Professional Services Agreement

CONFIDENTIAL


PROFESSIONAL SERVICES AGREEMENT


This Professional Services Agreement (the "Agreement") is made and entered into as of the date written below (the "Effective Date") by and between AMI SEMICONDUCTOR INC., a corporation incorporated under the laws of the state of Delaware, USA, whose chief executive office is located at Buckskin Road 2300, Pocatello, ID 83201, USA ("CONTRACTOR" or AMI), and STMICROELECTRONICS NV, a company duly organized under the law of The Netherlands, having its registered office at Strawinskylaan 1725, World Trade Center, Tower B, 17th floor, 1077XX Amsterdam, acting for the purposes of this Agreement through its Swiss branch, ICC - Bloc A, 20 route de Pre-Bois, 1215 Geneva 15, Switzerland (the "CUSTOMER").


WHEREAS, Pursuant to the terms and conditions of a Business Purchase Agreement (the "BPA"), dated May 8, 2002 among Contractor, Customer, AMI Semiconductor Belgium BVBA, a corporation incorporated and existing under the laws of Belgium ("BVBA") and Alcatel Microelectronics NV, a Belgian company ("AME")(which will become a party to the BPA on the Completion Date (as defined in the BPA)), Customer and AME are contemporaneously with the execution and delivery of this Agreement selling to Contractor and certain of its Affiliates the Mixed Signal Business (the "MSB" as defined in the BPA) of AME.


WHEREAS, for a certain period of time, Customer will require from Contractor the delivery of certain services (as specified herein) in order to allow AME to continue its business operations on a continuous, uninterrupted basis following the sale of MSB to Contractor.


WHEREAS, Contractor is willing to provide those services to Customer and Customer desires to obtain such services, subject to the terms and conditions set forth herein.


WHEREAS, Customer and Contractor are contemporaneously with the execution of this Agreement entering into an Agreement providing for the provision of services by Customer to Contractor and containing substantially similar terms to those contained in this Agreement.


NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein, Customer and Contractor hereby agree as follows:


1. DEFINITIONS


In this Agreement, unless the context otherwise requires, the following words and expressions shall have the following meanings:


"AFFILIATE" of a party means a Person owning or controlling a party, or under the same ownership or control as a party, or owned or controlled by a party, but only so long as such ownership or control exists. Ownership or control shall exist through the direct or indirect: (i) ownership of more than 50% of the Equity Interests and of the Equity Interests generally entitled to vote on matters submitted to holders of Equity Interests, or (ii) the right by any other means to elect or appoint a majority of directors, or Persons performing similar functions.


"CONTRACTOR TECHNOLOGY" means proprietary information and materials in electronic design automation, CAD or CAE, electronic product manufacturing, software tools, computer programs and their documentation, computer languages, methods, methodologies, design flows, cell libraries, algorithms, databases, mechanical and electronic hardware, electronic components and other materials and technology owned or controlled by Contractor.


"DELIVERABLES" means the specific materials, devices, products or other deliverables Contractor provides to Customer as a result of performing Services and which are specified in the Statement(s) of Work.


"EQUITY INTERESTS" shall mean capital stock, share capital, ordinary or preference shares, common or preferred stock, general or limited partnership interests, limited liability company interests or any other interests in any Person entitling the holder thereof to share in the profits or liquidation value of a Person.


-1-


AMI => ST


CONFIDENTIAL


"IP RIGHTS" means semiconductor topography rights, mask works rights, patents, copyrights, trademarks (including service marks), trade secrets, and design rights, whether registered or unregistered, and including any application for registration of any of the foregoing and all rights or forms of protection of a similar nature of having equivalent or similar effect to any of these, which may subsist anywhere in the world.


"INNOVATIONS" means any invention, discovery, improvement, development or innovation conceived or developed by Contractor during the term of this Agreement and in the course of performance of the Services and whether or not forming part of a Deliverable, including, but not limited to, blocks, database rights, cells, models, formulas, algorithms, methods, libraries, design flows, processes, databases, mechanical and electronic hardware, electronic components, computers and their parts, computer languages, programs and their documentation, encoding techniques, articles, writings, compositions, works of authorship and improvements.


"CUSTOMER TECHNOLOGY" means the proprietary information and materials in electronic design automation, CAD or CAE, electronic product manufacturing, software tools, computer programs and their documentation, computer languages, methods, methodologies, design flows, cell libraries, algorithms, databases, mechanical and electronic hardware, electronic components and other materials and technology owned or controlled by Customer which Contractor reasonably requires rights to use in order to perform the Services.


