CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

THE `[**]` SYMBOL INDICATES THAT INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2 AND THAT CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO SUCH OMITTED PORTIONS.

___1___

TOSHIBA

TOSHIBA AMERICA ELECTRONIC COMPONENTS, INC.

MASTER PURCHASE AGREEMENT

This Master Purchase Agreement ("Agreement") is entered into and is effective as of August 10, 1998 ("Effective Date") by and between Toshiba America Electronic Components, Inc., a California corporation (a second-tier subsidiary of "Toshiba Corporation") having its principal place of business at 9775 Toledo Way, Irvine, California 92618-1811 (hereinafter referred to as "TAEC") and M-Systems, Inc., a California corporation having its principal place of business at 39899 Balentine Drive, Newark, CA., 94560 (hereinafter referred to as "M-Systems").

RECITALS

M-Systems Ltd., and Toshiba Corp., have entered into, on June 5, 1998 a Development and License Agreement for development of an integrated flash memory device based on Toshiba`s 64MBit NAND flash and M-Systems` flash file system and NAND Flash Disk Controller, known as the Monolithic DiskOnChip or MDOC-64 ("Product"), and granting certain licensing rights to each other. The parties desire to enter into this Agreement to define the general terms and conditions governing Toshiba`s manufacture and sale of the MDOC-64 and other Products to M-Systems. The Exhibits to this Agreement shall define the terms and conditions specific to each respective Product. The parties intend that additional Products may be added to this Agreement by the mutual agreement of the parties. Terms and conditions specific to each such additional Product will be set forth in Exhibits of the same number. For example, Exhibits B-1 ("Price Schedule-Product #1"), C-1 ("Quality Requirements-Product #1"), etc., shall apply to the Product set forth in Exhibit A-1 ("Design Specification-Product #1").

NOW, THEREFORE, in consideration of the foregoing premises and the covenants and agreements set forth in this Agreement, the parties agree as follows:

AGREEMENT

1. DEFINITIONS

1.1 "Confidential Information" shall mean: (a) the prices of the Products; (b) any trade secrets or other proprietary information related to the Products and designated by the disclosing party as confidential in writing or, if disclosed orally, reduced to writing within thirty (30) days; and (c) the terms, conditions and existence of this Agreement; provided, however that "Confidential Information" shall not include information that: (i) is or becomes generally known or available by publication, commercial use or otherwise through no fault of the receiving party; (ii) can be shown by documentary evidence to have been known and has been reduced to tangible form by the receiving party at the time of disclosure and is not subject to restriction; (iii) can be shown by documentary evidence to have been independently developed or learned by the receiving party; (iv) can be shown by documentary evidence to have been lawfully obtained from a third party who has the right to make such disclosure; or (v) is released for publication by the disclosing party in writing.

___2___

1.2 "Deliver, Delivered or Delivery" means the complete delivery of a particular Purchase Order`s Product quantities to the Delivery Point.

1.3 "Delivery Point" means the delivery destination identified in the Purchase Order.

1.4 "Epidemic Failure" means product failures at or above the rates set forth in Exhibit C "Quality Requirements" resulting from defects in material, workmanship, manufacturing process and/or design deficiencies attributable to TAEC, including but not limited to use of components with inherent or latent defects, or consistent maladjustments during manufacture. There are two types of Epidemic Failures: (a) product failures attributable to any cause or causes; or (b) product failures attributable to the same root cause.

1.5 "Lead Time" means the amount of time in advance of shipment to the Delivery Point that TAEC must receive an M-Systems Purchase Order in order to deliver Products by the requested Delivery date, as set forth in Exhibit D "Miscellaneous Provision".

1.6 "Order Adjustment Schedule" means the schedule for allowable increases or rescheduling of Purchase Order quantities, as set forth in Exhibit D "Miscellaneous Provision".

1.7 "Preferred Carrier(s)" means the carrier(s) set forth in Exhibit D "Miscellaneous Provision".

1.8 "Price Schedule" means the prices for each Product as set forth in Exhibit B "Price Schedule".

