<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended December 29, 1995 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 0-15071
ADAPTEC, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2748530
(State of Incorporation) (I.R.S. Employer
Identification No.)
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 945-8600
N/A
(Former name, former address and former fiscal year, if
changed since last report)
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 outstanding of common stock as of January 19, 1996
was 52,562,638.
This document consists of 4 pages, excluding exhibits, of which this is page 1.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 3
Signatures 4
</TABLE>
2
<PAGE> 3
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10.1* Option Agreement I Between Adaptec Manufacturing
(S)Pte. Ltd. and Taiwan Semiconductor Manufacturing
Co., Ltd. dated October 23, 1995
10.2* Option Agreement II Between Adaptec Manufacturing
(S)Pte. Ltd. and Taiwan Semiconductor Manufacturing
Co., Ltd. dated October 23, 1995
27** Financial Data Schedule
</TABLE>
*The Company has requested confidential treatment for portions of
these agreements.
**Previously filed.
No Reports on Form 8-K were filed during the quarter.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADAPTEC, INC.
-----------------------------------------
Registrant
\s\PAUL G. HANSEN
-----------------------------------------
Paul G. Hansen, Vice-President, Finance
and Chief Financial Officer
(Principal Financial Officer),
Assistant Secretary
Date: November 5, 1996
\s\ANDREW J. BROWN
-----------------------------------------
Andrew J. Brown, Corporate Controller
(Principal Accounting Officer)
Date: November 5, 1996
4
<PAGE> 1
EXHIBIT 10.1
OPTION AGREEMENT I
Between
Adaptec Manufacturing (S) Pte. Ltd.
And
Taiwan Semiconductor Manufacturing Co., Ltd.
October 23, 1995
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. VOLUME CAPACITY 2
3. WAFER PRICE 3
4. OTHER PURCHASE TERMS AND CONDITIONS 3
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY 3
6. FAILURE TO PURCHASE THE OPTION CAPACITY; 4
FIRST RIGHT OF REFUSAL
7. TERM AND TERMINATION 4
8. BOARD APPROVAL 5
9. LIMITATION OF LIABILITY 5
10. NOTICE 5
11. ENTIRE AGREEMENT 6
12. GOVERNING LAW 6
13. ARBITRATION 6
14. ASSIGNMENT 7
15. CONFIDENTIALITY 7
16. FORCE MAJEURE 7
17. NO AGENCY 7
18. GOVERNMENTAL APPROVAL 7
19. COUNTERPARTS 8
<PAGE> 3
OPTION AGREEMENT I
THIS AGREEMENT is made and becomes effective as of October 23, 1995
(the "Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd.
("TSMC"), a company organized under the laws of the Republic of China with its
registered address at No. 121, Park Ave. 3, Science Based Industrial Park,
Hsinchu, Taiwan and Adaptec Manufacturing (S) Pte. Ltd., a company organized
under the laws of Singapore, with its registered address at 6 Battery Road,
532-00, Singapore 049909 ("Customer").
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers and Customer
wishes to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order to increase its output, TSMC must accelerate its ramp
up in Fab 3 and advance the start of Fab 4;
WHEREAS, as a condition to TSMC's acceleration of these facilities,
TSMC has asked that Customer make a capacity commitment and advance payment for
the right to buy additional capacity, and Customer is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
1. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the
annualized run rate that TSMC commits to provide the Customer
as set forth in Exhibit B.
(b) "Customer Committed Capacity" used in this Agreement shall mean
the total capacity that Customer agrees to purchase from TSMC
pursuant to this Agreement, either itself or by an Affiliate,
and as set forth in Exhibit B.
(c) "Foundry Agreement" used in this Agreement shall mean the
Foundry Agreement between TSMC and Adaptec, Inc., dated
October 29, 1993, together with any amendments thereto.
(d) "Option Capacity" used in this Agreement shall mean the firm
capacity commitment made by Customer pursuant to this
Agreement, for which
1
<PAGE> 4
capacity Customer agrees to pay the Option Fee as defined in
Section 1(e) below.
(e) "Option Fee" used in this Agreement shall mean the deposit that
Customer agrees to place with TSMC as the advance payment for
the wafers comprising the Option Capacity.
(f) "TSMC Committed Capacity" used in this Agreement shall mean the
total capacity that TSMC agrees to provide to Customer or its
Affiliates, consisting of Base Capacity and Option Capacity as
set forth in Exhibit B.
(g) "Wager Equivalent" used in this Agreement shall mean the number
of six-inch wafers, adjusted by the equivalency factor based
on 1996 Base Capacity as set forth on Exhibit A, by which
capacity commitments are measured hereunder. An example of
such calculation is set forth on Exhibit B-1. Any and all
capacity commitments referred to in this Agreement shall be
for the calender year and measured in Wafer Equivalents.
(h) "Affiliates" used in this Agreement shall mean a party which
holds at least a seventy-five percent (75%) ownership interest
in Customer or a party in which Customer's parent holds at
least a seventy-five percent (75%) ownership interest.
