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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) JUNE 27, 1997
SANDISK CORPORATION
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(Exact name of registrant as specified in charter)
DELAWARE 0-26734 77-0191793
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
140 CASPIAN COURT, SUNNYVALE, CALIFORNIA 94089
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 542-0500
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NONE
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(Former name or former address, if changed since last report.)
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Item 5 Other Events.
SanDisk Corporation, a Delaware corporation ("SanDisk"), entered into a
Foundry Venture Agreement dated June 27, 1997 (the "Agreement") with United
Microelectronics Corporation, a corporation organized under the laws of the
Republic of China ("UMC"). Pursuant to the Agreement (included as Exhibit
10.23), SanDisk and UMC, along with other existing and potential parties to the
venture, have committed to form and invest in a corporation formed under the
laws of the Republic of China for purposes of engaging in the joint venture
which will, among other things, engage in the business of foundry services.
Also, pursuant to the Agreement, UMC has confirmed certain points and
further explained other points concerning the Agreement. These confirmations and
explanations have been set forth in the documents included as Exhibits 10.24 and
10.25.
Item 7 Exhibits.
10.23* Foundry Venture Agreement entered into as of June 27,
1997, by and between SanDisk Corporation and United
Microelectronics Corporation.
10.24* Written Assurances Re: Foundry Venture Agreement given by
United Microelectronics Corporation, dated September 13,
1995.
10.25* Side Letter dated May 28, 1997 between United
Microelectronics Corporation and SanDisk Corporation.
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SanDisk Corporation
(Company)
Date: October 16, 1997 By: /s/ CINDY BURGDORF
-------------------------
Name: Cindy Burgdorf
Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibit
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10.23* Foundry Venture Agreement entered into as of June 27, 1997, by and
between SanDisk Corporation and United Microelectronics Corporation.
10.24* Written Assurances Re: Foundry Venture Agreement given by United
Microelectronics Corporation, dated September 13, 1995.
10.25* Side Letter dated May 28, 1997 between United Microelectronics
Corporation and SanDisk Corporation.
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.23
FOUNDRY VENTURE AGREEMENT
This Foundry Venture Agreement ("Foundry Venture Agreement") is entered
into as of June ___, 1997, by and between SanDisk Corporation, a corporation
with its headquarters in California ("SanDisk") and United Microelectronics
Corporation, a corporation organized under the laws of the Republic of China
("UMC").
SanDisk understands that UMC is in discussions with others who are
interested in participating in USI. SanDisk agrees that UMC may commit to such
others (collectively referred to in this Foundry Venture Agreement as
"OtherVen") in such amounts as UMC deems appropriate, subject to the commitments
made to SanDisk hereunder, and provided further that each OtherVen must commit
in writing to comply with and be bound by this Foundry Venture Agreement as if
specifically named as a Venturer herein. Notwithstanding such OtherVen, SanDisk
will be fully bound by and is committed to the terms of this Foundry Venture
Agreement.
SanDisk, OtherVen and UMC (collectively "the Venturers") agree:
1. PURPOSE AND FORMATION OF VENTURE
1.1 Subject to the Technology Transfer and License Agreement and the
Foundry Capacity Agreement referred to in paragraphs 3 and 5 below
(collectively, the "Venture Agreements"), the Venturers each commit to form and
invest in a corporation to be formed under the laws of the Republic of China
("R.O.C.") for purposes of engaging in the business of providing integrated
circuit foundry services, making and selling integrated circuits in wafer, die
and packaged form as generally described in the USI Business Plan referred to in
paragraph 1.4 below.
1.2 UMC has arranged for the formalities of submission to the
Administration of the Science Based Industrial Park for approval of and then for
incorporation of the corporation contemplated under this Foundry Venture
Agreement, using a name mutually agreeable to the Venturers (for purposes of
this Foundry Venture Agreement, the corporation contemplated under this Foundry
Venture Agreement shall be referred to as "USI."). All reasonable expenses, up
to a maximum of USD [*] (exclusive of fees to be paid to the government),
incurred by UMC pursuant to this paragraph 1.2 with respect to such
incorporation shall be subject to reimbursement by USI if the USI shares
contemplated under Paragraph 4 are not issued to UMC as described below.
1.3 Subject to the terms of the Venture Agreements, USI shall engage in
the business of foundry services, and develop and improve processing and
manufacturing techniques in order to improve its competitiveness in the foundry
area.
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
1.
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1.4 UMC has submitted to the Science Based Industrial Park a written
business plan (the "USI Business Plan") for the operations and for the capital
structure and expenditures of USI; this USI Business Plan is subject to approval
by the Administration of the Science Based Industrial Park; and, subject to the
conditions of confidentiality in Paragraph 9.7 below, will be made available to
the Venturers. As part of the USI Business Plan, the Venturers contemplate USI
will apply for "tax holiday" and/or other favorable tax treatment under R.O.C.
law.
2. INITIAL OPERATIONS
2.1 The Venturers generally contemplate the Building and Construction
Schedule for USI as shown in Attachment A and the Production and Business
Schedule for USI as shown in Attachment B.
2.2 Under mutually agreeable written terms to be negotiated between UMC
and USI, USI shall lease from UMC the land generally described in Attachment C,
and commonly known as UMC's Module C, located at No. 3 Li-Hsin Road Science
Based Industrial Park, Hsin Chu City, Taiwan, R.O.C.
(a) The Venturers contemplate that except as agreed by them in writing,
the terms of this lease will be at the market rate which would be negotiated
between a lessor and lessee dealing with one another at arms length in the
context of an independent lease and not based on some other business
relationship.
(b) Without limiting the foregoing, any and all services and supplies
(including without limitation power, water, gas and/or materials) will not be
part of such lease, and will be the subject of such terms as may be negotiated
by USI.
(c) The lease term for Module C will be for an initial period of five
years, and USI will have the right to extend the lease for up to two additional
five year periods under terms to be stated in the lease agreement. USI will
occupy the land for this Module as its principal place of business, and will
utilize this land for its production facility.
2.3 The Venturers shall each cooperate to build out this land as USI's
production facility as quickly and efficiently as commercially reasonable,
provided however that this Paragraph 2.3 shall not impose any obligation to
provide additional funding beyond that expressly required under this Foundry
Venture Agreement.
3. TECHNOLOGY TRANSFER AND MANAGERIAL SUPPORT
Promptly after USI's formation, UMC and USI will enter into a mutually
agreeable Technology Transfer and License Agreement pursuant to which UMC will
transfer to USI for
2.
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use in USI facilities the Licensed Process (as defined in the Technology
Transfer and License Agreement) and related manufacturing know-how. The
execution of the Technology Transfer and License Agreement is an essential
aspect of the relationship contemplated under this Foundry Venture Agreement.
4. INVESTMENT COMMITMENTS & STOCK PURCHASE AND SHAREHOLDER
AGREEMENTS & REPRESENTATION ON BOARD OF DIRECTORS
4.1 The Venturers will purchase shares in USI as follows:
(a) The total capital of USI shall be USD $1 Billion: USD $600 million
will be by investment in standard shares, and, as may be approved by the USI
board of directors, USD $400 million (plus any other additional capital
required) will be by way of participation in UMC credit facilities and/or bank
loans, and/or will be by way of other debt and/or equity to the extent such
other debt and equity is approved in writing by each of the Venturers.
Notwithstanding anything to the contrary, (i) UMC shall not be required to
provide participation on behalf of USI in UMC's credit facilities in any amount
in excess of USD $400 million, and (ii) provided further that, to the extent
demanded by the lender and subject to the requirements of the law, UMC shall
guarantee such bank loans made directly to USI but only so long as and to the
extent that the total USI capital financed by way of participation in credit
facilities, bank loans, debt and/or such other equity (excluding the investment
stated in the table of paragraph 4.1(b) below) is less than and/or equal to USD
$410 million.
(b) The Venturers will invest according to the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
$ investment
represented by
Standard standard share
share % (USD millions) Technical share %
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<S> <C> <C> <C>
SanDisk 10% $60M 0%
- --------------------------------------------------------------------------------
OtherVen TBD% $TBD 0%
- --------------------------------------------------------------------------------
UMC, UMC Affiliates* 40% $240M 15%
USI employees, UMC
employees** & R.O.C.
financial institutions
- --------------------------------------------------------------------------------
Total shareholding 85% $510M 15%
- --------------------------------------------------------------------------------
</TABLE>
*For purposes of this Foundry Venture Agreement, "UMC Affiliates" shall mean
those entities: (i) nominated by UMC and approved by the Venturers in writing,
(ii) which UMC directly and/or indirectly controls, and/or (iii) in which UMC
directly or indirectly owns a majority interest.