"PERSON" shall include individuals, corporations, companies, partnerships, trusts, limited liability companies and other entities.


"PROJECT SCHEDULE" means the timetable (including the required end date by which the projects on the Statement(s) of Work must be completed) relating to the performance of the Services set out in each Statement of Work.


"SERVICES" means the services described in the Statement(s) of Work.


"RESIDUAL INFORMATION" means ideas, concepts, know-how or techniques related to the disclosing party's technology that are retained by the unaided memories of the receiving party's employees who have had access to confidential information consistent with the terms of this Agreement. An employee's memory will be considered to be unaided if the employee has not intentionally memorized the confidential information for the purpose of retaining and subsequently using or disclosing it. The receiving party's use of Residual Information is subject to valid patents, copyrights, and semiconductor mask work rights of the disclosing party.


"STATEMENT(S) OF WORK" means the description of the Services and Deliverables to be provided hereunder from time to time, which may include single or multiple Statements of Work.


2. PROFESSIONAL SERVICES


2.1 Contractor will provide to Customer the Services that are described in a Statement(s) of Work attached hereto under the terms and conditions of this Agreement. The parties acknowledge and agree that the Statement(s) of Work include only the current iteration of products and that Contractor has no obligation to provide Services relating to future iterations of products (for purposes of the foregoing an "iteration" shall mean a silicon modification which implies a mask change from the current design as of the date hereof). Such Statement(s) of Work may be amended or modified in a writing by both parties hereto and attached to the Statement(s) of Work, and thereafter, the Services shall be deemed to include the services described in such supplement or modification.


Contractor will provide such resources and utilize such employees or design consultants as specified in the Statement(s) of Work, or in the absence of specific designation, as Contractor deems necessary, acting in a commercially reasonable manner, to perform the Services. All work shall be performed at Contractor's designated facilities specified in the Statement(s) of Work or as mutually agreed between the parties.


2.2 Customer will provide, if necessary, Contractor with the use of the Customer Technology.


PAGE 2 OF 20
AMI => ST
---------


CONFIDENTIAL


2.3 Contractor shall meet the project schedules, end dates and time of performance of Services and delivery of Deliverables set forth in the Statement(s) of Work unless such delay is caused by Customer. Customer agrees to cooperate in good faith to allow Contractor to achieve completion of Services in a timely and professional manner. Customer understands and agrees that Contractor's provision of the Services may depend on completion of certain Customer tasks or adherence to Customer schedules within Customer's control; consequently, the project schedule, end dates, time of performance, and Services may require adjustments or changes in the event such Customer tasks or schedules change, are modified, or are not completed as anticipated.


2.4 In performing the Services, Contractor shall design, develop and/or make for Customer the Deliverables as required in the Statement(s) of Work. Contractor shall ensure that the Deliverables meet the specifications, if any, set forth in the Statement(s) of Work for such Deliverables. In case Contractor has reason to believe that any of the foregoing is not going to be met, Contractor will inform Customer and the Parties will discuss in good faith reasonable corrective actions.


2.5 If the Deliverables consist of software, then the Deliverables shall be deemed to include in both source code and object code forms the final version and all intermediate versions of the software and all routines and subroutines, as well as all program materials, flowcharts, notes, outlines, work papers and the like created or developed in connection therewith, the resulting screen formats and other visual effects of the software, and any formulae, processes, algorithms, ideas and other information not generally known to the public, whether or not protected by copyright, developed or generated by Contractor in the course of performing the Services.


2.6 Contractor is not providing or licensing to Customer any Contractor software programs or products or other IP Rights or Contractor Technology. In the event Contractor provides such software or other IP Rights or Contractor Technology, such tools shall be provided only under the terms of a separate license agreement or maintenance agreement.


2.7 Unless otherwise set forth in the Statement(s) of Work, Contractor will undertake a close-out meeting at the conclusion of the Services.


3. NEW OR RELATED SERVICES


3.1 If in performing the Services Customer require further Services or Deliverables over and above those specified in the Statement(s) of Work a new or amended Statement(s) of Work must be agreed to in writing by each of the Parties.


