<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-7882
------
ADVANCED MICRO DEVICES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-1692300
- -------------------------------- -----------------------------------
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
One AMD Place
P. O. Box 3453
Sunnyvale, California 94088-3453
- --------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 732-2400
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ---------
The number of shares of $0.01 par value common stock outstanding as of October
31, 1996: 136,543,378.
-----------
<PAGE>
ADVANCED MICRO DEVICES, INC.
- ----------------------------
INDEX
- -----
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------------------- --------
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations--
Quarters Ended September 29, 1996
and October 1, 1995, and Nine Months
Ended September 29, 1996 and October 1, 1995 3
Condensed Consolidated Balance Sheets--
September 29, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Cash Flows--
Nine Months Ended September 29, 1996
and October 1, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9
Part II. Other Information
-----------------
Item 1. Legal Proceedings 26
Item 6. Exhibits and Reports on Form 8-K 27
Signature 32
----------
</TABLE>
<PAGE>
1. FINANCIAL INFORMATION
---------------------
ITEM 1.
-------
FINANCIAL STATEMENTS
--------------------
ADVANCED MICRO DEVICES, INC.
----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
----------------------------- --------------------------------
October 1, October 1,
September 29, 1995 September 29, 1995
1996 (Restated)* 1996 (Restated)*
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $456,862 $606,953 $1,456,151 $1,873,201
Expenses:
Cost of sales 337,692 368,359 1,086,206 989,949
Research and development 105,656 106,237 293,204 308,806
Marketing, general and administrative 90,432 102,549 276,506 311,885
-------- -------- ---------- ----------
533,780 577,145 1,655,916 1,610,640
-------- -------- ---------- ----------
Operating income (loss) (76,918) 29,808 (199,765) 262,561
Interest income and other, net 4,214 10,408 55,312 24,441
Interest expense (3,443) (315) (7,236) (1,394)
-------- -------- ---------- ----------
Income (loss) before income taxes
and equity in joint venture (76,147) 39,901 (151,689) 285,608
Provision (benefit) for income taxes (30,459) 10,212 (62,182) 92,052
-------- -------- ---------- ----------
Income (loss) before equity in joint venture (45,688) 29,689 (89,507) 193,556
Equity in net income of joint venture 7,326 12,311 41,800 13,426
-------- -------- ---------- ----------
Net income (loss) (38,362) 42,000 (47,707) 206,982
Preferred stock dividends - - - 10
-------- -------- ---------- ----------
Net income (loss) applicable to common stockholders $(38,362) $ 42,000 $ (47,707) $ 206,972
======== ======== ========== ==========
Net income (loss) per common share $ (.28) $ .30 $ (.35) $ 1.53
======== ======== ========== ==========
Shares used in per share calculation 136,082 139,288 135,019 135,451
======== ======== ========== ==========
</TABLE>
* Restated from previously released financial information to reflect the January
1996 merger with NexGen, Inc., which has been accounted for under the
pooling-of-interests method.
See accompanying notes
- ----------------------
3
<PAGE>
ADVANCED MICRO DEVICES, INC.
----------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Thousands)
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995(1)
(Unaudited) (Restated)*
------------- -------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 108,748 $ 126,316
Short-term investments 252,596 383,349
----------- -----------
Total cash, cash equivalents, and short-term investments 361,344 509,665
Accounts receivable, net 234,242 284,238
Inventories:
Raw materials 23,680 29,494
Work-in-process 97,946 68,827
Finished goods 41,863 57,665
----------- -----------
Total inventories 163,489 155,986
Deferred income taxes 149,289 147,489
Prepaid expenses and other current assets 95,287 40,564
----------- -----------
Total current assets 1,003,651 1,137,942
Property, plant, and equipment, at cost 3,231,071 2,946,901
Accumulated depreciation and amortization (1,497,804) (1,305,267)
----------- -----------
Property, plant, and equipment, net 1,733,267 1,641,634
Investment in joint venture 192,128 176,821
Other assets 124,946 122,070
----------- -----------
$ 3,053,992 $ 3,078,467
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Notes payable to banks $ 12,902 $ 26,770
Accounts payable 166,791 241,916
Accrued compensation and benefits 73,333 106,347
Accrued liabilities 107,617 103,404
Income tax payable 148 56,297
Deferred income on shipments to distributors 85,936 100,057
Current portion of long-term debt and capital lease obligations 27,711 41,642
----------- -----------
Total current liabilities 474,438 676,433
Deferred income taxes 97,407 84,607
Long-term debt and capital lease obligations, less current portion 445,489 214,965
Stockholders' equity:
Capital stock:
Common stock, par value 1,413 1,050
Capital in excess of par value 943,077 908,989
Retained earnings 1,092,168 1,192,423
----------- -----------
Total stockholders' equity 2,036,658 2,102,462
----------- -----------
$ 3,053,992 $ 3,078,467
=========== ===========
</TABLE>
(1) The information in this column was derived from the Company's Supplemental
Audited Consolidated Balance Sheet as of December 31, 1995.
* Restated from previously released financial information to reflect the
January 1996 merger with NexGen, Inc., which has been accounted for under
the pooling-of-interests method.
See accompanying notes
- ----------------------
4
<PAGE>
ADVANCED MICRO DEVICES, INC.
---------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
October 1,
September 29, 1995
1996 (Restated)*
-------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) (47,707) $ 206,982
Adjustments to reconcile net income (loss) to net cash:
provided by (used in) operating activities
Depreciation and amortization 248,457 180,622
Net (gain) loss on sale of property, plant, and equipment 6,252 (348)
Write-down of property, plant, and equipment 1,068 513
Net gain realized on sale of available-for-sale securities (41,028) (2,707)
Compensation recognized under employee stock plans 2,478 1,863
Undistributed income of joint venture (41,800) (13,426)
Changes in operating assets and liabilities:
Net increase in receivables, inventories, prepaid
expenses, and other assets (56,420) (84,792)
Payment of litigation settlement - (20,000)
Net (increase) decrease in deferred income taxes 11,000 (16,900)
Increase (decrease) in income tax payable (59,471) 56,260
Net increase (decrease) in payables and accrued liabilities (98,972) 111,232
-------------- ------------
Net cash provided by (used in) operating activities (76,143) 419,299
-------------- ------------
Cash flows from investing activities:
Purchase of property, plant, and equipment (349,132) (491,176)
Proceeds from sale of property, plant, and equipment 2,278 3,046
Purchase of available-for-sale securities (518,317) (628,079)
Proceeds from sale of available-for-sale securities 692,741 582,072
Purchase of held-to-maturity debt securities - (566,619)
Proceeds from maturities of held-to-maturity debt securities - 508,635
Investment in joint venture - (18,019)
-------------- ------------
Net cash used in investing activities (172,430) (610,140)
-------------- ------------
Cash flows from financing activities:
Proceeds from borrowings 432,760 227,828
Payments on capital lease obligations and other debt (230,377) (117,270)
Proceeds from issuance of stock 28,622 96,051
Redemption of preferred stock and stockholder rights - (2,501)
Payments of preferred stock dividends - (10)
-------------- ------------
Net cash provided by financing activities 231,005 204,098
-------------- ------------
Net increase (decrease) in cash and cash equivalents (17,568) 13,257
Cash and cash equivalents at beginning of period 126,316 85,966
-------------- ------------
Cash and cash equivalents at end of period $ 108,748 $ 99,223
============== ============
Supplemental disclosures of cash flow information:
Cash paid during the first nine months for:
Interest (net of amounts capitalized) $ - $ 2,541
============== ============
Income taxes $ 4,441 $ 53,291
============== ============
Non-cash financing activities:
Equipment capital leases $ 342 $ 19,690
============== ============
Conversion of preferred stock to common stock $ - $ 270,328
============== ============
</TABLE>
* Restated from previously released financial information to reflect the
January 1996 merger with NexGen, Inc., which has been accounted for under the
pooling-of-interest method.
See accompanying notes
- ----------------------
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. The results of operations of Advanced Micro Devices, Inc. (AMD or the
Company) for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year. In the opinion of
management, the information contained herein reflects all adjustments
necessary to make the results of operations for the interim periods a fair
statement of such operations. All such adjustments are of a normal
recurring nature.
The Company uses a 52 to 53 week fiscal year ending on the last Sunday in
December. The quarters ended September 29, 1996 and October 1, 1995
included 13 weeks. The nine months ended September 29, 1996 and October 1,
1995 included 39 and 40 weeks, respectively.
Certain prior year amounts on the Condensed Consolidated Financial
Statements have been reclassified to conform to the 1996 presentation.
2. The following is a summary of available-for-sale securities included in
cash and cash equivalents and short-term investments as of September 29,
1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash equivalents
Certificates of deposit $ 15,000
Treasury notes 2,017
Federal agency notes 32,267
Security repurchase agreements 7,400
Commercial paper 52,064
---------
Total cash equivalents $ 108,748
=========
Short-term investments
Certificates of deposit $ 63,103
Corporate notes 18,954
Treasury notes 62,671
Commercial paper 80,368
Money market auction preferred stocks 27,500
---------
Total short-term investments $ 252,596
=========
</TABLE>
As of September 29, 1996, the Company held $13.2 million of available-for-
sale equity securities with a fair value of $19.9 million which are
included in other assets. The net unrealized gain on these equity
securities is included in retained earnings. During the first nine months
of 1996, the Company sold a portion of its available-for-sale equity
securities and realized a pre-tax gain of $41.0 million.
6
<PAGE>
3. The primary net income per common share computation is based on the
weighted average number of common shares outstanding plus dilutive common
share equivalents. The primary net loss per common share computation
excludes common share equivalents as their effect on the net loss per share
would be anti-dilutive. In the first quarter of 1995, the Company called
for redemption of all outstanding shares of its Convertible Preferred
Stock. As a result, all of its outstanding preferred stock was either
redeemed or converted to the Company's common stock. Shares used in the
per share computations are as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------------------- --------------------------
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
------------- ----------- ------------- ----------
(Thousands)
<S> <C> <C> <C> <C>
Common shares outstanding 135,827 130,494 134,782 126,394
Employee stock plans 255 2,290 237 5,808
Warrants - 6,504 - 3,249
------------- ----------- ------------- ----------
136,082 139,288 135,019 135,451
=========== =========== ============= ==========
</TABLE>
4. On January 17, 1996, the Company acquired NexGen, Inc. (NexGen) in a
transaction accounted for as a pooling-of-interests. All financial data
and footnote information of the Company, including the Company's previously
issued financial statements for the periods presented in this Form 10-Q,
have been restated to include the historical financial information of
NexGen in accordance with generally accepted accounting principles.
Separate results of the combining entities for the quarter and nine
months ended October 1, 1995 are as follows:
7
<PAGE>
<TABLE>
<CAPTION>
Quarter ended Nine Months Ended
October 1, 1995 October 1, 1995
(Thousands) (Thousands)
---------------- ----------------
<S> <C> <C>
Net sales:
AMD $ 590,385 $ 1,836,695
NexGen 16,568 36,506
---------------- ----------------
$ 606,953 $ 1,873,201
================ ================
Net income (loss):
AMD $ 62,468 $ 261,849
NexGen (20,468) (54,867)
---------------- ----------------
$ 42,000 $ 206,982
================ ================
</TABLE>
5. In August 1996, the Company sold $400.0 million of Senior Secured Notes due
August 1, 2003 under its shelf registration statement declared effective by
the Securities and Exchange Commission on May 17, 1994. Due to the sale of
the Senior Secured Notes, the Company has fully utilized its existing shelf
registration statement. Interest on the Senior Secured Notes accrues at
the rate of 11 percent per annum and is payable semi-annually in arrears on
February 1 and August 1 of each year, commencing February 1, 1997.
On July 19, 1996, the Company entered into a syndicated bank loan agreement
(the New Credit Agreement) which provides for a new $400.0 million term
loan and revolving credit facility which became available concurrently with
the sale of the Senior Secured Notes. The New Credit Agreement replaced the
Company's unsecured and unused $250.0 million line of credit and its
unsecured $150.0 million four-year term loan. The New Credit Agreement
provides for a $150.0 million three-year secured revolving line of credit
(which can be extended for one additional year, subject to approval of the
lending banks) and a $250.0 million four-year secured term loan which is
available to the Company for a period of six months after the closing of
the sale of Senior Secured Notes and which the Company expects to utilize
fully.
The Company used $150.0 million of the net proceeds to repay its existing
four-year term bank loan which was to mature on January 5, 1999. The New
Credit Agreement and the Indenture which relates to the Senior Secured
Notes contain covenants regarding limits on the Company's ability to engage
in various transactions and require maintenance of specified financial
ratio requirements. The Senior Secured Notes are redeemable at the
Company's option after August 1, 2001.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------- -----------------------------------------------------------------
FINANCIAL CONDITION
-------------------
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
- ---------------------------------------------------------
The statements in this Management's Discussion and Analysis of Results of
Operations and Financial Condition that are forward looking are based on current
expectations and beliefs and involve numerous risks and uncertainties that could
cause actual results to differ materially. The forward looking statements
relate to operating results, cash flow, capital expenditures and adequacy of
resources to fund operations and capital investments; future business prospects
for microprocessors, Flash memory device products and other product lines; the
effect of foreign exchange contracts; the development, validation,
certification, introduction, market acceptance and pricing of the K86(TM)
products; the impact of the Company's acquisition of NexGen, Inc. (NexGen); the
Company's commitment to research and development; the planned build-out of Fab
25 (as defined below); and the proposed Dresden and FASL II manufacturing
facilities (which are defined below). See "Financial Condition" and "Risk
Factors" below, as well as such other risks and uncertainties as are detailed in
the Company's Securities and Exchange Commission reports and filings for a
discussion of the factors that could cause the actual results to differ
materially from the forward looking statements.
The following discussion should be read in conjunction with the attached
Condensed Consolidated Financial Statements and Notes thereto, and with the
Company's Supplemental Consolidated Financial Statements and Notes thereto at
December 31, 1995 and December 25, 1994, and for each of the three years in the
period ended December 31, 1995. On January 17, 1996, the Company acquired
NexGen in a transaction accounted for as a pooling-of-interests. All financial
data and footnote information of the Company, including the Company's previously
issued financial statements for the periods discussed herein, have been restated
to give retroactive effect to the merger with NexGen.
Am486 and Nx586 are registered trademarks of AMD.
K86, K86 RISC SUPERSCALAR, AMD-K5, AMD-K6, SLAC, and Nx686 are trademarks of
AMD.
Windows and WindowsNT are registered trademarks of Microsoft Corporation.
9
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net sales were $456.9 million for the third quarter of 1996 as compared to
$607.0 million for the same period in 1995 and $455.1 million for the second
quarter of 1996. For the nine month period ended September 29, 1996, net sales
decreased to $1,456.2 million from $1,873.2 million for the comparable period in
1995. Net sales decreased in the third quarter of 1996 as compared to the
corresponding period in 1995 primarily due to a decline in Am486(R)
microprocessor sales as average selling prices decreased significantly, and
secondarily due to a decline in Flash memory device sales. These decreases were
partially offset by increased sales of AMD-K5(TM) microprocessors. Net sales
decreased in the nine month period ended September 29, 1996 as compared to the
corresponding period in 1995 primarily due to a decline in Am486 microprocessor
sales, as average selling prices decreased significantly.
Communications and Components Group (CCG) net sales were $284.2 million for the
third quarter of 1996 as compared to $324.2 million for the same period in 1995
and $290.1 million for the second quarter of 1996. For the nine month period
ended September 29, 1996, CCG net sales increased to $922.7 million from $859.3
million for the comparable period in 1995. The three main factors contributing
to the decrease in CCG net sales in the third quarter of 1996 as compared to the
same period in 1995, were first, a decline in Flash memory device sales, as
average selling prices declined; second, a decline in unit shipments of bipolar
programmable logic devices; and third, a decline in Erasable Programmable Read-
Only Memories (EPROMs) sales, as average selling prices declined. CCG net sales
increased in the nine month period ended September 29, 1996 as compared to the
corresponding period in 1995 primarily due to increased unit shipments of Flash
memory devices, and secondarily due to an increase in unit shipments of AMD's
Subscriber Line Interface Circuit (SLIC) and Subscriber Line Audio-Processing
Circuit (SLAC(TM)) products. These increases were partially offset by a decline
in unit shipments of bipolar programmable logic devices. The market for the
Company's Flash memory devices in 1996 has been characterized by increased
competition and falling prices. There can be no assurance that these trends
will not continue or accelerate.
Programmable Logic Division (PLD) net sales were $58.1 million for the third
quarter of 1996 as compared to $68.1 million for the same period in 1995 and
$61.6 million for the second quarter of 1996. For the nine month period ended
September 29, 1996, PLD net sales increased to $189.2 million from $186.8
million for the comparable period in 1995. PLD net sales in the third quarter
of 1996 decreased from the comparable period in 1995 due to decreased unit
shipments and declines in average selling prices. The Company believes this
decline in net sales is attributable to decreased market demand in the simple
programmable logic market. There can be no assurance that this trend will not
continue.
10
<PAGE>
Computation Products Group (CPG) net sales were $114.6 million for the third
quarter of 1996 as compared to $214.7 million for the same period in 1995 and
$103.4 million for the second quarter of 1996. For the nine month period ended
September 29, 1996, CPG net sales decreased to $344.3 million from $827.1
million for the comparable period in 1995. CPG net sales increased in the third
quarter of 1996 as compared to the immediate prior quarter due to higher unit
shipments of AMD-K5 microprocessors which more than offset the decline in Am486
microprocessor sales. The decline in CPG net sales was in each other case due
to increased market acceptance of higher performance fifth generation
microprocessors from Intel Corporation, coupled with the Company's delay in
introducing competitive fifth generation microprocessors. Average selling prices
for fourth generation microprocessors, including the Company's Am486
microprocessor, have continued to decline as the product life cycle ages. The
Company's fifth generation microprocessor, the AMD-K5 microprocessor, was
introduced relatively late in the life cycle of fifth generation products. As
such, the Company believes the AMD-K5 microprocessor will be a transitional
product and will be unlikely to generate levels of sales achieved by the Am486
microprocessor over its product life.
Gross margins were 26 percent for the third quarter of 1996 as compared to 39
percent for the same period in 1995. For the nine month period ended September
29, 1996, gross margins decreased to 25 percent from 47 percent for the
comparable period in 1995. The gross margin declines were due to lower sales
and underutilization of the Company's production facilities.
Research and development expenses were $105.7 million for the third quarter of
1996 as compared to $106.2 million for the same period in 1995. For the nine
month period ended September 29, 1996, research and development expenses
decreased to $293.2 million from $308.8 million for the comparable period in
1995.
Marketing, general and administrative expenses were $90.4 million for the third
quarter of 1996 as compared to $102.5 million for the same period in 1995 and
$83.1 million for the second quarter of 1996. For the nine month period ended
September 29, 1996, marketing, general and administrative expenses decreased to
$276.5 million from $311.9 million for the comparable period in 1995.
Marketing, general and administrative expenses in the third quarter of 1996
increased from the immediate prior quarter primarily due to a charge of
approximately $6.0 million for employee severance pay and benefits associated
with a work force reduction. The decline in marketing, general and
administrative expenses was in each other case primarily due to the cessation of
promotional expenses associated with NexGen's products, which the Company no
longer offers.
Interest income and other, net was $4.2 million for the third quarter of 1996 as
compared to $10.4 million for the same period in 1995 and $23.0 million for the
second quarter of 1996. For the nine month period ended September 29, 1996,
interest income and other, net increased to $55.3 million from $24.4 million for
the
11
<PAGE>
comparable period in 1995. The Company's quarter ended June 30, 1996 and
nine month period ended September 29, 1996 include pre-tax gains of $16.3
million and $41.0 million, respectively, resulting from the sales of equity
investments.
Interest expense was $3.4 million for the third quarter of 1996 as compared to
$0.3 million for the same period in 1995 and $1.8 million for the second quarter
of 1996. For the nine month period ended September 29, 1996, interest expense
increased to $7.2 million from $1.4 million for the comparable period in 1995.
Interest expense increased from the immediate prior quarter primarily due to
interest expense incurred on the Company's Senior Secured Notes sold in August
1996, partially offset by higher capitalized interest mainly related to the
second phase of equipment installation at AMD's manufacturing facility in
Austin, Texas (Fab 25) to increase its production capacity. Gross interest
expense increased in the third quarter and the nine month periods ended
September 29, 1996 from 1995, and is expected to increase in the future,
primarily due to interest expense incurred on the Company's Senior Secured Notes
as discussed above.
During the third quarter of 1996, the Company recorded a tax credit of $30.5
million. This results in an effective tax rate (benefit) of approximately 40
percent for the third quarter and nine month periods ended September 29, 1996.
The income tax rate was 26 percent and 32 percent in the third quarter and the
first nine months of 1995, respectively.
International sales were 53 percent of net sales in the third quarter of 1996 as
compared to 56 percent for the same period in 1995 and 53 percent for the second
quarter of 1996. For the nine month period ended September 29, 1996,
international sales decreased to 52 percent of net sales from 58 percent for the
comparable period in 1995. Approximately 17 percent of the Company's net sales
were denominated in foreign currencies in the first nine months of 1996. The
Company does not have sales denominated in local currencies in those countries
which have highly inflationary economies. (A highly inflationary economy is
defined in accordance with the Statement of Financial Accounting Standards No.
52 as one in which the cumulative inflation over a three-year consecutive period
approximates 100 percent or more.) The impact on the Company's operating
results from changes in foreign currency rates individually and in the aggregate
has not been material.
The Company enters into foreign exchange forward contracts to buy and sell
currencies as economic hedges of the Company's foreign net monetary asset
position including the Company's liabilities for products purchased from its
manufacturing joint venture with Fujitsu Limited, Fujitsu AMD Semiconductor
Limited (FASL). In 1995 and 1996, these hedging transactions were denominated
in lira, yen, French franc, Deutsche mark, and pound sterling. The maturities
of these contracts are generally short-term in nature. The Company believes its
foreign exchange contracts do not subject the Company to material risk from
exchange rate movements because gains and losses on these contracts are designed
to offset losses and gains on the net monetary asset position being hedged. Net
foreign currency gains and losses have not
12
<PAGE>
been material. As of September 29, 1996, the Company had approximately $34.3
million (notional amount) of foreign exchange forward contracts.
The Company has engaged in interest rate swaps primarily to reduce its interest
rate exposure by changing a portion of the Company's interest rate obligation
from a floating rate to a fixed rate basis. At September 29, 1996, the net
outstanding notional amount of interest rate swaps was $165.0 million, of which
$125.0 million will mature in 1996 and $40.0 million will mature in 1997. Gains
and losses related to these interest rate swaps have been immaterial.
The Company participates as an end user in various derivative markets to manage
its exposure to interest and foreign currency exchange rate fluctuations. The
counterparties to the Company's foreign exchange forward contracts and interest
rate swaps consist of a number of major, high credit quality, international
financial institutions. The Company does not believe that there is significant
risk of nonperformance by these counterparties because the Company monitors the
credit ratings of such counterparties, and reduces the financial exposure by
limiting the amount of agreements entered into with any one financial
institution.
FINANCIAL CONDITION
- -------------------
The Company's working capital balance increased to $529.2 million at September
29, 1996 from $461.5 million at December 31, 1995 primarily due to $400.0
million of cash received from the sale of its Senior Secured Notes in the third
quarter of 1996, which was partially offset by both repayment of the Company's
$150.0 million four-year term bank loan, and continued capital spending,
particularly on Fab 25. The Company's operations required the use of $76.1
million in cash for the nine months ended September 29, 1996. The Company's
cash, cash equivalents and short-term investments balance was approximately
$361.3 million at September 29, 1996 compared to $509.7 million at December 31,
1995.
Excluding the cash received from the sale of the Senior Secured Notes, the
Company's capital investments and its recent operating performance have resulted
in significant negative cash flow and the Company anticipates negative cash flow
through the remainder of 1996. In 1996, the Company has made substantial
capital investments in its process technology and manufacturing capacity based,
in part, upon Company and industry projections regarding future growth in the
market for integrated circuits (ICs). The Company plans to continue to make
significant capital investments through the remainder of 1996 and in 1997. The
Company's current capital plan and requirements are based on the availability of
financial resources and various product-mix, selling-price, and unit-demand
assumptions and are, therefore, subject to revision.
The Company plans to construct an 875,000 square foot submicron integrated
circuit manufacturing and design facility in Dresden, in the State of Saxony,
Germany (the Dresden Facility) over the next five years at a presently estimated
cost in Deutsche
13
<PAGE>
marks equivalent to approximately $1.5 billion (under current exchange rates).
It is presently intended that the Dresden Facility will be dedicated to the
production of microprocessors and other advanced logic products. The governments
of the Federal Republic of Germany and the State of Saxony have agreed to
provide financing assistance for the Dresden Facility through grants and
allowances in Deutsche marks in an aggregate amount equivalent to approximately
$350.0 million at current exchange rates, interest subsidies in Deutsche marks
in an aggregate amount equivalent to approximately $200.0 million at current
exchange rates, and loan guarantees. Through 1997, AMD currently intends to
invest in the Dresden Facility, through a wholly owned subsidiary (the German
Subsidiary) or through a wholly-owned intermediate holding company, as
appropriate, an aggregate amount in Deutsche marks which is equivalent to
approximately $150.0 million at current exchange rates. The planned Dresden
Facility costs are denominated in Deutsche marks and, therefore, are subject to
change due to foreign exchange rate fluctuations.
The Company's total cash investment in FASL was $160.4 million at the end of
the third quarter of 1996 and at the end of 1995. No additional cash investment
is currently planned for the remainder of 1996. In March of 1996, FASL began
construction of a second Flash memory device wafer fabrication facility (FASL
II) at a site contiguous to the existing FASL facility in Aizu-Wakamatsu, Japan.
The facility is expected to cost approximately $1.1 billion when fully equipped.
Capital expenditures for FASL II construction are expected to be funded by the
cash anticipated to be generated from FASL operations and, if necessary, bank
borrowings by FASL. To the extent that FASL is unable to secure the necessary
funds for FASL II, AMD may be required to contribute cash or guarantee third-
party loans in proportion to its percentage interest in FASL. At September 29,
1996, AMD had loan guarantees of $12.6 million outstanding with respect to such
loans. The planned FASL II costs are denominated in yen and, therefore, are
subject to change due to foreign exchange rate fluctuations.
In August 1996, the Company sold $400.0 million of Senior Secured Notes due
August 1, 2003 under its shelf registration statement declared effective by the
Securities and Exchange Commission on May 17, 1994. Due to the sale of the
Senior Secured Notes, the Company has fully utilized its existing shelf
registration statement. Interest on the Senior Secured Notes accrues at the rate
of 11 percent per annum and is payable semi-annually in arrears on February 1
and August 1 of each year, commencing February 1, 1997.
The net proceeds to the Company from the sale of Senior Secured Notes, after
deducting underwriting discounts and commissions and estimated expenses of the
sale of Senior Secured Notes, were approximately $389.0 million. The Company
used $150.0 million of the net proceeds to repay its existing four-year term
bank loan which was to mature on January 5, 1999. The Company expects to use the
balance of the net proceeds of approximately $239.0 million for general
corporate purposes.
14
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On July 19, 1996, the Company entered into a syndicated bank loan agreement (the
New Credit Agreement) which provides for a new $400.0 million term loan and
revolving credit facility which became available concurrently with the sale of
the Senior Secured Notes. The New Credit Agreement replaced the Company's
unsecured and unused $250.0 million line of credit and its unsecured $150.0
million four-year term loan. The New Credit Agreement provides for a $150.0
million three-year secured revolving line of credit (which can be extended for
one additional year, subject to approval of the lending banks) and a $250.0
million four-year secured term loan which is available to the Company for a
period of six months after the closing of the sale of Senior Secured Notes and
which the Company expects to utilize fully.
The Company believes that current cash balances, together with cash flows, will
be sufficient to fund operations and capital investments currently planned
through 1997.
RISK FACTORS
- ------------
The Company's business, results of operations and financial condition are
subject to the following risk factors:
Microprocessor Products
Intel Dominance. Intel Corporation (Intel) has long held a dominant position in
- ---------------
the market for microprocessors used in personal computers (PCs). Intel's
dominant market position has to date allowed it to set x86 microprocessor
standards and thus dictate the type of product the market requires of Intel's
competitors. In addition, Intel's financial strength has enabled it to reduce
prices on its microprocessor products within a short period of time following
their introduction, which reduces the margins and profitability of its
competitors. AMD believes that the process technologies used in the fabrication
of the Company's microprocessors are currently somewhat behind those of Intel.
The Company expects Intel to continue to invest heavily in research and
development and new manufacturing facilities and to maintain its dominant
position through advertising campaigns designed to engender brand loyalty to
Intel among PC purchasers. In addition to its dominant microprocessor market
share, Intel also dominates the PC platform in other manners. For example, Intel
has obtained a dominant market share in sales of 64-bit or Pentium-class core
logic chip sets, has emerged as the world's largest motherboard manufacturer,
has become a significant manufacturer of personal computers, incorporating Intel
microprocessors, chip sets, motherboards and other Intel-designed components for
resale by third-party original equipment manufacturers (OEMs) under such OEMs'
names, and has purchased an equity interest in Phoenix Technologies Ltd., a
company which has a significant share of the market for BIOS software (basic
input/output system software encoded in read-only memory which controls access
to devices connected to a PC, such as the monitor and the serial communications
port). The Company does not have the financial resources to compete with Intel
on such a large
15
<PAGE>
scale. As long as Intel remains in this dominant position, its product
introduction schedule, product pricing strategy and customer brand loyalty may
continue to have a material adverse effect on the Company, as they have had in
the past.
As Intel has expanded its role in designing and setting standards for PC
systems, many PC OEMs have reduced their system development expenditures and
have begun to purchase microprocessors in conjunction with chip sets or in
assembled motherboards. In marketing its microprocessors to these OEMs and
dealers, AMD is dependent upon companies other than Intel for the design and
manufacture of core-logic chip sets, motherboards, BIOS software and other
components. In recent years, these third-party designers and manufacturers have
lost market share to Intel. In addition, these companies are able to produce
chip sets, motherboards, BIOS software and other components to support each new
generation of Intel's microprocessors only to the extent that Intel makes its
related proprietary technology available. Any delay in the availability of such
technologies would make it increasingly difficult for them to retain or regain
market share. To compete with Intel in this market in 1996 and beyond, the
Company intends to form closer relationships with third-party designers and
manufacturers of core-logic chip sets, motherboards, BIOS software and other
components, expand its chip set and system design capabilities, and sell a
portion of the Company's processors along with chip sets and license system
designs incorporating the Company's processors and products resulting from AMD's
relationships with such third party designers and manufacturers to OEMs. There
can be no assurance, however, that such efforts by the Company will be
successful. The Company expects that as Intel introduces future generations of
microprocessors, chip sets and motherboards, the design of chip sets and higher
level board products which support Intel microprocessors will become
increasingly dependent on the Intel microprocessor design and may become
incompatible with non-Intel PC systems. If the infrastructure of third-party
designers and manufacturers which supports non-Intel PC platforms were to fail
to continue to support the Company's products or to offer products competitive
with Intel's, the Company could experience difficulties marketing its
microprocessors, which could have a material adverse effect on the Company.
Dependence on New AMD Microprocessor Products. Am486 microprocessor products
- ---------------------------------------------
contributed a significant portion of AMD's revenues, profits and margins in 1994
and 1995. Am486 microprocessor revenues, profits and margins in 1996 will be
significantly below those of 1995. As the product life cycle of fourth-
generation x86 products ages, AMD's ability to maintain or expand its
current levels of revenues from microprocessor products, and its ability to
benefit fully from the substantial financial commitments it has made to process
technologies and integrated circuit manufacturing facilities dedicated to
the production of microprocessors, will depend upon its success in developing
and marketing in a timely manner its next generations of microprocessor
products, the K86 RISC SUPERSCALAR(TM) products. The Company is now shipping
its K86 products including the 133 and 150 megahertz (MHz) AMD-K5 products
which are designed to be competitive with the Pentium, Intel's fifth
16
<PAGE>
generation microprocessor. The Company anticipates that the AMD-K5
microprocessor, which was introduced relatively late in the life cycle of fifth
generation microprocessor products, will be a transitional product, unlikely to
result in the levels of revenue for the Company realized from the Am486
microprocessor. The Company's AMD-K5 products have not, to date, achieved
substantial market acceptance, which has had and continues to have a material
adverse effect on the Company. The Company acquired NexGen in January 1996, in
part, to accelerate the introduction of its microprocessor products,
particularly its sixth generation products. The Company is modifying NexGen's
sixth-generation design using AMD's design, verification and manufacturing
technologies. With these changes, AMD intends to develop and produce the AMD-
K6(TM) microprocessor. AMD does not expect any sales of the AMD-K6 products in
1996. The Company intends to begin volume shipments of the AMD-K6 products in
the first half of 1997, although no assurance can be given that such shipments
will occur. The Company's production and sales plans for K86 microprocessors,
including the AMD-K6 microprocessor, are subject to numerous risks and
uncertainties, including the timing of the introduction of future AMD-K5
products and of AMD-K6 products, the possibility that volume shipments of the
AMD-K6 may be delayed due to the time required to verify operating systems and
application software compatibility, the development of market acceptance for the
AMD-K5 and the AMD-K6 products particularly with leading OEMs of PCs, the
effects of marketing and pricing strategies adopted by Intel, the possible
adverse effects of existing and future customer inventory levels, the pace at
which the Company is able to ramp production of fifth and sixth generation
microprocessors in Fab 25, the possibility that products newly introduced by the
Company may be found to be defective, possible adverse conditions in the
personal computer market and unexpected interruptions in the Company's
manufacturing operations. A failure of the Company's K86 products, particularly
the AMD-K6, to be timely introduced or to achieve market acceptance, would have
a material adverse effect on the Company.