3.
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**UMC employees who intend to become (and who later become) regular employees of
USI will be among the USI shareholders pursuant to this table. The UMC employees
and the eligible USI employees shall be required to pay the value shown in this
table for their standard shares.
(c) The Venturers shall pay in cash for their standard shares as
follows:
(i) twenty-five percent (25%) to be paid in full on the later of
September 15, 1995, or when the appropriate governmental approvals for
the formation of USI have been obtained;
(ii) fifty percent (50%) to be paid in full on or before the start of
clean room construction; and
(iii) the remainder, twenty-five percent (25%), to be paid in full on or
before the start of fab production ramp-up.
(d) Subject to the requirements of law and pursuant to the applicable
statutory and regulatory rules, the standard shares of the Venturers, of the UMC
Affiliates, of the UMC employees, and of the USI employees as shown in paragraph
4.1(b) above shall vest upon payment for the shares involved; UMC's technical
shares shall vest upon completion of first silicon for any process licensed from
UMC having feature sizes of 0.35u or less; the shares of UMC Affiliates (to the
extent fully paid) shall be issued as UMC requests; and the shares of UMC and
UMC Affiliates shall be transferrable amongst UMC and UMC Affiliates without the
necessity of USI's, SanDisk's, and/or OtherVen's prior written consent.
(e) The Venturers' shares shall be common stock, and, to the fullest
extent allowable under the law, will be registered in any public offering by
USI, provided that with respect to such shares, each Venturer (and all UMC
Affiliates holding such shares) must follow and comply with all requirements of
R.O.C. law and of the Taiwan Securities and Exchange Commission and of the
Taiwan Securities Exchange, including, without limitation, with respect to
stand-still, lock-up, and/or other requirements.
(f) Until USI completes a successful offering of its shares on a
recognized securities exchange, the shares of the Venturers (and of UMC
Affiliates holding such shares) in USI will not be transferable in any manner
whatsoever except with the written consent of the Venturers, provided however
that any Venturer may transfer its entire right, title and interest in USI
(including its proportionate right of first refusal for foundry capacity, the
"Foundry Rights") and other rights under the Foundry Venture Agreement and/or
Venture Agreements:
(i) once but only to the extent and only as part of a transfer of all or
substantially all of the assets, business and/or ownership of that
Venturer to a transferee subject, with respect to the Foundry Rights, to
the terms of paragraph 4.1(f)(iii) below; and/or
4.
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(ii) once to or between itself and any of its subsidiaries in which, at the
time of such transfer, the transferring Venturer owns at least 50%.
Notwithstanding anything to the contrary:
(iii) the Foundry Rights when and if transferred pursuant to Paragraph
4.1(f)(i) above shall only be exercisable with respect to the manufacture
of products which the transferring Venturer at the time of such transfer
was selling, was designing (as reflected in contemporaneous documents) or
was contemplating designing and selling (as demonstrated in its then
written business plan(s)), and all future revisions and more highly
integrated versions of such products.
(iv) if prior to the completion of a public offering of USI securities on a
recognized securities exchange, any Venturer (or UMC Affiliate holding such
shares) wishes and/or attempts to transfer its shares in USI (other than as
allowed by Paragraph 4.1(f)(i) and/or 4.1(f)(ii)) pursuant to any Court or
other order or law, or as a result of any nonconsensual action by any
authority with jurisdiction, the shares involved will be subject to a right
of first refusal as follows:
(aa) the other Venturers (the "eligible other Venturers") will have
the right to purchase the shares involved at their then fair market
value as determined by a mutually agreeable independent appraiser;
(bb) each such eligible other Venturer will have the right to
purchase such shares on a pro rata basis as determined by the ratio
of their respective shareholding percentages (which, absent any
previously permitted transfers, would be as shown in the table in
Paragraph 4.1(b) above);
(cc) if any such eligible other Venturer elects not to exercise any
portion or all of such right of first refusal within 30 days of the
independent appraisal, such portion of such right of first refusal
will be subject to exercise by the other eligible other Venturer,
and the shares involved will be subject to a right of such other
eligible other Venturer to purchase on the same terms as outlined
above; and
(dd) if the other eligible other Venturer does not commit to
purchase such shares within 60 days of the independent appraisal,
all rights under this Paragraph 4.1(f)(iv) will expire as to such
unpurchased shares.
(g) Subject to the requirements of and to the extent permissible under
R.O.C. law, to the extent that USI wishes to offer any equity beyond the USD
$600 million referred to in Paragraph 4.1(a) above, each Venturer shall have the
right of first refusal to participate in such offering in proportion to its then
current respective shareholding.
5.
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4.2 The parties shall in good faith after execution of this Foundry
Venture Agreement enter into negotiations regarding audit and information rights
to be provided to the Venturers, in order to, among other things, make timely
public disclosure of information about USI's profits, losses, and/or other
financial information reasonably required, in the view of such Venturer's
counsel and accountants, to be disclosed separately, in conjunction with, or
consolidated into, such Venturer's public quarterly, annual and/or other
reports. Such rights shall at a minimum be sufficient for such Venturers to
timely comply with their public reporting obligations, but shall not require USI
to pay for and/or incur the expenses of such matters. In the event the parties
do not reach agreement on such rights by December 15, 1995, the extent of such
rights will be decided conclusively by Price Waterhouse & Co. (Taipei office)
and a nationally recognized independent accounting firm nominated by SanDisk and
OtherVen. If the aforesaid accounting firms fail to decide such rights by
January 30, 1996, the matter shall be resolved by binding arbitration on an
expedited basis.
5. FOUNDRY CAPACITY & COMMITMENTS
Each Venturer's obligations under Paragraphs 1 to 5 of this Foundry
Venture Agreement shall be conditioned upon entry by the Venturer into a Foundry
Capacity Agreement with USI (the "Foundry Capacity Agreement") and none of the
obligations of the Venturer or of USI under those sections shall be binding
until such time as it enters such a Foundry Capacity Agreement. The terms of the
Articles of Incorporation and Bylaws of USI shall be consistent with the terms
of this Foundry Venture Agreement, and the Venture Agreements.
6. TERMINATION OF RIGHTS & PRIVILEGES
6.1 Subject to Paragraph 6.2 below, any one or more of the Venturers
and/or USI (collectively "the Parties") shall have the right to terminate the
rights of any other Party under this Foundry Venture Agreement and/or the
Venture Agreements by giving written notice of termination to that other Party
at any time upon or after:
(a) the filing by the other Party of a petition in bankruptcy or
insolvency;
(b) any adjudication that the other Party is bankrupt or insolvent;
(c) the filing by the other Party of any petition or answer seeking
reorganization, readjustment or arrangement of its business under any law
relating to bankruptcy or insolvency;
(d) the appointment of a receiver for all or substantially all of the
property of the other Party;
6.
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(e) the making by the other Party of any assignment for the benefit of
creditors; or,
(f) the institution of any proceeding for the liquidation or winding up
of the other Party's business or for the termination of its corporate charter.
Notwithstanding anything to the contrary, no termination under this Paragraph
6.1 as to such other Party shall affect the rights of any other Venturer under
this Foundry Venture Agreement and/or the Venture Agreements.
6.2 (a) Termination pursuant to Paragraph 6.1 above shall be effective
immediately upon delivery of the written notice, or in the case of airmail
notice, four days after dispatch, pursuant to Paragraph 8 below.
(b) Upon termination as to a Venturer under Paragraph 6.1 above, any
shares held by that Venturer shall be subject to purchase by the remaining
Venturers pursuant to Paragraph 4.1(f)(iv) above.
(c) Except as permitted in paragraph 4.1(f), no Venturer may transfer
its interest or right in USI in any manner to any competitor of UMC or to any
entity in the business of fabricating integrated circuits except under terms (i)
in which such Venturer first relinquishes and releases all rights to USI
capacity under this and any and all other agreements, and (ii) in which such
entity and/or competitor expressly consents in writing that they have no such
interest or right to such capacity.
6.3 USI will undertake its reasonable best efforts to implement the
Technology Road Map attached as Attachment B, and to achieve the goals described
in the USI Business Plan. In addition, and subject to the terms of this Foundry
Venture Agreement and the Venture Agreements, USI will cooperate with each
Venturer in a commercially reasonable manner to qualify products of such
Venturer under the processes involved.
