<PAGE> 1
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 June 30, 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 0-16617
ALTERA CORPORATION
(Exact name of registrant as specified in its charter)
California 77-0016691
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2610 Orchard Parkway, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 894-7000
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 at least the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding at June 30, 1996: 43,721,685
<PAGE> 2
ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1996
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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ALTERA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, Dec.31,
1996 1995
----------- -----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash, cash equivalents $ 104,067 $ 79,409
Short-term investments 187,284 285,810
----------- -----------
Total cash, cash equivalents, and
short-term investments 291,351 365,219
Accounts receivable, less allowance
for doubtful accounts of $1,662 and $1,005 40,048 54,518
Inventories 101,124 55,421
Deferred income taxes 43,840 37,339
Other current assets 3,250 5,510
----------- -----------
Total current assets 479,613 518,007
Property and equipment, net 64,067 54,846
Investments and other assets 218,630 142,701
----------- -----------
$ 762,310 $ 715,554
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,455 $ 17,049
Accrued liabilities 85,036 72,209
Notes payable and short-term obligations 42,120 61,920
Accrued compensation 11,071 16,347
Income taxes payable 924 4,240
----------- -----------
Total current liabilities 160,606 171,765
Notes payable and long-term obligations 56,160 58,600
Convertible notes 230,000 230,000
----------- -----------
Total liabilities 446,766 460,365
----------- -----------
Shareholders' equity:
Common stock; no par value: 80,000,000
shares authorized, 43,721,685 and 43,558,321
shares issued and outstanding 88,095 83,445
Retained earnings 227,449 171,744
----------- -----------
Total shareholders' equity 315,544 255,189
----------- -----------
$ 762,310 $ 715,554
=========== ===========
</TABLE>
3
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ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $116,295 $ 92,165 $253,393 $167,203
-------- -------- -------- --------
Costs and expenses:
Cost of sales 44,849 37,489 97,903 67,540
Research and development 11,343 7,677 23,866 14,263
Selling, general, and administrative 22,574 17,014 45,894 32,396
-------- -------- -------- --------
Total costs and expenses 78,766 62,180 167,663 114,199
-------- -------- -------- --------
Operating income 37,529 29,985 85,730 53,004
Interest and other income 387 1,177 1,310 2,122
-------- -------- -------- --------
Income before taxes 37,916 31,162 87,040 55,126
Provision for income taxes 13,651 11,530 31,335 20,397
-------- -------- -------- --------
Net income $ 24,265 $ 19,632 $ 55,705 $ 34,729
======== ======== ======== ========
Income per share:
Primary $ 0.53 $ 0.43 $ 1.21 $ 0.77
======== ======== ======== ========
Fully diluted $ 0.52 $ 0.43 $ 1.18 $ 0.77
======== ======== ======== ========
Shares and equivalents used in
calculation of income per share:
Primary 45,774 45,524 45,889 45,339
======== ======== ======== ========
Fully diluted 50,269 46,077 50,373 45,791
======== ======== ======== ========
</TABLE>
4
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ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED ENDED
----------------------
June 30, June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 55,705 $ 34,729
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,691 5,573
Changes in assets and liabilities:
Accounts receivable, net 14,470 (21,241)
Inventories (45,703) 194
Deferred income taxes (6,501) (6,000)
Other current and non-current assets 2,260 (1,385)
Accounts payable 4,406 6,225
Accrued liabilities 12,827 15,699
Accrued compensation (5,276) 615
Income taxes payable (3,316) --
--------- ---------
Cash provided by operating activities 38,563 34,409
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (15,841) (30,780)
Net change in short-term investments 98,526 (218,744)
Long-term investments (44,120) --
--------- ---------
Cash provided by (used for) investing activities 38,565 (249,524)
--------- ---------
Cash flows from financing activities:
Long-term debt, net of issuance costs -- 224,825
Net proceeds from issuance of common stock 4,650 2,605
Payment on notes payable (57,120) --
--------- ---------
Cash provided by (used for) financing activities (52,470) 227,430
--------- ---------
Net increase in cash and cash equivalents 24,658 12,315
Cash and cash equivalents at beginning of period 79,409 41,639
--------- ---------
Cash and cash equivalents at end of period $ 104,067 $ 53,954
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 39,000 $ 27,989
Cash paid during the period for interest $ 6,613 $ --
</TABLE>
5
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ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION
(Unaudited)
Note 1 - Interim Statements:
In the opinion of the Company, the accompanying unaudited financial data contain
all adjustments, consisting only of normal, recurring adjustments, necessary to
present fairly the financial information included therein. This financial data
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report to Shareholders for the year
ended December 31, 1995. Results for the interim period presented are not
necessarily indicative of results for the entire year.
Note 2 - Balance Sheet Detail:
.
<TABLE>
<CAPTION>
(In Thousands)
June 30, Dec. 31,
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
Inventories:
Purchased parts and raw materials $ 1,683 $ 2,067
Work-in-process 70,917 38,617
Finished goods 28,524 14,737
--------- ---------
$ 101,124 $ 55,421
========= =========
Property and equipment:
Land $ 19,925 $ 19,925
Building 5,109 1,605
Equipment 73,195 64,703
Office furniture and equipment 8,446 4,908
Leasehold improvements 3,496 3,512
--------- ---------
110,171 94,653
Less accumulated depreciation and
amortization (46,104) (39,807)
--------- ---------
$ 64,067 $ 54,846
========= =========
</TABLE>
Note 3 - Earnings Per Share:
Primary income per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of the assumed net shares issuable upon the
exercise of dilutive stock options using the treasury stock method. The
Convertible Subordinated Notes issued in June 1995 are not common stock
equivalents and, therefore, have been excluded from the computation of primary
earnings per share.
Fully diluted net income per share is computed by adjusting the primary shares
outstanding and net income for the potential effect of the conversion of the
weighted convertible subordinated notes into shares of common stock outstanding
during the respective periods and the elimination of the related interest
requirements (net of income taxes).
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ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION (continued)
(Unaudited)
Note 4 - Notes Payable:
In 1995, the Company entered into several agreements with TSMC, whereby it
agreed to make certain deposits to TSMC for future wafer capacity allocations
extending into 2001. During the second quarter of 1996, the Company and TSMC
renegotiated these agreements, resulting in the cancellation of all notes
payable and a refund of certain prepayments, except for a $57.1 million
prepayment made in January 1996 for wafer capacity from 1997 through 2000.
Note 5 - Joint Venture Agreement:
In June 1996, Altera, TSMC, and several other partners formed a joint venture
company, called WaferTech, to build and operate a wafer manufacturing plant in
Camas, Washington. See Item 5 - Other Events.
In return for a $140.4 million cash investment, Altera will receive an 18%
equity ownership in the joint venture company and certain rights to procure
output from the fab at market price. The investment is to be made in three
installments of which the first was made in June 1996 in the amount of $42.1
million. The remaining two installments amount to $42.1 million and $56.2
million, due in November 1996 and August 1997, respectively. In addition, the
Company has an obligation to guarantee its pro rata share of debt incurred by
WaferTech, up to a maximum of $45 million. The Company intends to apply equity
basis of accounting to its investment in WaferTech.
Note 6 - Subsequent Event:
On July 15, 1996, the Board of Directors authorized the repurchase of up to
2,000,000 shares of the Company's common stock. In addition, the Board of
Directors approved an ongoing program to provide for the repurchase of
additional shares of the Company's common stock in order to fund the issuance of
stock under the Company's stock option and employee stock purchase plans.
7
<PAGE> 8
ALTERA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales. Second quarter 1996 sales of $116.3 million were 26% higher than
the $92.2 million reported for the same period last year, and were down 15% from
first quarter 1996 sales of $137.1 million. Sales were higher than the second
quarter of 1995 primarily as a result of higher sales of the Company's MAX 7000
and FLEX 8000 product lines. As compared to the first quarter of 1996, lower
sales were primarily a result of reduced sales of the FLEX 8000 family.
Geographically, the reduction in sales from the first to the second quarter in
1996 was mainly driven by lower sales in North America.
During 1996, improved availability of the Company's products and
slowing growth rates in end-markets, have resulted in a rapidly changing
business climate for the Company. As a result of increased wafer supply from the
Company's vendors, the delivery lead times for many of the Company's products
were reduced significantly, enabling customers to hold less inventories and
place orders for the Company's products on an as-needed basis. This was a
significant change from 1995 when wafer supplies were constrained and the
Company's customers held greater inventories and placed orders prior to
requested delivery dates by as much as six months in order to secure a supply of
the Company's products.
Given the significantly increased availability of the Company's
products at the end of the first quarter, end-customers started reducing their
inventories by purchasing significantly less product during the second quarter.
The 15% decrease in sales from the first quarter to the second quarter of 1996
reflects this inventory correction at the Company's end-customers. Although
management believes that most of the anticipated correction occurred in the
second quarter, additional inventory adjustments at the end-customers are likely
to occur in the third quarter. In general, given the possibility of continued
inventory corrections and slowing growth rates in end-markets, management
believes that the prospects for near term revenue growth are limited and that
revenues may actually decline in the short-term.
Historically, semiconductor prices decline as products mature. New
product introductions from competitors may also increase pricing pressure and
compete for overall unit sales. Periodically, the Company responds to these
pricing pressures with the introduction of new, higher margin products. In 1995
the Company began shipping two new product families, the MAX 9000 and FLEX 10K
families, which are currently gaining market acceptance. Future growth rates
will be
8
<PAGE> 9
highly dependent on, among other things, full market acceptance of these
new product lines. There can be no assurance that these or other new products
will be successful in securing broad market acceptance or achieving higher
margins, or that the average selling price decline on existing products will not
accelerate.
Gross Margin. Gross margin percentage in the second quarter of 61.4%
was essentially equal to the prior quarter, but up from 59.3% in the same period
a year ago. The gross margin improvement over the prior year was due to a
greater proportion of proprietary product shipments at higher margins and
improved manufacturing yields. Despite reductions in book prices on the MAX 7000
and FLEX 8000 product lines in the first and second quarters of 1996, the gross
margin was maintained as a result of lower manufacturing costs resulting from
improved yields and scale economies on higher manufacturing volumes. In
addition, during the second quarter, the Company benefited from a strengthening
dollar against the yen, resulting in decreased costs of silicon wafers.
Although yields improved in the first six months of 1996 as compared to
the prior year, there can be no assurances that recently achieved yield
improvements will continue or that yields will not deteriorate. The Company
continues to spend significant research and development resources to improve
production yields on its products. The need to improve production yields also
exists with the new products and fabrication processes used by the Company.
However, there can be no assurances that these cost reductions will be achieved.
Start-up difficulties often occur when beginning production of products on new
processes, and these difficulties could potentially result in higher costs and
reduced product availability. Management also expects to introduce products in
the future using other process technologies new to the Company and may encounter
similar startup difficulties with such process technologies. Production
throughput times also vary considerably among the Company's wafer suppliers and
the Company has experienced delays from time to time in processing some of its
products. In addition, gross margins may be negatively affected by lower
manufacturing volumes which result in manufacturing inefficiencies.
As a result of the lower than anticipated sales levels during the
second quarter and the Company's limited flexibility to reduce wafer supply
arrangements with its vendors in the short-term, inventories on hand increased
$26 million during the second quarter, from $75.1 million at March 31, 1996 to
$101.1 million at June 30, 1996. As the inventory growth consists primarily of
the Company's main stream products (MAX 7000 and FLEX 8000) and the Company's
newer products (MAX 9000 and FLEX 10K), management believes that the increase
will allow the Company to support the customers' desire to order on a shorter
lead time basis. In order to limit further inventory increases and improve
control over inventory levels, during the second quarter management reduced the
level of wafer procurement from its vendors.
9
<PAGE> 10
Reduced wafer supplies in the third and fourth quarters will result in
lower manufacturing volumes, which may cause manufacturing inefficiencies and a
higher per unit cost. In anticipation of the lower manufacturing volumes,
management laid off approximately 100 of its employees in its domestic
manufacturing operations. Management believes that cost reductions stemming from
the lay off, combined with recently improved manufacturing yields and lower
wafer prices, will mitigate to some extent the effect of anticipated
manufacturing inefficiencies and price reductions of the Company's products
which were implemented in the first and second quarters of 1996. There can be no
assurance that such costs reductions will be achieved or maintained and that
such price reductions or manufacturing inefficiencies will not result in the
deterioration of gross margins.
Research and Development. Research and development expenditures were
$11.3 million for the quarter ended June 30, 1996, or $3.7 million higher than
the quarter ended a year ago, and down $1.2 million from the prior quarter. The
increase in research and development expenditures compared to the quarter ended
a year ago reflects increased headcount, higher prototype and pre-production
costs and higher expenditures for development of process technology, development
of software to support new products and design environments, and development of
new packages. The decrease from the first quarter to the second quarter of 1996
is due to higher than normal prototype and pre-production expenditures in the
first quarter of 1996 for the MAX 9000 and FLEX 10K product families. Management
of the Company expects to continue to make significant investments in research
and development. The Company is focusing its research and development efforts on
the development of programmable logic chips, related development software and
hardware, and advanced semiconductor wafer fabrication processes. However, even
if the Company accomplishes its goals for the development of new products and
manufacturing processes, there is no assurance that these products will achieve
market acceptance, that the new manufacturing processes will be successful, or
that the suppliers will provide the Company with the quality or quantity of
wafers and materials that the Company requires. The Company must continue to
develop and introduce new products in a timely manner to counter the industry's
historical trend of prices declining as products mature.
Selling, General, and Administrative. Second quarter selling, general,
and administrative expenses of $22.6 million increased by $5.6 million from a
year ago, and decreased $0.7 million from the prior quarter. The increase as
compared to the prior year was mainly due to increased commission and incentive
expenses (on the increased sales volume), as well as increased advertising and
promotional expenditures, and increased salary expenses due to increased field
sales, marketing, and administrative headcounts. Decreased commission and
incentive expenses, consistent with the lower sales volume, were the primary
reasons for the decrease compared to the prior quarter.
10
<PAGE> 11
The Company uses three methods to market its products: sales through
licensed domestic and foreign distributors, direct sales to electronics
manufacturers via independent sales representatives, and direct sales to
customers by Altera sales department personnel. The Company has approximately
twenty field sales offices. Approximately 80% percent of the Company's current
worldwide sales are made through distributors.
Operating Income. Second quarter 1996 operating income of $37.5
million, representing 32.3% of sales, was lower than the second quarter of 1995
(32.5%) and the most recent prior quarter (35.2%). The decrease in operating
income on a percentage of revenue basis is mainly attributed to lower revenues
than anticipated.
Interest and Other Income. Interest income decreased during the last
six months as compared to the same period in the prior year as a result of
decreased cash balances and lower yields. The Company's cash balance has
decreased throughout 1996 as a result of a $57.1 million payment made on a note
payable to TSMC and a $42.1 million investment in the joint venture with TSMC.
In addition, during the second quarter of 1996, management started investing a
larger portion of the Company's investment portfolio in tax exempt versus
taxable investments, which resulted in lower pre-tax yields. During the six
months ended June 30, 1996, interest income was partially offset by interest
expense of approximately $6.0 million related to the Convertible Subordinated
Notes issued in June 1995.
Income Taxes. The Company's provision for income taxes was 36% in 1996
compared to 37% in 1995. The decrease in the income tax rate is primarily due to
an increased amount of earned interest from tax exempt investments.
Future Results. Future operating results depend on the Company's
ability to develop, manufacture, and sell complicated semiconductor components
and complex software that offer customers greater value than competing vendors.
The Company's efforts in this regard may not be successful. Also, a number of
factors outside of the Company's control, including general economic conditions
and cycles in world markets, exchange rate fluctuations, or a lack of growth in
the Company's end markets could impact future results. The Company is highly
dependent upon subcontractors to manufacture silicon wafers and perform assembly
and testing services. Disruptions or adverse supply conditions arising from
market conditions, political strife, labor disruptions, natural or man-made
disasters, other factors, and normal process variations could have a material
adverse effect on the Company's future operating results. Competitive
break-throughs, and particularly competitive pricing could also impact future
operating results. Additionally, litigation relating to competitive patents and
intellectual property could have an adverse impact on the Company's financial
condition or operating results.
11
<PAGE> 12
The Company owns more than 50 United States patents and has additional
pending United States patent applications on its semiconductor products. The
Company also has technology licensing agreements with AMD, Cypress, Intel, and
Texas Instruments giving the Company royalty-free rights to design, manufacture,
and package products using certain patents they control. Other companies have
filed applications for, or have been issued, other patents and may develop, or
obtain proprietary rights relating to, products or processes competitive with
those of the Company. From time to time the Company may find it desirable to
obtain additional licenses from the holders of patents relating to products or
processes competitive with those of the Company. Although its patents and patent
applications may have value in discouraging competitive entry into the Company's
market segment and the Company believes that its current licenses will assist it
in developing additional products, there can be no assurance that any additional
patents will be granted to the Company, that the Company's patents will provide
meaningful protection from competition, or that any additional products will be
developed based on any of the licenses that the Company currently holds. The
Company believes that its future success will depend primarily upon the
technical competence and creative skills of its personnel, rather than on its
patents, licenses, or other proprietary rights.
The Company, in the normal course of business, from time-to-time
receives and makes inquiries with respect to possible patent infringements. As a
result of inquiries received from companies, it may be necessary or desirable
for the Company to obtain additional licenses relating to one or more of its
current or future products. There can be no assurance that such additional
licenses could be obtained, and, if obtainable, could be obtained on conditions
that would not have a material adverse effect on the Company's operating
results. If the inquiring companies were to allege infringement of their
patents, as is the case in the Company's current litigation with two of its
competitors, there can be no assurance that any necessary licenses could be
obtained, and, if obtainable, that such licenses would be on terms or conditions
that would not have a material adverse effect on the Company. In addition, if
litigation ensued, there can be no assurance that these companies would not
succeed in obtaining significant monetary damages or an injunction against the
manufacture and sale of one or more of the Company's product families. It may be
necessary or desirable for the Company to incur significant litigation expenses
to enforce its intellectual property rights.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments
decreased by $73.8 million in the first six months of 1996, from $365.2 million
at the end of 1995 to $291.4 million at June 30, 1996. The decrease is mainly
attributable to a $57.1 million deposit paid to TSMC in January 1996 for future
wafer capacity, a $42.1 million investment in the joint venture company with
12
<PAGE> 13
TSMC made in June 1996, and $15.8 million of capital expenditures. These cash
outflows were partially offset by cash from operating activities in the amount
of $38.6 million. Cashflows from operating activities during the first half of
1996 were positive, despite significant increases in the balances for
inventories and accounts receivable of $45.7 million and $6.5 million,
respectively.
During the six months ended June 30, 1996, the Company invested
approximately $15.8 million in capital, mainly consisting of computer and test
equipment (approximately $9.2 million) and the construction of the new corporate
headquarters (approximately $3.5 million). The Company expects to invest
approximately $40 million of additional capital during the remainder of 1996,
including approximately $25 to 30 million for the construction of its corporate
headquarters.
During the second quarter of 1996, the Company and TSMC renegotiated
the agreements for future wafer capacity, resulting in the cancellation of all
notes payable ($63.4 million) and a refund of certain prepayments ($2.4
million). At June 30, 1996, the only remaining deposit with TSMC for future
wafer capacity is a $57.1 million prepayment made in January 1996 for wafer
capacity from 1997 through 2000.
In June 1996, Altera finalized a joint venture agreement with TSMC and
several other partners to build and operate a U.S.-based wafer fab. Altera will
receive an 18% equity ownership in the joint venture company, called WaferTech,
in return for a $140.4 million investment. The investment is to be made in three
installments of which the first was made in June 1996 in the amount of $42.1
million. The remaining two installments amount to $42.1 million and $56.2
million, due in November 1996 and August 1997, respectively. See Item 5, Other
Events.
On July 15, 1996, the Board of Directors authorized the repurchase of
up to 2,000,000 shares of the Company's common stock. In addition, the Board of
Directors approved an ongoing program to provide for the repurchase of
additional shares of the Company's common stock in order to fund the issuance of
stock under the Company's stock option and employee stock purchase plans.
The Company believes that its cash, cash equivalents, and short-term
investments, combined with cash generated from ongoing operations, will be
adequate to finance the Company's operations, obligations under the joint
venture agreement, and capital investment needs for at least the next year.
Impact of Currency and Inflation. The Company purchases the majority of
its materials and services in U.S. Dollars, and most of its foreign sales are
transacted in U.S. dollars. However, Altera does have Yen denominated purchase
contracts with Sharp Corporation of Japan for processed silicon wafers. The
Company historically has engaged in a variety of foreign exchange
13
<PAGE> 14
hedging strategies to mitigate the exposure from these Yen denominated
purchases. This hedging has included the purchase of forward contracts and the
use of offsetting Yen receipts. During 1996, the Company did not hold or
purchase any forward Yen contracts. Effects of inflation on Altera's financial
results have not been significant.
Safe Harbor Notice
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors
described in this report and in the Company's Annual Report on Form 10-K on file
with the Securities and Exchange Commission.
14
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ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1996
PART II
OTHER INFORMATION
15
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS.
In June 1993, Xilinx, Inc. ("Xilinx") brought suit against the Company
seeking monetary damages and injunctive relief based on the Company's alleged
infringement of certain patents held by Xilinx. In June 1993, the Company
brought suit against Xilinx, seeking monetary damages and injunctive relief
based on Xilinx's alleged infringement of certain patents held by the Company.
In April 1995, the Company filed a separate lawsuit against Xilinx in Delaware,
Xilinx's state of incorporation, seeking monetary damages and injunctive relief
based on Xilinx's alleged infringement of one of the Company's patents. In May
1995, Xilinx counterclaimed against the Company in Delaware, asserting defenses
and seeking monetary damages and injunctive relief based on the Company's
alleged infringement of certain patents held by Xilinx. A motion by Xilinx to
transfer the Delaware cases to California has been granted. The California
litigation is presently the subject of court-ordered mediation. Due to the
nature of the litigation with Xilinx and because the lawsuits are still in the
pre-trial stage, the Company's management cannot estimate the total expense, the
possible loss, if any, or the range of loss that may ultimately be incurred in
connection with the allegations. Management cannot ensure that Xilinx will not
succeed in obtaining significant monetary damages or an injunction against the
manufacture and sale of the Company's MAX 5000, MAX 7000, FLEX 8000, or MAX 9000
families of products, or succeed in invalidating any of the Company's patents.
Although no assurances can be given as to the results of these cases, based on
the present status, management does not believe that such results will have a
material adverse effect on the Company's financial condition or results of
operations.
In August 1994, Advanced Micro Devices ("AMD") brought suit against the
Company seeking monetary damages and injunctive relief based on the Company's
alleged infringement of certain patents held by AMD. In September, 1994 Altera
answered the complaint asserting that it is licensed to use the patents which
AMD claims are infringed and filed a counterclaim against AMD alleging
infringement of certain patents held by the Company. In a June, 1996 trial
bifurcated from the infringement claims, the Company prevailed in its defense
that it is licensed under some or all of the patents asserted by AMD in the
suit. A second phase of the bifurcated licensing trial will determine the
specific AMD patents which are covered by the license. Due to the nature of the
litigation with AMD, and because the infringement portion of the lawsuit is
still in the pre-trial stage, the Company's management cannot estimate the total
expense, the possible loss, if any, or the range of loss that may ultimately be
incurred in connection with the allegations. Management cannot ensure that AMD
will not succeed in obtaining significant monetary damages or an injunction
against the manufacture and sale of the Classic, MAX 5000, MAX 7000, FLEX 8000,
MAX 9000, FLEX 10K, and FLASHlogic product families, or succeed in invalidating
any of the Company's patents remaining in the suit. Although no assurances can
be given as to the results of this case, based on its present status, management
does not believe that such results will have a material adverse effect on the
Company's financial condition or results of operations.
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Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on May 8,
1996 at 10:00 a.m., at which time the following matters were acted upon:
<TABLE>
<CAPTION>
Votes
For Votes Withheld/ Broker
Matter Acted Upon Votes Against Abstentions Non-Votes
<S> <C> <C> <C> <C>
1. Rodney Smith 37,454,410 0 406,083 0
Michael A. Ellison 37,507,926 0 352,567 0
Paul Newhagen 37,455,785 0 404,708 0
Robert Reed 37,446,145 0 414,348 0
William Terry 37,507,853 0 352,640 0
Deborah Triant 37,446,145 0 414,348 0
2. Approval of amendment to the 28,746,571 4,289,523 63,080 4,761,319
1988 Director Stock Option Plan to
increase the Common Stock
available for issuance by 70,000
shares
3. Approval of the 1996 Stock Option 23,102,468 9,912,059 84,647 4,761,319
Plan and reservation of 2,000,000
shares of Common Stock for
issuance thereunder
4. Ratification of Price Waterhouse 37,821,626 11,422 27,445 0
LLP as independent accountants
of the Company for the year
ending December 31, 1996
</TABLE>
17
<PAGE> 18
Item 5. Other Events
On June 25, 1996, the Company entered into a joint venture with Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC"), two other companies, and several
individual investors for the construction and operation of a semiconductor
fabrication facility ("fab") in Camas, Washington. The joint venture is
organized as a limited liability company under the name WaferTech, LLC
("WaferTech"). The following summarizes the principal terms of the joint
venture:
1. Project
The fab will be built on land acquired by WaferTech located in Camas,
Washington. The fab is expected to be at full operating capacity in
1999.
2. Investment
The Company will invest a total of $140,400,000 in cash for an 18%
equity interest in WaferTech, of which $42,120,000 was paid on June 25,
1996, $42,120,000 is to be paid on November 30, 1996 and the remaining
$56,160,000 is to be paid on August 31, 1997. Significant penalties may
be imposed if the Company fails to pay the second or third installment
of its capital contribution when due. In addition, the Company has an
obligation to guarantee its pro rata share of debt incurred by
WaferTech, up to a maximum for the Company of $45,000,000. In addition,
the Company may be required to contribute additional capital in order
to avoid dilution of its interest should the need arise in the future
for additional capital. The Company intends to apply equity basis of
accounting to its investment in WaferTech.
3. Take or Pay Purchase Obligations
Each of the Company and the other two principal equity members of
WaferTech is committed to take or pay for at least 85% of its pro rata
share of the capacity of the fab at prevailing market prices. The
Company will have the right, but not the obligation, to purchase up to
27% of the capacity of the fab.
4. Management
TSMC (which owns approximately 57% of the venture) will have
controlling interest in WaferTech, subject to certain veto powers for
the Company and the other two principal equity participants (which own
18% and 4%, respectively). Specified matters will require the approval
of holders of at least 71% of the interests in WaferTech, and a more
limited set of matters will require approval by holders of at least 87%
of the interests. WaferTech will be managed by a Board of Directors,
consisting of seven directors, of whom four shall be designated by TSMC
and one by each of the Company and the other two principal equity
18
<PAGE> 19
participants. Each director (one "voting" director in the case of TSMC)
will have as many votes as the percentage interest held by the member
who designated that director.
5. Intellectual Property Rights
TSMC has contributed to WaferTech non-exclusive rights to its existing
and certain future process technologies in consideration for a portion
of its equity interest in WaferTech. Some of TSMC's process technology
is licensed from others, and WaferTech is obligated to pay TSMC the
same royalties as TSMC is required to pay to its licensors. In
addition, TSMC has agreed to license to WaferTech rights to its
sub-0.25 micron process if, as, and when developed, for a royalty based
on net sales. WaferTech may also be required to obtain licenses from
third parties which could impose additional royalty costs on WaferTech.
6. Limited Liability Company Status
WaferTech is organized as a Delaware limited liability company which is
expected to be treated as a partnership for federal income tax
purposes. As a result, WaferTech will not incur any federal income tax
expense; each of the participants will reflect its distributive share
of WaferTech's taxable income or loss on its own tax return. TSMC has
reserved the right to convert WaferTech to a regular corporation at any
time, subject to the approval of either the Company or the venture's
other 18% equity owner. If WaferTech is converted to a regular
corporation, it would become a separate taxable entity and the tax
benefits to the Company could be somewhat diminished. The participants
have agreed to significantly limit their right to sell or transfer
their interests in WaferTech.
19
<PAGE> 20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.3 Amended and Restated Bylaws of the Registrant, as amended
through May 8, 1996.
10.47 Amended and Restated Limited Liability Company
Agreement of Wafertech, LLC, a Delaware limited
liability company, dated as of August 9, 1996.
10.48 Purchase Agreement by and between Taiwan Semiconductor
Manufacturing Co., Ltd., as Seller, and Analog Devices,
Inc., the Registrant, and Integrated Silicon Solutions,
Inc., as Buyers (dated as of June 25, 1996).
10.49 Rescission (dated as of June 25, 1996) of Option
Agreement 1 dated as of June 26, 1995 by and between the
Registrant and Taiwan Semiconductor Manufacturing Co.,
Ltd.
11.1 Computation of earnings per share
27. Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
20
<PAGE> 21
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.
ALTERA CORPORATION
/s/ Nathan Sarkisian
------------------------------
Nathan Sarkisian, Vice President
(duly authorized officer), and Chief
Financial Officer (principal financial
officer)
Date: August 12, 1996
21
<PAGE> 1
Exhibit 3.3
BYLAWS
OF
ALTERA CORPORATION
RESTATED AS OF MAY 8, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I - CORPORATE OFFICES.............................................1
1.1 PRINCIPAL OFFICE..............................................1
1.2 OTHER OFFICES.................................................1
ARTICLE II - MEETINGS OF SHAREHOLDERS.....................................1
2.1 PLACE OF MEETINGS............................................ 1
2.2 ANNUAL MEETING............................................... 1
2.3 SPECIAL MEETING.............................................. 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS............................. 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................. 3
2.6 QUORUM....................................................... 3
2.7 ADJOURNED MEETING; NOTICE ................................... 3
2.8 VOTING....................................................... 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT............ 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING.................................................... 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING;
GIVING CONSENTS ............................................. 6
2.12 PROXIES...................................................... 6
2.13 INSPECTORS OF ELECTION....................................... 7
ARTICLE III - DIRECTORS.................................................. 8
3.1 POWERS....................................................... 8
3.2 NUMBER OF DIRECTORS.......................................... 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS..................... 8
3.4 RESIGNATION AND VACANCIES ................................... 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..................... 9
3.6 REGULAR MEETINGS............................................. 9
3.7 SPECIAL MEETINGS; NOTICE..................................... 9
3.8 QUORUM.......................................................10
3.9 WAIVER OF NOTICE.............................................10
3.10 ADJOURNMENT..................................................10
3.11 NOTICE OF ADJOURNMENT........................................10
-i-
<PAGE> 3
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT
A MEETING....................................................11
3.13 FEES AND COMPENSATION OF DIRECTORS...........................11
3.14 APPROVAL OF LOANS TO OFFICERS................................11
ARTICLE IV - COMMITTEES..................................................12
4.1 COMMITTEES OF DIRECTORS .....................................12
4.2 MEETINGS AND ACTION OF COMMITTEES............................12
ARTICLE V - OFFICERS.....................................................13
5.1 OFFICERS.....................................................13
5.2 ELECTION OF OFFICERS.........................................13
5.3 SUBORDINATE OFFICERS.........................................13
5.4 REMOVAL AND RESIGNATION OF OFFICERS..........................13
5.5 VACANCIES IN OFFICES.........................................14
5.6 CHAIRMAN OF THE BOARD........................................14
5.7 PRESIDENT....................................................14
5.8 VICE PRESIDENTS..............................................14
5.9 SECRETARY....................................................14
5.10 CHIEF FINANCIAL OFFICER......................................15
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS.................................15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS....................15
6.2 INDEMNIFICATION OF OTHERS ...................................16
6.3 PAYMENT OF EXPENSES IN ADVANCE...............................16
6.4 INDEMNITY NOT EXCLUSIVE .....................................16
6.5 INSURANCE INDEMNIFICATION ...................................16
6.6 CONFLICTS....................................................17
ARTICLE VII - RECORDS AND REPORTS........................................17
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER.................17
7.2 MAINTENANCE AND INSPECTION OF BYLAWS.........................18
7.3 MAINTENANCE AND INSPECTION OF OTHER
CORPORATE RECORDS............................................18
7.4 INSPECTION BY DIRECTORS......................................18
-ii-
<PAGE> 4
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER........................18
7.6 FINANCIAL STATEMENTS.........................................19
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...............19
ARTICLE VIII - GENERAL MATTERS...........................................20
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING ..................................................20
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS....................20
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW
EXECUTED.....................................................20
8.4 CERTIFICATES FOR SHARES......................................20
8.5 LOST CERTIFICATES............................................21
8.6 CONSTRUCTION; DEFINITIONS ...................................21
ARTICLE IX - AMENDMENTS..................................................21
9.1 AMENDMENT BY SHAREHOLDERS ...................................21
9.2 AMENDMENT BY DIRECTORS ......................................22
-iii-
<PAGE> 5
BYLAWS
OF
ALTERA CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside the
State of California designated by the board of directors. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the last
Wednesday of April each year at 9:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if
sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30))
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
-2-
<PAGE> 7
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 2.6 of these bylaws.