4. SERVICES FEES COSTS, AND EXPENSES


4.1 For the Services and Deliverables provided by Contractor, Customer agrees to pay Contractor a fees equal to the number of hours actually worked in providing the Services in accordance with the schedule attached as exhibit X hereto.


provided, however, that the maximum number of hours chargeable by Contractor for each individual project identified in the Statement(s) of Work shall not exceed the number of hours specified on such Statement(s) of Work plus an additional 10% of hours; provided, however, that as stated in Section 2.1, Contractor has no obligation to provide Services relating to future iterations of products. For the avoidance of doubt one man week shall be comprised of 40 hours.


4.2 Customer shall reimburse Contractor for all actual, reasonable travel and out-of-pocket expenses incurred in the course of providing any Services that must be performed by an employee, consultant or agent of Contractor away from the facility where such person normally works.


4.3 Customer shall reimburse Contractor for all other material cost and other out of pocket expenses incurred by Contractor in the course of providing any Services, including, without limitation, the costs of making any masks or prototypes.


4.4 If achievement of any project described in the Statement(s) of Work, in whole or in part, is dependent upon performance or completion of tasks or provision of technology, specifications, data or other information within the control of the Customer or by a third party outside Contractor's control, the applicable required end or delivery dates for a specific project will be appropriately adjusted to reflect any delay caused by Customer or such third party not caused by Contractor the effect of which is to delay completion of such projects in whole or in part.


PAGE 3 OF 20
AMI=>ST


CONFIDENTIAL


4.5 The amounts payable to Contractor pursuant to this Agreement are exclusive of any value added tax, sales or use deductions, withholding or other taxes or governmental charges. Customer shall be responsible for payment of all such taxes or charges, except for any taxes based solely on Contractor's net income.


5. INVOICING AND PAYMENT


5.1 For each calendar month in which Services are rendered, Contractor shall submit to Customer an invoice within 15 days of the end of such month specifying any fees or reimbursable expenses payable hereunder plus any VAT or other tax related thereto, accompanied by an appropriate level of detail to permit verification of provision of Services and of such fees and reimbursable expenses, and the Parties shall supply each other with any supplemental information relating to the Services or such fees and expenses that is reasonably requested by either Party.


5.2 Amounts invoiced shall be due and payable by wire transfer of immediately available funds within thirty (30) days following receipt of such invoice and supporting evidence.


6. INTELLECTUAL PROPERTY RIGHTS


6.1 Customer hereby grants Contractor a royalty-free, non-exclusive, world-wide license to use and practice the Customer Technology, and all Customer owned IP Rights covering such Customer Technology, solely for the purpose and use of Contractor performing the Services and developing or preparing the Deliverables solely during the term of this Agreement. Customer represents and warrants that to the extent Customer provides to Contractor any Customer or third party IP Rights or Customer Technology hereunder, it has obtained all necessary permissions, licenses, consents, and has the authority and right, to provide such technology to Contractor.


6.2 Except as otherwise set forth herein, neither this Agreement, nor the provision of Services hereunder, shall give either Contractor or Customer any ownership interest in or rights to the IP Rights or other technology of the other party. All IP Rights that are owned or controlled by a Party at the commencement of this Agreement shall remain under the ownership or control of such party throughout the term of this Agreement and thereafter.


6.3 All right, title, and interest in and to any and all Innovations, generated or developed by Contractor or Contractor's personnel in the course of performing this Agreement or any other work performed on Customers' behalf by Contractor or its personnel, including all IP Rights therein, shall be assigned to and owned solely by Customer, and all Innovations shall be considered works made by Contractor and its personnel for hire for the benefit of Customer, and Contractor shall take all reasonable actions deemed necessary by Customer to perfect Customer's rights therein. Notwithstanding the foregoing, Customer shall grant to Contractor a royalty free, worldwide, non-exclusive, non-transferable, non sub-licensable (except to Contractor's Affiliates) license to use such Innovations.


6.4 To perfect ownership of Customer IP Rights, Contractor agrees to assign to Customer all rights Contractor may have in the Customer owned Innovations, and to assist and cooperate with Customer in all reasonable respects, subject to reasonable availability, (a) in actions to acquire, transfer or maintain such Customer IP Rights, including executing documents associated therewith, and (b) in actions of enforcement of such Customer IP Rights, subject to payment by Customer of all costs incurred by Contractor which are associated therewith.


7. LICENSE GRANT


7.1 Subject to payment in full of the amounts owed to Contractor hereunder and compliance by the Customer with the terms and conditions hereof, Contractor grants to Customer and its Affiliates a worldwide, non-exclusive, non-transferable, perpetual, fully paid, royalty free license under the Contractor IP Rights incorporated in the Deliverables for the sole purpose of making, having made, using and selling, having sold the Customer products or technology described in the applicable Statement of Work. Customer shall have no rights to sublicense to third parties Contractor IP Rights except as necessary to allow Customer to make, have made, use or sell the products or technology as set forth in the applicable Statement of Work.