7. DISPUTE RESOLUTION
7.1 The Venturers and USI shall cooperate and attempt in good faith to
resolve any and all disputes arising out of and/or relating to this Foundry
Venture Agreement and/or any of the Venture Agreements. Without limiting the
foregoing, within thirty days of a written demand to meet to resolve such a
dispute, senior management with the authority to negotiate and resolve the
issues shall meet in the State of Hawaii or in some other mutually agreeable
location to discuss the issues, from time to time during the forty-five day
period following such demand (or longer if agreeable to the Venturers involved)
as reasonably requested by any party involved, and such senior management will
attempt to resolve the dispute.
7.2 Any such disputes relating to and/or arising out of this Foundry
Venture Agreement and/or any of the Venture Agreements which cannot be so
resolved will be
7.
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decided exclusively by binding arbitration under procedures which ensure
efficient and speedy resolution. Such an arbitration may be commenced by USI
and/or any Venturer involved in the dispute (i) after the expiration of the
forty-five day period following the written demand to meet to resolve the
dispute pursuant to Paragraph 7.1 above, and/or (ii) at such earlier time as any
Party involved repudiates and/or refuses to continue with its obligations to
negotiate in good faith.
7.3 The arbitration hearing will be before a panel of three neutral,
independent arbitrators. The arbitration hearing will be conducted in the State
of Hawaii, and will be in the English language (with translations and
interpretations as reasonable for the presentation of evidence and/or conduct of
the arbitration). Notwithstanding anything to the contrary, any party may apply
to any court of competent jurisdiction for interim injunctive relief as may be
allowed under applicable law with respect to irreparable harm which cannot be
avoided and/or compensated by such arbitration proceedings, without breach of
this Paragraph 7 and without any abridgment of the powers of the arbitrators.
7.4 The arbitration will be conducted under the Rules of the Asia
Pacific Arbitration Center. Notwithstanding anything to the contrary:
(a) the arbitrators will have no power to order discovery; and
(b) the arbitrators shall require pre-hearing exchange of documentary
evidence to be relied upon by each of the respective parties in their respective
cases in chief, and pre-hearing exchange of briefs, witness lists and summaries
of expected testimony.
7.5 The arbitrators will make their decision in writing; and their
decision will be binding upon the Venturers and USI and it may be entered by any
court having jurisdiction.
8. NOTICES
All notices required or permitted to be given under this Foundry Venture
Agreement and/or any of the Venture Agreements shall be in writing and be deemed
as given when delivered, or in the case of airmail, four days after dispatch,
and shall be addressed as follows and dispatched by personal delivery, by
airmail letter in any post office in the U.S. or in Taiwan, or by facsimile:
If to SanDisk:
SanDisk Corporation
140 Caspian Court
Sunnyvale CA 94089
Attention: Eli Harari, President
fax (408) 542-0503; fon (408) 542-0500
If to UMC:
8.
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United Microelectronics Corporation
No. 13 Innovation Road I
Science Based Industrial Park
Hsin Chu City, Taiwan, R.O.C.
Attention: John Hsuan, President
fax (035) 774-767; fon (035) 782-258
If to USI:
USI
No. 3 Li-Hsin Road
Science Based Industrial Park
Hsin Chu City, Taiwan, R.O.C.
Attention: President
fax (035) ; fon (035)
Any Venturer and/or USI may at any time give written notice of a change of its
address to the others.
9. MISCELLANEOUS
9.1 No Party shall be liable to the others with respect to the failure
or delay in the performance of any obligation under this Foundry Venture
Agreement and/or any of the Venture Agreements for the time of and to the extent
that such failure is caused by or the result of war, fire, flood, earthquake,
acts of god or any causes beyond the reasonable control of the Venturers and/or
USI.
9.2 No Party shall be liable to the others (i) for any special,
incidental, indirect or consequential damages; (ii) for increased costs of
obtaining substitute goods or services to the extent such increased costs are in
excess of those amounts which such Party would have been entitled to receive for
the goods and services involved had it properly performed; (iii) for loss of
use, opportunity, market potential, and/or profit, on any theory (whether
contract, tort, from third party claims or otherwise).
9.3 Except as expressly stated above and in Paragraphs 9.5 and/or 9.13
below and/or in the Venture Agreements, no Party makes any warranties or
representations (express, implied or statutory), and there are no other
warranties, representations, or indemnities, and THE PARTIES EXPRESSLY DISCLAIM
ALL SUCH OTHER WARRANTIES, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE. Without limiting the
foregoing, except as expressly stated in this Foundry Venture Agreement and/or
in any of the Venture Agreements (these "Agreements"), there are no other
representations and/or warranties concerning the subject matter of such
Agreements, and/or relating to USI of any
9.
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sort or manner, and each Party expressly agrees that it is not relying upon any
such other representations and/or warranties. Each Party has consulted with
counsel concerning such Agreements and USI, and enters into these Agreements
with full advice and understanding and accepting the risks involved.
9.4 Notwithstanding anything to the contrary (whether in the Venture
Agreements or elsewhere), nothing contained in this Foundry Venture Agreement,
in the Venture Agreements, and/or in the USI Business Plan shall be or be
construed as:
(a) a warranty or representation as to the validity, utility,
suitability or economic viability of this opportunity or of any intellectual
property or technology except as expressly stated in paragraph 9.5 below, in
Paragraph 9 of the Technology Transfer and License Agreement, and/or in
Paragraphs 5 and/or 7 of the Foundry Capacity Agreement;
(b) a warranty or representation that any manufacture, sales, use or
other disposition of products to be manufactured by USI will be free from
infringement of patents, utility models and/or design patents other than those
under which licenses have been granted hereunder and/or except as expressly
stated in paragraph 9.5 below, and/or in Paragraph 7 of the Foundry Capacity
Agreement;
(c) a warranty or representation that USI will be successful, that USI
will realize and/or fulfill any of its Business Plans, that USI will go public
or return profit to the Parties, or that the Parties will recover their
investments (for purposes of this Paragraph 9.4(c), any covenant or obligation
in these Agreements shall not be eliminated and/or excluded by reason of it also
being part of the USI Business Plan, nor shall this Paragraph 9.4(c) absolve USI
from efforts required under these Agreements to implement the USI Business
Plan);
(d) conferring any right to the other Parties to use in advertising,
publicity, or otherwise, any trademark, trade name or names of any Party, or any
contraction, abbreviation or simulation thereof; and/or
(e) conferring by implication, estoppel or otherwise, upon any Party any
license or other right under any class or type of patent, utility model or
design patent except the licenses and rights expressly granted under the Venture
Agreements.
9.5 (a) Each Venturer represents and warrants to the other Venturers and
to USI that all technology, processes, masks and other information tranferred by
that Venturer pursuant to the terms of this Foundry Venture Agreement and/or the
Venture Agreements, and/or its respective foundry relationship with USI shall be
free from any claims of infringement or violation of valid and enforceable trade
secret, trademark, copyright, and/or mask work rights of others; and that
Venturer shall defend, indemnify and hold the other Venturers and USI harmless
from and against any claims to the contrary, provided however that such
indemnifying Venturer shall receive (i) prompt written notification of any claim
for which it is providing indemnification under this Paragraph 9.5, (ii) the
right to assume, in a
10.
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prompt fashion, sole control of the defense or settlement of such claim
(provided that the indemnifying Venturer cannot commit any other Venturer and/or
USI to the payment of sums), and (iii) reasonable assistance from the
indemnified party or parties, at the indemnifying Venturer's request and expense
and provided further that if the indemnifying Venturer assumes sole control of
the defense of such claim, the indemnified party may, at its expense,
participate in such defense.
(b) USI represents and warrants to the Venturers that all technology,
processes, masks and other information transferred by it (in products or
otherwise) or used by it in any process employed in the fabrication of products
pursuant to the terms of this Foundry Venture Agreement and/or the Venture
Agreements, and/or under its respective foundry relationships with the Venturers
shall be free from any claims of infringement or violation of valid and
enforceable trade secret, trademark, copyright, and/or mask work rights of
others; and USI shall defend, indemnify and hold the Venturers harmless from and
against any claims to the contrary, provided however that USI shall receive (i)
prompt written notification of any claim for which it is providing
indemnification under this Paragraph 9.5, (ii) the right to assume, in a prompt
fashion, sole control of the defense or settlement of such claim (provided that
USI cannot commit any Venturer to the payment of sums), and (iii) reasonable
assistance from the indemnified party or parties, at USI's request and expense,
and provided further that if USI assumes sole control of the defense of such
claim, the indemnified party may, at its expense, participate in such defense.