Dependence on Market Acceptance of x86 Standard and Dominance of Windows.
- ------------------------------------------------------------------------
Customer acceptance of AMD's K86 products will depend upon the continued demand
for x86-based personal computers, including the continued development of
application software programs for such computers. There can be no assurance of
the continued acceptance of the x86 standard or that software developers will
continue to develop software compatible with this standard. AMD's K86 products
will face competition not only from x86 products manufactured by Intel and
others but also from products based upon an increasing number of different
architectures which have been developed or are under development by Hewlett-
Packard, IBM, Motorola, Silicon Graphics, Sun Microsystems, Digital Equipment
Corporation and other manufacturers of integrated circuits. Several of these
manufacturers, such as Motorola, Digital Equipment Corporation, Silicon Graphics
and Sun Microsystems, produce microprocessors which are designed to be
compatible with such operating systems as WindowsNT(R) and UNIX but not with
Windows(R). Currently, as a result of the dominance of the Windows operating
system, which operates with x86 based PCs, AMD is able to market its
microprocessors without significant competition from
17
<PAGE>
these manufacturers. AMD would lose much of this advantage if the Microsoft
Windows operating system should be displaced as the dominant operating system
software by one or more other systems, such as WindowsNT or UNIX. A reduction in
the market acceptance of either the x86 standard or the Windows operating system
could have a material adverse effect on the Company.
Compatibility Certifications. For its future generations of K86 microprocessors,
- ----------------------------
AMD intends to obtain Windows and Windows 95 certifications from Microsoft and
other appropriate certifications from recognized testing organizations. A
failure to obtain certification from Microsoft would prevent the Company from
describing and labeling its K86 microprocessors as Microsoft Windows compatible.
This could substantially impair the Company's ability to market the products and
could have a material adverse effect on the Company.
Acquisition of NexGen. AMD believes that its acquisition of NexGen is important
- ---------------------
to the development and introduction of its K86 products, particularly the AMD-K6
microprocessor. AMD has acquired and is currently developing new technologies
to manufacture its sixth generation microprocessor which will utilize NexGen's
sixth generation design as modified by AMD. There can be no assurance that AMD
will be successful in implementing these new technologies. If the new
technologies cannot be successfully implemented or if AMD encounters other
difficulties in manufacturing its sixth generation microprocessors, such an
event would have a material adverse effect on the Company.
Fluctuation in PC Market. Since most of AMD's microprocessor products are used
- ------------------------
in personal computers and related peripherals, AMD's future growth is closely
tied to the performance of the PC industry. The Company could be materially and
adversely affected by industry-wide fluctuations in the PC marketplace in the
future.
Possible Rights of Others. Prior to its acquisition by AMD, NexGen granted
- -------------------------
limited manufacturing rights regarding certain of its current and future
microprocessors, including the Nx586(R) and Nx686(TM), to IBM and Compaq. The
Company does not intend to produce any NexGen products as it is the Company's
position that its forthcoming AMD-K6 products are AMD products and not NexGen
products. There can be no assurance that neither IBM nor Compaq will seek to
establish rights with respect to the products. If either IBM or Compaq or both
were deemed to have rights to produce AMD's AMD-K6 products for their own use
and IBM were deemed to have the right to produce limited volumes of such
products for sale to third parties, such production could reduce the potential
market for microprocessor products produced by AMD, the profit margin achievable
with respect to such products, or both.
18
<PAGE>
Manufacturing
Underutilized Capacity. The Company's manufacturing facilities are currently
- ----------------------
underutilized as a result of reduced demand for certain of the Company's
products and may remain so until the Company has developed new products and such
products have achieved market acceptance. The Company's operations related to
microprocessors are particularly affected by this situation. The
underutilization of the Company's manufacturing facilities is having, and could
continue to have, a material adverse effect on the Company. The Company plans to
increase its manufacturing capacity by making significant capital investments in
Fab 25 and in its German Subsidiary which will construct an integrated circuit
manufacturing facility, which is presently intended to be dedicated to the
production of microprocessors and other advanced logic products. In addition,
FASL has begun construction of a second Flash memory device manufacturing
facility (FASL II). There can be no assurance that the industry projections
regarding future growth in the markets for integrated circuits upon which the
Company is basing its strategy of increasing its manufacturing capacity will
prove to be accurate. If demand for the Company's products does not increase,
the underutilization of the Company's manufacturing facilities will likely
increase and have a material adverse effect on the Company.
Process Technology. Manufacturers of integrated circuits are constantly seeking
- ------------------
to improve the process technologies used to manufacture their products. In order
to remain competitive, the Company must make continuing substantial investments
in improving its process technologies. In particular, the Company has made and
continues to make significant research and development investments in the
technologies and equipment used in the fabrication of its microprocessor
products and by FASL in the fabrication of Flash memory devices. Portions of
these investments might not be recoverable if the Company's K86 microprocessors
fail to gain market acceptance or if the market for its Flash memory products
should significantly deteriorate. This could have a material adverse effect on
the Company. In addition, any inability of the Company to remain competitive
with respect to process technology could have a material adverse effect on the
Company.
Commitments to Facilities Dedicated to Specific Products. The Company has made
- --------------------------------------------------------
and plans to continue to make substantial capital investments in integrated
circuit manufacturing facilities dedicated to the production of specific product
lines. AMD has invested over $970.0 million in Fab 25 and ancillary facilities
as of September 29, 1996, and currently expects to have invested over $1.2
billion by the end of 1997 and over $1.6 billion by the end of 1999, although
the Company is not obligated to make such further investments. Fab 25 is
currently dedicated to the production of Microsoft Windows compatible
microprocessors. Other facilities of the Company are also dedicated to the
production of specific product lines. In addition, the Company's German
Subsidiary currently plans to construct a semiconductor manufacturing facility,
at an estimated cost of $1.5 billion over 5 years, which will be dedicated to
the production of microprocessors. Significant time and expense would be
incurred
19
<PAGE>
were the Company to alter any of its facilities so that they could be used to
produce other IC products. Any such alteration, resulting from a need to respond
to changes in the markets for the Company's products or otherwise, could have a
material adverse effect on the Company.
Manufacturing Constraints. While the Company's manufacturing facilities are
- -------------------------
currently underutilized, there have been situations in the past in which the
Company's manufacturing facilities were inadequate to enable the Company to meet
demand for certain of its products. In addition to having its own fabrication
facilities, AMD has foundry arrangements for the production of its products by
third parties. Any inability of AMD to generate sufficient manufacturing
capabilities to meet demand, either in its own facilities or through foundry or
similar arrangements with others, could have a material adverse effect on the
Company.
Manufacturing Interruptions. Any substantial interruption with respect to any of
- ---------------------------
AMD's manufacturing operations, either as a result of a labor dispute, equipment
failure or other cause, could have a material adverse effect on the Company. The
Company may also be materially adversely affected by fluctuations in
manufacturing yields.
Essential Manufacturing Materials. Certain of the raw materials used by AMD in
- ---------------------------------
the manufacture of its products are available from a limited number of
suppliers. For example, several types of the integrated circuit packages
purchased by AMD, as well as by the majority of other companies in the
semiconductor industry, are principally supplied by Japanese companies.
Shortages could occur in various essential materials due to interruption of
supply or increased demand in the industry. If AMD were unable to procure
certain of such materials from any source, it would be required to reduce its
manufacturing operations which could have a material adverse effect on the
Company.
International Manufacturing. Nearly all product assembly and final testing of
- ---------------------------
AMD's products are performed at its manufacturing facilities in Penang,
Malaysia; Singapore; and Bangkok, Thailand; or by subcontractors in Asia.
Foreign manufacturing entails political and economic risks, including political
instability, expropriation, currency controls and fluctuations, changes in
freight and interest rates, and loss or modification of exemptions for taxes and
tariffs. For example, if AMD were unable to assemble and test its products
abroad, or if air transportation between the United States and AMD's overseas
facilities were disrupted, there could be a material adverse effect on the
Company.
20
<PAGE>
Other Risk Factors
Debt Restrictions. The New Credit Agreement and the Indenture related to the
- -----------------
Senior Secured Notes contain significant covenants that limit the Company's and
its subsidiaries' ability to engage in various transactions and, in certain
cases, require satisfaction of specified financial performance criteria. In
addition, the occurrence of certain events (including, without limitation,
failure to comply with the foregoing covenants, material inaccuracies of
representations and warranties, certain defaults under or acceleration of other
indebtedness and events of bankruptcy or insolvency) would, in certain cases
after notice and grace periods, constitute events of default permitting
acceleration of the indebtedness under the New Credit Agreement and the
Indenture. The limitations imposed by the New Credit Agreement and the Indenture
are substantial, and failure to comply with such limitations could have a
material adverse effect on the Company.
Importance of Flash Memory Device Business; Recent Pricing Weakness. The market
- -------------------------------------------------------------------
for Flash memory devices has recently experienced rapid growth and is likely to
become increasingly competitive as additional manufacturers introduce
competitive products and production capacity in the industry increases. The
Company's primary competition with respect to Flash memory devices is Intel. A
substantial portion of the Company's revenues are derived from sales of Flash
memory devices, and the Company expects that this will continue to be the case.
During 1996, the Company has experienced declines in the selling prices of Flash
memory devices. There can be no assurance that the Company will be able to
maintain its market share in Flash memory devices or that price declines may not
accelerate as the market develops and as new competitors emerge. A decline in
the Company's Flash memory device business could have a material adverse effect
on the Company.
Dependence on Third Party for PLD Software. Customers utilizing programmable
- -------------------------------------------
logic devices must use special software packages, generally provided by the
suppliers of the programmable logic devices, to program these devices. AMD
currently provides its programmable logic device customers with software which
it licenses from MINC, Inc. (MINC), an unaffiliated company, and is dependent
upon MINC for the software and continuing improvements in the software. An
inability of AMD to continue to obtain appropriate software and improvements
from MINC, to license alternative software from another third party, or to
develop its own software internally could adversely affect AMD's PLD business,
including the timing of new or improved product introductions, which could have
a material adverse effect on the Company.
Technological Change and Industry Standards. The market for AMD's products is
- -------------------------------------------
generally characterized by rapid technological developments, evolving industry
standards, changes in customer requirements, frequent new product introductions
and enhancements, short product life cycles and severe price competition. The
establishment of industry standards is a function of market acceptance.
Currently accepted industry standards may change at any time. AMD's success
depends
21
<PAGE>
substantially upon its ability, on a cost-effective and timely basis, to
continue to enhance its existing products and to develop and introduce new
products that take advantage of technological advances and adhere to evolving
industry standards. An unexpected change in one or more of the technologies
related to its products, in market demand for products based on a particular
technology or in accepted industry standards could have a material adverse
effect on the Company. There can be no assurance that AMD will be able to
develop new products in a timely and satisfactory manner to address new industry
standards and technological changes, or to respond to new product announcements
by others, or that any such new products will achieve market acceptance.
Product Incompatibility. While AMD submits its products to rigorous internal and
- -----------------------
external testing, there can be no assurance that AMD's products will be
compatible with all industry standard software and hardware. Any inability of
AMD's customers to achieve such compatibility or compatibility with other
software or hardware after AMD's products are shipped in volume could have a
material adverse effect on the Company. There can be no assurance AMD will be
successful in correcting any such compatibility problems that are discovered or
that such corrections will be acceptable to customers or made in a timely
manner. In addition, the mere announcement of an incompatibility problem
relating to the Company's products could have a material adverse effect on the
Company.
Competition. The integrated circuit industry is intensely competitive and,
- -----------
historically, has experienced rapid technological advances in product and system
technologies together with substantial price reductions in maturing products.
After a product is introduced, prices normally decrease over time as production
efficiency and competition increase, and a successive generation of products is
developed and introduced for sale. Technological advances in the industry result
in frequent product introductions, regular price reductions, short product life
cycles and increased product capabilities that may result in significant
performance improvements. Competition in the sale of integrated circuits is
based upon performance, product quality and reliability, price, adherence to
industry standards, software and hardware compatibility, marketing and
distribution capability, brand recognition, financial strength and ability to
deliver in large volumes on a timely basis.
Fluctuations in Operating Results. AMD's operating results are subject to
- ----------------------------------
substantial quarterly and other fluctuations due to a variety of factors,
including the effects of competition with Intel in the microprocessor industry,
competitive pricing pressures, anticipated decreases in unit average selling
prices of AMD's products, fluctuations in manufacturing yields, availability and
cost of products from AMD's suppliers, the gain or loss of significant
customers, new product introductions by AMD or its competitors, changes in the
mix of products sold and in the mix of sales by distribution channels, market
acceptance of new or enhanced versions of AMD's products, seasonal customer
demand, the timing of significant orders and the timing and extent of product
development costs. In addition, operating results could be
22
<PAGE>
adversely affected by general economic and other conditions affecting the timing
of customer orders, a downturn in the market for PCs, and order cancellations or
rescheduling. AMD's customers may change delivery schedules or cancel orders
without significant penalty. Many of the factors listed above are outside of
AMD's control. These factors are difficult to forecast, and these or other
factors could materially adversely affect AMD's quarterly or annual operating
results.
Order Revision and Cancellation Policies. AMD manufactures and markets a
- ----------------------------------------
standard line of products. Sales are made primarily pursuant to purchase orders
for current delivery, or agreements covering purchases over a period of time,
which are frequently subject to revision and cancellation without penalty. As a
result, AMD must commit resources to the production of products without having
received advance purchase commitments from customers. Any inability to sell
products to which it had devoted significant resources could have a material
adverse effect on the Company. Distributors typically maintain an inventory of
AMD's products. Pursuant to the Company's agreements with the distributors, AMD
protects its distributors' inventory of AMD's products against price reductions
as well as products that are slow moving or have been discontinued. These
agreements, which may be canceled by either party on a specified notice,
generally contain a provision for the return of AMD's products in the event the
agreement with the distributor is terminated. The price protection and return
rights AMD offers to its distributors may materially adversely affect the
Company.
Key Personnel. AMD's future success depends upon the continued service of
- -------------
numerous key engineering, manufacturing, sales and executive personnel. There
can be no assurance that AMD will be able to continue to attract and retain
qualified personnel necessary for the development and manufacture of its
products. Loss of the service of, or failure to recruit, key engineering design
personnel could be significantly detrimental to AMD's product development
programs or otherwise have a material adverse effect on the Company.
Product Defects. One or more of AMD's products may possibly be found to be
- ---------------
defective after AMD has already shipped such products in volume, requiring a
product replacement, recall, or a software fix which would cure such defect but
impede performance. Product returns could impose substantial costs on AMD and
have a material adverse effect on the Company.
Intellectual Property Rights; Potential Litigation. Although AMD attempts to
- --------------------------------------------------
protect its intellectual property rights through patents, copyrights, trade
secrets and other measures, there can be no assurance that AMD will be able to
protect its intellectual property adequately or that competitors will not be
able to develop similar technology independently. There can be no assurance that
any patent applications that AMD may file will be issued or that foreign
intellectual property laws will protect AMD's intellectual property rights.
There can be no assurance that any patent licensed by or issued to AMD will not
be challenged, invalidated or circumvented or
23
<PAGE>
that the rights granted thereunder will provide competitive advantages to AMD.
Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate AMD's products or design around the patents
issued to or licensed by AMD.
From time to time, AMD has been notified that it may be infringing intellectual
property rights of others. If any such claims are asserted against AMD, AMD may
seek to obtain a license under the third party's intellectual property rights.
AMD could decide, in the alternative, to resort to litigation to challenge such
claims. Such challenges could be extremely expensive and time consuming and
could materially adversely affect the Company. For example, for many years the
Company was involved in intellectual property litigation with Intel which was
settled in 1995. The litigation required substantial resources of the Company.
No assurance can be given that all necessary licenses can be obtained on
satisfactory terms, or that litigation may always be avoided or successfully
concluded.
Environmental Regulations. The failure to comply with present or future
- -------------------------
governmental regulations related to the use, storage, handling, discharge or
disposal of toxic, volatile or otherwise hazardous chemicals used in the
manufacturing process could result in fines being imposed on AMD, suspension of
production, alteration of AMD's manufacturing processes or cessation of
operations. Such regulations could require AMD to acquire expensive remediation
equipment or to incur other expenses to comply with environmental regulations.
Any failure by AMD to control the use, disposal or storage of, or adequately
restrict the discharge of, hazardous substances could subject AMD to future
liabilities and could have a material adverse effect on the Company.
International Sales. AMD derives a substantial portion of its revenues from its
- -------------------
subsidiaries located in Europe and Asia. AMD's international sales operations
entail political and economic risks, including expropriation, currency controls,
exchange rate fluctuations, changes in freight rates and changes in rates for
taxes and tariffs.
Domestic and International Economic Conditions. AMD's business is subject to
- ----------------------------------------------
general economic conditions, both in the United States and abroad. A significant
decline in economic conditions in any significant geographic area could have a
material adverse effect upon the Company.
Volatility of Stock Price; Ability to Access Capital. Based on the trading
- ----------------------------------------------------
history of its stock, AMD believes factors such as quarterly fluctuations in
AMD's financial results, announcements of new products by AMD or its competitors
and general conditions in the semiconductor industry have caused and are likely
to continue to cause the market price of AMD common stock to fluctuate
substantially. Technology company stocks in general have experienced extreme
price and volume fluctuations that often have been unrelated to the operating
performance of the companies. This market volatility may adversely affect the
market price of AMD's common stock and
24
<PAGE>
consequently limit the Company's ability to raise capital. In addition, an
actual or anticipated shortfall in revenue, gross margins or earnings from
securities analysts' expectations could have an immediate effect on the trading
price of AMD common stock in any given period.
Earthquake Danger. AMD's corporate headquarters, a portion of its manufacturing
- -----------------
facilities, assembly and research and development activities and certain other
critical business operations are located near major earthquake fault lines. The
Company could be materially adversely affected in the event of a major
earthquake.
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<PAGE>
II. OTHER INFORMATION
Item 1. Legal Proceedings
SEC Investigation. The Securities and Exchange Commission (SEC) began an
- -----------------
informal investigation of the Company in 1993 regarding the Company's
disclosures about the development of its AM486SX microcode and the extent to
which it included access to Intel's 386 microcode. These disclosures were the
subject of securities class actions and a derivative suit that were settled and
dismissed with prejudice. The Company has entered into an agreement with the
SEC settling proceedings related to this investigation. The Company has
consented to entry of a cease and desist order barring the Company from
committing future violations of SEC rules and regulations governing official
Company reports and disclosure of material information. No fines were imposed,
and only the Company was named as the subject of the order.
Advanced Micro Devices, Inc. v. Altera Corporation (Case No. C94-20567-RMW, U.S.
- --------------------------------------------------------------------------------
District Ct., San Jose, California). This litigation, which began in 1994,
- -----------------------------------
involves multiple claims and counterclaims for patent infringement relating to
the Company's and Altera Corporation's programmable logic devices. On June 21,
1996, the jury returned a verdict favorable to Altera. The Company filed a
motion seeking to set aside the verdict. The judge issued a ruling confirming
the jury's verdict. The parties have stipulated that the court, not a jury,
will decide which of the AMD patents-in-suit fall within the scope of the
license that the jury found. Based upon information presently known to
management the Company does not believe that the ultimate resolution of this
lawsuit will have a material adverse effect upon the financial condition or
results of operations of the Company.
26
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits 4.1 Form of Advanced Micro Devices, Inc. 11%
Senior Secured Notes due August 1, 2003,
filed as Exhibit 4.1 to the Corporation's
Current Report on Form 8-K dated August 13,
1996, is hereby incorporated herein by
reference.
4.2 Indenture, dated as of August 1, 1996,
between Advanced Micro Devices, Inc. and
United States Trust Company of New York, as
trustee, filed as Exhibit 4.2 to the
Corporation's Current Report on Form 8-K dated
August 13, 1996, is hereby incorporated herein
by reference.
4.3 Intercreditor and Collateral Agent
Agreement, dated as of August 1, 1996, among
United States Trust Company of New York, as
trustee, Bank of America NT&SA, as agent for
the banks under the Credit Agreement of July
19, 1996, and IBJ Schroder Bank & Trust
Company, filed as Exhibit 4.3 to the
Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
4.4 Payment, Reimbursement and Indemnity
Agreement, dated as of August 1, 1996,
between Advanced Micro Devices, Inc. and IBJ
Schroder Bank & Trust Company, filed as
Exhibit 4.4 to the Corporation's Current
Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
4.5 Deed of Trust, Assignment, Security
Agreement and Financing Statement, dated as
of August 1, 1996, among Advanced Micro
Devices, Inc., as grantor, IBJ Schroder Bank
& Trust Company, as grantee, and Shelley W.
27
<PAGE>
Austin as trustee, filed as Exhibit 4.5 to
the Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
4.6 Security Agreement, dated as of August 1,
1996, between Advanced Micro Devices, Inc.
and IBJ Schroder Bank & Trust Company, as
agent for United States Trust Company of New
York, as Trustee, and Bank of America NT&SA,
as agent for banks, filed as Exhibit 4.6 to
the Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
4.7 Lease, Option to Purchase and Put Option
Agreement, dated as of August 1, 1996,
between Advanced Micro Devices, Inc., as
lessor, and AMD Texas Properties, LLC, as
lessee, filed as Exhibit 4.7 to the
Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
4.8 Reciprocal Easement Agreement, dated as of
August 1, 1996, between Advanced Micro
Devices, Inc. and AMD Texas Properties, LLC,
filed as Exhibit 4.8 to the Corporation's
Current Report on Form 8-K dated August 13,
1996, is hereby incorporated herein by
reference.
4.9 Sublease Agreement, dated as of August 1,
1996, between Advanced Micro Devices, Inc.,
as sublessee, and AMD Texas Properties, LLC,
as sublessor, filed as Exhibit 4.9 to the
Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
28
<PAGE>
10.11(a) Employment Agreement dated September 29,
1996 between the Company and W. J. Sanders
III.
10.24 Credit Agreement, dated as of July 19, 1996,
among Advanced Micro Devices, Inc., Bank of
America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndication
agent and lender, and Canadian Imperial Bank
of Commerce, as documentation agent and
lender, filed as Exhibit 99.1 to the
Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
10.24(a) First Amendment to Credit Agreement, dated
as of August 7, 1996, among Advanced Micro
Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO
Bank N.V., as syndication agent and lender,
and Canadian Imperial Bank of Commerce, as
documentation agent and lender, filed as
Exhibit 99.2 to the Corporation's Current
Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
10.24(b) Second Amendment to Credit Agreement dated
as of September 9, 1996 among Advanced Micro
Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO
Bank N.V., as syndication agent and lender,
and Canadian Imperial Bank of Commerce, as
documentation agent and lender.
10.25(n) Third Amendment to Third Amended and
Restated Guaranty, dated as of May 10, 1996
(amending the Second Amendment to the Third
Amended and Restated Guaranty, dated as of
January
29
<PAGE>
12, 1996, made by the Company in favor of
CIBC, Inc.).
10.25(o) Fourth Amendment to Third Amended and
Restated Guaranty, dated as of June 20, 1996
(amending the Third Amendment to the Third
Amended and Restated Guaranty, dated as of
May 10, 1996, made by the Company in favor
of CIBC, Inc.).
10.25(p) Fifth Amendment to Third Amended and
Restated Guaranty, dated as of August 1,
1996 (amending the Third Amended and
Restated Guaranty, dated as of August 25,
1995, made by the Company in favor of CIBC,
Inc.), filed as Exhibit 99.3 to the
Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby
incorporated herein by reference.
10.25(q) Fifth Amendment to Building Lease, dated as
of August 1, 1996 (amending the Building
Lease, dated as of September 22, 1992, by
and between AMD International Sales &
Service, Ltd. and CIBC, Inc.), filed as
Exhibit 99.4 to the Corporation's Current
Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
10.25(r) Fifth Amendment to Land Lease, dated as of
August 1, 1996 (amending the Land Lease,
dated as of September 22, 1992, by and
between AMD International Sales & Service,
Ltd. and CIBC, Inc.), filed as Exhibit 99.5
to the Corporation's Current Report on Form
8-K dated August 13, 1996, is hereby
incorporated herein by reference.
30
<PAGE>
<TABLE>
<S> <C>
*10.48 C-4 Technology Transfer and Licensing
Agreement dated June 11, 1996
between the Company and IBM
Corporation.
27.1 Financial Data Schedule.
</TABLE>
(b). Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter for
which this report is filed:
1. Current Report on Form 8-K dated July 10, 1996 reporting under
Item 5 - Other Events - second quarter earnings.
2. Current Report on Form 8-K dated July 22, 1996 reporting under
Item 5 - Other Events - commencement of the underwritten offering
of the Company's Senior Secured Notes.
3. Current Report on Form 8-K dated August 13, 1996 reporting under
Item 5 - Other Events - Completion of the underwritten offering
of the Company's Senior Secured Notes.
* Confidential treatment has been requested as to certain portions of this
Exhibit.
31
<PAGE>
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 thereunto duly authorized.
ADVANCED MICRO DEVICES, INC.
Date: 11/7/96 By: /s/ Geoffrey Ribar
------------------------------- ------------------
Geoffrey Ribar
Vice President and
Corporate Controller
Signing on behalf of the
registrant and as the principal
accounting officer
32
<PAGE>
EXHIBIT INDEX
-------------
Exhibits
- --------
4.1 Form of Advanced Micro Devices, Inc. 11% Senior Secured Notes due
August 1, 2003, filed as Exhibit 4.1 to the Corporation's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated
herein by reference.
4.2 Indenture, dated as of August 1, 1996, between Advanced Micro
Devices, Inc. and United States Trust Company of New York, as
trustee, filed as Exhibit 4.2 to the Corporation's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated herein by
reference.
4.3 Intercreditor and Collateral Agent Agreement, dated as of August 1,
1996, among United States Trust Company of New York, as trustee,
Bank of America NT&SA, as agent for the banks under the Credit
Agreement of July 19, 1996, and IBJ Schroder Bank & Trust Company,
filed as Exhibit 4.3 to the Corporation's Current Report on Form 8-K
dated August 13, 1996, is hereby incorporated herein by reference.
4.4 Payment, Reimbursement and Indemnity Agreement, dated as of August
1, 1996, between Advanced Micro Devices, Inc. and IBJ Schroder Bank
& Trust Company, filed as Exhibit 4.4 to the Corporation's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated
herein by reference.
4.5 Deed of Trust, Assignment, Security Agreement and Financing
Statement, dated as of August 1, 1996, among Advanced Micro Devices,
Inc., as grantor, IBJ Schroder Bank & Trust Company, as grantee, and
Shelley W. Austin as trustee, filed as Exhibit 4.5 to the
Corporation's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
4.6 Security Agreement, dated as of August 1, 1996, between Advanced
Micro Devices, Inc. and IBJ Schroder Bank & Trust Company, as agent
for United States Trust Company of New York, as Trustee, and Bank of
America NT&SA, as agent for banks, filed as Exhibit 4.6 to the
Corporation's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
<PAGE>
4.7 Lease, Option to Purchase and Put Option Agreement, dated as of
August 1, 1996, between Advanced Micro Devices, Inc., as lessor, and
AMD Texas Properties, LLC, as lessee, filed as Exhibit 4.7 to the
Corporation's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
4.8 Reciprocal Easement Agreement, dated as of August 1, 1996, between
Advanced Micro Devices, Inc. and AMD Texas Properties, LLC, filed as
Exhibit 4.8 to the Corporation's Current Report on Form 8-K dated
August 13, 1996, is hereby incorporated herein by reference.
4.9 Sublease Agreement, dated as of August 1, 1996, between Advanced
Micro Devices, Inc., as sublessee, and AMD Texas Properties, LLC, as
sublessor, filed as Exhibit 4.9 to the Corporation's Current Report
on Form 8-K dated August 13, 1996, is hereby incorporated herein by
reference.
10.11(a) Employment Agreement dated September 29, 1996 between the Company and
W.J. Sanders III.
10.24 Credit Agreement, dated as of July 19, 1996, among Advanced Micro
Devices, Inc., Bank of America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndication agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 99.1 to the Corporation's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated herein by
reference.
10.24(a) First Amendment to Credit Agreement, dated as of August 7, 1996,
among Advanced Micro Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO Bank N.V., as syndication
agent and lender, and Canadian Imperial Bank of Commerce, as
documentation agent and lender, filed as Exhibit 99.2 to the
Corporation's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated herein by reference.
10.24(b) Second Amendment to Credit Agreement dated as of September 9, 1996
among Advanced Micro Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO Bank N.V., as syndication
agent and lender, and Canadian Imperial Bank of Commerce, as
documentation agent and lender.
10.25(n) Third Amendment to Third Amended and Restated Guaranty, dated as of
May 10, 1996 (amending the Second Amendment to the Third
<PAGE>
Amended and Restated Guaranty, dated as of January 12, 1996, made by
the Company in favor of CIBC, Inc.).
10.25(o) Fourth Amendment to Third Amended and Restated Guaranty, dated as of
June 20, 1996 (amending the Third Amendment to the Third Amended and
Restated Guaranty, dated as of May 10, 1996, made by the Company in
favor of CIBC, Inc.).
10.25(p) Fifth Amendment to Third Amended and Restated Guaranty, dated as of
August 1, 1996 (amending the Third Amended and Restated Guaranty,
dated as of August 25, 1995, made by Advanced Micro Devices, Inc. in
favor of CIBC, Inc.), filed as Exhibit 99.3 to the Corporation's
Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated herein by reference.
10.25(q) Fifth Amendment to Building Lease, dated as of August 1, 1996
(amending the Building Lease, dated as of September 22, 1992, by and
between AMD International Sales & Service, Ltd. and CIBC, Inc.),
filed as Exhibit 99.4 to the Corporation's Current Report on Form 8-
K dated August 13, 1996, is hereby incorporated herein by reference.
10.25(r) Fifth Amendment to Land Lease, dated as of August 1, 1996 (amending
the Land Lease, dated as of September 22, 1992, by and between AMD
International Sales & Service, Ltd. and CIBC, Inc.), filed as
Exhibit 99.5 to the Corporation's Current Report on Form 8-K dated
August 13, 1996, is hereby incorporated herein by reference.
*10.48 C-4 Technology Transfer and Licensing Agreement dated June 11, 1996,
between the Company and IBM Corporation.
27.1 Financial Data Schedule
* Confidential treatment has been requested as to certain portions of this
Exhibit.
<PAGE>
EXHIBIT 10.11(a)
Execution Copy
EMPLOYMENT AGREEMENT
DATED AS OF SEPTEMBER 29, 1996
ADVANCED MICRO DEVICES, INC.
AND
W. J. SANDERS III
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Term................................................... 2
2. Position and Duties.................................... 2
3. Salary................................................. 3
4. Bonus.................................................. 4
5. Stock Options and Related Incentive Plans.............. 6
6. Reimbursement of Expenses.............................. 9
7. Other Benefits During Service.......................... 9
8. Special Retirement Benefit; Change of Control.......... 11
9. Disability Benefits.................................... 13
10. Death During Service; Split Dollar Policy.............. 13
11. Confidential Information............................... 14
12. Inventions, Patents, Copyrights and Proprietary
Information............................................ 15
13. Termination by Company................................. 16
14. Termination by Executive............................... 18
15. Consequences of Termination by Executive, by Company
for Certain Reasons and Breach by Company.............. 19
16. Other Benefits Following Termination................... 23
17. Indemnification........................................ 25
18. Remedies............................................... 25
19. Binding Agreement...................................... 26
20. No Attachment.......................................... 26
21. Assignment............................................. 26
22. Waiver................................................. 26
23. Notice................................................. 27
24. Governing Law.......................................... 27
25. Costs.................................................. 27
26. Severability........................................... 27
27. Arbitration............................................ 28
28. Entire Agreement....................................... 29
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
DATED AS OF SEPTEMBER 29, 1996
ADVANCED MICRO DEVICES, INC.
AND
W. J. SANDERS III
This Employment Agreement (the "Agreement") is made and entered into as of the
29th day of September, 1996 (the "Effective Date") by and between W. J. Sanders
III ("Executive") and Advanced Micro Devices, Inc., a Delaware corporation
("Company").