-3-
<PAGE> 8
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or a vote by classes is
required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled, unless otherwise provided in the articles of
incorporation, to cumulate votes (i.e., cast for any candidate a number of votes
greater than the number of votes which such shareholder normally is entitled to
cast) if the candidates' names have been placed in nomination prior to
commencement of the voting and the shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any
-4-
<PAGE> 9
or all of the candidates, as the shareholder thinks fit. The candidates
receiving the highest number of affirmative votes, up to the number of directors
to be elected, shall be elected; votes against any candidate and votes withheld
shall have no legal effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
-5-
<PAGE> 10
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII
of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the
-6-
<PAGE> 11
shareholder or the shareholder's attorney-in-fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless (i) the person who executed the proxy revokes it prior to the time
of voting by delivering a writing to the corporation stating that the proxy is
revoked or by executing a subsequent proxy and presenting it to the meeting or
by voting in person at the meeting, or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment. If
no inspector of election is so appointed, then the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall, appoint an
inspector or inspectors of election to act at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed at
a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
-7-
<PAGE> 12
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the articles
of incorporation and these bylaws relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than four (4)
nor more than seven (7). The exact number of directors shall be fixed, within
the limits specified above, by resolution duly adopted by the board of directors
or by the shareholders. The indefinite number of directors may be changed, or a
definite number may be fixed without provision for an indefinite number, by a
duly adopted amendment to the articles of incorporation or by an amendment to
this bylaw duly adopted by the vote or written consent of the holders of a
majority of the outstanding shares entitled to vote; provided, however, that an
amendment reducing the fixed number or the minimum number of directors to a
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting of the shareholders, or the shares not consenting in the
case of action by written consent, are equal to more than sixteen and two-thirds
percent (16b%) of the outstanding shares entitled to vote thereon. No amendment
may change the stated minimum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
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Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by removal, if by written consent, shall require
the consent of the holders of a majority of the outstanding shares entitled to
vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
California that has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, at the principal executive office
of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than
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twenty-four (24) hours, then notice of the time and place of the adjourned
meeting shall be given before the adjourned meeting takes place, in the manner
specified in Section 3.7 of these bylaws, to the directors who were not present
at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS (1)
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
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(1) This section is effective only if it has been approved by the shareholders
in accordance with Sections 315(b) and 152 of the Code.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the board
of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7
(specialmeetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of
notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and
Section 3.12 (action without meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of
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the board of directors, and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make
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it effective. Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of
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those present at directors' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving
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at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was a director or officer of a corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against or incurred by such person in
such capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
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6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(a) That it would be inconsistent with a provision of the Articles
of Incorporation, these bylaws, a resolution of the shareholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
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Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
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The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
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ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and
-20-
<PAGE> 25
by the chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
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<PAGE> 26
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
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<PAGE> 27
Certificate by Secretary
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Altera Corporation and that the foregoing Bylaws,
comprising twenty-two pages, constitute the Bylaws of this Corporation as
originally adopted and subsequently amended through this date.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 8th day of May, 1996.
/s/ C. Wendell Bergere
______________________________________
C. Wendell Bergere, Secretary
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<PAGE> 1
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
WAFERTECH, LLC
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF AUGUST 9, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
EX 10.47
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION.................. 1
1.1 DEFINITIONS............................................ 1
1.2 RULES OF CONSTRUCTION.................................. 9
ARTICLE 2 ORGANIZATIONAL MATTERS................................. 9
2.1 FORMATION OF COMPANY................................... 9
2.2 NAME................................................... 9
2.3 FICTITIOUS BUSINESS NAME STATEMENT; OTHER
CERTIFICATES........................................... 9
2.4 PRINCIPAL EXECUTIVE OFFICE; OTHER OFFICES.............. 9
2.5 AGENTS FOR SERVICE OF PROCESS.......................... 10
2.6 BUSINESS AND PURPOSE OF THE COMPANY.................... 10
2.7 TERM OF THE COMPANY.................................... 11
2.8 INITIAL MEMBERS; STATUS OF MEMBERS..................... 11
2.9 LIABILITY OF MEMBERS................................... 11
2.10 COMPETITION; CONFLICT OF INTEREST...................... 11
2.11 BUSINESS PLAN.......................................... 12
2.12 MEMBER INTELLECTUAL PROPERTY........................... 12
2.13 FORMATION AUTHORIZATION................................ 13
2.14 REIMBURSEMENT OF TSMC EXPENSES......................... 13
ARTICLE 3 CAPITAL CONTRIBUTIONS.................................. 14
3.1 INITIAL CAPITAL CONTRIBUTIONS.......................... 14
3.2 ADDITIONAL CAPITAL CONTRIBUTION........................ 15
3.3 CONSEQUENCES OF FAILURE TO CONTRIBUTE.................. 15
3.4 CAPITAL ACCOUNTS....................................... 19
3.5 TRANSACTIONS BETWEEN MEMBERS AND THE
COMPANY; COMPANY LOANS AND GUARANTEES.................. 20
3.6 RIGHTS WITH RESPECT TO CAPITAL......................... 22
ARTICLE 4 DISTRIBUTIONS.......................................... 22
4.1 CASH AVAILABLE FOR DISTRIBUTION........................ 22
4.2 TAX DISTRIBUTIONS...................................... 23
4.3 AMOUNTS WITHHELD....................................... 23
ARTICLE 5 ALLOCATION OF PROFITS AND LOSSES....................... 23
5.1 ALLOCATION OF NET PROFIT AND LOSS...................... 23
5.2 RESIDUAL ALLOCATIONS................................... 24
5.3 OTHER ALLOCATION RULES................................. 24
5.4 TAX ALLOCATIONS........................................ 24
(i)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 3
Ex 10.47
ARTICLE 6 MANAGEMENT OF THE COMPANY................................... 24
6.1 MANAGEMENT BY DIRECTORS..................................... 24
6.2 NUMBER AND DESIGNATION OF DIRECTORS; OBSERVER
OF THIRD PARTY INVESTORS.................................... 25
6.3 MEETINGS OF DIRECTORS....................................... 25
6.4 POWERS OF DIRECTORS......................................... 26
6.5 ANNUAL INFORMATIONAL MEETING OF MEMBERS..................... 28
6.6 COMPENSATION COMMITTEE...................................... 28
6.7 EXPENSE REIMBURSEMENT....................................... 28
6.8 INSURANCE................................................... 29
6.9 OFFICERS.................................................... 29
6.10 MEMBER CONSENTS............................................. 31
6.11 BEST INTEREST OF THE COMPANY................................ 31
ARTICLE 7 MEMBER REPRESENTATIONS AND WARRANTIES....................... 31
7.1 NATURE OF MEMBER'S INTEREST................................. 31
7.2 MEMBER REPRESENTATIONS AND WARRANTIES....................... 31
ARTICLE 8 RESTRICTIONS ON TRANSFER; PREEMPTIVE RIGHT;
ADMISSION OF NEW MEMBERS; RIGHT OF FIRST
REFUSAL..................................................... 33
8.1 RESTRICTIONS ON TRANSFER.................................... 33
8.2 GENERAL TRANSFER PROVISIONS................................. 34
8.3 PREEMPTIVE RIGHTS........................................... 35
8.4 ADMISSION OF NEW MEMBERS.................................... 36
8.5 RIGHT OF FIRST REFUSAL...................................... 37
8.6 SPECIAL TRANSFER PROVISION.................................. 38
8.7 SPECIAL RIGHT OF MANAGING MEMBERS OTHER THAN
TSMC TO PURCHASE............................................ 38
ARTICLE 9 BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS................... 39
9.1 MAINTENANCE OF BOOKS AND RECORDS............................ 39
9.2 INSPECTION RIGHTS........................................... 40
9.3 RIGHTS TO RECEIVE COPIES OF DOCUMENTS....................... 40
9.4 BANK ACCOUNTS............................................... 40
9.5 TAX MATTERS HANDLED BY TAX MATTERS PARTNER.................. 40
9.6 FEDERAL INCOME TAX ELECTIONS MADE BY TAX
MATTERS PARTNER............................................. 41
9.7 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS................ 41
ARTICLE 10 EVENT OF DEFAULT; TERMINATION OF MEMBERSHIP................. 42
10.1 EVENT OF DEFAULT............................................ 42
10.2 TERMINATION OF MEMBER....................................... 43
10.3 PURCHASE RIGHT.............................................. 43
10.4 NOTICE OF INTENT TO PURCHASE................................ 44
10.5 ELECTION TO PURCHASE LESS THAN ALL OF THE
TERMINATED MEMBER'S INTEREST............................. 44
(ii)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 4
EX 10.47
10.6 PAYMENT OF PURCHASE PRICE................................ 45
10.7 CLOSING OF PURCHASE OF TERMINATED MEMBER'S
INTEREST................................................. 45
ARTICLE 11 TERMINATION AND DISSOLUTION.............................. 45
11.1 TERMINATION.............................................. 45
11.2 DISSOLUTION.............................................. 46
11.3 WINDING UP............................................... 46
11.4 DISTRIBUTION OF ASSETS................................... 47
11.5 TIME FOR WINDING UP...................................... 48
11.6 FINAL ACCOUNTING; CERTIFICATES OF CANCELLATION........... 48
ARTICLE 12 EXECUTIVE INCENTIVE PLAN................................. 48
12.1 AUTHORIZATION OF EXECUTIVE COMPENSATION.................. 48
12.2 ADMISSION OF PARTICIPANTS................................ 48
ARTICLE 13 TSMC LAND OPTION; NEW VENTURE RIGHTS..................... 49
13.1 LAND OPTION.............................................. 49
13.2 NEW FAB VENTURE RIGHT OF FIRST REFUSAL................... 49
13.3 FURTHER ASSURANCES....................................... 49
ARTICLE 14 CHANGE OR CONVERSION TO A GENERAL
CORPORATION.............................................. 49
14.1 MERGER OR CONSOLIDATION TO A GENERAL
CORPORATION.............................................. 49
14.2 REGISTRATION RIGHTS...................................... 50
14.3 VOTING ARRANGEMENTS...................................... 50
14.4 OPTIONS.................................................. 50
ARTICLE 15 STANDARD OF CARE; INDEMNIFICATION........................ 51
15.1 STANDARD OF CARE......................................... 51
15.2 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS..................................... 51
15.3 EXPENSES................................................. 51
15.4 INDEMNIFICATION RIGHTS NON-EXCLUSIVE..................... 51
15.5 ERRORS AND OMISSIONS INSURANCE........................... 52
15.6 ASSETS OF THE COMPANY.................................... 52
ARTICLE 16 AMENDMENTS............................................... 52
16.1 AMENDMENT, ETC. OF LIMITED LIABILITY COMPANY
AGREEMENT................................................ 52
16.2 AMENDMENT, ETC. OF CERTIFICATE OF FORMATION.............. 52
ARTICLE 17 CONDITIONS PRECEDENT....................................... 52
17.1 CONDITIONS TO MEMBERS' PERFORMANCE......................... 52
17.2 CONDITIONS TO TSMC'S PERFORMANCE........................... 53
17.3 CONDITIONS TO ADI'S PERFORMANCE............................ 53
17.4 CONDITIONS TO ALTERA'S PERFORMANCE......................... 53
(iii)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 5
EX 10.47
17.5 CONDITIONS TO ISSI'S PERFORMANCE........................... 54
17.6 CONDITIONS TO THE THIRD PARTY INVESTORS'
PERFORMANCE................................................ 54
ARTICLE 18 CONFIDENTIALITY............................................ 54
18.1 EXCHANGE OF INFORMATION AND NONDISCLOSURE.................. 55
18.2 CONFIDENTIALITY AGREEMENTS FOR VISITORS AND
EMPLOYEES.................................................. 55
18.3 THIRD PARTY REQUEST FOR INFORMATION........................ 55
18.4 REPORTING LOSS, THEFT OR MISAPPROPRIATION.................. 55
18.5 BREACH OF CONFIDENTIALITY.................................. 56
ARTICLE 19 ANCILLARY AGREEMENTS....................................... 56
19.1 EXECUTION AND DELIVERY..................................... 56
19.2 TERMINATION OF MANUFACTURING AGREEMENT;
FUTURE PURCHASE AGREEMENT.................................. 56
ARTICLE 20 DISPUTE RESOLUTION; ARBITRATION............................ 56
20.1 NEGOTIATION BETWEEN EXECUTIVES............................. 56
20.2 MEDIATION.................................................. 57
20.3 CLAIMS SUBJECT TO ARBITRATION.............................. 57
ARTICLE 21 LIMITATION ON DAMAGES; CONTRACTUAL LIMITATIONS
PERIOD..................................................... 59
21.1 LIMITATION ON DAMAGES...................................... 59
21.2 CONTRACTUAL LIMITATIONS PERIOD............................. 60
ARTICLE 22 FORCE MAJEURE.............................................. 60
22.1 FORCE MAJEURE.............................................. 60
22.2 NOTIFICATION............................................... 61
22.3 RESPONSE TO FORCE MAJEURE.................................. 61
22.4 LIMITATIONS ON APPLICABILITY OF FORCE MAJEURE.............. 61
ARTICLE 23 GENERAL PROVISIONS......................................... 61
23.1 SEVERABILITY............................................... 61
23.2 NEUTRAL INTERPRETATION; WAIVER............................. 61
23.3 NOTICES.................................................... 62
23.4 TIME OF THE ESSENCE........................................ 62
23.5 GOVERNING LAW.............................................. 62
23.6 ENTIRE AGREEMENT........................................... 62
23.7 WAIVER..................................................... 62
23.8 COOPERATION................................................ 62
23.9 COUNTERPARTS............................................... 62
23.10 EXHIBITS AND SCHEDULES..................................... 62
23.11 ATTORNEYS' FEES............................................ 63
23.12 DATE OF PERFORMANCE........................................ 63
(iv)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 6
EX 10.47
23.13 SURVIVAL.............................................. 63
23.14 SURVIVAL OF RIGHTS.................................... 63
23.15 THIRD-PARTY BENEFICIARIES............................. 63
23.16 PARTITION............................................. 63
23.17 GOVERNING LANGUAGE OF AGREEMENT....................... 63
23.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS........ 64
23.19 LIQUIDATED DAMAGES.................................... 64
23.20 AUTHORIZED REPRESENTATIVES............................ 64
23.21 REMEDIES CUMULATIVE, CONCURRENT AND NON-
EXCLUSIVE............................................. 65
23.22 WAIVER OF CONFLICT OF INTEREST........................ 65
23.23 AMENDMENT AND RESTATEMENT............................. 65
(v)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 7
LIST OF EXHIBITS
Exhibit A - Capital Contributions
Exhibit B - Certificate of Formation
Exhibit C - Confidentiality Agreements
(1) Visitor Confidentiality Agreement
(2) Employee Invention Assignment and Confidentiality
Agreement
Exhibit D - Description of Real Property
Exhibit E - Possible Future Restructuring
Exhibit F - Future Purchase Agreement
(vi)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 8
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
WAFERTECH, LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is dated
as of August 9, 1996, by and among TSMC Development, Inc., a Delaware
corporation ("TSMC"), Analog Devices, Inc., a Massachusetts corporation ("ADI"),
Altera Corporation, a California corporation ("Altera"), Integrated Silicon
Solutions, Inc., a Delaware corporation ("ISSI") and each of the other Persons
identified on the signature page hereof as a Member (as hereinafter defined)
hereunder ("Third Party Investors").
WHEREAS, TSMC, ADI, ALTERA, ISSI and the Third Party Investors as of
June 25, 1996 (the "Effective Date") formed a limited liability company
organized under the laws of the State of Delaware in the United States of
America, pursuant to that certain Limited Liability Company Agreement by and
among TSMC, ADI, Altera, ISSI and the Third Party Investors, dated as of June
25, 1996 (the "Original Agreement"), the purpose of which is to construct a
foundry which shall provide foundry services for the manufacture of IC wafers in
accordance with the terms of this Agreement.
WHEREAS, solely for the convenience of each Member but without altering
the rights or obligations of each Member thereunder, this Agreement amends and
restates the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration had and received, each of the
parties hereto agrees as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
1.1 DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, the following words and expressions shall have the meanings set
forth below:
1.1.1 "AAA" means the American Arbitration Association.
1.1.2 "ACT" means the Delaware Limited Liability Company
Act set forth in Title 6, Sections 18-101 through 18-1109 of the Delaware Code,
as amended from time to time. Any reference to the Act shall automatically
include a reference to any subsequent or successor limited liability company law
in Delaware.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 9
1.1.3 "ADDITIONAL CAPITAL CONTRIBUTION" is defined in
Section 3.2.
1.1.4 "ADVANCED PROCESS AGREEMENT" means that certain
Advanced Process License Agreement dated as of April 10, 1996, between TSMC and
TSMC International Investment Ltd., a British Virgin Islands corporation ("TSMC
IIL"), whereby TSMC has been granted a license to certain future processes and
know-how of TSMC IIL which Advanced Process Agreement has been assigned by TSMC
to the Company as described in Section 3.1.1.
1.1.5 "AFFILIATE" means, when used with reference to a
specified Person:
(i) With respect to any corporation, limited
liability company, partnership or other business enterprise: (a) which owns or
controls, directly or indirectly, fifty percent (50%) or more of the voting
rights with respect to the election of directors or managers, or which has
practical control directly or indirectly, of any party to this Agreement; (b) of
which fifty percent (50%) or more of the voting rights with respect to the
election of directors or managers is owned or controlled, directly or
indirectly, by, or which is under the practical control directly or indirectly
of, any party to this Agreement; or (c) of which fifty percent (50%) or more of
the total voting rights with respect to the election of directors or managers is
owned or controlled, directly or indirectly, by, or which is under the practical
control directly or indirectly of, any corporation, limited liability company,
partnership or other business enterprise qualifying under subsections (a) or (b)
above; and
(ii) With respect to any natural person, any
relative of such Person or such Person's spouse, whether by blood, marriage or
adoption.
1.1.6 "AGREEMENT" means this Amended and Restated Limited
Liability Company Agreement, including all Exhibits (which are hereby
incorporated into and made a part of this Agreement by this reference), as
originally executed and as amended from time to time, as the context requires.
1.1.7 "ANCILLARY AGREEMENTS" mean (i) the Confidentiality
Agreements, (ii) the Manufacturing Agreement, (iii) the Technology License and
Assistance Agreement, (iv) the Advanced Process Agreement, (v) the Assignments
of each of the Manufacturing Agreement, the Technology License and Assistance
Agreement and the Advanced Process Agreement, (vi) the Registration Rights
Agreement, (vii) the Purchase Agreement, (viii) the TSMC Land Option and (ix)
the Future Purchase Agreement.
1.1.8 "BOARD OF DIRECTORS" is defined in Section 6.1.
1.1.9 "BUSINESS DAY" means a day on which banking
institutions are open for business in Seattle, Washington and San Jose,
California other than a Saturday or Sunday.
1.1.10 "BUSINESS PLAN" is defined in Section 2.11.
1.1.11 "CAPITAL ACCOUNT" is defined in Section 3.4.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
2
<PAGE> 10
1.1.12 "CAPITAL CONTRIBUTION" OR "INITIAL CAPITAL
CONTRIBUTION" means the total amount of cash and the agreed fair market value
(net of liabilities) of other property contributed to the Company by a
particular Member, as contemplated in Section 3.1, and any subsequent
contributions of cash and the agreed fair market value (net of liabilities) of
any other property subsequently contributed to the Company by that Member.
"TOTAL INITIAL CAPITAL CONTRIBUTION" means the sum of all "INITIAL CAPITAL
CONTRIBUTIONS," as set forth on Exhibit A.
1.1.13 "CASH AVAILABLE FOR DISTRIBUTION" is defined in
Section 4.1.2.
1.1.14 "CERTIFICATE OF FORMATION" means the certificate to be
filed with the Office of the Delaware Secretary of State for the purpose of
forming the Company, attached hereto as Exhibit B.
1.1.15 "CODE" means the Internal Revenue Code of 1986, as
amended (or any corresponding provision or provisions of any succeeding law).
1.1.16 "COMPANY" means WaferTech, LLC.
1.1.17 "COMPANY LOANS" means any loans or advances made by
any Member to the Company as contemplated in Section 3.5.2.
1.1.18 "CONFIDENTIAL INFORMATION" means confidential or
secret information, including information protected under the Confidentiality
Agreements or confidential or secret information protected under any of the
Ancillary Agreements, including but not limited to Trade and Industrial Secrets
(as defined in the Technology License and Assistance Agreement) and Proprietary
Information (as defined in the Manufacturing Agreement).
1.1.19 "CONFIDENTIALITY AGREEMENTS" mean that certain
Member's Confidentiality Agreement dated May 25, 1996 executed by the Company
and each Member and the Visitor Confidentiality Agreements executed by the
Company and each Visitor (as provided in Article 18) substantially in the form
attached hereto as Exhibit C(1).
1.1.20 "DEFAULTING MEMBER" means a Member who fails to make
a Member's Second Part Capital Contribution or Third Part Capital Contribution
hereunder or an Additional Capital Contribution under the circumstances
described in Section 3.3.2.2, or otherwise breaches this Agreement in a manner
that constitutes an Event of Default.
1.1.21 "DELAWARE CORPORATION" is defined in Section 14.1.
1.1.22 "DEPRECIATION" means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable as determined for book purposes under GAAP.
1.1.23 "DILUTION EVENT" means an event resulting in
reduction of a Member's Percentage Interest in the Company as contemplated in
Section 3.3.2.1 or Section 3.5.4 of this
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
3
<PAGE> 11
Agreement if the Additional Capital Contribution or guaranteed debt which the
Member did not provide or guarantee, as the case may be, was used for purposes
other than the completion of the Foundry in accordance with the Business Plan.
1.1.24 "DIRECTOR" is defined in Section 6.2.1, and includes
voting and non-voting Directors.
1.1.25 "DISSOLUTION DATE" shall mean the first date on which
one of the events set forth in Section 11.2 shall occur.
1.1.26 "ECONOMIC INTEREST" means a Person's right to share
in the Net Profit, Net Loss or similar items of, and to receive distributions
from, the Company, but does not include any other rights of a Member including,
without limitation, the right to vote or to participate in the management of the
Company, or, except as provided in Sections 9.2 and 9.3, any right to
information concerning the business and affairs of the Company.
1.1.27 "EVENT OF DEFAULT" is defined in Section 10.1.
1.1.28 "FISCAL YEAR" means each twelve (12) month period
commencing January 1 and through and including December 31 and including as the
first Fiscal Year, the period from the date of this Agreement to and including
December 31, 1996.
1.1.29 "FORCE MAJEURE" means any one or more of the
following: acts of war declared or undeclared, nationalization, expropriation,
civil unrest or other public disturbance, fire, storm, floods, typhoon, tidal
wave, hurricane, cyclone or other severe weather conditions, earthquake, or
other Acts of God, legal restraints, governmental or like interference, judicial
action, accidental damage to equipment, as well as any other cause outside the
reasonable control of a Member. "Force Majeure" also includes the failure to
obtain such license(s) and other approvals, including export licenses, as are
required by United States law or other applicable law for the equipment,
technical information, software, technology and Proven Products to be provided
pursuant to the terms of this Agreement, the Technology License and Assistance
Agreement or the Advanced Process Agreement.
1.1.30 "FUTURE PURCHASE AGREEMENT" is defined in Section
19.2.
1.1.31 "FOUNDRY" is defined in Section 2.6.1.
1.1.32 "GAAP" means generally accepted accounting principles
in the United States of America.
1.1.33 "GOVERNMENTAL INTERVENTION" means (i) any action
taken by any government or agency thereof, subsequent to the formation of the
Company, which is material and adverse to any Member, or (ii) any
recommendations by any government or agency thereof to the Members or any of
them individually, requiring directly or indirectly, formally or informally,
alteration or modification of any term or condition of this Agreement or of the
Ancillary
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
4
<PAGE> 12
Agreements, or of the performance of the Members under this Agreement or the
Ancillary Agreements in a manner which is material and adverse to one Member.
1.1.34 "IC" means integrated circuit.
1.1.35 "INCENTIVE PLAN" means any incentive plan approved by
the Board of Directors and, with respect to any incentive plan, other than the
Executive Incentive Plan, which was approved by the Board of Directors on the
Effective Date, which is approved by Members holding not less than 71% in
Percentage Interest.
1.1.36 "INDEMNITEE" is defined in Section 15.1 hereof.
1.1.37 "INTELLECTUAL PROPERTY RIGHTS" means (a) all patent
rights and all right, title and interest in and to all letters patent and
applications for letters patent, and all other government-issued or -granted
indicia of invention ownership, including any reissue, division, term
extensions, continuation or continuation-in-part applications; (b) all
copyrights and all other literary property and author rights, and all right,
title and interest in and to all copyrights, copyright registrations,
certificates of copyrights and copyrighted interests; (c) all trademarks, trade
names and service marks, and all rights, title and interest in and to all
applications, certifications and registrations therefor; (d) all mask work
rights, mask work applications, and mask work registrations; (e) all rights,
title and interest in and to all trade secrets and trade secret rights; and (f)
any licenses or license rights with respect to the foregoing.
1.1.38 "INTEREST" means either (i) a Membership Interest, or
(ii) an Economic Interest, as the case may be.
1.1.39 "IPO" means an underwritten initial public offering
of securities made pursuant to an effective Registration Statement under the
Securities Act of 1933, as amended, and the Rules and Regulations of the
Securities and Exchange Commission thereunder.
1.1.40 "LAND" is defined in Section 1.1.69.
1.1.41 "MAJORITY IN INTEREST" means Members holding,
collectively, more than fifty percent (50%) of the Percentage Interests.
1.1.42 "MANAGING MEMBERS" means TSMC, ADI, Altera and ISSI.
1.1.43 "MANUFACTURING AGREEMENT" means that certain
Manufacturing Agreement dated as of February 16, 1996, by and between TSMC and
Taiwan Semiconductor Manufacturing Co. Ltd. of Taiwan ("TSMC Taiwan"), pursuant
to which TSMC Taiwan has agreed to purchase all IC wafers manufactured by TSMC
for the time and on the terms therein specified, which Manufacturing Agreement
has been assigned by TSMC to the Company as described in Section 3.1.1.
1.1.44 "MEMBER" means a Person who:
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
5
<PAGE> 13
(i) Has been admitted to the Company as a member
in accordance with the Certificate of Formation or this Agreement, or an
assignee of an Interest who has become a Member pursuant to Article 8; and
(ii) Has not resigned, withdrawn or been expelled
as a Member or, if other than an individual, been dissolved.
Reference to a "Member" shall be to any one of the Members. Reference to an
"INITIAL MEMBER" shall be to any one of the Members who are such on the
Effective Date.
1.1.45 "MEMBERSHIP INTEREST" means a Member's ownership interest in
the Company, which includes the right to share in the Net Profit, Net Loss or
similar items of, and to receive distributions from, the Company, the right to
vote and participate in the management of the Company, and the right to
information concerning the business and affairs of the Company, as provided in
this Agreement and under the Act.
1.1.46 "NET PROFIT" AND "NET LOSS" mean, for each Fiscal Year or
other period, an amount equal to the Company's taxable income or loss for such
year or period, as the case may be, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss or deduction required
to be stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from U.S.
federal income tax and not otherwise taken into account in computing Net Profit
or Net Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken
into account in computing Net Profit or Net Loss shall be subtracted from such
taxable income or loss;
(iii) Gain or loss resulting from any disposition of
Property with respect to which gain or loss is recognized for U.S. Federal
income tax purposes shall be computed in accordance with the Section 704(b)
Regulations by reference to the book basis and fair market value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its book basis and fair market value;
(iv) In lieu of depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation as determined for book purposes
in accordance with the Section 704(b) Regulations for such Fiscal Year or other
period; and
(v) Notwithstanding any other provision of this
subsection, any items of income, gain, loss or deduction which are specifically
allocated to any Member shall not be taken into account in computing Net Profit
or Net Loss.
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1.1.47 "NON-DEFAULTING MEMBERS" means each Member who has
made such Member's Second Part Capital Contribution or Third Part Capital
Contribution or an Additional Capital Contribution under the circumstances
described in Section 3.3.2.2 hereunder, and is not otherwise in breach of this
Agreement in a manner that constitutes an Event of Default.
1.1.48 "OFFERING NOTICE" is defined in Section 8.5.1
1.1.49 "OFFICER" means an officer of the Company.
1.1.50 "PERCENTAGE INTEREST" means the Interest of a Member
or the holder of an Economic Interest in the Company, expressed as a percentage
of the Interests of all of the Members and holders of an Economic Interest. The
Percentage Interests shall initially be as set forth on Exhibit A and shall be
adjusted from time to time as herein provided. Notwithstanding the foregoing,
however, for the purpose only of determining the Percentage Interest required
for any vote or approval, including, but not limited to, the approvals
contemplated by Sections 3.5.1, 6.4.2, 6.4.3, 8.1.1, 8.1.2, 11.2 and Article 16,
the Percentage Interest shall be calculated without giving effect to the
issuance of options, exercise of any options or grant of any equity interest in
the Company pursuant to any Incentive Plan.
1.1.51 "PERSON" means a natural person, partnership (whether
general or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative capacity, in each case whether domestic or foreign.
1.1.52 "PRODUCTS" is defined in the Manufacturing Agreement.
1.1.53 "PROHIBITED PERSON" means a Person (i) who is in the
business of providing foundry services (other than TSMC or any Affiliate
thereof, and other than as permitted pursuant to the last two sentences of
Section 2.10.1), or (ii) whose admission as a Member could reasonably be
economically inimical to the interests of the Company or to any Member. The
Board of Directors and the Members pursuant to Section 6.4.2 shall determine who
is a Prohibited Person.
1.1.54 "PROPERTY" means the assets of the Company, both
tangible and intangible, or any portion thereof.
1.1.55 "PROJECT" is defined in Section 2.6.1.
1.1.56 "PROVEN PRODUCTS" is defined in the Manufacturing
Agreement.
1.1.57 "PURCHASE AGREEMENT" means that certain Purchase
Agreement dated as of the Effective Date by and between TSMC Taiwan, Altera, ADI
and ISSI, pursuant to which each of Altera, ADI and ISSI commit to purchase a
designated amount of IC wafers from TSMC Taiwan.
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1.1.58 "REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated as of the Effective Date by, between and
among the Company and each Member.
1.1.59 "REGULATIONS" means the U.S. Federal income tax
regulations promulgated by the Treasury Department under the Code, as such
regulations may be amended from time to time. All references herein to a
specific section of the Regulations shall be deemed also to refer to any
corresponding provisions of succeeding Regulations.
1.1.60 "REMAINING MEMBER" is defined in Section 10.2.3.
1.1.61 "SECRETARY OF STATE" means the Office of the
Secretary of State of the State of Delaware.
1.1.62 "SECTION 704(b) REGULATIONS" means the final or
temporary income tax regulations under Section 704(b) of the Code relating to
the determination of a partner's distributive share of partnership income, gain,
loss, deduction or credit (or item thereof), and to the extent not inconsistent
with any final or temporary regulations, any outstanding proposed income tax
regulations under Section 704(b) of the Code. All references to Section 704(b)
Regulations shall be deemed also to refer to any corresponding provisions of any
succeeding regulations to such Section 704(b) of the Code.
1.1.63 "SELLING MEMBER" is defined in Section 8.5.1.
1.1.64 "TAX MATTERS PARTNER" means the person designated as
such in Section 9.5.
1.1.65 "TECHNOLOGY LICENSE AND ASSISTANCE AGREEMENT" means
that certain Technology License and Assistance Agreement dated as of February
20, 1996, by and between TSMC Technology, Inc. and TSMC, providing for TSMC
Technology, Inc. to provide certain services to TSMC and granting a license to
use certain technology to TSMC, which Technology License and Assistance
Agreement has been assigned by TSMC to the Company as described in Section
3.1.1.
1.1.66 "TERMINATED MEMBER" is defined in Section 10.2.3.
1.1.67 "TRANSFER" is defined in Section 8.1.1.
1.1.68 "TSMC LAND OPTION" means that certain Option
Agreement dated as of the Effective Date between the Company and TSMC whereby
the Company granted an option to TSMC to purchase all or part of the Land (as
defined therein), hereinafter the "Land".
1.1.69 "WASHINGTON ACT" means the Washington Limited
Liability Act, codified at Title 25, Chapter 25.15 of the Revised Code of
Washington. Any reference to the Washington
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Act shall automatically include a reference to any subsequent or successor
limited liability law in Washington.
1.2 RULES OF CONSTRUCTION. For purposes of this Agreement:
1.2.1 GENERAL. Unless the context otherwise requires, (i)
"or" is not exclusive; (ii) words in the singular include the plural and vice
versa; (iii) words in the masculine include the feminine and neuter and vice
versa; and (iv) words such as "herein," "hereinafter," "hereto," "hereby," and
"hereunder," when used in this Agreement, refer to this Agreement as a whole,
unless the context otherwise requires.