9.6 The obligations of the Parties under Paragraphs 1 to 5 above shall
be subject to and conditioned upon funding of USI by the Venturers and upon
approval of the formation of USI and of its operation at Module C by all
required governmental authorities, including without limitation, the Science
Based Industrial Park Administration, but the obligations under the other
Paragraphs of this Agreement shall not be so conditioned. UMC shall cooperate
with USI in securing such approvals within the time contemplated under the
schedule of Attachment A. The obligations and responsibilities of the Venturers
and USI under Paragraphs 6 to 9 shall survive the expiration and/or termination
of this Foundry Venture Agreement.
9.7 (a) For purposes of these Agreements, "Confidential Information"
shall mean:
(i) any information disclosed by one party to another pursuant
to or in connection with these Agreements which is in written, graphic,
machine readable or other tangible form and is marked confidential,
proprietary, or in some other manner to indicate its confidential
nature; and
(ii) any information orally disclosed by one party to another
pursuant to or in connection with these Agreements provided that such
information is designated as confidential at the time of disclosure and
reduced to a writing delivered to the
11.
<PAGE> 12
receiving party within thirty days of the oral disclosure and detailing
the confidential information involved.
(b) Each party shall treat as confidential all Confidential Information
provided by any other party, shall not use or disclose such Confidential
Information except as contemplated in these Agreements and then only subject to
written confidentiality agreements at least as protective as those stated in
this Foundry Venture Agreement. Without limiting the above, each party shall use
at least the same procedures and degree of care which it uses to prevent the
disclosure of its confidential information of like importance and shall in no
event use less than reasonable procedures and a reasonable degree of care.
Notwithstanding the above, no party shall have obligations with respect to
Confidential Information of any other party which:
(i) Such party shows was generally known and available to the public at
the time it was disclosed, or becomes generally known and available to the
public through no fault of the receiver prior to the use and or disclosure of
such information by the receiver;
(ii) Such party shows was known to the receiver without obligation of
confidentiality at the time of disclosure as shown by written evidence in
existence at the time of disclosure;
(iii) Is disclosed with the prior written consent of the discloser;
(iv) Such party shows becomes known to the receiver without obligations
of confidentiality; or
(v) Is disclosed pursuant to the order or requirement of any court,
agency, or other governmental body having jurisdiction;
provided, however, that, prior to any such disclosure pursuant to paragraphs
9.7(b)(v) above, the Party seeking disclosure shall notify the others and take
all reasonable actions in an effort to minimize the nature and extent of such
disclosure.
(c) Each party agrees that the terms of these Agreements and the USI
Business Plan shall be treated as Confidential Information and not disclosed,
provided however that any and all parties may disclose the terms and conditions
of these Agreements and the USI Business Plan in confidence to its legal
counsel, accountants, banks, and financing sources and their advisers, or
pursuant to written confidentiality agreements having terms at least as
restrictive as those this Paragraph 9.7 in connection with an actual or proposed
merger or acquisition, and/or in connection with the enforcement of its rights
under this Foundry Venture Agreement
12.
<PAGE> 13
(d) Notwithstanding anything to the contrary, and subject to the
exceptions of Paragraph 9.7(b):
(i) any Confidential Information disclosed to UMC by a Venturer which is
marked "UMC only" (or similarly) may be used and disclosed by UMC solely in
connection with preparing and submitting the USI Business Plan and
applications for governmental approvals relating to USI but may not
otherwise be disclosed by UMC to USI or to any other Venturer;
(ii) any Confidential Information disclosed to UMC and/or to USI which
is marked as "USI Internal Only" may be disclosed by UMC to USI, but may
not be disclosed by USI to any other Venturer; and
(iii) any Confidential Information disclosed to a Venturer which is not
marked "UMC Only" and/or "USI Internal Only" (or similarly) may be
disclosed to USI and/or to any Venturer.
(e) Without limiting the foregoing, in order to facilitate exchanges of
Confidential Information amongst themselves, the Venturers contemplate they may
negotiate and execute one or more mutually satisfactory non-disclosure
agreements.
(f) The obligations of this Paragraph 9.7 shall survive the expiration
or termination of this Foundry Venture Agreement and the Venture Agreements for
a period of three (3) years after the last of them to expire and/or terminate.
In the event of any breach of this covenant, the Venturers and USI shall
promptly discuss and cooperate in good faith with respect to measures to
mitigate any harmful effect of such breach and with respect to possible
compensation to the injured party.
9.8 This Foundry Venture Agreement and the Venture Agreements are
written only in the English language, which language shall be controlling in all
respects, and all versions in any other language shall be for accommodation only
and shall not be binding upon the Venturers. All communications to be made or
given pursuant to such Agreements shall be in the English language, except as
may be required under applicable law.
9.9 This Foundry Venture Agreement and the Foundry Capacity Agreement
and matters connected with performance under any one or more of them shall be
interpreted and construed in all respects in accordance with the laws of the
State of California, provided however that all matters connected with the
purchase and formalities of stock and ownership interests in USI and the
Technology Transfer and License Agreement shall be interpreted and construed in
all respects in accordance with the laws of Taiwan, the Republic of China, all
without regard to that body of law which pertains to conflicts and/or choice of
law and excluding the UN Convention on Contracts for International Sales of
Goods.
13.
<PAGE> 14
9.10 If any provision of this Foundry Venture Agreement and/or the
Venture Agreements is held wholly or partially unenforceable for any reason,
such unenforceability shall not affect the enforceability of the remaining
provisions of such Agreements, and all provisions of such Agreements shall be
construed so as to preserve enforceability.
9.11 (a) The terms and conditions contained in the USI Business Plan,
this Foundry Venture Agreement and/or the Venture Agreements and the documents
attached thereto (the "Plan and Agreements") shall supersede all previous
communications, understandings, representations and/or agreements, oral and/or
written, between the Venturers with respect to the subject matter hereof;
(b) There are no other such agreements, understandings and/or writings
except as stated above;
(c) No agreement or understanding varying, modifying or extending the
terms and/or conditions of such Plan and Agreements, nor any custom, practice,
course of dealing or conduct of the parties, shall be binding upon any Venturer
unless in writing and signed by a duly authorized officer or representative of
each Party to be bound; provided however that a Venturer and USI may agree to
ordering procedures which are established by them pursuant to mutual agreement;
and
(d) Except as expressly allowed under this Foundry Venture Agreement, no
party may transfer or assign its rights or delegate its duties under this
Agreement, except with the written consent of all the Parties to the agreement
involved.
9.12 No licenses, other than the licenses expressly granted under these
Agreements, are granted under these Agreements, by implication, estoppel or
otherwise. Nothing in these Agreements shall be construed as conferring any
license, right to use or other right with respect to any trademark or trade name
of any party. Each party may make reasonable reference by name to any other
party provided that the written consent of that other has been obtained in
advance.
9.13 (a) The failure of any party to enforce, or the delay by any party
in enforcing any of its rights under these Agreements shall not be deemed a
waiver or a containing waiver of such rights or a modification of these
Agreements, and such party may, within the time provided by applicable law,
commence appropriate proceedings to enforce any and/or all such rights.
(b) The section headings in these Agreements are for convenience only
and do not define or limit nor will they be used to construe the content of such
sections.
(c) Each party expressly represents and warrants that it is free to
enter into these Agreements and that such party has not made and will not make
any creations or commitments in conflict with the provisions of these
Agreements, or which reasonably might
14.
<PAGE> 15
interfere with the full and complete performance of such party's obligations
under these Agreements. Each party further represents and warrants that these
Agreements, and the performance of its respective obligations under these
Agreements, and the consummation of the transactions contemplated under these
Agreements have been duly authorized and approved by all necessary action, and
all necessary consents or permits have been obtained, and neither the execution
of these Agreements nor the performance of the party's respective obligations
under these agreements will violate any term or provision of any valid contract
or agreement to which such party is subject and/or by which such party is bound.
No further actions or consents are necessary to make these Agreements valid
binding contracts, enforceable against the respective parties in accordance with
their terms.