R E C I T A L S
A. Executive and Company entered into an Employment Agreement (the
"Original Employment Agreement") as of July 1, 1991.
B. Executive is the founder of Company and is instrumental to developing
and expanding its business and operations, possesses unique and invaluable
knowledge, skills and judgment with respect to such business, and maintains
strong ties with the business community essential to the continued success and
growth of Company.
C. The non-management directors believe Executive to be uniquely
qualified to protect and enhance the best interests of Company and its
stockholders and that entering into a new employment contract to provide for
Executive's long-term continued employment would be of great value to Company
and the long-term interests of its stockholders.
D. Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change of control may exist and that the
uncertainty and questions which such possibility may raise among management may
result in the departure or distraction of management personnel to the detriment
of Company and its stockholders.
E. The non-management members of Company's Board of Directors have
determined that in the event of that contingency it is imperative to be able to
rely upon management's continuance and in particular Executive's leadership, and
that appropriate steps should be taken to reinforce and encourage that
leadership and to reward Executive's essential service.
F. Executive and Company now desire to extend the term of the Original
Employment Agreement until December 31, 2003 and modify certain other terms and
conditions contained in the Original Employment Agreement.
G. As a result, this Agreement amends and completely restates the
Original Employment Agreement.
1
<PAGE>
1. TERM
The term of this Agreement shall commence as of September 1, 1996 and shall
terminate on December 31, 2003. As used in this Agreement, "Expiration Date"
shall mean December 31, 2003.
2. POSITION AND DUTIES
(a) Executive shall be employed by Company as its Chairman and Chief
Executive Officer through December 31, 2001 (the "Initial Term"). Executive
shall report directly and solely to Company's Board of Directors ("Board"). The
Board agrees to nominate Executive for election to the Board as a member of the
management slate at each annual meeting of stockholders during the Initial Term
and the Optional Term. Executive agrees to serve on the Board if elected. The
duties and responsibilities of Chairman and Chief Executive Officer shall be as
defined in the By-Laws of Company in effect as of the date hereof, and shall be
without consideration of other positions Executive may hold with Company.
Executive's services are mutually agreed to be unique.
(b) Executive shall be employed by Company as its Chairman from January 1,
2002 through December 31, 2002 (the "Optional Term").
(c) Executive shall be employed by Company as its Vice Chairman or in such
other executive officer capacity as the Board shall determine and he may accept
from January 1, 2003 through December 31, 2003 (the "Extended Term"). During
such period, Executive shall report directly and solely to the Board.
(d) During Executive's period of service hereunder, Executive agrees to
perform such services not inconsistent with his position as shall from time to
time be assigned to him by Company's Board. During the Initial Term, except for
disability, illness and reasonable vacation periods, Executive shall devote
substantially his full productive time, attention, and energies to the position
of Chairman and Chief Executive Officer.
(e) Without the prior express authorization of Company, Executive shall
not, directly or indirectly, during the term of service:
(1) Render services of a business, professional or commercial nature
to any other person or firm, whether for compensation or otherwise; or
(2) Engage in any activity competitive with or adverse to Company's
business or welfare, whether alone, as a partner, or as an officer, director,
employee or holder (directly or indirectly, such as by means of a trust or
option arrangement) of
2
<PAGE>
more than 1% of the capital stock of any class of any other corporation.
Notwithstanding the foregoing requirement of substantially full-time
services to be rendered by Executive on behalf of Company, his expenditure of
reasonable amounts of time in connection with outside activities, not
competitive with Company's business, such as additional outside directorships
(but only with Board approval), or charitable or professional activities, or,
after the Initial Term, other business ventures shall not be considered to be in
violation of this Agreement subject, however, to the requirement that in no
event shall any such activities materially interfere with the performance of
Executive required under this Agreement. Further, it is understood and agreed
by the parties hereto that Executive is entitled to engage in passive and
personal investment activities not materially interfering with his performance
hereunder.
Service as an executive of an affiliate of Company, whether separately
compensated or not, shall not be considered to be in contravention of this
paragraph.
3. SALARY
(a) Through the Initial Term, Executive shall receive an annual base salary
of $1,000,000. The Board of Directors (or such Committee as may be designated
by the Board) shall review Executive's salary at least annually at or before the
first regularly scheduled Board meeting following the annual stockholders
meeting of each fiscal year during the Initial Term. The Board (or designated
Committee), in its discretion, may increase the base salary based upon relevant
circumstances. The base salary shall not be reduced during the Initial Term.
The Compensation Committee of the Board shall fulfill the Board's obligations
under this Section 3(a) until such designation is revoked by the Board. If
during any one year period of January 1 to December 31 of the Initial Term, the
Consumer Price Index for Urban Wage Earners, San Francisco, published by the
Bureau of Labor Statistics of the U.S. Department of Labor ("CPI-W") increases,
the salary for the following one year period from January 1 to December 31,
shall be automatically increased by the same percentage. Any such indexed
salary increases shall be accrued on a continuous basis and shall bear interest
from the date of accrual at an annual rate of 120% of the federal long-term
rate, with compounding, as of the effective date of this Agreement. The accrued
balance of any such indexed salary increases, together with accrued interest
thereon, shall be paid at the earliest time at which a deduction for federal
income tax purposes will be allowed for payment of such amounts under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), but in any
event no later than March 31, 2004, which earliest time shall be referred to as
the "Section 162(m) Deferred Payment Date".
3
<PAGE>
(b) During the Optional Term, Executive shall receive an annual base salary
of no less than $500,000 (with adjustment for CPI-W increases from base year
1996). The Board (or designated committee), in its discretion, may increase the
annual base salary based upon relevant circumstances. The base salary shall not
be reduced during the Optional Term.
(c) During the Extended Term, Executive shall receive an annual base salary
of no less than $350,000 (without adjustment for CPI-W increases from base year
1996). The Board (or designated committee), in its discretion, may increase the
annual base salary based upon relevant circumstances. The base salary shall not
be reduced during the Extended Term.
4. BONUS
(a) Executive shall, as provided in, and subject to, this Section 4(a) and
Sections 4(b) and (c) below, receive an incentive bonus for Company's fiscal
years ending December 31, 1997, December 31, 1998, December 31, 1999, December
31, 2000 and December 31, 2001 under Company's 1996 Executive Incentive Plan in
an amount equal to six-tenths of one percent (.6%) of Adjusted Operating Profits
of Company for each respective fiscal year in excess of twenty percent (20%) of
the Adjusted Operating Profits of Company for Company's immediately preceding
fiscal year, payable immediately upon release by Company of its operational
results for the last quarter of each fiscal year referred to above. The amount
payable under this Section 4(a) or Section 4(b) shall not be subject to the
further discretion of Company's Compensation Committee and shall not be reduced
or deferred except as specifically provided in this Section 4 or as otherwise
agreed to by Executive.
For purposes of all calculations, "Adjusted Operating Profits" of
Company shall be deemed to constitute operating income, as reported on Company's
financial statements, increased for any pre-tax operating income and decreased
for any pre-tax operating loss from the Fujitsu joint venture (and any
subsequent joint ventures approved by Executive and the Board for these
purposes); and increased by any expenses accrued for profit sharing plan
contributions, bonuses under Company's Executive Bonus Plan, bonuses to the
Chief Operating Officer of Company, and bonuses (including bonuses under this
Agreement and the Original Employment Agreement) provided for in Sections 4(a),
(b) and (d) hereof. The provisions of this Agreement with respect to bonus-
related benefits following a termination of service shall supersede any "in
service" provisions of the 1996 Executive Incentive Plan.
(b) The maximum bonus payable to Executive under Section 4(a) above for
each fiscal year shall not be greater than $5,000,000. The amount of the bonus
which exceeds the maximum bonus payable in any one fiscal year, if any, (the
"Excess
4
<PAGE>
Bonus") shall be carried over (on a "first-in, first-out" basis) and added to
the bonus determined for any of the next three fiscal years (or on the same
basis apportioned among the bonuses determined for each of the next three fiscal
years or such lesser number of fiscal years remaining through the last day of
the Optional Term), provided the addition of the Excess Bonus, or portion
thereof, does not cause the bonus payable in such fiscal year to exceed the
maximum bonus payable in that year. All bonus amounts, including Excess Bonus
amounts, earned under the Original Employment Agreement for fiscal years ending
on or prior to December 31, 1996, shall be payable as provided under the terms
of the Original Employment Agreement, the maximum bonus (including Excess Bonus)
amounts for the fiscal years ending on or prior to December 31, 1996 shall be
paid to Executive immediately upon the release of fourth quarter 1996
operational results, and the carryover Excess Bonus amount not paid by that date
shall carry over and be paid immediately upon confirmation that the performance
goals established by the Committee pursuant to the terms of the 1996 Executive
Incentive Plan for fiscal years 1997 and 1998 and attached hereto as Exhibit 1
---------
have been satisfied and certified, provided that the total amount paid pursuant
to this Section 4 (including Excess Bonus and carryover amounts) for any fiscal
year after 1996 does not exceed five million dollars ($5,000,000).
(c) In the event that there shall be a combination of Company with another
company or a capital restructuring of Company, or any other occurrence similar
to any of the foregoing, and as a result thereof the amount or value of the
bonuses payable pursuant to the bonus formula set forth in Section 4(a) above
would be, or could reasonably be expected to be, significantly affected thereby,
appropriate adjustment will, at the request of either party, be negotiated to
establish a substitute formula to yield an equitable and comparable result. If
the parties cannot agree upon such substitute formula, or if the parties cannot
agree as to whether or not an occurrence which would give rise to the right of
either party to request adjustment pursuant to the foregoing has occurred, the
parties shall submit such matter to arbitration under the provisions of Section
27.
(d) In addition to the bonus payable in each fiscal year under Section
4(a), Executive shall be entitled to receive as an additional bonus such
additional amounts as the Board (or such Committees as may be designated by the
Board) shall determine in its discretion. In determining the amount of such
additional amounts, the Board (or Committee) shall consider among other things
Executive's contribution to the accomplishment of Company's long-range business
goals, the success of various corporate strategies in which Executive
participated in reaching those goals, and Executive's unique services in
connection with the maintenance or increase in stockholder value of Company. The
Compensation Committee of the Board shall fulfill the Board's
5
<PAGE>
obligations under this Section 4(d), until such designation is revoked by the
Board.
5. STOCK OPTIONS AND RELATED INCENTIVE PLANS
(a) Executive shall be eligible to participate in the Stock Option Plans of
Company and any additional or successor incentive plan or plans. Any option
grants made to Executive pursuant to such plans shall provide for an expiration
date of ten (10) years following the date of grant subject to earlier
termination following termination of service pursuant to Sections 13 and 15
hereof.
(b) As of the Effective Date, Executive shall be granted a time-based
option to purchase 1,250,000 shares of Company's Common Stock, consisting of
750,000 shares pursuant to Company's 1996 Stock Incentive Plan, as amended as of
the Effective Date (the "1996 Plan"), and 500,000 shares pursuant to the 1995
Stock Plan of Nexgen, Inc., as amended as of the Effective Date (the "Nexgen
Plan" and, together with the 1996 Plan, the "Plans"), collectively, the "Time-
Based Options", in accordance with the following terms: The option shall have
an exercise price equal to one hundred percent (100%) of the fair market value
of Company Common Stock as of the date of grant. Of these option shares, an
option for 325,000 shares shall become fully exercisable on November 15, 1997;
an option for 325,000 shares shall become fully exercisable on November 15,
1998; an option for 200,000 shares shall become fully exercisable on November
15, 1999; an option for 200,000 shares shall become fully exercisable on
November 15, 2000; and an option for the remaining 200,000 shares shall become
fully exercisable on November 15, 2001.
(c) As of the Effective Date, Executive shall be granted an option to
purchase 1,250,000 shares of Company's common stock pursuant to Company's 1996
Plan ("Performance Accelerated Options"), in accordance with the following
terms: the Performance Accelerated Options shall have an exercise price equal
to one hundred percent (100%) of the fair market value of Company's common stock
as of the date of grant.
(d) The dates on which the Performance Accelerated Options (also, "PAOs")
are first exercisable will be the fixed dates to the extent set forth in Section
5(e) or the earlier Measurement Date to the extent provided in this Section
5(d). The number of shares with respect to which the exercisability of
Performance Accelerated Options shall be accelerated under this Section 5(d)
shall be determined as of each Measurement Date as follows:
If at any Measurement Date the Average Stock Price meets or exceeds a Stock
Price Target for the applicable Target Period or any subsequent Target Period,
Performance Accelerated Options with respect to an aggregate number of shares
(less the aggregate number of shares subject to Performance Accelerated Options
that
6
<PAGE>
previously became exercisable under Section 5(d) or (e)) equal to 250,000
multiplied by the sum of n + p shall become exercisable, where
n = the number of full fiscal years in the Initial Term that have elapsed
prior to the applicable Measurement Date or, if applicable,* that will
have elapsed prior to the end of the latest such subsequent Target
Period (if a greater number of full fiscal years would result)
p = the applicable percentage set forth in Column (2) of Exhibit 2 for the
applicable Average Stock Price, or (if the Average Stock Price falls
between two Stock Price Targets) the percentage derived by
interpolation of the applicable percentages corresponding to those
Stock Price Targets, as set forth below.
*The later date is applicable if the Average Stock Price meets or
exceeds a Stock Price Target for any Target Period subsequent to the
Target Period for the applicable Measurement Date.
"Average Stock Price" ("ASP") means the sum of the closing prices of the
Company's Common Stock during the applicable Target Period, divided by the
number of days in which the Company's Common Stock traded during such period.
"Measurement Date" means the first business day after the end of each Target
Period.
"Target Period" means each of the 3-month periods set forth in Column (1) of
Exhibit 2.
"Stock Price Target" means a Threshold Stock Price ("ThSP"), a Target Stock
Price ("TSP"), or Maximum Stock Price ("MSP"), as set forth in Column (3) of
Exhibit 2.
Interpolation Mechanics. If the Threshold Stock Price is equaled or
exceeded for a Target Period but the Target Stock Price is not equaled or
exceeded for such Target Period, then the number of shares subject to
performance acceleration for such Target Period, expressed as a percentage of
250,000, will equal 25% + 25% x (ASP - ThSP)
------------
(TSP - ThSP)
or, in actual shares (subject to adjustment), will equal the sum of (i) 62,500
plus (ii) 62,500 multiplied by (A) the Average Stock Price less the Threshold
Stock Price, divided by (B) the Target Stock Price less the Threshold Price. If
the Target Stock Price is equaled or exceeded for a Target Period but the
Maximum Stock price is not equaled or exceeded for such Target Period,
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then the number of shares subject to performance acceleration for such Target
Period, expressed as a percentage of 250,000, will equal 50% + 50% x (ASP - TSP)
-----------
(MSP - TSP)
or, in actual shares (subject to adjustment), will equal the sum of (i) 125,000
plus (ii) 125,000 multiplied by (A) the Average Stock Price less the Target
Stock Price, divided by (B) the Maximum Stock Price less the Target Stock Price.
Adjustments. If there is any change in the Common Stock of the
Company by reason of any stock dividend, stock split, spin-off, split up,
merger, consolidation, recapitalization, reclassification, combination or
exchange of Shares, or any other similar corporate event or reorganization,
however structured, then the number of shares subject to the Performance
Accelerated Options, the exercise price and the Stock Price Targets shall be
equitably and appropriately adjusted. Notice of any adjustment shall be given
by Company to the Executive and such adjustment (whether or not such notice is
given) shall be effective and binding for all purposes of this Agreement.
Limitations. Notwithstanding anything in this Section 5(d) or in
Section 5(e) to the contrary, in no event shall Options become exercisable in
accordance with Section 5(e) of the Agreement except to the extent that the
percentage of Options otherwise exercisable pursuant to Section 5(e) of the
Agreement exceeds the percentage of Options that have become exercisable
pursuant to this Section 5(d). Except as elsewhere provided in this Agreement,
the Executive must be in service on the last day of the Target Period
immediately preceding the earlier applicable Measurement Date.
(e) The Performance Accelerated Options shall vest and become fully
exercisable as follows: 125,000 of the Performance Accelerated Options shall
become fully exercisable on November 15, 1999; 187,500 of the Performance
Accelerated Options shall become fully exercisable on November 15, 2000; 250,000
of the Performance Accelerated Options shall become fully exercisable on
November 15, 2001, 250,000 of the Performance Accelerated Options shall become
fully exercisable on November 15, 2002 and 437,500 of the Performance
Accelerated Options shall become fully exercisable on November 15, 2003.
(f) Each of the Time-Based Options and the Performance Accelerated Options
described in this Section 5 (collectively, the "Options") shall be subject to,
and governed by, the terms and provisions in the applicable Plan under which the
Option was granted, except to the extent of modifications of the Option that are
expressly provided for herein. Notwithstanding anything in the Plans to the
contrary, the Options shall be exercisable for a period of five years following
Executive's retirement as Chief
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Executive Officer to the extent otherwise exercisable pursuant to Section 5(b)
through (e) but not later than ten years after the execution of this Agreement.
(g) Executive agrees to enter into a stock option agreement with Company
containing the terms and provisions of the Options together with such other
terms and conditions as counsel for Company may reasonably require to assure
compliance with applicable federal and state securities law and stock exchange
requirements in connection with the issuance of shares of Company Common Stock
upon exercise of such Options to be granted as provided herein, or as may be
required to comply with the Plan under which the Option was granted. Company
will undertake, as soon as practicable following the grant of the Options, to
register the shares underlying the Options on Form S-8 under the Securities Act
of 1933 and shall keep such Form S-8 in effect for the entire period the Options
remain outstanding.
(h) All outstanding options, stock appreciation rights, restricted stock
and other stock-based awards held by Executive immediately prior to the date
hereof shall remain outstanding in accordance with their original terms (but
without reference to this Agreement) and the terms of the Original Employment
Agreement and the Management Continuity Agreement dated July 1, 1991 between
Company and the Executive (the "MCA") and in the event of any inconsistency or
ambiguity with respect thereto, the provisions that are most favorable to the
Executive shall prevail.
6. REIMBURSEMENT OF EXPENSES
Executive shall be authorized to incur and shall be reimbursed by Company
for reasonable expenses for the advancement of Company's business pursuant to
standing Company policy and those specific categories of such expenses as the
Board has defined, which shall not during the period of any service hereunder be
reduced as to Executive.
7. OTHER BENEFITS DURING SERVICE
(a) During the period of any service hereunder, Executive shall also be
entitled to receive all other benefits of service which are, and which may be in
the future, generally available to members of Company's management, and
specifically, an allowance for use of automobiles as provided from time to time
by action of the Board of Directors, as well as, without limitation, group
health, disability, and life insurance benefits and participation in any Company
profit-sharing, retirement or pension plan, and vacation consistent with the
vacation policies of Company.
(b) No later than March 31st of each year during the term, Company shall
pay Executive an amount necessary to reimburse Executive for federal and state
income taxes payable with respect
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to income recognized by the Executive for income tax purposes as a result of (i)
Company providing the Executive with the services of any individuals hired as a
driver/security guard, and (ii) the amount paid under this Section 7(b), so that
Executive will be in the same after-tax position as if no such taxes had been
imposed. Company (consistent with past practice) shall reimburse or pay the
costs of any driver/guard and security, provided that reimbursement of any
residential security costs (exclusive of any driver/guard or any payments under
clauses (i) and (ii) above) incurred other than while traveling on Company
business shall not exceed $100,000.
(c) In addition, Company shall provide up to $25,000 each year for expenses
incurred by Executive for estate, tax and financial planning, including
attorneys' fees. If such expenses are less than $25,000 in any one year, the
unused amount(s) shall cumulate and be available to Executive in succeeding
years during the term. Company acknowledges that $117,247 in unused amount from
periods prior to the Effective Date hereof shall also be available to Executive
in future periods under this Agreement for these purposes.
(d) If Executive enters into loan agreements for the purpose of exercising
any options or warrants (whether such options or warrants arose by virtue of
this Agreement or any other past, present, or future agreement between Executive
and Company), or paying taxes thereon or on the vesting of restricted stock,
Company shall guarantee such loans for a period ending two (2) years after the
date of the event causing tax liability to be incurred by reason of such
exercise or vesting. Company's obligation to guarantee such loans shall continue
notwithstanding Executive's termination of service and shall apply to loans
entered into prior to termination of service which may run for a period beyond
the Date of Termination (as such term is defined in Section 13(b) hereof), as
well as loans obtained subsequent to the Date of Termination, provided that the
loan was obtained in connection with the exercise of any options or warrants
whenever granted or the vesting of restricted stock. The amount of said
guaranteed loans shall not exceed the lesser of: (a) the amount of the exercise
price, plus the actual tax paid during the two year period by reason of such
exercise, or (b) three and one-half million dollars ($3,500,000). In addition,
if Executive enters into any one or more loan agreements for any reason
whatsoever, Company shall guarantee such loans for a period ending 180 days
after retirement, death, or Disability, or other termination of service
hereunder (or after any extended period of consulting, as may be approved by the
Board) or, in the case termination by Company other than for good cause as set
forth in Section 13(a)(ii) hereof or upon the termination by Executive pursuant
to Section 14. The amount of said guaranteed loans shall not exceed three and
one-half million dollars ($3,500,000).
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8. SPECIAL RETIREMENT BENEFIT; CHANGE OF CONTROL
(a) Company will establish a non-discretionary supplemental retirement
arrangement (the "Special Retirement Benefit") to provide additional cash
payments to Executive that will be paid to Executive upon, or at Executive's
election after, the Section 162(m) Deferred Payment Date. The Special
Retirement Benefit will accrue at the rate of $400,000 per year on each of
December 31, 1997, December 31, 1998, December 31, 1999, December 31, 2000 and
December 31, 2001.
(b) The Special Retirement Benefit will be due and payable to Executive on
(or at Executive's election after) the Section 162(m) Deferred Payment Date (the
"Retirement Payment") and shall be increased by interest at the rate of 9% per
year, compounded annually from date of accrual under Section 8(a) until paid
(the "Interest"). Payment of the Special Retirement Payment plus the Interest
(collectively, the "Retirement Payment") shall be made to Executive only if
Executive is Chief Executive Officer of Company on his 65th birthday provided,
however, that a pro rata portion of the Retirement Payment (determined by
multiplying the Retirement Payment by a fraction, the numerator of which is the
number of months from January 1, 1997 until Executive's death or Disability and
the denominator of which is 60) will be paid to Executive or his designated
beneficiary or in the absence of a designated beneficiary, his estate (the
applicable beneficiary or estate being herein referred to as "Estate") upon his
death or to him or to his duly authorized representative in event of his
Disability as defined in Section 9 hereof.
(c) If Executive's Service hereunder is terminated by Executive pursuant to
Section 14 hereof during the Initial Term or by Company pursuant to Section
13(a)(iii) hereof during the Initial Term or if Company shall terminate
Executive's service under this Agreement in any way that is a breach of this
Agreement by Company during the Initial Term, the unaccrued installments of the
Retirement Payment shall be accelerated and accrued immediately and the entire
amount of the Retirement Payment shall be payable to Executive no later than the
Section 162(m) Deferred Payment Date.
(d) All cash payments pursuant to the Special Retirement Benefit will be
paid from the general funds of Company and no special or separate fund will be
established and no segregation of assets will be made to assure the payment of
funds pursuant to the Special Retirement Benefit. Executive shall have no
right, title or interest whatever in or to any investment which Company may make
to aid it in meeting its obligations under the Special Retirement Benefit.
Nothing contained in this Agreement, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between Company and Executive or any other person. To
the extent that Executive acquires a right to receive payments
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pursuant to the Special Retirement Benefit, such right shall be no greater than
the right of an unsecured creditor of Company.
(e) In the event or anticipation of a Change of Control, as defined in this
Section 8, the unaccrued installments of the Retirement Payment shall be
accelerated and accrued and the entire amount of the Retirement Payment shall be
payable to Executive immediately prior to such Change of Control or as soon
thereafter as practicable.
(f) For purposes of this Agreement, the term "Change of Control" shall mean
a change of control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or in response
to any other form or report to the Securities and Exchange Commission or any
stock exchange on which Company's shares are listed which requires the reporting
of a change of control. In addition, a Change of Control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act but excluding a person described in and satisfying the
requirements and conditions of the proviso at Rule 13d-1(b)(1)(i), (ii) and
(iii)) is or becomes the beneficial owner, directly or indirectly, of securities
of Company representing more than 20% if prior to October 1, 1998 or 35%
thereafter of the combined voting power of Company's then outstanding
securities; or (ii) in any two-year period, individuals who were members of the
Board at the beginning of such period, plus each new director whose election or
nomination for election was approved by at least two-thirds of the directors in
office immediately prior to such election or nomination, cease for any reason to
constitute at least a majority of the Board; or (iii) a majority of the members
of the Board in office prior to the happening of any event and who are still in
office after such event, determines in its sole discretion within one year after
such event, that as a result of such event that there has been a Change of
Control.
Notwithstanding the foregoing definition, the term "Change of Control" for
purposes of this Agreement shall exclude the acquisition of securities
representing more than 20% if prior to October 1, 1998 or 35% thereafter of the
combined voting power of Company (i) by Executive or any group with which
Executive is affiliated (as the terms "group" and "affiliate" are defined under
the Exchange Act), (ii) by Company, (iii) by any of its wholly-owned
subsidiaries (unless after giving effect to the acquisition, less than 80% if
prior to October 1, 1998 or 65% thereafter of the voting power of the subsidiary
is held by Company and persons who were stockholders of Company immediately
prior to the acquisition), or (iv) by any trustee (or other fiduciary) holding
securities of Company under an employee benefit plan now or hereafter
established by Company. As used herein, the term "beneficial owner" shall have
the same meaning
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as under Section 13(d) of the Exchange Act, and related case law.
9. DISABILITY BENEFITS
"Disability" shall mean Executive's incapacity due to physical or mental
illness or cause, which results in the Executive being absent from the
performance of his duties with Company on a full-time basis for a period of six
(6) consecutive months. The existence or cessation of a physical or mental
illness which renders Executive absent from the performance of his duties on a
full-time basis shall, if disputed by Company or Executive, be conclusively
determined by written opinions rendered by two qualified physicians, one
selected by Executive, and one selected by Company. During the period of
absence, Executive shall be deemed to be on disability leave of absence, with
his compensation paid in full. During the period of such disability leave of
absence, the Board of Directors may designate an interim Chief Executive Officer
on such terms as it deems proper.
Upon the expiration of twelve (12) consecutive months of such disability
leave of absence, Executive's service may be terminated by Company pursuant to
the provisions of Section 13(a)(i); provided, however, that prior to the Date of
Termination, Executive shall have the right to return to full-time service. At
Company's request, Executive shall be required to provide the written opinions
of two qualified physicians, one selected by Executive and one selected by
Company, to verify Executive's condition of health. If Company refuses to
permit Executive to resume full-time service as Chairman and Chief Executive
Officer, Company shall be deemed to have terminated this Agreement under Section
13(a)(iii) hereof.
10. DEATH DURING SERVICE; SPLIT DOLLAR POLICY
If Executive dies during the term of service provided for in this
Agreement, Company shall pay the regular compensation that would otherwise be
payable to Executive up to the end of the month in which his death occurs, plus,
as a death benefit, compensation for a period of twelve (12) months thereafter
at the same monthly rate of base compensation which prevailed during the month
of his death. In addition, Executive shall be entitled to receive the payments
and benefits enumerated in Section 13(c). Any amounts payable to Executive
under this Agreement which are unpaid at the date of Executive's death or
payable hereunder or otherwise by reason of his death, unless otherwise
expressly provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's Estate.
Company shall provide Executive with a split dollar life insurance policy
in the amount of one million dollars ($1,000,000). Under the terms of such
split dollar arrangement,
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on Executive's death, Company shall recover its cumulative premiums paid. If
Executive's employment with Company terminates for any reason or Executive
desires for any reason to dissolve the split dollar arrangement, Executive may
take ownership of the policy by paying to Company an amount equal to Company's
cumulative premiums paid, in which event Company shall assign to Executive all
of its interest under such policy.
11. CONFIDENTIAL INFORMATION
This and the next following Section 12 supersede all previous agreements,
if any, between Executive and Company relating to confidential affairs of
Company and to inventions conceived or made by Executive. Executive's
obligations hereunder are made partly in consideration of the salary to be paid
during service by Company. Confidential information shall mean all information
generated by Executive or obtained by Executive from or disclosed to Executive
by Company which relates to Company's past, present, and future research,
development and business activities, trade secrets, including in particular, all
matters of a technical nature, such as "know-how," formulae, secret processes or
machines, inventions, and research projects, and matters of a business nature,
such as information about costs, profits, markets, sales, lists of customers,
and any other information of a similar nature, also including plans for further
development. Except as authorized by Company in writing, Executive shall hold
all such confidential information in trust and confidence for Company, and
agrees not to disclose them to anyone outside of Company, either during or after
service with Company. This commitment shall impose no obligation upon Executive
with respect to any portion of the confidential information which (i) is now or
hereafter, through no act or failure to act on his part, becomes generally known
or publicly available, (ii) is hereafter furnished to Executive by a third party
as matter of right and without restriction on disclosure, or (iii) is furnished
to others by Company without restriction on disclosure. Executive further
agrees to deliver promptly to Company on termination of employment with Company,
or at any time it may so request all memoranda, notes, records, reports,
manuals, drawings, blueprints, and any other documents containing any
confidential information as defined above, including all copies of such
materials which Executive may then possess or have under his control. The
rights and obligations set forth in this Section 11 shall survive according to
the terms hereof and continue after any expiration or termination of this
Agreement or the service specified herein. In the event of a breach or
threatened breach by Executive of the provisions of this Section 11, Company
shall be entitled to an injunction restraining Executive from disclosing, in
whole or in part, any of such confidential information, or from rendering any
services to any person, firm, corporation, association, or other entity to whom
such confidential information, in whole or in part, has been disclosed or is
threatened to be disclosed.
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12. INVENTIONS, PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
Executive agrees that all inventions, works of authorship, trade secrets,
and proprietary information (including new contributions, improvements, ideas,
or discoveries), patentable or unpatentable, copyrightable or uncopyrightable,
conceived, made or first actually reduced to practice by him solely or jointly
with others during the period of his service with Company and which are either
related in any manner to the business (commercial or experimental) of Company or
of any of its subsidiaries, including product, service, research and development
fields in which Company or any of its subsidiaries has been or is engaged or
plans to engage, or to Executive's employment activities, or are conceived, made
or first reduced to practice in whole or in part on Company time or with the use
of Company facilities or materials (except any invention which qualifies fully
for exemption under Section 2870 of the California Labor Code) shall belong to
Company; provided that works of authorship concerning Executive or the
--------
electronics industry, and any copyrights thereon, shall belong to Executive and
Executive shall seek authorization in writing pursuant to Section 11 for
disclosure of any confidential information contained therein. Executive further
agrees that he will:
(a) Promptly disclose such inventions, works of authorship, trade secrets
and proprietary information to Company;
(b) Notify Company of any invention which he claims qualifies for exemption
under Section 2870 of the California Labor Code and offer to disclose such
inventions to Company in confidence;
(c) Assign to Company, at its request and without additional compensation,
the entire rights to the inventions for the United States and all foreign
countries;
(d) Sign all papers within the truth, necessary to carry out the above; and
(e) Give testimony (but without expense to Executive) in support of his
inventorship, idea or trade secret, or as otherwise reasonably deemed necessary
by counsel to Company.
Executive agrees to accept the compensation provided by this Agreement as
his sole compensation for the use, lease, sale or other transfer by Company of
any such inventions, works of authorship, trade secrets and proprietary
information or of any such patents obtained by it in such inventions, works of
authorship, trade secrets or proprietary information.
To the best of Executive's knowledge, there is no other contract to assign
inventions, works of authorship, patents, trade secrets, or other proprietary
information that is now in
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existence between him and any other person, corporation or partnership, unless
Executive has so indicated below, and unless a copy of any such other contract
is attached hereto.
13. TERMINATION BY COMPANY
(a) Company shall have the right to terminate Executive's service hereunder
under the following circumstances:
(i) Upon ten (10) days' written notice from Company to Executive in the
event of disability which has incapacitated him from performing his duties
for twelve (12) consecutive months as determined under Section 9, subject
to Executive's right to reinstatement as provided in Section 9.
(ii) For good cause upon ten (10) days' written notice from Company.
