Exhibit 4.2
AGREEMENT
between
Carl Zeiss SMT AG and its subsidiaries active in the field of cooperation (FoC)
(`SMT') on the one hand
and
and ASML Holding N.V. and its subsidiaries active in the field of cooperation
(FoC) ("ASML") on the other hand
1. DEFINITIONS
"FoC" as used herein refers to all optical lithography, where wafers, masks or
other substrates are exposed by photons to generate the lithographic patterning
thereon, using any kind of optics to project the pattern onto the substrate (in
this respect also EUVL is using photons and hence is considered optical).
"Background" as used herein refers to the relevant Patents and intellectual
property (`IP') originated prior to the date of this agreement.
"Foreground" as used herein refers to the relevant Patents and IP originated as
of the date of this agreement.
"Optical Systems" for the definition of this agreement is meant to be optical
projection systems consisting of a mask-illumination and mask-to-wafer
projection system used in mask based lithography systems for manufacturing of
semiconductors or other mask-based lithography applications with similar
requirements.
"Lithography equipment" for the definition of this agreement is meant to be
optical mask based lithography systems for manufacturing of semiconductors or
other mask-based lithography applications with similar requirements.
The definitions on Optical Systems and Lithography equipment shall be refined in
the new "Overall agreement", but shall in any case respect the current
activities of both parties excluding all undertakings of ASMLO which are defined
in section 7 "Exclusivity".
"Optical maskless" for the definition of this agreement is meant to be all
optical lithography where wafers, masks, or other substrates are exposed by
photons to generate the lithographic pattern thereon without using a mask but
using direct-write methods, by using any kind of optics to project the pattern
on the substrate.
"Patents" shall for the purpose hereof be considered to be patent applications
and issued Patents resulting from activities by or for the respective party,
irrespective of which legal entity owns the application or patent.
"ASMLO" shall mean the current legal entity ASML Optics LLC with its assets
including the previous optical business units of SVG Inc.
2. TRANSPARENCY
ASML's and SMT's Chief Financial Officers will continue to meet on a regular
basis to exchange details on each parties quarterly financial statements and to
review the common business situation.
At the Target Costing Stage which is set as finalisation of the "Global Spec",
ASML and SMT will provide each other with the following but limited thereto
breakdown on the cost of goods of their respective systems at the top SAP level.
A) Optics: Labor, Material, Depreciation (applicable to SMT only)
B) Mechanics: Labor, Material, Depreciation (applicable to ASML and
SMT)
C) Assembly: Labor, Material, Depreciation (applicable to ASML and SMT)
No details on hourly rates, cost center calculations or detailed routing sheets
will be provided.
*** Indicates certain information omitted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
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3. PRICING AND MARGIN DETERMINATION
Pricing between ASML and SMT as defined section 6 paragraph 1 through 3 of the
1997 contract have not resulted in a satisfactory way of working. For this
reason, with the signing of this agreement the pricing and margin determination
shall be as follows.
3.1 Pricing for current volume series *** and ***
The following pricing shall apply as of October 10, 2003.
A) *** per Optical system (projection optics & illumination system)
B) *** per Optical system (projection optics & illumination system)
The pricing for the components projection optics and illumination systems of the
*** and the *** shall be adjusted proportionately to the reduction in the
Optical system price.
ASML and SMT commit to investigate joint cost reduction measures in order to
realize ASML's price target of *** for the *** optical system. Both parties
acknowledge that the primary success factor for this cost reduction program is
the product specifications as set by ASML's R&D team.
3.2.Planning Phase for all future Optical Systems
For all future Optical Systems, starting with the *** optical system, the price
for the Optical Systems is derived based on a discounted cash flow model over
the jointly agreed upon product lifecycle excluding any terminal or residual
values. In principle, the end of the product lifecycle including product
improvement version (e.g. *** to ***) is determined as *** months after the
shipment of first system of the succeeding product as defined in the then
existing product roadmap. The price is calculated applying a discount rate set
annually that reflects SMT's cost of capital giving, as a minimum, a net present
value of "0" to SMT. The underlying volume scenarios will be jointly derived and
agreed upon. In case the parties cannot agree on a common volume scenario, the
SMT volume scenario shall apply. The DCF-model will include among standard
components, the following elements
A) Target Cost of Goods based on agreed upon product specifications
B) ***
C) Warranty Expectation and related Regulations
The DCF model will be completed with the determination of the "Global Spec".
Changes to the product specifications that change the Cost of Goods will require
a review of the determined system price. In case the price determination as per
DCF model does lead to a planned cumulated operating margin for SMT according to
US-GAAP for Optical systems above a bandwidth of *** versus ASML both parties
will reduce cost (based on transparency per Section 2) and consequently the
price to narrow the gap to the bandwidth. In case ASML has a planned cumulated
operating margin according to US-GAAP above the bandwidth, the pricing for the
optical system will be adjusted to the bandwidth. With every new product, as
determined in the Product Policy Meeting, the two companies' senior management
including the CFOs will review and approve the related business plan in a joint
meeting within *** months after the Product Policy decision and review these
business plans and changes thereto on a regular basis as part of a ***
review.