1.2.2 ARTICLES AND SECTIONS; HEADINGS. References to
Articles and Sections are to Articles and Sections of this Agreement unless
stated otherwise. Article and Section headings used in this Agreement are for
convenience of reference only and shall not be used in construing or
interpreting this Agreement.
1.2.3 OTHER AGREEMENTS. References herein to any agreement,
schedule or other instrument, including, without limitation, any other Ancillary
Agreement shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to the same as it may from
time to time be amended, modified or extended.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 FORMATION OF COMPANY. The parties have formed the Company
pursuant to the provisions of the Act by filing the Certificate of Formation
with the Secretary of State.
2.2 NAME. The name of the Company is "WaferTech, LLC".
2.3 FICTITIOUS BUSINESS NAME STATEMENT; OTHER CERTIFICATES. The
Directors have registered the Company as a foreign limited liability company in
the State of Washington and shall from time to time register the Company as a
foreign limited liability company and file on behalf of the Company such
fictitious or trade name statements or certificates in such other jurisdictions
and offices as the Directors consider necessary, convenient or appropriate. From
time to time, the Directors shall file such certificates of amendment,
certificates of cancellation, or other certificates as the Directors reasonably
deem necessary, convenient or appropriate under the Act, under the Washington
Act or under the laws of any jurisdiction in which the Company is doing business
to establish and continue the Company as a limited liability company or to
protect the limited liability of the Members.
2.4 PRINCIPAL EXECUTIVE OFFICE; OTHER OFFICES. The Company shall
maintain its principal executive office, which shall be its principal place of
business in the State of Washington, at Camas, or any other location determined
by the Directors. The Company shall
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also maintain a registered office in Delaware, which shall be at the business
office of the Company's agent for service of process in Delaware. The Company
may maintain such other offices as determined by the Directors.
2.5 AGENTS FOR SERVICE OF PROCESS. The name and address of the
Company's agent for service of process in Washington is the Corporation Service
Company, c/o 600 First Avenue, Suite 500, Seattle, Washington 98104. The name
and address of the Company's agent for service of process in Delaware is The
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
2.6 BUSINESS AND PURPOSE OF THE COMPANY.
2.6.1 GENERAL CHARACTER OF BUSINESS. The general character
of the business to be conducted by the Company shall be to provide foundry
services for the manufacture of IC wafers in North America to meet the
specifications of the purchasers of such IC wafers in accordance with the terms
and conditions of this Agreement and the Ancillary Agreements. In addition, the
Company may provide testing services, tooling services, ASIC design services,
computer assisted design services, maintain a design library, or provide other
related services for integrated circuits. The Company shall purchase, develop
and improve a portion of certain real property located in Camas, Washington that
is the subject of option agreements for the benefit of TSMC, as described in
Exhibit D hereto (which, subject to the TSMC Land Option, is referred to herein
as the "Real Property"). The Company shall construct and manage a foundry, or
"FAB" (the "Foundry") on the Real Property, subject to the TSMC Land Option, to
manufacture and produce IC wafers (subsumed in the definition of "Proven
Products") (collectively, the "Project") and to conduct any other activities,
operations or business (including the borrowing of money, the encumbering of the
Company's assets for security and the entry into contracts) directly and
reasonably related to the Project and its use and development. In accordance
with Section 3.1.1, TSMC has assigned the Manufacturing Agreement to the
Company, so that during the Manufacturing Agreement's term, TSMC Taiwan shall
have an obligation to purchase not less than 85% of Calculated Installed
Capacity (as defined in the Manufacturing Agreement) but shall have a right to
purchase up to 100% of Calculated Installed Capacity and TSMC has assigned the
Technology License and Assistance Agreement and Advanced Process Agreement to
the Company so that specified technical services and technology shall be
provided to the Company. The Managing Members shall order and take or pay for
Products from TSMC Taiwan as contemplated in the Purchase Agreement. The
Managing Members shall cause the Company to conduct the business of the Company
in compliance with all material laws and regulations.
2.6.2 OTHER PURPOSES. Subject to Section 2.6.1, the Company
may carry on any lawful business, purpose or activity, in accordance with this
Agreement, but the Company shall not engage in the business of granting policies
of insurance or assuming insurance risks or banking. The Company shall possess
and may exercise all the powers and privileges granted by the Act or by any
other law or by this Agreement, together with any powers incidental thereto, so
far as such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business, purposes or activities of the Company
as set forth in Section 2.6.1.
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2.7 TERM OF THE COMPANY. The Company was established and commenced
on the Effective Date. The Company shall dissolve on the Dissolution Date.
Notwithstanding the foregoing, the Company may be dissolved prior to the
Dissolution Date as provided in this Agreement or pursuant to the Act.
2.8 INITIAL MEMBERS; STATUS OF MEMBERS.
2.8.1 INITIAL MEMBERS. The Initial Members shall be those
Persons listed as Members on Exhibit A.
2.8.2 STATUS OF MEMBERS. The Initial Members and any
additional or substituted Members shall be "members" of the Company, as that
term is used in the Act, subject to the terms and provisions of this Agreement.
The Managing Members shall have authority as specified herein.
2.9 LIABILITY OF MEMBERS. No Member shall be obligated personally
for any debt, obligation or liability of the Company, whether arising in
contract, tort or otherwise, solely by reason of being a Member.
2.10 COMPETITION; CONFLICT OF INTEREST.
2.10.1 MEMBER COMPETITION. Subject to the provisions of the
Confidentiality Agreements, and except as hereinafter provided, any Member may
engage in, acquire or possess an interest or interests in other business
ventures of any nature or description, independently or with others and neither
the Company nor any Member shall have any rights in or to such independent
ventures or the income or profits derived therefrom. Notwithstanding the
foregoing, each Member acknowledges, understands and agrees that pursuant to
Section 3.1.1, TSMC has contributed to the Company proprietary, trade secret,
know-how and other Confidential Information and that TSMC would not have entered
into this Agreement with a Prohibited Person. Further, each Member acknowledges,
understands and agrees that monetary compensation would not be an adequate
inducement for TSMC to enter into this Agreement with a Prohibited Person.
Accordingly, each Member except TSMC agrees that so long as such Member shall be
a Member and for a period of two years thereafter, such Member shall not acquire
or possess a controlling interest, directly or indirectly, by operation of law
or otherwise, in any venture (an "Other Venture") (not including TSMC or an
Affiliate thereof) that has as one of its primary purposes the provision of
foundry services for the manufacture of IC wafers for sale to third parties not
affiliated with such Other Venture and not for the Member's own use or the use
of other parties affiliated with the Other Venture. This restriction shall not
limit the existing ventures of any Member, or future ventures in which any
Member has a non-controlling minority interest, from selling IC wafers to third
parties not affiliated with such Other Venture. This Section shall not limit the
ability of TSMC or any of its Affiliates to enter into any Other Venture or
subject to Section 13.2, to construct any other foundry.
2.10.2 CONFLICT OF INTEREST. Subject to Section 3.5, the
fact that a Person is employed by or is directly or indirectly interested in or
connected with any Person
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employed by the Company to render any service or from whom the Company may buy
merchandise shall not prohibit the Company from employing or dealing with such
Person; provided, however, that any contract, employment or other arrangement
with such Person shall be on an arm's-length basis and in accordance with
competitive rates and other terms prevailing throughout the industry for similar
goods or services.
2.11 BUSINESS PLAN. On the Effective Date each Member received a
preliminary annual operating budget and business plan of the Company for Fiscal
Years 1996 through 2002, which was prepared by TSMC and its Affiliates in good
faith for planning purposes and is incorporated herein by this reference (as it
may be amended from time to time, the "Business Plan"). Each Managing Member
agrees to use reasonable commercial efforts in accordance with the terms of this
Agreement to facilitate the implementation of the Business Plan by the Company.
Notwithstanding the foregoing, the Members acknowledge that the Business Plan is
a projection only and, as a forward looking statement, reflects certain
anticipated goals, which may not be realized. The Members further acknowledge
that the Business Plan does not constitute an assurance, representation,
warranty or agreement by any Member or the Company for any purpose, including
but not limited to, the purpose of determining whether to enter into this
Agreement. Any material change or amendment to the Business Plan shall require
the approval of Members holding not less than 71% in Percentage Interest, as
provided in Section 6.4.2.
2.12 MEMBER INTELLECTUAL PROPERTY.
2.12.1 GRANT OF LICENSES. Each Member, including TSMC and
its Affiliates to the extent not provided for pursuant to the Technology License
and Assistance Agreement or the Advanced Process Agreement, shall grant or
extend to the Company the rights, licenses or cross licenses from third parties
obtained or held by such Member as the same are related to and required for the
manufacture of IC wafers by the Company, to the extent that any such action is
not in conflict with such Member's agreements with third parties. In case any
third party agreement requires the payment of fees or royalties to a third party
in the event of such grant or extension, the Company shall be offered the option
to accept the grant or extension and to pay such fees or royalties.
2.12.2 SHARING OF TECHNOLOGY. Any Managing Member (other
than TSMC or its Affiliates, to which the terms of the Technology License and
Assistance Agreement and Advanced Process License Agreement will apply), which
has knowledge or know-how relating to the manufacture of IC wafers may offer to
provide such knowledge or know-how to the Company in consideration for the right
to use the knowledge or know-how developed by the Company relating to that
knowledge or know-how provided by such Member. The terms and conditions of any
such exchange of knowledge or know-how shall be determined by mutual agreement
between the applicable Managing Member and the Company. Notwithstanding the
foregoing, any such Managing Member (other than TSMC or its Affiliates)
shall not use the knowledge or know-how developed by the Company to manufacture
any products competitive with the Products produced for any other Managing
Member (other than TSMC or its Affiliates).
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2.12.3 CO-DEVELOPMENTS. In the event personnel of the
Company and any Managing Member co-develop (i.e. both parties substantially and
significantly contribute to the development) devices, ICs, processes or
apparatus relating to the subject matter of this Agreement, the Manufacturing
Agreement, the Purchase Agreement, or the Future Purchase Agreement, then the
Intellectual Property Rights created by such co-development shall be jointly
owned by the Company and the applicable Managing Member without accounting to
each other, both parties having the right under the Intellectual Property Rights
obtained with respect to such co- development to make, have made, use, modify,
lease, sell, or otherwise dispose of products and to license (with a right to
sub-license) such Intellectual Property Rights, subject to the other party's
rights therein but without the necessity of obtaining the consent of the other
party. The Company and applicable Managing Member shall cooperate in applying
for, prosecuting and maintaining patents and copyright and mask work
registrations for such co-developments and shall equally divide the expenses
thereof. Notwithstanding the preceding sentence, either the Company or the
applicable Managing Member may elect not to share the expenses of any such
applications in any or all countries, in which case the other party may file
and/or prosecute at its own expense and shall have sole control and ownership of
such applications and any patents, copyright or mask work registrations issuing
thereon, subject to a non-exclusive non- transferrable, paid-up and
royalty-free, worldwide license under such patents, copyright and mask right
registrations in favor of the non-electing party to make, have made, use,
modify, lease, sell, or otherwise dispose of products to the extent of the
rights granted by such patents and registrations (with the right to sublicense
only to Affiliates). The Company or the applicable Managing Member, as the case
may be, shall be obligated to share the expenses referred to in the preceding
sentence unless such party provides written notice of its election not to do so
to the other party within thirty (30) days of a written request from such other
party. An election not to share expenses shall be irrevocable.
2.13 FORMATION AUTHORIZATION. Each of the Members ratifies and
approves the acts of TSMC prior to the date of this Agreement taken to (i)
handle matters with respect to the formation and establishment of the Company,
(ii) commit to the acquisition of the Real Property including the grant of the
TSMC Land Option, (iii) commit to the construction of the Foundry, and (iv)
commit to the purchase of such equipment as is required by the Company to
commence the Project (collectively, the "Organizational Matters"). Each Member
authorizes TSMC to continue to implement the Organizational Matters in
accordance with this Agreement. TSMC will attempt to obtain favorable terms for
such Organizational Matters, and the Members will cooperate to discuss and
resolve any issues in connection therewith.
2.14 REIMBURSEMENT OF TSMC EXPENSES. By execution and delivery of
this Agreement, the Members agree that the following out-of-pocket expenses
incurred by TSMC, or its Affiliates, upon presentation by TSMC to the Company of
an itemization of such expenses, shall be reimbursed by the Company. Such
expenses may include the following:
2.14.1 Any and all reasonable expenses incurred for the
acquisition of the Real Property including but not limited to those incurred in
the site selection and permitting activities;
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2.14.2 Any and all reasonable fees and expenses incurred to
commit to construction of the Foundry;
2.14.3 Any and all fees and expenses charged by the counsel,
consultants and specialists retained in connection with the formation of the
Company, the acquisition of the Real Property and the construction of the
Foundry; and
2.14.4 Any and all other fees and expenses incurred in
handling the matters authorized in Section 2.13 or this Section 2.14.
An estimate of such expenses as of the Effective Date was delivered to each
Member on the Effective Date.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 INITIAL CAPITAL CONTRIBUTIONS.
3.1.1 FIRST PART CAPITAL CONTRIBUTION. Subject to the
satisfaction or waiver of the conditions precedent set forth in Article 17, on
the Effective Date (sometimes referred to herein as the "First Contribution
Date") each Initial Member contributed to the Company in good same day funds an
amount of cash equal to the cash contribution set forth opposite such Initial
Member's name on Exhibit A under the column "First Part Capital Contribution"
and in addition TSMC contributed to the Company (i) the Manufacturing Agreement,
the Technology License and Assistance Agreement and the Advanced Process
Agreement, by assigning such agreements to the Company, and (ii) all rights and
interests of TSMC in the Real Property, the Foundry and all equipment purchased
by TSMC ("First Part Capital Contribution").
3.1.2 SECOND PART CAPITAL CONTRIBUTION. On November 30,
1996 (the "Second Contribution Date"), each Initial Member shall contribute to
the Company an amount of cash equal to the cash contribution set forth opposite
such Initial Member's name on Exhibit A under the column "Second Part Capital
Contribution" (the "Second Part Capital Contribution").
3.1.3 THIRD PART CAPITAL CONTRIBUTION. On November 3, 1997
(the "Third Contribution Date"), each Initial Member shall contribute to the
Company an amount of cash equal to the cash contribution set forth opposite such
Initial Member's name on Exhibit A under the column "Third Part Capital
Contribution" (the "Third Part Capital Contribution").
3.1.4 PERCENTAGE INTEREST. Upon making each such Capital
Contribution, each Initial Member shall be credited for its Capital Contribution
and shall have the Percentage Interest in the Company as set forth with respect
to such Initial Member on Exhibit A.
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3.2 ADDITIONAL CAPITAL CONTRIBUTION. No Member shall be obligated
to or shall make any additional capital contribution to the Company in excess of
such Member's portion of the Initial Capital Contribution provided for in
Section 3.1 ("Additional Capital Contribution") except with the approval of the
Board of Directors. The Board of Directors shall send to each Member written
notice of the Additional Capital Contribution including a description of the
purpose of the Additional Capital Contribution, a statement of the potential
benefits to the Company and to Members who make such Additional Capital
Contribution and a statement of the potential impact upon each Member pursuant
to Section 3.3.1 if such Member does not make the Additional Capital
Contribution (the "Additional Capital Contribution Notice"). If a proposed
Additional Capital Contribution, together with all prior Additional Capital
Contributions, exceeds in the aggregate an amount equal to 15% of the Total
Initial Capital Contribution, as set forth on Exhibit A hereto, such Additional
Capital Contribution must also be approved by the Members holding not less than
71% in Percentage Interest as provided in Section 6.4.2. Following approval as
set forth above and subject to Section 3.3.2.1, each Member shall contribute its
Additional Capital Contributions to the Company in proportion to its Percentage
Interest promptly at such time or times as may be so established by the Board of
Directors for the payment thereof.
3.3 CONSEQUENCES OF FAILURE TO CONTRIBUTE.
3.3.1 DEFAULT ON SECOND PART OR THIRD PART CAPITAL
CONTRIBUTION. In the event a Member fails to pay its Second Part Capital
Contribution or its Third Part Capital Contribution as contemplated in this
Agreement, such Defaulting Member shall pay to the Non-Defaulting Members which
have made their required Second Part Capital Contributions or Third Part Capital
Contributions, as the case may be, as a partial liquidated payment for damages
suffered by the Company and the Non-Defaulting Members as a result of such
failure to pay, a cash payment equal to 10% of the Second Part Capital
Contribution or Third Part Capital Contribution, as the case may be, of the
Defaulting Member. Such cash payment shall be distributed among the
Non-Defaulting Members according to their respective Percentage Interests. The
Defaulting Member's Membership Interest thereupon and without more shall be
terminated and the following procedures shall apply:
3.3.1.1 MISSING CAPITAL CONTRIBUTION. The
Non-Defaulting Members shall have the right, but not the obligation to, subject
to the provisions of Section 8.6, contribute that portion of the Capital
Contribution to have been funded by the Defaulting Member ("Missing Capital")
according to each electing Non-Defaulting Member's Percentage Interest. If any
Non-Defaulting Member elects to contribute none or less than all of such
Non-Defaulting Member's pro rata share of the Missing Capital, then the other
Non-Defaulting Members may elect to contribute the remaining portion of the
Missing Capital in proportion to their respective Percentage Interests. If less
than all of the Missing Capital is contributed by Non-Defaulting Members,
subject to the provisions of Section 8.6, one or more new Members, if approved
pursuant to Section 8.4, may be admitted as a Member or Members to contribute
any remaining Missing Capital to the Company. If the entire Missing Capital is
not contributed, the Initial Capitalization of the Company shall be reduced
accordingly. Following such process, the Percentage Interest of all Members
shall, subject to the last sentence of Section 3.3.1.4, be
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adjusted so that each Member's Percentage Interest (including that of any new
Member) shall be a fraction, the numerator of which is the aggregate amount of
each Member's Capital Contributions and the denominator of which is the sum of
all Member's Capital Contributions (including that of any new Member) and each
Member's Capital Account Balance shall be adjusted accordingly. As used in the
preceding sentence, Capital Contributions shall include those portions of
Capital Contributions made by a Defaulting Member or a Terminated Member that
are credited to the Capital Account Balances of Non-Defaulting Members or
Remaining Members following a transfer of part of the Defaulting Member's
Interest or Terminated Member's Interest under clause (ii) of either of Section
3.3.1.4 or Section 10.5.
3.3.1.2 PURCHASE RIGHT. Upon termination of a Defaulting
Member's Membership Interest pursuant to this Section and after giving effect to
Section 3.3.1.1, subject to the provisions of Section 8.6, the Non-Defaulting
Members shall have the right to purchase and the Defaulting Member shall have
the obligation to sell, the Defaulting Member's Interest in the Company in the
manner contemplated in Sections 3.3.1.3 through 3.3.1.6, inclusive. The purchase
price for such Interest shall be an amount equal to 50% of the cash Capital
Contributions of the Defaulting Member as of the termination date of the
Defaulting Member. Such reduction in value shall constitute partial compensation
for damages suffered by the Company and the Non-Defaulting Members as a result
of the failure by the Defaulting Member to contribute the Second Capital
Contribution or Third Capital Contribution, as the case may be. The Board of
Directors shall give notice to all Non-Defaulting Members of such purchase
price.
3.3.1.3 OPTION OF NON-DEFAULTING MEMBERS TO PURCHASE. Each
Non-Defaulting Member shall have the right, but not the obligation, to elect to
purchase a portion of the Defaulting Member's Interest, as hereinafter provided.
Any Non-Defaulting Member so electing shall notify the Directors in writing
within thirty (30) days after the notice from the Directors referred to in
Section 3.3.1.2 above, of such Non- Defaulting Member's desire to purchase a
portion of the Defaulting Member's Interest. The failure of any Non-Defaulting
Member to submit such notice within the applicable period shall constitute an
election on the part of the Non-Defaulting Member not to purchase any of the
Defaulting Member's Interest. Each Non-Defaulting Member so electing to purchase
shall be entitled to purchase a portion of the Defaulting Member's Interest in
the same proportion that the Percentage Interest of the Non-Defaulting Member
bears to the aggregate of the Percentage Interest of all of the Non-Defaulting
Members electing to purchase a portion of the Defaulting Member's Interest.
3.3.1.4 ELECTION TO PURCHASE LESS THAN ALL OF THE DEFAULTING
MEMBER'S INTEREST. If any Non-Defaulting Member elects to purchase none or less
than all of such Non-Defaulting Member's pro rata share of the remaining
Defaulting Member's Interest, then subject to the provisions of Section 8.6, the
other Non-Defaulting Members may elect to purchase that Interest remaining in
proportion to their respective Percentage Interests. Each Non-Defaulting Member
who purchases part of the Defaulting Member's Interest shall succeed to a pro
rata share of the Defaulting Member's Capital Account Balance. If the
Non-Defaulting Members do not purchase the entire Interest of the Defaulting
Member, then subject to the provisions of Section 8.6, one or more new Members,
if approved pursuant to Section 8.4, may be admitted as a Member and purchase
the remaining Defaulting Member's Interest by paying for such Interest in
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cash. If the entire remaining Interest has not been purchased, with respect to
all or any remaining share of the Defaulting Member's Interest, the Defaulting
Member shall have only an Economic Interest, and without limiting the generality
of the foregoing, shall not be a Managing Member, shall not be entitled to
designate a Director hereunder and any current Director or Directors appointed
by such Member shall be deemed to be removed and the number of Directors on the
Board of Directors shall be reduced accordingly. In such event, as partial
compensation for damages suffered by the Company and the Non-Defaulting Members,
(i) the Defaulting Member's remaining Interest shall be reduced by fifty percent
(50%) and the Non-Defaulting Members' Interests shall be increased pro rata
accordingly, (ii) the Defaulting Member's Capital Account Balance shall be
reduced by 50%, and the difference shall be added to the Capital Account
Balances of the Non-Defaulting Members, pro rata according to their Interests,
and (iii) solely for purposes of determining the Managing Members' and a
Defaulting Member's rights and obligations to purchase the output of the Foundry
under the Purchase Agreement or Future Purchase Agreement (which rights and
obligations shall be a function, to be specified in each of those agreements, of
the Managing Members' and Defaulting Member's Percentage Interests), effect
shall not be given to any increase or decrease in a Managing Member's or
Defaulting Member's Percentage Interest attributable to (A) the operation of
clause (i), or (B) any reduction (x) in the Capital Contribution of the
Defaulting Member due to (I) that portion of the Missing Capital that is not
contributed by any other Person or (II) that portion of the Missing Capital
contributed by a Person other than a Managing Member or a new Member who will
become a party to the Purchase Agreement or Future Purchase Agreement (a "New
Buyer") or (y) in the total Capital Contributions of Members due to that portion
of the Missing Capital that is not contributed by any Person.
3.3.1.5 PAYMENT OF PURCHASE PRICE. The purchase price shall
be paid by the electing Non-Defaulting Members by either of the following
methods, each of which may be selected separately by the electing Non-Defaulting
Members in their respective sole discretion:
(I) The Non-Defaulting Members shall at the consummation
of the purchase of the Defaulting Member's Interest ("Closing") pay in cash the
total purchase price for the Defaulting Member's Interest; or
(II) The Non-Defaulting Members shall pay at the Closing
one-fifth (1/5) of the purchase price in cash and the balance of the purchase
price shall be paid in four equal annual principal installments, plus accrued
interest, and be payable each year on the anniversary date of the Closing. The
unpaid principal balance shall accrue interest at the current applicable U.S.
Federal rate as provided in the Code for the month in which the initial payment
is made, but the Non-Defaulting Members shall have the right to prepay in full
or in part at any time without penalty. The obligation of each purchasing
Non-Defaulting Member to pay its portion of the balance due shall be evidenced
by a separate promissory note executed by the respective Non-Defaulting Member.
Each such promissory note shall be in an original principal amount equal to the
portion owed by the respective purchasing Non-Defaulting Member. The promissory
note executed by each purchasing Non-Defaulting Member shall be secured by a
pledge of that portion of the Defaulting Member's Interest purchased by such
Non-Defaulting Member.
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3.3.1.6 CLOSING OF PURCHASE OF DEFAULTING MEMBER'S
INTEREST. The Closing for the sale of a Defaulting Member's Interest pursuant to
this Section 3.3 shall be held at 10:00 a.m. at the principal office of Company
no later than sixty (60) days after the determination of the purchase price. At
the Closing, the Defaulting Member or such Defaulting Member's legal
representative shall deliver to the electing Non-Defaulting Members an
instrument of transfer (containing warranties of title and no encumbrances)
conveying the Defaulting Member's Interest free and clear of all liens, charges
and encumbrances whatsoever, except as permitted by the purchaser thereof. The
Defaulting Member or such Defaulting Member's legal representative, the Company
and the Non-Defaulting Members shall do all things and execute and deliver all
documents as may be necessary or convenient to consummate such sale and purchase
in accordance with the terms and provisions of this Agreement. Without limiting
the generality of the foregoing, each Defaulting Member hereby appoints each
Non-Defaulting Member as its attorney-in-fact and agent, with full power and
authority to take all actions and execute and deliver all agreements, deeds,
leases, releases, assignments, bills of sale, security instruments and any other
document which, in the sole judgment of such Non-Defaulting Member, is necessary
or convenient to consummate such sale and purchase.
3.3.2 FAILURE TO PAY ADDITIONAL CAPITAL CONTRIBUTION.
3.3.2.1 FAILURE TO PAY ADDITIONAL CAPITAL CALL NOT
APPROVED BY NON-PAYING MEMBER. The provisions of this Section 3.3.2.1 shall
apply in the event a Member fails to make an Additional Capital Contribution:
(i) requiring the consent of Members holding not less than 71% in Percentage
Interest as provided in Section 6.4.2.5, if such non-paying Member did not
consent to such Additional Capital Contribution, or (ii) not requiring the
consent of Members pursuant to Section 6.4.2.5 and: (x) not approved by such
Member's representative on the Board of Directors if such Member has a
representative on the Board of Directors, or (y) if such Member does not have a
representative on the Board of Directors. Such a Member shall be referred to in
this Section as a "Non-Paying Member." In such event, the other Members who have
made the Additional Capital Contribution (the "Paying Members") shall have the
right, but not the obligation, subject to the provisions of Section 8.6, to
contribute that portion of the Additional Capital Contribution to have been
funded by the Non-Paying Member ("Missing Additional Capital") according to each
electing Paying Member's Percentage Interest. If any Paying Member elects to
contribute none, or less than all of such Paying Member's pro-rata share of the
Missing Additional Capital, then the other Paying Members may elect to
contribute the remaining portion in proportion to their respective Percentage
Interests. If less than all of the Missing Additional Capital is contributed by
the Paying Members, one or more new investors, approved as provided in Section
8.4, may be admitted as a Member to pay to the Company the remaining Missing
Additional Capital. The failure of the Non-Paying Member to make an Additional
Capital Contribution under the circumstances specified in this Section shall not
constitute an Event of Default under this Agreement, but the Percentage
Interests of all Members shall be adjusted so that each Member's Percentage
Interest (including that of the new Member, if any), shall be a fraction, the
numerator of which is the aggregate amount of each Member's Capital
Contributions and the denominator of which is the sum of all Members' Capital
Contributions (including that of the new Member, if any). As used in the
preceding sentence, Capital Contributions shall include those portions of
Capital Contributions made by a Defaulting Member or a Terminated Member that
are credited to the Capital Account Balances of Non-
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Defaulting Members or Remaining Members following a transfer of part of the
Defaulting Member's or Terminated Member's Interest to such Members under clause
(ii) of either of Section 3.3.1.4 or Section 10.5. Notwithstanding the
foregoing, if the Board of Directors in its reasonable discretion determines
that the fair market value of the Company as of the date immediately prior to
the requested Additional Capital Contribution is less than total Capital
Contributions made to such date, the Members' Percentage Interests (including
that of the new Member, if any), shall be adjusted to reflect a fraction, the
numerator of which is (A) the fair market value of the Company multiplied by the
Percentage Interest of each Member as of such date, plus (B) the Additional
Capital Contribution made by such Member (if any), and the denominator of which
is such fair market value of the Company as of such date plus the total
Additional Capital Contributions of all Members (including that of the new
Member, if any). The Board of Directors in its reasonable discretion shall
determine the fair market value of the Company except that any Director who was
elected by a Non-Paying Member shall not vote or otherwise participate in any
such determination. Each Member's Capital Account shall be adjusted as provided
in Section 3.4. If the failure to make the Additional Capital Contribution is a
Dilution Event, each Managing Member's right to receive and obligation to take
the output of the Foundry pursuant to the Purchase Agreement and the Future
Purchase Agreement shall be adjusted contemporaneously to give effect to the
changes in Members' Percentage Interests. If the failure to make the Additional
Capital Contribution is not a Dilution Event each Managing Member's right to
receive and obligation to take the output of the Foundry pursuant to the
Purchase Agreement and Future Purchase Agreement shall not be affected in which
case the provisions of Section 8.6 with respect to an increase in the
obligations of new Members or Members acquiring an additional Percentage
Interest pursuant to such agreements shall not apply. Additionally, a Non-Paying
Member shall not be entitled to acquire directly or indirectly any Products of
the Company, the production of which has been funded, enabled or otherwise
facilitated by such Additional Capital Contribution made by the Paying Members,
and the production of which was described in the Additional Capital Contribution
Notice.
3.3.2.2 DEFAULT FOLLOWING MEMBERS APPROVAL OF
ADDITIONAL CAPITAL CONTRIBUTION. This Section 3.3.2.2 shall apply in the event a
Member fails to make an Additional Capital Contribution or any installment
payment of an Additional Capital Contribution that has been: (i) approved by
such Defaulting Member, if the Additional Capital Contribution is one requiring
approval of Members holding not less than 71% in Percentage Interest as provided
in Section 6.4.2.5, or (ii) approved by such Member's representative on the
Board of Directors (if such Defaulting Member has a representative on the Board
of Directors) if the Additional Capital Contribution is not one requiring
approval of Members holding not less than 71% in Percentage Interest as provided
in Section 6.4.2.5. In either circumstance, the Defaulting Member's Membership
Interest shall be terminated and the procedures set forth in Sections 3.3.1.1
through 3.3.1.6 inclusive, shall apply.
3.4 CAPITAL ACCOUNTS. The Capital Accounts of the Members shall be
determined and maintained throughout the full term of the Company in accordance
with the capital account rules of Section 1.704-1(b)(2)(iv) of the Section
704(b) Regulations (relating to maintenance of capital accounts).
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3.4.1 Each Member shall have a capital account ("Capital
Account") which shall be credited (increased) by:
3.4.1.1 the amount of such Member's cash capital
contributions to the Company and the agreed net fair market value of property
other than cash contributed to the Company by such Member (net of liabilities
secured by such contributed property that the Company is considered to have
assumed or taken subject to for purposes of Section 752 of the Code);
3.4.1.2 the amount of Net Profits and items thereof
allocated to it pursuant to Article 5 hereof; and
3.4.1.3 any other increase required to be made to
the Capital Account of the Member by the Section 704(b) Regulations, to the
extent not otherwise provided for herein.
3.4.2 Each Member's Capital Account shall be debited
(decreased) by:
3.4.2.1 the amount of Net Losses and items thereof
allocated to such Member pursuant to Article 5 hereof;
3.4.2.2 all amounts paid, distributed or deemed
distributed to it pursuant to Article 4 hereof, and the fair market value of
property distributed to it (in each case, net of liabilities securing such
distributed property that such Member is considered to have assumed or taken
subject to under Section 752 of the Code); and
3.4.2.3 any other reductions in the Capital Account
of the Member required by the Section 704(b) Regulations, to the extent not
otherwise provided for herein.
3.4.3 In the discretion of the Board of Directors, the
capital accounts may be adjusted to reflect a revaluation of Company property to
the extent permitted by the Section 704(b) Regulations in connection with
capital contributions to the Company by new or existing Members resulting in a
change of Percentage Interests held by the Members, or in connection with
distributions by the Company to a retiring or continuing Member as consideration
for an Interest in the Company.
3.5 TRANSACTIONS BETWEEN MEMBERS AND THE COMPANY;
COMPANY LOANS AND GUARANTEES.
3.5.1 TRANSACTIONS BETWEEN MEMBERS AND THE COMPANY. With the
written approval of the Board of Directors, and the written consent of Members
with no economic interest in the transaction in question ("Disinterested
Members") holding a majority of the Percentage Interests of Disinterested
Members, a Member or an Affiliate of a Member may transact business or contract
with the Company so long as the terms of any such transaction are at fair market
value and are comparable to those that could be obtained between independent
parties negotiating at arm's-length. The representatives of the contracting
Member on the Board of
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Directors shall not be prohibited from participating in the decision made to
enter into any such transaction. All Members agree that the terms of the
Ancillary Agreements and the Executive Incentive Plan satisfy the standard set
forth in this Section 3.5.1, that such documents are deemed to have been
approved by the Board of Directors and the Members and that no further action or
approval by the Board of Directors or the Members to approve such instruments or
transactions is required.