Termination by Company of Executive's service for "good cause" as used in
this Agreement shall mean (A) that the Board of Directors has found that
Executive has committed a material act of theft, misappropriation, or
conversion of corporate funds, or (B) a termination of Executive's
employment during the Initial Term (other than in contemplation of, in
connection with or following a Change in Control (as defined in Section 8
hereof)) as a result of Executive's demonstrably willful, deliberate and
continued failure to follow reasonable directives of the Board of Directors
(other than for any such failure resulting from Executive's incapacity due
to physical or mental illness or any such actual or anticipated failure in
connection with a resignation by Executive pursuant to Section 14 hereof)
within Executive's ability to perform, which failure has had a material
adverse effect on Company. For purposes of the previous sentence, no act
or failure to act by Executive shall be deemed "willful" unless done, or
omitted to be done, by Executive in bad faith and without reasonable belief
that his action or omission was in the best interest of Company.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for good cause under clause (B) above unless and until: (1)
there shall have been delivered to Executive a copy of a resolution duly
adopted by the Board of Directors in good faith at a meeting of the Board
of Directors called and held for such purpose (after reasonable notice to
Executive and an opportunity for Executive, together with his counsel, to
be heard before the Board of Directors), finding that Executive was guilty
of conduct set forth above in clause (B) and specifying the particulars
thereof in reasonable detail, and (2) Executive shall have been provided
the opportunity to correct the performance at issue within 20 business days
after his receipt of the resolution; and (3) if Executive contests such
finding (or a conclusion that he has failed to timely cure the performance
in response thereto), the arbitrators by final determination in an
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arbitration proceeding pursuant to Section 27 hereof have concluded that
Executive's conduct met the standard for termination for "good cause" above
and that the Board of Directors' conduct met the standards of good faith
and satisfied the procedural and substantive conditions of this Section 13.
(iii) Upon ninety-five (95) days' written notice to Executive where the
Board by majority vote, elects to terminate Executive for any reason, other
than the reasons referred to in subparagraphs (i) or (ii) above.
(b) Except as provided below, as used in this Agreement "Date of
Termination" shall mean the date specified in the written notice of termination
given by Company pursuant to Section 13(a)(i), (ii) or (iii) hereof. If
termination occurs pursuant to Executive's death, the date of Executive's death
shall be the Date of Termination. Further, if within sixty (60) days after any
notice of termination is given, the party receiving such notice of termination
notifies the other party that a dispute exists concerning the termination, the
Date of Termination shall be the date as finally determined by mutual written
agreement of the parties or by a final and binding arbitration award. Any party
giving notice of a dispute shall pursue the resolution of such dispute. During
the period until the dispute is finally resolved in accordance with this Section
13(b), Company will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, base salary) and continue Executive as a participant in all compensation,
employee benefit, health and welfare and insurance plans, programs, arrangements
and perquisites in which Executive was participating or to which he was entitled
when the notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with this Section 13(b). Amounts paid under this
Section 13(b) shall be repaid to Company or be offset against or reduce any
other amounts due Executive under this Agreement, if appropriate, only upon the
final resolution of the dispute.
(c) If Executive's service hereunder is terminated by reason of Executive's
death or Disability pursuant to Section 13(a)(i) hereof, Executive or his Estate
shall be entitled to receive 100% of his base salary (including adjustments) for
the remainder of the Initial Term, the amounts provided under Section 10, his
compensation under Sections 4(a), (b) and 4(d) hereof for the fiscal year in
which the Date of Termination occurs and for the following fiscal year, and any
Excess Bonus remaining unpaid as of the date the foregoing bonuses are paid.
Company may purchase insurance to cover all or any part of its obligations set
forth in the preceding sentence, and Executive agrees to take a physical
examination to facilitate the obtaining of such insurance. In addition to the
foregoing, (i) all Time-Based Options which otherwise would have vested within
two years
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following the Date of Termination shall accelerate and become exercisable on the
Date of Termination, and (ii) all Performance Accelerated Options which
otherwise would have become exercisable if any of the Performance Accelerated
Stock Option Price Targets were satisfied prior to the end of the first fiscal
year of Company beginning after the Executive's death or disability (the "Death
or Disability Vesting Period") shall become fully exercisable on the Measurement
Date or Dates, if any, such Performance Accelerated Stock Option Price Targets
are satisfied but only if and to the extent such Performance Accelerated Stock
Option Price Targets are satisfied prior to the end of the Death or Disability
Vesting Period. The Time-Based Options shall remain exercisable until three
years after the Date of Termination; the Performance Accelerated Options shall
remain exercisable until three years after the end of the Death or Disability
Vesting Period. Notwithstanding the foregoing provisions of this Section 13, in
no event shall any Option remain exercisable beyond the maximum 10-year period
allowed therefor in the Plans. All options and rights granted prior to the
Effective Date shall be subject to the provisions of Section 5(h) hereof.
(d) If Executive's service hereunder is terminated pursuant to Section
13(a)(ii) hereof, or by reason of Executive's voluntary termination other than
pursuant to Section 14 hereof, Company shall be obligated to pay Executive only
such severance compensation as the Board by majority vote deems appropriate, or
none at all, and Company's obligations under Sections 3 and 4 hereof shall
cease. If Executive's service hereunder is terminated pursuant to Section
13(a)(ii), any Options otherwise exercisable on the Date of Termination shall
remain exercisable for a period of 30 days from the Date of Termination. If
Executive's termination is by reason of a voluntary resignation of Executive
other than pursuant to Section 14 hereof, such Options shall remain exercisable
for a period of one year from the Date of Termination. In the circumstances
addressed in this Section 13(d), any Options not otherwise exercisable on (or
accelerated as of) the Date of Termination shall expire.
(e) If Executive's service hereunder is terminated pursuant to Section
13(a)(iii), the provisions of Sections 15 and 16 hereof shall apply.
14. TERMINATION BY EXECUTIVE
Executive shall have the right to terminate his service under this
Agreement upon 30 days' notice to Company given within 180 days following the
date on which the Executive becomes aware of any of the following events:
(a) Executive is not elected or retained as Chairman and Chief Executive
Officer and a director of Company during the
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Initial Term or as Chairman and a director of Company during the Optional Term;
(b) any assignment to Executive of any duties other than those reasonably
contemplated by, or any limitation of the powers or prerogatives of Executive in
any respect not reasonably contemplated by, Section 2 hereof;
(c) any removal of Executive from responsibilities substantially similar to
those described or contemplated in Section 2 hereof (except pursuant to Section
13 (a)(ii) hereof);
(d) any reduction in, or limitation upon, the compensation, reimbursable
expenses or other benefits provided in Section 3, 4, Section 7 and Section 8,
respectively, hereof, other than by valid public law or regulation; or
(e) any assignment to Executive of duties that would require him to
relocate or transfer his current principal place of residence in Southern
California, or would make the continuance of such current principal place of
residence unreasonably difficult or inconvenient for him; or
(f) a Change of Control of Company (as defined in Section 8 hereof);
provided that in such event no advance notice shall be required.
15. CONSEQUENCES OF TERMINATION BY EXECUTIVE, BY COMPANY FOR CERTAIN REASONS
AND BREACH BY COMPANY
(a) If Executive's service hereunder is terminated by Executive pursuant to
Section 14 hereof during the Initial Term or the Optional Term, or by Company
pursuant to Section 13(a)(iii) hereof during the Initial Term or the Optional
Term, or if Company shall terminate Executive's service under this Agreement in
any way that is a breach of this Agreement by Company during the Initial Term or
the Optional Term, the following shall apply:
(i) Executive shall continue to receive Executive's base salary (in effect
in the fiscal year in which the Date of Termination occurs and as adjusted
under Section 3) until the later of the end of the Optional Term, or one
full year after the Date of Termination; provided, however, that in the
event of a Change of Control (as defined in Section 8 hereof), such base
salary shall be payable for no less than three years following the Date of
Termination. Company may at its election following such Date of
Termination immediately pay to Executive in a lump sum the full amount to
which he is entitled under this Section 15(a)(i), but appropriately
discounted for the period over which such compensation would otherwise be
paid by a factor measured by
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the prevailing interest rate on ninety (90) day U.S. Treasury Bills at the
date of such lump sum payment.
(ii) Executive shall be entitled to receive the bonuses that would have
been paid to Executive under Sections 4(a), (b) and 4(d) hereof for (x) the
fiscal year in which such Date of Termination occurred and (y) the fiscal
year following the fiscal year in which the Date of Termination occurred.
Notwithstanding the foregoing, in the event of a Change of Control (as
defined in Section 8 hereof), Company shall pay Executive immediately an
amount equal to the average of the two highest bonuses paid (or payable) to
Executive for the last five full fiscal years immediately prior to such
Change of Control and shall pay Executive as soon as determinable the
difference between any greater amount determined pursuant to the preceding
sentence and such average amount previously paid. Any bonuses otherwise
payable pursuant to this Section 15(a)(ii) shall be paid to Executive (or
his Estate) at the same time as such bonuses would have been paid to
Executive if Executive's service hereunder had not been terminated. If
such termination occurs in the fiscal year beginning January 1, 2001, the
bonus payable for the fiscal year following the fiscal year in which the
Date of Termination occurs shall be calculated and paid as if Executive's
service hereunder had not been terminated, notwithstanding any "in service"
or other requirements under the 1996 Executive Incentive Plan. Executive
shall also be entitled to receive the amount of any Excess Bonus remaining
unpaid as of the Date of Termination.
(iii) All stock options and stock appreciation rights granted by Company
to Executive prior to the Effective Date and all Time-Based Options held by
Executive shall accelerate and become fully exercisable on the Date of
Termination.
(iv) All Performance Accelerated Options shall become fully exercisable on
the date the applicable Stock Price Targets are satisfied but (except as
provided in clause (v) below) only if and to the extent such Stock Price
Targets are satisfied at or prior to the end of the first fiscal year of
Company beginning after the Executive's termination and ending on or before
the end of the Term (the "Termination Vesting Period"). In addition, if
the Date of Termination occurs on or prior to the end of the Optional Term,
any Performance Accelerated Stock Options which otherwise would have become
exercisable pursuant to Section 5(e) hereof in the fiscal year in which the
Date of Termination occurs shall become fully exercisable.
(v) If a Change of Control (as defined in Section 8 hereof) occurs or will
occur prior to the end of the Initial Term,
20
<PAGE>
any Performance Accelerated Options which have not otherwise become
exercisable will become fully exercisable immediately prior to such Change
of Control (or, as may be the case under clause (B) below, as soon
thereafter as vesting occurs) if one of the following occurs: (A) the
consideration to be paid to stockholders of Company for a share of
Company's common stock is equal to or in excess of a Stock Price Target
applicable to the Performance Accelerated Options; or (B) the closing price
of Company's common stock on any date thirty (30) days before or after the
Change of Control is equal to or in excess of a Stock Price Target
applicable to such Performance Accelerated Options, in each case to the
extent provided in Section 5(d) but without applying the averaging
methodology in the definition of Average Stock Price or the prescribed
Measurement Dates therein (either of such events being referred to as a
"Change of Control Vesting Event"). In addition, if the Change of Control
occurs on or prior to the end of the Optional Term, any Performance
Accelerated Options which otherwise would have become exercisable in the
fiscal year of the Change of Control pursuant to Section 5(e) hereof shall
become fully exercisable.
(vi) Except as provided elsewhere in this Agreement (including but not
limited to Section 13(c) and (d)), any Options that are exercisable without
regard to this Section 15 shall remain exercisable for a period ending two
years from the Termination Date. Any Options that become exercisable
solely by reason of the provisions of Section 15(a)(iii), Section 15(a)(iv)
or Section 15(a)(v) hereof shall remain exercisable for a period of one
year from the Date of Termination in the case of the Time-Based Options, or
until one year after the end of the Termination Vesting Period or after the
Change of Control Vesting Event, as the case may be, in the case of the
Performance Accelerated Options. Notwithstanding the foregoing provisions
of this Section 15, in no event shall any Option remain exercisable beyond
the maximum 10-year period allowed therefor in the Plans.
(vii) In addition to all other amounts payable to Executive under this
Section 15, the Executive shall be entitled to receive, not later than the
fifteenth day following the Date of Termination, all benefits payable to
him under any of Company's tax-qualified employee benefit plans and any
other plan, program or arrangement relating to deferred compensation,
retirement or other benefits including, without limitation, the Special
Retirement Benefit and any profit sharing, 401(k), employee stock ownership
plan, or any plan established as a supplement to any of the aforementioned
plans or expressly provided by other provisions of this Agreement.
21
<PAGE>
(viii) Company shall also pay to the Executive, not later than the 15th
day following the Date of Termination, an amount equal to all unvested
Company contributions credited to the Executive's account under any tax-
qualified employee benefit plan maintained by Company as of the Date of
Termination.
(ix) Company shall also pay to the Executive all legal fees and expenses
incurred by the Executive (1) in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement (the Executive shall have no obligation to repay
any such legal fees or expenses regardless of the outcome of any contest or
dispute), or (2) in connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder.
(x) Company shall also pay to Executive, not later than the second day
following the Date of Termination, a pro rata amount of his base salary
under Section 3 hereof, in effect on the Date of Termination, for each day
of vacation or sick leave which has accrued as of the Date of Termination,
but which is unpaid as of such date, to which Executive is entitled under
Company's vacation and sick leave policies.
(b) If Executive's service hereunder is terminated by Company pursuant to
Section 13(a)(iii) hereof after the last day of the Optional Term and before the
last day of the Extended Term, or if Company shall terminate Executive's service
under this Agreement in any way that is a breach of this Agreement by Company on
or after the last day of the Optional Term, the following shall apply:
(i) Executive shall receive an amount equal to Executive's annual base
salary (in effect for the fiscal year beginning January 1, 2003) in one
lump sum;
(ii) All Performance Accelerated Options which otherwise would have become
exercisable pursuant to Section 5(e) for the period beginning January 1,
2003 and ending December 31, 2003 and have not vested prior to the
termination shall be forfeited;
(iii) In addition to all other amounts payable to Executive under this
Section 15, the Executive shall be entitled to receive, not later than the
15th day following the Date of Termination, all benefits payable to him
under any of Company's tax-qualified employee benefit plans and any other
plan, program or arrangement relating to deferred compensation, retirement
or other benefits including, without limitation, the Special Retirement
Benefits and any profit sharing, 401(k), employee stock ownership plan, or
22
<PAGE>
any plan established as a supplement to any of the aforementioned plans or
expressly provided by any other provisions of this Agreement.
(iv) Company shall also pay to Executive, not later than the second day
following the Date of Termination, a pro rata amount of his base salary
under Section 3 hereof, in effect on the Date of Termination, for each day
of vacation or sick leave which has accrued as of the Date of Termination,
but which is unpaid as of such date, to which Executive is entitled under
Company's vacation and sick leave policies.
(c) Executive may waive only in writing the effect of any breach of this
Agreement and continue in any other position or capacity with Company, as a
part-time or full-time employees, retaining his compensation pursuant to Section
3 hereof for the term hereof and a pro rata portion of his compensation under
--- ----
Sections 4(a) and (d) hereof for that part of the fiscal year which then elapsed
prior to such change in position or capacity, and the parties upon mutual
agreement may provide additional compensation from Company for such other
position or capacity with Company.
(d) Upon a Change of Control, Company's obligation to pay the benefits
described herein shall be absolute and unconditional, shall be paid as soon as
practicable but not more than ten (10) business days thereafter or (if expressly
provided herein) as earlier or later herein provided, and shall not be affected
by any circumstances or any set-off, counter-claim, recoupment, defense or other
right which Company or any of its subsidiaries may have or claim against
Executive or anyone else.
16. OTHER BENEFITS FOLLOWING TERMINATION
(a) If Executive's service is terminated by Company pursuant to Section
13(a)(i) or (iii) before the last day of the Optional Term, or by Executive
pursuant to Section 14 on or before the last day of the Extended Term, or if
Company shall terminate Executive's service under this Agreement in any way that
is a breach of this Agreement by Company on or before the last day of the
Extended Term, in addition to the benefits contained in Section 15, Executive
shall also be entitled to the following benefits:
(i) Company shall provide for a period of ten (10) years following the
termination or expiration of Executive's services to Company, health and
welfare benefits, at least comparable to those benefits in effect on the
date of termination or expiration, including but not limited to medical,
dental, disability, spouse and dependent care, and life insurance coverage.
At Company's election, health benefits may be provided by reimbursing
Executive for the cost of converting group policy to individual coverage,
or
23
<PAGE>
for the cost of extended COBRA coverage. Company shall also pay to
Executive an amount calculated to pay any income taxes due as a result of
the payment by Company on Executive's behalf for such health benefits.
Such tax payment shall be calculated to place Executive in the same after-
tax position as if no such income taxes had been imposed. Notwithstanding
anything to the contrary in this Agreement, if this Agreement expires in
accordance with its terms or Executive's service terminates voluntarily
after completion of thirty (30) years of service or Executive dies or is
disabled, benefits pursuant to this Section 16(a)(i) shall continue for ten
(10) years following such expiration or termination.
(ii) Company shall allow Executive the continued use of a Company
automobile on the same terms which existed prior to the Date of
Termination, for five (5) years following the Date of Termination.
(iii) Company shall provide Executive up to $25,000 each year for expenses
incurred by Executive for estate, tax and financial planning, including
legal fees, for five years following the Date of Termination. Such amount
shall cumulate as provided in Section 7(c) hereof.
(iv) Company shall provide Executive with an office and secretarial
services equivalent to those provided to Executive in his Southern
California office at the Date of Termination for five years after the Date
of Termination.
Notwithstanding the foregoing, benefits under Section 16(a)(ii), (iii) and (iv)
shall continue for at least one year after the expiration of this Agreement in
accordance with its terms.
(b) If Executive's service is terminated by Company other than for good
cause, for at least six (6) years following the Date of Termination, Executive
shall continue to be indemnified under Company's Certificate of Incorporation
and Bylaws at least to the same extent as prior to the Date of Termination and
Executive shall be covered by the directors' and officers' liability insurance,
the fiduciary liability insurance and the professional liability insurance
policies that are the same as, or provide coverage at least equivalent to, those
Company carried prior to the Date of Termination.
(c) If all or any portion of the amounts payable to Executive or his Estate
under this Agreement or otherwise are subject to the excise tax imposed by
Section 4999 of the Code (or similar state tax and/or assessment), Company shall
pay to Executive an amount necessary to place Executive in the same after-tax
position as Executive would have been in had no such excise tax been imposed.
The amount payable pursuant to the preceding sentence shall be increased to the
extent necessary to
24
<PAGE>
pay income and excise taxes due on such amount. The determination of the amount
of any such additional amount shall initially be made by the independent
accounting firm then employed by Company. If at a later date it is determined
(pursuant to final regulations or published rulings of the IRS, final judgment
of a court of competent jurisdiction or otherwise) that the amount of excise
taxes payable by Executive is greater than the amount initially so determined,
then Company (or its successor) shall pay Executive an amount equal to the sum
of (1) such additional excise taxes, (2) any interest, fines and penalties
resulting from such underpayment, plus (3) an amount necessary to reimburse
Executive for any income, excise or other taxes payable by Executive with
respect to the amounts specified in (1) and (2) above, including any income,
excise or other taxes payable with respect to such amounts, and the
reimbursement provided by this clause.
(d) Notwithstanding anything in this Section 16 to the contrary, Executive
may elect in his sole discretion not to have any portion of any payment be paid
or not to have the vesting of any Options accelerated in order to avoid any
"excess parachute payment" under Section 280G(b)(1) of the Code.
17. INDEMNIFICATION
In addition to the provisions of Section 16(b), in the event Executive is
made, or threatened to be made, a party to any legal action or proceeding,
whether civil or criminal or administrative, by reason of the fact that
Executive is or was a director or officer of Company or serves or served any
other corporation fifty percent (50%) or more owned or controlled by Company in
any capacity at Company's request, Executive shall be indemnified by Company,
and Company shall pay Executive's related expenses when and as incurred, all to
the full extent permitted by law.
18. REMEDIES
Company recognizes that because of Executive's special talents, stature and
opportunities in the semiconductor industry, in the event of termination by
Company hereunder (except under Section 13(a)(ii)), or in the event of
termination by Executive under Section 14, before the end of the Agreement,
Company acknowledges and agrees that the provisions of this Agreement regarding
further payment of base salary, bonuses, and the exercisability of Options and
other benefits constitute fair and reasonable provisions for the consequences of
such termination, do not constitute a penalty, and such payments and benefits
shall not be limited or reduced by amounts Executive might earn or be able to
earn from any other employment or ventures during the remainder of the
Agreement. Notwithstanding the foregoing, amounts paid or benefits provided
under Section 16(a)(ii)-(iv) shall be so limited or reduced. Executive shall
25
<PAGE>
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise.
19. BINDING AGREEMENT
This Agreement shall be binding upon and inure to the benefit of Executive,
his heirs, distributees and assigns, and Company, its successors and assigns.
Executive may not, without the express written permission of Company, assign or
pledge any rights or obligations hereunder to any person, firm or corporation.
If the Executive should die while any amount would still be payable to Executive
if he had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with this Agreement to the Executive's Estate.
20. NO ATTACHMENT
Except as required by law or with the consent of Company or by laws of
descent and distribution or permitted designation, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
21. ASSIGNMENT
Company will require any successor (whether direct or indirect, by
operation of law, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company) to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that Company would be required to perform it if no such succession had taken
place. Failure of Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall at Executive's election be deemed a
material breach of this Agreement and shall entitle the Executive to
compensation from Company in an amount equal to the greater of (A) the same
amount on the same terms as the Executive would be entitled under Section 15 and
Section 16 hereof upon a termination without good cause by Company, or (B) the
benefits hereunder upon a Change of Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be the Date of Termination. As used in this Agreement,
"Company" shall mean Company as defined above and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
22. WAIVER
No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the
26
<PAGE>
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
23. NOTICE
For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered and acknowledged or delivered by
United States registered mail, return receipt requested, addressed to the
Executive at 10659 Bellagio Road, Los Angeles, California 90077, with a copy to
James R. Ukropina, O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles,
California 90071-2899 in the case of Executive, and in the case of Company, to
the attention of the Chairman of the Compensation Committee of the Board of
Directors with copies to the Chief Financial Officer and the Secretary of
Company at the principal executive offices of Company, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
24. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware.
25. COSTS
Company shall pay all the expenses of Executive, including attorneys' fees,
in the negotiation and preparation of the Agreement, in addition to Company's
own expenses in connection therewith.
26. SEVERABILITY
If, for any reason, any provision of this Agreement is held invalid, such
invalidity shall not affect any other provision of this Agreement not held so
invalid, and each such other provision shall to the full extent consistent with
law continue in full force and effect. If any provision of this Agreement shall
be held invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.
27
<PAGE>
27. ARBITRATION
(a) Any disagreement, dispute, controversy or claim arising out of or in
any way related to this Agreement or the subject matter hereof or the
interpretation hereof or any arrangements relating hereto or contemplated herein
or the breach, termination or invalidity hereof or the provision or failure to
provide any other benefits upon a change of control pursuant to any other bonus
or compensation plans, stock option plan, stock ownership plan, stock purchase
plan, life insurance plan or similar plan or agreement with Company and/or any
of its subsidiaries as "change of control" may be defined in such other
agreement or plan, which benefits constitute "parachute payments" within the
meaning of Section 280G of the Code, shall be settled exclusively and finally by
arbitration. If this Section 27 conflicts with any provision in any such
compensation or bonus plan, stock option plan or any other similar plan or
agreement, this provision requiring arbitration shall control.
(b) The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA"). The arbitral tribunal shall consist of three
arbitrators, one chosen by Company, one chosen by the Executive and one chosen
by the preceding two persons.
(c) Company shall pay all of the fees, if any, and expenses of such
arbitration, and shall also pay all Executive's expenses, including attorneys'
fees, incurred in connection with the arbitration regardless of the final
outcome of such arbitration.
(d) The arbitration shall be conducted in Los Angeles if initiated by
Company and in San Francisco if initiated by the Executive or in any other city
in the United States of America as the parties to the dispute may designate by
mutual written consent.
(e) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties hereto
hereby waive to the extent permitted by law any rights to appeal or to review of
such award by any court or tribunal. The parties hereto agree that the arbitral
award may be enforced against the parties to the arbitration proceeding or their
assets wherever the award may be entered in any court having jurisdiction
thereof.
(f) The parties stipulate that discovery may be held in any such
arbitration proceeding as provided in Section 1283.05 of the California Code of
Civil Procedure, as may be amended or revised from time to time.
28
<PAGE>
28. ENTIRE AGREEMENT
As of the Effective Date, all previous agreements relating to the
employment of the Executive to the extent inconsistent herewith, including, but
not limited to Executive's Original Employment Agreement and (except as
otherwise specifically provided herein) the MCA, are hereby superseded, and this
Agreement embodies all agreements, contracts, and understandings by and between
the parties hereto. Notwithstanding the foregoing, nothing contained in this
Agreement shall adversely affect or limit any rights Executive may have or any
benefits Executive may be entitled to receive under any other agreements,
plans, programs or otherwise, including, without limitation, any pension,
retirement, health, welfare or fringe benefit arrangements, the Restricted Stock
Award Agreement dated August 5, 1994 between Company and Executive and any other
stock option, stock appreciation rights or restricted stock award agreements or
other stock based benefits held by Executive. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought.
"Executive" "Company"
ADVANCED MICRO DEVICES, INC.
/s/ W. J. Sanders III /s/ Charles M. Blalack
_______________________ By: _________________________
W. J. SANDERS III CHARLES M. BLALACK
Chairman, Compensation
Committee
29
<PAGE>
Exhibit 1
---------
Performance Goals for 1997 and 1998 pursuant to Section 4(b) of the Agreement:
Adjusted Operating Profits (as defined in Section 4(a) of the Agreement) in any
amount for any two successive fiscal quarters after December 31, 1996.
<PAGE>
Exhibit 2
---------
Stock Price Targets Applicable to
---------------------------------
Performance Accelerated Options
-------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(1) (2) (3)
Applicable Target Period Performance Share Acceleration Stock Price Targets
- --------------------------------------------------------------------------------------------------------
1997 25% 50% 100% Threshold Target Maximum
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
November 1, 1996 - January 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
December 1, 1996 - February 28, 1997 62,500 125,000 250,000 19.50 22.75 26.00
January 1, 1997 - March 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
February 1, 1997 - April 30, 1997 62,500 125,000 250,000 19.50 22.75 26.00
March 1, 1997 - May 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
April 1, 1997 - June 30, 1997 62,500 125,000 250,000 19.50 22.75 26.00
May 1, 1997 - July 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
June 1, 1997 - August 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
July 1, 1997 - September 30, 1997 62,500 125,000 250,000 19.50 22.75 26.00
August 1, 1997 - October 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
September 1, 1997 - November 30, 1997 62,500 125,000 250,000 19.50 22.75 26.00
October 1, 1997 - December 31, 1997 62,500 125,000 250,000 19.50 22.75 26.00
- --------------------------------------------
1998
- --------------------------------------------
November 1, 1997 - January 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
December 1, 1997 - February 28, 1998 62,500 125,000 250,000 28.50 29.75 31.00
January 1, 1998 - March 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
February 1, 1998 - April 30, 1998 62,500 125,000 250,000 28.50 29.75 31.00
March 1, 1998 - May 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
April 1, 1998 - June 30, 1998 62,500 125,000 250,000 28.50 29.75 31.00
May 1, 1998 - July 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
June 1, 1998 - August 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
July 1, 1998 - September 30, 1998 62,500 125,000 250,000 28.50 29.75 31.00
August 1, 1998 - October 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
September 1, 1998 - November 30, 1998 62,500 125,000 250,000 28.50 29.75 31.00
October 1, 1998 - December 31, 1998 62,500 125,000 250,000 28.50 29.75 31.00
- --------------------------------------------
1999
- --------------------------------------------
November 1, 1998 - January 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
December 1, 1998 - February 28, 1999 62,500 125,000 250,000 34.25 35.88 37.50
January 1, 1999 - March 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
February 1, 1999 - April 30, 1999 62,500 125,000 250,000 34.25 35.88 37.50
March 1, 1999 - May 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
April 1, 1999 - June 30, 1999 62,500 125,000 250,000 34.25 35.88 37.50
May 1, 1999 - July 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
June 1, 1999 - August 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
July 1, 1999 - September 30, 1999 62,500 125,000 250,000 34.25 35.88 37.50
August 1, 1999 - October 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
September 1,1999 - November 30, 1999 62,500 125,000 250,000 34.25 35.88 37.50
October 1, 1999 - December 31, 1999 62,500 125,000 250,000 34.25 35.88 37.50
- --------------------------------------------------------------------------------------------------------
</TABLE>
*The percentage Performance Share Acceleration (as a percentage of 250,000
shares) correlates to the Stock Price Targets as follows: 25% at Threshold; 50%
at Target; and 100% at Maximum.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(1) (2) (3)
Applicable Target Period Performance Share Acceleration Stock Price Targets
- --------------------------------------------------------------------------------------------------------
2000 25% 50% 100% Threshold Target Maximum
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
November 1, 1999 - January 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
December 1, 1999 - February 29, 2000 62,500 125,000 250,000 41.25 43.13 45.00
January 1, 2000 - March 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
February 1, 2000 - April 30, 2000 62,500 125,000 250,000 41.25 43.13 45.00
March 1, 2000 - May 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
April 1, 2000 - June 30, 2000 62,500 125,000 250,000 41.25 43.13 45.00
May 1, 2000 - July 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
June 1, 2000 - August 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
July 1, 2000 - September 30, 2000 62,500 125,000 250,000 41.25 43.13 45.00
August 1, 2000 - October 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
September 1, 2000 - November 30, 2000 62,500 125,000 250,000 41.25 43.13 45.00
October 1, 2000 - December 31, 2000 62,500 125,000 250,000 41.25 43.13 45.00
- ---------------------------------------
2001
- ---------------------------------------
November 1, 2000 - January 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
December 1, 2000 - February 28, 2001 62,500 125,000 250,000 49.50 51.75 54.00
January 1, 2001 - March 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
February 1, 2001 - April 30, 2001 62,500 125,000 250,000 49.50 51.75 54.00
March 1, 2001 - May 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
April 1, 2001 - June 30, 2001 62,500 125,000 250,000 49.50 51.75 54.00
May 1, 2001 - July 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
June 1, 2001 - August 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
July 1, 2001 - September 30, 2001 62,500 125,000 250,000 49.50 51.75 54.00
August 1, 2001 - October 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
September 1, 2001 - November 30, 2001 62,500 125,000 250,000 49.50 51.75 54.00
November 1, 2001 - December 31, 2001 62,500 125,000 250,000 49.50 51.75 54.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.24(b)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is
---------
entered into as of September 9, 1996, among Advanced Micro Devices, Inc., a
Delaware corporation (the "Company"), Bank of America National Trust and Savings
-------
Association, ABN AMRO Bank N.V. and Canadian Imperial Bank of Commerce (the
"Banks" and, individually, each a "Bank"), ABN AMRO Bank N.V., as Syndication
- ------ ----
Agent for the Banks (the "Syndication Agent"), Canadian Imperial Bank of
-----------------
Commerce, as Documentation Agent for the Banks (the "Documentation Agent"), and
-------------------
Bank of America National Trust and Savings Association, as Administrative Agent
for the Banks (the "Agent").
-----
WHEREAS, the Company, the Banks, the Syndication Agent, the
Documentation Agent and the Agent are parties to a Credit Agreement dated as of
July 19, 1996, as amended by a First Amendment to Credit Agreement dated as of
August 7, 1996 (as so amended, the "Credit Agreement");
----------------
WHEREAS, the Company has requested that the Banks agree to certain
amendments to the Credit Agreement;
WHEREAS, the Banks have agreed to such request, subject to the terms
and conditions hereof;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto agree as follows:
1. Definitions; Interpretation.
---------------------------
(a) Terms Defined in Credit Agreement. All capitalized terms used in
---------------------------------
this Amendment (including in the recitals hereof) and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement.
(b) Interpretation. The rules of interpretation set forth in Section
--------------
1.02 of the Credit Agreement shall be applicable to this Amendment and are
incorporated herein by this reference.
2. Amendments to the Credit Agreement.
----------------------------------
(a) Amendment. Effective as of the date upon which executed signature
---------
pages hereof for the Agent, the Banks, the Company, the Syndication Agent and
the Documentation Agent shall have been received by the Agent (the "Effective
---------
Date"), the Credit Agreement is amended as follows:
- ----
1.
<PAGE>
(i) Subsection 7.04(g) of the Credit Agreement is hereby amended by
inserting after the word "hereof" and before the period at the end of such
subsection the following:
"; minus the aggregate amount of Contingent Obligations of the Company
-----
outstanding under Subsection 7.08(g) at such time"
(ii) Section 7.08 of the Credit Agreement is hereby amended by
deleting "and" at the end of Subsection 7.08(e), replacing the period at the end
of Subsection 7.08(f) with "; and" and adding a new Subsection 7.08(g) as
follows:
"(g) other Contingent Obligations of the Company not described above
of not more than $50,000,000 at any time in the aggregate, provided that
--------
after giving effect to the incurrence of such Contingent Obligations the
Company shall be and remain in compliance with Subsection 7.04(g)."
(b) References Within Credit Agreement. Each reference in the Credit
----------------------------------
Agreement to "this Agreement" and the words "hereof," "herein," "hereunder," or
words of like import, shall mean and be a reference to the Credit Agreement as
amended by this Amendment.