9.14 Nothing in this Foundry Venture Agreement and/or in the Venture
Agreements shall be deemed to create a general or limited partnership or an
agency relationship between the Venturers and/or USI, and the Venturers and USI
are independent companies. The Venturers intend to become shareholders of USI
and thereafter purchase products manufactured from USI in an arm's length
vendor-purchaser relationship, and, in the case of USI and UMC, in an arm's
length vendor-purchaser, lessor-lessee, and licensor-licensee relationship. No
party shall be entitled to act on behalf of and/or to bind any one or more of
the others.
9.15 The Venturers will cause USI to execute promptly after its
formation the Foundry Capacity Agreement, Technology Transfer and License
Agreement, and this Foundry Venture Agreement, to confirm USI's agreement to
abide by the terms in such agreements which are binding upon USI.
IN WITNESS WHEREOF, the Venturers have caused this Foundry Venture Agreement to
be signed below by their respective duly authorized officers.
SANDISK CORPORATION
/s/ ELI HARARI
-------------------------------------
Eli Harari
UNITED MICROELECTRONICS
CORPORATION
/s/ I.D. LIU
-------------------------------------
I.D. Liu, President First Group
15.
<PAGE> 16
The attached Written Assurances re: Foundry Venture Agreement and May 28, 1997
letter to Eli Harari are entered as part of this foundry agreement.
16.
<PAGE> 17
ACCORDING TO SECTION 232.304 OF REGISTRATION S-T, THE FOLLOWING NARRATIVE
DESCRIPTIONS REPRESENT A GOOD FAITH EFFORT TO FAIRLY AND ACCURATELY DESCRIBE
THE GRAPHICAL IMAGE(S) ATTACHED TO THE PAPER FORMAT OF THIS AGREEMENT.
I. Schedule of USI Plant Construction
This graphical image represents the project schedule for building up the
new fabrication facility and for producing wafers from this facility. The
time-line represented in the graphical image begins at March 1996 and ends at
December 1998. The milestones represented on this graphical image are the
following: "Building Construction," "Office Partitions," "Facility
Installation," Clean Room Installation," "FAB Equipment Installation," "Pilot,"
and "Production Ramp-up." The time-lines for each milestone are confidential
information for which Confidential Treatment has been requested. Confidential
portions omitted have been filed with the Commission.
II. USI Production Ramp-up Schedules
The first line graph represents the projected wafer output versus time
for the new venture. The abscissa of the line graph represents time, beginning
at April 1998 and ending March 1999 (the graph uses a monthly time line). The
ordinate of the line graph represents wafer output of the new venture.
Therefore, the line graph represents the projected wafer output of the new
venture versus time. The values on the graph are confidential information for
which Confidential Treatment has been requested. Confidential portions omitted
have been filed with the Commission.
The second line graph describes the same information as the first with
the exception that it is based on a quarterly schedule (more specifically, the
quarters of years 1998 and 1999) rather than a monthly schedule as in the first
line graph.
III. Fabrication Facility Layout
This graphical image represents the plat of the research park in which
the new fabrication facility is located. The plat is written in Chinese. In
English, the plat shows the location of Modules C and D with respect to two
major roads and with respect to each other. The location and situation of
Modules C and D as well as the writing describing the map are confidential
information for which Confidential Treatment has been requested. Confidential
portions omitted have been filed with the Commission.
<PAGE> 1
EXHIBIT 10.24
UNITED MICROELECTRONICS CORPORATION
No. 13 Innovation Road I
Science Based Industrial Park
Hsin Chu City, Taiwan, R.O.C.
telephone (035) 782-258; facsimile (035) 774-767
September 13, 1995
WRITTEN ASSURANCES RE: FOUNDRY VENTURE AGREEMENT
At the suggestion of several venturers, UMC is pleased to confirm in
writing the following points concerning the Foundry Venture Agreement and the
Foundry Capacity Agreement. Where these commitments require the consent of
FabVen, UMC will exercise its influence and commit best faith efforts to secure
that consent.
1. ALL VENTURERS ARE OFFERED EQUAL TERMS. As stated in the Foundry
Venture Agreement, the terms of investment and of wafer purchases to each
Venturer under the Foundry Venture Agreement and under the Foundry Capacity
Agreement are the same, except for the percentages of ownership and capacity
rights of each Venturer [capacity rights for Venturers are equal to 1.25 times
the percentage of ownership]; provided however that Venturers who commit to a
minimum of [*] will have the right to appoint a representative to a seat on the
board of directors for the initial three year term.
2. ACCESS TO BOARD MEETINGS & BOARD MEMBERS. Subject to the obligations
of Confidentiality imposed under the Foundry Venture Agreement, the Foundry
Capacity Agreement, and/or the Technology Transfer and License Agreement
("Venture Agreements"), and to the requirements of law, each Venturer will be
given reasonable notice of meetings of the board of directors of FabVen, and the
opportunity to have a representative attend such meetings and communicate at
such meetings with the board members in connection with matters concerning
FabVen.
3. MEMBERSHIP ON FABVEN BOARD--FIRST THREE YEARS AND
BEYOND. The board of directors of FabVen will be comprised of seven members. Of
these seven members, four will be appointed by UMC for an initial three year
term, one will be appointed by the R.O.C. financial institutions which invest in
FabVen for an initial three year term, and the other two board members will be
appointed for an initial three year term by the Venturers other than UMC under
procedures to be mutually agreed upon by such Venturers, provided that any
Venturer who holds at least [*] of the shares of FabVen will be entitled to
appoint one of such other two board members. After the initial three year term,
the board will be elected by the shareholders pursuant to R.O.C. law in the
manner provided in the bylaws.
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 2
4. STRATEGIC ACTIONS SUBJECT TO SPECIAL BOARD APPROVALS.
Subject to the other requirements of the law, and for so long as the Venturer
involved remains in compliance with all payment obligations under the Foundry
Venture Agreement and such Venturer retains at least [*] of the ownership
percentage in FabVen as listed in Paragraph 4.1 of the Foundry Venture
Agreement, all board actions directly deciding strategic technical issues
[including without limitation, the type of process technology (such as that used
in the manufacture of logic, SRAM, DRAM, EPROM, EEPROM, and/or FLASH) to be
developed, implemented and/or offered by FabVen, the amendment of the Technical
Transfer and License Agreement, and/or the transfer or licensing of technology
developed by FabVen to others (except as contemplated under the Technology
Transfer and License Agreement)] shall not be effective unless and until
approved by at least one of the board members designated by the Venturers other
than UMC, and (ii) all board actions authorizing liquidation of FabVen, merger
of FabVen, sale of all or substantially all of FabVen or of FabVen's assets,
and/or the offering of any equity (except pursuant to a public offering of
FabVen shares on a recognized securities exchange) shall not be effective unless
and until approved by both board members designated by the non-UMC Venturers
under the terms of the Foundry Venture Agreement.
5. NO UNAUTHORIZED CHANGES TO TECHNOLOGY ROADMAP. For so
long as the Venturer involved remains in compliance with all payment obligations
under the Foundry Venture Agreement and such Venturer retains at least [*] of
the ownership percentage as listed in Paragraph 4.1 of the Foundry Venture
Agreement, FabVen shall not make any material changes to the Technology Road Map
as shown in Attachment A which affect such Venturer's existing and/or planned
production without the consent of that Venturer.
6. CONDITIONAL "PUT" RIGHT. To the extent that FabVen fails (i) to
qualify silicon manufactured with [*] and [*] processes each having a minimum of
0.35u feature sizes under a test vehicle to be agreed upon by FabVen, UMC and a
majority of the Venturers other than UMC (including without limitation, a test
vehicle from a Venturer, provided that such qualification under a test vehicle
from a Venturer is commercially reasonable and within industry standards)
("First Qualification") on or before the end of December 31, 1998, and/or (ii)
to achieve the ability to manufacture a minimum of [*] wafer outs per month for
such [*] process and [*] wafer outs per month for such [*] process on or before
December 31, 1998 for reasons attributable to UMC, FabVen and/or the Licensed
Processes, the Venturers (one or more of them) will have the option to sell
their shares (and their corresponding rights to capacity in FabVen) to UMC for
the total amount they paid for such shares by sending written demand to UMC as
follows:
(a) No such demand shall be effective unless it is made on or
before April 1, 1999; and
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
2.
<PAGE> 3
(b) Within ninety days of such written demand from the Venturer
involved, UMC will buy the shares (and capacity rights) involved, and/or arrange
another buyer willing to purchase such shares (and capacity rights) under the
terms and conditions as stated in this heading.