3.5.2 LOANS TO THE COMPANY. With the approval of the Board of
Directors, and the consent of the Members contemplated in Section 6.4.2, a
Member may lend money to, act as a surety, guarantor or endorser for, or
guarantee or assume one or more specific obligations of, or provide collateral
for the Company (collectively, "Company Loans"), and, subject to applicable law,
has the same rights and obligations with respect to any Company Loan as a Person
who is not a Member; provided, however, that each Managing Member shall have the
option to participate in any such Company Loan pro rata in accordance with such
Managing Member's Percentage Interest. Unless otherwise agreed to in writing by
the Board of Directors, Company Loans shall not be considered capital
contributions or be reflected in the balance of any Capital Account. Each
Company Loan shall be a debt due from the Company to the lending Member, shall
bear interest at the rate agreed to between such Member and the Company and,
except as otherwise expressly provided in this Agreement or agreed between such
Member and the Company at the time such funds are advanced, shall be repaid as
soon as practicable to such Member.
3.5.3 PROHIBITION ON LOANS TO MEMBERS. The Company shall not lend
money to, act as a surety, guarantor or endorser for, or guaranty or assume any
obligations of any Member.
3.5.4 GUARANTEES. To the extent a Member guarantee is required by an
institutional lender to the Company, the Board of Directors shall send to each
Member written notice of the required guarantee including a description of the
purpose of the loan the Members are being asked to guarantee, a statement of the
potential benefits of the loan to the Company and the Members who guarantee the
loan and a statement of the potential impact upon each Member pursuant to this
Section if such Member does not guarantee the loan (the "Guarantee Notice"). The
Members agree to provide, to a maximum aggregate amount of US $250 Million, a
several guarantee of the Company's debt according to their respective Percentage
Interests. If any Member fails to provide, in whole or in part, a guarantee as
specified above, such failure shall not constitute an Event of Default under
this Agreement, but the Percentage Interests of the Members shall be adjusted so
that each Member's Percentage Interest shall be a fraction, the numerator of
which represents the aggregate amount of each Member's Capital Contribution plus
any amount such Member guaranteed as provided for above, and the denominator of
which represents the sum of all Members' Capital Contributions plus the total
amount guaranteed by the Members. As used in the preceding sentence, Capital
Contributions shall include those portions of Capital Contributions made by a
Defaulting Member or Terminated Member that are credited to the Capital Account
Balances of Non-Defaulting Members or Remaining Members following a transfer of
part of the Defaulting Member's or Terminated Member's Interest to such Members
under clause (ii) of either of Section 3.3.1.4 or Section 10.5. If the failure
to guarantee the
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Company's debt is not a Dilution Event each Member's right to receive and
obligation to take the output of the Foundry pursuant to the Purchase Agreement
and Future Purchase Agreement shall not be affected. However, if such failure is
a Dilution Event, the Members' right to receive and obligation to take the
output of the Foundry pursuant to the Purchase Agreement and the Future Purchase
Agreement shall be adjusted contemporaneously to reflect the change in
Percentage Interests. Additionally, if a Member fails to provide a guarantee as
specified above, such Member shall not be entitled to acquire directly or
indirectly any Products of the Company, the production of which has been funded,
enabled or otherwise facilitated by the proceeds of any Company debt such Member
failed to guarantee, the production of which was described in the Guarantee
Notice.
3.6 RIGHTS WITH RESPECT TO CAPITAL.
3.6.1 CAPITAL. No Member shall have the right to withdraw
all or any part of its Capital Contribution. No Member shall have any right to
the return of all or any part of its Capital Contribution except through
distributions as provided in this Agreement.
3.6.2 NO INTEREST ON CAPITAL CONTRIBUTIONS. Except as
expressly provided in this Agreement, no Capital Contribution of any Member
shall bear any interest or otherwise entitle the contributing Member to any
compensation for use of the contributed capital.
3.6.3 DISTRIBUTION IN KIND. Except as provided in Article
19, no Member shall have the right to demand and receive any distribution in any
form other than cash, regardless of the nature of its Capital Contribution. No
Member shall be compelled to accept a distribution of any asset in kind to the
extent that the percentage of the asset distributed to such Member exceeds a
percentage of that asset that is equal to the percentage in which such Member
shares in distributions from the Company.
ARTICLE 4
DISTRIBUTIONS
4.1 CASH AVAILABLE FOR DISTRIBUTION. Cash Available for
Distribution shall be distributed to the Members pro rata in accordance with
each Member's Percentage Interest, in accordance with the following:
4.1.1 DETERMINATION. The Company shall distribute, from
time to time, as determined by the Board of Directors and approved by the
Members as provided in Section 6.4.2, Cash Available For Distribution, if any,
to the Members in accordance with their respective Percentage Interests.
4.1.2 DEFINITION OF CASH AVAILABLE FOR DISTRIBUTION. For
purposes of this Agreement, "Cash Available For Distribution" means the cash
available for distribution to Members after giving effect to the following: (i)
projected cash available from operations of the Company as determined by the
Board of Directors; (ii) cash on hand of the
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Company, (iii) a prudent level of reserves for the Company, as determined by the
Board of Directors; (iv) projected cash needed for operations of the Company
including for payment of debt and for future Special Tax Distributions to
Members, as such are determined by the Board of Directors, and (iv) the
anticipated total project costs for any new foundry to be developed by the
Company or retrofit of the Foundry which have been approved by the Members in
accordance with Section 6.4.2.
4.1.3 FINAL SALE. Notwithstanding the foregoing provisions,
all distributions and proceeds resulting from a final sale or other event
causing a dissolution of the Company shall be applied in the manner set forth in
Section 11.4 and not in the manner set forth in this Section 4.1.
4.2 TAX DISTRIBUTIONS. Notwithstanding anything in Section 4.1 to
the contrary, for each Fiscal Year, the Company shall distribute to its Members
in accordance with their respective Percentage Interest and to the extent
available from the cash resources of the Company (including borrowings), before
calculation of Cash Available for Distribution, within ninety (90) days after
the end of each Fiscal Year (a "Special Tax Distribution"), an aggregate amount
of cash equal to the excess of (i) the product of (A) the Company's aggregate
amount of Net Profit for the Fiscal Year determined for this purpose only
without regard to the adjustments set forth in clauses (iii) and (iv) of Section
1.1.47 and (B) the highest applicable composite marginal rate borne by any
Member for U.S. Federal, state and local taxes for such Fiscal Year over (ii)
the aggregate net cash distributions previously made to the Members with respect
to such Fiscal Year. All amounts withheld under Section 4.3 shall be deemed to
be distributions to the respective Members for purposes of this Section 4.2.
4.3 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or
any provision of any state or local tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated for
all purposes under this Agreement as amounts distributed to the Members pursuant
to this Article 4. The Board of Directors is authorized to withhold from
distributions, or with respect to allocations, to the Members and to pay over to
any U.S. Federal, state, or local government any amounts required to be so
withheld pursuant to the Code or any provisions of any other U.S. Federal, state
or local law and shall allocate such amounts to the Members with respect to
which such amount was withheld.
ARTICLE 5
ALLOCATION OF PROFITS AND LOSSES
5.1 ALLOCATION OF NET PROFIT AND LOSS. In each fiscal period Net
Profit and Net Loss of the Company shall be allocated among the Members as
follows:
5.1.1 First, Net Profit and Net Loss shall be allocated
among the Members in a manner to bring Capital Account balances of the Members
in proportion to their respective Percentage Interests as quickly as possible.
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5.1.2 Thereafter, Net Profit and Net Loss shall be
allocated among the Members in proportion to their respective Percentage
Interests.
5.2 RESIDUAL ALLOCATIONS. Except as otherwise provided in this
Agreement, all items of Company income, gain, loss, deduction, and any other
allocations not otherwise provided for shall be divided among the Members in the
same proportions as they share Net Profit or Net Losses, as the case may be, for
the Fiscal Year.
5.3 OTHER ALLOCATION RULES.
5.3.1 The Members are aware of the income tax consequences
of the allocations made by this Article 5 and agree to be bound by the
provisions of this Article 5 in reporting their shares of Company income and
loss for income tax purposes.
5.3.2 For purposes of determining the Net Profits, Net
Losses, or any other items allocable to any period, Net Profits, Net Losses, and
any such other items shall be determined on a daily, monthly, or other basis, as
determined by the Board of Directors using any permissible method under Code
Section 706 and the Regulations thereunder.
5.4 TAX ALLOCATIONS.
5.4.1 Except as otherwise provided in this Section 5.4, for
income tax purposes each item of income, gain, loss and deduction (collectively,
"Tax Items") shall be allocated among the Members in the same manner as its
correlative item of "book" income, gain, loss or deduction is allocated pursuant
to Sections 5.1 - 5.2.
5.4.2 Notwithstanding Section 5.4.1, Tax Items with respect
to Property that is contributed to the Company by a Member shall be shared among
the Members for income tax purposes in accordance with the "traditional method"
pursuant to Regulations promulgated under Section 704(c) of the Code, so as to
take into account the variation, if any, between the book and tax basis of the
Property contributed to the Company.
5.4.3 Any elections or other decisions relating to such
allocations shall be made by the Directors in a manner that reasonably reflects
the purpose and intention of this Agreement. Allocations pursuant to this
Section 5.4 are solely for purposes of U.S. Federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Person's
Capital Account or share of Net Profits, Net Losses, other items, or
distributions pursuant to any provisions of this Agreement.
ARTICLE 6
MANAGEMENT OF THE COMPANY
6.1 MANAGEMENT BY DIRECTORS. Subject to the provisions of the
Certificate of Formation and this Agreement relating to actions required to be
approved by the Members, the
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business, property and affairs of the Company shall be managed and all powers of
the Company shall be exercised by or under the direction of the Managing Members
who shall act through their designated representatives as the Board of Directors
("Board of Directors"). Subject to the foregoing, the Members are the "Managers"
of the Company as such term is defined under the Act. Notwithstanding Section
18-402 of the Act, the powers of the Members and the Board of Directors to bind
the Company are as set forth in this Agreement.
6.2 NUMBER AND DESIGNATION OF DIRECTORS; OBSERVER OF
THIRD PARTY INVESTORS.
6.2.1 BOARD OF DIRECTORS. The Company shall have a board of
seven (7) directors ("Directors"). TSMC shall designate four (4) of the
Directors, one (1) of whom shall be voting and three (3) of whom shall be
non-voting. Each of Altera, ADI and ISSI shall designate one (1) voting
Director. Each Director shall serve at the pleasure of the Member who designated
such Director. Only the Member who originally designated a Director may remove
such Director, except that one or more Members holding a Majority in Interest
may remove any Director appointed by a Terminated Member. Any Director may
resign upon written notice to the Member who designated such Director. The
resignation shall take effect upon receipt of such notice, or at such later time
as shall be specified in such notice. Any vacancy occurring for any reason in
the number of Directors shall be filled by the Member who originally designated
the Director whose position has become vacant.
6.2.2 OBSERVER. The Third Party Investors may from time to
time designate one representative, approved by TSMC, who shall serve in an
advisory capacity to the Board of Directors, with no other rights, duties or
authority (the "Observer"). TSMC may revoke its approval of a designated
Observer at any time, following which the Third Party Investors shall select an
alternative Observer approved by TSMC. The Observer shall be entitled to attend
such meetings of the Board of Directors as he is invited by the Board of
Directors to attend, and to receive all materials distributed to the Directors
for such meetings. The initial Observer shall be Mr. Quintin Wu.
6.3 MEETINGS OF DIRECTORS.
6.3.1 MEETINGS. Meetings of the Directors shall be held at
least once each calendar quarter and may be called by the Chairman/Chief
Executive Officer ("CEO") of the Company. All meetings shall be held upon seven
(7) days notice by mail or four (4) days notice (or upon such shorter notice
period if necessary under the circumstances) delivered personally or by
telephone, e-mail or facsimile. A notice need not specify the purpose of any
meeting. Notice of a meeting need not be given to any Director who signs a
waiver of notice or a consent to holding the meeting (which waiver or consent
need not specify the purpose of the meeting) or an approval of the minutes
thereof, whether before or after the meeting, or who attends the meeting without
protesting, prior to its commencement, the lack of notice to such Director. All
such waivers, consents and approvals shall be filed with the Company records or
made a part of the minutes of the meeting. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. If the meeting is adjourned for more than
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twenty-four (24) hours, notice of any adjournment shall be given prior to the
time of the adjourned meeting to the Directors who are not present at the time
of the adjournment. Meetings of the Directors may be held at any place which has
been designated in the notice of the meeting or at such place as may be approved
by the Directors. Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all
Directors participating in such meeting can hear one another. Participation in a
meeting in such manner constitutes a presence in person at such meeting.
6.3.2 QUORUM; ACTION OF THE DIRECTORS. Directors elected by
one or more Members holding a Majority in Interest, present at a meeting shall
constitute a quorum of Directors for the transaction of business. Every action
or resolution done or made by Directors holding a majority of the Director Votes
(as defined below) at a meeting at which a quorum is present is the action of
the Directors. Each voting Director shall hold the same number of votes as the
Percentage Interest held by the Member who designated such Director ("Director
Votes"). If the voting Director of TSMC shall not be present at a meeting, such
voting Director may delegate in writing such Director's voting authority to one
of the non-voting Directors nominated by TSMC. TSMC shall designate which of its
Director nominees shall be its voting Director.
6.3.3 ACTION BY WRITTEN CONSENT. Any action required or
permitted to be taken by the Directors may be taken by the Directors without a
meeting, if Directors holding all Director Votes consent in writing to such
action. Such action by written consent shall have the same force and effect as a
unanimous vote of such Directors.
6.4 POWERS OF DIRECTORS.
6.4.1 POWERS OF DIRECTORS. Without limiting the generality
of Section 6.1, but subject to Sections 3.5, 6.4.2 and 6.4.3, and to any express
limitations set forth elsewhere in this Agreement, the Board of Directors shall
have all powers necessary or convenient to manage and carry out the purposes,
business, property and affairs of the Company, including, without limitation,
the power to:
6.4.1.1 approve the annual budget;
6.4.1.2 provide for capital increase and capacity
expansion of the Company;
6.4.1.3 sell, transfer, mortgage or dispose of
property of the Company;
6.4.1.4 borrow, guarantee or incur long term debt;
6.4.1.5 amend the Certificate of Formation of the
Company or this Agreement;
6.4.1.6 voluntarily dissolve the Company or merge
the Company with another entity;
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6.4.1.7 dissolve, liquidate, wind up, reorganize the
Company, or any similar action; or
6.4.1.8 convert or exchange the Interests of the
Members into or for, as the case may be, an interest in the Delaware Corporation
as contemplated in Article 14.
Subject to applicable laws and regulations, all actions of the Board of
Directors shall be taken as provided in Section 6.3.2 and 6.3.3.
6.4.2 LIMITATIONS ON RIGHTS AND POWERS; APPROVAL OF MEMBERS
WITH 71% PERCENTAGE INTEREST. In addition to any affirmative vote of the Board
of Directors or Members otherwise required by law or this Agreement, each of the
following actions shall require the written consent of Members holding not less
than 71% in Percentage Interest:
6.4.2.1 borrow, guarantee or incur long term debt in
any way greater than the amount of US $25 Million in the aggregate;
6.4.2.2 determine that a Member or an Affiliate of a
Member is a Prohibited Person;
6.4.2.3 convert or exchange the Interest of the
Members into or for, as the case may be, an interest in the Delaware Corporation
if such conversion or exchange does not occur contemporaneously with an IPO of
the Delaware Corporation;
6.4.2.4 reduce the Company's capital;
6.4.2.5 authorize or call for any Additional Capital
Contribution in an amount exceeding 15% of the Total Initial Capital
Contribution as set forth on Exhibit A hereto;
6.4.2.6 determine if Cash Available For Distribution
exists to be distributed to the Members;
6.4.2.7 engage legal counsel to the Company or
engage certified public accountants to audit and certify the financial
statements of the Company;
6.4.2.8 construct another foundry or retrofit the
Foundry;
6.4.2.9 create any Incentive Plan, except for the
Executive Incentive Plan provided for in Article 12, or amend an Incentive Plan
in any manner that increases the maximum aggregate awards thereunder;
6.4.2.10 make any material change or amendment to the
Business Plan including, but not limited to, the capacity ramp up schedule
incorporated therein; or
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6.4.2.11 admit any new Member.
6.4.3 LIMITATIONS ON RIGHTS AND POWERS; APPROVAL OF MEMBERS
WITH 87% PERCENTAGE INTEREST. In addition to any affirmative vote of the Board
of Directors or Members otherwise required by law or this Agreement, each of the
following actions shall require, in addition to the approval of the Board of
Directors, the written consent of Members holding not less than 87% in
Percentage Interest:
6.4.3.1 Except for any action taken pursuant to
Section 6.4.2.8, discontinue a material part of, add materially to or materially
change the business of the Company as it is described in Section 2.6.1;
6.4.3.2 Transfer in a single transaction or in a
series of related transactions, all or substantially all of the Company's
business and assets;
6.4.3.3 subject to Article 16, amend, restate or
alter the Certificate of Formation or this Agreement (other than an Incentive
Plan or the Business Plan, which may be changed or amended as contemplated in
Section 6.4.2.9 or 6.4.2.10, respectively);
6.4.3.4 merge or consolidate the Company, other than
as provided in Article 14; or
6.4.3.5 dissolve, liquidate, place into bankruptcy,
wind up or reorganize the Company or any similar event, if such action does not
occur contemporaneously with an IPO of the Delaware Corporation.
6.5 ANNUAL INFORMATIONAL MEETING OF MEMBERS. The Members shall
hold an annual informational meeting concerning the affairs of the Company. All
Members of the Company shall be entitled to attend the annual informational
meeting. The annual informational meeting shall be held in the first quarter of
each year with the exact time and date of the meeting to be determined by the
Chairman/CEO. Notice of the annual informational meeting shall be given to all
Members at least ten (10) days before the scheduled meeting. At such meeting,
the Members may take any action that pursuant to this Agreement, would otherwise
be taken by written consent.
6.6 COMPENSATION COMMITTEE. The Board of Directors shall appoint a
Compensation Committee composed of the Directors designated by Altera and ADI
and the voting Director designated by TSMC pursuant to Section 6.2.1. The
Compensation Committee shall serve in an advisory capacity only to the Board of
Directors and may make non-binding recommendations to the Board of Directors
regarding the compensation of employees of the Company and the administration of
any Incentive Plan.
6.7 EXPENSE REIMBURSEMENT. The Company shall reimburse the Members
for any expenses paid by them that properly are to be borne by the Company, as
approved from time to time by the Board of Directors.
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6.8 INSURANCE. The Company shall maintain adequate types and
amounts of insurance as determined from time to time by the Board of Directors
including worker's compensation, comprehensive general liability, product
liability, and fire and extended coverage, considering the risks of conducting
the Company's business and the replacement value of the Project.
6.9 OFFICERS.
6.9.1 APPOINTMENT OF OFFICERS. The Officers of the Company
shall include a Chairman/CEO, a Vice Chairman, a President/Chief Operating
Officer ("COO"), one or more Vice Presidents, a Secretary, and a Chief Financial
Officer, each of whom shall be appointed by the Board of Directors. If deemed
necessary by the Board of Directors, the Company shall have such additional
Officers as the Board of Directors may from time to time approve. The Officers
shall serve at the pleasure of the Directors, subject to all rights, if any, of
an Officer under any contract of employment with the Company. Any individual may
hold any number of offices. A Member's officers, directors, members or
employees, as the case may be, may serve as Officers of the Company if elected
by the Directors. The Officers shall exercise such powers and perform such
duties as specified in this Agreement and as shall be determined from time to
time by the Directors. Notwithstanding the foregoing, no Officer shall have the
power or authority to implement any of the matters specifically enumerated in
Section 6.4.1, without the explicit approval of the Board of Directors.
6.9.2 REMOVAL, RESIGNATION AND FILLING OF VACANCY OF
OFFICERS. Any Officer may be removed, either with or without cause, by the
Directors at any time. Any Officer may resign at any time by giving written
notice to the Directors. Any resignation shall take effect at the date of the
receipt of such notice or at any later time specified in such notice; and,
unless otherwise specified in such notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Company under any contract to which such
Officer is a party. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in this Agreement for regular appointments to that office.
6.9.3 DUTIES AND POWERS OF THE CHAIRMAN/CEO. The
Chairman/CEO shall be the chief executive officer of the Company and, if
present, shall preside at all meetings of the Members and at all meetings of the
Directors. The Chairman/CEO shall have the general powers and duties of
management usually vested in the office of chief executive officer of a Delaware
general corporation and shall have general and active management of the business
of the Company and shall see that all orders and resolutions of the Members and
Directors are carried into effect. The Chairman/CEO shall have such other duties
and responsibilities as may be assigned to the Chairman/CEO by the Board of
Directors and which he shall accept.
6.9.4 DUTIES AND POWERS OF THE VICE CHAIRMAN. The Vice
Chairman shall in the absence or disability of the Chairman/CEO perform the
duties and exercise
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the powers of the Chairman/CEO and shall perform such other duties and have such
other powers as the Directors by resolution may from time to time determine.
6.9.5 DUTIES AND POWERS OF THE PRESIDENT/COO. Subject to
such supervisory powers, if any, as may be assigned by the Directors to the
Chairman/CEO and Vice Chairman, the President/COO shall assist the Chairman/CEO
and Vice Chairman with the general and active management of the business of the
Company. The President/COO shall have authority to execute bonds, mortgages and
other contracts except where required or permitted by law to be otherwise signed
and executed, and except where the signing and execution thereof shall be
expressly delegated by the unanimous action of the Directors to some other
officer or agent of the Company. The President/COO shall perform such other
duties and have such other powers as the Directors by resolution may from time
to time determine.
6.9.6 DUTIES AND POWERS OF VICE-PRESIDENT. The Vice-
President, or if there shall be more than one, the Vice-Presidents in the order
determined by a resolution of the Directors, shall, in the absence or disability
of the President, perform the duties and exercise the powers of the President
and shall perform such other duties and have such other powers as the Directors
by resolution may from time to time determine.
6.9.7 DUTIES AND POWERS OF SECRETARY.
6.9.7.1 The Secretary shall attend all meetings of
the Directors and all meetings of the Members, and shall record all the
proceedings of the meetings in a book to be kept for that purpose, and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the Members and all
meetings of the Directors and shall perform such other duties as may be
determined by the Directors. The Secretary shall have custody of the seal, if
any, and the Secretary shall have authority to affix the same to any instrument
requiring it, and when so affixed, it may be attested by the Secretary's
signature. The Directors may give general authority to any other officer to
affix the seal of the Company, if any, and to attest the affixing by his or her
signature.
6.9.7.2 The Secretary shall keep, or cause to be
kept, at the principal executive office or at the office of the Company's
transfer agent or registrar, as determined by resolution of the Directors, a
register, or a duplicate register, showing the names of all Members and their
addresses and their Percentage Interests. The Secretary shall also keep all
documents described in Section 9.1 and such other documents as may be required
under the Act. The Secretary shall perform such other duties and have such other
authority as may be prescribed elsewhere in this Agreement or from time to time
by the Directors. The Secretary shall have the general duties, powers and
responsibilities of a secretary of a Delaware general corporation.
6.9.8 DUTIES AND POWERS OF CHIEF FINANCIAL OFFICER.
6.9.8.1 The Chief Financial Officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the Company,
including accounts of its assets, liabilities, receipts,
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disbursements, gains, losses, capital, Membership Interests and Economic
Interests. The books of account shall at all reasonable times be open to
inspection by any Director.
6.9.8.2 The Chief Financial Officer shall have the
custody of the funds and securities of the Company, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Company, and shall deposit all moneys and other valuable effects in the name and
to the credit of the Company in such depositories as may be designated by the
Directors.
6.9.8.3 The Chief Financial Officer shall disburse
the funds of the Company as may be ordered by the Directors, taking proper
vouchers for such disbursements, and shall render to the CEO and the Directors,
at their regular meetings, or when Members so require, at a meeting of the
Members an account of all his or her transactions as treasurer and of the
financial condition of the Company.
6.9.8.4 The Chief Financial Officer shall perform
such other duties and shall have such other responsibility and authority as may
be prescribed elsewhere in this Agreement or from time to time by the Directors.
The Chief Financial Officer shall have the general duties, powers and
responsibility of a Chief Financial Officer of a Delaware general corporation,
and shall be the chief financial and accounting officer of the Company.
6.10 MEMBER CONSENTS. Except for actions approved by unanimous
written consent of all Members, no action requiring written consent of the
Members shall become effective until five (5) Business Days after all Members
have been notified of such action in accordance with Section 23.3.
6.11 BEST INTEREST OF THE COMPANY. In managing the affairs of the
Company the Members and the Board of Directors will take into account, among
other things, the best interests of the Company and the best interests of the
Members as a whole, and will endeavor not to take any action prejudicial to any
Member unless, in the sole determination of the Board of Directors, such action
is in the best interests of the Company or the best interests of the Members as
a whole.
ARTICLE 7
MEMBER REPRESENTATIONS AND WARRANTIES
7.1 NATURE OF MEMBER'S INTEREST. The Interest of each Member
constitutes personal property of such Member. No Member has any interest in the
Property.
7.2 MEMBER REPRESENTATIONS AND WARRANTIES.
7.2.1 POWER AND AUTHORITY. Each Member represents and
warrants that such Member has full corporate power and authority to enter into
this Agreement and to
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consummate and perform the transactions contemplated hereby. Each Member further
represents and warrants that this Agreement has been duly authorized by it.
7.2.2 GOOD STANDING. Each Member (other than natural
persons) represents and warrants that it is duly incorporated or formed, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation.
7.2.3 EXECUTION. Each Member represents and warrants that
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or violate its charter
documents or any law, rule, regulation, court order, contract, agreement,
judgment or decree binding upon or applicable to such Member or by which the
property of such Member is bound or affected in a manner that would materially
and adversely affect such Member's performance hereunder and thereunder.
7.2.4 INVESTMENT REPRESENTATIONS.
7.2.4.1 KNOWLEDGE. Each Member represents and
warrants that such Member (i) has such knowledge, skill and experience in
business and financial matters, that such Member is capable of evaluating the
merits and risks of an investment in the Company and the suitability thereof as
an investment for such Member, (ii) has sufficient net worth to sustain a loss
of all such Member's interest in the Company without economic hardship if such a
loss should occur and can bear the economic risk of such Member's investment in
the Company, (iii) understands that an investment in the Company involves a
considerable degree of risk of loss by such Member, (iv) has reviewed this
Agreement and each of the Ancillary Agreements and has received such other
documents and information as such Member has requested and has had an
opportunity to ask questions of and receive satisfactory answers from the
Company concerning the terms and conditions of the investment contemplated under
this Agreement, and based thereon believes that such Member can make an informed
investment decision, and (v) (if not a natural person) was not formed for the
specific purpose of making an investment in the Company.
7.2.4.2 INVESTMENT INTENT. Each Member represents
and warrants that such Member is acquiring such Member's Interest for investment
for such Member's own account and not with a view to, or for resale in
connection with, any distribution thereof, subject, nevertheless, to the
condition that, except as otherwise provided herein, the disposition of the
property of each Member shall at all times be within such Member's control. By
execution of this Agreement, each Member represents and warrants that, except as
otherwise permitted by this Agreement, such Member has no agreement, contract,
or understanding with any person or entity to sell, transfer, or grant rights in
any of such Member's Interest.
7.2.5 SECURITIES LAWS. EACH MEMBER REPRESENTS AND WARRANTS
THAT SUCH MEMBER UNDERSTANDS THAT SUCH MEMBER'S INTEREST HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER APPLICABLE U.S. FEDERAL OR STATE SECURITIES LAWS BY
REASON OF CERTAIN EXEMPTIONS FROM THE REGISTRATION PROVISIONS THEREOF WHICH
DEPEND UPON, AMONG OTHER THINGS, THE BONA FIDE NATURE OF SUCH MEMBER'S
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REPRESENTATIONS AND INVESTMENT INTENT AS EXPRESSED HEREIN, AND UNDERSTANDS THAT
NO PUBLIC MARKET NOW EXISTS, OR MAY EVER EXIST, FOR THE INTERESTS.
7.2.6 STATEMENTS IN BUSINESS PLAN. EACH MEMBER REPRESENTS
AND WARRANTS THAT SUCH MEMBER UNDERSTANDS THAT THE STATEMENTS CONTAINED IN THE
BUSINESS PLAN THAT ARE NOT HISTORICAL STATEMENTS ARE FORWARD LOOKING STATEMENTS.
THESE FORWARD LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING BUT
NOT LIMITED TO THE RISK THAT ACTUAL RESULTS OF OPERATIONS MAY NOT MATCH THOSE
PRESENTED THEREIN.
7.2.7 ACCREDITED INVESTOR. Each Member represents and
warrants that it is an institutional investor or accredited investor meeting the
standards of sophistication normally expected of an investor in a transaction
exempt from the registration provisions of the United States Securities Act of
1933, as amended, under Section 4(2) thereof or as defined in Regulation D
promulgated thereunder, with respect to the purchase of the Interests.
7.2.8 NO COMMISSIONS. Each Member represents and warrants
that no person has or will have, as a result of the transactions contemplated by
this Agreement, any rights, interest or valid claim against or upon the Company
or any other party hereto for any commission, fee or other compensation as a
finder or broker because of any act or omission by such Member or any agent of
such Member. Each Member agrees to indemnify and hold the Company and each other
party hereto harmless against any and all costs and liabilities as a result of
any such claim arising from any such act or omission by such Member.
ARTICLE 8
RESTRICTIONS ON TRANSFER; PREEMPTIVE RIGHT;
ADMISSION OF NEW MEMBERS; RIGHT OF FIRST REFUSAL
8.1 RESTRICTIONS ON TRANSFER.
8.1.1 NO TRANSFER WITHOUT CONSENT. Until the fifth
anniversary of the Effective Date, except with the prior unanimous consent of
the Members or as provided in Sections 3.3.1, 3.3.2.2, 8.1.2, or 10.3 through
10.7, inclusive, no Member may sell, convey, transfer, assign, mortgage, pledge,
hypothecate or otherwise encumber in any way ("Transfer") all or any portion of
such Member's Interest. As used in this Agreement, a Transfer shall not include
a reincorporation or merger not entered into for the purpose of, and not having
the effect of, changing or influencing the control of such Member. From and
after the fifth anniversary of the Effective Date, no Member may Transfer all or
any portion of such Member's Interest except (i) with the prior written consent
of other Members holding not less than a majority of the Percentage Interests
held by such other Members and (ii) in compliance with Section 8.5. This Section
8.1.1 shall not apply to a Transfer by a Member to its wholly-owned subsidiary,
or to a Transfer pursuant to Section 14.1.
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8.1.2 TRANSFER FOLLOWING APPROVAL OF NEW FOUNDRY.
Notwithstanding the provisions of Section 8.1.1, a Member may Transfer such
Member's Interest if (i) such Transfer follows the approval of the construction
of a new foundry by the Company by the Board of Directors and the Members as
provided in Section 6.4.2.8 and the Member proposing to Transfer its Interest
did not consent to the construction of such new foundry by the Company, and (ii)
the provisions of Section 8.5 have been complied with. A Transfer pursuant to
this Section 8.1.2 shall be limited to a Member's Economic Interest if the Board
of Directors of the Company in its reasonable discretion determines that a
Transfer of the Member's Membership Interest will jeopardize the Company's
treatment as a partnership for tax purposes.
8.1.3 NO TRANSFER TO COMPETITOR. Without the prior
unanimous written consent of the Managing Members, no Transfer may be made by a
Member of such Member's Interest to a Prohibited Person.
8.1.4 TRANSFER IN VIOLATION VOID. Any attempted Transfer
not permitted hereunder shall be null and void ab initio. If, notwithstanding
the foregoing, a Transfer not permitted hereunder is determined by a court of
competent jurisdiction to be valid, any transferee taking pursuant thereto shall
receive only the Economic Interest of the transferring Member. Any Member who
Transfers or purports or attempts to Transfer an Interest in violation of
Section 8.1 shall promptly pay over and be liable to the non-breaching Members,
according to their respective Percentage Interests, for the total transfer price
of such Interest, received and to be received, in addition to, and not in lieu
of, any other right or remedy which the non-breaching Members may have, at law
or in equity, or pursuant to Article 10, all subject to Article 21.