2. VOLUME COMMITMENT
(a) Customer agrees to purchase annually form TSMC, either itself
or through its Affiliates, the Customer Committed Capacity set
forth for such year on Exhibit B and, subject to the payment
of the Option Fee by Customer under Section 5 below, TSMC
agrees to provide to Customer the TSMC Committed Capacity,
as set forth in Exhibit B. In any calender year, the orders
placed by Customer or its Affiliates shall first apply to
fulfill the Base Capacity portion of the Customer Committed
Capacity, and then the Option Capacity portion.
(b) Each month, Customer agrees to provide to TSMC a six-month
rolling forecast of the number of wafers that Customer will
purchase, with the volume for the first twelve weeks being
frozen (i.e., Customer must purchase all of the quantity
forecast for the delivery in the first twelve weeks of the
forecast). The forecast must be based on wafers out.
(c) TSMC will use its best efforts to cause its fabs to be capable
of producing wafers of more advanced specifications, as set
forth in the TSMC Technology Road Map attached to Exhibit C.
(The parties anticipate that the conversion factor for migration
of 6" to 8" inch wafers will 1.78.)
2
<PAGE> 5
-----------------------------------------------------------
Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------------------------------------------
3. WAFER PRICE
(a) The prices for wafers purchased by Customer during the term of
this Agreement shall not be more than TSMC's average wafer
prices to the optionees (i.e., other customers that are parties
to option agreements similar to this Agreement) for the same
technology, the same fab and the same period of time, taking
into account Customer's total volume across all TSMC fabs. At
Customer's request, TSMC shall permit an independent third party
mutually agreed upon by the parties to audit such books and
records as may be required to verify TSMC's most favored
customer pricing obligations in the preceding sentence. Such
audits shall be at Customer's expense at any time during the
term of this Agreement upon at least one (1) month prior written
notice to TSMC. In the event that the wafer prices do not comply
with the first sentence, TSMC will make proper price changes for
all unfilled orders upon Customer's notice in writing.
(b) The parties shall negotiate in good faith each year the wafer
prices for the Option Capacity of the following year, and if no
agreement is reached by the parties before October of each year
for the succeeding calendar year, the parties agree to submit
the dispute to the binding arbitration pursuant to Section 13
below, and under such circumstances, neither party shall have
the right to terminate this Agreement under Section 7 below.
4. OTHER PURCHASE TERMS AND CONDITIONS
The Foundry Agreement, together with any amendments thereto, will apply
to all purchases of wafers by Customer from TSMC, except that the
provisions of this Agreement will supersede the Foundry Agreement with
respect to the subject matter hereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to pay to TSMC the Option Fee in the amount of
[****] per Wafer Equivalent for the right to purchase the Option
Capacity pursuant to this Agreement. The Option Fee is set forth
in Exhibit D, and Customer agrees to pay the Option Fee for the
entire term of this Agreement $19.6M in cash by November 15,
1995. The Option Fee, once paid, shall be non-refundable, except
as provided in Section 6(a) and Section 7(d), and will be
credited against payments due for wafers purchased by Customer
for the Option Capacity provided by TSMC under this Agreement.
3
<PAGE> 6
6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL
If, in any calendar year, for any reason, Customer is not able to use or
purchase all or a portion of the Customer Committed Capacity for that
year, Customer shall promptly notify TSMC of such in writing and first
offer TSMC such capacity for sales to any third parties. TSMC may, at
its option, accept such offer, in whole or in part, within thirty (30)
days following Customer's notification and, if TSMC so accepts, the
Option Fee attributable to that capacity will be refunded to Customer
without interest. In the event that TSMC decides not to accept such
offer, Customer may sell such unused capacity to third parties
reasonably acceptable to TSMC (given the processes and capacity then
available in its fabs), within two months after TSMC's written notice
that it will not accept such offer. If Customer fails to sell such
unused Customer Committed Capacity, TSMC shall not be required to refund
any portion of the unapplied Option Fee applicable to that unused
capacity. TSMC is entitled to sell or use any such capacity thereafter.
Forfeiture of the applicable Option Fee shall be TSMC's sole remedy for
Customer's failure to purchase the Customer Committed Capacity in any
calendar year.
7. TERM AND TERMINATION
(a) TERM
The term of this Agreement shall commence from the Effective
Date, and continue until December 31, 1999.
(b) TERMINATION BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION FEE
TSMC may terminate this Agreement if Customer fails to pay the
Option Fee pursuant to Section 5 above, and does not cure or
remedy such breach within thirty (30) days of receiving written
notice of such breach.
(c) TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY
Either party may terminate this Agreement if, (i) the other
party breaches any material provisions of this Agreement (other
than Customer's breach of Section 5 above), and does not cure or
remedy such breach within one hundred and twenty (120) days of
receiving written notice of such breach, or (ii) becomes the
subject of a voluntary or involuntary petition in bankruptcy or
any proceeding relating to insolvency, receivership or
liquidation, if such petition or proceeding is not dismissed
with prejudice within sixty (60) days after filing.