3. Representations and Warranties.
------------------------------
To induce the Agent, the Syndication Agent, the Documentation Agent
and each Bank to enter into this Amendment, the Company hereby confirms and
restates, as of the date hereof, the representations and warranties made by it
in Article V of the Credit Agreement and in the other Loan Documents to which it
is a party. For the purposes of this Section 3, (i) each reference in Article V
of the Credit Agreement to "this Agreement," and the words "hereof," "herein,"
"hereunder," or words of like import in such Section, shall mean and be a
reference to the Credit Agreement as amended by this Amendment, and (ii) any
representations and warranties which relate solely to an earlier date shall not
be deemed confirmed and restated as of the date hereof (provided that such
--------
representations and warranties shall be true, correct and complete as of such
earlier date).
4. Miscellaneous.
-------------
(a) Credit Agreement Otherwise Not Affected. Except as expressly
---------------------------------------
amended pursuant hereto, the Credit Agreement shall remain unchanged and in full
force and effect and is hereby ratified and confirmed in all respects. The
Banks', the Agent's, the Syndication Agent's and the Documentation Agent's
execution and delivery of, or acceptance of, this Amendment shall not be deemed
to create a course of dealing or otherwise create any express or implied duty by
any of them to provide any other or further amendments, consents or waivers in
the future.
2.
<PAGE>
(b) No Reliance. The Company hereby acknowledges and confirms to the
-----------
Agent, the Syndication Agent, the Documentation Agent and the Banks that the
Company is executing this Amendment on the basis of its own investigations and
for its own reasons without reliance upon any agreement, representation,
understanding or communication by or on behalf of the Agent, the Syndication
Agent, the Documentation Agent, any Bank or any other Person.
(c) Amendments and Waivers. The provisions of this Amendment may only
----------------------
be amended or waived, and any consent with respect to any departure by the
Company therefrom may only be granted, in accordance with the terms of Section
10.01 of the Credit Agreement.
(d) Costs and Expenses. The Company shall, whether or not the
------------------
amendments contemplated hereby shall become effective, pay or reimburse the
Agent on demand for all costs and expenses incurred by the Agent in connection
with the development, preparation, delivery, administration and execution of,
and any amendment, supplement, waiver or modification to, this Amendment and the
consummation of the transactions contemplated hereby and thereby, including the
Attorney Costs incurred by the Agent with respect thereto.
(e) Successors and Assigns. The provisions of this Amendment shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(f) Counterparts. This Amendment may be executed by one or more of
------------
the parties to this Amendment in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Company and the Agent. The parties hereto agree that
the Agent may accept and rely on facsimile transmissions of executed signature
pages of this Amendment.
(g) Severability. The illegality or unenforceability of any
------------
provision of this Amendment or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Amendment or any instrument or agreement required
hereunder.
(h) No Third Parties Benefited. This Amendment is made and entered
--------------------------
into for the sole protection and legal benefit of the Company, the Syndication
Agent, the Documentation Agent, the Banks and the Agent, and their successors
and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Amendment. Each of the Agent, the Syndication Agent, the
Documentation Agent and the Banks shall
3.
<PAGE>
not have any obligation to any Person not a party to this Amendment.
(i) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT
THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(j) Entire Agreement. This Amendment embodies the entire agreement
----------------
and understanding among the Company, the Banks, the Syndication Agent, the
Documentation Agent and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
(k) Interpretation. This Amendment is the result of negotiations
--------------
between and has been reviewed by counsel to the Agent, the Company and other
parties, and is the product of all parties hereto. Accordingly, this Amendment
shall not be construed against the Banks, the Syndication Agent, the
Documentation Agent or the Agent merely because of the Agent's or such other
Person's involvement in the preparation of such documents and agreements.
[SIGNATURE PAGES FOLLOW]
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered in San Francisco, California, by their proper and duly
authorized officers as of the day and year first above written.
THE COMPANY
-----------
ADVANCED MICRO DEVICES, INC.
By: /s/ Marvin D. Burkett
---------------------------
Title: Senior Vice President, Chief
Financial and Administrative
Officer and Treasurer
THE AGENT
---------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/ Kevin McMahon
---------------------------
Title: Vice President
THE SYNDICATION AGENT
---------------------
ABN AMRO BANK N.V., as Syndication Agent
By: ABN AMRO NORTH AMERICA, INC.,
its agent
By: /s/ Tom R. Wagner
---------------------------
Title: VP and Director
By: /s/ Robin S. Yim
--------------------------
Title: VP and Director
5.
<PAGE>
THE DOCUMENTATION AGENT
-----------------------
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent
By: /s/ James E. Anderson
--------------------------
Title: Managing Director
THE BANKS
---------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ Kevin McMahon
---------------------------
Title: Vice President
ABN AMRO BANK N.V., as a Bank
By: ABN AMRO NORTH AMERICA, INC.,
its agent
By: /s/ Tom R. Wagner
--------------------------
Title: VP and Director
By: /s/ Robin S. Yim
---------------------------
Title: VP and Director
CANADIAN IMPERIAL BANK OF COMMERCE,
as a Bank
By: /s/ James E. Anderson
---------------------------
Title: Managing Director
6.
<PAGE>
EXHIBIT 10.25(n)
THIRD AMENDMENT TO THIRD AMENDED AND RESTATED GUARANTY
------------------------------------------------------
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED GUARANTY (the
"Amendment"), dated as of May 10, 1996 is entered into by and between
---------
ADVANCED MICRO DEVICES, INC., a Delaware corporation (the "Guarantor"), and
---------
CIBC INC., a Delaware corporation ("Lessor").
------
RECITALS
--------
A. The Guarantor executed and delivered to Lessor as Third Amended
and Restated Guaranty, dated as of August 21, 1995 and accepted by Lessor as of
August 21, 1995, pursuant to which the Guarantor guarantied to Lessor certain
obligations of AMD International Sales & Service, Ltd. a Delaware corporation.
Such Amended and Restated Guaranty was amended by a First Amendment to Third
Amended and Restated Guaranty, dated as of October 20, 1995, and by a Second
Amendment to Third Amended and Restated Guaranty, dated as of January 12, 1996
(as so amended, "Guaranty").
--------
B. The Guarantor has requested that the Lessor agree to certain
amendments of the Guaranty.
C. Lessor is willing to amend the Guaranty, subject to the terms and
conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Defined Terms. Capitalized terms not otherwise defined herein
-------------
shall have the meanings given to them in the Guaranty.
2. Amendment to the Guaranty. Section 4.2.1(k) of the Guaranty is
-------------------------
hereby deleted and replaced with the following:
"(k) Purchase money security interests on any Assets (other than
the Property) acquired or held by Guarantor or its Subsidiaries in the Ordinary
Course of Business, securing Indebtness incurred or assumed for the purpose
of financing all or any part of the cost of acquiring such Assets; on the
------
condition that (i) any such Lien attaches to such Assets concurrently with or
- --------------
within six months after the acquisition thereof, (ii) such Lien attaches solely
to the Assets so acquired in such transaction, and (iii) the principal amount
of the Indebtness secured thereby does not exceed 100% of the cost of such
Assets; and"
<PAGE>
3. Representations and Warranties
------------------------------
The Guarantor hereby represents and warrants to the Lessor as follows:
(a) No Default or Event of Default or Deposit Event has occurred and is
continuing.
(b) The execution, delivery and performance by the Guarantor of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Guaranty as amended by this Amendment
constitutes the legal, valid and binding obligations of the Guarantor,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Guarantor contained in the
Guaranty are true and correct.
(d) The Guarantor is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon Lessor or any
other Person.
4. Conditions to Effectiveness of Amendment.
----------------------------------------
This Amendment will become effective on the date on which all of the
following conditions precedent have been satisfied:
4.1 Lessor shall have received from the Guarantor and Long-Term Credit
Bank of Japan, Los Angeles Agency, a duly executed original (or, if elected by
Lessor, an executed facsimile copy) of this Amendment; and
4.2 Each of the representations and warranties set forth in Section 3 of
this Amendment are true and correct as of such date.
4. Reservation of Rights. The Guarantor acknowledges and agrees that the
---------------------
execution and delivery by Lessor of this Amendment shall not be deemed to create
a course of dealing or otherwise obligate Lessor to forbear or execute similar
amendments under the same or similar circumstances in the future.
-2-
<PAGE>
6. Miscellaneous.
-------------
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Guaranty are and shall remain in full force and effect and all
references therein to such Guaranty shall henceforth refer to the Guaranty as
amended by this Amendment. This Amendment shall be deemed incorporated into, and
a part of, the Guaranty. The Guaranty, as amended by this Amendment, is hereby
absolutely and unconditionally affirmed in its entirety by the Guarantor.
(b) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No third
party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance with
the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by Lessor of a
facsimile transmitted document purportedly bearing the signature of the
Guarantor shall bind the Guarantor with the same force and effect as the
delivery of a hard copy original. Any failure by Lessor to receive the hard copy
executed original of such document shall not diminish the binding effect of
receipt of the facsimile transmitted executed original of such document of the
party whose hard copy page was not received by Lessor.
(e) This Amendment, together with Guaranty, contains the entire and
exclusive agreement of the parties hereto with reference to the matters
discussed herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended except in
accordance with the provisions of Section 6.2 of the Guaranty.
(f) If any term or provision of this Amendment shall be deemed prohibited
by or invalid under any applicable law, such provision shall be invalidated
without affecting the remaining provisions of this Amendment or the Guaranty,
respectively.
(g) The Guarantor covenants to pay or to reimburse the Lessor, upon demand,
for all costs and expenses (including allocated costs of in-house counsel)
-3-
<PAGE>
incurred in connection with the development, preparation, negotiation, execution
and delivery of this Amendment.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
ADVANCED MICRO DEVICES, INC.
By: /s/ Marvin D. Burkett
--------------------------------------
Marvin D. Burkett
Senior Vice President and Chief
Financial Officer
CIBC INC.
By: /s/ Tom R. Wagner
--------------------------------------
Name: Tom R. Wagner
Title: Director
Reference is made to the Loan Agreement, dated as of December 17, 1993 (the
"Loan Agreement") between CIBC INC., a Delaware corporation, and THE LONG-TERM
--------------
CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY ("Lender"). In accordance with
------
Section 8(b) of the Loan Agreement, Lender hereby consents to the foregoing
Amendment.
THE LONG-TERM CREDIT BANK OF
JAPAN, LOS ANGELES AGENCY
By: /s/ Motokazu Uematsu
------------------------------
Name: Motokazu Uematsu
-----------------------------
Title: Deputy General Manger
----------------------------
Date: May 15, 1996
-------
<PAGE>
EXHIBIT 10.25(o)
FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED GUARANTY
-------------------------------------------------------
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED GUARANTY (this
"Amendment") dated as of June 20, 1996, is entered into by and among Advanced
---------
Micro Devices, Inc., a Delaware corporation ("Guarantor"), CIBC Inc., a
Delaware corporation ("Lessor"), and, solely for the purpose of making certain
representations and warranties in Section 3 below, AMD International Sales &
Service, Ltd., a Delaware corporation ("Lessee").
-------
RECITALS
--------
A. Guarantor executed and delivered to Lessor a Third Amended and
Restated Guaranty, dated as of August 21, 1995 and accepted by Lessor as of
August 21, 1995, pursuant to which the Guarantor guarantied to Lessor certain
obligations of Lessee. Such Amended and Restated Guaranty was amended by a
First Amendment to Third Amended and Restated Guaranty, dated as of October
20, 1995, by a Second Amendment to Third Amended and Restated Guaranty, dated
as of January 12, 1996, and by a Third Amendment to Third Amended and Restated
Guaranty, dated as of May 10, 1996 (as so amended, the "Guaranty").
--------
B. The Guarantor has requested that the Lessor agree to certain
amendments of the Guaranty.
C. Lessor is willing to amend the Guaranty, subject to the terms
and conditions of this Amendment.
AGREEMENT
---------
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein
-------------
shall have the meanings given to them in the Guaranty.
2. Amendment. Subject to satisfaction of the conditions set forth
---------
herein, Section 4.2.9 of the Guaranty shall be amended and restated so as to
read as follows:
"4.2.9 Modified Quick Ratio. Guarantor shall not, as of the
--------------------
last day of any fiscal quarter, suffer or permit its ratio (determined on a
consolidated basis) of (a) cash plus the value (valued in accordance with
GAAP) of all Cash Equivalents and 75% of all Long Term
-1-
<PAGE>
Investments, other than Cash Equivalents or Long Term Investments subject
to a Lien securing an obligation that is not a GAAP liability, plus the
amount of Receivables, net of allowances for doubtful accounts, to (b)
Consolidated Current Liabilities of the Guarantor and its Subsidiaries,
to be less than 1.10 to 1.00; provided, however, that such ratio may be
-----------------
less than 1.10 to 1.00, but may not be less than 0.80 to 1.00, for the
fiscal quarter ended June 30, 1996."
3. Representations and Warranties. To induce Lessor to amend the Guaranty
------------------------------
as provided above: (a) Guarantor hereby represents that (i) after giving
effect to the amendment set forth in Section 2 above, no Default, Event of
Default or Deposit Event under the Guaranty, or Guarantor Default under the
Amended Land Lease or the Amended Building Lease, has occurred and is
continuing, and (ii) all representations and warranties of Guarantor contained
in the Guaranty are true and correct, and (b) Lessee hereby represents that
(i) after giving effect to the amendment set forth in Section 2 above, no
Default or Event of Default under the Amended Land Lease or the Amended
Building Lease has occurred and is continuing, and (ii) all representations
and warranties of Lessee contained in the Amended Land Lease and the Amended
Building Lease are true and correct.
4. Conditions to Effectiveness of Amendment. This Amendment shall become
----------------------------------------
effective on the date on which all of the following conditions precedent have
been satisfied:
(a) Lessor shall have received from Guarantor, Lessee and Long-Term
Credit Bank of Japan, Los Angeles Agency (the "Lender"), a duly executed
------
original (or, if elected by Lessor, an executed facsimile copy) of this
Amendment.
(b) Lessor shall have received from the Majority Banks under the Term
Loan Agreement, a duly executed original (or, if elected by Lessor, an
executed facsimile copy) amendment to the Term Loan Agreement amending the
"Modified Quick Ratio" set forth in Section 7.10 of the Term Loan Agreement as
provided in Section 2 above.
(c) Lessor shall have received from the Majority Banks under that certain
Amended and Restated Credit Agreement dated as of September 21, 1994, as
amended and restated from time to time (the "Credit Agreement"), among
----------------
Guarantor, the Banks party thereto, Bank of America National Trust and Savings
Association, as agent for the Banks, and The First National Bank of Boston, as
co-agent for the Banks, a duly executed original (or, if elected by Lessor, an
executed facsimile copy) amendment to the Credit Agreement changing the
"Modified Quick Ratio" set forth in Section 7.10 of the Credit Agreement as
provided in Section 2 above.
-2-
<PAGE>
(d) Each of the representations and warranties set forth in Section 3 above
are true and correct as of such date.
5. Reservation of Rights. The Guarantor acknowledges and agrees that the
---------------------
execution and delivery by Lessor of this Amendment shall not be deemed to create
a course of dealing or otherwise obligate Lessor to forbear or execute similar
amendments under the same or similar circumstances in the future.
6. Miscellaneous.
-------------
(a) Except as herein expressly amended, all terms, covenants and provisions
of the Guaranty are and shall remain in full force and effect and all references
therein to such Guaranty shall henceforth refer to the Guaranty as amended by
this Amendment. This Amendment shall be deemed incorporated into, and a part of,
the Guaranty. The Guaranty, as amended by this Amendment, is hereby absolutely
and unconditionally affirmed in its entirety by the Guarantor.
(b) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No third
party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance with
the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (any other document required herein)
may be delivered by facsimile transmission to be followed promptly by mailing of
a hard copy original, and that receipt by Lessor of a facsimile transmitted
document purportedly bearing the signature of Guarantor or Lessee shall bind
Guarantor and Lessee with the same force and effect as the delivery of a hard
copy original. Any failure by Lessor to receive the hard copy executed original
of such document shall not diminish the binding effect of receipt of the
facsimile transmitted executed original of such document of the party whose hard
copy page was not received by Lessor.
(e) This Amendment, together with Guaranty, contains the entire and
exclusive agreement of the parties hereto with reference to the matters
discussed herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended except in
accordance with the provisions of Section 6.2 of the Guaranty.
-3-
<PAGE>
(f) If any term or provision of this Amendment shall be deemed prohibited
by or invalid under any applicable law, such provision shall be invalidated
without affecting the remaining provisions of this Amendment.
(g) The Guarantor covenants to pay or to reimburse Lessor, upon demand, for
all costs and expenses (including reasonable fees and costs of counsel) incurred
in connection with the development, preparation, negotiation, execution and
delivery of this Amendment.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written above.
CIBC INC.
By: /c/ Tom R. Wagner
------------------------------------
Title: Director
---------------------------------
ADVANCED MICRO DEVICES, INC.
By: /c/ Marvin D. Burkett
------------------------------------
Marvin D. Burkett
Title: Senior Vice President, Chief Financial
and Administrative Officer and Treasurer
AMD INTERNATIONAL SALES &
SERVICE, LTD.
By: /c/ Marvin D. Burkett
-------------------------------------
Marvin D. Burkett
Title: Senior Vice President, Chief Financial
and Administrative Officer and Treasurer
Reference is made to the Loan Agreement, dated as of December 17, 1993, as
amended (the "Loan Agreement") between Lessor and the Lender. In accordance with
--------------
Section 8(a) of the Loan Agreement, Lender hereby consents to the foregoing
Amendment.
THE LONG-TERM CREDIT BANK OF
JAPAN, LOS ANGELES AGENCY
By: /c/Motokazu Uematsu
--------------------
Title: Motokazu Uematsu,
-----------------
Deputy General Manager
Date: June 21, 1996
------------------
-5-
<PAGE>
EXHIBIT 10.48
A REDACTED COPY OF THIS AGREEMENT BETWEEN INTERNATIONAL BUSINESS MACHINES
CORPORATION AND ADVANCED MICRO DEVICES, INC., EFFECTIVE JUNE 14, 1996, IS
ATTACHED AS EXHIBIT 10.48 TO THE QUARTERLY REPORT OF ADVANCED MICRO DEVICES,
INC. ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 29, 1996, PURSUANT TO THE
REQUIREMENTS OF ITEM 6(A) OF FORM 10-Q AND ITEM 601(B)(10) OF REGULATION S-K
REGARDING MATERIAL CONTRACTS.
C-4 TECHNOLOGY TRANSFER AND LICENSING AGREEMENT
by and between
INTERNATIONAL BUSINESS MACHINES CORPORATION
and
ADVANCED MICRO DEVICES
AMD/IBM CONFIDENTIAL June 11, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Section 1 - Definitions............................................... -2-
Section 2 - Licenses.................................................. -11-
Section 3 - Transfer of LICENSED TECHNOLOGY........................... -16-
Section 4 - IMPROVEMENTS.............................................. -20-
Section 5 - Technical Assistance...................................... -22-
Section 6 - Compensation.............................................. -25-
Section 7 - Termination and Assignability............................. -29-
Section 8 - Confidentiality........................................... -33-
Section 9 - C-4 Foundry Services...................................... -40-
Section 10 - Management Process and Technical Coordinators............. -40-
Section 11 - Renewal of Patent Cross-License........................... -42-
Section 12 - General Provisions........................................ -42-
APPENDIX A LICENSED TECHNOLOGY Documentation Items..................... -55-
APPENDIX B LICENSED TECHNOLOGY Technical Assistance.................... -58-
APPENDIX C............................................................. -61-
APPENDIX D Sale and Purchase of C4 Foundry Services.................... -67-
</TABLE>
AMD/IBM CONFIDENTIAL June 11, 1996
<PAGE>
AGREEMENT
---------
This Agreement, having an EFFECTIVE DATE as defined herein, is entered into by
and between ADVANCED MICRO DEVICES, a Delaware corporation having an office
at Sunnyvale, California (hereinafter called "AMD"), and INTERNATIONAL BUSINESS
MACHINES CORPORATION, a New York corporation having an office at Burlington,
Vermont (hereinafter called "IBM").
WHEREAS, IBM has developed certain wafer fabrication, bonding and assembly
processes, collectively known as controlled collapse chip connection processes,
and possesses certain proprietary rights in the valuable technology related
thereto;
WHEREAS, AMD and IBM have previously discussed a "Semiconductor Technology Non-
Binding Business Term Sheet" which set forth a framework for the technology
licensing of controlled collapse chip connection processes of IBM to AMD;
WHEREAS, AMD desires to obtain licenses and other proprietary information and
rights from IBM in order to become a user of such controlled collapse chip
connection processes of IBM, upon the terms and conditions provided herein;
WHEREAS, IBM desires to obtain licenses and other information and rights from
AMD concerning improvements AMD may make to the IBM processes, upon the terms
and conditions provided herein;
WHEREAS, IBM wishes to make its licenses and other proprietary information and
rights, along with other technical information and technical assistance, all
relating to the controlled collapse chip connection processes of IBM, available
to AMD; and
AMD/IBM CONFIDENTIAL June 11, 1996
-1-
<PAGE>
WHEREAS, IBM believes that AMD, and AMD believes that IBM, is a trustworthy
company which will protect all proprietary rights licensed hereunder, upon the
terms and conditions provided herein.
NOW, THEREFORE, IBM and AMD agree as follows:
Section 1 - Definitions
-----------------------
Words shall have their normally accepted meanings as employed in this Agreement.
The terms "herein", "hereunder" and "hereof," unless specifically limited, shall
have reference to the entire Agreement. The words "shall" and "will" are
mandatory, the word "may" is permissive, the word "or" is not exclusive, the
words "includes" and "including" are not limiting and the singular includes the
plural. The following terms shall have the described meanings:
"AMD IMPROVEMENTS" shall mean any change, upgrade, modification or revision to
the LICENSED TECHNOLOGY, actually introduced into, and practiced in production
in, the manufacturing line of AMD or AMD's FACILITIES during the TERM of this
Agreement. AMD IMPROVEMENTS shall also mean any change, upgrade, modification
or revision to the LICENSED TECHNOLOGY, actually introduced into the
manufacturing line of the another manufacturer authorized pursuant to Section
2.1.3 during the TERM of this Agreement (the another manufacturer's
improvements). AMD IMPROVEMENTS shall not include any change, upgrade,
modification or revision to the LICENSED TECHNOLOGY that AMD is contractually
obligated to not provide to a third party. AMD IMPROVEMENTS shall not include
any change, upgrade, modification or revision to the joining of an integrated
circuit to an ORGANIC CHIP CARRIER.
"AMD IMPROVEMENT PATENTS" shall mean all AMD patents:
l) issuing prior to [*] from the EFFECTIVE DATE;
2) having claims directed to AMD IMPROVEMENTS; and
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3) which AMD or any of its SUBSIDIARIES now has, or hereafter obtains, the
right to grant immunities to IBM of or within the scope granted herein
without such grant or the exercise of rights thereunder resulting in the
payment of royalties or other consideration by AMD or its SUBSIDIARIES to
third parties (except for payments between AMD and its SUBSIDIARIES, and
payments to third parties for inventions made by said third parties while
employed by AMD or any of its SUBSIDIARIES).
"BA" shall mean BOND AND ASSEMBLY.
"BOND AMD ASSEMBLY" shall mean a process consisting of the following steps:
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
"BOND AND ASSEMBLY PATENTS" shall mean all patents:
l) issuing prior to [*] from the EFFECTIVE DATE;
2) having claims directed to IBM IMPROVEMENTS to BOND AND ASSEMBLY; and
3) which IBM or any of its SUBSIDIARIES now has, or hereafter obtains, the
right to grant immunities to AMD of or within the scope granted herein
without such grant or the exercise of rights thereunder resulting in the
payment of royalties or
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other consideration by IBM or its SUBSIDIARIES to third parties (except
for payments between IBM and its SUBSIDIARIES, and payments to third
parties for inventions made by said third parties while employed by IBM
or any of its SUBSIDIARIES).
"BUMP" shall mean [*] limiting metal formed on an integrated circuit.
"BUMPING" shall mean a process of forming BUMPS, consisting of the following
steps:
[*]
[*]
[*]
[*]
"BUMPING PATENTS" shall mean all patents:
l) issuing prior to [*] from the EFFECTIVE DATE;
2) having claims directed to IBM IMPROVEMENTS to BUMPING; and
3) which IBM or any of its SUBSIDIARIES now has, or hereafter obtains, the
right to grant immunities to AMD of or within the scope granted herein
without such grant or the exercise of rights thereunder resulting in the
payment of royalties or other consideration by IBM or its SUBSIDIARIES to
third parties (except for payments between IBM and its SUBSIDIARIES, and
payments to third parties for inventions made by said third parties while
employed by IBM or any of its SUBSIDIARIES).
"C-4" shall mean controlled collapse chip connection.
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"C-4 TECHNOLOGY" shall mean, collectively, BUMPING and BA.
"CHANGE OF CONTROL" shall mean, with respect to AMD, one (1) transaction or a
series of related transactions which results in a third party obtaining,
directly or indirectly, [*] or more of the ownership of the outstanding voting
shares or other ownership interest of, or (ii) CONTROL of AMD.
"CERAMIC CHIP CARRIER" shall mean [*].
"CHIP CARRIER" shall mean CERAMIC CHIP CARRIER and ORGANIC CHIP CARRIER.
"CONTROL" shall mean the power to direct the affairs of a PERSON by reason of
ownership of voting stock, by asset acquisition, contract or otherwise.
"EFFECTIVE DATE" shall mean the date three (3) days after the date of the last
signature necessary to the formation of this Agreement provided the payment
specified in Section 6.2.a. has been received by IBM.
"FACILITIES" shall mean the premises where AMD is licensed to practice the
LICENSED TECHNOLOGY as set forth in Section 2.3.
"IBM IMPROVEMENTS" shall mean any change, upgrade, modification or revision to
the LICENSED TECHNOLOGY actually introduced into, and practiced in production
in, the manufacturing line of IBM's Microelectronics Division facilities
performing work related to the LICENSED TECHNOLOGY during the TERM and subject
to the Technical Coordinator awareness provision of Section 4.1.1. IBM
IMPROVEMENTS shall not include any change, upgrade, modification or revision to
the LICENSED TECHNOLOGY that IBM is contractually obligated to not provide to a
third party. IBM IMPROVEMENTS shall not include the
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replacement or elimination of the process to [*] with a process which eliminates
the [*] or the replacement or elimination of the process [*] with a process
which eliminates the use of a [*]. IBM IMPROVEMENTS shall not include any
change, upgrade, modification or revision: to the joining of an integrated
circuit to an ORGANIC CHIP CARRIER, or to quality, yield management techniques,
or to specifications for lids, capacitors, polyimide and CHIP CARRIERS, or to
MATERIALS, or to the [*] or to the [*].
"IMPROVEMENTS" shall mean IBM IMPROVEMENTS and AMD IMPROVEMENTS.
"IMPROVEMENT LICENSEES" shall mean licensees of IBM with activities related to
the LICENSED TECHNOLOGY.
"INTEGRATED CIRCUIT" shall mean a silicon chip.
"LICENSED PRODUCTS" shall mean:
[*]
[*]
[*]
[*]
"LICENSED TECHNOLOGY" shall mean a) know-how or other information contained in
the documents specified in Appendix A relating to the C-4 TECHNOLOGY to be
transferred to AMD, b) additional information transferred or otherwise disclosed
in writing by IBM to AMD in providing technical assistance pursuant to Section
5, and/or c) IBM IMPROVEMENTS. LICENSED TECHNOLOGY shall not include any know-
how or other information related to the MATERIALS (as defined in Section 3.3),
or to the [*]
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[*]
[*]
[*] shall mean a single integrated circuit that contains [*].
[*] Set" shall mean a maximum of two integrated circuits that together contain a
[*] that are to be joined to the same CHIP CARRIER by at least one BUMP on each
of such integrated circuits, and that are to be used together as the central
processing unit of a microcomputer.
[*] shall mean the [*].
[*] PRODUCT" shall mean a [*] joined to the same CHIP CARRIER by at least one
BUMP on each of the two integrated circuits that comprise the [*].
[*] PRODUCT" shall mean a [*] having at least one BUMP and/or a [*] joined to
a CHIP CARRIER by at least one BUMP.
[*] PRODUCT" shall mean a [*] having at least one BUMP and/or a [*] joined to
a CHIP CARRIER by at least one BUMP.
[*] shall mean a single integrated circuit other than a [*] or a [*]
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or a [*]. [*] shall include, for example, [*].
[*] PRODUCT" shall mean a [*] having at least one BUMP and/or a [*] joined
to a CHIP CARRIER by at least one BUMP.
"ORGANIC CHIP CARRIER" shall mean a printed circuit board; or other organic
single-chip or multi-chip pin grid array substrate; or other organic single-chip
or multi-chip ball grid array substrate.
"PERSON" shall mean any individual, corporation, partnership, joint venture,
trust, business association, governmental entity or other entity.
"ROYALTY-BEARING BUMPS" shall mean:
i.) each BUMP on LICENSED PRODUCTS transferred to AMD's RELATED COMPANY,
and
ii.) each BUMP on [*] PRODUCTS and [*] PRODUCTS in excess of the sum of [*]
multiplied by the Yearly Average Number of BUMPS. The Yearly Average Number
of BUMPS shall mean the total number of BUMPS on [*] PRODUCTS and [*]
PRODUCTS first sold, or otherwise disposed of, in any year divided by the
total number of [*] PRODUCTS and [*] PRODUCTS first sold, or otherwise
disposed of, in such year. For purposes of this definition ii.), [*]
PRODUCTS and [*] PRODUCTS transferred to AMD's RELATED COMPANY shall not be
included.
"SUBSIDIARY" shall mean a corporation, company or other entity:
1) more than [*] of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing
authority) are,
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now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be
deemed to be a SUBSIDIARY only so long as such ownership or control
exists; or
2) which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture or unincorporated association, but
more than [*] of whose ownership interest representing the right to
make the decisions for such corporation, company or other entity is,
now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be
deemed to be a SUBSIDIARY only so long as such ownership or control
exists.
"TERM" shall mean the period of time this Agreement is in effect which shall
commence on the EFFECTIVE DATE and expires [*], unless sooner terminated
pursuant to Section 7.
"TERM SHEET" shall mean the "Semiconductor Technology Non-Binding Business Term
Sheet" between the parties of March 1996.
"TYPE I SUBSIDIARY" shall mean a corporation, company or other entity:
1) more than [*] of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing
authority) are, now or hereafter, owned or controlled, directly or
indirectly, by a party hereto, but such corporation, company or other
entity shall be deemed to be a TYPE I SUBSIDIARY only so long as such
ownership or control exists; or
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2) which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture or unincorporated association, but
more than [*] of whose ownership interest representing the right to
make the decisions for such corporation, company or other entity is,
now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be
deemed to be a TYPE I SUBSIDIARY only so long as such ownership or
control exists.
"RELATED COMPANY" shall mean a corporation, company or other entity:
1) more than [*] of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing
authority) are, now or hereafter, owned or controlled, directly or
indirectly, by a party hereto, but such corporation, company or other
entity shall be deemed to be a RELATED COMPANY only so long as such
ownership or control exists; or
2) which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture or unincorporated association, but
more than [*] of whose ownership interest representing the right to
make the decisions for such corporation, company or other entity is,
now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be
deemed to be a RELATED COMPANY only so long as such ownership or
control exists.