8.2 GENERAL TRANSFER PROVISIONS. Notwithstanding any other
provisions of this Agreement:
8.2.1 NO VIOLATION OF LAW. No portion of, or interest in,
an Interest may be the subject of a Transfer without assurances to the Company
that are satisfactory to non-transferring Members that the proposed Transfer
does not violate any law applicable to the Company. The Members may, among other
things, require (i) a written opinion addressed to the Company, in form and
substance satisfactory to the non- transferring Members, of legal counsel
acceptable to the non-transferring Members, to the effect that the proposed
Transfer is exempt from registration under the Securities Act of 1933, as
amended (or a "no action" letter from the staff of the Securities and Exchange
Commission satisfactory to the non-transferring Members, to the effect that such
Transfer is exempt from such registration); (ii) registration under applicable
state securities laws or a written opinion addressed to the Company, in form and
substance satisfactory to the non-transferring Members, of legal counsel
acceptable to the Company, to the effect that such Transfer is exempt under
applicable state securities laws; (iii) a written opinion addressed to the
Company, in form and substance satisfactory to the non-transferring Members, of
legal counsel acceptable to the non- transferring Members, to the effect that
any such contemplated Transfer will not require the Company to register under
the Investment Company Act of 1940, require that the Company or any Member
register as an investment adviser under the Investment Advisers Act of 1940, or
cause the Company to lose its partnership status for U.S. Federal income tax
purposes; and (iv) representations and warranties concerning the facts and
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circumstances establishing the basis for the availability of exemptions from
registration under the Securities Act of 1933, the Investment Company Act of
1940, the Investment Advisers Act of 1940, and other reasonable assurances
relating to any other applicable laws, from the proposed substituted or proposed
transferee Member.
8.2.2 TRANSFEREE TO BE BOUND BY THIS AGREEMENT. In addition
to any other requirements contained in this Agreement pertaining to a Transfer
of Interests, as a condition precedent to any Transfer, the prospective
transferee shall, for the express benefit of the Company and each
non-transferring Member, agree to be bound by all of the terms of this Agreement
and to make such reasonable representations and warranties as the Members may
request.
8.2.3 DELAY IN TRANSFER. Except as may occur upon
conversion of the Company or upon transfers of Interest to a corporation
pursuant to Section 14.1, if, in the determination of the non-transferring
Members, a proposed Transfer would, alone or in conjunction with one or more
other Transfers cause the Company to lose its partnership status or terminate
its partnership existence for U.S. Federal income tax purposes, such Transfer
(if otherwise permitted) shall be delayed in whole or in part until the earliest
time as determined by the non-transferring Members that such Transfer may occur
without causing the Company to lose its partnership status or to terminate for
U.S. Federal income tax purposes. If at any time more than one Transfer is being
delayed under this Section 8.2.3, such Transfers shall be made in the order in
which the Company received written notice of the proposed Transfers under this
Section.
8.2.4 LIABILITY OF TRANSFEROR. Except as may occur upon
conversion of the Company or upon Transfers of Interest to a corporation
pursuant to Section 14.1, any Member who voluntarily Transfers or attempts to
Transfer any portion of or interest in its Interest, if such a Transfer causes
or would cause the Company to lose its partnership status or terminate its
partnership existence for U.S. Federal income tax purposes, shall be liable to
the Company and promptly shall pay for any incremental costs, taxes, fines,
penalties, damages or losses which may be due from the Company or the Members or
suffered by the Company or the Members, including costs of enforcement of the
Company's power to void or otherwise prohibit such Transfer or attempted
Transfer.
8.2.5 NO RELEASE. No Transfer of all or any portion of, or
interest in, an Interest, whether or not in compliance with this Article 8 and
even if it results in the substitution of the transferee as a new Member, shall
release the transferor from those liabilities to the Company which survive such
Transfer.
8.3 PREEMPTIVE RIGHTS.
8.3.1 PREEMPTIVE RIGHT. Subject to Section 8.6, if the
Company shall propose to issue, sell or distribute any Membership Interest or
any option, warrant or right to acquire, or any security convertible into or
exchangeable for any of the foregoing, each Member shall, subject to the
provisions of Section 8.6, have a right of first refusal to participate in such
issuance, sale or distribution on a pro rata basis according to the Percentage
Interest held by each
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Member so that following such issuance, sale or distribution each Member would
acquire or have the right to acquire, if each Member had elected to acquire such
Member's pro rata portion, the same Percentage Interest in the Company as each
Member had by reasons of such Member's Percentage Interest prior to such
issuance, sale or distribution.
8.3.2 PROCEDURE. The Company shall provide each Member with
notice of any such proposed issuance which notice shall specify the nature of
the proposed issuance, the consideration to be received therefor, the identity
of the proposed purchaser, and the terms upon which such issuance shall be
undertaken. Each Member shall have the right to elect to purchase from the
Company a portion of the Interest referred to in the notice at the same price
and on the same terms as specified in the notice for a period of sixty (60) days
after the giving of the notice but not thereafter. A Member shall exercise this
right by delivering in writing to the Company notice of such Member's intent to
purchase such Member's pro rata share along with the purchase price therefore.
If any Member shall elect to purchase none, or less than all of the offered
Interest, the other Members shall have the right to purchase the pro rata share
of the Member who has declined to purchase the offered Interest, according to
each purchasing Member's pro rata share of such Interest, for a successive
period of thirty (30) days thereafter. All or any portion of the Interest not so
purchased may be issued as specified in the notice within a period of forty-five
(45) days after the expiration of such ninety (90) day period specified above.
8.3.3 LIMITATION. Notwithstanding the foregoing, the
provisions of this Section 8.3 shall not apply to any of the following: (i) any
issuance, sale or distribution in connection with the conversion of each
Member's Interest in the Company to an interest in the Delaware Corporation as
provided for in Article 14, (ii) the transactions contemplated by Sections
3.3.1, 3.3.2, 3.5.4 or 10.5, or (iii) any option, warrant or other rights
granted to Officers, Directors or employees of the Company pursuant to the
Incentive Plan.
8.4 ADMISSION OF NEW MEMBERS. A new Member may be admitted to the
Company only if Section 8.3 has been complied with and upon the written consent
of Members holding not less than 71% in Percentage Interest (without
consideration of the Percentage Interest of any Defaulting Member, Selling
Member, Terminated Member or Non-Paying Member). Prior to any new Member
acquiring the Interest of a Managing Member, the Managing Member proposing to
Transfer its Interest shall disclose to the other Members, whether it is
proposed that the new Member shall, following the Transfer, designate such
Managing Member's representative on the Board of Directors, and hold the
decision making authority of the Managing Member for decisions which pursuant to
this Agreement require the consent of the Managing Members. Any Transfer
approved pursuant to the first sentence of this Section shall then be an
approval of the Transfer of the rights specified in the disclosure notice.
8.4.1 CAPITAL CONTRIBUTION. The type and amount of Capital
Contribution which must be made by a new Member shall be determined by the
written consent of Members holding not less than 71% in Percentage Interest
(without consideration of the Percentage Interest of any Defaulting Member,
Selling Member, Terminated Member or Non-Paying Member).
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8.4.2 TIME OF ADMISSION. A new Member shall not be deemed
admitted into the Company until the Capital Contribution required of such Person
shall have been made and such Person has become a party to this Agreement.
8.4.3 ADJUSTMENT OF INTERESTS. Upon admission of a new
Member, the Percentage Interests of all previously existing Members shall be
adjusted to reflect the addition of such new Member and such new Member's
Capital Contribution.
8.5 RIGHT OF FIRST REFUSAL.
8.5.1 If any Member ("Selling Member") intends to Transfer
its Interest or any part thereof (the "Offered Interest") (except to a
wholly-owned subsidiary) it shall notify the Company and the other Members of
its intention to do so ("Offering Notice"). The Offering Notice shall specify
the nature of the Transfer, the consideration to be received therefor, the
identity of the proposed purchaser (or lender, as the case may be), and the
terms upon which such Member intends to undertake such Transfer. Within thirty
(30) days after receipt of the Offering Notice, the Members other than the
Selling Member shall have the right, but not the obligation, subject to Section
8.6, to elect to purchase from the Selling Member a portion of the Offered
Interest referred to in the Offering Notice at the same price and on the same
terms as specified in the Offering Notice for a period of thirty (30) days after
the giving of the Offering Notice (or make the loan, if the same involves an
encumbrance, hypothecation or mortgage, upon the same terms on which said loan
was to be made therefor) by delivering in writing to the Company an offer to
purchase (or loan) a portion of the Offered Interest of the Selling Member. Each
Member so electing to purchase shall be entitled to purchase a portion of such
Offered Interest in the same proportion that such Member's Percentage Interest
bears to the aggregate of the Percentage Interests of all of the Members
electing to purchase the Offered Interest. In the event any Member elects to
purchase less than all of such Member's pro rata share of such Offered Interest
("Shortfall"), subject to Section 8.6, the other Members may elect to purchase
their pro rata share of the Shortfall. Within sixty (60) days after the election
notice of the Members who so elect, the purchase shall be consummated on the
terms and conditions set forth in the Offering Notice of the Selling Member (or
if the same involves a mortgage, encumbrance or other hypothecation, the loan
shall be consummated upon the terms and conditions of the loan set forth in the
Offering Notice).
8.5.2 If none of the other Members elect to purchase the
Offered Interest (or elect to make the loan specified), or the election is made
for less than all of the Offered Interest, then the Selling Member, subject to
Section 8.6, within thirty (30) days after the expiration of said sixty (60) day
period, may undertake and complete the Transfer to any Person the identity of
which was disclosed in the Offering Notice for that portion of the Offered
Interest not undertaken to be purchased by the other Members provided, however,
that the proposed transferee has been approved by the other Members as specified
in Sections 8.1.1, 8.1.3, and 8.4, as such Sections may be applicable to the
Transfer, and the provisions of Section 8.6 have been complied with. The
Transfer shall not be undertaken at a lower price or upon more favorable terms
than specified in the Offering Notice. If the Selling Member does not then
consummate the original proposed Transfer within ninety (90) days after the date
of the Offering Notice, or within the time scheduled
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for closing by the purchasing person, firm or corporation, whichever is later,
then all restrictions of this Section shall apply as though no Offering Notice
had been given.
8.6 SPECIAL TRANSFER PROVISION. Any Managing Member who elects
pursuant to Sections 3.3, 8.1, 8.5 or 10.3 of this Agreement to acquire an
additional Interest in the Company (which Interest was previously held by or was
to be held by a Managing Member) shall at the time such Member's Percentage
Interest is increased also have an increase in such Member's rights and
obligations to purchase the output of the Foundry pursuant to the Purchase
Agreement or Future Purchase Agreement corresponding to the additional
Percentage Interest being acquired. Any New Buyer which acquires pursuant to
Section 3.3, 8.1, 8.5 or 10.3 hereof an Interest that was previously held by a
Managing Member or other Person holding rights and obligations to purchase the
output of the Foundry pursuant to the Purchase Agreement or Future Purchase
Agreement shall at the time of such acquisition acquire rights and obligations
to purchase the output of the Foundry corresponding to the Percentage Interest
being acquired. If at any time (a) a Member's or other Person's Percentage
Interest changes as a result of (i) a Transfer in accordance herewith, (ii) a
failure to pay a Second Part Capital Contribution, Third Part Capital
Contribution, or Additional Capital Contribution, (iii) a failure to guarantee a
loan to the Company in accordance herewith, (iv) an Event of Default, or (v) any
other provision hereunder and (b) in the reasonable opinion of the Board of
Directors, such change, in conjunction with the provisions herein and in the
Purchase Agreement or Future Purchase Agreement for adjusting the Managing
Members' purchase rights or obligations under such agreements, produces an
inequitable or unintended result, then the Board of Directors, with the
concurrence of all Managing Members that are parties to the Purchase Agreement
or Future Purchase Agreement, may adjust the purchase rights and obligations of
such Members in such manner as the Board of Directors determines in good faith
is equitable under the circumstances.
8.7 SPECIAL RIGHT OF MANAGING MEMBERS OTHER THAN TSMC TO PURCHASE.
This Section shall apply if pursuant to Sections 3.3, 8.3, 8.5, or 10.3 of this
Agreement, TSMC provides notice to the Company of its intention to acquire an
additional Interest in the Company which, after the Percentage Interests of all
Members are adjusted in connection with such transaction, would result in TSMC
having a Percentage Interest which, when combined with the Percentage Interest
of the Third Party Investors', would equal or exceed a 71% Percentage Interest.
Prior to the completion of any such transaction, the Board of Directors shall
provide written notice to each Managing Member of this provision and the option
of such Managing Members (other than TSMC and excluding any Managing Member
whose Interest is being offered pursuant to Sections 3.3, 8.5 or 10.3 of this
Agreement (the "Subject Interest")) to purchase, in addition to their pro rata
portion of the Subject Interest, a pro rata portion of the Excess Subject
Interest (including the right to purchase a pro rata portion of any shortfall
resulting from another Member's election to purchase less than its entire pro
rata allocation). As used in this Section 8.7, the term "Excess Subject
Interest" means the portion of the Subject Interest which TSMC has elected to
purchase which would cause TSMC and the Third Party Investors to jointly hold a
Percentage Interest equal to or exceeding 71%. Each such Managing Member shall
have the right to purchase its pro rata share of the Excess Subject Interest by
giving notice within thirty (30) days of the notice received from the Board of
Directors pursuant to this Section of such Member's intent to acquire its pro
rata share of the Excess Subject
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Interest, TSMC may proceed with its acquisition of any portion of the Excess
Subject Interest not so acquired.
ARTICLE 9
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
9.1 MAINTENANCE OF BOOKS AND RECORDS. The Company shall cause books and
records of the Company to be maintained in accordance with GAAP (except for the
Capital Accounts which shall be maintained in accordance with the Regulations as
provided in Section 3.4), and shall give reports to the Members in accordance
with prudent business practices and the Act. The annual accounting period of the
Company shall be the Fiscal Year. The books and records of the Company shall be
audited annually by a certified public accounting firm nationally recognized in
the United States, selected by the Board of Directors and approved by the
Members as provided for in Section 6.4.2.7. The Company shall promptly upon
receipt make available to the Managing Members all preliminary drafts of
financial statements that it receives from the Company's certified public
accountants. Not less than five (5) days before the financial statements of the
Company become final, the Company shall provide each of the Managing Members
with a copy of the draft of the financial statements of the Company and during
this period, shall provide each of the Managing Members with the opportunity to
comment on such financial statements. The initial firm of certified public
accountants is Arthur Andersen & Co. LLP. There shall be kept at the principal
business office of the Company specified in Section 2.4 the following Company
documents:
9.1.1 A current list of the full name and last known business
or residence address of each Member and each holder of an Economic Interest, set
forth in alphabetical order, together with the amount of cash and a description
and statement of the agreed value of any other property or services that were
Capital Contributions of each Member and that each Member has agreed to
contribute to the Company in the future, the date on which each Member became a
Member, and the share in Net Profit and Net Loss of each Member and holder of an
Economic Interest;
9.1.2 A copy of the Certificate of Formation and any
amendments thereto, together with any powers of attorney pursuant to which the
Certificate of Formation and any amendments thereto were executed;
9.1.3 Copies of the Company's U.S. Federal, state, local and
other income tax or information returns and reports, if any, for the six most
recent taxable years;
9.1.4 A signed counterpart of this Agreement and any
amendments hereto, together with any powers of attorney pursuant to which this
Agreement and any amendments hereto were executed;
9.1.5 Copies of the financial statements of the Company, if
any, for the six (6) most recent Fiscal Years;
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9.1.6 The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four (4)
Fiscal Years;
9.1.7 Any other information necessary to provide true and full
information regarding the status of the business and financial condition of the
Company; and
9.1.8 Other information regarding the affairs of the Company
as is reasonable or prudent.
9.2 INSPECTION RIGHTS. Each Member and each holder of an Economic
Interest has the right upon reasonable request, for purposes reasonably related
to the interest of that Person as a Member or holder of an Economic Interest, to
inspect and copy during normal business hours any of the books and records
required to be maintained in accordance with Section 9.1. Such right may be
exercised by such Person or by that Person's agent or attorney.
9.3 RIGHTS TO RECEIVE COPIES OF DOCUMENTS. Upon the request of a Member
or holder of an Economic Interest, for purposes reasonably related to the
interest of that Person as a Member or holder of an Economic Interest, the
Member who has custody of the following documents shall promptly deliver to the
Member or holder of an Economic Interest, at the expense of the Company, a copy
of this Agreement and a copy of the documents listed in Sections 9.1.1 and 9.1.3
of this Agreement.
9.4 BANK ACCOUNTS. The bank accounts of the Company shall be maintained
in such banking institutions as the Board of Directors shall determine.
9.5 TAX MATTERS HANDLED BY TAX MATTERS PARTNER.
9.5.1 TSMC is hereby designated the "Tax Matters Partner" (as
defined in Code Section 6231), and is authorized and required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including administrative and judicial
proceedings, and to expend Company funds for professional services and costs
associated therewith. The Tax Matters Partner will control all decisions with
respect to such proceedings, but will keep the Board of Directors and other
Managing Members reasonably informed with respect to such proceedings and will
provide the other Managing Members the opportunity to offer comments and
suggestions with respect to such proceedings to the extent practicable. Each
Member agrees to cooperate with the Tax Matters Partner and to do or refrain
from doing any or all things reasonably requested by the Tax Matters Partner
with respect to the conduct of such proceedings. The Tax Matters Partner shall
arrange for the preparation and timely filing of all returns required to be
filed by the Company. Any Member receiving advice that the Internal Revenue
Service or any state or foreign revenue service intends to examine any income
tax return of the Company shall promptly notify the Tax Matters Partner.
9.5.2 The Tax Matters Partner shall exert commercially
reasonable efforts to adopt positions and make elections for tax purposes which
(i) minimize the sum of the current taxable income and gain, and (ii) maximize
the sum of the current taxable losses, deductions, and
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credits, to the Managing Members as a group. In addition, notwithstanding any
other provision of this Agreement, the Tax Matters Partner shall cause all
Company tax returns and other related tax filings to be prepared in such manner
as to reflect that any income, gain, loss, or deduction recognized by the
Company as the result of an adjustment, reallocation or recharacterization by
any tax authority of the tax treatment of any transaction between the Company
and a Member or an Affiliate of a Member as originally reported on any tax
return filed for the Company shall be specially allocated to such Member for the
taxable year of the adjustment, reallocation or recharacterization and for each
taxable year thereafter so that the tax consequences to the other Members shall,
to the extent possible, have the same cumulative aggregate tax consequences as
if no such adjustment, reallocation or recharacterization had occurred. No such
adjustment shall be reflected in the Capital Accounts of the Members. Not less
than thirty (30) days before actual filing, the Tax Matters Partner shall
provide to all of the other Managing Members a copy of each of the final returns
and other administrative or judicial filings of the Company relating to income
taxation, and during this period, shall provide the other Managing Members with
the opportunity to comment on such returns and filings. The Members agree that,
except as otherwise approved in advance by the Board of Directors, no Member
shall take any position in any such administrative proceeding inconsistent with
the tax returns filed by the Company, provided such tax returns are prepared in
a manner consistent with this Agreement. Nothing in this Agreement shall be
construed to provide the Tax Matters Partner with rights, powers or privileges
relating to tax administrative proceedings in excess of the minimum rights,
powers and privileges provided to the Tax Matters Partner by Code sections 6221,
et. seq., and the Treasury Regulations thereunder.
9.6 FEDERAL INCOME TAX ELECTIONS MADE BY TAX MATTERS PARTNER. Except as
otherwise provided herein, the Tax Matters Partner on behalf of the Company may
make all elections for U.S. Federal, state and local income tax purposes,
including but not limited to, the following:
9.6.1 USE OF ACCELERATED DEPRECIATION METHODS. To the extent
permitted by applicable law and regulations, the Company may elect to use an
accelerated depreciation method on any depreciable unit of the assets of the
Company.
9.6.2 ADJUSTMENT OF BASIS OF ASSETS. In case of a transfer of
all or part of the Interest of any Member, the Company may elect, pursuant to
Sections 734, 743, and 754 of the Code, to adjust the basis of the assets of the
Company.
9.7 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware
of the income tax consequences of the allocations made by this Agreement and
hereby agree to be bound by the provisions of this Agreement in reporting their
shares of the Company income and loss for income tax purposes in a manner
consistent with the tax returns filed by the Company, provided such tax returns
are prepared in a manner consistent with this Agreement.
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ARTICLE 10
EVENT OF DEFAULT; TERMINATION OF MEMBERSHIP
10.1 EVENT OF DEFAULT. The occurrence of any one or more of the
following events shall be a breach and a default ("Event of Default") hereunder:
10.1.1 A Member shall fail to perform a material obligation of
this Agreement or of any of the Ancillary Agreements and, (except for breaches
contemplated in Sections 10.1.5 or 10.1.6 of this Agreement, which provide for
no opportunity to cure, and except for breaches for which another cure period is
specified herein), does not cure or remedy the default within sixty (60) days
thereafter. Notwithstanding the foregoing, the breach or failure to perform any
of the following Sections shall not be, or be deemed to be, an Event of Default:
Sections 3.3.1, 3.3.2, and 3.5.4 (each of which shall be treated as provided in
such Sections ).
10.1.2 Any representation, warranty or statement made by a
Member under or pursuant to this Agreement or any Ancillary Agreement or under
any affidavit, certificate or other instrument executed in connection with any
of the foregoing, shall be false or misleading in any material respect as of the
Effective Date or shall become so at any time prior to the Dissolution Date, and
such Member does not cure the same within thirty (30) days written notice
thereof.
10.1.3 A Member shall (i) be adjudicated as bankrupt or
insolvent; (ii) make a general assignment for the benefit of its creditors;
(iii) file a petition, answer or consent seeking, or have entered against it (or
fail reasonably to contest the material allegations of any petition for) an
order for relief (or any similar remedy) under any provision of Title 11 of the
United States Code or any other U.S. Federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, or
consent to the institution of any proceedings thereunder; (iv) convene a general
meeting of its creditors, or any class thereof, for the purpose of effecting a
general moratorium upon or general extension or composition of its debts; (v)
fail to pay such Member's debts as they mature; (vi) admit in writing that such
Member is generally not able to pay its debts as they mature; or (vii) apply for
or consent to the appointment of a receiver, trustee, custodian, liquidator or
other similar official of all or a substantial portion of such Member's assets.
10.1.4 Any one or more of the following occurs: (i) a petition
is filed or any case or proceeding described in Section 10.1.3 above is
commenced against any Member or against the assets thereof, unless such petition
and the case or proceeding initiated thereby is dismissed within sixty (60) days
from the date of the filing; (ii) an answer is filed by any Member admitting the
allegations of any such petition; or (iii) a court of competent jurisdiction
enters an order, judgment or decree appointing, without the consent of any
Member, a custodian, trustee, agent or receiver of it,or for all or a
substantial part of its property, or authorizing the taking possession by a
custodian, trustee, agent or receiver of it, or of all or a substantial part of
its property unless such appointment is vacated or dismissed or such possession
is terminated within sixty (60) days from the date of such appointment or
commencement of such possession, but not later than 5 days
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before the proposed sale of any assets of such Member by such custodian,
trustee, agent or receiver.
10.1.5 A Member files a certificate of dissolution or
otherwise dissolves, terminates or liquidates, or is merged with or is
consolidated into any other corporation, limited liability company, partnership,
or other entity other than an Affiliate of such Member, except for a merger or
consolidation not entered into for the purpose of and not having the effect of
changing or influencing the control of the Member.
10.1.6 A Member becomes a Prohibited Person or an Affiliate of
a Prohibited Person.
10.2 TERMINATION OF MEMBER. If an Event of Default occurs and is not
cured within the applicable time period (if any) specified in Section 10.1, the
defaulting Member shall be terminated as a Member, and all rights and privileges
of such former Member under this Agreement shall be adjusted and disposed of as
follows:
10.2.1 If the Event of Default is as provided or described in
any of Section 10.1.1, Section 10.1.2 or Section 10.1.5, the Member shall be
terminated as a Member upon the vote of the non-defaulting Members with a
majority of the Interests held by non-defaulting Members.
10.2.2 For all other Events of Default, termination of
Membership shall occur immediately following the elapse of the specified cure
period, if any.
10.2.3 Notwithstanding any other provision of this Agreement
and subject to Section 11.2.3, the termination of a Member ("Terminated Member")
as contemplated in this Section 10.2 shall not affect the rights of any other
Member (a "Remaining Member") under this Agreement. The Company shall promptly
notify a Terminated Member of such termination, but the failure to give such
notice shall not affect such termination or create any rights in the Terminated
Member.
10.3 PURCHASE RIGHT. Unless provided otherwise in this Agreement, upon
termination of a Terminated Member as contemplated in Section 10.2, the
Remaining Members shall have the right to purchase and the Terminated Member
shall have the obligation to sell, the Terminated Member's Interest as provided
in Sections 10.3 through 10.7, inclusive. The purchase price for such Interest
shall be an amount equal to 50% of the lesser of (i) the Terminated Member's
Percentage Interest in the book value of the Company as of such termination
date, or (ii) the fair market value of the Terminated Member's Interest as of
such termination date as determined in the reasonable discretion of the Board of
Directors, not including any Director appointed by the Terminated Member. Such
reduction in value shall constitute partial compensation for damages suffered by
the Remaining Members as a result of the act, omission or condition which
resulted in the termination of the Terminated Member, and subject to Article 21,
shall be in addition to, and not in lieu of any other right or remedy which the
Remaining Members may have, at law or in equity, or pursuant to this Agreement.
The Directors shall give notice to all Remaining Members of such purchase price.
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10.4 NOTICE OF INTENT TO PURCHASE. Within thirty (30) days after the
Directors have determined and notified the Remaining Members as to the purchase
price of the Terminated Member's Interest determined in accordance with Section
10.3, each Remaining Member shall have the right, but not the obligation, to
elect to purchase a portion of the Terminated Member's Interest. Any Remaining
Member so electing shall notify the Directors in writing within thirty (30) days
after the notice from the Directors of such Remaining Member's desire to
purchase a portion of the Terminated Member's Interest. The failure of any
Remaining Member to submit such notice within the applicable period shall
constitute an election on the part of the Remaining Member not to purchase any
of the Terminated Member's Interest. Each Remaining Member so electing to
purchase shall be entitled to purchase a portion of the Terminated Member's
Interest in the same proportion that the Percentage Interest of the Remaining
Member bears to the aggregate of the Percentage Interest of all of the Remaining
Members electing to purchase the Terminated Member's Interest.
10.5 ELECTION TO PURCHASE LESS THAN ALL OF THE TERMINATED MEMBER'S
INTEREST. If any Remaining Member elects to purchase none or less than all of
such Remaining Member's pro rata share of the Terminated Member's Interest
("Shortfall Amount"), then subject to the provisions of Section 8.6, the other
Remaining Members may elect to purchase the Shortfall Amount in proportion to
their respective Percentage Interests. Each Remaining Member who purchases part
of the Terminated Member's Interest shall succeed to a pro rata share of the
Terminated Member's Capital Account balance. If the Remaining Members do not
purchase the entire Interest of the Terminated Member, then subject to the
provisions of Section 8.6, with respect to all or any remaining share of the
Terminated Member's Interest, one or more new Members, if approved pursuant to
Section 8.4, may be admitted as a Member or Members and purchase the Terminated
Member's remaining Interest by paying for the Interest in cash. If the entire
Interest of the terminated Member is not purchased, the Terminated Member shall
have only an Economic Interest, and without limiting the generality of the
foregoing, shall not be a Managing Member, shall not be entitled to designate a
Director hereunder and any current Director or Directors appointed by such
Terminated Member shall be deemed to be removed and the number of Directors on
the Board of Directors shall be reduced accordingly. In such event as partial
compensation for damages suffered by the Company and the Remaining Members, (i)
the Terminated Member's remaining Interest shall be reduced by fifty percent
(50%) and the Remaining Members' Interests shall be increased pro rata
accordingly, (ii) the Terminated Member's Capital Account Balance following the
purchase of any Remaining Member, if any, shall be reduced by 50%, and the
difference shall be added to the Capital Account Balances of the Remaining
Members, pro rata according to their Interests, and (iii) solely for purposes of
determining the Managing Members' and a Terminated Member's rights and
obligations to purchase the output of the Foundry under the Purchase Agreement
or Future Purchase Agreement (which rights and obligations shall be a function,
to be specified in each of those agreements, of the Managing Members' and
Terminated Member's Percentage Interests), effect shall not be given to any
increase or decrease in a Managing Member's or Terminated Member's Percentage
Interest attributable to the operation of clause (i).
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10.6 PAYMENT OF PURCHASE PRICE. The purchase price shall be paid by the
electing Remaining Members by either of the following methods, each of which may
be selected separately by the electing Remaining Members in their respective
sole discretion:
10.6.1 The Remaining Members shall at the consummation of the
purchase of the Terminated Member's Interest ("Closing") pay in cash the total
purchase price for the Terminated Member's Interest; or
10.6.2 The Remaining Members shall pay at the Closing
one-fifth (1/5) of the purchase price in cash and the balance of the purchase
price shall be paid in four equal annual principal installments, plus accrued
interest, and be payable each year on the anniversary date of the Closing. The
unpaid principal balance shall accrue interest at the current applicable U.S.
Federal rate as provided in the Code for the month in which the initial payment
is made, but the Remaining Members shall have the right to prepay in full or in
part at any time without penalty. The obligation of each purchasing Remaining
Member to pay its portion of the balance due shall be evidenced by a separate
promissory note executed by the respective Remaining Member. Each such
promissory note shall be in an original principal amount equal to the portion
owed by the respective purchasing Remaining Member. The promissory note executed
by each purchasing Remaining Member shall be secured by a pledge of that portion
of the Terminated Member's Interest purchased by such Remaining Member.
10.7 CLOSING OF PURCHASE OF TERMINATED MEMBER'S INTEREST. The Closing
for the sale of a Terminated Member's Interest pursuant to this Article 10 shall
be held at 10:00 a.m. at the principal office of Company no later than sixty
(60) days after the determination of the purchase price. At the Closing, the
Terminated Member or such Terminated Member's legal representative shall deliver
to the electing Remaining Members an instrument of transfer (containing
warranties of title and no encumbrances) conveying the Terminated Member's
Interest free and clear of all liens, charges and encumbrances whatsoever,
except as permitted by the purchaser thereof. The Terminated Member or such
Terminated Member's legal representative, the Company and the Remaining Members
shall do all things and execute and deliver all documents as may be necessary or
convenient to consummate such sale and purchase in accordance with the terms and
provisions of this Agreement. Without limiting the generality of the foregoing,
each Member hereby appoints each Remaining Member as its attorney-in-fact and
agent, with full power and authority to take all actions and execute and deliver
all agreements, deeds, leases, releases, assignments, bills of sale, security
instruments and any other document which, in the sole judgment of such Remaining
Member, is necessary or convenient to consummate such sale and purchase.
ARTICLE 11
TERMINATION AND DISSOLUTION
11.1 TERMINATION. This Agreement shall terminate on the first to occur
of (i) the Dissolution Date or (ii) the unanimous written consent of the Members
or (iii) upon consummation of the Company's merger or consolidation as
contemplated in Article 14.
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11.2 DISSOLUTION. The Company shall be dissolved upon the first to
occur of the following events:
11.2.1 The written approval of Members holding not less than
87% in Percentage Interest if the dissolution does not occur contemporaneously
with an IPO of the Delaware Corporation;
11.2.2 The action of the Board of Directors if such action
occurs contemporaneously with an IPO of the Delaware Corporation;
11.2.3 The death, retirement, insanity, incapacity,
resignation, expulsion, bankruptcy or dissolution of a Managing Member, or the
occurrence of any other event which terminates a Managing Member's continued
membership in the Company, unless the business of the Company is continued with
the written consent of other Members holding a Majority in Interest of such
other Members within ninety (90) days following the occurrence of such event;
11.2.4 The appointment of a receiver, trustee or liquidator of
the Project which appointment is not vacated within thirty (30) days; or the
attachment, execution or other judicial seizure of the Project where such
seizure is not discharged within ten (10) days thereafter; or
11.2.5 The entry of a decree of judicial dissolution under
Section 18-802 of the Act; or
11.2.6 Following an act of Governmental Intervention, if
written request shall be made by one Managing Member to the other Managing
Members within sixty (60) days from said Governmental Intervention and the
Managing Members hereto shall have entered into good faith negotiations with the
objective of restructuring the relationship among the Members in a manner such
that the adverse effect of said alteration or modification of this Agreement
will be minimized and following which, the Managing Members cannot unanimously
reach a reasonably acceptable modification to this Agreement, within six (6)
months from the date of dispatch of said written request, or within such longer
period of time as mutually agreed upon by the unanimous consent of the Managing
Members.
11.2.7 On the thirtieth (30th) anniversary of the date of the
filing of the Certificate of Formation of the Company.