4
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(d) EFFECT OF TERMINATION
In the event of termination of this Agreement, each party shall
remain liable to the other party for any outstanding and matured
rights and obligations at the time of termination, including
payment of the Option Fee applicable to the used Option Capacity
and for the wafers already ordered and shipped to Customer. Any
wafers then in process pursuant to a Customer order may be
completed and shipped to Customer and the applicable Option Fee
amount applied against such wafers. In the event Customer
terminates this Agreement pursuant to the terms of Section 7(c),
any portion of the Option Fee then remaining, which has not been
applied against purchases of wafers, will be refunded to
Customer within thirty (30) days of termination of this
Agreement.
8. BOARD APPROVAL
Customer shall obtain the approval by its board of directors of this
Agreement, and submit to TSMC, at the time of executing this Agreement,
an authentic copy of its board resolution authorizing the representative
designated below to execute this Agreement.
9. LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, special,
incidental or consequential damages (including loss of profits or loss
of use) resulting from, arising out of or in connection with such
party's performance or failure to perform under this Agreement, or
resulting from, arising out of or in connection with the production,
supply and/or purchase and sale of the wafers, whether due to a breach
of contract, breach of warranty, tort, or negligence of such party, or
otherwise.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
prepaid, or by personal delivery, or by fax. Any notice given by fax
shall be followed by a confirmation copy within ten (10) days. Unless
changed by written notice given by either party to the other, the
addresses and fax numbers of the respective parties shall be as follows:
5
<PAGE> 8
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
No. 121, Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China FAX: 886-35-781545
To Customer:
ADAPTEC MANUFACTURING (S) PTE. LTD.
Block 1001
Jalan Bukit Merah #07/01-20
Singapore 0315
With a copy to:
ADAPTEC, INC.
Attention: Vice President, Procurement
691 South Milpitas Boulevard
Milpitas, California 95035 FAX: (408) 262-2533
11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-D, and together with the Foundry
Agreement, constitutes the entire Agreement between the parties with
respect to the subject matter hereof, and supersedes and replaces all
prior to contemporaneous understandings, agreements, dealings and
negotiations, oral or written, regarding the subject matter hereof. No
modification, alteration or amendment of this Agreement shall be
effective unless in writing and signed by both parties. No waiver of any
breach or failure by either party to enforce any provision of this
Agreement shall be deemed a waiver of any other or subsequent breach, or
a waiver of future enforcement of that or any other provision.
12. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the State of California.
13. ARBITRATION
Each party will use its best efforts to resolve amicably any disputes or
claims under this Agreement between the parties. In the event that a
resolution is not reached among the parties within thirty (30) days
after written notice by any party of the
6
<PAGE> 9
dispute or claim, the dispute or claim shall be finally settled by
binding arbitration in the San Francisco Bay Area, California under
the Rules of Commercial Arbitration of the American Arbitration
Association by three (3) arbitrators appointed in accordance with such
rules. The arbitration proceeding shall be conducted in English.
Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its permitted successors and assigns. Customer may assign its
purchase rights and obligations under this Agreement (a) to third
parties in accordance with Section 6 above, and (b) to its Affiliates.
Except as provided in Section 6, neither party shall assign any of its
rights hereunder, nor delegate its obligations hereunder, to any third
party, without the prior written consent of the other.
15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this Agreement
except as required by Customer's assignment of this Agreement to any
third parties pursuant to Sections 6 and 14 above, in confidence to its
advisors, as required by applicable law, or otherwise with the prior
written consent of the other party.
16. FORCE MAJEURE
Neither party shall be responsible for delays or failure in
performance resulting from acts beyond the reasonable control of such
party. Such acts shall include but not be limited to acts of God, war,
riot, labor stoppages, governmental actions, fires, floods, and
earthquakes. If such delays or failures on the party of either party
continue for a period of more than one hundred twenty (120) days, the
other party may terminate this Agreement upon written notice, subject
to Section 7(d).
17. NO AGENCY
No agency, partnership, joint venture, teaming agreement or other joint
relationship is created hereby and neither party, nor any of its agents
or representatives, has any authority of any kind to bind the other
party in any respect whatsoever.
18. GOVERNMENTAL APPROVAL
TSMC represents and warrants to Customer that no governmental approval
or registration by or with the ROC is required for this Agreement or
for the transactions contemplated hereby. In the event any such
approval or registration is required, TSMC agrees to indemnify and hold
Customer
7
<PAGE> 10
harmless from any and all loss or damage to Customer which may result
from the failure to procure such approval or effect such registration.
19. COUNTERPARTS
This Agreement may be executed in two counterparts, together which will
constitute a fully executed Agreement.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the
Effective Date by their duly authorized representatives.