Section 2 - Licenses
--------------------
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2.1 IBM, on behalf of itself and its SUBSIDIARIES, hereby grants to AMD, to the
extent it has the right to do so and subject to Section 6 of this Agreement, the
nonexclusive, nontransferable, royalty-bearing, revocable right and license:
2.1.1 to use the LICENSED TECHNOLOGY (only in the FACILITIES specified in
Section 2.3) solely for AMD;
2.1.2 to manufacture solely for AMD and use solely for AMD LICENSED
PRODUCTS (only in the FACILITIES specified in Section 2.3) using the
LICENSED TECHNOLOGY;
2.1.3 after [*] years from the EFFECTIVE DATE, to have another
manufacturer (but only one manufacturer at any one time) do BA solely on
LICENSED PRODUCTS, and solely for AMD for resale under Section 2.1.4,
provided that:
-------------
2.1.3.1 such another manufacturer enters into an agreement with
AMD with terms and conditions acceptable to IBM regarding
confidentiality, reverse engineering of the MATERIALS per Section
3.3.2, such another manufacturer's improvements to the LICENSED
TECHNOLOGY, and the licensing of such another manufacturer's
improvements to the LICENSED TECHNOLOGY to IBM at no cost to IBM, and
2.1.3.2 such another manufacturer is either:
2.1.3.2.1 [*], or
2.1.3.2.2 with IBM's prior written approval, [*] IBM reserves
the right to grant written approval so that both parties are
assured that intellectual property licensed in this Agreement
will be accorded adequate protection or enforcement in the
geographic location of the proposed another manufacturer or
with respect to the potential partner(s), if any, with AMD in
the proposed another manufacturer. IBM will share with AMD
information that is considered to be objective, or
information available in the trade that IBM feels
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to be reliable, which reasonably identifies legitimate
concerns regarding the commercial and/or intellectual
property integrity and/or geographic location and/or
financial stability of the proposed another manufacturer;
2.1.4 to sell and have sold by other than the RELATED COMPANY in Section
2.1.5 (worldwide) LICENSED PRODUCTS solely under the AMD brand name using
the LICENSED TECHNOLOGY;
2.1.5 to transfer LICENSED PRODUCTS to AMD's RELATED COMPANY for sale
(worldwide) by AMD's RELATED COMPANY solely under such AMD RELATED COMPANY
brand name, provided that:
-------------
2.1.5.1 such LICENSED PRODUCTS must be manufactured by AMD according
to the terms of this Section 2;
2.1.5.2 the metallized and patterned silicon wafer used to make the
LICENSED PRODUCTS must be made in its entirety by AMD;
2.1.5.3 each BUMP on LICENSED PRODUCTS shall be deemed to be a
ROYALTY-BEARING BUMP and the royalty specified in Section 6.3 shall
accrue for all such LICENSED PRODUCTS transferred to such AMD RELATED
COMPANY; AMD shall have sole responsibility for payment, and shall
pay, such royalty to IBM;
2.1.5.4 LICENSED PRODUCTS transferred to such AMD RELATED COMPANY
shall not be considered part of the [*] PRODUCTS or [*] PRODUCTS used
in the calculation of the sum for ROYALTY-BEARING BUMPS;
2.1.5.5 for purposes of Section 6.6, transfer of LICENSED PRODUCTS
to AMD's RELATED COMPANY shall be considered to be transferred to a
third party; and 2.1.5.6 such AMD RELATED COMPANY brand name must be a
brand name which is currently not in existence; and
2.1.6 to manufacture (only in the FACILITIES specified in Section 2.3) and
have manufactured for internal use only, and solely for AMD, any apparatus
required to implement any
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hardware or process specifications contained in the LICENSED
TECHNOLOGY.
The license granted in this Section 2.1 to AMD is limited to the LICENSED
TECHNOLOGY and no license or other right is granted in this Section 2.1, either
directly or indirectly, by implication, estoppel or otherwise, to AMD with
respect to any patents or patent applications, trademarks, copyrights, trade
secrets (other than the LICENSED TECHNOLOGY), mask works or other intellectual
property rights of IBM.
2.2 The license granted in Section 2 to AMD is revocable and shall not survive
the termination or expiration of this Agreement except as specified in Section
7. IBM additionally shall have the right at any time, before or after the
termination or expiration of this Agreement, to revoke such license for a breach
by AMD of the terms and conditions of the license granted in Section 2, and/or
for a breach by AMD of its royalty obligations under Section 6, and/or for a
breach by AMD of AMD's confidentiality obligations under Section 8. Upon the
completion of AMD's payment and royalty obligations of Section 6, AMD's license
in Section 2 shall be revocable by IBM only for a breach by AMD of the terms and
conditions of the license granted in Section 2 and/or a breach by AMD of AMD's
confidentiality obligations under Section 8.
2.3 The FACILITIES at which AMD is licensed under Section 2.1 to practice
the LICENSED TECHNOLOGY shall only be as follows:
2.3.1 AMD may do BUMPING in:
2.3.1.l any AMD wholly-owned facility [*](exclusive of any of AMD's
TYPE I SUBSIDIARIES' OR SUBSIDIARIES' facilities),
2.3.1.2 any AMD TYPE I SUBSIDIARY facility [*],
2.3.1.3 AMD's TYPE I SUBSIDIARY facility [*] and
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2.3.1.4 any other TYPE I SUBSIDIARY facility [*] with IBM's prior written
approval. IBM reserves the right to grant written approval so that both
parties are assured that intellectual property licensed in this Agreement
will be accorded adequate protection or enforcement in the [*] of the
proposed TYPE I SUBSIDIARY facility or with respect to the potential
partner(s) with AMD in the proposed TYPE I SUBSIDIARY facility. IBM will
share with AMD information that it considers to be objective, or
information available in the trade that IBM considers reliable, which
reasonably identifies legitimate concerns regarding the commercial and/or
intellectual property integrity and/or geographic location and/or
financial stability of the proposed TYPE I SUBSIDIARY facility.
2.3.2 AMD may do BA in:
2.3.2.l any AMD wholly-owned facility [*] (exclusive of any of AMD's TYPE
I SUBSIDIARIES' OR SUBSIDIARIES' facilities),
2.3.2.2 any AMD TYPE I SUBSIDIARY [*]
2.3.2.3 AMD's TYPE I SUBSIDIARY facility [*]
2.3.2.4 AMD's existing TYPE I SUBSIDIARY facility [*] and in AMD's
existing TYPE I SUBSIDIARY facility [*], and
2.3.2.5 any SUBSIDIARY facility [*] with IBM's prior written approval.
IBM reserves the right to grant written approval so that both parties are
assured that intellectual property licensed in this Agreement will be
accorded adequate protection or enforcement in the [*] of the proposed
SUBSIDIARY facility or with respect to the potential partner(s) with AMD
in the proposed SUBSIDIARY facility. IBM will share with AMD information
that it considers to
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be objective, or information available in the trade that IBM
considers reliable, which reasonably identifies legitimate concerns
regarding the commercial and/or intellectual property integrity
and/or geographic location and/or financial stability of the
proposed SUBSIDIARY facility.
2.4 AMD, on behalf of itself and its TYPE I SUBSIDIARIES and SUBSIDIARIES,
hereby grants to IBM, to the extent it has the right to do so, the nonexclusive,
irrevocable (subject to Section 7.4), fully paid-up, worldwide right and
license:
2.4.1 to use and have used any AMD IMPROVEMENTS;
2.4.2 to manufacture, have manufactured, use, have used, sell and have sold
any product using the AMD IMPROVEMENTS; and,
2.4.3 to manufacture and have made for sale or use any apparatus required
to implement any hardware or process specifications contained in the AMD
IMPROVEMENTS.
The license granted to IBM in this Section 2.4 shall include the right of IBM to
extend sublicenses to its SUBSIDIARIES and to IMPROVEMENT LICENSEES, subject to
Section 8, and for each sublicensed SUBSIDIARY to correspondingly sublicense its
own SUBSIDIARIES. Any such sublicense shall terminate on the date the
sublicensed SUBSIDIARY ceases to be a SUBSIDIARY. The license granted in this
Section 2.4 to IBM is limited to the AMD IMPROVEMENTS and no license or other
right is granted in this Section 2.4, either directly or indirectly, by
implication, estoppel or otherwise, to IBM with respect to any patents or patent
applications, trademarks, copyrights, trade secrets (other than the AMD
IMPROVEMENTS), mask works or other intellectual property rights of AMD.
2.5 For a period of [*] from the EFFECTIVE DATE, IBM, on behalf of itself and
its SUBSIDIARIES, hereby grants to AMD and its SUBSIDIARIES a worldwide,
revocable, royalty-free (provided the payments and royalty in Section 6 are
timely paid) immunity from
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any charge or claim of infringement of the BOND AND ASSEMBLY PATENTS or the
BUMPING PATENTS, which charge or claim arises from the exercise of the license
granted to AMD pursuant to Section 2.1 with respect to IBM IMPROVEMENTS.
2.6 For a period of [*] from the EFFECTIVE DATE, AMD on behalf of itself and
its SUBSIDIARIES, hereby grants to IBM and its SUBSIDIARIES a worldwide,
irrevocable and royalty-free immunity from any charge or claim of infringement
of the AMD IMPROVEMENT PATENTS, which charge or claim arises from the exercise
of the license granted to IBM pursuant to Section 2.4.
2.7 IBM agrees to make available to AMD, on terms and conditions (including any
applicable licenses, fees and/or royalties) acceptable to IBM, know-how on
joining of integrated circuits to ORGANIC CHIP CARRIERS with at least one BUMP
that is actually practiced in production in the manufacturing line of IBM's
Microelectronics Division's facilities during the TERM of the Agreement.
2.8 IBM agrees to make available to AMD, on terms and conditions (including any
applicable licenses, fees and/or royalties) acceptable to IBM, improvements to
the MATERIALS (as defined in Section 3.3) that are actually practiced in
production in the manufacturing line of IBM's Microelectronic's Division's
facilities during the TERM of the Agreement.
2.9 IBM agrees that AMD shall be free to make AMD IMPROVEMENTS and other
improvements, subject to the terms of this Agreement, including Sections 2 and
8.
Section 3 - Transfer of LICENSED TECHNOLOGY
-------------------------------------------
3.1 IBM shall transfer to AMD, only at its wholly-owned Austin, Texas or Santa
Clara County, California facility, the LICENSED TECHNOLOGY as practiced as of
the EFFECTIVE DATE in IBM's
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Burlington, Vermont and Bromont, Canada facilities. The parties understand and
agree that the only process to be transferred and installed at AMD is the
[*], as more particularly defined as the LICENSED TECHNOLOGY, wherein [*] and
[*] are evaporated through a metal mask onto selected sites of an integrated
circuit, the integrated circuit with [*] and [*] is joined to a CERAMIC CHIP
CARRIER, and the joined integrated circuit and CERAMIC CHIP CARRIER are [*].
Except as provided herein, there is no obligation whatsoever to transfer any
other know-how or other information including know-how or information relating:
to MATERIALS, or the joining of an integrated circuit to an ORGANIC CHIP
CARRIER, or to the forming of the pads and solder elements of a ball grid array
for a ceramic ball grid array substrate, or to the forming of the pads and
solder elements of a ball grid array for an organic ball grid array substrate;
provided, however, that if IBM qualifies for introduction.the manufacturing line
- -----------------
of IBM's Microelectronics Division facilities performing work related to the
LICENSED TECHNOLOGY as an IBM IMPROVEMENT a [*] process for the LICENSED
TECHNOLOGY during the TERM, IBM agrees to transfer such [*] process as an IBM
IMPROVEMENT to AMD promptly after such introduction into its manufacturing line,
provided, further, that the parties agree that such [*]
- -----------------
process is provided "AS-IS" and at no additional cost.
3.2 IBM shall use its Burlington, Vermont and Bromont, Canada facilities to
coordinate activities related to the transfer of the LICENSED TECHNOLOGY to AMD.
These activities shall consist of assistance in the transfer of documentation
items related to the LICENSED TECHNOLOGY as specified in Appendix A and the
provision of limited technical assistance as set forth in Section 5. The
transfer of documentation items related to the LICENSED TECHNOLOGY as specified
in Appendix A shall commence within thirty (30) days from the EFFECTIVE DATE of
this Agreement, provided payment has been received by IBM pursuant to Section
6.2.a., and be completed within ninety (90) days thereafter.
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3.3 From the EFFECTIVE DATE and under the terms and conditions of this
Agreement, including those contained in Appendix C hereto, IBM agrees to sell to
AMD, only for use in the FACILITIES and in the another manufacturer's facility
per Section 2.1.3 and only for the purposes of making and selling LICENSED
PRODUCTS under the AMD brand name, or transferring LICENSED PRODUCTS pursuant to
Section 2.1.5 to AMD's RELATED COMPANY for sale by AMD's RELATED COMPANY solely
under such AMD RELATED COMPANY brand name, and AMD has the right to purchase 1)
[*] 2) [*] and 3) [*] (collectively referred to as "MATERIALS"). The MATERIALS
and their prices shall be as set forth in Appendix C. In IBM's sole discretion,
such prices to AMD for all of the MATERIALS in this Section 3.3 which IBM may
sell to AMD may be changed on each yearly anniversary of the EFFECTIVE DATE with
thirty (30) days notice to AMD.
3.3.1 LIMITED MATERIALS WARRANTY BY IBM. IBM warrants that the MATERIALS
sold to AMD hereunder will comply with IBM's internal then current
MATERIALS acceptance criteria at the time of shipment of the MATERIALS to
AMD, and at no other time. If an item of MATERIALS does not perform to
IBM's internal MATERIALS acceptance criteria at the time specified above,
IBM, in its sole discretion, will repair, replace, or refund any of AMD's
payment for such item of MATERIALS. Such remedy shall be the sole and
exclusive remedy for AMD with respect to non-conformity of MATERIALS. IBM
makes no representation or warranty as to intellectual property
infringement by the MATERIALS and no express or implied indemnity as to
such infringement is provided hereunder, except as specified in paragraph
C4 of Appendix C. THE FOREGOING WARRANTY REPLACES ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE MATERIALS OR ANY ITEM THEREOF,
INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY AMD FITNESS OR USE FOR A
PARTICULAR PURPOSE.
3.3.2 AMD agrees not to physically or chemically analyze, have analyzed, or
reverse engineer in any manner or at any
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time the MATERIALS, except for failure analysis of the LICENSED PRODUCTS.
The results of any such failure analysis shall be used only for failure
analysis and not for any other use including use by AMD for second sourcing
or for developing materials alternative to the MATERIALS.
3.4 Notwithstanding any other provision of this Agreement, in the event IBM's
ability to provide the MATERIALS set forth in Section 3.3 is constrained or
prevented for reasons beyond IBM's reasonable control, IBM, as AMD's sole remedy
therefor, will reduce the quantity of MATERIALS to be provided to AMD in the
same proportion as the reduction in quantities of MATERIALS to be supplied to
satisfy customers other than AMD.
3.5 AMD's REQUIREMENTS shall mean AMD's annual purchases of [*] and [*] that AMD
purchases from its suppliers for use with or in LICENSED PRODUCTS. During the
TERM of the Agreement, AMD agrees that IBM will be AMD's preferred supplier of
[*] and [*] with respect to at least [*] of AMD's REQUIREMENTS, except as
otherwise specified in Section 3.5.1. Purchases of [*] and [*] by AMD are to be
contracted on an annual basis based on a minimum of [*] of AMD's REQUIREMENTS,
subject to IBM meeting price, quality and delivery as compared to AMD's other
suppliers of similar products. In addition, IBM shall have a right of last
refusal with respect to such [*] of AMD's REQUIREMENTS. IBM's right of last
refusal response to AMD shall be provided to AMD within fifteen (15) working
days after being notified by AMD that a third party has provided a bona fide bid
that is better than IBM's bid as to price, quality and delivery with respect to
such [*] of AMD's REQUIREMENTS.
3.5.1 AMD agrees that during the Foundry Service period, as defined in
Appendix D, AMD will supply IBM only with IBM-
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approved CHIP CARRIERS where CHIP CARRIERS are required for the performance
of foundry services requested by AMD.
3.6 IBM shall be under no obligation hereunder to transfer the LICENSED
TECHNOLOGY, or any part thereof, to any PERSON other than AMD, and in
particular, not to suppliers or customers of AMD.
Section 4 - IMPROVEMENTS
------------------------
4.1 IBM and AMD shall share with each other, to the extent each party has
the right to do so, all IMPROVEMENTS to the LICENSED TECHNOLOGY in accordance
with the following:
4.1.1 IBM and AMD shall each identify its own IMPROVEMENTS. Each party shall
use its appropriate Technical Coordinator identified in Section 10.2 to
inform the other party of its IMPROVEMENTS and, if requested by the other
party, will provide such IMPROVEMENTS to the other party, as provided in
more detail in Section 4.1.2. These Technical Coordinators shall identify
their respective company's IMPROVEMENTS, notify the other party of such
IMPROVEMENTS, and provide assistance for all activities related to the
transfer of IMPROVEMENTS including the transfer of related documentation,
and the hosting or coordination of visits. As to IBM IMPROVEMENTS that are
actually introduced into, and practiced in production in, the manufacturing
line of IBM's Microelectronics Division facilities performing work related
to the LICENSED TECHNOLOGY other than Burlington, Vermont and Bromont,
Canada, IBM shall be obligated to only disclose IBM IMPROVEMENTS that IBM's
Technical Coordinator becomes aware of and IBM's sole duty in regard to the
Technical Coordinator's awareness is expressly limited to establishing a
procedure whereby IBM's Technical Coordinator sends out a letter or e-mail
at the end of each quarter to a person at such other facilities whom the
Technical Coordinator deems would be knowledgeable of such IBM IMPROVEMENTS
if they exist at such other facilities requesting
AMD/IBM CONFIDENTIAL June 11, 1996
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notification of any IBM IMPROVEMENTS to the LICENSED TECHNOLOGY.
4.1.2 The Technical Coordinators of the parties shall meet within forty-
five (45) days following the end of each calendar quarter to discuss
whether any IMPROVEMENTS have been made, and the disclosure of such
IMPROVEMENTS to the other party. Upon receipt of notification by either
party of the introduction and practicing of any IMPROVEMENT by the other
party, the receiving party shall have the option of reviewing on-hand
documentation related to such IMPROVEMENT or visiting the manufacturing
facility where such IMPROVEMENT has been incorporated, or both, to
determine if it wants to request the provision of such IMPROVEMENT. To the
extent possible and upon mutual agreement of the parties, visits to the
manufacturing facility where the IMPROVEMENT was introduced and practiced
shall be coordinated so as to occur only once for each party in any one
quarter. IBM may request the provision of an AMD IMPROVEMENT through its
Technical Coordinator in any quarter, but only once per quarter, during the
TERM of the Agreement and during the next six (6) months thereafter. AMD
may request the transfer of an IBM IMPROVEMENT through its Technical
Coordinator in any quarter, but only once per quarter, during the TERM of
the Agreement and during the next six (6) months thereafter, provided that
such IBM IMPROVEMENT is currently practiced in production in manufacturing
at the time of such request. After a party requests provision of an
IMPROVEMENT, the requesting party shall be entitled to: one (1) additional
visit during the quarter, in the case of an IBM IMPROVEMENT, to IBM's
Microelectronics Division manufacturing facility where such IBM IMPROVEMENT
is incorporated into manufacturing, or in the case of an AMD IMPROVEMENT to
the FACILITIES, to view such IMPROVEMENT; and to receive up to eight (8)
person-hours of technical assistance during that visit. To the extent
possible and upon mutual agreement of the parties, only one visit to the
providing party's manufacturing facility per
AMD/IBM CONFIDENTIAL June 11, 1996
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quarter will be allowed to receive the IMPROVEMENT(S), and any technical
assistance with respect to the IMPROVEMENT(S). Documentation with respect
to the IMPROVEMENTS(S) will be provided to the receiving party during the
visit or within thirty (30) days thereafter. The visiting party will
coordinate all activities through the Technical Coordinators and will pay
all of its own expenses incurred in connection with such visits. A visit,
as used in this Section 4, shall mean a maximum of three (3) working days
during which a maximum of seven (7) employees of the requesting party visit
the provider's facilities. Additional visits to a party's facilities shall
be provided only if mutually agreed to.
Section 5 - Technical Assistance
--------------------------------
5.1 In addition to the technical assistance provided for in Section 4.1.2
regarding IMPROVEMENTS, during the period beginning on the EFFECTIVE DATE and
[*[ thereafter, IBM shall provide to AMD limited technical assistance as
specified in Appendix B and in this Section 5.
5.1.1 Such limited technical assistance shall only occur at (i) IBM's
Burlington, Vermont and Bromont, Canada facilities, or (ii) AMD's wholly-
owned Austin, Texas or Santa Clara County, California facility, if IBM
agrees that travel to AMD's wholly-owned Austin, Texas or Sunnyvale,
California facility is required, and at times agreeable to both parties.
5.1.2 That portion of the FACILITIES where the LICENSED TECHNOLOGY,
or any portion thereof, is practiced shall have restricted access such that
such portion of the FACILITIES is accessible only by AMD employees, the IBM
Technical Coordinator or its designees, selected AMD customers with the
approval of the IBM Technical Coordinator, and AMD's contractors providing
maintenance, tooling, facilities
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services and manufacturing productivity improvements with the approval of
the IBM Technical Coordinator.
5.1.3 The IBM and AMD technical coordinators shall keep accurate records
of all limited technical assistance performed and shall compare records for
accuracy and provide access to such records to the other party once a month
or pursuant to a schedule mutually agreed to.
5.2 IBM will provide as part of limited technical assistance the identity of its
vendors supplying equipment, materials (including [*], and services used in the
practice of the LICENSED TECHNOLOGY, except for the MATERIALS provided in
Section 3.3, so long as such identification does not breach any contractual
obligation of IBM. In the event that IBM is unable to identify supplying vendors
due to contractual obligations, IBM will work with AMD and such vendors with
contractual obligations with the objective to allow for such identification to
be made or attempt to identify alternate supplying vendors. IBM shall authorize,
as determined solely by IBM but such authorization not to be unreasonably
withheld, such vendors supplying equipment, materials, and services to AMD to
use IBM Confidential Information, if needed, for supplying such equipment,
materials, and services to AMD. AMD, at its own cost and expense, shall be
responsible for acquiring the necessary equipment, materials, and services
required to implement the LICENSED TECHNOLOGY.
5.3 During the [*] period specified in Section 5.1 IBM agrees to provide at no
additional cost to AMD a maximum of [*] of assistance in the transfer of the
LICENSED TECHNOLOGY to AMD and for technical assistance in connection therewith,
with the limitation that IBM is required to provide a maximum of five (5)
persons per week, or the equivalent thereof, in any one (1) week. AMD may make
site visits to IBM's Burlington, Vermont and Bromont, Canada facilities upon
reasonable notice to IBM and upon mutual agreement of the parties. A maximum of
six (6) AMD employees may visit either of IBM's
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facilities at any one time. The travel and living expenses of such visiting AMD
employees shall be at the expense of AMD. If technical assistance is provided by
IBM at the AMD facility per Section 5.1.1, AMD agrees to pay IBM for reasonable
travel and living expenses incurred by IBM in providing such technical
assistance at such AMD facility.
5.4 After such [*] of limited transfer assistance and limited technical
assistance specified in Section 5.3 are exhausted, IBM agrees to provide limited
additional transfer assistance and technical assistance to AMD, subject to the
availability of requisite personnel within IBM, for the remainder of the TERM.
AMD agrees to pay IBM for such limited additional transfer and technical
assistance provided to AMD [*] per person-hour or at IBM's then prevailing rate
for technical assistance. AMD may make site visits to IBM's Burlington, Vermont
and Bromont, Canada facilities upon reasonable notice to IBM and upon mutual
agreement of the parties. A maximum of [*] AMD employees may visit either of
IBM's facilities at any one time. The travel and living expenses of such
visiting AMD employees shall be at the expense of AMD. If limited additional
transfer and technical assistance is provided by IBM at the facility per Section
5.1.1, AMD agrees to pay IBM for reasonable travel and living expenses incurred
by IBM in providing such limited additional transfer and technical assistance at
the facility per Section 5.1.1. Said limited additional transfer assistance and
technical assistance shall be defined and determined by mutual agreement,
including the number of hours provided to AMD, and the period of time in which
said assistance shall be complete.
5.5 Pursuant to the TERM SHEET, and prior to the EFFECTIVE DATE, IBM and AMD
have agreed to a visit to IBM's Burlington, Vermont and Bromont, Canada
facilities for the purpose of preparing AMD's FACILITIES for transfer of the
LICENSED TECHNOLOGY and for identifying those tools which require particularly
long lead times in procuring such tools. Any transfer and technical assistance
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provided to AMD during such visit shall be counted against the [*] specified in
Section 5.3.
5.6 IBM shall invoice charges monthly for the limited additional transfer
assistance and technical assistance provided for in Section 5.4.
5.7 IBM shall be under no obligation hereunder to provide transfer or technical
assistance to any PERSON other than AMD, and in particular, not to suppliers or
customers of AMD.
Section 6 - Compensation
------------------------
6.1 In consideration for the LICENSED TECHNOLOGY to be transferred, and
transfer and technical assistance to be provided and license granted hereunder,
AMD agrees to pay IBM a technology license fee in the sum of [*], which sum
shall be nonrefundable and noncancelable, notwithstanding any termination or
expiration of this Agreement under any Section of this Agreement, provided,
--------
however, such nonrefundability and noncancelability will not preclude the award
- -------
of damages by a court of competent jurisdiction.
6.2 The sum specified in Section 6.1 shall be payable according to the
following schedule:
a. [*] three (3) days after the signing of this Agreement by AMD,
b. [*] by one (1) year from the EFFECTIVE DATE; and
c. [*] by two (2) years from the EFFECTIVE DATE.
6.3 From the EFFECTIVE DATE, and continuing through [*], AMD shall pay
IBM a royalty of [*] for each ROYALTY-BEARING BUMP
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on LICENSED PRODUCTS. Beginning on [*] and continuing until [*], AMD shall pay
IBM a royalty of [*] for each ROYALTY-BEARING BUMP on LICENSED PRODUCTS.
6.4 AMD agrees to maintain adequate documentation and accounting records for
demonstration of compliance with all the provisions of this Agreement, including
disclosure and use of the LICENSED TECHNOLOGY. At IBM's request and expense, and
upon ten (10) days written notice to AMD, AMD shall permit IBM or a mutually
acceptable independent third party auditor to review all such documentation and
accounting records.
6.5 The royalty of Section 6.3 shall accrue when a product is first sold, leased
or otherwise disposed of. For the purpose of determining such royalty, products
shall be considered sold, leased or otherwise disposed of when invoiced. If not
invoiced, then products are to be considered sold, leased or otherwise disposed
of when delivered or when paid for, if paid for before delivery. If not
invoiced, delivered or paid for before delivery, products are to be considered
sold, leased or otherwise disposed of at the earlier of when put into use or
when possession is transferred to a third party or a RELATED COMPANY for the
purpose of Section 2.1.5.
6.6 Accrued royalties shall be calculated on a calendar year basis. Any
royalties due IBM for any calendar year shall be paid to IBM by February 15
after the immediately preceding calendar year. Any accrued royalties paid to IBM
are nonrefundable. AMD may deduct from the accrued royalties calculation in this
Section 6.7 those royalties accrued on products which have been returned to AMD
or for which credit allowances have been made.
6.7 By February 15 of each year, AMD shall furnish to IBM a written statement
showing the LICENSED PRODUCTS, and the BUMPS and ROYALTY-BEARING BUMPS for each
of such LICENSED PRODUCTS, which were made, used, sold, leased and/or otherwise
disposed of during the immediately preceding calendar year and the royalties
payable
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thereon. If no royalties are payable, that fact shall be shown on such
statement.
6.8 In addition to the statements in Section 6.8, AMD, within ninety (90) days
after the end of each calendar year, shall furnish to IBM a written statement
certified by a mutually acceptable third party auditor using United States
Generally Accepted Accounting Principles showing the LICENSED PRODUCTS, and the
BUMPS and ROYALTY-BEARING BUMPS for each of such LICENSED PRODUCTS, which were
made, used, sold, leased and/or otherwise disposed of during such calendar year
and the royalties payable thereon. If no royalties are payable, that fact shall
be shown on the statement.
6.9 AMD shall bear and pay, and indemnify and hold IBM harmless from any and all
taxes (including, without limitation, sales, royalty, value added, and property
taxes) imposed by any national government (including any political subdivision
thereof) of any country, as the result of the existence of this Agreement or the
exercise of rights hereunder, or arising from the purchase of goods and services
hereunder, and IBM shall not be responsible for any taxes that arise from the
foregoing. Notwithstanding the foregoing, AMD shall not be liable for any taxes
or assessments based on the net income of IBM.
6.10 For the purposes of this Agreement, and to assist any taxing authority to
determine the fair market value of the tangible property provided to AMD under
this Agreement excluding Exhibit D hereof, IBM undertook to evaluate said fair
market value for sales and use purposes only. IBM thereby assessed that included
in the consideration for the LICENSED TECHNOLOGY payable under Section 6.1 is
the amount of [*], which amount represents the fair market value of the tangible
personal property provided to AMD in connection with this Agreement excluding
Appendix D hereof.
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6.10.1 IBM will notify AMD of any litigation against IBM dealing with sales
or use taxes as a result of this Agreement within a reasonable period after
the commencement of such action against IBM. IBM will seek any assistance of
AMD as IBM deems reasonably necessary to defend against such action. AMD
agrees to promptly provide such assistance at IBM's written request. If IBM
decides not to contest such action, and IBM deems it appropriate to do so,
IBM will grant to AMD the right to pursue, at AMD's cost, a separate action
against any governmental entity which imposes any sales or use tax against
IBM because of this Agreement. In such event, IBM agrees to provide
reasonable assistance to AMD in connection with AMD's action at AMD's
written request.
6.11 AMD shall be liable for interest on any and all overdue payments and
royalties required to be made to IBM under this Agreement, commencing on the
date such overdue payment or royalties become due, at an annual rate of [*]
quoted by the head office of Citibank N.A., New York, at the close of banking on
such date, or on the first business day thereafter if such date falls on a
nonbusiness day. If such interest rate exceeds the maximum legal rate in the
jurisdiction where a claim therefor is being asserted, the interest rate shall
be reduced to such maximum legal rate.
6.12 AMD shall pay all royalties and other payments due hereunder in United
States dollars. All prices quoted herein for products and services provided to
AMD hereunder by IBM are expressed in United States dollars.
6.13 Unless otherwise expressly stated herein, all payments due under this
Agreement are payable when the payment is due or thirty (30) days from the date
of the invoice, if any.
6.14 All royalties and payments to IBM that result from this Agreement are
to reference this Agreement and be sent by electronic funds transfer to the
following address:
AMD/IBM CONFIDENTIAL June 11, 1996
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<PAGE>
IBM Director of Licensing
The Bank of New York
48 Wall Street
New York, New York 10286
United States of America
Credit Account No. 890-0209-674
ABA No. 0210-001-8
Section 7 - Termination and Assignability
-----------------------------------------
7.1 If either party to this Agreement should violate or fail to perform
any material term or material covenant of this Agreement ("Material Default"),
then the non-defaulting party may give prompt written notice of such default
("Notice of Default") to the defaulting party. The decision to give notice
shall be at the sole discretion of the non-defaulting party and no failure on
the part of that party to exercise, and no delay in exercising any right, power,
or remedy hereunder, shall operate as a waiver thereof or as a waiver of any
other right, power, or remedy hereunder or to the performance of any party; and
no single or partial exercise by a party of any right, power, or remedy
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power, or remedy. If a Notice of Default is given and the
defaulting party should fail to cure such default within thirty (30) days after
the date of receipt of the Notice of Default, or in the case of breach of the
obligation of confidentiality under this Agreement, if the defaulting party
should fail to cure such breach immediately, the non-defaulting party may
terminate this Agreement by a second written notice ("Notice of Termination") to
the defaulting party. If the Notice of Termination is sent by said non-
defaulting party, it shall be effective upon a date specified in said Notice of
Termination, provided, however, that for breaches other than the breach of the
obligation of confidentiality under this Agreement, such date must be no earlier
than thirty (30) days after receipt of said Notice of Termination by the
defaulting party.
AMD/IBM CONFIDENTIAL June 11, 1996
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7.1.1 The parties agree that some of the grounds of Material Default, for
which IBM shall have the right to terminate this Agreement per Section 7.1
are:
7.1.1.1 AMD engages in or suffers a CHANGE OF CONTROL.
7.1.1.2 AMD becomes insolvent, is dissolved or liquidated, has a
petition in bankruptcy, reorganization, dissolution or liquidation or
similar action filed by or against it, is adjudicated a bankrupt, or has
a receiver appointed for its business.
7.1.1.3 AMD has all or a substantial portion of its capital stock or
assets expropriated or attached by any government entity.
7.1.1.4 AMD makes an assignment for the benefit of creditors.
7.1.1.5 AMD is subject to property attachment, court injunction, or
court order materially affecting its operations under this Agreement.
7.1.1.6 AMD breaches its obligation of confidentiality under Section 8.
7.1.1.7 AMD breaches the terms of its license under Section 2.
7.1.1.8 AMD breaches its payment or royalty obligations under Section 6.
7.1.1.9 AMD breaches its obligation to deliver IMPROVEMENTS under
Section 4.
AMD/IBM CONFIDENTIAL June 11, 1996
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7.1.2 The parties agree that some of the grounds of Material Default, for
which AMD shall have the right to terminate this Agreement per Section 7.1
are:
7.1.2.1 IBM becomes insolvent, is dissolved or liquidated, has a
petition in bankruptcy, reorganization, dissolution or liquidation or
similar action filed by or against it, is adjudicated a bankrupt, or has
a receiver appointed for its business.
7.1.2.2 IBM has all or a substantial portion of its capital stock or
assets expropriated or attached by any government entity.
7.1.2.3 IBM makes an assignment for the benefit of creditors.
7.1.2.4 IBM is subject to property attachment, court injunction, or
court order materially affecting its operations under this Agreement.
7.1.2.5 IBM breaches its obligation to deliver IMPROVEMENTS under
Section 4.
7.1.2.6 IBM breaches its obligation to deliver LICENSED TECHNOLOGY under
Section 3.
7.1.2.7 IBM breaches its obligation of confidentiality under Section 8.
7.1.2.8 IBM breaches its obligation to provide MATERIALS under Appendix
C of this Agreement.