11.3 WINDING UP. Upon the dissolution of the Company, TSMC (or if TSMC
is no longer a Member, a liquidating trustee appointed by a Majority in Interest
of the remaining Members), shall wind up the affairs of the Company (such Person
or Persons herein collectively called the "Liquidating Person"). Upon
dissolution of the Company and until the filing of the certificates of
cancellation pursuant to Section 11.6, the Liquidating Person may, in the name
of, and on behalf of, the Company, prosecute and defend suits, whether civil,
criminal or administrative, gradually settle and close the Company's business,
dispose of and make reasonable provision for the Company's liabilities, and
distribute to the members any remaining assets of the Company, all without
affecting the liability of the Members and without imposing liability on a
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liquidating trustee. The Liquidating Person shall be entitled to reimbursement
for out-of-pocket expenses incurred and reasonable compensation for services
rendered in connection with the winding up and liquidation of the Company, as
agreed by the Members. Such reimbursement shall be paid as an expense of the
Company after all debts to third parties have been repaid or adequately provided
for but before any repayment of loans or advances by Members.
11.4 DISTRIBUTION OF ASSETS. The Members shall continue to divide Net
Profit and Net Loss and Cash Available For Distribution during the winding-up
period in the same manner and the same priorities as provided for in Articles 4
and 5 hereof. The proceeds from the liquidation of Property shall be applied in
the following order:
11.4.1 To the payment of creditors, including Members who are
creditors, in satisfaction of liabilities of the Company (whether by payment of
the making or reasonable provision for payment thereof) other than liabilities
for which reasonable provision for payment has been made and liabilities to
Members for distributions pursuant to Article 4;
11.4.2 To set up reasonable reserves for contingent or
unforeseen liabilities of the Company, to be maintained in a regular trust fund
account;
11.4.3 To repay pro rata all loans or advances made by the
Members to the Company, but in the event the amount available for such repayment
shall be insufficient, then pro rata on account thereof; and
11.4.4 The balance if any, shall be paid or distributed to the
Members in proportion to their Percentage Interests; except, if the Company
shall be dissolved prior to the expiration of the period beginning on the
Effective Date and ending five years from the date of Commencement of
Production, as defined in the Purchase Agreement (the "Subordination Period")
and if such dissolution is as a result of an event of Force Majeure or a major
economic or business event or condition such that the economic or business
assumptions underlying the Business Plan have changed to the extent that it is
economically impracticable to substantially implement the Business Plan
(including, but not limited to, major claims or litigation against the Company,
failure to operate the Foundry on an economically viable basis, a change in
technology rendering the business of the Company obsolete, or a major economic
recession), and the Board has determined to dissolve the Company with the
approval of the Members as provided in Section 11.2.1, then the Manufacturing
Agreement, the Technology License and Assistance Agreement, and the Advanced
Process Agreement (collectively and together with the other property listed as
contributed by TSMC on Exhibit A, the "TSMC Contributed Property") shall each be
terminated and the balance of the proceeds from the liquidation of Property
shall be paid or distributed to the Members as follows: (i) first, to the
Members in reverse chronological order (last in, first out), until the entire
Cash Contribution of each is returned to each Member, without any interest, and
(ii) the rest, residue and remainder, if any, to the Members in accordance with
each Member's Percentage Interest. For purposes of the preceding sentence, TSMC
shall be treated as if it had contributed pursuant to the First Part Capital
Contribution described in Section 3.1.1 hereof, an amount of cash ("Property
Cash"), in addition to the cash contribution of TSMC described in such Section
3.1.1, equal to the product of (x) the initial agreed value of the TSMC
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Contributed Property as shown on Exhibit A and (y) the Permitted Percentage. For
purposes of this Section 11.4.4, the term "Permitted Percentage" shall be and
mean zero percent (0%) on and before the Commencement of Production, increasing
daily thereafter at an annual rate of twenty percent (20%) until the Permitted
Percentage is one hundred percent (100%) on the last day of the Subordination
Period.
Where the distribution pursuant to this Section 11.4 consists both of cash (or
cash equivalents) and non-cash property, the cash (or cash equivalents) shall
first be distributed, in a descending order, to fully satisfy each category
starting with the most preferred category above. To the maximum extent
practicable consistent with the foregoing, non-cash property shall be returned
to the Member which has contributed it.
11.5 TIME FOR WINDING UP. A reasonable time shall be allowed for the
orderly liquidation of assets of the Company and the discharge or other
provision of liabilities to creditors so as to enable the Liquidating Person to
minimize any losses attendant upon a liquidation.
11.6 FINAL ACCOUNTING; CERTIFICATES OF CANCELLATION. Each of the
Members shall be furnished with a statement, prepared by the Company's
independent certified public accountant, setting forth the assets and
liabilities of the Company as of the date of the complete liquidation. Upon the
compliance by the Liquidating Person with the foregoing distribution plan, the
Members shall cease to be such, and the Liquidating Person shall execute and
cause to be filed any and all documents necessary with respect to the
termination and cancellation of the Company, including, without limitation, a
certificate of cancellation under Section 18-203 of the Act.
ARTICLE 12
EXECUTIVE INCENTIVE PLAN
12.1 AUTHORIZATION OF EXECUTIVE COMPENSATION. The Company shall have an
Executive Incentive Plan in the form approved by the Board of Directors on the
Effective Date, with an initial award of option rights as set forth in Section 7
of the Executive Incentive Plan. The Executive Incentive Plan shall be
administered by the Board in accordance with its terms. In no event shall the
rights awarded under any Incentive Plan exceed an aggregate of 5% in Percentage
Interests.
12.2 ADMISSION OF PARTICIPANTS. Upon exercise of an option or payment
of an award with an equity interest in the Company, and payment of any
applicable purchase price determined in the discretion of the Board of Directors
and execution of a counterpart of this Agreement, a participant shall be
admitted as a Member with a Percentage Interest as earned under the Executive
Incentive Plan. Such participant shall have an initial Capital Account with
respect to the acquired Interest equal to the amount determined by multiplying
the participant's Percentage Interest with respect to the acquired Interest
times the amount determined by dividing (i) the aggregate sum of all Capital
Accounts of the Members prior to the transfer of the Interest
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to such participant, by (ii) one hundred percent (100%) minus the Percentage
Interest being acquired by such participant.
ARTICLE 13
TSMC LAND OPTION; NEW VENTURE RIGHTS
13.1 LAND OPTION. By execution of this Agreement, the Members agree and
acknowledge that as part of the Initial Capital Contribution of TSMC, and as a
convenience and accommodation to the Company, TSMC has arranged for option
agreements covering the Real Property to be assigned to the Company, which
option agreements cover real property in excess of that amount necessary to
construct the Foundry. On the Effective Date, the Company with the approval of
the Members granted to TSMC the TSMC Land Option, whereby TSMC has the option to
purchase the Land from the Company, for the Purchase Price (as defined in the
TSMC Land Option).
13.2 NEW FAB VENTURE RIGHT OF FIRST REFUSAL. On the Effective Date and
until the tenth (10th) anniversary of the Effective Date, TSMC has granted and
hereby grants a right of first refusal to each of the Managing Members to
participate in any venture controlled by TSMC or its Affiliates to construct
another foundry on the Land which is the subject of the TSMC Land Option, or
anywhere else in North America in proportion to their respective Percentage
Interests in the Company. TSMC agrees to meet and confer with the Managing
Members prior to exercise of TSMC's rights under the TSMC Land Option, in order
to discuss the participation of the Managing Members in any venture related
thereto.
13.3 FURTHER ASSURANCES. The Members, from time to time and as
requested by a Managing Member, shall, and shall cause the Company to, execute
and deliver such additional documents, give such further assurances and take any
additional actions as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Article 13.
ARTICLE 14
CHANGE OR CONVERSION TO A GENERAL CORPORATION
14.1 MERGER OR CONSOLIDATION TO A GENERAL CORPORATION. Subject to the
approval required by Section 6.4.2.3, each Member by execution and delivery of
this Agreement agrees to vote, and hereby votes, in favor of the
reincorporation, merger or consolidation of the Company, pursuant to Section
18-209 of the Act, or otherwise, to change or convert the Company into a
Delaware general corporation or a parent or a subsidiary of a Delaware
corporation, at such time, in such manner and on such basis as the Board of
Directors shall determine is in the best interests of the Company. Such change
or conversion to a Delaware general corporation may be accomplished by a direct
merger into a corporation, by one of the methods illustrated in Exhibit E, or by
any other method the Board of Directors determines is desirable, provided,
however, that each Member shall have the right to participate in proportion to
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its Percentage Interest in whichever method is selected by the Board of
Directors. As used herein "Delaware Corporation" shall mean any corporation
which through one transaction or a series of transactions involves the
conversion or exchange of the Interests of those Members who choose to
participate in such transaction into an interest in or the stock of such
corporation in proportion to a Member's Interest in the Company as adjusted to
reflect the participation of the other Members. Additionally, by execution and
delivery of this Agreement, each Member agrees to take any and all actions
necessary to consummate such a change or conversion, including, but not limited
to, the execution and delivery of an Agreement of Merger or Consolidation and
filing of a Certificate of Merger or Consolidation with the Office of the
Secretary of State, in such form and on such basis as the Board of Directors may
determine.
14.2 REGISTRATION RIGHTS. In the event the Delaware Corporation
undertakes an IPO, the Members shall have the registration rights provided for
in the Registration Rights Agreement. At the time the Member's Interests are
converted into or exchanged for an interest or shares in the Delaware
Corporation, each of the Members shall use its best efforts to cause the
Delaware Corporation to assume all rights, duties and obligations ascribed to it
in the Registration Rights Agreement. In the event any Member's shares of the
Delaware Corporation are included for sale in the initial public offering, each
Member shall be entitled to include such Member's shares of the Delaware
Corporation in such initial public offering on a pro rata basis.
14.3 VOTING ARRANGEMENTS.
14.3.1 CONVERSION CONTEMPORANEOUSLY WITH IPO. Each Member
agrees that if the conversion or exchange of each Member's Interest into an
interest in the Delaware Corporation occurs contemporaneously with an IPO of the
Delaware Corporation, then such Member shall execute and deliver a voting
agreement or other arrangement with a term and on such terms as may be specified
by TSMC, whereby TSMC shall have authority to designate the majority of the
board of directors of the Delaware Corporation. Each Member shall take any and
all actions necessary and execute any and all documents necessary to give TSMC
such authority.
14.3.2 CONVERSION NOT CONTEMPORANEOUSLY WITH IPO. Each Member
agrees that if the conversion or exchange of each Member's Interest into an
interest in the Delaware Corporation is not contemporaneous with an IPO of the
Delaware Corporation, then the Articles, Bylaws, Stockholder's Agreement, and
other governing documents of the Delaware Corporation shall provide for
corporate governance substantially equivalent to that of the Company as set
forth in this Agreement.
14.4 OPTIONS. In the event that each Member's Interest is converted or
exchanged into an interest in or shares of the Delaware Corporation, any
outstanding options, warrants or right to securities of the Company shall be
changed or converted into similar securities of the Delaware Corporation on the
same basis as a Member's Interest is changed or converted to an interest in or
shares of the Delaware Corporation.
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ARTICLE 15
STANDARD OF CARE; INDEMNIFICATION
15.1 STANDARD OF CARE. Each Director, Officer, employee and agent shall
perform its, his or her duties to the Company in good faith, in a manner he, she
or it reasonably believes to be in or not opposed to the best interests of the
Company, and with the care that a prudent person in a similar position would use
under similar circumstances. Each Director, Officer, employee and agent of the
Company and any Liquidating Person (individually, an "Indemnitee" and
collectively, the "Indemnitees") acting in such capacity shall be fully
protected in relying in good faith on information, opinions, reports or
statements, including financial statements, books of account and other financial
data, if prepared or presented by (i) one or more Directors, Officers or
employees of the Company who the Indemnitee reasonably believes are reliable and
competent in the matters prepared or presented, or (ii) legal counsel, certified
public accountants or other persons as to matters that the Indemnitee reasonably
believes are within the person's professional or expert competence. No
Indemnitee shall be liable for damages to the Company or any present or former
Member with respect to claims relating to its conduct for or on behalf of the
Company, except to the extent that there is a final judicial determination based
on clear and convincing evidence that (a) its action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company, or (b) with respect to any criminal action, proceeding or
investigation, it had no reasonable cause to believe its conduct was unlawful.
15.2 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
Company shall indemnify, defend and hold harmless each Indemnitee from and
against any and all claims, demands, causes of action, loss, liability, cost, or
expense (including reasonable attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which the Indemnitee was involved or may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the business of the Company, excluding liabilities to any Member, regardless
of whether the Indemnitee is or continues to be a Director, Officer, employee,
or agent of the Company, or a Liquidating Person at the time any such liability
or expense is paid or incurred, to the fullest extent permitted by the Act and
all other applicable laws.
15.3 EXPENSES. Expenses incurred by an Indemnitee in defending any
claim, demand, action, suit or proceeding subject to Section 15.2 shall, from
time to time, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
be determined that such Person is not entitled to be indemnified as authorized
in Section 15.2.
15.4 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The indemnification provided
by Section 15.2 shall be in addition to any other rights to which those
indemnified may be entitled under any agreement, action of the Board of
Directors, vote of the Members, as a matter of law or equity or otherwise, both
as to action in the Indemnitee's capacity as an Officer,
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Director, employee, or agent of the Company or as a Liquidating Person and as to
any action in another capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
15.5 ERRORS AND OMISSIONS INSURANCE. The Company may purchase and
maintain insurance, at the Company's expense, on behalf of the Directors and
Officers and such other Persons as the Directors shall determine, against any
liability that may be asserted against, or any expense that may be incurred by,
such Person in connection with the activities of the Company, regardless of
whether the Company would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
15.6 ASSETS OF THE COMPANY. Any indemnification pursuant to Section
15.2 shall be satisfied solely out of the assets of the Company. No Member shall
be subject to personal liability or required to fund or to cause to be funded
any obligation by reason of these indemnification provisions.
ARTICLE 16
AMENDMENTS
16.1 AMENDMENT, ETC. OF LIMITED LIABILITY COMPANY AGREEMENT. Except as
provided in Sections 6.4.2.9 and 6.4.2.10 and except to admit a new Member
approved as contemplated in Section 6.4.2.11, this Agreement may be amended, or
repealed and a new agreement may be adopted, only by (i) action of the
Directors, and (ii) the written consent of the Members holding not less than 87%
in Percentage Interest.
16.2 AMENDMENT, ETC. OF CERTIFICATE OF FORMATION. The Certificate of
Formation may be amended only by (i) action of the Directors, and (ii) the
written consent of the Members holding not less than 87% in Percentage Interest.
ARTICLE 17
CONDITIONS PRECEDENT
17.1 CONDITIONS TO MEMBERS' PERFORMANCE. Notwithstanding anything to
the contrary contained herein, on the Effective Date each of the following
conditions had been satisfied:
17.1.1 Expiration of any waiting periods that are required by
the laws of the U.S. or Taiwan to expire, and obtaining all requisite
governmental and other approvals, prior to the consummation of such
transactions, including, but not limited to, any waiting period required under
the U.S. Hart Scott Rodino Antitrust Improvement Act of 1976, as amended.
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17.1.2 The execution and delivery by the Company of all
Ancillary Agreements that this Agreement contemplates the Company shall execute.
17.1.3 The Certificate of Formation shall have been filed with
the Office of the Delaware Secretary of State.
17.2 CONDITIONS TO TSMC'S PERFORMANCE. In addition to the conditions
set forth in Section 17.1, notwithstanding anything to the contrary contained
herein, on the Effective Date each of the following conditions were deemed
satisfied by TSMC:
17.2.1 The truth and accuracy as of the Effective Date of each
of the representations and warranties set forth in Section 7.2 made by each
other Initial Member.
17.2.2 The execution and delivery by each other Initial Member
of each of the Ancillary Agreements that this Agreement contemplates such
Initial Member shall execute.
17.2.3 The performance by each other Initial Member of all
obligations and covenants set forth in this Agreement and required to be
performed on the date hereof, including without limitation, that each other
Initial Member shall have made its respective First Part Capital Contribution.
17.2.4 Receipt of any necessary approval by the Taiwan
Ministry of Economic Affairs of the investment in the Company by TSMC as
contemplated hereby.
17.3 CONDITIONS TO ADI'S PERFORMANCE. In addition to the conditions set
forth in Section 17.1, notwithstanding anything to the contrary contained
herein, on the Effective Date each of the following conditions were deemed
satisfied by ADI:
17.3.1 The truth and accuracy as of the Effective Date of each
of the representations and warranties set forth in Section 7.2 made by each
other Initial Member.
17.3.2 The execution and delivery by each other Initial Member
of each of the Ancillary Agreements that this Agreement contemplates such
Initial Member shall execute.
17.3.3 The performance by each other Initial Member of all
obligations and covenants set forth in this Agreement and required to be
performed on the date hereof, including without limitation, that each other
Initial Member shall have made its respective First Part Capital Contribution.
17.4 CONDITIONS TO ALTERA'S PERFORMANCE. In addition to the conditions
set forth in Section 17.1, notwithstanding anything to the contrary contained
herein, on the Effective Date each of the following conditions were deemed
satisfied by Altera:
17.4.1 The truth and accuracy as of the Effective Date of each
of the representations and warranties set forth in Section 7.2 made by each
other Initial Member.
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17.4.2 The execution and delivery by each other Initial Member
of each of the Ancillary Agreements that this Agreement contemplates such
Initial Member shall execute.
17.4.3 The performance by each other Initial Member of all
obligations and covenants set forth in this Agreement and required to be
performed on the date hereof, including without limitation, that each other
Initial Member shall have made its respective First Part Capital Contribution.
17.5 CONDITIONS TO ISSI'S PERFORMANCE. In addition to the conditions
set forth in Section 17.1, notwithstanding anything to the contrary contained
herein, on the Effective Date each of the following conditions were deemed
satisfied by ISSI:
17.5.1 The truth and accuracy as of the Effective Date of each
of the representations and warranties set forth in Section 7.2 made by each
other Initial Member.
17.5.2 The execution and delivery by each other Initial Member
of each of the Ancillary Agreements that this Agreement contemplates such
Initial Member shall execute.
17.5.3 The performance by each other Initial Member of all
obligations and covenants set forth in this Agreement and required to be
performed on the date hereof, including without limitation, that each other
Initial Member shall have made its respective First Part Capital Contribution.
17.6 CONDITIONS TO THE THIRD PARTY INVESTORS' PERFORMANCE. In addition
to the conditions set forth in Section 17.1, notwithstanding anything to the
contrary contained herein, on the Effective Date each of the following
conditions were deemed satisfied by the Third Party Investors:
17.6.1 The truth and accuracy as of the Effective Date of each
of the representations and warranties set forth in Section 7.2 made by each
other Initial Member.
17.6.2 The execution and delivery by each other Initial Member
of each of the Ancillary Agreements that this Agreement contemplates such
Initial Member shall execute.
17.6.3 The performance by each other Initial Member of all
obligations and covenants set forth in this Agreement and required to be
performed on the date hereof, including without limitation, that each other
Initial Member shall have made its respective First Part Capital Contribution.
17.6.4 Receipt of any necessary approval by the Taiwan
Ministry of Economic Affairs of the investment in the Company by a Third Party
Investor as contemplated hereby.
ARTICLE 18
CONFIDENTIALITY
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18.1 EXCHANGE OF INFORMATION AND NONDISCLOSURE. In furtherance of this
Agreement, or pursuant to the Ancillary Agreements the Members may from time to
time come into possession of certain information and data, including business
plans, fabrication techniques, processes, technology, financial information and
other compilations of information, which relate to the business of the Members.
Prior to the execution of this Agreement, each Initial Member has executed, and
each new Member shall sign and become a party to, the Member's Confidentiality
Agreement relating to such information.
18.2 CONFIDENTIALITY AGREEMENTS FOR VISITORS AND EMPLOYEES. Any
employee, contractor, subcontractor or guest of TSMC, ADI, Altera or ISSI who
visit the Foundry ("Visitor") shall execute and deliver a copy of the
Confidentiality Agreement in the form of Exhibit C(1). Visitors shall not be
permitted to: make or compile any notes, documentation or other information, or
make any photographs, drawings, tapes, films or other graphic representations.
Each employee of the Company at the time of employment shall execute and deliver
a copy of the Employee Invention Assignment and Confidentiality Agreement in the
form of Exhibit C(2).
18.3 THIRD PARTY REQUEST FOR INFORMATION. Except as otherwise provided
in this Agreement and except for private requests in the ordinary course of
business for non-Confidential Information relating to the Proven Products, a
Member shall immediately notify the other Members of any private or governmental
request for Confidential Information or any other information or documents
relating to the Proven Products or this Agreement. Each Member shall have the
right to participate in any other Member's response to any such request. In the
event that a Member receives any subpoena or other legal process requiring the
production of information, documents, data, work papers, reports, or other
materials relating to this Agreement, that Member shall:
18.3.1 give the other Members, if possible, the opportunity to
participate in quashing, modifying or otherwise responding to any compulsory
process in an appropriate and timely manner; and
18.3.2 cooperate fully with the other Member's efforts to
narrow the scope of any such compulsory process, to obtain a protective order
limiting the use or disclosure of the information sought, or in any other lawful
way to obtain continued protection of the Confidential Information.
Notwithstanding the foregoing, a private request to a Member from a third party
for Design Rules (as defined in the Purchase Agreement) and reliability results
may be disclosed without prior notice to the other Members if such third party
executes a Confidentiality Agreement in the form of Exhibit L to the Purchase
Agreement and the other Members are promptly provided with notice of the
disclosure after the disclosure is made.
18.4 REPORTING LOSS, THEFT OR MISAPPROPRIATION. If any Member becomes
aware of the loss, theft or misappropriation of Confidential Information which
is in its
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possession or control, it shall notify the other Members in writing within five
(5) days of its discovery of such loss, theft or misappropriation.
18.5 BREACH OF CONFIDENTIALITY. Each Member acknowledges that a breach
of this Article 18 or a breach of either of the Confidentiality Agreements will
result in irreparable injury to the party whose Confidential Information has
been disclosed and such party shall be entitled to temporary, preliminary and
permanent injunctive relief or to a protective order for any threatened or
actual violation of the provisions of this Article. Each Member agrees and
consents to the entry of an injunction or protective order by any court of
competent jurisdiction upon a showing by the party whose Confidential
Information has been disclosed that its Confidential Information is being used
or disclosed contrary to the terms of this Article 18 or the Confidentiality
Agreements. The foregoing provisions are in addition to, and not in limitation
of, the remedies of specific performance, damages, and any other remedies at
law, in equity or otherwise that the Members may have upon breach. The Members
stipulate that the arbitration provisions of Article 20 shall not apply to any
temporary restraining order, preliminary injunctive relief or other provisional
remedy sought to prohibit a breach or threatened breach of the provisions of
this Article or the Confidentiality Agreements.
ARTICLE 19
ANCILLARY AGREEMENTS
19.1 EXECUTION AND DELIVERY. On or before the Effective Date, the
following documents were executed and delivered by the parties thereto, and the
Company executed and delivered each such document: the Confidentiality
Agreements, the Registration Rights Agreement, and the Assignments of the
Manufacturing Agreement, the Technology License and Assistance Agreement and the
Advanced Process Agreement.
19.2 TERMINATION OF MANUFACTURING AGREEMENT; FUTURE PURCHASE AGREEMENT.
Following the expiration or termination of the Manufacturing Agreement (and
consequently, the termination of the Purchase Agreement), until the useful life
of the Foundry has ended, the Managing Members shall enter into the Future
Purchase Agreement, the form of which is attached hereto as Exhibit F, whereby
the Managing Members shall have the right and obligation to purchase the output
of the Foundry as provided for in the Future Purchase Agreement. Notwithstanding
the foregoing, the Members agree that if the Company constructs an additional
foundry on the Real Property, any rights or obligations to purchase the output
of such additional foundry shall be negotiated at that time and shall not be
covered by the provisions of the Purchase Agreement or the Future Purchase
Agreement.
ARTICLE 20
DISPUTE RESOLUTION; ARBITRATION
20.1 NEGOTIATION BETWEEN EXECUTIVES. Each of the Members and the
Company shall attempt in good faith to resolve any dispute, controversy or claim
("Dispute")
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arising out of or relating to this Agreement promptly by negotiations between
executives who have authority to settle the Dispute. Any Member or the Company
may give the other Members and the Company written notice of any Dispute not
resolved in the normal course of business. Within twenty (20) days after
delivery of such a notice, executives of the Members and the Company involved in
the Dispute who have authority to settle the Dispute shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the Dispute. If the matter has not been
resolved within thirty (30) days after such notice, unless extended by the
agreement of the parties involved in the Dispute in writing (the "Negotiation
Period"), the matter shall be subject to mediation as provided in Section 20.2.
If a Member or the Company intends to be accompanied at a meeting by an
attorney, the other involved parties shall be given at least three (3) Business
Days' notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this provision are confidential and shall be treated as
compromise and settlement negotiations for purpose of the United States Federal
Rules of Evidence and state rules of evidence.
20.2 MEDIATION. Any Dispute not settled pursuant to Section 20.1 shall
be submitted to mediation administered by the American Arbitration Association
under its Commercial Mediation Rules (such mediation, "Mediation"), before
resorting to arbitration as hereinafter provided. The Mediation shall be
completed within forty-five (45) days of its initiation pursuant to the
Commercial Mediation Rules, unless all the parties involved in the Dispute
otherwise agree. Executives of all parties involved in the Dispute with
authority to resolve the Dispute shall participate in the Mediation. The
Mediation shall take place in San Jose, California. The parties shall attempt in
good faith to reach agreement on the appointment of a mediator. If they cannot
so agree, the mediator shall be appointed pursuant to the Commercial Mediation
Rules; provided, however, that the mediator appointed shall have a background in
the semiconductor industry. The parties involved in the Dispute shall each pay
their own expenses of Mediation, including attorney's fees, and shall share
equally the mediator's fees and expenses.
20.3 CLAIMS SUBJECT TO ARBITRATION. Except as otherwise specified
below, any Dispute arising out of or relating to this Agreement, or the breach
or termination thereof, and not resolved pursuant to Section 20.1 or Section
20.2 shall be resolved by binding arbitration in accordance with the Federal
Arbitration Act, 9 U.S.C. Sections 1 et seq. (the "FAA"), and the
Commercial Arbitration Rules and, where the amount in controversy exceeds
$1,000,000, the Supplementary Procedures for Large Complex Disputes, of the AAA
(collectively, the "Rules"). In the event of a conflict between the FAA and the
Rules, the Rules shall govern. In the event of a conflict between this Article
20 and the FAA or the Rules, the provisions of this Article 20 shall govern. A
court of competent jurisdiction, upon application from any party to the Dispute,
may relieve the parties of their duty to arbitrate Disputes in whole or in part,
or may stay any arbitration hereunder in whole or in part, if ongoing litigation
between one or more of the parties and a third party (or parties) involves
issues of fact or law common with those subject to arbitration hereunder and
there exists the possibility of inconsistent judgments if such relief is not
granted. Each party involved in a Dispute also reserves the right to file with a
court of competent jurisdiction an application for temporary or preliminary
injunctive relief, a protective order or other appropriate provisional remedy on
grounds that (a) the arbitration award to which the applicant may be entitled
may be rendered ineffectual in the absence of such relief; or (b) in the event
of a breach or threatened breach of Article 18 hereof or the Confidentiality
Agreements.
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20.3.1 VENUE. The venue for such arbitration proceeding will
be San Jose, California.
20.3.2 SELECTION OF ARBITRATOR AND DETERMINATION OF
CONTROVERSIES.
20.3.2.1 Any Dispute subject to arbitration shall be submitted
to a single neutral arbitrator, who, unless otherwise agreed by all parties
involved in the Dispute, shall be a retired judge or other lawyer who is a
member of the arbitration panel of the Judicial Arbitration and Mediation
Service ("JAMS") or the national panel of arbitrators of the AAA and who has
substantial experience in the area of the Dispute. The parties involved in the
Dispute shall confer concerning the selection of the AAA or JAMS with the
objective of selecting one or the other within thirty (30) days of the
conclusion of the Mediation; provided, however, that if all parties to the
Dispute do not agree on one or the other within such thirty (30) day period, the
Dispute initially will be submitted simultaneously to both the AAA and JAMS for
the sole purpose of picking the arbitrator. If the parties to the Dispute select
the arbitrator from the JAMS panel, then the term "Rules" as used herein shall
mean the then-prevailing JAMS rules. The AAA (or JAMS, as the case may be)
simultaneously shall submit to each party involved in the Dispute an identical
list of five proposed qualified arbitrators drawn from the applicable panel of
commercial arbitrators. If the parties involved in the Dispute are unable to
agree upon an arbitrator within thirty (30) days from the date that the AAA (or
JAMS, as the case may be) submits such list to the parties involved in the
Dispute, then the AAA (or JAMS, as the case may be) shall simultaneously submit
to each party involved in the Dispute a second identical list of five additional
proposed qualified arbitrators drawn from the applicable panel of commercial
arbitrators. If for any reason, the appointment of an arbitrator cannot be made
from either list, the AAA (or JAMS, as the case may be) may make the appointment
from among other qualified members of the panel without the submission of
additional lists to the parties involved in the Dispute. If the Dispute is
initially submitted to both the AAA and JAMS for the purpose of picking the
arbitrator, then both the AAA and JAMS simultaneously shall submit to each party
lists of five proposed qualified arbitrators drawn from the applicable panel
(with each party receiving the identical list from AAA and the identical list
from JAMS), and if the parties are unable to agree upon an arbitrator within
thirty (30) days from the date that both the AAA and JAMS submit the first such
lists to each party, then the AAA and JAMS simultaneously shall submit to each
party second lists of five additional proposed qualified arbitrators (with each
party receiving an identical second list from AAA and an identical second list
from JAMS). If the parties for any reason are unable to select an arbitrator
from the first and second lists submitted by the AAA and JAMS, then a majority
of the parties shall select to arbitrate with either the AAA or JAMS, and the
arbitration organization so selected shall make the appointment from among other
qualified members of the arbitration panel of that organization without the
submission of additional lists to the parties. Where the parties have initially
submitted the Dispute to both the AAA and JAMS, then once an arbitrator has been
appointed, the arbitration proceeding will be terminated with the arbitration
organization that has not been selected and the parties shall equally share the
costs and fees of the arbitration organization so terminated. If for any reason
the parties to the Dispute have not selected an arbitrator within ninety (90)
days of the conclusion of the Mediation, then the arbitration shall be conducted
with the AAA. No matter how selected, the
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arbitrator shall have no prior or existing affiliation or relationship with any
party involved in the Dispute or its counsel, and shall sign an oath of
impartiality upon appointment.
20.3.2.2 The parties involved in the Dispute shall be entitled
to obtain pre-hearing discovery through depositions and requests for the
inspection and copying of documents and other items upon reasonable notice and
to obtain the issuance of a subpoena duces tecum therefor in accordance with
applicable law, including without limitation 9 U.S.C. Section 7 and
(notwithstanding Section 1297.17 of the California Code of Civil Procedure)
Section 1283.05 of the California Code of Civil Procedure; provided that
depositions shall not be taken unless leave to do so is first granted by the
arbitrator. As between the parties involved in the Dispute, the arbitrator shall
have the power to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, sanctions and penalties as may be imposed in like circumstances in
a civil action by a U.S. Federal court.
20.3.3 ARBITRATION AWARD AND JUDICIAL REVIEW. The arbitrator,
in deciding any Dispute, shall base his or her decision on the record and in
accordance with this Agreement and applicable law. In no event shall the
arbitrator make any ruling, finding or award that does not conform to the terms
and conditions of this Agreement, is not supported by the weight of the
evidence, or is contrary to statute, administrative regulations or established
judicial precedents. The arbitration award shall be a factually detailed,
reasoned opinion stating the arbitrator's findings of fact and conclusions of
law. Unless the arbitrator for good cause determines otherwise, the final award
shall include attorneys' fees, costs and expenses of the prevailing party,
including expert and non-expert witness fees and the prevailing party's share of
the administrative fee and the arbitrator's fees and expenses, if any.
Notwithstanding any other provisions of this Agreement, the arbitrator shall
have no jurisdiction to award damages in contravention of Article 21 hereof. The
arbitration award shall be subject to judicial review in accordance with 9
U.S.C. Sections 10-12; provided, however, that the arbitration award shall
also be vacated to the extent that the arbitrator exceeds his or her authority
as set forth in this Section 20.3.3, and, on balance, the party seeking vacation
of the award has been materially and adversely affected thereby. Judgment may be
entered on the award by the United States District Court in accordance with 9
U.S.C. Section 9.
20.3.4 DERIVATIVE ACTION. Pursuant to Section 20.3, a Member
may initiate and pursue in the right of the Company any Dispute arising out of
or relating to a transaction which is the subject matter of Section 2.10.2 or
Section 3.5.1. The parties to any such Dispute shall first attempt to resolve
the Dispute pursuant to Section 20.1 or 20.2.