PAGE 4 OF 20


AMI=>ST


CONFIDENTIAL


8. LIMITED WARRANTIES AND EXCEPTIONS


8.1 Without prejudice to greater service or quality levels specified in the Statement(s) of Work, Contractor shall use commercially reasonable best efforts to perform the Services in a professional manner and using reasonable care the Services will be of substantially the same quality and in substantially the same manner of performance as provided by AME prior to the Completion Date, as defined in the BPA.


8.2 The warranty above is exclusive and in lieu of all other warranties, whether express, implied, or statutory, including the implied warranties concerning the Services or the Deliverables of merchantability, reasonable skill and care, fitness for a particular purpose or non-infringement, which are expressly disclaimed to the fullest extent permissible by law.


8.3 In order to receive warranty remedies, deficiencies in the Services must be reported to Contractor in writing within one hundred eighty (180) days from Contractor's delivery of the final milestone related to the Services subject matter of a Statement of Work. Customer shall not make any additions, deletions or modifications to the Deliverables except as specifically set forth in the Contractor documentation or as authorized in writing by Contractor. Unauthorized modification of the Deliverables shall cause immediate termination of any applicable warranty as established above. Customer's sole remedy shall be to have the deficiencies remedied within a reasonable period of time or to receive a refund of the pro rata amount of the fees allocated to such Services, at Contractor's option.


9. INDEMNIFICATION


9.1 Subject to the provisions of Sections 9.3, 10.1 and 10.2 below Contractor hereby agrees to indemnify, defend and hold Customer, its Affiliates, and their respective officers, directors, employees, and agents ("Customer Indemnitees") harmless from and against any and all liabilities, losses, damages, legal costs, and legal expenses ("Losses"), and any attorneys' fees relating to its defense, resulting from any suit or action brought against the Customer Indemnitees due to, infringement of any third party IP Rights, by Customer due to the incorporation of any Contractor owned or controlled IP Rights in any Deliverables or Services. Contractor shall not be obligated to defend or be liable for Losses if the infringement claim arises out of compliance with Customer's specifications or requirements, or results from an addition to or modification by Customer to the Deliverables or the Services, or the Customer Technology, Customer owned IP Rights, including the IP Rights therein, or from a combination of the Deliverables or Services provided by Contractor under this Agreement with other products or items developed or made by third parties if such infringement would have not existed but for such combination. Notwithstanding the foregoing, should any Deliverable or Service become or in Contractor's opinion be likely to become, the subject of any such suit or action for infringement, Contractor may, at Contractor's option and expense, (1) procure for Customer the right to continue using such Deliverable or Service, or (2) replace of modify such Deliverable or Service so that it becomes non-infringing while still in conformity with the applicable Statement(s) of Work, which shall extinguish Contractor's obligations hereunder.


9.2 Subject to the provisions of Sections 9.3, 10.1 and 10.2 below, Customer hereby agrees to indemnify defend and hold Contractor, its Affiliates, and their respective officers, directors, employees, and agents ("Contractor Indemnitees") harmless from and against any and all Losses (as defined in Section 9.1 above), and any attorneys' fees and expenses relating to its defense, resulting from any suit or action brought against any of the Contractor Indemnitees due to infringement of any third party IP Rights, by Contractor due to the authorized use in providing the Services or delivering the Deliverables of any Customer owned or controlled IP Rights. Provided, however, that Customer shall not be obligated to defend or be liable for Losses if the infringement claim arises from an addition to or modification by Contractor of the Customer's owned or controlled IP Rights, or from a combination of the Customer's owned or controlled IP Rights with other IP Rights if such infringement would have not existed but for such combination.


9.3 If any claim or action is commenced against a party entitled to indemnification under this Section for Losses resulting from such claim or action (a "Claim"), such party shall give written notice to the other party within ten (10) days of notice of such Claim. If such party receiving notice is obligated under this Section to defend the party against such Claim, then the indemnifying party shall take control of the defense and investigation of the Claim, using such attorneys and other assistance as it selects in its discretion. The indemnified party shall cooperate in all reasonable respects in such investigation and defense, including trial and any appeals, provided that such party may also participate, at its own expense, in such defense. No settlement of a Claim that involves a remedy other than payment of money by indemnifying party shall be agreed to and entered without the consent of the indemnified party, which consent shall not be unreasonably withheld.