TAIWAN SEMICONDUCTOR ADAPTEC MANUFACTURING
MANUFACTURING CO., LTD. (S) PTE. LTD.
By: /s/ DONALD BROOKS By: /s/ SAM KAZARIAN
------------------ ------------------
Donald Brooks Sam Kazarian
President Director and Attorney-In-Fact
8
<PAGE> 11
Exhibit A
CAPACITY FACTOR TABLE
Masking W-Plug Complexity Capacity
Generic Technology Layers(A) Layers(B) Index(C) Factor(D)
(w/o ESD or
Polyimide)
1.5um SPDM (BiCMOS) 16 16 1.23
1.2um SPDM (Logic) 13 13 1.00
1.0um SPDM (Logic) 13 13 1.00
1.0um DPDM (BiCMOS) 18 18 1.38
0.8um SPDM (Logic) 13 13 1.00
0.8um DPDM (MixMode) 14 14 1.08
0.8um SPTM (Logic Salicide) 17 17 1.31
0.8um DPDM (BiCMOS) 22 22 1.69
0.6um SPDM (Logic) 14 1 14.5 1.12
0.6um SPTM (Logic) 16 1 16.5 1.27
0.6um DPDM (MixMode) 15 1 15.5 1.19
0.6um DPDM (SRAM) 20 20 1.54
0.6um TPSM (DRAM) 15 1 15.5 1.19
0.6um QPDM (DRAM) 18 1 18.5 1.42
0.5um SPDM (Logic) 14 2 15 1.15
0.5um SPTM (Logic SACVD) 16 3 17.5 1.35
0.5um SPTM (Logic-CMP) 21 3 22.5 1.73
0.5um DPDM (SRAM) 20 1 20.5 1.58
0.5um QPDM (DRAM) 21 1 21.5 1.65
0.35um SPTM (Logic-CMP) 21 3 22.5 1.73
Remarks: (1) Masking Layer of w/i ESD (or Polyimide) = Masking Layer of w/o
ESD (or Polyimide) + 1
(2) Masking Layer of Mixed-Mode(DP) = Masking Layer of Logic(SP) + 1
(3) Complexity Index (C) = (A) + (B) / 2
(4) Capacity Factor (D) = (C) / 13, normalized to 0.8um SPDM as 1
Date of issue: 6/9/95
<PAGE> 12
EXHIBIT B
CUSTOMER/TSMC COMMITTED CAPACITY
Unit: K 6" Wafer Equivalent
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Take or Pay * *
Capacity
Base Capacity * * * * *
(For Options)
X% of Base 90% 80% 70% 60% 50%
Capacity
Option I * * * *
Capacity
Option II * * * *
Capacity
TSMC Committed * * * * *
Capacity (Base
Capacity + Option
Capacity)
Customer Committed * * * * *
Capacity (X% Base
Capacity + Option
Capacity)
</TABLE>
Deposits Required:
Option I - At contract signing $19.6M
Option II - June 30, 1996 $46.2M
-----------------------------------------------------------
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------------------------------------------
[*****]
<PAGE> 13
Exhibit B1
WAFER EQUIVALENT CALCULATION
TO CALCULATE THE WEIGHTED CAPACITY FACTOR
<TABLE>
<CAPTION>
WEIGHTED
CAPACITY WAFER PERCENTAGE CAPACITY
PROCESS FACTOR CAPACITY OF VOLUME FACTOR
<S> <C> <C> <C> <C>
.8um SPDM * * * *
.6um SPTM * * * *
TOTAL VOLUME * * * *
1996 WEIGHTED CAPACITY FACTOR *
.6um SPTM * * * *
TOTAL VOLUME * * *
1997 WEIGHTED CAPACITY FACTOR *
TO CALCULATE THE EQUIVALENT CAPACITY
1997 COMMITTED CAPACITY *
1997 EQUIVALENT CAPACITY *** *
</TABLE>
1997 EQUIVALENT CAPACITY = (1996 WEIGHTED CAPACITY FACTOR/1997 WEIGHTED
CAPACITY FACTOR) * 1997 COMMITTED CAPACITY
-----------------------------------------------------------
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------------------------------------------
[*****]
<PAGE> 14
Exhibit C
TSMC TECHNOLOGY ROAD MAP
TSMC CMOS Technology Roadmap
MIXED 0.6um 0.5um 0.35um
MODE 2P3M 2P3M 2P4M
3V
3V
LOGIC 0.6um 0.5um 0.35um
1P3M 1P3M 1P4M
3V
1P3M
3V
SRAM 0.6um 0.5um 0.45um 0.35um
3V
3V 3V
Q1 Q2 Q3 Q4
* * * * *
-------------------------------------------------------------
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-------------------------------------------------------------
[*****]
<PAGE> 15
EXHIBIT D
OPTION FEE (OPTION I)
Year Option Capacity Option Fee Due Date
Established (Unit: Wafer (Unit: US$)
Equivalent)
1995 * $19.6M November 15, 1995
-----------------------------------------------------------
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------------------------------------------
[* * *]
<PAGE> 1
EXHIBIT 10.2
OPTION AGREEMENT II
Between
Adaptec Manufacturing (S) Pte. Ltd.