7. RELEASE OF SHARE TRANSFER RESTRICTION IF NO PUBLIC
OFFERING. To the extent that FabVen does not offer its shares in a public
offering on a recognized securities exchange on or before December 31, 2006, and
notwithstanding anything to the contrary, each Venturer other than UMC will have
the right to transfer its entire right and interests in FabVen as follows:
(a) The Venturer wishing to transfer ("Transferring Venturer")
shall send the other Venturers (including UMC) written notice of its intention
to transfer, stating in such notice the general terms and payment contemplated
by such Transferring Venturer;
(b) Within thirty days (the "Transfer Notice Period") of such
notice, any one or more such other Venturers may send a written offer to
purchase such Transferring Venturer's interest under terms to be stated in the
written offer [for purposes of this Paragraph, each other Venturer making such
an offer shall be referred to as the "Offering Venturer"];
(c) If no other Venturer makes such an offer within the Transfer
Notice Period, then, subject to subpart (g) below, the Transferring Venturer
shall be allowed to transfer its entire interest and ownership in FabVen to
other purchasers;
(d) If any Offering Venturer makes such an offer within the
Transfer Notice Period, the Transferring Venturer and the Offering Venturer will
negotiate in good faith concerning each such offer for not less than thirty days
(the "Transfer Negotiation Period");
(e) If by the end of the Transfer Negotiation Period and despite
such negotiations, the Transferring Venturer has not reached agreement with the
Offering Venturer(s) for sale of the Transferring Venturer's interest, then,
subject to this Paragraph (and all of its subparts), the Transferring Venturer
shall be allowed to transfer its entire interest and ownership in FabVen to
other purchasers;
(f) Notwithstanding anything to the contrary, no Transferring
Venturer shall be allowed to accept from any third party any offer with price
and terms, taken together, which are less favorable than last offered in writing
by an Offering Venturer during the Transfer Notice and/or Transfer Negotiation
Periods, unless such Transferring Venturer first offers the same price terms to
such Offering Venturer in writing, and allows such Offering Venturer ten
business days to accept or reject such price and terms;
3.
<PAGE> 4
(g) Except as permitted in paragraph 4.1(f) of the Foundry
Venture Agreement and/or in Paragraph 15 of this Written Assurance, no Venturer
may transfer its interest or right in FabVen under this paragraph or otherwise
in any manner to any competitor of UMC or to any entity in the business of
fabricating integrated circuits except under terms (i) in which such Venturer
first relinquishes and releases all rights to FabVen capacity and to designate
membership on the FabVen board of directors under this and any and all other
agreements, and (ii) in which such entity and/or competitor expressly consents
in writing that they have no such interest or right to such capacity and/or
designation.
8. TECHNOLOGY TRANSFER AND LICENSE CONDITION TO FIRST PAYMENT.
Notwithstanding anything to the contrary, the execution of the Technology
Transfer and License Agreement in the form presented to the Venturers as of
September 15, 1995 shall be a condition precedent to any payment of investment
amounts pursuant to the Foundry Venture Agreement.
9. CLARIFICATION OF FAB RAMP-UP CONDITION TO THIRD
INSTALLMENT. Notwithstanding anything to the contrary, the milestone for the
third investment payment milestone shall be on or before "fab production
ramp-up" as that phrase is generally understood and interpreted in the industry.
10. USE OF INVESTMENT MONIES. Unless otherwise agreed by each
Venturer, FabVen will use all funds invested by the Venturers pursuant to
paragraph 4.1(b) of the Foundry Venture Agreement solely as outlined in and
consistent with the FabVen Business Plan.
11. RIGHTS OF FIRST REFUSAL ON SUBSEQUENT OFFERINGS. FabVen
will provide the Venturers with notice reasonable under the circumstances in
order to enable them to exercise their rights of first refusal in connection
with equity offerings pursuant to paragraph 4.1(g) of the Foundry Venture
Agreement.
12. VESTING OF TECHNICAL SHARES. UMC's technical shares will not vest
under paragraph 4.1(d) of the Foundry Venture Agreement until FabVen produces
wafers with the 0.35u process (as that phrase is defined in general industry
usage) with sufficient yield to be recognized as "production ready" within
general industry usage.
13. AUDIT RIGHTS. The specific wording of the provisions contemplated
under paragraph 4.2 of the Foundry Venture Agreement with respect audit rights
and financial information will be as stated by Price Waterhouse, with their
commitment to prepare the reports as promptly as possible under the
circumstances. The exact language for the audit rights will be modeled on
whatever Price Waterhouse and the other accountants agree upon in connection
with the joint venture announced with UMC, Alliance and S3. Currently, it is
contemplated that the financials will be prepared in a manner consistent with
that imposed on U.S. public companies for minority interests.
4.
<PAGE> 5
14. TERMS FOR RIGHTS OF FIRST REFUSAL UNDER PARAGRAPH
4.1(f)(iv). The rights of first refusal under Paragraph 4.1(f)(iv) of the
Foundry Venture Agreement are intended to extend to and benefit all other
eligible Venturers. To avoid any ambiguity, 4.1(f)(iv)(cc) and 4.1(f)(iv)(dd)
are to be interpreted as follows:
(cc) if any such eligible other Venturer elects not to exercise
any portion or all of such right of first refusal within 30 days
of the independent appraisal, such portion of such right of first
refusal will be subject to exercise by the other eligible other
Venturers in proportion to their then existing shareholdings in
FabVen, and the shares involved will be subject to a right of
such other eligible other Venturers to purchase on the same terms
as outlined above; and
(dd) if any such other eligible other Venturer does not commit to
purchase such shares within 60 days of the independent appraisal,
all rights under this Paragraph 4.1(f)(iv) will expire as to such
unpurchased shares.
15. TRANSFERS OF SHARES AFTER PUBLIC OFFERING. Nothing in
Paragraph 6.2(c)(i) of the Foundry Venture Agreement or elsewhere shall prohibit
a Venturer from offering and/or selling its shares in FabVen on the public
market to a competitor of UMC, provided however that such competitor must
relinquish all rights to representation and access to Board information under
the Foundry Venture Agreement and under this Written Assurance, and provided
that the restrictions of Paragraph 6.2(c)(ii) of the Foundry Venture Agreement
and of Paragraph 7 of this Written Assurance shall still apply, and provided
further that the other restrictions concerning transfers of capacity and
reductions in capacity on a proportional basis with reductions in ownership will
also apply.
16. TRANSFERS OF CAPACITY AMONGST VENTURERS. Notwithstanding anything
to the contrary, the Venturers in Module C may each transfer their respective
capacities (whether or not previously forecast) as stated in Paragraph 2.1 of
the Foundry Capacity Agreement to and between one another by written notice to
FabVen and the other Venturers, provided that such written notice must state the
capacity amounts so transferred and the months in which such transfer will apply
and provided that FabVen's consent (which must not be unreasonably withheld)
shall be required for a transfer of quantities previously committed under
Paragraph 2.3(b) of the Foundry Capacity Agreement. To the extent that FabVen
receives such written notices forty-five or more days prior to the beginning of
each month in which such capacity is to be transferred, such capacity will be
treated as if allocated to the Venturer to whom it has been transferred for all
purposes for the period of the transfer involved, including, without limitation,
for purposes of forecasts, commitments, and the right of FabVen to commit to
others any capacity unexercised by the Venturers.
17. ONE YEAR WARRANTY. The warranty period as stated in Paragraph 5.1
of the Foundry Capacity Agreement, and the claim period as stated in Paragraph
5.3 of the Foundry Capacity Agreement shall each be one year.
5.
<PAGE> 6
18. CLARIFICATION OF PARAGRAPH 5.4 OF THE FOUNDRY CAPACITY AGREEMENT.
The limitations of paragraph 5.4 of the Foundry Capacity Agreement are intended
to limit the remedies under the Warranty provisions, Section 5 of the Foundry
Capacity Agreement. Thus, the Paragraph will be understood and interpreted as
follows:
THIS PARAGRAPH 5.4 STATES THE ONLY AND EXCLUSIVE REMEDY FOR ANY AND ALL CLAIMS
MADE AGAINST FABVEN UNDER THIS SECTION 5 OF THIS FOUNDRY CAPACITY AGREEMENT.