3.3. Actual Margin Development
With the shipment of the first system of all future Optical systems starting
with the ***,
A) SMT bears the full risk but also the full opportunities associated
with market-driven volume fluctuations.
B) SMT fully absorbs positive and negative variances in the cost of
goods of the Optical Systems, given unchanged product specifications
as compared to the "Global Spec". Any Changes to the product
specifications will likely change the cost of goods accordingly and
may result in a change of the determined system price.
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C) SMT will proportionally share price discounts and premiums as
compared to the initial list price of the two companies products.
ASML and SMT will implement within 4 weeks after the signing of this
agreement appropriate processes for the sharing of discounts and
premiums.
If the underlying volumes in the planning phase per section 3.2. have been
determined according to SMT's scenario, and as soon as SMT did actually ship
that volume, the pricing for the Optical System shall be Cost of Goods excluding
depreciation plus ***. In case the resulting gross margin of the Optical system
in question will be higher than ASML's gross margin on the Lithography
equipment, the pricing for the Optical system shall be adjusted accordingly.
With the above pricing models in place, ASML will no longer claim actual "equal
operating margins", and accepts that, as a result of the differences in ASML's
and SMT's business model, differences in both companies' earnings may occur.
4. *** AND WARRANTY
For current volume series, SMT will maintain the following ***
A) *** maximum *** projection optics
B) *** maximum *** projection optics
SMT will within *** after signing of this agreement be able to guarantee the
availability of the above defined *** projection optics. In case ASML calls off
the entire ***, the *** delivery period shall lapse until the *** quantities are
re-established within ***. For all future Optical Systems, starting with the
***, the number of projection optics to be held by SMT in the *** will be
determined with the definition of the optical system price per the DCF model.
Within 6 months after signing of this agreement, ASML and SMT agree to jointly
define and install an integrated in-field service concept for Optical Systems
including preventive maintenance in order to reduce the frequency of *** and
maintain a *** reaction time on these ***.
SMT will provide a standard guarantee term of *** years on its Optical Systems,
excluding prototypes (like e.g. 1150i) and consumables (like e.g. mixer rod and
***), with the details of the warranty regulations and the related sharing of
lens refurbishment cost to be finalized in a separate agreement between ASML and
SMT.
5. CUSTOMER FUNDING
ASML is willing to channel-through customer advances on system sales on a
proportional basis, as long as SMT accepts that customers view these payments as
pre-financing but not as risk sharing.
6. RISK SHARING OF CAPITAL EXPENDITURES
ASML will continue to fund SMT's annual capital expenditures according to the
1997 contract, that is 30% of the total amount relating to the particular
products, excluding buildings. If these product-specific advanced payments are
not fully amortized over the life of the product, the part of the investment
that actually cannot be re-used will be forfeited. Amortization of these
advanced payments will start with the shipment of the first Optical systems.
7. EXCLUSIVITY
7.1 ASML/ASMLO
SMT will be the exclusive supplier of Optical systems to ASML for integration in
Lithography equipment, except for the EUVL MET and similar projects mutually
agreed upon in the future.
ASML is entitled to manufacture, and exploit optics other than in Optical
systems. These ASML manufacturing activities will be executed exclusively
through its affiliate ASMLO whose competencies are limited to optics. ASMLO will
focus on *** and *** manufacturing technologies and will not be engaged in the
manufacturing of
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products and components as determined in Section 2 and 3 of Appendix A to the
1997 contract that, at the time of this agreement, are part of SMT's product
offering. Further, ASMLO will not be engaged in the development and
manufacturing of Optical Systems. ASMLO shall be allowed to continue the
activities in the field of Optical Systems in order to fulfill its obligations
relating to SMT's purchase orders. Once the obligations per these purchase
orders are fulfilled and SMT is not placing additional purchase orders, ASMLO
will no longer be engaged in the field of Optical Systems
7.2 SMT
SMT will exclusively supply its Optical systems to ASML only.
8. INTELLECTUAL PROPERTY
8.1 SMT grants ASML an non-exclusive, royalty free license on Background
Patents for use in the field of "Lithography equipment" and an exclusive,
royalty free license on Foreground Patents not exclusively related to
"Lithography equipment" for use in the field of "Lithography equipment".
8.2 SMT will transfer to ASML ownership to any Foreground Patents exclusively
related to "Lithography equipment". SMT will offer ASML to appropriately
divide Patents that are not exclusively related to "Lithography equipment".
However, securing the Patent defense power of SMT shall be the overriding
principle in determining whether Patents should be divided.
8.3 SMT grants to ASMLO an exclusive royalty free license to all Foreground and
Background Patents for use in optical maskless lithography for
manufacturing of semiconductors or similar applications such as
manufacturing of ***. In case ASML sells ASMLO to a third party, these
exclusive licenses shall be converted to non-exclusive licenses.
8.4 The license agreement in section 8.1 through 8.3 above shall by no means
restrict SMT's last call right and right of quotation, respectively for
products and components as defined in Appendix A, section 2 and 3 of the
1997 contract.