7.1.2.9 IBM breaches its obligation to provide foundry services under
Appendix D of this Agreement.
AMD/IBM CONFIDENTIAL June 11, 1996
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7.2 Neither party shall assign any of its rights, privileges or obligations
under this Agreement without the prior written consent of the other party except
for (i) an assignment by IBM to its SUBSIDIARY of substantially all of IBM's
business related to the LICENSED TECHNOLOGY, or (ii) an assignment by IBM to a
third party of substantially all of IBM's business related to the LICENSED
TECHNOLOGY. In the case of any such assignment, IBM will contractually obligate
the assignee to perform IBM's outstanding obligations under this Agreement by
entering into a written contract with such assignee and expressly provide that
AMD is a third-party beneficiary of such contractual obligation and has the
right to enforce its third-party beneficiary rights but shall have no further
obligation with respect to any such assignment. IBM will provide AMD reasonable
cooperation and assistance in connection with AMD's enforcing such third-party
beneficiary rights. Should either party attempt an assignment in derogation of
the foregoing, the other party shall have the right to terminate immediately
this Agreement, and such attempted assignment is void.
7.3 If this Agreement is terminated by IBM for Material Default of this
Agreement by AMD:
i) all LICENSED TECHNOLOGY previously transferred to AMD shall be
returned to IBM forthwith; ii) the license granted to AMD in Section 2
shall terminate except that AMD may sell its inventory of LICENSED PRODUCTS
that are completed and ready for sale as of the date that IBM gives its
Notice of Default pursuant to Section 7.1 and for six (6) months
thereafter; and iii) the license granted or extended to IBM and to its
SUBSIDIARIES in Section 2 shall survive.
7.4 If this Agreement is terminated by AMD for material default of this
Agreement by IBM:
i) the license granted to AMD in Section 2 shall survive; and
ii) the license granted or extended to IBM and to its SUBSIDIARIES in
Section 2 shall survive; provided, however,
-----------------
AMD/IBM CONFIDENTIAL June 11, 1996
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that if such termination by AMD is for breach by IBM provided for in
Section 7.1.2.8, such license granted or extended to IBM shall terminate.
7.5 In the event of termination by either party, all royalties due and
payable hereunder as of the date of termination shall remain due and payable, as
will royalties payable on LICENSED PRODUCTS sold from inventory pursuant to
Section 7.3. ii).
7.6 Except as stated in Sections 7.3 and 7.4, to the extent a particular
right or obligation herein does not have a specifically identified survival
period, all rights and obligations in this Section or in any other Section in
this Agreement which by their nature survive the termination of this Agreement
will remain in effect beyond any termination for the time period reasonably
necessary to accomplish their purpose and shall bind and inure to the benefit of
the parties, their legal representatives and successors.
Section 8 - Confidentiality
---------------------------
8.1 The handling of all confidential information exchanged between the
parties relating to the LICENSED TECHNOLOGY or the performance of this
Agreement, including any confidential information relating to C-4 wafer and
packaging processes and associated ground rules transferred under the prior
Confidential Information Exchange Agreement entered into between AMD and IBM on
[*], as amended, and signed by [*], shall be in accordance with this Section 8,
except that confidential information transferred under the prior Confidential
Information Exchange Agreement shall have a nondisclosure period of three (3)
years from the date of original disclosure. All further disclosures of
confidential information relating to the LICENSED TECHNOLOGY and the performance
of this Agreement shall only be made in accordance with this Section 8.
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8.2 Transfer of the LICENSED TECHNOLOGY pursuant to this Agreement and any
subsequent transfer between the parties of any information relating thereto will
be effected by, or under the supervision of, the Technical Coordinators for the
parties or their respective designees as specified in Section 10.1 of this
Agreement.
8.3 In addition to the information contained in Appendices A and B, IBM or
AMD may from time to time disclose to the other party certain information
relating to the LICENSED TECHNOLOGY, including IMPROVEMENTS. Any such
information disclosed by a party hereto under this Agreement, including this
Section 8, is hereafter referred to as "INFORMATION". All disclosures of
INFORMATION by IBM or AMD, as the disclosing party, shall be made by or under
the supervision of its Technical Coordinator, or his/her designee, to the
receiving party's Technical Coordinator, or his/her designee. Any such designee
shall be identified by a party's Technical Coordinator in writing to the
Technical Coordinator of the other party. In the event of inadvertent
disclosure, either party may give notice to the other party that previously
disclosed INFORMATION was confidential and the receiving party thereafter will
treat in good faith such INFORMATION as confidential INFORMATION.
Notwithstanding the foregoing, no license is granted in this Section 8.3 with
respect to any patent or software program or mask works or any medium containing
a copyright notice of the disclosing party. Each party hereby grants to the
other party, to the extent it has the right to do so, the limited right to make
a reasonable number of copies of any written material disclosed in accordance
with this Section 8.3 including programming code relating to the LICENSED
TECHNOLOGY only for its internal use.
8.4 With respect to INFORMATION designated as being confidential to the
disclosing party, when disclosed to the receiving party in writing (including
such INFORMATION recorded in a medium such as a tape or diskette), the writing
will state (a) the date of disclosure, (b) that the information contained
therein is
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confidential and being disclosed pursuant to this Agreement; and (c)
will contain an appropriate legend, such as "IBM Confidential Information", or
"AMD Confidential Information". If such disclosure is orally and/or visually
made, then it shall be confirmed by the disclosing party in a written resume
delivered to the receiving party within twenty (20) calendar days following such
disclosure. The resume will specifically recite that INFORMATION which is
confidential, set forth the date of the disclosure, and contain an appropriate
legend, such as "IBM Confidential Information", or "AMD Confidential
Information".
8.5 For a period of [*] years from the date of disclosure, the
receiving party agrees to use the same degree of care and discretion, but at
least a reasonable level of care and discretion, to avoid any disclosure,
publication, or dissemination of any part or all of the disclosed confidential
INFORMATION outside of the receiving party (except as permitted in Sections 8.6
and 8.7) as the receiving party employs with information of its own which it
regards as confidential and which it does not desire to publish, disclose or
disseminate.
8.6 Subject to the license herein granted under Section 2 and subject to
any applicable patent rights of AMD, IBM shall be free to use within IBM and its
SUBSIDIARIES any confidential INFORMATION of AMD, any writings or resumes
prepared by AMD and any reports and written documentation prepared by IBM
containing any such AMD confidential INFORMATION, and any ideas, concepts and/or
techniques contained in any such AMD confidential INFORMATION for any purpose
including the use thereof in the development, manufacture, marketing and
maintenance of products, subject to the obligation not to disclose, publish or
disseminate such AMD confidential INFORMATION outside of IBM and its
SUBSIDIARIES, except as specified in Section 8.10 of this Agreement, during such
foregoing specified period of nondisclosure. Regarding any such documents
containing AMD confidential INFORMATION, AMD hereby grants to IBM the right to
make a reasonable number of copies of any such
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writings or resumes only for the internal use of IBM or as otherwise required to
exercise the rights granted in Section 2.
8.7 Subject to the license herein granted under Section 2 and subject to any
applicable patent rights of IBM, AMD shall use, only in the FACILITIES, any
confidential INFORMATION of IBM, any writings or resumes prepared by IBM and any
reports and written documentation prepared by AMD containing any such IBM
confidential INFORMATION, and any ideas, concepts and/or techniques contained in
any such IBM confidential INFORMATION only for the purpose of manufacturing or
providing of LICENSED PRODUCTS, subject to the obligation not to disclose,
publish or disseminate such IBM confidential INFORMATION outside of the
FACILITIES, except as specified in Section 8.11, during such foregoing specified
period of nondisclosure. Regarding any such documents containing IBM
confidential INFORMATION, IBM hereby grants to AMD the right to make a
reasonable number of copies of any such writings or resumes only for the
internal use of AMD or as otherwise required to exercise the rights granted in
Section 2.
8.8 Disclosure of confidential INFORMATION shall not be precluded, if such
disclosure is:
8.8.1 in response to a valid order of a court or other governmental
body of the United States or any political subdivision thereof;
provided, however, that the receiving party shall first have given
-----------------
notice to the disclosing party and made a reasonable effort to obtain a
protective order requiring that the information and/or documents so
disclosed be used only for the purposes for which the order was issued;
8.8.2 otherwise required by law, statute, or governmental rule or
regulation; or
8.8.3 necessary to establish rights under this Agreement.
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8.9 Notwithstanding any other provisions of this Agreement, the non-
disclosure obligations specified in Section 8.5 shall not apply to any
information which:
8.9.1 is already in the rightful possession of the receiving party without
obligation of confidence;
8.9.2 is independently developed by the receiving party;
8.9.3 becomes publicly available without breach of this Agreement;
8.9.4 is rightfully received by the receiving party from a third party; or
8.9.5 is released for disclosure by the disclosing party with its written
consent.
8.10 IBM shall have the right to disclose to IBM's suppliers and customers
with activities related to the LICENSED TECHNOLOGY, AMD IMPROVEMENTS, provided
that said parties sign a written agreement with confidentiality obligations no
less stringent than those contained in this Section 8.
8.10.1 Any suppliers of IBM performing work for IBM and customers pursuant
to Section 8.10 shall be deemed to be performing under the license granted
by AMD to IBM under Section 2.4.
8.11 AMD shall have the right to disclose to AMD's customers with bond and
assembly activities related to the LICENSED TECHNOLOGY, the following items of
LICENSED TECHNOLOGY: [*] provided that said customers sign a written agreement
with confidentiality obligations no less stringent than those contained in this
Section 8.
AMD/IBM CONFIDENTIAL June 11, 1996
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8.11.1 Customers of AMD pursuant to Section 8.11 shall be deemed to be
performing under the license granted by IBM to AMD under Section 2.1.
8.12 IBM shall have the right to disclose AMD's IMPROVEMENTS to IMPROVEMENT
LICENSEES to practice AMD's IMPROVEMENTS which have been transferred to IBM by
AMD and further transferred to such IMPROVEMENT LICENSEES by IBM provided that:
(i) AMD's IMPROVEMENTS have been introduced into, and practiced in production
in, IBM's Microelectronics Division manufacturing facilities performing work
related to the LICENSED TECHNOLOGY prior to the transfer of AMD's IMPROVEMENTS
to IMPROVEMENT LICENSEES; (ii) the IMPROVEMENT LICENSEES agree to the disclosure
of their improvements to AMD by IBM, under confidentiality obligations agreed to
by AMD which are no less stringent than those contained in this Section 8, after
the IMPROVEMENT LICENSEES' improvements have been introduced into, and practiced
in production in, IBM's Microelectronics Division manufacturing facilities
performing work related to the LICENSED TECHNOLOGY, (iii) the IMPROVEMENT
LICENSEES agree to grant a license to AMD, with respect to the IMPROVEMENT
LICENSEES' improvements, to use and have used any IMPROVEMENT LICENSEES'
improvements; to manufacture, have manufactured, use, have used, sell and have
sold any product using the IMPROVEMENT LICENSEES' improvements; and to
manufacture, and have manufactured, for internal use only any apparatus required
to implement any hardware or process specifications contained in the IMPROVEMENT
LICENSEES' improvements; and (iv) the IMPROVEMENT LICENSEES sign a written
agreement with confidentiality obligations no less stringent than those
contained in this Section 8.
8.12.1 The IMPROVEMENT LICENSEES in Section 8.12 shall be deemed to be
performing under the licenses granted by AMD to IBM under this
Agreement.
8.13 IBM also shall have the right to disclose AMD's IMPROVEMENTS to
IMPROVEMENT LICENSEES to practice AMD's IMPROVEMENTS which have been transferred
to IBM by AMD and further transferred to such
AMD/IBM CONFIDENTIAL June 11, 1996
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IMPROVEMENT LICENSEES by IBM at the time the IMPROVEMENT LICENSEES receive their
initial transfer of the LICENSED TECHNOLOGY provided that: (i) AMD's
IMPROVEMENTS have been introduced into, and practiced in production in, IBM's
Microelectronics Division manufacturing facilities performing work related to
the LICENSED TECHNOLOGY prior to the transfer of AMD's IMPROVEMENTS to
IMPROVEMENT LICENSEES; and (ii) the IMPROVEMENT LICENSEES sign a written
agreement with confidentiality obligations no less stringent than those
contained in this Section 8.
8.13.1 The IMPROVEMENT LICENSEES in Section 8.13 shall be deemed to be
performing under the licenses granted by AMD to IBM under this
Agreement.
8.14 It is understood that receipt of confidential INFORMATION under this
Agreement will not create any obligation in any way limiting or restricting the
assignment and/or reassignment of IBM employees within IBM or AMD employees
within AMD subject to Sections 2 and 8.
8.15 Within two (2) months following the termination of this Agreement by
IBM pursuant to Section 7.3, AMD shall return all writings and resumes received
from IBM and copies thereof containing confidential INFORMATION. Upon
expiration of this Agreement, the receiving party shall not be required to
return any confidential INFORMATION provided pursuant to Sections 3, 4 and 5,
except that for a breach by AMD of the terms and conditions of AMD's license
under Section 2 or for a breach by AMD of its payment or royalty obligations
under Section 6 or for a breach by AMD of AMD's confidentiality obligations
under Section 8, AMD shall return all writings and resumes received from IBM and
copies thereof containing confidential INFORMATION.
8.16 Each party represents that it has, and agrees to maintain, an
appropriate agreement with each of its employees who may have access to any
confidential INFORMATION sufficient to enable each party to comply with all the
terms of this Agreement.
AMD/IBM CONFIDENTIAL June 11, 1996
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Section 9 - C-4 Foundry Services
--------------------------------
9.1 IBM agrees to supply foundry services for C-4 BUMPING on wafers and
module assembly of LICENSED PRODUCTS under this Agreement in accordance with the
terms and conditions as set forth in Appendix D.
Section 10 - Management Process and Technical Coordinators
----------------------------------------------------------
10.1 The parties agree that the activities to be accomplished under this
Agreement will be the responsibility of the individual parties who have accepted
the commitments hereunder. However, the parties understand that they need a
mechanism to manage and oversee the activities of this Agreement. For this
reason, the parties agree to establish under this Agreement an Oversight
Committee (OSC), which shall consist of no more than four (4) persons from each
party, to oversee the performance hereunder and to resolve issues which arise
during the TERM of this Agreement. Furthermore, both parties agree that the OSC
will be augmented by senior management advisors ("Senior Advocates") who will be
asked to resolve any issues which cannot be resolved by the OSC. The OSC shall
consist of the following persons:
For AMD For IBM
------- -------
D. Ostrander J. Acocella
R. Lain M. Mara
C. Wolfe D. Mele
F. Stillger A. Yu
The Senior Advocates shall be the following persons:
For AMD For IBM
------- -------
G. Heerssen M. Denick
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The OSC shall meet as required but, during the first two (2) years after the
EFFECTIVE DATE, not less frequently than quarterly and then semiannually
thereafter to review the progress in the execution of the activities under the
Agreement and address issues and disputes brought to them by the Technical
Coordinators. Notwithstanding this Section 10.1, both parties reserve the right
to pursue legal remedies after reasonable efforts to resolve issues and disputes
have been made through the OSC. Such efforts will be deemed reasonable after
the dispute has been submitted to the OSC augmented by the Senior Advocates and
the dispute remains unresolved sixty (60) days after such submission.
10.2 AMD and IBM each will designate one (1) of its employees as
Technical Coordinators for LICENSED TECHNOLOGY related transfers and they will
be responsible for execution of the progress of this program. These Technical
Coordinators shall consist of the following persons:
For AMD For IBM
------- -------
C. Wolfe J. Bilowith
The Technical Coordinator for each party shall control the exchange of
information between the parties in accordance with Section 8 of this Agreement
and will monitor within their respective companies the distribution of
INFORMATION received from the other party to those who have a need to know. The
Technical Coordinator for each party shall be responsible for awareness of all
IMPROVEMENTS and coordinating the sharing of such with the other party pursuant
to Section 4. The Technical Coordinators shall also coordinate technical
assessments, arrange conferences and visitations as required by this Agreement
between personnel of the respective parties, maintain appropriate records,
acknowledge the receipt from the other party of all information, and other
similar tasks.
AMD/IBM CONFIDENTIAL June 11, 1996
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10.3 The Oversight Committee members, Senior Advocates and
Technical Coordinator of either party designated in this Section 10 may be
replaced by written notice to the other party.
10.4 There will be a quarterly Business and Technical Review. This Review
will include a statement of AMD's demand forecast for the MATERIALS set forth in
Section 3.3, [*] in Section 3.5, and technical assistance to be provided under
Section 5, royalties, payments, IMPROVEMENTS, royalty outlook based upon AMD's
revenue projections and other related matters.
Section 11 - Renewal of Patent Cross-License
--------------------------------------------
11.1 The parties agree to engage in good faith negotiations towards
completion of the [*] agreement that [*].
Section 12 - General Provisions
-------------------------------
12.1 This Agreement is non-exclusive. IBM and AMD recognize and agree that
each has been and may continue to be active in the development of technology
indirectly or directly relating to the technologies, processes and products
contemplated by this Agreement, and AMD acknowledges and agrees that IBM will be
free in all respects and not precluded by this Agreement to pursue such
activities independent of AMD, including with third parties, and further, IBM
acknowledges and agrees that AMD will be free in all respects and not precluded
by this Agreement to pursue such activities independent of IBM, including with
third parties.
12.2 Nothing contained in this Agreement shall be construed as:
12.2.1 conferring any rights to use in advertising, publicity, or other
marketing activities any name, trade name,
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trademark, or other designation of either party hereto, including any
contraction, abbreviation, or simulation of any of the foregoing without
prior mutual written agreement; or
12.2.2 conferring by implication, estoppel, or otherwise upon either party
hereunder any license or other right except the licenses and rights
expressly granted hereunder to a party hereto or third parties; or
12.2.3 a warranty or representation that the manufacture, sale, lease,
use, or other disposition of systems, processes, circuits, devices,
packages, software, and products hereunder will be free from infringement
of intellectual property rights of third parties; or
12.2.4 a warranty that the recipient party will successfully manufacture
products, or a particular volume of products, based upon the LICENSED
TECHNOLOGY transferred hereunder including transfer and technical
assistance; or
12.2.5 an obligation to bring or prosecute actions or suits against third
parties for infringement, or to defend actions or suits from third parties
for infringement, or to secure and/or maintain any of its intellectual
property rights; or
12.2.6 in any way limiting the rights which a party has outside the scope
of this Agreement.
12.3 AMD and IBM represent that they have the right to grant the licenses
herein, and that the terms and conditions of this Agreement do not violate their
respective Articles of Incorporation or By-Laws and do not conflict with any
other agreements to which they are a party or by which they are bound.
12.4 EXCEPT FOR THE PROVISIONS IN SECTION 3.3.1, ALL INFORMATION,
IMPROVEMENTS, INVENTIONS, EQUIPMENT, PRODUCTS, MATERIALS, ASSISTANCE, AND
SERVICES PROVIDED BY EITHER PARTY HEREUNDER ARE
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PROVIDED "AS IS" WITHOUT ANY WARRANTY OF ANY KIND INCLUDING THAT NEITHER PARTY
MAKES ANY WARRANTY AS TO THE ACCURACY, SUFFICIENCY, OR SUITABILITY FOR THE OTHER
PARTY'S USE OF ANY INFORMATION, IMPROVEMENTS, INVENTIONS, LICENSED TECHNOLOGY OR
EQUIPMENT PROVIDED HEREUNDER FOR THE MANUFACTURE OF PRODUCTS OR DELIVERY OF
SERVICES USING THE INFORMATION, IMPROVEMENTS, INVENTIONS, LICENSED TECHNOLOGY OR
EQUIPMENT, OR THE YIELD FROM THE MANUFACTURE OF PRODUCTS OR DELIVERY OF SERVICES
USING THE INFORMATION, IMPROVEMENTS, INVENTIONS, LICENSED TECHNOLOGY OR
EQUIPMENT, OR FOR THE QUALITY OF SUCH PRODUCTS MADE OR SERVICES DELIVERED USING
THE INFORMATION, IMPROVEMENTS, INVENTIONS, LICENSED TECHNOLOGY OR EQUIPMENT, OR
THE QUALITY OF ANY OF THE MATERIALS SUPPLIED BY IBM TO AND IN SECTION 3.3, OR
ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND NEITHER
PARTY ASSUMES ANY RESPONSIBILITY OR LIABILITY FOR LOSSES OR DAMAGES, WHETHER
DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE, WHICH MIGHT ARISE OUT
OF THE OTHER PARTY'S USE OF THE INFORMATION, IMPROVEMENTS, INVENTIONS, LICENSED
TECHNOLOGY, EQUIPMENT OR ASSISTANCE, OR THE MATERIALS SUPPLIED BY IBM TO AMD IN
SECTION 3.3, WHICH SHALL BE ENTIRELY AT THE OTHER PARTY'S RISK AMD PERIL.
12.5 AMD acknowledges and agrees that the LICENSED TECHNOLOGY and any IBM
confidential INFORMATION disclosed hereunder are unique and are of special
value. Accordingly, AMD acknowledges and agrees that a breach or threatened
breach by AMD or its employees of the license granted to AMD under Section 2,
the prohibition against reverse engineering under Section 3.3.2, and its
obligation of confidentiality under Section 8 would cause IBM irreparable injury
and damage, for which monetary damages will be an inadequate remedy. AMD
therefore agrees that, in addition to all other rights and remedies granted to
IBM hereunder, IBM shall be entitled to file with a court of competent
jurisdiction for a temporary restraining order, injunctive relief and other
equitable relief against AMD and its employees, to prevent any breach or
continuing breach of any provisions of this Agreement. Resort by IBM to such
AMD/IBM CONFIDENTIAL June 11, 1996
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equitable relief, however, shall not be construed as a waiver by IBM of any
other rights or remedies IBM may have for actual damages or otherwise. In the
event that IBM is required to take legal action against AMD's customers or
others, AMD agrees to comply with reasonable requests to provide information
as necessary to IBM with respect to such action.
12.6 If any term or provision of this Agreement or the application thereof
to any party hereto or set of circumstances shall, in any jurisdiction and to
any extent, be finally held to be invalid or unenforceable, such term or
provision shall only be ineffective as to such jurisdiction, and only to the
extent of such invalidity or unenforceability, without invalidating or rendering
unenforceable any other terms or provisions of this Agreement or under any other
circumstances, so long as the remainder of this Agreement still effectuates the
intent of the parties to this Agreement. If such intent cannot be effectuated,
this Agreement shall either be renegotiated or terminated immediately without
cause by either party.
12.7 AMD agrees to indemnify, defend, and hold harmless, IBM, its officers,
directors, agents, and employees, from any and all liability, losses, damages,
reasonable attorney's fees or expenses associated with claims, suits, or actions
brought by or on behalf of any third party of any nature, including, but not
limited to, personal injury (including death), environmental liability, or
property damage arising from, or alleged to arise from, AMD's negligence or
other wrongful acts or omissions resulting from or in any way related to the
making, using or selling of the MATERIALS or other items and services supplied
by IBM to AMD in Section 3.3; or use of the LICENSED TECHNOLOGY in products.
Notwithstanding anything to the contrary, this Section 12.7 indemnity always
applies to claims or actions brought by or on behalf of current or former
employees of AMD.
12.8 IBM agrees to indemnify, defend, and hold harmless, AMD, its officers,
directors, agents, and employees, from any and all
AMD/IBM CONFIDENTIAL June 11, 1996
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liability, losses, damages, reasonable attorney fees or expenses associated with
claims, suits, or actions brought by or on behalf of any third party of any
nature, including, but not limited to, personal injury (including death),
environmental liability, or property damage arising from, or alleged to arise
from, IBM's negligence or other wrongful acts or omissions resulting from or in
any way related to the use of AMD IMPROVEMENTS in products.
12.9 AMD will indemnify, defend, and hold harmless, IBM, its SUBSIDIARIES,
officers, directors, agents, and employees, from any and all liability, losses,
damages, reasonable attorney's fees, and/or expenses associated with claims,
suits, or actions brought by or on behalf of any third party of any nature,
including, but not limited to, personal injury (including death), environmental
liability, or property damage arising from, or alleged to arise from, IBM's
negligence or other wrongful acts or omissions which AMD or IBM may incur or
sustain:
(a) in connection with chemicals or materials related to the MATERIALS or
other items or services in Section 3.3, any related wastes or by-products
generated by AMD's processes or any waste which may be created by the
handling or use thereof in the manufacture or processing of any product by
AMD under this Agreement; or
(b) from the noncompliance by AMD with any environmental law or
regulations; or
(c) in connection with any contaminant, pollutant or hazardous substance
used, generated, treated, stored, disposed of or otherwise used by AMD
whether on its own property or the property of any third party.
12.10 The provisions of Sections 12.7, 12.8 and 12.9 shall survive any
expiration or termination of this Agreement.
AMD/IBM CONFIDENTIAL June 11, 1996
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12.11 All notices required or permitted to be given hereunder (except for
notices to be addressed to the Technical Coordinators) shall be in writing and
shall be valid and sufficient if dispatched by registered or certified mail,
return receipt requested, postage prepaid, in any post office in the United
States, or in the case of international delivery, dispatched by a delivery
service providing a receipt of delivery, or by receipted FAX addressed
respectively as follows:
AMD IBM CORPORATION
--- ---------------
5204 E. Ben White Blvd. 1000 River Street
Mail Stop 612 Essex Junction, VT 05452
Austin, TX 78741
FAX:(512) 602-0460 FAX:(802) 769-3865
Attn: Daryl Ostrander Attn: Douglas Grose
Vice-President Site General Manager
with copies to:
T. McCoy John T. Higgins
Vice-President & General Associate General Counsel
Counsel
1 AMD Place 1580 Route 52
P.O. Box 3453 Hopewell Junction, NY
12533
Sunnyvale, CA 94088
Either party may change its address by a notice given to the other party in the
manner set forth above. Notices given by mail as herein provided shall be
considered to have been given seven (7) days after the mailing thereof.
AMD/IBM CONFIDENTIAL June 11, 1996
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12.12 If any party is rendered wholly or partially unable by Force Majeure to
carry out its obligations under this Agreement, and if that party gives prompt
written notice and full particulars of such Force Majeure to the other party,
the notifying party shall be excused from performance of its obligations
hereunder during the continuance of any inability so caused, but for no longer
period; provided that if payment cannot be made due to the existence of a
banking crisis or international payment embargo, such amount may be paid within
the following thirty (30) days. Such cause shall be remedied by the notifying
party as far as possible with reasonable speed and effort. For the purposes of
this Agreement, Force Majeure shall mean Acts of God, acts of public enemies or
terrorists, wars, other military conflicts, blockades, insurrections, riots,
epidemics, quarantine restrictions, landslides, lightning, earthquake, floods,
washouts, civil disturbances, restraints by or actions of any governmental body
(including export or security restrictions on information, material, personnel,
equipment or otherwise), and any other acts or events whatsoever, whether or not
similar to the foregoing, not within the control of the party claiming excuse
from performance, which by the exercise of due diligence and best reasonable
effort that party shall not have been able to overcome or avoid. If the
notifying party cannot remedy the Force Majeure situation and resume
satisfactory performance within [*] in the case of IBM or [*] in the case of
AMD, the other party may at its option immediately terminate this Agreement
pursuant to Section 7.
12.13 The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver, nor shall it deprive
that party of the right to insist later on adherence thereto, or thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing and signed by an authorized representative of the
waiving party to be effective.
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12.14 Each party agrees to comply with all applicable country, Federal, State,
and Local laws, rules, regulations, and ordinances, including those of any other
duly constituted governmental authority having jurisdiction, and including
without limitation, all rules and regulations of the Occupational Health and
Safety Administration, Environmental Protection Agency, U.S. Department of
Commerce, and U.S. Department of Transportation. Each party, on behalf of
itself and its SUBSIDIARIES, shall do all things necessary (i) to obtain in a
timely manner all required licenses and approvals and (ii) to comply with all
applicable laws, rules and regulations, including, but not limited to, the
Regulations of the United States Government relating to the export and re-export
of technical data, commodities, and products produced as a result of the use of
such data. Each party hereto, on behalf of itself and its SUBSIDIARIES, agrees
that neither it nor any of its SUBSIDIARIES will export or re-export, directly
or indirectly, any technology, software, and/or commodities furnished under this
Agreement, or the direct product thereof, to any country, or the nationals
thereof, specified in such laws, rules, regulations, and ordinances referred to
above as an unauthorized destination without IBM or AMD first obtaining U.S.
Government approval.
12.15 The captions used in this Agreement are for convenience of reference
only and are not to be used in interpreting the obligations of the parties under
this Agreement.
12.16 This Agreement shall be construed and the legal relations between the
parties shall be determined in accordance with the law of the State of New York
without regard to the conflict of law provisions thereof. Any proceedings to
enforce this Agreement, or to resolve disputes relating to this Agreement, shall
be commenced within one (1) year of the date such dispute arose in the United
States District Court for the Southern District of New York, Westchester County
Division. IBM and AMD waive the right to trial by jury in any matter which
arises between the parties pursuant to this Agreement.
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12.17 Each party agrees to pay the other party's attorney's fees and costs of
litigation if the party, for any reason whatever, brings suit against the other
party and the other party is finally adjudicated not to have liability.
12.18 Neither party shall use any name, service mark, trade dress, trademark,
trade name or other designation of the other party (including any contraction,
abbreviation or simulation of any of the foregoing) without the express prior
written consent of the other party, and nothing contained in this Agreement
shall be construed as conferring any right to such use upon either party.
12.19 Nothing contained herein, or done in pursuance of this Agreement, shall
constitute the parties as entering upon a joint venture or partnership or shall
constitute either party hereto the agent for the other party for any purpose or
in any sense whatsoever.
12.20 For the TERM of this Agreement, each party agrees not to solicit or
recruit engineers of the other party who are (i) directly involved in the
LICENSED TECHNOLOGY or (ii) have been or are assigned to perform work under this
Agreement. This does not restrict general solicitations for employment or the
right of any employee of one party, on that employee's own initiative or in
response to general solicitations, to seek employment from the other party.
12.21 Either party may disapprove the assignment of any of its former employees
to perform work under this Agreement on its premises by the other party and such
personnel will not be so assigned. Each party will take appropriate preventive
steps, before the assignment of any of its employees to perform work under this
Agreement, that that party reasonably believes will ensure that its employees
will not engage in inappropriate conduct while on the other party's premises.
Inappropriate conduct shall include, but not be limited to: 1) being under the
influence of, or affected by, alcohol, illegal drugs or controlled substances or
engaging in
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their use, distribution or sale; 2) the possession of a weapon of any sort; and
3) harassment, threats or violent behavior.
12.22 Unless required by law, statute, rule, or regulation, each party agrees
not to disclose to any third party the terms, conditions, subject matter or
existence of this Agreement without the prior written consent of the other
party.
12.23 Representatives and personnel of each party, during the time they are
present on the premises of the other party, shall be subject to all rules and
regulations prevailing on such premises. Each party shall be responsible for
the payment of all compensation and expense of its respective representatives
and personnel. None of the representatives or personnel of either party shall
be considered, for any reason, to be an employee or agent of the other.
12.24 Subject to Section 12.2.3, each party represents that, regarding any
information, including information relating to any IMPROVEMENTS, to be disclosed
to the other party under this Agreement, it has or will have the full right and
power to disclose the same and that the Technical Coordinator for each party is
not aware that the disclosure and/or copying of any such information will
constitute a: (i) misappropriation of any trade secret or any other type of
confidential information of any third party; or (ii) violation of a copyright.
12.25 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR CAUSED BY THE PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT, THE
BREACH OF ITS TERMS AMD CONDITIONS, OR THE TERMINATION OF THIS AGREEMENT,
PROVIDED, HOWEVER, THAT IN THE CASE OF AMD, SHOULD AMD BREACH ITS LICENSE UNDER
- -----------------
SECTION 2, THE PROHIBITION AGAINST REVERSE-ENGINEERING UNDER SECTION 3.3.2 OR
ITS OBLIGATION OF CONFIDENTIALITY UNDER SECTION 8, AMD SHALL BE LIABLE FOR SUCH
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR CAUSED BY ANY
SUCH BREACH, AMD FURTHER,
-------
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PROVIDED, THAT IN THE CASE OF IBM, SHOULD IBM BREACH ITS LICENSE UNDER SECTION 2
- --------
OR ITS OBLIGATION OF CONFIDENTIALITY UNDER SECTION 8, IBM SHALL BE LIABLE FOR
SUCH INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR CAUSED BY
ANY SUCH BREACH UP TO A MAXIMUM OF [*] FOR ALL SUCH IBM BREACHES IN THE
AGGREGATE.
12.26 The description provided in Section 3, all documentation items transferred
in accordance with Section 3, and the documentation delivered with the transfer
of requested IMPROVEMENTS in accordance with Section 4 shall be provided in the
language available. If more than twenty (20) pages of the documentation are in
a foreign language, the costs of any translating of the above documentation into
English, when such translation is requested by the party receiving a foreign
language document, shall be shared equally by both parties. In no event, will
the party providing, transferring or delivering material to be translated be
responsible for errors in translation.