ARTICLE 21
LIMITATION ON DAMAGES; CONTRACTUAL LIMITATIONS PERIOD
21.1 LIMITATION ON DAMAGES.
21.1.1 WITH THE EXCEPTION OF ANY LOSS, LIABILITY, DAMAGE OR
OBLIGATION ARISING OUT OF OR RELATING TO DISCLOSURE OF CONFIDENTIAL INFORMATION
IN VIOLATION OF ARTICLE 18, NO MEMBER SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
59
<PAGE> 67
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR LOSS OF USE) SUFFERED BY ANY
OTHER MEMBER ARISING FROM OR RELATING TO A MEMBER'S PERFORMANCE,
NON-PERFORMANCE, BREACH OF OR DEFAULT UNDER A COVENANT, WARRANTY,
REPRESENTATION, TERM OR CONDITION HEREOF. EXCEPT AS SPECIFICALLY PROVIDED IN THE
PRECEDING SENTENCE, EACH MEMBER WAIVES AND RELINQUISHES CLAIMS FOR INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NOTWITHSTANDING SUCH WAIVER AND
RELINQUISHMENT, WITH RESPECT TO ANY LOSS, LIABILITY, DAMAGE OR OBLIGATION
ARISING OUT OF OR RELATING TO DISCLOSURE OF CONFIDENTIAL INFORMATION IN
VIOLATION OF ARTICLE 18, A MEMBER SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGE (INCLUDING WITHOUT LIMITATION, LOSS OF
PROFITS OR LOSS OF USE) SUFFERED BY ANY OTHER MEMBER ARISING FROM OR RELATING TO
A MEMBER'S PERFORMANCE, NON-PERFORMANCE, BREACH OF OR DEFAULT UNDER SAID ARTICLE
18.
21.1.2 NO MEMBER SHALL HAVE THE RIGHT TO RECOVER PUNITIVE
DAMAGES FROM THE OTHER MEMBER, AND EACH MEMBER HEREBY WAIVES AND RELINQUISHES
ANY AND ALL PUNITIVE DAMAGE CLAIMS.
21.1.3 THE LIMITATIONS ON LIABILITY AND DAMAGES SET FORTH IN
SECTIONS 21.1.1 AND 21.1.2 APPLY TO ALL CAUSES OF ACTION THAT MAY BE ASSERTED
HEREUNDER, WHETHER SOUNDING IN BREACH OF CONTRACT, BREACH OF WARRANTY, TORT,
PRODUCT LIABILITY, NEGLIGENCE OR OTHERWISE.
21.2 CONTRACTUAL LIMITATIONS PERIOD. Any arbitration, litigation,
judicial reference or other legal proceeding involving the parties shall be
commenced within two (2) years after the accrual of the cause of action, except
for arbitration, litigation, judicial reference or other legal proceedings in
respect to claims for indemnification under the provisions of this Agreement,
which indemnification claims shall be commenced within the statutory limitations
period provided by applicable law.
ARTICLE 22
FORCE MAJEURE
22.1 FORCE MAJEURE. Subject to the limitations set forth in Section
22.4, should any Member be prevented from performing such Member's contractual
obligations under this Agreement due to the cause or causes of Force Majeure,
that Member shall not be liable to any other Member for any delay or failure of
performance caused by any Force Majeure events; nor shall that Member be deemed
to have committed an Event of Default hereunder. Notwithstanding the foregoing,
a Force Majeure event shall not excuse a Member's obligation to pay money.
However, a monetary obligation shall be suspended until cessation of such Force
Majeure event if,
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
60
<PAGE> 68
and only if, the Force Majeure event actually and directly renders physically
impossible a Member's payment of money due under this Agreement.
22.2 NOTIFICATION. The Member prevented or delayed by a Force Majeure
event in the performance of any obligation hereunder shall promptly notify the
other Members of the occurrence of any Force Majeure event in writing by cable,
telex or telecopier.
22.3 RESPONSE TO FORCE MAJEURE. Should the delay caused by any events
of Force Majeure continue for more than ninety (90) days, the Members shall
settle all questions of further performance of this Agreement through good faith
negotiations as soon as possible with the objective of restructuring the
relationship among them such that the effects of such events of Force Majeure
are minimized. If the Members do not agree in writing on a mutually acceptable
solution within six (6) months of a Member's request for such negotiations, the
Board of Directors shall have the authority to deem the Member subject to the
Force Majeure event to have committed an Event of Default at which time, the
Member shall become a Terminated Member, without necessity for a vote of the
Members, and, without limitation, shall be subject to the provisions of Sections
10.3 through 10.7, inclusive.
22.4 LIMITATIONS ON APPLICABILITY OF FORCE MAJEURE. This Article 22
shall be void and inapplicable to any Member (i) if such Member fails to use
reasonable diligence to remedy any Force Majeure event that prevents or delays
that Member's performance hereunder by continuously pursuing such actions as
that Member reasonably can take under the circumstances; and (ii) in the event
of a strike, lockout or other labor disruption, if the Member is found by the
National Labor Relations Board or other governmental agency having jurisdiction
to have caused such strike, lockout or labor disruption or if such Member
refuses to enter into bargaining with respect to such strike, lockout or labor
disruption.
ARTICLE 23
GENERAL PROVISIONS
23.1 SEVERABILITY. If any provision of this Agreement is, or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, such provision
shall be deemed amended to conform to applicable laws so as to be valid and
enforceable or, if it cannot be so amended without materially altering the
intention of the Members, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
23.2 NEUTRAL INTERPRETATION; WAIVER. Each party hereto has received
independent legal advice from its attorneys with respect to the advisability of
executing this Agreement and the meaning of the provisions hereof. Each party
hereto waives any real, apparent, possible or inchoate conflict in connection
with, arising out of or resulting from the representation of any Member and its
Affiliates, and the Company by the same law firm. The provisions of this
Agreement shall be construed as to their fair meaning, and not for or against
any party hereto based upon any attribution to such party as the source of the
language in question.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
61
<PAGE> 69
23.3 NOTICES. Any notices, demands, requests, waivers or other
communications required or permitted to be given to a party hereunder shall be
in writing in the English language and shall be delivered or sent to such party
at its address set forth on Exhibit A hereto, or such other address as such
party may hereafter specify, and shall be deemed given (i) when personally
delivered to such party, (ii) when transmitted by facsimile and receipt of such
transmission is confirmed by facsimile, (iii) 24 hours after dispatch via an
established overnight courier service, or (iv) three (3) days after mailing by
prepaid first class, certified mail with return receipt requested.
23.4 TIME OF THE ESSENCE. Time is of the essence with respect to each
provision of this Agreement.
23.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of America,
without regard to conflicts of laws principles.
23.6 ENTIRE AGREEMENT. Except as provided in Section 23.23, this
Agreement, the Ancillary Agreements, the Executive Incentive Plan and that
certain letter from TSMC Taiwan to the Members dated as of the Effective Date
(the "Letter of Assurances") constitute and contain the entire agreement of the
Members, and supersede any and all prior or contemporaneous negotiations,
correspondence, understandings, representations, warranties and agreements
between the Members, written or oral, respecting the subject matter hereof or
thereof. Other than as contained herein and as provided in Section 23.23, in the
Ancillary Agreements or in the Letter of Assurances, no representation,
warranty, statement, or condition is binding on the parties hereto or thereto,
or has any force or effect whatsoever.
23.7 WAIVER. No waiver of any provision of this Agreement shall be
effective unless and until made in writing and signed by each party hereto. No
waiver, forbearance or failure by any party hereto of its right to enforce any
provision of this Agreement shall constitute a waiver or estoppel of such
party's right to enforce any other provision of this Agreement or a continuing
waiver by such party of compliance with any provision.
23.8 COOPERATION. Each party hereto shall cooperate with each other
party hereto and shall take such further action and shall execute and deliver
such further documents as may be necessary or desirable in order to carry out
the provisions and purposes of this Agreement. Each party, recognizing that
there may be drafting errors in and among this Agreement, the Ancillary
Agreements and the Letter of Assurances, agrees that it will cooperate with each
other party to exercise good faith efforts to correct any such drafting errors.
23.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
23.10 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to which
reference is made in this Agreement are deemed to be incorporated by reference
into this Agreement, whether or not actually attached hereto.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
62
<PAGE> 70
23.11 ATTORNEYS' FEES. In the event of any arbitration, mediation,
litigation or other proceeding involving the parties to this Agreement to
enforce any provision of this Agreement, to enforce any remedy available upon
default under this Agreement, or seeking a declaration of the rights of a party
under this Agreement, the prevailing party shall be entitled to recover from the
other such attorneys' fees and costs as may be reasonably incurred, including
the cost of reasonable investigation, preparation and professional or expert
consultation incurred by reason of such litigation. Notwithstanding the
foregoing, (a) in an arbitration proceeding the award of attorneys' fees shall
be governed by the provisions of Section 20.3.3, and (b) in a mediation each
party shall pay its own attorneys' fees in accordance with Section 20.2.
23.12 DATE OF PERFORMANCE. If the date on which any performance
required hereunder is other than a Business Day, then such performance shall be
required as of the next following Business Day.
23.13 SURVIVAL. Following early termination or the elapse or expiration
of this Agreement, the provisions of Article 1, Section 7.2, Article 9, Article
14, Article 15, Article 16, Article 20, Article 21 and Article 23 shall survive
and remain in full force and effect in accordance with their terms.
23.14 SURVIVAL OF RIGHTS. This Agreement shall be binding upon, and, as
to permitted or accepted successors, transferees and assigns, inure to the
benefit of the Members and the Company and their respective heirs, legatees,
legal representatives, successors, transferees and assigns, in all cases whether
by the laws of descent and distribution, merger, reverse merger, consolidation,
sale of assets, other sale, operation of law or otherwise.
23.15 THIRD-PARTY BENEFICIARIES. There are no third-party beneficiaries
of this Agreement except Indemnitees.
23.16 PARTITION. Each Member hereby irrevocably waives any and all
rights, duties, obligations and benefits with respect to any action for
partition of Company Property or to compel any sale or appraisal thereof or of
any deceased Member's interest therein. Further, all rights, duties, benefits
and obligations including inventory and appraisal of the Company assets or sale
of a deceased Member's interest therein, provision for which is made in the law
of Delaware, or on account of the operation of any other rule or law of any
other jurisdiction to compel any sale or appraisal of Company assets or sale or
appraisal of a deceased Member's interest therein, are hereby irrevocably waived
and dispensed with. The Interest of a deceased Member shall be subject to the
provisions of this Agreement.
23.17 GOVERNING LANGUAGE OF AGREEMENT. This Agreement is in the English
language only, which language shall be controlling in all respects, and all
other versions thereof in any other language shall be for accommodation only and
shall not be binding upon each party hereto. All communications to be made or
given pursuant to this Agreement shall be in the English language.
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
63
<PAGE> 71
23.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each party hereto
irrevocably consents to the jurisdiction of the courts located in San Jose,
California, agrees, subject to the provisions of Article 20 and Article 21, that
any action, suit or proceeding by or among the Members (or any of them) or the
Company and any Member may be brought in any such court sitting in San Jose,
California and waives any objection which the Member may now or hereafter have
concerning jurisdiction and venue, whether based on considerations of personal
jurisdiction, forum non conveniens or on any other ground. Each party hereto
hereby irrevocably designates, appoints and empowers the Secretary of State of
California to receive for and on behalf of such party service of process in the
State of California and further irrevocably consents to the service of process
outside of the territorial jurisdiction of said courts by mailing copies thereof
by registered or certified United States mail, postage prepaid, to such party's
last known address as shown in the records of the Company with the same effect
as if such party were a resident of the State of California and had been
lawfully served in such state. Nothing in this Agreement shall affect the right
to service of process in any other manner permitted by law. Any process served
on the California Secretary of State in accordance with the preceding sentence
shall also be noticed to the served party's last known address established in
accordance with Section 23.3, in a manner permitted by such Section 23.3. Each
party hereto further agrees that final judgment against it in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction
within or outside the State of California by suit on the judgment, a certified
or exemplified copy of which shall be conclusive evidence of the fact and the
amount of such judgment.
23.19 LIQUIDATED DAMAGES. All provisions of this Agreement, including
without limitation those relating to the valuation of a Member's Interest or
adjustments in Percentage Interests, have been negotiated by the parties hereto
at arm's-length, and each party affirms that all such provisions are fair, just
and equitable. Without limiting the generality of the foregoing, the provisions
of Sections 3.3, 3.5.4, 8.1.4, 8.2.4, 10.3, 10.5 and 22.3 reflect the parties'
best estimates of liquidated compensatory damages and do not constitute a
penalty, and no party shall make any claim or allegation to the contrary.
23.20 AUTHORIZED REPRESENTATIVES. Until changed by a party hereto by
written notice to each of the other parties, the following individuals, and only
such individuals, are authorized to act on behalf of the party so designating
them as its authorized representative with full power and authority to speak for
and bind such Member in connection with all matters arising under this Agreement
or relating to the business of the Company:
TSMC Donald W. Brooks
ALTERA Rodney Smith
ADI Rob Marshall
ISSI Jimmy Lee
COMPANY Kenneth Smith
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
64
<PAGE> 72
The Third Party Investors pursuant to a Power of Attorney and Proxy
contained in Subscription Agreements dated as of June 5, 1996 have designated
Donald W. Brooks as their attorney-in-fact and authorized representative, who
shall be their only representative authorized to act on their behalf, with full
power and authority to vote, speak for and bind such Third Party Investors in
connection with all matters arising under this Agreement or relating to the
business of the Company.
23.21 REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. The parties
hereto shall have all rights, remedies and recourse granted in this Agreement,
in any other agreements entered into between the parties hereto and available at
law or in equity,and except as otherwise provided in this Agreement or the
Ancillary Agreements the same (i) shall be cumulative and concurrent; (ii) may
be pursued separately, successively or concurrently; (iii) may be exercised as
often as occasion therefore shall arise, it being agreed that the exercise or
failure to exercise any right, remedy or recourse shall in no event be construed
as a waiver or release thereof; and (iv) are intended to be, and shall be,
non-exclusive.
23.22 WAIVER OF CONFLICT OF INTEREST. EACH OF THE MEMBERS HAS BEEN
REPRESENTED BY SEPARATE COUNSEL IN CONNECTION WITH THIS AGREEMENT AND THE
ANCILLARY AGREEMENTS. SUCH COUNSEL HAS NOT REPRESENTED THE COMPANY PRIOR TO THE
EFFECTIVE DATE. THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS WHO HAVE PERFORMED
SERVICES FOR THE MEMBERS IN THE PAST MAY PERFORM SERVICES FOR THE COMPANY AND
MAY CONTINUE TO ALSO PERFORM SERVICES FOR THE SEPARATE MEMBERS IN THE FUTURE. TO
THE EXTENT THAT SUCH DUAL REPRESENTATION CONSTITUTES A CONFLICT OF INTEREST, THE
COMPANY AND THE MEMBERS HEREBY EXPRESSLY WAIVE ANY SUCH CONFLICT OF INTEREST
WITH RESPECT TO ANY SUCH DUAL REPRESENTATION RELATIVE TO THE NEGOTIATION AND
EXECUTION OF THIS AGREEMENT AND THE ANCILLARY AGREEMENTS.
23.23 AMENDMENT AND RESTATEMENT. This Agreement amends, restates and
supercedes the Original Agreement, and makes certain non-material changes for
the convenience of the Members; nothing contained in this Agreement is intended
to change or alter the rights and obligations of each Member set forth in the
Original Agreement. The operative effect of this Agreement and the rights and
obligations of each Member hereunder relate back to the Effective Date.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
65
<PAGE> 73
[SIGNATURE PAGE TO AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TSMC DEVELOPMENT, INC.
By: /s/ Donald W. Brooks
Name: Donald W. Brooks
Its: President
ANALOG DEVICES, INC.
By: /s/ Joseph E. McDonough
Name: Joseph E. McDonough
Its: Vice President Finance & CFO
ALTERA CORPORATION
By: /s/ Rodney Smith
Name: Rodney Smith
Its: President, Chief Executive Officer
and Chairman
INTEGRATED SILICON SOLUTIONS, INC.
By: /s/ Jimmy S.M. Lee
Name: Jimmy S.M. Lee
Its: Chairman, President and
Chief Executive Officer
<PAGE> 74
[SIGNATURE PAGE TO AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT]
THIRD PARTY INVESTORS:
Chung Mou Chang (a.k.a. Morris Chang)
Donald W. Brooks
Swanlake Traders Ltd.
Taiwan United Venture Capital Corp.
Sunpower Enterprises Limited
I-Mon Wu (a.k.a. Johnny Wu)
I-Kuang Wu
Seaquest Ventures Inc.
Yi-Ming Wu (a.k.a. Bill Wu)
Yih-Chueh Wu (a.k.a. Eric Y.C. Wu)
Fesdon Investments Ltd.
Kenneth Smith
By: /s/ Donald W. Brooks
Donald W. Brooks, individually and as attorney-in-
fact for the above named Third Party Investors
<PAGE> 75
EXHIBIT A
CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
CASH AND PROPERTY AS FIRST PART CASH AS SECOND PART CASH AS THIRD PART
------------------------------- ------------------- ------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
- ----------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
TSMC Development, Inc. (1) Property consisting of: U.S. $98,820,960 U.S. $131,761,280
1740 Technology Drive Assignment of Manufacturing
Suite 660 Agreement, Technology License and
San Jose, CA 95110 Assistance Agreement and
Phone: (408) 437-8762 Advanced Process Agreement, real
Fax: (408) 441-7713 estate options, equipment orders
and other property with agreed
value of U.S. $112,000,000; and
(2) U.S. $103,820,960*
Analog Devices, Inc. U.S. $42,120,000 U.S. $42,120,000 U.S. $56,160,000
1 Technology Way
P. O. Box 9106
Norwood, MA 02062
Phone: (617) 329-4700
Fax: (617) 461-2491
Altera Corporation U.S. $42,120,000** U.S. $42,120,000 U.S. $56,160,000
2610 Orchard Parkway
San Jose, CA 95134
Phone: (408) 894-8072
Fax: (408) 894-8000
Integrated Silicon Solutions, U.S. $9,360,000 U.S. $9,360,000 U.S. $12,480,000
Inc.
680 Alamanor Ave.
Sunnyvale, CA 94806
Phone: (408) 733-4774
Fax: (408) 749-1979
THIRD PARTY U.S. $6,479,040 U.S. $6,479,040 U.S. $8,638,720
----------------- ----------------- -----------------
INVESTORS:
TOTAL CAPITAL
CONTRIBUTION: U.S. $315,900,000 U.S. $198,900,000 U.S. $265,200,000
================= ================= =================
<CAPTION>
AGREED PERCENTAGE
-----------------
AGREED TOTAL VALUE OF INTEREST FOLLOWING EACH
--------------------- -----------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
- ----------------------- -------------------- --------------------
<S> <C> <C>
TSMC Development, Inc. U.S. $446,403,200 57.2312%
1740 Technology Drive
Suite 660
San Jose, CA 95110
Phone: (408) 437-8762
Fax: (408) 441-7713
Analog Devices, Inc. U.S. $140,400,000 18%
1 Technology Way
P. O. Box 9106
Norwood, MA 02062
Phone: (617) 329-4700
Fax: (617) 461-2491
Altera Corporation U.S. $140,400,000 18%
2610 Orchard Parkway
San Jose, CA 95134
Phone: (408) 894-8072
Fax: (408) 894-8000
Integrated Silicon Solutions, U.S. $31,200,000 4%
Inc.
680 Alamanor Ave.
Sunnyvale, CA 94806
Phone: (408) 733-4774
Fax: (408) 749-1979
THIRD PARTY U.S. $21,596,800 2.7688%
----------------- ------
INVESTORS:
TOTAL CAPITAL
CONTRIBUTION: U.S. $780,000,000 100%
================= ======
</TABLE>
* An additional U.S. $2,400,000 shall be contributed by TSMC on behalf of Altera
pursuant to the provisions of that certain Revision of Option Agreement #1,
dated as of even date herewith.
**U.S.$2,400,000 of this amount shall be contributed by TSMC on behalf of Altera
pursuant to the provisions of that certain Revision of Option Agreement #1,
dated as of even date herewith.
LIMITED LIABILITY COMPANY AGREEMENT
1
<PAGE> 76
THIRD PARTY CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
CASH AND PROPERTY AS FIRST PART CASH AS SECOND PART CASH AS THIRD PART
------------------------------- ------------------- ------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Chung Mou Chang U.S. $299,360 U.S. $299,360 U.S. $399,147
(a.k.a Morris Chang)
121, Park Avenue 3
Science-Based Industrial
Park
Hsin-chu, Taiwan, R.O.C.
Phone: (886) 3-578-0221
Fax: (886) 3-578-1546
Donald W. Brooks U.S. $149,680 U.S. $149,680 U.S. $199,573
121, Park Avenue 3
Science-Based Industrial
Park
Hsin-chu, Taiwan, R.O.C.
Phone: (886) 3-578-3011
Fax: (886) 3-578-1545
Swanlake Traders Ltd. U.S. $2,160,000 U.S. $2,160,000 U.S. $2,880,000
9th Floor, 212 Chung
Hsaio East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Ms. Mary Yeh
Phone: (886) 2-7216511
Fax: (886) 2-7516639
Taiwan United Venture U.S. $840,000 U.S. $840,000 U.S. $1,120,000
Capital Corp.
9th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Phone: (886) 2-7216511
Fax: (886) 2-7734203
Sunpower Enterprises U.S. $600,000 U.S. $600,000 U.S. $800,000
Limited
10th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Mr. K.S. Yu
Phone: (886) 2-7216511
Fax: (886) 2-7516639
<CAPTION>
AGREED PERCENTAGE
-----------------
AGREED TOTAL VALUE OF INTEREST FOLLOWING EACH
--------------------- -----------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- --------------------
<S> <C> <C>
Chung Mou Chang U.S. $997,867 .1279%
(a.k.a Morris Chang)
121, Park Avenue 3
Science-Based Industrial
Park
Hsin-chu, Taiwan, R.O.C.
Phone: (886) 3-578-0221
Fax: (886) 3-578-1546
Donald W. Brooks U.S. $498,933 .0640%
121, Park Avenue 3
Science-Based Industrial
Park
Hsin-chu, Taiwan, R.O.C.
Phone: (886) 3-578-3011
Fax: (886) 3-578-1545
Swanlake Traders Ltd. U.S. $7,200,000 .9231%
9th Floor, 212 Chung
Hsaio East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Ms. Mary Yeh
Phone: (886) 2-7216511
Fax: (886) 2-7516639
Taiwan United Venture U.S. $2,800,000 .3590%
Capital Corp.
9th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Phone: (886) 2-7216511
Fax: (886) 2-7734203
Sunpower Enterprises U.S. $2,000,000 .2564%
Limited
10th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Mr. K.S. Yu
Phone: (886) 2-7216511
Fax: (886) 2-7516639
</TABLE>
LIMITED LIABILITY COMPANY AGREEMENT
2
<PAGE> 77
THIRD PARTY CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
CASH AND PROPERTY AS FIRST PART CASH AS SECOND PART CASH AS THIRD PART
------------------------------- ------------------- ------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
I-Mon Wu U.S. $360,000 U.S. $360,000 U.S. $480,000
(a.k.a. Johnny Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
I-Kuang Wu U.S. $360,000 U.S. $360,000 U.S. $480,000
(a.k.a. Edward Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
Seaquest Ventures Inc. U.S. $510,000 U.S. $510,000 U.S. $680,000
11th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Mr. Quintin Wu
Phone: (886) 2-7216511
Fax: (886) 2-7213325
Yi-Ming Wu (a.k.a. Bill Wu) U.S. $510,000 U.S. $510,000 U.S. $680,000
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
Yih-Chueh Wu U.S. $360,000 U.S. $360,000 U.S. $480,000
(a.k.a. Eric Y.C. Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
<CAPTION>
AGREED PERCENTAGE
-----------------
AGREED TOTAL VALUE OF INTEREST FOLLOWING EACH
--------------------- -----------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- --------------------
<S> <C> <C>
I-Mon Wu U.S. $1,200,000 .1538%
(a.k.a. Johnny Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
I-Kuang Wu U.S. $1,200,000 .1538%
(a.k.a. Edward Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
Seaquest Ventures Inc. U.S. $1,700,000 .2179%
11th Floor, 212 Chung
Hsiao East Road, Sec. 4,
Taipei, Taiwan, R.O.C.
Attn.: Mr. Quintin Wu
Phone: (886) 2-7216511
Fax: (886) 2-7213325
Yi-Ming Wu (a.k.a. Bill Wu) U.S. $1,700,000 .2179%
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
Yih-Chueh Wu U.S. $1,200,000 .1538%
(a.k.a. Eric Y.C. Wu)
4th Floor, 25 Jen Ai
Road, Sec. 4, Taipei,
Taiwan, R.O.C.
Phone: (886) 2-7406518
Fax: (886) 2-7417002
</TABLE>
LIMITED LIABILITY COMPANY AGREEMENT
3
<PAGE> 78
THIRD PARTY CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
CASH AND PROPERTY AS FIRST PART CASH AS SECOND PART CASH AS THIRD PART
------------------------------- ------------------- ------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Fesdon Investments Ltd. U.S. $300,000 U.S. $300,000 U.S. $400,000
33rd Floor, Asia Pacific
Finance Tower, Citibank
Plaza, 3 Garden Road,
Central, Hong Kong
Phone: (852) 284-79288
Fax: (852) 281-04001
Kenneth Smith U.S. $30,000 U.S. $30,000 U.S. $40,000
2600 N.W. Lake Road
Camas, WA 98607-9526
Phone: (360) 817-5598
Fax: (360) 817-6007
THIRD PARTY U.S. $6,479,040 U.S. $6,479,040 U.S. $8,638,720
INVESTORS: --------------- --------------- ---------------
<CAPTION>
AGREED PERCENTAGE
-----------------
AGREED TOTAL VALUE OF INTEREST FOLLOWING EACH
--------------------- -----------------------
NAME/ADDRESS/FAX NUMBER CAPITAL CONTRIBUTION CAPITAL CONTRIBUTION
----------------------- -------------------- --------------------
<S> <C> <C>
Fesdon Investments Ltd. U.S. $1,000,000 .1282%
33rd Floor, Asia Pacific
Finance Tower, Citibank
Plaza, 3 Garden Road,
Central, Hong Kong
Phone: (852) 284-79288
Fax: (852) 281-04001
Kenneth Smith U.S. $100,000 .0128%
2600 N.W. Lake Road
Camas, WA 98607-9526
Phone: (360) 817-5598
Fax: (360) 817-6007
THIRD PARTY U.S. $21,596,800 2.7688%
INVESTORS: ---------------- -------
</TABLE>
LIMITED LIABILITY COMPANY AGREEMENT
4
<PAGE> 79
<PAGE> 80
EXHIBIT B
CERTIFICATE OF FORMATION
OF
WaferTech, LLC
The undersigned, an authorized natural person, for the purpose of
forming a limited liability company, under the provisions and subject to the
requirements of the State of Delaware (particularly Chapter 18, Title 6 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified, and referred to as the "Delaware Limited Liability Company
Act"), hereby certifies that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is WaferTech, LLC.
SECOND: The address of the registered office and the name and the
address of the registered agent of the limited liability company required to be
maintained by Section 18-104 of the Delaware Limited Liability Company Act are
the Corporation Service Company, 1013 Centre Road, in the City of Wilmington,
County of New Castle, Delaware 19805.
THIRD: The latest date on which the limited liability company is to
dissolve is ________, 2026.
Executed on ____________, 1996.
________________________
Authorized Person
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 81
EXHIBIT C(1)
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the "Agreement") is made and entered
into as of this day of , 1996, by and between WaferTech, LLC, a Delaware limited
liability company ("Company") and [__________________________________], [a
______________________ corporation] [a natural person] (the "Receiving Party").
WHEREAS, Company has disclosed or plans to disclose to the Receiving
Party certain confidential and proprietary information regarding its business
and products, and specifically information pertaining to Company's provision of
foundry services for the manufacture of integrated circuit ("IC") wafers at a
foundry fabrication facility ("FAB") located in the United States (the
"Business") for the purpose of Receiving Party
________________________________________________ (the "Purpose"), and Company
regards this information as confidential and requires that it remain secret;
WHEREAS, Company shall disclose Confidential Information (as
hereinafter defined) to Receiving Party and its agents or Representatives. As
used herein, the term "Representatives" shall mean a party's attorneys,
financial advisors, directors, officers, employees, agents or advisors.
WHEREAS, the Company has requested that Receiving Party execute this
Confidentiality Agreement as a condition precedent to the disclosure of
Confidential Information to Receiving Party.
In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITION OF CONFIDENTIAL INFORMATION
As used herein, "Confidential Information" shall mean all
data, concepts, ideas, methods, processes, techniques, formulae, know-how, trade
secrets and improvements relating to research, development or manufacturing
activities of each of the Company and other confidential and proprietary
information concerning the Company's existing or proposed business and marketing
plans, operations, client and contact lists, marketing expertise and strategies,
business development proposals and other information compiled and developed by
the Company for use in FAB operations, including providing foundry services for
the manufacture of IC wafers, as well as confidential and proprietary
information concerning the Company's other businesses. Confidential Information
shall include not only written information, but also information transferred
orally, visually, electronically or by any other means, provided that the
Company expressly indicates to the Receiving Party that such disclosures
constitute "Confidential Information" for purposes of this Agreement, and all
notes, analyses, compilations, presentations or other documents (including
materials prepared by Receiving Party), which contain or otherwise reflect such
information. Confidential Information shall include, if applicable, any
confidential or proprietary information of any subsidiary or other affiliate of
the Company.
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
<PAGE> 82
2. NON-CONFIDENTIAL INFORMATION
The term "Confidential Information" does not include
information which (i) becomes generally available to the public other than as
the result of a disclosure by the Receiving Party or its Representatives; (ii)
was available to the Receiving Party on a nonconfidential basis (including, but
not limited to information developed by the Receiving Party) prior to its
disclosure to the Receiving Party by the Company, its Representatives or its
agents; (iii) becomes available to the Receiving Party on a nonconfidential
basis from a source other than the Company, its Representatives or its agents,
provided that such source is not bound by a confidentiality agreement with the
Company, its Representatives or its agents, or otherwise prohibited from
transmitting the information to the Receiving Party or its Representatives by a
contractual, legal or fiduciary obligation; or (iv) is required to be disclosed
by the Receiving Party pursuant to law, governmental regulation or judicial
order, provided that written notice is given to the Company prior to the
required disclosure.
3. ACCESS TO CONFIDENTIAL INFORMATION
Company will furnish to Receiving Party and Receiving Party's
Representatives, but only to the extent such Representatives require such
information for the Purpose, such Confidential Information as each Receiving
Party shall reasonably request.
4. USE OF CONFIDENTIAL INFORMATION
Receiving Party and its Representatives shall use the
Confidential Information solely for the Purpose and for no other purpose. In no
event will a Receiving Party use Confidential Information in the Receiving
Party's own business, or in the business of any other entity, or in any other
manner whatsoever except as may be expressly permitted in this Agreement.
Company shall have the right to review all documents prepared by the Receiving
Party relating to Confidential Information prior to any dissemination of such
communication to third parties. The Receiving Party will delete any information
from the documents that Company requires to be deleted.
5. DISCLOSURE OF CONFIDENTIAL INFORMATION
Without the prior consent of Company, the Receiving Party and
its Representatives will not disclose to any person (i) the fact that the
Confidential Information has been made available to Receiving Party or that
Receiving Party has inspected any portion of the Confidential Information, or
(ii) any of the terms, conditions or other facts with respect to the Business,
except to the extent the foregoing is required to be disclosed by the Receiving
Party pursuant to law, governmental regulation or judicial order, provided that
written notice is given to the Company prior to the required disclosure.
Notwithstanding the foregoing, a Receiving Party may disclose Confidential
Information without prior consent of the Company to its officers, directors,
employees, attorneys and accountants who have a need to know such information in
order to perform their duties. Each person to whom the Confidential Information
is disclosed must be advised of its confidential nature and of the terms of this
Agreement and must have
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
2
<PAGE> 83
entered into a written agreement with the Receiving Party (a copy of which must
be delivered to the Company) that obligates such person to abide by such terms.
The fact that such information has been delivered to Receiving Party, and any
discussions regarding the Business or the Company are deemed Confidential
Information for the purposes of this Agreement, except to the extent the
foregoing is required to be disclosed by the Receiving Party pursuant to law,
governmental regulation or judicial order, provided that written notice is given
to the Company prior to the required disclosure.
6. DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION
Upon request from the Company to the Receiving Party (i) the
Receiving Party and its Representatives will either destroy or return to the
Company all Confidential Information which is in tangible form, including any
copies of which the Receiving Party or its Representatives may have made,
destroy all abstracts, summaries thereof or references thereto in the documents
of the Receiving Party or its Representatives, and certify to Company in writing
that this has been done, and (ii) neither the Receiving Party nor its
Representatives will use any of the Confidential Information with respect to, or
in furtherance of, the Receiving Party's business, any of their respective
businesses or in the business of anyone else, whether or not in competition with
the Company, or for any other purpose whatsoever.