And
Taiwan Semiconductor Manufacturing Co., Ltd.
October 23, 1995
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS 1
2. VOLUME CAPACITY 2
3. WAFER PRICE 3
4. OTHER PURCHASE TERMS AND CONDITIONS 3
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY 3
6. FAILURE TO PURCHASE THE OPTION CAPACITY; 4
FIRST RIGHT OF REFUSAL
7. TERM AND TERMINATION 4
8. BOARD APPROVAL 5
9. LIMITATION OF LIABILITY 5
10. NOTICE 5
11. ENTIRE AGREEMENT 6
12. GOVERNING LAW 6
13. ARBITRATION 7
14. ASSIGNMENT 7
15. CONFIDENTIALITY 7
16. FORCE MAJEURE 7
17. NO AGENCY 7
18. GOVERNMENTAL APPROVAL 8
19. COUNTERPARTS 8
<PAGE> 3
OPTION AGREEMENT II
THIS AGREEMENT is made and becomes effective as of October 23, 1995
(the "Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC"),
a company organized under the laws of the Republic of China with its registered
address at No. 121, Park Ave. 3, Science Based Industrial Park, Hsinchu,
Taiwan and Adaptec Manufacturing (S) Pte. Ltd., a company organized under the
laws of Singapore, with its registered address at 6 Battery Road, 532-00,
Singapore 049909 ("Customer").
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers and Customer
wishes to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order in increase its output, TSMC must accelerate its ramp
up in Fab 3 and advance the start of Fab 4;
WHEREAS, as condition to TSMC's acceleration of these facilities, TSMC
has asked that Customers make a capacity commitment and advance payment for the
right to buy additional capacity, and Customer is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual convents and
conditions contained herein the parties agree as follows:
1. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the annualized
run rate that TSMC commits to provide to Customer as set forth
in Exhibit B.
(b) "Customer Committed Capacity" used in this Agreement shall mean
the total capacity that Customer agrees to purchase from TSMC
pursuant to this Agreement, either itself or by an Affiliate,
and as set forth in Exhibit B.
(c) "Foundry Agreement" used in this Agreement shall mean the
Foundry Agreement between TSMC and Adaptec, Inc., dated
October 29, 1993, together with any amendments thereto.
(d) "Option Capacity" used in this Agreement shall mean the firm
capacity commitment made by Customer pursuant to this
Agreement, for which
1
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capacity Customer agrees to pay the Option Fee as defined in Section
1(e) below.
(e) "Option Fee" used in this Agreement shall mean the deposit that
Customer agrees to place with TSMC as the advance payment for the
wafers comprising the Option Capacity.
(f) "TSMC Committed Capacity" used in this Agreement shall mean the total
capacity that TSMC agrees to provide to Customer or its Affiliates,
consisting of Base Capacity and Option Capacity as set forth in Exhibit
B.
(g) "Wafer Equivalent" used in this Agreement shall mean the number of
six-inch wafers, adjusted by the equivalency factor based on 1996 Base
Capacity as set forth on Exhibit A, by which capacity commitments are
measured hereunder. An example of such calculation is set forth on
Exhibit B-1. Any and all capacity commitments referred to in this
Agreement shall be for the calendar year and measured in Wafer
Equivalents.
(h) "Affiliates" used in this Agreement shall mean a party which holds at
least a seventy-five percent (75%) ownership interest in Customer or a
party in which Customer's parent holds at least a seventh-five percent
(75%) ownership interest.
2. VOLUME COMMITMENT
(a) Customer agrees to purchase annually from TSMC, either itself or
through its Affiliates, the Customer Committed Capacity set forth for
such year on Exhibit B and, subject to the payment of the Option Fee by
Customer under Section 5 below, TSMC agrees to provide to Customer the
TSMC Committed Capacity, as set forth in Exhibit B. In any calendar
year, the orders placed by Customer or its Affiliates shall first apply
to fulfill the Base Capacity portion of the Customer Committed
Capacity, and then the Option Capacity portion.
(b) Each month, Customer agrees to provide to TSMC a six-month rolling
forecast of the number of wafers that Customer will purchase, with the
volume for the first twelve weeks being frozen (i.e., Customer must
purchase all of the quantity forecast for the delivery in the first
twelve weeks of the forecast). The forecast must be based on wafers
out.
(c) TSMC will use its best efforts to cause its fabs to be capable of
producing wafers of more advanced specifications, as set forth in the
TSMC Technology Road Map attached as Exhibit C. (The parties anticipate
that the conversion factor for migration of 6" to 8" inch wafers will
1.78.)