8.5 ASML grants SMT an non-exclusive, royalty free license on Background
Patents invented outside ASMLO for use in the field of "Optical Systems"
and an exclusive, royalty free license on Foreground Patents invented
outside ASMLO not exclusively related to "Optical Systems" for use in the
field of "Optical Systems".
8.6 ASML will transfer to SMT ownership to any Foreground exclusively related
to "Optical Systems" invented outside ASMLO. ASML will offer SMT to
appropriately divide Patents that are not exclusively related to "Optical
Systems". However, securing the Patent defense power of ASML shall be the
overriding principle in determining whether Patents should be divided.
8.7 ASML grants SMT an exclusive, royalty free license on Background and
Foreground Patents invented inside ASMLO for use by SMT in "Optical
Systems". In case ASML sells ASMLO to a third party, these exclusive
licenses shall be converted to non-exclusive licenses.
8.6 In case of legal disputes of ASMLO or SMT, the respective exclusive
licenses as determined in section 8.1, 8.2, 8.3, 8.5, 8.6, 8.7 shall be
converted to a non-exclusive license for the purpose of the settlement of
such legal disputes only.
8.9 All licenses in section 8.1 through 8.3 and 8.5 through 8.7 shall be
converted to non-exclusive licenses in case of the termination of the 1997
contract.
8.10 Background license regulations as per sections 8.1 and 8.5 shall not apply
to the Patents defined in the 2000 EUVL contract.
9. SMT'S CALL OPTION ON ASMLO
9.1 ASML will allow SMT to exercise the option to purchase ASMLO before 31
October 2008 at a price of equal to the fair market value of ASMLO, as
determined by a third party independent appraiser, jointly appointed by
ASML and SMT. As compensation for SMT's Patents contribution to ASMLO, SMT
will be entitled to receive a discount equal to the net present value of
the market conform royalties ASMLO would have paid for the Patents used in
its business according to section 8.3 minus the net present value of the
market conform royalties SMT would have paid for the Patents used in its
business according to section 8.7. The gain is defined as fair market
value, as defined by the third party appraiser, less the net asset value.
However, the selling price will be at least equal to the net asset value
plus intercompany financing. As of September 30, 2003, the net asset value
of ASMLO was positive.
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9.2 If ASML sells all or parts of its equity interest in ASMLO or all or parts
of ASMLO's assets to a third party before 31 October 2008, SMT will also be
entitled to receive a payment equal to the discount as defined in sections
9.1 and is allowed to exercise the call option prior of ASML proceeding
with the sale (right of first refusal).
10. MISCELLANEOUS
A) In incidental cases, SMT will discuss a more deal-driven pricing on
the *** and *** series. SMT will be involved at the earliest
possible time if and when such a situation occurs.
B) Both parties agree to split the risk of obsolescence of materials
according to the following schedule
-SMT to bear *** of the initial purchase price of the obsolete
materials
-ASML to bear *** of the initial purchase price of the obsolete
materials
Effective October 10, 2003 with every material order (phase I)
placed with SMT, ASML will deposit *** of the order's face value
with SMT within *** after placement of the material order. The
inventory situation and related obsolescence shall be reviewed as
part of the *** review meetings.
C) In incidental cases, SMT will consider ASML's request for extension
of the warranty term up to *** years for particular deals. SMT will
be involved at the earliest possible time if and when such a
situation occurs.
D) ASML will provide SMT with a payment of *** as a solution to the
obsolete inventory of *** resulting from the proposed *** order
cancellation for illumination systems and will place a re-order for
approximately *** before ***. The amount of *** will be invoiced
before 09/30/2003.
E) ASML extends the deposit of the remaining balance of the
pre-financing for the *** and *** systems for an additional ***
until ***. SMT will take the necessary actions to re-use the ***
projection optics inventory.
F) There will be a complete and open information exchange between SMT
and ASML outside ASMLO.
G) ASML will stop all *** illumination activities with respect to
Optical Systems at ASMLO within *** after signing of this agreement.
H) To the extent not modified above the 1997 and 2000 Agreements
remains in force. The LoI as of May 2001, the Cooperation Agreement
as of November 2001, and the ASML Services Agreement as of August
2002, become invalid with signing of this Agreement
I) SMT will come up with a proposal for DOE's within 4 weeks after
signing of this agreement. In case SMT does not meet the competitive
requirements, the exclusivity with respect to this component shall
disappear and ASML will refund SMT for all not recovered investments
for this component. As SMT will from then on no longer be the
supplier for this component, SMT shall no longer be liable for any
quality issues in the Optical Systems arising from this component.
The parties will merge this agreement, the 1997 agreement and the 2000 agreement
into a new Overall agreement before 31 March 2004.
Duesseldorf, October 24, 2003
ASML Holding N.V. Carl Zeiss SMT AG
/s/ Peter Wennink /s/ Dr. Hermann Gerlinger
- ------------------------------------ -----------------------------------
Peter Wennink Dr. Hermann Gerlinger
EVP and Chief Financial Officer President and Chief Executive Officer
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/s/ Martin van den Brink /s/ Daniel Schoch
- ------------------------------------ -----------------------------------
Martin van den Brink Daniel Schoch
EVP Marketing and Technology MoBM and Chief Financial Officer
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