19. CONFIRMATION OF "COVER" REMEDY. To the extent an intentional breach
by FabVen of its obligations concerning wafer start and/or delivery under the
Foundry Capacity Agreement results in a delay of more than 60 days in delivery
of Wafers to a Venturer, then, notwithstanding anything to the contrary, at the
election of the Venturer, FabVen will compensate such Venturer for reasonable
damages of such Venturer in securing substitute or cover Wafers for those
involved in the breach, subject to the limitation stated below. In addition, to
the extent that FabVen breaches its warranties under Section 5 of the Foundry
Capacity Agreement, and fails, for reasons attributable to a breach by FabVen or
the Licensed Process to correct such breach after two successive attempts to do
so, then, at the election of the Venturer, FabVen will compensate such Venturer
for reasonable damages of such Venturer in securing substitute or cover Wafers
for those involved in the breach, subject to the limitation stated below.
Notwithstanding anything to the contrary, for purposes of this commitment in
Paragraph 19 of this Written Assurance, the recoverable substitute and/or cover
damages shall be (i) the reasonable and necessary costs to replace mask sets for
the products involved, together with (ii) the difference between (aa) the price
which the Venturer would have paid for the Wafers had FabVen fully performed
(the "contract price"), and (bb) all direct and reasonable costs (up to a
maximum of [*] of the contract price) incurred by the Venturer in securing
substitutes and/or cover.
20. LEASE TERM AND LEASEHOLD IMPROVEMENTS. Notwithstanding anything to
the contrary under any local real estate or other law, custom or practice, UMC
will consider all investments, improvements and fixtures purchased by FabVen to
be the property of FabVen, and UMC will not request higher rents under the lease
of Module C as a result of any such investment, improvement and/or fixture. In
addition, at the request of FabVen, UMC will negotiate in good faith with FabVen
over additional extensions of the lease term beyond the fifteen year period
contemplated under the Foundry Venture Agreement, and, to the extent that UMC
retains the underlying right to do so, UMC will renew the lease to FabVen for
the land of Module C for subsequent five year terms continuing until the term
(or partial term) ending August 31, 2044. Without limiting the terms of the
Foundry Venture Agreement, the lease rate for the land for Module C will be
proportional to the amount paid by UMC to the Park Administration for the
respective square footage involved, plus a reasonable amount to cover overhead
directly related to the lease (not to exceed [*] of the rate for the respective
share).
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
6.
<PAGE> 7
21. CONTINUED ASSISTANCE BY UMC. Notwithstanding anything to the
contrary, UMC will continue to provide technical assistance to FabVen with
respect to the Licensed Processes to the extent and for the period reasonably
necessary to permit each Venturer to qualify its products on each Licensed
Process which is suitable for the production of such products. In addition, UMC
will make good faith efforts to improve and develop UMC technology so as to
enable UMC to provide that technology to be provided to FabVen by UMC as shown
in the Technology RoadMap.
22. CHOICE OF LAW--NO "HIDDEN" MEANINGS. To the extent any aspect of
Taiwan law purports to alter the express meaning of any term of the Technology
Transfer and License Agreement, such term will not be governed by Taiwan law,
but instead will be governed by California law so as to give effect to the
express intention of the parties as stated in that agreement.
23. CONFIRMATION OF SCOPE OF LICENSE. All licenses granted and/or to be
granted under the Technology Transfer and License Agreement are intended to
include rights to import, to offer to sell, and to otherwise dispose of Wafers,
Die and product made using the Wafers made, together with all other rights
stated.
24. NO KNOWN INFRINGEMENTS--UMC. UMC represents and warrants to the
Venturers and to FabVen that UMC has no actual knowledge that the Licensed
Process (as defined in the Technology Transfer and License Agreement) infringes
any Patent Claims (as defined below).
25. NO KNOWN INFRINGEMENTS--FABVEN. FabVen represents to each of the
Venturers that, to its or UMC's actual knowledge as of August 29, 1995, the
technology, processes, masks and other information transferred or licensed to
FabVen under the Technology Transfer and License Agreement or otherwise used in
the manufacture of products pursuant to the terms of this Foundry Venture
Agreement and/or the Venture Agreements will not infringe any valid patent
rights enforceable under R.O.C. and/or U.S. law ("Patent Claims"), provided
however that "Patent Claims" shall not include claims arising out of and/or in
connection with patents licensed to UMC by third parties as of August 29, 1995.
FabVen shall indemnify and hold harmless each of the Venturers from and against
any such Patent Claims (i) to the extent arising out of a breach of this
representation, and/or (ii) to the extent and proportional to any claim that
such Venturer is liable as a direct and/or indirect result (aa) of its execution
of this Foundry Venture Agreement or any of the Venture Agreements, and/or (bb)
of its investment in FabVen and/or any actions under such agreements on any
agency, express or implied partnership or joint venture, respondent superior,
piercing the corporate veil, conspiracy or other legal theory whereby liability
is asserted against such Venturer for or on account of actions of FabVen. Under
no circumstances shall FabVen have any obligation under this Paragraph with
respect to any Venturer who conspires and/or cooperates, other than pursuant to
process of law, with the person raising the Patent Claim for which indemnity is
sought, with respect to such Patent
7.
<PAGE> 8
Claim. Notwithstanding anything to the contrary, and except for breaches of the
representation of FabVen in the first sentence of this Paragraph, FabVen will
not indemnify or hold any Venturer harmless from or against any Patent Claim to
the extent arising out of the manufacture for such Venturer and/or the purchase,
use and/or sale of products by that Venturer, provided however that with respect
to such Patent Claims the Venturer shall be entitled to the same replace or
refund remedy as is set forth in Paragraph 5.4 of the Foundry Capacity Agreement
with respect to defectively manufactured product, provided however that unless
otherwise agreed, replacement product shall not satisfy FabVen's obligations
under this Paragraph 25 unless that replacement is non-infringing.
26. CLARIFICATION OF PURPOSE. As is clear from the documents involved,
FabVen shall be in the business of fabricating integrated circuits and
developing related processes and know-how. In doing so, FabVen will sell Wafers
to the Venturers and others as described in more detail in the Foundry Capacity
Agreements.
27. CONFIRMATION OF COMMITMENTS BY FABVEN. FabVen will undertake its
reasonable best efforts to implement the Technology Road Map attached to the
Foundry Venture Agreement as Attachment A, to achieve the goals described in
the FabCo Business Plan, and to achieve the [*] wafer out minimums with respect
to each of the [*] and the [*] processes described in Paragraph 6 above. In
addition, and subject to the terms of this Foundry Venture Agreement,
the Foundry Capacity Agreement and the Technology Transfer and License
Agreement, FabVen will cooperate with each Venturer in a commercially reasonable
manner to qualify products of such Venturer under the processes involved.
28. LIMITED DISCOVERY IN CONNECTION WITH ARBITRATION. Notwithstanding
anything to the contrary in the Foundry Venture Agreement, the arbitrators will
have the power to require discovery in connection with any dispute within their
jurisdiction pursuant to the Federal Rules of Civil Procedure to the extent they
find such discovery necessary to achieve a fair and equitable result, and
subject to reasonable orders from the arbitrators to minimize the burdens
involved and to focus the discovery on those areas necessary. All reasonable
costs of such discovery (including attorneys' fees) incurred by a party which
prevails in the arbitration in connection with the issue involved in the
discovery will be recoverable by that party against the party which requested
the discovery.
29. CONFIRMATION OF OBLIGATIONS CONCERNING PROPRIETARY PROCESSES.
Without limiting the obligations under the confidentiality provisions
of the Foundry Venture Agreement, and at the written request of a Venturer,
FabVen will treat as confidential all processes provided by a Venturer which are
designated by that Venturer as "Confidential" under the Foundry Venture
Agreement, and, without the written consent of the Venturer which provided the
process, FabVen shall not use or otherwise disclose any such process for any
purpose other than the fabrication of Wafers for such Venturer.
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
8.
<PAGE> 9
30. RATIFICATION BY FABVEN. UMC shall exert best faith efforts to have
FabVen ratify in writing the commitments and obligations under this Written
Assurance which apply to FabVen.
31. APPROPRIATE PUBLIC OFFERING ROADMAP. Promptly upon incorporation
of FabVen, the parties will use reasonable best efforts to pursue discussions
with mutually acceptable investment bankers or other appropriate people to
attempt to establish the appropriate roadmap to an initial public offering.
32. APPROPRIATE RESOLUTION MECHANISM FOR DISPUTES. Promptly upon
incorporation of FabVen, the parties will use reasonable best efforts to discuss
and evaluate dispute and conflict resolution mechanisms and procedures in an
attempt to anticipate and hopefully resolve matters.
9.