2
<PAGE> 5
-----------------------------------------------------------
Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-----------------------------------------------------------
3. WAFER PRICE
(a) The prices for wafers purchased by Customer during the term of this
Agreement shall not be more than TSMC's average wafer prices to the
optionees (i.e., other customers that are parties to option agreements
similar to this Agreement) for the same technology, the same fab and
the same period of time, taking into account Customer's total volume
across all TSMC fabs. At Customer's request, TSMC shall permit an
independent third party mutually agreed upon by the parties to audit
such books and records as may be required to verify TSMC's most favored
customer pricing obligations in the preceding sentence. Such audits
shall be at Customer's expense at any time during the term of this
Agreement upon at least one (1) month prior written notice to TSMC. In
the event that the wafer prices do not comply with the first sentence,
TSMC will make proper price changes for all unfilled orders upon
Customer's notice in writing.
(b) The parties shall negotiate in good faith each year the wafer prices
for the Option Capacity of the following year, and if no agreement is
reached by the parties before October of each year for the succeeding
calendar year, the parties agree to submit the dispute to the binding
arbitration pursuant to Section 13 below, and under such circumstances,
neither party shall have the right to terminate this Agreement under
Section 7 below.
4. OTHER PURCHASE TERMS AND CONDITIONS
The Foundry Agreement, together with any amendments thereto, will apply to
all purchases of wafers by Customer from TSMC, except that the provisions of
this Agreement will supersede the Foundry Agreement with respect to the
subject matter hereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to pay to TSMC the Option Fee in the amount of [* *]
per Wafer Equivalent for the right to purchase the Option Capacity
pursuant to this Agreement. The Option Fee is set forth in Exhibit D,
and Customer agrees to pay the Option Fee for the entire term of this
Agreement $46.2M in cash by June 30, 1996. The Option Fee, once
paid, shall be non-refundable, except as provided in Section 6(a) and
Section 7(d), and will be credited against payments due for wafers
purchased by Customer for the Option Capacity provided by TSMC under
this Agreement.
(b) Customer agrees to deliver to TSMC, within seven (7) days following
the Effective Date, a promissory note in an amount of the Option Fee
and evidencing the payment required pursuant to Section 5(a), payable
to TSMC or
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<PAGE> 6
order, which promissory note shall be in the form of Exhibit E. The
promissory note shall be cancelled and returned by TSMC to customer
within seven (7) days after receipt of the corresponding Option Fee by
TSMC.
6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL
If, in any calendar year, for any reason, Customer is not able to use or
purchase all or a portion of the Customer Committed Capacity for that year,
Customer shall promptly notify TSMC of such in writing and first offer TSMC
such capacity for sales to any third parties. TSMC may, at its option,
accept such offer, in whole or in part, within thirty (30) days following
Customer's notification and, if TSMC so accepts, the Option Fee attributable
to that capacity will be refunded to Customer without interest. In the event
that TSMC decides not to accept such offer, Customer may sell such unused
capacity to third parties reasonably acceptable to TSMC (given the processes
and capacity then available in its fabs), within two months after TSMC's
written notice that it will not accept such offer. If Customer fails to sell
such unused Customer Committed Capacity, TSMC shall not be required to
refund any portion of the unapplied Option Fee applicable to that unused
capacity. TSMC is entitled to sell or use any such capacity thereafter.
Forfeiture of the applicable Option Fee shall be TSMC's sole remedy for
Customer's failure to purchase the Customer Committed Capacity in any
calendar year.
7. TERM AND TERMINATION
(a) TERM
The term of this Agreement shall commence from the Effective Date, and
continue until December 31, 2000.
(b) TERMINATION BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION FEE
TSMC may terminate this Agreement if Customer fails to pay the Option
Fee pursuant to Section 5 above, and does not cure or remedy such
breach within thirty (30) days of receiving written notice of such
breach.
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<PAGE> 7
(c) TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY
Either party may terminate this Agreement if, (i) the other
party breaches any material provisions of this Agreement (other
than Customer's breach of Section 5 above), and does not cure or
remedy such breach within one hundred and twenty (120) days of
receiving written notice of such breach, or (ii) becomes the
subject of a voluntary or involuntary petition in bankruptcy or
any proceeding relating to insolvency, receivership or
liquidation, if such petition or proceeding is not dismissed
with prejudice within sixty (60) days after filing.
(d) EFFECT OF TERMINATION
In the event of termination of this Agreement, each party shall
remain liable to the other party for any outstanding and matured
rights and obligations at the time of termination, including
payment of the Option Fee applicable to the used Option Capacity
and for the wafers already ordered and shipped to Customer. Any
wafers then in process pursuant to a Customer order may be
completed and shipped to Customer and the applicable Option Fee
amount applied against such wafers. In the event Customer
terminates this Agreement pursuant to the terms of Section 7(c),
any portion of the Option Fee then remaining, which has not been
applied against purchases of wafers, will be refunded to
Customer within thirty (30) days of termination of this
Agreement.