PAGE 5 OF 20
AMI => ST


CONFIDENTIAL


9.4 THE FOREGOING SECTIONS 9.1, 9.2 AND 9.3 STATES THE ENTIRE LIABILITY OF CONTRACTOR AND CUSTOMER AND THEIR RESPECTIVE AFFILIATES AND THE EXCLUSIVE REMEDY OF CONTRACTOR AND CUSTOMER WITH RESPECT TO INFRINGEMENT. EXCEPT AS EXPRESSLY STATED IN THESE SECTIONS, ALL WARRANTIES OF NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS ARE HEREBY DISCLAIMED BY CONTRACTOR AND CUSTOMER.


10. LIMITATION OF LIABILITY.


10.1 In no event shall either party be liable under this Agreement for any special, consequential, incidental, indirect, punitive or exemplary damages, or lost profits or for the cost of procurement of substitute goods or services, however caused, whether for breach of warranty, contract, tort negligence, strict liability or otherwise, even if such party has been advised of the possibility of such damages.


10.2 Each party's aggregate cumulative liability to the other or Customer Indemnitees or Contractor Indemnitees, as applicable, arising out of or related to this Agreement shall not exceed the total amount actually paid by Customer to Contractor under the applicable Statement(s) of Work, except that the foregoing limitation in this section 10.2 will not apply in case of willful misconduct or gross negligence.


11. CONFIDENTIALITY


11.1 During the term of this Agreement, either Party may disclose Confidential Information (hereafter defined) to the other one. In such case, the following provisions shall apply. Confidential Information means the terms of this Agreement as well as any proprietary information and data of either Party, contained in written or tangible form, which is marked with "Internal Use Only", "Proprietary", "Confidential", or with other similar words. One Party's ("Disclosing Party") Confidential Information shall also include its confidential information and data orally disclosed to the other Party ("Receiving Party") if: a reasonable summary of the same is reduced to a writing and marked with "Proprietary", "Confidential", or with other similar words and the writing is delivered to the Receiving Party within thirty (30) days of the first disclosure to the Receiving Party. However, Confidential Information shall not include any data or information which:


(a) is or becomes publicly available through no fault of the Receiving Party; is already in the rightful possession of the Receiving Party prior to its receipt of such data or information;


(b) is independently developed by the Receiving Party;


(c) is rightfully obtained by the Receiving Party from a third party or in the public domain; is disclosed with the written consent of the Disclosing Party; or


(d) is disclosed pursuant to a valid order or other legal compulsion of a court of other government body; provided, however, that Receiving Party shall, to the extent possible: (1) prior to such disclosure promptly notify Disclosing Party of the requirement and give Disclosing Party the opportunity to object; (ii) upon disclosure inform the body to which the Confidential Information is disclosed of its confidential status and shall seek to obtain confidential treatment of such Confidential Information by such body; and (iii) disclose only such Confidential Information as is strictly required by such order.


11.2 Each Party undertakes to use the same degree of care as it uses with respect its own information of a similar nature to avoid disclosing the Confidential Information received from the other Party unless the Disclosing Party previously consented in writing to such disclosure. Notwithstanding the foregoing, the Receiving Party shall, during the term of this Agreement, and for a period of three (3) years from the termination or expiration of this Agreement, hold all Confidential Information of the Disclosing Party received, in confidence.


11.3 The Parties shall not use the Confidential Information for purposes other than for the purpose of this Agreement.


11.4 Either Party may disclose any Confidential Information to its and its Affiliates' employees having the reasonable need for access to such Confidential Information in connection with or during the performance of this Agreement or their employment responsibilities and the Parties shall ensure that such employees comply with the provisions of this Section.


PAGE 6 OF 20


AMI => ST


CONFIDENTIAL


11.5 Upon termination or expiration of this Agreement, either Party shall return to the other party all Confidential Information, whether in written, documentary or other form, as well as computer programs, software and technical drawings other than any Confidential Information that is required to be retained under applicable law or which is necessary to defend against or prosecute any claim hereunder.


11.6 Neither Party shall in any manner disclose to third parties, advertise or publish the fact it has entered into or the terms of this Agreement except by the express written consent of the other Party.


11.7 Notwithstanding the foregoing, either Party may disclose the fact of entering into this Agreement and its terms (i) to its advisors or to any Person providing it with finance, subject to such Person agreeing to keep such information confidential, or (ii) ...