12.27 AMD shall properly handle, use, store, sell, otherwise transfer,
and/or dispose of all the MATERIALS in Section 3.3 manufactured by IBM and sold
or otherwise transferred to AMD, together with related chemicals or materials
and any related wastes or by-products generated by its processes and any waste
which may be created by the handling or use thereof, and shall be solely
responsible for the proper handling and disposal thereof. AMD shall be
responsible for selecting, at its sole discretion, any waste disposer or waste
disposal service.
12.28 Each party represents that it has, or will have in place, established
procedures and agreements with its SUBSIDIARIES, employees or others, including
subcontractors, whose services the party may require, sufficient to enable the
party to comply with all the provisions of this Agreement.
12.29 AMD shall be solely responsible for determining its prices and other
terms and conditions for its products sold to its
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customers. AMD shall be solely responsible for marketing products to its
customers and IBM shall have no obligation to provide any support of any kind to
AMD's customers.
12.30 In the event of any inconsistency between the terms and conditions of this
Agreement and language set forth in the Appendices, the inconsistency shall be
resolved by giving precedence to the terms and conditions of this Agreement.
12.31 Except as expressly provided herein, neither this Agreement nor any
activities thereunder will impair any right of either party to design, develop,
manufacture, market, service, or otherwise deal in, directly or indirectly,
other products or services including those competitive with those of the other
party.
12.32 This Agreement, and the Appendices attached hereto and made a part
thereof, embody the entire understanding of the parties with respect to the
subject matter contained herein and shall supersede all previous or
contemporaneous communications, representations or understandings, either oral
or written, between the parties relating to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon the
parties unless signed by their respective, duly authorized representatives.
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In WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the dates written below.
ADVANCED MICRO INTERNATIONAL BUSINESS
DEVICES MACHINES CORPORATION
/s/ G. Connor /s/ Michael H. Van Vranken
By: ________________________ By: __________________________
G. Connor Michael H. Van Vranken
Senior Vice President Vice President
Operations Finance, Planning & Business
Operations
June 13, 1996 6/14/96
Date: _______________________ Date: _________________________
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APPENDIX A
----------
LICENSED TECHNOLOGY Documentation Items
The following are the steps to practice the LICENSED TECHNOLOGY and the most
recent documentation relating thereto which documentation will be provided to
AMD in total fulfillment of IBM's LICENSED TECHNOLOGY transfer obligation
hereunder.
A1 Engineering, process, manufacturing and material specifications, as
applicable, for IBM's wafer passivation process as it pertains to the
LICENSED TECHNOLOGY, as of the EFFECTIVE DATE. The wafer passivation
process to be transferred is made up of the following process steps for
which applicable documentation will be provided:
[*]
A2 Engineering, process, manufacturing and material specifications, as
applicable, for BUMPING, as of the EFFECTIVE DATE. The process for
BUMPING to be transferred is made up of the following process steps for
which applicable documentation will be provided:
[*]
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[*]
[*]
A3 Engineering, process, manufacturing and material specifications, as
applicable, for BOND AMD ASSEMBLY, as of the EFFECTIVE DATE. The
process for BOND AMD ASSEMBLY to be transferred is made up of the
following process steps for which applicable documentation will be
provided:
[*]
A4 Engineering, process, manufacturing and material specifications, as
applicable, for IBM's dicing process as it pertains to the LICENSED
TECHNOLOGY, as of the EFFECTIVE DATE. The process for dicing to be
transferred is made up of the following process steps for which
applicable documentation will be provided:
[*]
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[*]
A5 Manufacturing tool specifications as available including tooling
maintenance specifications and proprietary tooling designs to support
items Al through A4 above for which applicable documentation will be
provided.
A6 Pertinent facilities information such as facilities drawings with
recommended changes, clean room and environmental standards, product
flows, process controls, as available at IBM on the EFFECTIVE DATE of
this Agreement for the existing LICENSED TECHNOLOGY at IBM's
Burlington, Vermont and Bromont, Canada facilities for which applicable
documentation will be provided.
A7 Documentation as of the EFFECTIVE DATE for quality, yield management
and specifications for lids, capacitors, [*] and CHIP CARRIERS.
A8 The existing [*].
AMD/IBM CONFIDENTIAL June 11, 1996
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APPENDIX B
----------
LICENSED TECHNOLOGY Technical Assistance
IBM will provide technical assistance, as discussed in more detail hereafter, in
the installation of the LICENSED TECHNOLOGY only in AMD's wholly-owned Austin,
Texas or Santa Clara County, California facility. This Appendix B describes the
total obligation of IBM to provide assistance of any kind with respect to the
transfer of the LICENSED TECHNOLOGY.
B1. Assignment of personnel.
AMD personnel to be assigned to the transfer of the LICENSED TECHNOLOGY will be
experienced in semiconductor manufacturing, packaging and/or assembly as
appropriate to the tasks they will perform on such transfer. Skill types may
include, but are not limited to, engineers and technicians disciplined in
facilities, equipment, maintenance, manufacturing engineering, mechanical
engineering, chemical engineering, materials handling and process controls.
IBM personnel involved in this transfer will have expertise and experience as
determined necessary by IBM, in its sole discretion, to provide technical
assistance to AMD personnel.
B2. Installation Assistance
Pursuant to Section 5 of the Agreement, the following specific items of
technical assistance will be provided to AMD, at no additional cost for the
first [*] man weeks of effort, as specified in Sect.5.3.
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B2.l. Identification of sources of equipment, materials, and services,
except for MATERIALS as defined in Sect.3, and as described in Section
5.2.
B2.2. Consistent with Section 5.5, a pre-contract technical seminar, to be
held at IBM's Burlington, Vt. and Bromont Canada facilities for the sole
purpose of identifying to AMD those long lead time facilities and tooling
considerations for which AMD may choose to act on prior to completion of
this Agreement
B2.3 A comprehensive process overview of the LICENSED TECHNOLOGY at IBM's
Burlington, Vermont and Bromont, Canada facilities, including tours of
IBM's associated manufacturing operations which shall be at reasonable
times and restricted to the Licensed Technology
B2.4. A detailed review of all documents provided to AMD consistent
with Appendix A of this Agreement for AMD's use in installation of the
Licensed technology.
B2.5 A detailed review of IBM's existing facilities layouts as they pertain to
the Licensed Technology, including technical discussions with IBM
facility and line engineers , and a review of AMD's manufacturing line
layout plans by IBM with recommendations as appropriate
B2.6 At AMD's option and on a schedule that is mutually agreeable, an on-site
critique of AMD's initial manufacturing line installation(s), to be
performed by IBM personnel and to include:
1. a review of installed equipment
2. a review of process control data
3. recommendations prior to the initiation of production runs
AMD/IBM CONFIDENTIAL June 11, 1996
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B2.7. On-going technical support to AMD's technical team directly
involved in the transfer and installation of the Licensed Technology
B3. Additional Technical Assistance
B3.1 Additional technical assistance beyond [*] man weeks and or [*] months
from EFFECTIVE DATE will be supplied by IBM at AMD's expense, as
specified in Section 5.3 of the Agreement.
B4 Coordination
B4.l All coordination of technical assistance shall be through the
Technical Coordinators.
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APPENDIX C
----------
Sale and Purchase of MATERIALS, CHIP CARRIERS, and Metal
Evaporation Masks
Pursuant to Sections 3.3 and 3.5 of the Agreement, by purchase order referencing
this Agreement, AMD may request to purchase MATERIALS, [*] and [*] from IBM. The
face of said purchase order must expressly substitute the terms and conditions
of this Agreement for any terms and conditions of such AMD purchase order.
[*]
- -----------------------------------------------
Subject to the terms and conditions of this Agreement, [*] and [*] are
products made available through IBM Microelectronics Division. Prices and terms
and conditions, including lead times, therefor will be provided in response to a
request for quotation (RFQ) from AMD which AMD will issue to IBM in connection
with the purchase of any such product. Requests for quotation (RFQ's) are to be
addressed to:
IBM Microelectronics Division
Route 52, Zip 92E
Hopewell Junction, NY 12533
Attention: OEM Marketing
C2. MATERIALS:
- ---------------
C2.l Forecasting of Requirements for MATERIALS
C2.l.1 AMD will supply IBM with a forecast of AMD's requirements for MATERIALS.
AMD's forecast will, at a minimum, cover a [*] period, by quarter, and be
updated on a quarterly basis.
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AMD agrees that the volume forecast represents AMD's intent to purchase from IBM
and, upon acceptance by IBM in a purchase order for a forecast volume, IBM
agrees to fulfill this forecast. At all times during the TERM, the parties will
keep in effect a purchase order for at least the subsequent ninety (90) days of
the forecast.
C2.l.2 AMD's initial forecast is due at the time of the first Quarterly Business
Technical review following execution of the Agreement, as provided for in
Section 10.4.
C2.2 Purchase Order Processing
C2.2.l Purchase orders issued to IBM shall be directed to:
IBM Microelectronics Division
Route 52, Zip 92E
Hopewell Junction, NY 12533
Attn: OEM Marketing
Acknowledgments and other correspondence sent to AMD shall be directed to:
Magnus Matthiasson
1 AMD Place
P.O. Box 3453
Mail Stop #12
Sunnyvale, CA 94088
C2.2.2 Purchase orders issued to IBM shall include the following information:
Buyer's name and address
Buyer's purchase order name
Description of MATERIALS to be ordered
Quantity to be ordered
Unit Price
Requested delivery point, including contact name and phone
number
AMD/IBM CONFIDENTIAL June 11, 1996
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Invoicing address
Requested delivery date
Reference to this Agreement
C2.2.3 Purchase order lead times will be supplied by IBM at the time of AMD's
first forecast submission as provided for in Section C2.l.2 of this Appendix C.
C2.2.4 Changes to purchase orders that may become necessary from time to time
may be initiated by either IBM or AMD and must be mutually agreed upon between
buyer and seller. Any changes must be in writing and agreed to by the parties.
Changes may carry an adjustment charge or cancellation fee, payable by AMD,
which will be determined and agreed upon at the time when the purchase order is
changed.
C2.2.5 The terms of this Agreement shall govern in case of a conflict with the
terms and conditions of a purchase order.
C2.3 MATERIALS Supply Constraints
The provisions of Section 3.4 of this Agreement are applicable.
C2.4 Shipment, Title, Risk of Loss
C2.4.1 In response to AMD's purchase orders, IBM will prepare MATERIALS for
shipment to AMD using IBM designed packaging materials. AMD's purchase order
will be referenced on the package exterior. Shipment will be F.O.B. IBM's
designated factory shipping dock, or at such other suitable location that IBM
selects, where AMD or its duly authorized representative will take title and
arrange prompt delivery to AMD's carrier of choice.
AMD/IBM CONFIDENTIAL June 11, 1996
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<PAGE>
C2.5 MATERIALS Warranty
The provisions of Section 3.3.1 of this Agreement, are applicable.
C2.6 Prices, Invoicing, Payment Terms and Taxes
Prices for [*] and [*] are valid for one year commencing with the execution of
the Agreement, and are subject to an update on a yearly basis thereafter. AMD
will be notified of any lead time changes due to IBM supplier requirements
which amended lead time will be effective upon such notice.
<TABLE>
<CAPTION>
C2.6.l [*]
<S> <C> <C>
PRICE LEADTIMES SHIPMENT
- ----- --------- --------
[*] [*] Shipped in [*]
C2.6.2 [*]
PRICE LEADTIMES SHIPMENT
- ----- --------- --------
[*] [*] Shipped in [*] or more
</TABLE>
C2.6.3 [*]: All [*] are customized to meet specific customer requirements and
each application. Prices, terms and conditions and leadtimes will be provided
in response to a RFQ from AMD to IBM. For reference purposes, the specific
price of the [*] as identified by AMD as
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<PAGE>
[*], and utilizing [*] and [*], is [*], with a [*]. This price does not include
any charges for repair, maintenance or training, which would be identified as a
separate charge in any RFQ response.
C2.6.4 IBM will invoice AMD on or after the date of shipment to AMD. Such
invoices will include AMD's purchase order number. Payment by AMD will be due
within 30 days from the date of invoice. IBM shall apply a late payment charge
of 1.5% per month to any outstanding balance not paid within 30 days. Payment
should be made as directed on the invoice.
C3. Patents and Copyrights
- ---------------------------
No license, immunity or other right is granted herein to AMD, whether directly
or by implication, estoppel or otherwise, with respect to any patent, trademark,
copyright, mask work, trade secret or other intellectual property right of IBM,
except as expressly stated in this Agreement.
C4. Patent Indemnification
- ---------------------------
IBM agrees to indemnify AMD against damages assessed against AMD as a result of
a final judgement of a court of competent jurisdiction holding that any
MATERIALS provided by IBM to AMD hereunder infringe a patent or copyright of a
third party in any country in which IBM sells or provides similar products, [*]
whichever is less; provided, that AMD: 1) promptly notifies IBM in writing of
--------------
the charge of infringement; 2) allows IBM to control, and cooperates with IBM in
the defense and any related settlement action; and 3) upon the written request
of IBM, (a) allows IBM to modify or replace the MATERIALS, or (b) returns the
MATERIALS to IBM for an
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<PAGE>
appropriate credit or refund as IBM decides. Such indemnification does not
apply to a claim of infringement involving any MATERIALS provided by IBM to
AMD which have been modified by AMD, used in combination with any materials
not sold by IBM to AMD, or made, modified or provided by IBM in compliance
with AMD's specifications. AMD agrees to indemnify IBM against all damages and
costs resulting from such a claim of infringement in the preceding sentence.
The foregoing states the entire obligation and exclusive remedy of IBM and AMD
regarding any claim of patent or copyright infringement relating to any
MATERIALS provided hereunder.
AMD/IBM CONFIDENTIAL June 11, 1996
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<PAGE>
APPENDIX D
----------
Sale and purchase of C4 Foundry Services
IBM agrees to provide certain foundry services to AMD during the period
specified in the volume table below. Such period shall hereafter be referred to
as the Foundry Service Period.
Dl. DEFINITIONS:
For the purpose of this Appendix D:
Foundry Services shall consist of:
(1.) Bumping, as defined in "Section 1 - Definitions" of the
Agreement except that the subparagraph 1) concerning [*] is
deleted from the definition for Foundry Services purposes.
Dice/Sort/Pick, which is defined as the separation of good
die from the wafer and subsequent Group B inspection.
BA is as defined in "Section 1 - Definitions" of the
Agreement.
Wafer Test, which is defined as testing to measure
performance of semiconductor AMD Wafers against electrical
test criteria defined by AMD, to determine "good" and "bad"
die, and the creation of an electronic data file containing
this information.
(2.) Product shall mean the product, in wafer or module form,
resulting from performance by IBM of one or more Foundry
Services upon an AMD Wafer.
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<PAGE>
(3.) AMD Wafer shall mean a production level semiconductor wafer
intended for commercial sale by AMD as a LICENSED PRODUCT,
and upon which AMD desires IBM to perform Foundry Service.
D2. VOLUMES:
The following volume table represents AMD's planned volume of purchases of
Foundry Services from IBM and IBM's capability to provide Foundry Services to
AMD. In order for IBM to be able to support these volumes, AMD is required to
provide the Dice/Sort/Pick equipment and the AMD TEST SYSTEM as specified in the
body of Attachment D.
Volume Table #1
<TABLE>
<S> <C>
[*] [*]
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Bumping Wafers [*]
(K wafers)
Dice/Sort/Pick [*]
(K wafers)
BA (K modules) [*]
Test [*]
(K wafers)
</TABLE>
In the event that AMD owned tooling installed at IBM pursuant to this Appendix D
is determined by IBM to be under utilized, then AMD may request, in accordance
with the purchase order procedure in Section D6 of this Appendix D, that such
tooling be loaded with additional Foundry Service volume provided IBM has the
available support for the additional volume. All such AMD owned tooling shall
be loaded with Product as a first priority.
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<PAGE>
Additional Bumping and BA Foundry Service capacity may be installed by IBM, at
AMD expense, using AMD owned tooling, under mutually agreed terms and conditions
that support the additional Foundry Service volumes stated in Volume Table #2
below:
Volume Table #2
<TABLE>
<S> <C>
[*] [*]
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Bumping Wafers [*]
(K wafers)
BA (K modules) [*]
</TABLE>
[*]
D3. PRICES:
The prices for Foundry Services set forth below are effective for Foundry
Services provided during the Foundry Period unless otherwise stated in this
section.
Bumping [*] per AMD Wafer during the Foundry Service Period
Dice/Sort/Pick [*] per AMD Wafer during the Foundry Service
Period
BA Subject to AMD design and confirmed by RFQ. For
reference, the 2/13/96 design point price is [*]
Wafer Test Wafer Test will be provided by IBM using the AMD TEST
SYSTEM (defined in D6.21 below) at a price of [*] per
AMD Wafer,
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<PAGE>
which assumes a throughput of [*] AMD
Wafers per hour. AMD recognizes that throughput is
directly dependent on AMD test patterns and IBM will
adjust Wafer Test prices upwards in the event that
throughput is less than [*] AMD Wafers per hour. AMD
agrees to pay IBM a minimum of [*] per month, beginning
with installation of the AMD TEST SYSTEM for Wafer Test
services regardless of actual quantity of AMD Wafers
tested. Said minimum charge of [*] per month will
commence as specified in Section D6(21). AMD Wafers
actually tested will be credited against the [*] minimum
monthly charge at the Wafer Test price as defined in
this paragraph. Wafer Test prior to AMD TEST SYSTEM
availability will be considered as engineering hardware
requirements and priced as such via RFQ.
To support Dice/Sort/Pick, AMD will be required to purchase one (1) saw and one
(1) pick tool. IBM will specify the tools to be purchased. AMD will purchase
the tools and deliver them to IBM's Burlington, Vermont facility by year end
1996. IBM will install the tools in its Burlington, Vermont facility, at AMD's
expense.
D4. YIELD ASSUMPTION:
For purposes of this Appendix D, Base Yields are defined as those process yields
that are typically experienced by IBM for the specific Foundry Service
operations identified below, and which IBM expects to experience when performing
Foundry Services for AMD
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Wafers. If Actual Yields deviate from Base Yields, a price adjustment may be
made as defined in Section D5.
<TABLE>
<CAPTION>
Operation Actual Yield Definition Base Yields
<S> <C> <C>
Yield (TM) = Bumping yield. Actual IBM [*]
Burlington terminal metals
yield in Bumping process.
Yield (WT) = Wafer Test yield. 100% minus [*]
the actual IBM Burlington wafer
test yield loss related to
mechanical handling damage
during Wafer Test.
Yield (DSP)= Dice/Sort/Pick yield. Actual IBM [*]
Burlington Dice/Sort/Pick yield at
wafer level.
Yield (GPB)= Group B inspection yield. Actual IBM [*]
Burlington Group B inspection
yield at die level.
Yield (BA) = BA yield. Actual IBM Bromont [*]
identified BA yield at module
level. IBM will define Base Yield (BA)
after AMD chooses BA design point.
IBM's current projection is [*]
Yield (MT) = Module Test BA Yield. The yield loss, [*]
of type 1 below, identified at AMD
and being caused by BA, in excess of
x%. The value for x will be defined
by IBM after AMD chooses a BA design
point. This yield loss will be
limited to opens or shorts in
the C4 interconnections.
GCPW = Good chips per wafer. The average [*]
number of good die per AMD Wafer
identified at Wafer Test, as determined
by AMD.
</TABLE>
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<PAGE>
Where practical IBM will classify defect types that cause Actual Yield loss in
three types: 1) caused by the Foundry Service process at IBM, 2) caused by or
attributable to the AMD Wafer manufacturing process, and 3) cause could be
either 1) or 2) above.
D5. BILLING CALCULATION:
IBM will invoice AMD for Foundry Services when Product is shipped FOB from IBM's
designated dock to AMD. The billing calculation of shipped Product will be
calculated using Base Yields, as follows:
For each Foundry Service performed on a unit of Product, the applicable price
[*]. The [*] shall be the price charged to AMD for each unit of Product.
For example, AMD will be billed the following Foundry Service prices at
shipment:
(a) Assuming that IBM performed only Bumping Foundry Services, the price charged
for each unit of Product would be as follows:
[*] or
[*]
(b) Assuming that IBM performed Bumping and Wafer Test Foundry Services using
the AMD TEST SYSTEM, the price charged for each unit of Product would be as
follows:
[*] or
[*]
(c) For Product shipped to AMD in module form for which IBM performed Bumping,
Dice/Sort/Pick, Wafer Test and BA, the price for each unit of Product would be
as follows:
[*]
AMD/IBM CONFIDENTIAL June 11, 1996
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<PAGE>
Should AMD cancel or postpone Foundry Service activity on wafers, or die in
process at IBM, IBM will return the incompletely processed wafers or die to AMD
and bill AMD for the Foundry Service performed prior to the cancellation or
postponement during the next billing cycle.
Notwithstanding the foregoing, IBM reserves the right to submit a monthly
adjustment, billing or credit for future Foundry Services, to reflect
differences in excess of [*] between Base Yields and Actual Yields, including
GCPW, achieved on Products. Additional charges to AMD hereunder will only occur
when Actual Yield detractors are attributed to Type 2 and Type 3 causes, as
described in Section D4.
AMD may request credit for BA Foundry Service on future Foundry Services
provided by IBM when the Yield (MT), averaged over a calendar quarter exceeds
the loss allowed in Yield (MT) by [*].
D6. TERMS AMD CONDITIONS:
(1.) AMD will provide IBM with a monthly forecast, hereinafter referred to as
the Updated Forecast, on a monthly basis, for the Foundry Services Period. If
AMD's forecasted volumes exceed IBM's capability's stated in the Volumes Table
#1, Section D2, IBM will offer AMD additional Foundry Services, to the extent
available.
(2) Should IBM, at its sole discretion, choose to increase its Foundry Services
capability in response to AMD's Updated Forecast in excess of Table #1 and Table
#2 volumes, IBM will identify to AMD, capital investments and additional
expenses required to fulfill the Updated Forecast. Should AMD choose to accept
IBM's offer of additional Foundry Services, AMD will pay for all capital
investments and additional expenses as identified by IBM.
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(3.) AMD agrees that the forecasts in Volume Table #1 and Volume Table #2,
Section D2, represent AMD's intent to purchase from IBM and agrees to purchase
the volumes set forth in such forecasts [*] except for AMD line start-up
volumes, which is limited to [*] wafers per month.
(4.) AMD shall purchase Foundry Services hereunder pursuant to quarterly
purchase orders. Purchase orders and other correspondences sent to IBM by AMD
regarding these Foundry Services shall be directed to OEM MARKETING, at the
following address, unless AMD is notified in writing of another address by OEM
MARKETING:
IBM Microelectronics Division
Route 52, Zip 92E
Hopewell Junction, New York 12533
Attention: Mr. John Dux
Acknowledgments and other correspondences sent to AMD by IBM shall be directed
to:
ADVANCED MICRO DEVICES
915 DeGuigne
Sunnyvale, California 94088
Attention: Mr. Ray Lain
(5.) Purchase orders issued to IBM shall include the following:
0 AMD Name
0 purchase order or purchase order alteration number
0 Product part number and engineering change (EC) level, where
appropriate
0 specific Foundry Service ordered, and quantity of said Foundry
Service
0 Foundry Service unit price
0 Product destination (address and contact name/phone number)
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0 invoicing address
0 requested shipment date, and
0 reference to this Agreement.
(6.) AMD will submit purchase orders for Foundry Service to IBM [*] prior to the
beginning of the quarter in which Foundry Services are to be provided.
(7.) The terms of this Agreement shall govern in case of a conflict with, and
shall supersede any additional or differing terms and conditions of a purchase
order.
(8.) For the initial order for each Product part number, AMD will buy [*] from
IBM or supply such [*] to IBM as required by IBM. IBM will supply all additional
[*], all [*] cleaning and materials required to complete Foundry Services for
that specific Product part number during the Foundry Services Period.
Engineering changes (EC's) that require alteration of the [*] will be
considered a new Product part number.
(9.) AMD will ship AMD Wafers to IBM with open C4 passivation in AMD shipping
containers. Following the completion of wafer level Foundry Services, IBM will
repackage the AMD Wafers in their original shipping containers for return
shipment to AMD. All such shipping containers shipped to AMD will have
documentation referencing AMD's purchase order number on the outside of the
shipping container. The cost of shipping AMD Wafers to or from IBM will be paid
by AMD.
(10.) IBM will provide AMD with specifications for module assembly shipping
trays that are compatible with current IBM tooling. AMD will purchase and
supply to IBM sufficient quantities of such shipping trays to meet AMD's
requirements for Foundry Services. IBM will ship finished Product modules to
AMD in such trays. AMD may recycle such trays to IBM, at AMD's expense, for use
in future shipments.
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(11.) IBM will invoice AMD on or after the date of Product shipment to AMD.
Such invoices will include reference to AMD's purchase order. Payment by AMD
will be due within 30 days from date of invoice. IBM shall apply a late payment
charge of 1.5% per month to any outstanding balance. Payment should be made as
directed on the invoice.
(12.) IBM will perform the requested Foundry Services at its Burlington, Vermont
and Bromont, Canada facilities, or any other location that IBM selects. IBM
shall notify AMD of the location to which to ship AMD Wafers at least seven (7)
days prior to said shipment.
(13.) IBM will deliver Product to AMD's carrier FOB IBM's designated dock in
Burlington, Vermont or other location that IBM selects. Title to, and risk of
loss for each unit of Product shall pass at delivery to AMD's carrier. In no
event shall IBM be deemed to assume any liability in connection with any
shipment nor shall the carrier be construed as an agent of IBM.
(14.) IBM shall not be obligated to perform Foundry Services that deviate from
the IBM C4 engineering process specifications and test facility specifications
in place at IBM during the time that the Foundry Services are performed. All
bumped AMD Wafers will be inspected according to IBM's outgoing quality
monitoring specification in effect at the time of shipment.
(15.) IBM shall own masks made by IBM hereunder. AMD shall own the design data,
masks made or purchased by AMD and AMD Wafers which it sends to IBM for Bumping.
(16.) While the AMD Wafers are in IBM's possession, AMD agrees to indemnify and
save IBM harmless from all liability, damages, and expense for injuries
(including death) to persons or damage or loss of property arising out of IBM's
possession or processing of the AMD Wafers except as caused by IBM's negligence.
AMD/IBM CONFIDENTIAL June 11, 1996
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<PAGE>
(17.) IBM warrants all Foundry Services provided hereunder to be free from
defects in materials and workmanship for a period of [*] from the date of
shipment of Product resulting from such defective Foundry Services.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
IBM's sole liability, and AMD's sole remedy for breach of warranty
shall be limited as stated in this Section 17. If AMD claims that any Foundry
Services fail to conform to the forgoing warranty, AMD shall:
Promptly notify IBM in writing of the basis for such claim, and follow
IBM instructions for the return of the Products claimed to be affected
by the breach of warranty. If IBM determines such Products are
defective beyond the defect rate assumed by the Base Yield (BA), IBM
will, at IBM's option, repair the Product damaged by the defective
Foundry Service, or issue credit to AMD for future Foundry Services
based on the price of the Product so damaged, to the extent the number
of such damaged Product exceeds the yield loss allowed by Base Yield
(BA).
(18.) IBM's maximum liability for any claim or cause of action relating to the
Foundry Services provided under this Agreement shall not exceed [*] to the
warranty set forth herein. In no event shall either party be entitled to
incidental, consequential or punitive damages, including lost profit based on
any breach or default of the other party arising out of the providing of Foundry
Services hereunder.
(19.) IBM makes no warranty or representation regarding the infringement of the
intellectual property rights of third parties.
(20.) No license, immunity or other right is granted herein to AMD, whether
directly or by implication, estoppel or otherwise, with respect to any patent,
trademark, copyright, mask work, trade
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secret or other intellectual property right of IBM, except as expressly stated
in this Agreement.
(21). Should AMD desire to order Wafer Test Foundry Services hereunder, AMD
will so inform IBM in writing ninety (90) days prior to the requested date for
the start of Wafer Test production. AMD will deliver the AMD TEST SYSTEM to IBM
no later than forty-five (45) days prior to the requested date for start of
Wafer Test production. AMD shall be liable for the minimum monthly charge
identified in Section D3 commencing upon the earlier of forty-five (45) days
after delivery to IBM of the AMD TEST SYSTEM or the start of Wafer Test
production on the AMD TEST SYSTEM. Also, AMD will consign to IBM one [*] tester
(referred to herein and throughout this Appendix D as AMD TESTER), one [*]
and all custom hardware and software required for IBM to perform Wafer Test on
AMD Wafers (Collectively referred to herein and throughout this Appendix D as
AMD TEST SYSTEM). IBM will install the AMD TEST SYSTEM and AMD will reimburse
IBM for the installation costs. Once installed, IBM will provide operational
maintenance and production support for the AMD TEST SYSTEM equivalent to that
provided for IBM's existing tester base. To the extent the AMD TEST SYSTEM
components are not common with IBM's current tool set, AMD and IBM will require
mutual agreement on how to proceed. AMD will reimburse IBM for third party
repair service as required to maintain the AMD TEST SYSTEM. The foregoing
constitutes IBM's entire obligation with respect to operational maintenance and
production support for the AMD TEST SYSTEM. IBM agrees to accept one additional
AMD TEST SYSTEM under the same provisions as IBM accepted the initial AMD TEST
SYSTEM.
(22) AMD grants permission to IBM to use the AMD TEST SYSTEM for Wafer Test of
non-AMD product provided that there are no AMD Wafers available for Wafer Test.
IBM agrees to provide operational support for the AMD TEST SYSTEM consistent
with the operation of the IBM test center. Should the AMD TEST SYSTEM be
unavailable due to system maintenance or repair, IBM agrees to use its own Wafer
Test equipment, if available, for short term backup capacity. This
AMD/IBM CONFIDENTIAL June 11, 1996
*CONFIDENTIAL TREATMENT IS REQUESTED FOR THE MARKED LANGUAGE
-78-
<PAGE>
Section 22 is IBM's entire obligation with respect to operational support
for the AMD TEST SYSTEM.
(23) AMD will provide IBM with limit flags' for some test bins. Depending upon
action criteria provided by AMD, for AMD Wafers and AMD Wafer lots which
exceed limit flags, IBM will remove AMD Wafers or AMD Wafer lots from the
production line and return them to AMD as: 1) scrap wafers to be returned
in high density pancake jars or 2) evaluation wafers to be returned in
their original shipping containers. IBM will use AMD provided shipping
materials and instructions for such returns. Such returned AMD Wafers
shall be billed to AMD in accordance with Section D.5.
(24) IBM will preserve AMD Wafer lot identity through all Foundry Services
steps, traceable to the original AMD Wafer lot.
(25) IBM will provide AMD with a weekly production snapshot report consisting of
the following information: WIP, cycle time, starts, ships and yield of
Product in each form of the Foundry Service. During the quarterly OSC
meetings IBM and AMD will review and discuss operational logistics issues ,
volume forecast, cycle time forecast and the purchase order for the next
quarter.
(26) As part of the technical assistance provided under Section 5 of the
Agreement and as limited thereunder, IBM agrees to provide technical
assistance to AMD to address AMD's yield and reliability problems which may
arise, and a) are related to the Foundry Service, or its MATERIALS, or b)
which arise through interaction of the Foundry Service process or
MATERIALS with AMD Wafers.
(27) IBM will return AMD Wafer carcasses which contain the die not picked as
part of the Foundry Services, to AMD on a weekly basis unless otherwise
agreed. Scrap modules resulting from performance of BA Foundry Services
will be returned in a similar manner. All such returns shall be at AMD's
expense.
AMD/IBM CONFIDENTIAL June 11, 1996
-79-
<PAGE>
(28) AMD may make one request to IBM for the extension of the Foundry Service
Period for Bumping Foundry Services only. Such request must be made in
writing no later than [*]. Notwithstanding the foregoing, IBM has no
obligation to extend the Foundry Service Period as it is currently stated
in this Appendix D.
(29) Following the conclusion of the Foundry Service Period, IBM will remove and
return to AMD, at AMD expense, the AMD TEST SYSTEM and all other AMD owned
tooling provided to IBM during the Foundry Service period pursuant to
Appendix D.
(30) AMD agrees that during the Foundry Services Period, only IBM approved CHIP
CARRIERS will be used for BA Foundry Services performed by IBM. AMD may
purchase IBM manufactured CHIP CARRIERS as provided for in Appendix C. AMD
will provide such CHIP CARRIERS to IBM Burlington in volumes and on a
schedule consistent with BA Foundry Service requirements.
AMD/IBM CONFIDENTIAL June 11, 1996
*CONFIDENTIAL TREATMENT IS REQUESTED FOR THE MARKED LANGUAGE
-80-
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