8. BOARD APPROVAL
Customer shall obtain the approval by its board of directors of this
Agreement, and submit to TSMC, at the time of executing this
Agreement, an authentic copy of its board resolution authorizing the
representative designated below to execute this Agreement.
9. LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, special,
incidental or consequential damages (including loss of profits or loss
of use) resulting from, arising out of or in connection with such
party's performance or failure to perform under this Agreement, or
resulting from, arising out of or in connection with the production,
supply and/or purchase and sale of the wafers, whether due to a breach
of contract, breach of warranty, tort, or negligence of such party, or
otherwise.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
postage prepaid, or by personal
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<PAGE> 8
delivery, or by fax. Any notice given by fax shall be followed by a
confirmation copy within ten (10) days. Unless changed by written
notice given by either party to the other, the addresses and fax
numbers of the respective parties shall be as follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
No. 121, Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China FAX: 886-35-781545
To Customer:
ADAPTEC MANUFACTURING (S) PTE. LTD.
Block 1001
Julan Bukit Merah #07/01-20
Singapore 0315
With a copy to:
ADAPTEC, INC.
Attention: Vice President, Procurement
691 South Milpitas Boulevard
Milpitas, California 95035 FAX: (408) 262-2533
11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, and together with the Foundry
Agreement, constitutes the entire Agreement between the parties with
respect to the subject matter hereof, and supersedes and replaces all
prior to contemporaneous understandings, agreements, dealings and
negotiations, oral or written, regarding the subject matter hereof. No
modification, alteration or amendment of this Agreement shall be
effective unless in writing and signed by both parties. No waiver of any
breach or failure by either party to enforce any provision of this
Agreement shall be deemed a waiver of any other or subsequent breach, or
a waiver of future enforcement of that or any other provision.
12. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the State of California.
13. ARBITRATION
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<PAGE> 9
Each party will use its best efforts to resolve amicably any disputes
or claims under this Agreement between the parties. In the event that a
resolution is not reached among the parties within thirty (30) days
after written notice by any party of the dispute or claim, the dispute
or claim shall be finally settled by binding arbitration in the San
Francisco Bay Area, California under the Rules of Commercial Arbitration
of the American Arbitration Association by three (3) arbitrators
appointed in accordance with such rules. The arbitration proceeding
shall be conducted in English. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its permitted successors and assigns. Customer may assign its
purchase rights and obligations under this Agreement (a) to third
parties in accordance with Section 6 above, and (b) to its Affiliates.
Except as provided in Section 6, neither party shall assign any of its
rights hereunder, nor delegate its obligations hereunder, to any third
party, without prior written consent of the other.
15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this
Agreement except as required by Customer's assignment of this Agreement
to any third parties pursuant to Sections 6 and 14 above, in confidence
to its advisors, as required by applicable law, or otherwise with the
prior written consent of the other party.
16. FORCE MAJEURE
Neither party shall be responsible for delays or failure in performance
resulting from acts beyond the reasonable control of such party. Such
acts shall include but not be limited to acts of God, war, riot, labor
stoppages, governmental actions, fires, floods, and earthquakes. If such
delays or failures on the party of either party continue for a period of
more than one hundred twenty (120) days, the other party may terminate
this Agreement upon written notice, subject to Section 7(d).
17. NO AGENCY
No agency, partnership, joint venture, teaming agreement or other joint
relationship is created hereby and neither party, nor any of its agents
or representatives, has any authority of any kind to bind the other
party in any respect whatsoever.
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<PAGE> 10
18. GOVERNMENTAL APPROVAL
TSMC represents and warrants to Customer that no governmental approval
or registration by or with the ROC is required for this Agreement or for
the transactions contemplated hereby. In the event any such approval or
registration is required, TSMC agrees to indemnify and hold Customer
harmless from any and all loss or damage to Customer which may result
from the failure to procure such approval or effect such registration.
19. COUNTERPARTS
This Agreement may be executed in two counterparts, together which will
constitute a fully executed Agreement.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the
Effective Date by their duly authorized representatives.
TAIWAN SEMICONDUCTOR ADAPTEC MANUFACTURING
MANUFACTURING CO., LTD. (S) PTE. LTD.
