrier, forwarding agent or type of conveyance, Fairchild shall make such designation in conformance with its standard shipping practices. Delivery will be CIF Samsung's Onyang Plant. Delivery shall be deemed to be made and risk of loss and title shall pass to Samsung when shipment is made to a carrier. Shipments will be subject to incoming inspection as set forth in Section 11.1.





8.4 To facilitate the inspection of Product deliveries to Samsung, lot integrity shall be maintained on all such deliveries, unless specifically waived by mutual agreement of the Parties.



8.5 Subject to the provisions of Section 5 and its other obligations hereunder, Samsung may cancel any purchase order upon 30 days written notice prior to the commencement of manufacturing without charge, provided that Samsung reimburses Fairchild for labor costs actually incurred by Fairchild and the cost of any raw materials purchased for such order to the extent such raw materials are not used for any other products. Any reimbursement pursuant to this Section 8.5 shall not be included for purposes of determining the Committed Profit with respect to any Annual Period.



8.6 Samsung may request that Fairchild stop production of Wafers in process for Samsung's convenience, and Fairchild shall consider stopping depending on the point of process. In such event, Samsung shall pay for all Wafers at the agreed price, subject to a negotiated adjustment based upon the degree of completion of the Wafers and whether or not Fairchild is able to use the unfilled capacity. Fairchild shall, if reasonably practicable, restart production of stopped Wafers within a reasonable time after receipt of a written request ...