1.9 "Products" means those products made by Toshiba which are designed to meet the Specifications.

1.10 "Purchase Orders" means written or electronically transmitted purchase orders to TAEC for the Products, including the description, quantity, Delivery Point and requested Delivery date.

1.11 "Quality Requirements" means the quality requirements for the Products, as set forth in Exhibit C "Quality Requirements".

1.12 "Specifications" means the respective specifications for each Product as separately set forth in Exhibit A "Specifications".

2. TERM OF AGREEMENT

This Agreement shall come into force on the Effective Date and will remain in effect until December 31, 2001, unless earlier terminated by either party pursuant to Section 16 "Termination".

___3___

3. PRODUCT AVAILABILITY

TAEC shall accept and fill M-Systems` Purchase Orders for the Products on the terms and at the prices set forth in this Agreement. TAEC may discontinue a Product under the circumstances set forth in Exhibit B "Price Schedule". TAEC will guarantee manufacturing capacity for the Product in accordance with the requirements of Exhibit B "Price Schedule".

4. PRICING

4.1 Prices. Subject to the terms and conditions of this Agreement, TAEC agrees to Deliver the Products at the prices set forth in Exhibit B "Price Schedule".

4.2 Price Reductions/Increases. In the event TAEC is able to achieve any reduction in component prices, TAEC will reduce the prices of affected Products accordingly. TAEC shall meet with M-Systems every three (3) months during the term of this Agreement to review and establish a plan to negotiate all reasonable cost reduction opportunities. In the event TAEC experiences any increase in component price, TAEC and M-Systems shall meet to review and negotiate any increase in component price.

5. FORECASTS, ORDERING, AND ADJUSTMENTS

5.1 Forecasts. M-Systems will attempt to provide TAEC with a monthly forecast covering the period of six (6) calendar months beginning with the month in which such forecast is provided. However, M-Systems commits to provide such forecasts every three (3) months as a minimum. Such forecast will specify the number of units of the Products which M-Systems anticipates purchasing during such six (6) month period. Such forecast will not be regarded as a commitment to purchase.

5.2 Ordering. M-Systems may issue Purchase Orders to TAEC pursuant to the terms of this Agreement. Each Purchase Order will be issued by M-Systems in accordance with the applicable Lead Time(s) and Pricing. TAEC shall accept each Purchase Orders within three (3) business days of receipt by sending a Purchase Order Acknowledgement to M-Systems.

Purchase Orders will be sent to:

Toshiba America Electronic Components, Inc.

2460 North First Street, Suite 180

San Jose, CA 95131

Telephone: (408) 965-4200

Facsimile: (408) 432-8566

Purchase Order Acknowledgements will be sent to:

M-Systems, Inc.

39899 Balentine Drive

Newark, CA 94560

Telephone: (510) 413-5950

Facsimile: (510) 413-5980

___4___

TAEC may change the address for reciept of Purchase Orders and M-Systems may change the address for receipt of Purchase Order Acknowledgements by providing written notice of such change as provided in Section 26.8 "General, Notices".

5.3 Adjustments. M-Systems may increase, or reschedule Product quantities under Purchase Orders prior to the Delivery, in accordance with the Order Adjustment Schedule set forth in Exhibit D "Miscellaneous Provisions".

5.4 Lead Time Reduction Program. TAEC and M-Systems will meet periodically to discuss options which both parties can implement to effect reductions in Lead Times to allow improved flexibility in ordering and delivery. The agenda for each meeting will include identification of such options, schedules for determination of associated cost and schedules for implementation.

6. DELIVERY, CARRIER, AND RISK OF LOSS

6.1 Carrier; Risk of Loss. TAEC shall use the Preferred Carriers for Delivery. If no carrier is designated by M-Systems, TAEC will select a common carrier at its discretion. Title and risk of loss or damage to the Product will pass to M-Systems upon delivery to the Preferred Carrier, "FOB Shipping Point".

End of Preview

Home Intelligence Services Subscriptions News About Us