By: /s/ Donald Brooks By: /s/ Sam Kazarian
------------------ ------------------
Donald Brooks Sam Kazarian
President Director and Attorney-In-Fact
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<PAGE> 11
Exhibit A
CAPACITY FACTOR TABLE
Masking W-Plug Complexity Capacity
Generic Technology Layers(A) Layers(B) Index(C) Factor(D)
(w/o ESD or
Polyimide)
1.5um SPDM (BiCMOS) 16 16 1.23
1.2um SPDM (Logic) 13 13 1.00
1.0um SPDM (Logic) 13 13 1.00
1.0um DPDM (BiCMOS) 18 18 1.38
0.8um SPDM (Logic) 13 13 1.00
0.8um DPDM (MixMode) 14 14 1.08
0.8um SPTM (Logic Salicide) 17 17 1.31
0.8um DPDM (BiCMOS) 22 22 1.69
0.6um SPDM (Logic) 14 1 14.5 1.12
0.6um SPTM (Logic) 16 1 16.5 1.27
0.6um DPDM (MixMode) 15 1 15.5 1.19
0.6um DPDM (SRAM) 20 20 1.54
0.6um TPSM (DRAM) 15 1 15.5 1.19
0.6um QPDM (DRAM) 18 1 18.5 1.42
0.5um SPDM (Logic) 14 2 15 1.15
0.5um SPTM (Logic SACVD) 16 3 17.5 1.35
0.5um SPTM (Logic-CMP) 21 3 22.5 1.73
0.5um DPDM (SRAM) 20 1 20.5 1.58
0.5um QPDM (DRAM) 21 1 21.5 1.65
0.35um SPTM (Logic-CMP) 21 3 22.5 1.73
Remarks: (1) Masking Layer of w/i ESD (or Polyimide) = Masking Layer of w/o
ESD (or Polyimide) + 1
(2) Masking Layer of Mixed-Mode(DP) = Masking Layer of Logic(SP) + 1
(3) Complexity Index (C) = (A) + (B) / 2
(4) Capacity Factor (D) = (C) / 13, normalized to 0.8um SPDM as 1
Date of issue: 6/9/95
<PAGE> 12
EXHIBIT B
CUSTOMER/TSMC COMMITTED CAPACITY
Unit: K 6" Wafer Equivalent
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Take or Pay * *
Capacity
Base Capacity * * * * *
(For Options)
X% of Base 90% 80% 70% 60% 50%
Capacity
Option I * * * *
Capacity
Option II * * * *
Capacity
TSMC Committed * * * * *
Capacity (Base
Capacity + Option
Capacity)
Customer Committed * * * * *
Capacity (X% Base
Capacity + Option
Capacity)
</TABLE>
Deposits Required:
Option I - At contract signing $19.6M
Option II - June 30, 1996 $46.2M
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* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[****]
<PAGE> 13
Exhibit B1
WAFER EQUIVALENT CALCULATION
TO CALCULATE THE WEIGHTED CAPACITY FACTOR
<TABLE>
<CAPTION>
WEIGHTED
CAPACITY WAFER PERCENTAGE CAPACITY
PROCESS FACTOR CAPACITY OF VOLUME FACTOR
<S> <C> <C> <C> <C>
.8um SPDM * * * *
.6um SPTM * * * *
TOTAL VOLUME * * * *
1996 WEIGHTED CAPACITY FACTOR *
.6um SPTM * * * *
TOTAL VOLUME * * *
1997 WEIGHTED CAPACITY FACTOR *
TO CALCULATE THE EQUIVALENT CAPACITY
1997 COMMITTED CAPACITY *
1997 EQUIVALENT CAPACITY *** *
</TABLE>
1997 EQUIVALENT CAPACITY = (1996 WEIGHTED CAPACITY FACTOR/1997 WEIGHTED
CAPACITY FACTOR) * 1997 COMMITTED CAPACITY
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* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*****]
<PAGE> 14
Exhibit C
TSMC TECHNOLOGY ROAD MAP
TSMC CMOS Technology Roadmap
MIXED 0.6um 0.5um 0.35um
MODE 2P3M 2P3M 2P4M
3V
3V
LOGIC 0.6um 0.5um 0.35um
1P3M 1P3M 1P4M
3V
1P3M
3V
SRAM 0.6um 0.5um 0.45um 0.35um
3V
3V 3V
Q1 Q2 Q3 Q4
* * * * *
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* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*****]
<PAGE> 15
EXHIBIT D
OPTION FEE (OPTION II)
Year Option Capacity Option Fee Due Date
Established (Unit: Wafer (Unit: US$)
Equivalent)
1995 * $46.2M June 30, 1996
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*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[****]
<PAGE> 16
EXHIBIT E
STANDARD FORM OF PROMISSORY NOTE
Amount: $46,200,000.00 Due Date: June 30, 1996
The undersigned, Adaptec manufacturing (S) Ptd. Ltd. (the "Maker"),
unconditionally promise to pay to Taiwan Semiconductor Manufacturing Co., Ltd.,
or its order the sum of forty-six million, two hundred thousand dollars
($46,200,000), plus interest calculated from the due date stated herein to the
date of full payment at the rate 10% per annum on any unpaid portion of the
principal amount stated herein, and said payment will be made to such account
as Maker may direct.
This Note shall be governed in all respects by the laws of the State of
California.
The Maker of this Note agrees to waive protests and notice of whatever
kind in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
Issue Dated: October __, 1995
Issue Place: Singapore
By: ______________________
Title: ______________________________
Adaptec Manufacturing (S) Pte. Ltd.
6 Bartery Road. 530-00
Singapore 049909
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* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*****]