<PAGE> 10
We request that each Venturer countersign this Written Assurance below
to signify their approval and assent to its terms, and to confirm that we each
will hold this Written Assurance as an integral and material part of our Foundry
Venture Agreements.
Yours sincerely,
/s/ JOHN HSUAN
--------------------------
John Hsuan, President
AGREED ON BEHALF OF
- -------------------------------
/s/ ELI HARARI
- -------------------------------
Name of Venturer
As of September _____, 1995
SanDisk
- -------------------------------
Authorized signature
RATIFIED BY FABVEN
/s/ I.D. LIU
- -------------------------------
Authorized signature
10.
<PAGE> 11
ACCORDING TO SECTION 232.304 OF REGISTRATION S-T, THE FOLLOWING NARRATIVE
DESCRIPTIONS REPRESENT A GOOD FAITH EFFORT TO FAIRLY AND ACCURATELY DESCRIBE
THE GRAPHICAL IMAGE(S) ATTACHED TO THE PAPER FORMAT OF THIS AGREEMENT.
I. USI Technology Transfer Schedule
This graphical image represents the project schedule for decreasing the
production line widths of the new fabrication facility. The time-line
represented in the graphical image begins at the first quarter of 1998 and ends
at the third quarter of 1999. The milestones represented on this graphical image
are confidential information for which Confidential Treatment has been
requested. Confidential portions omitted have been filed with the Commission.
<PAGE> 1
EXHIBIT 10.25
May 28, 1997
Eli Harari
SanDisk Corporation
140 Caspian Court
Sunnyvale, CA 94089
Dear Eli:
On behalf of UMC and USI, I am pleased to confirm our arrangements with
respect to payment installments, and wafer capacity/pricing, in connection with
the investment by SanDisk in USI. In particular, and conditioned upon SanDisk's
signatures on the Foundry Venture and Foundry Capacity Agreements for a total
investment of USD $45 Million in USI, we agree:
1. PAYMENTS SCHEDULE AND TERMS:
SanDisk will be permitted to make its investment in two parts with two
payment dates. Although our current target is for SanDisk to acquire
approximately 10% of USI, the exact number of shares at each payment date will
be calculated based upon then current exchange rates, with the statutory per
share price of NTD $10.
As discussed, the deadline for SanDisk's first payment of USD $22.5
Million will be set for the closing of USI's second installment: June 30, 1997.
Upon receipt of this first payment, USI will issue to SanDisk the number of
shares which that sum will purchase based upon the per share price of NTD $10.
SanDisk will pay its second payment in U.S. Dollars on or before April
1, 1998. As I described, the per share price for that second payment date will
be equal to NTD $10 plus interest from June 30, 1997 calculated at a rate of
8.5% per annum. Under this approach, the per share price will be set in an
amount which is greater than NTD $10, and the number of shares will depend upon
the exchange rate as of the date of payment. At least sixty days before this
second due date, our finance group will send a calculation of the amount needed
in NTD for SanDisk to bring its total investment up to 10% of the shares of USI.
This should permit SanDisk to plan its payment in USD, and to hedge the dollars
involved against adverse foreign exchange risks should you wish to do so.
As discussed, although SanDisk will not be able to pay its entire amount
on June 30, 1997, USI must receive all funds needed to close its scheduled
second installment. Accordingly,
<PAGE> 2
at the closing of USI's second installment, UMC will pay for and receive the
shares represented by the shortfall in SanDisk's first payment. UMC will then
sell those shares to SanDisk on April 1, 1998, upon receipt of SanDisk's second
payment in the amount calculated as described above. As we mentioned, SanDisk
will be responsible for any incidental and/or transfer taxes which may be
levied.
Unfortunately, we cannot accept SanDisk's proposal that we reduce the
interest rate: UMC is a publicly held company, and our shareholders and
supervisors will not permit a lower rate of return. In addition, other Venturers
who have requested similar extensions of payment times have paid this same rate,
and UMC committed we would afford our venturers equal treatment. As a result, we
are satisfied these terms are fair to all, and hope that you will understand the
constraints we face.
2. COMMITMENT TO PROPORTIONATE SHARE OF [*] PER MONTH WAFER OUT CAPACITY
UMC, USI, and the other Venturers in USI do not presently anticipate
there will be any need for the third installment payment (as described in the
Foundry Venture Agreement) in order for USI to ramp its capacity to [*] wafer
starts per month. Accordingly, and conditioned upon SanDisk acquiring and
holding the shares involved in its investment as described above, we promise
that SanDisk will not be required to make any additional investment in USI
beyond the amounts committed under item 1 above: (i) in order to preserve its
right of first refusal with respect to proportional capacity in that amount, or
(ii) in order to retain a seat on the board of directors during the first term
(i.e., during the first three years).
3. BRIDGE CAPACITY & PRICING
UMC will [*]. As discussed, these amounts will be conditioned upon
receipt of appropriate written forecasts and purchase orders from SanDisk for
the amounts involved pursuant to our standard foundry forecast and order
procedures. These procedures are outlined generally in the Foundry Capacity
Agreement. As discussed, this commitment [*]. Thus, the capacity amounts offered
under this arrangement will serve to discharge the then applicable rights of
first refusal for capacity from USI under the Foundry Venture and Foundry
Capacity Agreements.
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
2.
<PAGE> 3
[*] also agreed to the following pricing for the wafers included within this
bridge capacity commitment for [*] (i.e., substantially the [*]), [*] SanDisk
wafer with target D.D. [*]:
- --------------------------------------------------------------------------------
[*] [*] [*] [*]
- --------------------------------------------------------------------------------
Wafer Price [*] [*] [*] [*]
(USD/wafer)
- --------------------------------------------------------------------------------
We will of course negotiate in good faith for competitive pricing for any
additional process steps and/or wafers.
4. CONDITIONAL PUT RIGHTS--IF SANDISK PROCESS IS NOT QUALIFIED
In addition, [*] and USI will cooperate to bring up the processes needed
to fabricate wafers on behalf of SanDisk in as prompt a manner as is
commercially and technically practicable. We appreciate that SanDisk has some
unique processing requirements, and that our ability to meet those requirements
is essential to SanDisk. Accordingly, to the extent that:
(i) USI fails to qualify silicon manufactured with [*] processes having
a minimum of [*] feature sizes for at least one suitable SanDisk mask set (to be
provided by SanDisk within a reasonable time after the applicable design rules
are available) on or before the end of [*] and/or
(ii) USI fails to qualify silicon manufactured with [*] processes having
a minimum of [*] feature sizes for at least one commercially reasonable test
vehicle on or before the end of [*],
SanDisk will have the option to sell its USI shares (and its
corresponding rights to capacity in USI) to UMC for the total amount it paid for
such shares by sending written demand to UMC as follows:
(a) No such demand shall be effective unless it is made on or before
[*]; and
(b) Within ninety days of such written demand, UMC will buy the shares
(and capacity rights) involved, and/or arrange another buyer willing to purchase
such shares (and capacity rights) under the terms and conditions as stated
above.
5. UPDATED TECHNOLOGY ROADMAP
As requested, we will update the Technology Roadmap to show the
development of the SanDisk Flash processes in a manner generally following the
slides which Frank Wen showed during our meetings. In particular, we will attach
to our agreements the Updated Technology Roadmap showing the anticipated dates
and path for [*] processes, our [*] processes, and our [*] processes.
- ------------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
3.
<PAGE> 4
Once again, we at UMC believe that our foundry venture model represents
the path of future success within the industry, and a unique opportunity to meld
the design expertise of Silicon Valley fabless entrepreneurs with the
semiconductor manufacturing skill of UMC and the supporting infrastructure of
Taiwan. We therefore appreciate your interest in the USI opportunity, and I look
forward to welcoming you to the board of directors.
Yours sincerely,
Robert H.C. Tsao
4.
<PAGE> 5
ACCORDING TO SECTION 232.304 OF REGISTRATION S-T, THE FOLLOWING NARRATIVE
DESCRIPTIONS REPRESENT A GOOD FAITH EFFORT TO FAIRLY AND ACCURATELY DESCRIBE
THE GRAPHICAL IMAGE(S) ATTACHED TO THE PAPER FORMAT OF THIS AGREEMENT.
I. Foundry Bridge Supply
This graphical image represents the production scheduled forcasted by the
Company. The abscissa of the line graph represents time. The ordinate of the
line graph represents volume. The values on the graph are confidential
information for which Confidential Treatment has been requested. Confidential
portions omitted have been filed with the Commission.