7. INDEMNIFICATION
Receiving Party shall take all such precautions as may be
reasonably necessary to prevent the unauthorized disclosure to any person of any
Confidential Information. Receiving Party shall cause Receiving Party's
Representatives to take similar precautions. Receiving Party hereby agrees to
indemnify, defend and hold harmless Company from any damages, loss, cost or
liability (including legal fees and costs of enforcing this indemnity) arising
out of or resulting from any unauthorized use or disclosure by Receiving Party
or Receiving Party's Representatives of the Confidential Information.
8. REMEDIES
Receiving Party also acknowledges that money damages would be
both incalculable and an insufficient remedy for any breach of this Agreement by
a Receiving Party or a Receiving Party's Representatives, and that such breach
would cause Company irreparable harm. In addition to all other remedies, the
Company will be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and the breaching party agrees
to waive any requirement of receiving or posting any bond in connection with
such remedy. Receiving Party agrees and consents to the entry of a preliminary
injunction or protective order by any court of competent jurisdiction upon a
showing by the Company that its Confidential Information is being used or
disclosed contrary to the provisions of this Agreement. The arbitration
provisions of Section 12 shall not apply to any temporary restraining order,
preliminary injunctive relief or other provisional remedy sought to prohibit a
breach or threatened breach of the provisions of this Agreement.
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
3
<PAGE> 84
9. NO LICENSE
This Agreement does not imply any license to the Receiving
Party of Company's Confidential Information or any of its patents, copyrights,
trademarks, or applications therefor. All proprietary rights, including but not
limited to patent rights and trade secrets, in and to the Confidential
Information shall remain Company's property.
10. WAIVERS
It is understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any or
further exercise or the exercise of any right, power or privilege hereunder.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. CONSENT TO JURISDICTION; GOVERNING LAW
All differences or controversies arising from this Agreement
shall be settled by the American Arbitration Association in San Jose,
California, pursuant to such Association's rules for commercial arbitration. The
language of arbitration shall be English. This Agreement shall be governed by
and construed in accordance with the laws of Delaware. Any litigation relating
to or arising under this Agreement shall be brought in federal or state court
located in San Jose, California. The parties hereby consent to the jurisdiction
and venue of such courts.
13. DURATION
This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect for so long as
Company shall exist; provided, however, that the obligations of the Receiving
Party under paragraphs 4, 5, 6, 7 and 12 shall survive indefinitely.
14. ENTIRE AGREEMENT; SURVIVAL; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the
parties hereto concerning the subject matter hereof and supersedes any prior
agreement or understanding of the parties. This Agreement shall survive the
execution of any other definitive document between the parties hereto and may
not be modified except in writing, duly signed by the party against whom
enforcement is sought. This Agreement shall inure to the benefit of and is
binding upon each of the parties hereto and their respective successors, assigns
and personal representatives.
15. THIRD PARTIES
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
4
<PAGE> 85
Nothing in this Agreement, express or implied, is intended to
confer upon any person, other than the parties hereto and their successors and
assigns, any rights or remedies under or by any reason of this Agreement.
16. FURTHER ASSURANCES
Each party agrees to execute and deliver such additional
documents and to perform such additional acts as may be necessary or appropriate
to effectuate, carry out and perform all of the terms, provisions and conditions
of this Agreement.
17. COUNTERPARTS
This Agreement is expected to be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. The facsimile signature
of a party to this Agreement is and shall be deemed to be an original execution
and is binding.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
FORM OF VISITOR
CONFIDENTIALITY AGREEMENT
5
<PAGE> 86
[SIGNATURE PAGE TO VISITOR CONFIDENTIALITY AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
WAFERTECH, LLC ------------------------
By: By:
--------------------------------- --------------------------------
Name: Name:
-------------------------- -------------------------
Title: Title:
------------------------- ------------------------
Address for Notices: Address for Notices:
- -------------------- --------------------
2600 N.W. Lake Road
- ------------------------------------ -----------------------------------
Camas, Washington 98607
- ------------------------------------ -----------------------------------
Telephone: (360) 817-5599 Telephone:
- ------------------------------------ -------------------------
Facsimile: (360) 817-6007 Facsimile:
- ------------------------------------ -------------------------
<PAGE> 87
EXHIBIT C(2)
EMPLOYEE INVENTION ASSIGNMENT AND
CONFIDENTIALITY AGREEMENT
In consideration of, and as a condition to, my employment with
WaferTech, LLC, a Delaware limited liability company (the "Company"), from
__________, 1996 (the "Effective Date"), I hereby represent to, and agree with,
the Company as follows:
1. PURPOSE OF AGREEMENT. I understand that the Company is engaged in a
continuous program of research, development, production and marketing in
connection with its business and that it is critical for the Company to preserve
and protect its Proprietary Information (as defined below), and its rights in
Inventions (as defined below) and in all related intellectual property rights.
Accordingly, I am entering into this Agreement as a condition of my employment
with the Company, whether or not I am expected to create inventions of value for
the Company.
2. DISCLOSURE OF INVENTIONS. I will promptly disclose in confidence and
in writing to the Company all inventions, improvements, designs, original works
of authorship, derivative works, formulas, processes, techniques, know-how,
ideas, concepts, compositions of matter, computer software programs, databases,
mask works and trade secrets ("Inventions") that I make, conceive, first reduce
to practice or create, either alone or jointly with others, during the period of
my employment with the Company (the "Employment Period"), whether or not in the
course of such employment, and whether or not such Inventions are patentable,
copyrightable or protectible as trade secrets or mask works. Listed on Schedule
A hereto are Inventions I have made, conceived, first reduced to practice or
created, either alone or jointly with others, before the Effective Date, which I
consider to remain unaffected by the terms and provisions of this Agreement.
3. WORKS MADE FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge and
agree that any copyrightable works prepared by me, either alone or jointly with
others, within the scope of my employment during the Employment Period are
"works made for hire" under the United States Copyright Act (17 U.S.C.
Sections 101-810) and that the Company will be considered the author and
owner of such copyrightable works. In the event that any such copyrightable
works are not deemed to be "works made for hire," I hereby irrevocably assign
all of my right, title and interest in and to such copyrightable works to the
Company. I agree that all Inventions that (a) are developed using equipment,
supplies, facilities or trade secrets of the Company, (b) result from work
performed by me for the Company during the Employment Period, or (c) relate to
the Company's business or current or anticipated research and development, will
be the sole and exclusive property of the Company and are hereby irrevocably
assigned by me to the Company.
4. ASSIGNMENT OF OTHER RIGHTS. In addition to the foregoing assignment
of Inventions to the Company, I hereby irrevocably transfer and assign to the
Company all worldwide patents, patent applications, copyrights, mask works,
trade secrets and other intellectual property rights that I may have in any
Invention. I also hereby forever waive and agree never to assert any and all
Moral Rights (as defined below) I may have in or with respect to any Invention,
even after termination of my work on behalf of the Company. "Moral Rights" mean
EMPLOYEE INVENTION ASSIGNMENT
AND CONFIDENTIALITY AGREEMENT
<PAGE> 88
any rights to claim authorship of a work, to object to or prevent any distortion
or other modification of a work, or to withdraw from circulation or control the
publication or distribution of a work, and any similar right, existing under
judicial or statutory law of any country in the world, or under any treaty,
regardless of whether or not such right is denominated or generally referred to
as a "moral right."
5. LABOR CODE 2870 NOTICE. I have been notified and understand that the
provisions of Sections 3 and 4 of this Agreement do not apply to any Invention
that qualifies fully under the provisions of Section 2870 of the California
Labor Code, which states as follows:
ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE SHALL
ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO HIS OR
HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED
ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT,
SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS
THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUALLY OR DEMONSTRABLY
ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2) RESULT FROM ANY WORK
PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE EXTENT A PROVISION IN AN
EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION
OTHERWISE EXCLUDED FROM BEING REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR
CODE SECTION 2870(a), THE PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE
AND IS UNENFORCEABLE.
6. ASSISTANCE. I agree to assist the Company in every proper way to
obtain for the Company and enforce patents, copyrights, mask work rights, trade
secret rights and all other legal protections for the Company's Inventions in
any and all countries. I will execute any documents that the Company may
reasonably request for use in obtaining or enforcing such patents, copyrights,
mask work rights, trade secrets and all other legal protections. My obligations
under this Section 6 will be in consideration of my employment with the Company
during the Employment Period and will continue beyond the termination of the
Employment Period, provided that the Company will compensate me at a reasonable
rate for time or expenses actually spent by me at the Company's request after
such termination on such assistance, which reasonable rate will be determined in
light of my hourly rate or salary in effect prior to the termination of the
Employment Period. I appoint the Secretary of the Company as my attorney-in-fact
to execute documents on my behalf for this purpose.
7. PROPRIETARY INFORMATION. I understand and agree that my employment
by the Company creates a relationship of confidence and trust with respect to
any information of a confidential or secret nature that may be disclosed to me
by the Company that relates to the business of the Company or to the business of
any parent, subsidiary, affiliate, customer or supplier of the Company or any
other party with whom the Company agrees to hold information of such party in
confidence ("Proprietary Information"). Such Proprietary Information includes
EMPLOYEE INVENTION ASSIGNMENT
AND CONFIDENTIALITY AGREEMENT
2
<PAGE> 89
but is not limited to Inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information and customer
lists.
8. CONFIDENTIALITY. At all times, both during the Employment Period and
after its termination, I will keep and hold all such Proprietary Information in
strict confidence and trust, and I will not use or disclose any of such
Proprietary Information without the prior written consent of the Company, except
as may be necessary (a) to perform my duties as an employee of the Company for
the benefit of the Company, or (b) to comply with a court order to disclose such
Proprietary Information. Upon termination of my employment with the Company, I
will promptly deliver to the Company all documents and materials of any nature
pertaining to my work with the Company and I will not take with me any documents
or materials or copies thereof containing any Proprietary Information.
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all
the terms of this Agreement and my duties as an employee of the Company will not
breach any invention assignment, proprietary information or similar agreement
with any former employer or other party. I represent that I will not bring with
me to the Company or use in the performance of my duties for the Company any
documents or materials of a former employer that are not generally available to
the public or have not been legally transferred to the Company.
10. DUTY NOT TO COMPETE. I understand that my employment with the
Company requires my undivided attention and effort. As a result, during the
Employment Period, I will not, without the Company's express written consent,
engage in any employment or business other than for the Company, or invest in or
assist in any manner any business which directly or indirectly competes with the
business or future business plans of the Company.
11. NOTIFICATION. I hereby authorize the Company to notify my future
employers of the terms of this Agreement and my responsibilities hereunder.
12. NON-SOLICITATION. During the Employment Period, I will not directly
or indirectly solicit or take away supplies, customers, employees or consultants
of the Company for my own benefit or for the benefit of any other party. I
understand that this Agreement does not prevent me from soliciting supplies,
customers, employees and consultants for the Company during the Employment
Period. To the extent permitted by law, I will not directly or indirectly
solicit or take away for a period of one (1) year after termination of the
Employment Period supplies, customers, employees or consultants of the Company
for my own benefit or for the benefit of any other party.
13. NAME AND LIKENESS RIGHTS, ETC. I hereby authorize the Company to
use, reuse, and to grant others the right to use and reuse, my name, photograph,
likeness (including caricature), voice, and biographical information, and any
reproduction or simulation thereof, in any media now known or hereafter
developed (including but not limited to film, video and digital or other
electronic media), both during and after my employment, for whatever purposes
the Company deems necessary. I understand and agree that I will receive no
compensation whatsoever for any such use or reuse.
EMPLOYEE INVENTION ASSIGNMENT
AND CONFIDENTIALITY AGREEMENT
3
<PAGE> 90
14. INJUNCTIVE RELIEF. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and will therefore be entitled to injunctive relief to enforce this
Agreement or any of its provisions, without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.
15. GOVERNING LAW; SEVERABILITY. This Agreement will be governed and
interpreted in accordance with the internal laws of the State of Delaware,
without regard to or application of choice of law rules or principles. In the
event that any provision of this Agreement is found by a court, arbitrator or
other tribunal to be illegal, invalid or unenforceable, then such provision
shall not be voided, but shall be enforced to the maximum extent permissible
under applicable law, and the remainder of this Agreement shall remain in full
force and effect.
16. NO DUTY TO EMPLOY. I understand that this Agreement does not
constitute a contract of employment or obligate the Company to employ me for any
stated period of time and this Agreement does not interfere in any way with any
right the Company have to terminate my employment at any time, with or without
cause. This Agreement shall be effective as of the Effective Date.
17. COUNTERPARTS. This Agreement may be executed as separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
EMPLOYEE INVENTION ASSIGNMENT
AND CONFIDENTIALITY AGREEMENT
4
<PAGE> 91
[SIGNATURE PAGE TO EMPLOYEE INVENTION ASSIGNMENT AND
CONFIDENTIALITY AGREEMENT]
WAFERTECH, LLC EMPLOYEE
By: By:
---------------------------------- -----------------------------------
Name: Name:
-------------------------------- ---------------------------------
Title:
-------------------------------
<PAGE> 92
Schedule A
Inventions
(to be completed at time
Confidentiality Agreement
is entered)
EMPLOYEE INVENTION ASSIGNMENT
AND CONFIDENTIALITY AGREEMENT
<PAGE> 93
EXHIBIT D
DESCRIPTION OF REAL PROPERTY
(see following page)
LIMITED LIABILITY COMPANY AGREEMENT
<PAGE> 94
EXHIBIT D
The following described real property situated in the County of Clark, State of
Washington, described as follows:
PARCEL A
A parcel of property in the West half of Section 33 and the East half of Section
32, Township 2 North, Range 3 East of the Willamette Meridian in Clark County,
Washington, described as follows:
BEGINNING at the Northwest corner of said Section 33; thence South 88 degrees
55'21" East along the North line of said Section 33 a distance of 1997.08 feet
to the West line of that tract conveyed to the Camas School District by deed
recorded under Auditor's File No. 9503310349, as monumented by MacKay & Sposito,
Inc.; thence South 01 degree 12'55" West along said West line as monumented
1680.06 feet to an angle point in said Camas School District Tract; thence North
88 degrees 39'58" West along the North line of said Camas School District Tract
and its Westerly extension 719.31 feet to the West line of NW Parker Avenue as
dedicated to the City of Camas, recorded under Auditor's File No. 8910120164 of
Clark County records; thence South 01 degree 14'29" West along said West line of
NW Parker Avenue 1019.21 feet to a 1/2 inch iron rod set by Olson Engineering,
Inc.; thence North 89 degrees 04'51" West 1283.63 feet to a 1 inch iron pipe
with brass cap set by Lawson Surveying and Engineering; thence North 88 degrees
23'35" West 1316.83 feet to a 1/2 inch iron rod set by Olson Engineering, Inc.;
thence South 01 degree 15'02" West 0.34 feet to the North line of that tract
conveyed to Peter T. Wang by deed recorded under Auditor's File No. 9405310207
of Clark County records; thence North 88 degrees 54'45" West along the North
line of said Wang tract and the North line of that tract conveyed to John W.
Schroeder by real estate contract recorded under Auditor's File No. 9405020129
of Clark County records 1047.84 feet to the East line of County Ridge 2 as
recorded in Book "H" of Plats, at page 264 of Clark County records; thence North
01 degree 18'51" East along said East line, the East line of that tract conveyed
to John L. Forgey by deed recorded under Auditor's File No. 8610230145 of Clark
County records, and the East line of that tract conveyed to Robin Gibson by deed
recorded under Auditor's File No. 8606100045 of Clark County records 2688.02
feet to the North line of the Northeast quarter of said Section 32; thence South
88 degrees 54'45" East along said North line 1048.66 feet to the West line of
the West half of the Northeast quarter of said Northeast quarter of Section 32;
thence South 01 degree 19'54" West along said West line 1343.84 feet to the
South line of said West half of the Northeast quarter of the Northeast quarter
of Section 32; thence South 88 degrees 39'11" East along said South line 658.61
feet to the East line of said West half; thence North 01 degree 20'25" East
along said East line 1346.83 feet to the North line of said Northeast quarter of
Section 32; thence South 88 degrees 54'45" East along said North line 658.82
feet to the Point of Beginning.
EXCEPT any portion thereof lying in SE 1st Street.
ALSO EXCEPT any portion thereof lying in NW Parker Avenue as dedicated to the
City of Camas, recorded under Auditor's File No. 8910120164 of Clark County
records.
<PAGE> 95
PARCEL B
The West half of the Northeast quarter of the Northeast quarter of Section 32,
Township 2 North, Range 3 East of the Willamette Meridian in Clark County,
Washington;
EXCEPT any portion lying within 1st Street.
-2-
<PAGE> 96
EXHIBIT E
POSSIBLE FUTURE RESTRUCTURING
The following paragraphs provide summaries of charts that are included
as Exhibit E to this Agreement.
Alternative A: Rollup of LLC into New Public Corporation
Under this restructuring alternative, the existing members of Watertech
LLC would become shareholders of a new public corporation, with such members
holding share interests in the new corporation as follows: Analog Devices,
Inc., 18%; Altera Corporation, 18%; Integrated Silicon Solutions, Inc., 4%;
former shareholders of TSMC Development, Inc., 57.244%; other investors, 2.756%.
TSMC Development, Inc. would become a wholly owned subsidiary of the
new public corporation. TSMC Development, Inc. would hold a 55% membership
interest and the new public corporation would hold a 45% membership interest in
a limited liability corporation that would own the fabrication facility.
Alternative B: Rollup of TSMC Development, Inc. and Individual Interests in LLC
Under this restructuring alternative, former shareholders of TSMC
Development, Inc. would own 95.41% and other individual investors would own
4.59% of a new public corporation that would own 100% of TSMC Development, Inc.
TSMC Development, Inc. would then hold a 60% membership interest in a limited
liability company that would own the fabrication facility. Analog Devices, Inc.
and Altera Corporation would each hold an 18% membership interest in such
limited liability corporation, and Integrated Silicon Solutions, Inc. would
hold a 4% membership interest.
Alternative C: Replicating Partial Rollup Structure for Additional FABS
Under this restructuring alternative, former shareholders of TSMC
Development, Inc. and electing investors, customers, and other investors would
own a new public corporation that would own 100% of TSMC Development, Inc. TSMC
Development, Inc. and nonelecting investors/customers would then jointly hold
interests in three limited liability corporations that would own fabrication
facilities.
<PAGE> 97
EXHIBIT F
FORM OF FUTURE PURCHASE AGREEMENT
The preamble to the Form of Future Purchase Agreement names as parties
and, in particular, as "Initial Buyers" the Managing Members that are Initial
Members. However, the identities of the Initial Buyers in the agreement, when
entered into, will be modified as appropriate to reflect the Persons that are
then Managing Members and that are then intended to have purchase rights and
obligations with respect to Foundry capacity.
FUTURE PURCHASE AGREEMENT
<PAGE> 98
PURCHASE AGREEMENT
BY AND BETWEEN
WAFERTECH, LLC,
AS SELLER
AND
TSMC DEVELOPMENT, INC.
ANALOG DEVICES,
ALTERA CORPORATION,
AND
INTEGRATED SILICON SOLUTIONS, INC.,
AS BUYERS
DATED AS OF __________
FUTURE PURCHASE AGREEMENT
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS AND RULES OF INTERPRETATION.......... 2
1.1 Definitions.............................................. 2
1.2 Rules of Interpretation.................................. 8
ARTICLE 2 TERM............................................. 8
2.1 Term..................................................... 9
2.2 End of Foundry's Useful Life............................. 9
ARTICLE 3 WAFER SUPPLY; FOUNDRY OUTPUT RIGHTS
AND OBLIGATIONS.................................. 9
3.1 Manufacturing Capability................................. 9
3.2 Production Availability.................................. 9
3.3 Buyer's Purchase Rights and Obligations During the Term.. 10
3.4 Take-Or-Pay Obligation for Unused Minimum Purchase Share. 10
ARTICLE 4 PRODUCTION PLANNING AND QUALIFICATION............ 12
4.1 Forecasts................................................ 12
4.2 Production Qualification................................. 13
ARTICLE 5 OTHER AGREEMENTS RELATING TO
PRODUCTION AND SUPPLY............................ 14
5.1 Quantity Requirement..................................... 14
5.2 Accelerate Supply......................................... 14
5.3 Modifications to Existing Processes or Specifications.... 14
5.4 Additions or Substitutions of Products................... 15
5.5 Vendor Information....................................... 15
5.6 Process Records.......................................... 15
5.7 Trademarks............................................... 15
5.8 Mask Set Protection...................................... 16
5.9 Rights to Inspect and Monitor Production................. 16
5.10 Obtain Grant of Non-exclusive Manufacturing Rights....... 17
5.11 Unique Processes, Methods or Materials................... 17
5.12 Adjustment in Capacity Rights and Obligations;
Admission of New Buyers.......................... 18
5.13 Certain Terms Applicable to Test Wafers.................. 18
5.14 Certain Terms Applicable to Risk Wafers Run on a
Qualified Process................................ 19
5.15 Sale of Risk Wafers...................................... 19
</TABLE>
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<PAGE> 100
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 6 PURCHASES.......................................... 20
6.1 Purchase Orders............................................. 20
6.2 Price....................................................... 20
6.3 Invoice..................................................... 23
6.4 Payment..................................................... 23
6.5 No Limitation On Buyer's Pricing............................ 23
ARTICLE 7 DELIVERY........................................... 23
7.1 Delivery.................................................... 23
7.2 Shipments F.O.B............................................. 23
7.3 Packaging and Ship Date..................................... 23
7.4 Partial Shipments........................................... 23
7.5 Failure to Meet Delivery Dates.............................. 24
7.6 Force Majeure............................................... 24
ARTICLE 8 INCOMING TEST; ACCEPTANCE AND RETURNS.............. 24
8.1 Incoming Testing............................................ 24
8.2 Acceptance.................................................. 24
8.3 Returns..................................................... 25
ARTICLE 9 PRODUCT WARRANTY................................... 25
9.1 Seller's Warranty........................................... 25
9.2 Limited Warranty............................................ 25
9.3 Seller's Inspection Rights.................................. 25
ARTICLE 10 LIMITATION ON DAMAGES; CONTRACTUAL
LIMITATIONS PERIOD................................. 26
10.1 Limitation on Damages....................................... 26
10.2 Contractual Limitations Period.............................. 26
ARTICLE 11 INDEMNITIES........................................ 27
11.1 Intellectual Property Indemnity............................. 27
11.2 Personal Injury Indemnity................................... 27
11.3 Product Liability........................................... 28
11.4 General Indemnity Provisions................................ 28
</TABLE>
ii
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<PAGE> 101
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 12 FORCE MAJEURE..................................... 29
12.1 Force Majeure............................................. 29
12.2 Notification.............................................. 29
12.3 Response to Force Majeure................................. 29
12.4 Limitations on Applicability of Force Majeure............. 30
ARTICLE 13 GOVERNMENTAL INTERVENTION......................... 30
13.1 Governmental Intervention................................. 30
ARTICLE 14 DEFAULT AND TERMINATION........................... 31
14.1 Events of Default......................................... 31
14.2 Remedies for Default...................................... 32
14.3 Effective Date of Termination............................. 33
14.4 Rights and Remedies Following Termination................. 33
14.5 Remedies Cumulative, Concurrent and Non-Exclusive......... 33
ARTICLE 15 PROPRIETARY INFORMATION........................... 34
15.1 Proprietary Information................................... 34
15.2 Other Confidentiality Agreements.......................... 34
15.3 Confidentiality Agreements for Specific Persons........... 34
15.4 Third Party Request for Information....................... 35
15.5 Reporting Loss, Theft or Misappropriation................. 35
ARTICLE 16 EXPORT COMPLIANCE................................. 35
16.1 Compliance With Export Administration Regulations......... 35
16.2 U.S. Export Licenses...................................... 36
16.3 Republic of China Export Regulations...................... 36
ARTICLE 17 DISPUTE RESOLUTION; ARBITRATION................... 36
17.1 Negotiation Between Executives............................ 36
17.2 Mediation................................................. 37
17.3 Claims Subject to Arbitration............................. 37
17.4 Venue..................................................... 37
17.5 Selection of Arbitrator and Determination of
Controversies........................................... 37
17.6 Arbitration Award and Judicial Review..................... 38
17.7 Consolidation and Joinder................................. 39
</TABLE>
iii
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<PAGE> 102
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 18 GENERAL PROVISIONS............................ 39
18.1 Severability............................................. 39
18.2 Neutral Interpretation: Waiver of Conflict............... 39
18.3 Notices.................................................. 39
18.4 Time of the Essence...................................... 40
18.5 Governing Law............................................ 40
18.6 Entire Agreement......................................... 40
18.7 Waiver; Amendment........................................ 40
18.8 Cooperation.............................................. 40
18.9 Counterparts............................................. 40
18.10 Exhibits and Schedules................................... 40
18.11 Attorneys' Fees.......................................... 40
18.12 Date of Performance...................................... 41
18.13 Survival................................................. 41
18.14 Assignment; Parties Bound................................ 41
18.15 Third-Party Beneficiaries................................ 41
18.16 Governing Language of Agreement.......................... 41
18.17 Consent to Jurisdiction and Service of Process........... 42
18.18 Authorized Representatives............................... 42
18.19 Relationship of the Parties.............................. 42
</TABLE>
iv
FUTURE PURCHASE AGREEMENT
<PAGE> 103
LIST OF EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit "A" -- Pricing Schedule
Exhibit "B" -- Product Qualification Plan
Exhibit "C" -- Quality and Reliability Specifications
Exhibit "D" -- Wafer Equivalents
Exhibit "E" -- Production Plan
Exhibit "F" -- Design Rule and Parametric Information
Exhibit "G" -- Inspection and Testing Methods
Exhibit "H" -- Addresses for Notices
Exhibit "I" -- Form of Confidentiality Agreement
Exhibit "J" -- Method for Apportioning the Unused Minimum Purchase
Allocation
Exhibit "K" -- Form of Confidentiality Agreement Between a Buyer
and Its Customer
Exhibit "L" -- Form of Indemnity
</TABLE>
v
FUTURE PURCHASE AGREEMENT
<PAGE> 104
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is entered into as of
____________ (the "Effective Date"), by and among WaferTech, LLC, a Delaware
limited liability company, as seller hereunder ("Seller"), and TSMC Development,
Inc. ("TSMC"), a Delaware corporation, Analog Devices, Inc. ("ADI"), a
Massachusetts corporation; Altera Corporation ("Altera"), a California
corporation; and Integrated Silicon Solutions, Inc. ("ISSI"), a Delaware
corporation, as buyers hereunder (each buyer hereunder, a "Buyer," TSMC, ADI,
Altera and ISSI each is sometimes referred to as an "Initial" Buyer, each Buyer
other than TSMC is sometimes referred to as a "Regular" Buyer). Each party
hereto is sometimes referred to as a "Party".
R E C I T A L S:
This Agreement is made with reference to the following facts and
circumstances:
A. Each capitalized term used herein (i) if defined herein, has the
meaning specified in these Recitals, in Article 1 below, or elsewhere
parenthetically herein or (ii) if not defined herein, has the meaning specified
(A) in the instrument or document that is referenced where the term is
introduced herein or (B) in the LLC Agreement, if no instrument or document is
so referenced.
B. The Initial Buyers are members of Seller under its Limited Liability
Company Agreement, dated June __, 1996 (such agreement, the "LLC Agreement," and
such date, the "LLC Agreement Date"). Seller built, owns and operates a
semiconductor wafer fabrication plant in Camas, Washington (such plant, the
"Foundry"). The Foundry provides foundry services for the manufacture of
integrated circuits in wafer form.
C. Following the commencement of production at the Foundry and until
the Effective Date of this Agreement, the Foundry sold its entire output to
Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC Taiwan"), of which TSMC is a
second-tier subsidiary. Such sale occurred pursuant to the Manufacturing
Agreement, dated as of February 16, 1996, originally entered into between TSMC
Taiwan, as buyer, and TSMC, as supplier. Supplier's interest under the
Manufacturing Agreement was assigned by TSMC to Seller pursuant to the
Assignment and Assumption dated as of the LLC Agreement Date. The Manufacturing
Agreement expired or terminated on or before the Effective Date.
D. During the term of the Manufacturing Agreement, TSMC Taiwan in turn
resold the output to ADI, Altera, ISSI, and other customers of TSMC Taiwan.
Sales to ADI, Altera, and ISSI occurred pursuant to that certain Purchase
Agreement, dated as of the LLC Agreement Date, among TSMC Taiwan, ADI, Altera,
and ISSI (the "Original Purchase Agreement"). The
FUTURE PURCHASE AGREEMENT
<PAGE> 105
Original Purchase Agreement expired or terminated with the expiration or
termination of the Manufacturing Agreement.
E. Seller and the Initial Buyers, in accordance with the LLC Agreement,
are entering into this Agreement:
(1) to provide for the direct sale of Foundry output (a) to
the Initial Buyers and (b) to any other Persons that (i) are admitted
to membership in Seller in accordance with the LLC Agreement after the
Effective Date and (ii) become Buyers in accordance with the terms
below; and
(2) to define the purchase obligations and rights of Buyers
with respect to Foundry output for the duration of the Foundry's
remaining useful life.
NOW, THEREFORE, in consideration of the foregoing Recitals and
the terms, covenants and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF INTERPRETATION
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following words and expressions shall have the meaning set forth
below:
1.1.1 "AAA" means the American Arbitration Association.
1.1.2 "AFFILIATE" of a Party means any corporation, limited
liability company, partnership or other business enterprise:
(a) Which owns or controls, directly or
indirectly, fifty percent (50%) or more of the voting rights
with respect to the election of directors or managers, or
which has practical control directly or indirectly, of the
Party;
(b) Of which fifty percent (50%) or more of
the voting rights with respect to the election of directors or
managers is owned or controlled, directly or indirectly, by,
or which is under the practical control directly or indirectly
of, the Party; or
(c) Of which fifty percent (50%) or more of
the total voting rights with respect to the election of
directors or managers is owned or controlled, directly or
indirectly, by, or which is under the practical control
directly or indirectly of, any corporation, limited liability
company, partnership or other business enterprise described by
subsections (a) or (b) above.
2
FUTURE PURCHASE AGREEMENT
<PAGE> 106
Any corporation, limited liability company, partnership or other business
enterprise which would at any time be an Affiliate of a Party by reason of the
foregoing, shall be considered an Affiliate for purposes hereof only for so long
as the foregoing conditions are met. For purposes hereof, no Party shall be
considered an Affiliate of any other Party.
1.1.3 "BASIC PURCHASE SHARE"
(a) Basic Purchase Share of a Buyer at a given time
means the quotient of:
(i) the Buyer's "Adjusted Percentage
Interest" at such time divided by
(ii) the sum of all Buyers' Adjusted
Percentage Interests at such time.
(b) For purposes of paragraph (a), the "Adjusted
Percentage Interest" of a Buyer at a given time means:
(i) the Buyer's Percentage Interest in
effect pursuant to the LLC Agreement at such time; increased by
(ii) any prior reduction in the Buyer's
Percentage Interest attributable to operation of (A) the penultimate
sentence of Section 3.3.1.1 to the extent that (I) the Buyer has failed
to contribute that part of the Missing Capital that is not contributed
by any other Person and such failure reduces the capital contribution
the Buyer would otherwise have made and the total capital contributions
that the parties to the LLC Agreement would otherwise have made or (II)
any part of the Missing Capital is contributed by a member of the LLC
that is not an existing Party and does not become a Party at the time
of the contribution, (B) clause (i) of Section 3.3.1.4 of the LLC
Agreement, (C) Section 3.3.2.1 of the LLC Agreement, where the Buyer
failed to make an Additional Capital Contribution and such failure was
not a Dilution Event, (D) the last sentence of Section 3.3.2.2 of the
LLC Agreement, (E) Section 3.5.4 of the LLC Agreement, where the Buyer
failed to guarantee Seller's debt and such failure was not a Dilution
Event, or (F) clause (i) of Section 10.5 of the LLC Agreement;
and reduced by
(iii) any prior increase in the Buyer's
Percentage Interest attributable to operation of (A) the penultimate
sentence of Section 3.3.1.1 to the extent that (I) another party to the
LLC Agreement has failed to contribute that
3
FUTURE PURCHASE AGREEMENT
<PAGE> 107
part of the Missing Capital that is not contributed by any
Person and such failure reduces the total capital
contributions that the parties to the LLC Agreement would
otherwise have made or (II) any part of the Missing Capital is
contributed by a member of the LLC that is not an existing
Party and does not become a Party at the time of the
contribution, (B) clause (i) of Section 3.3.1.4 of the LLC
Agreement, (C) Section 3.3.2.1 of the LLC Agreement, where
another Buyer failed to make an Additional Capital
Contribution and such failure was not a Dilution Event, (D)
the last sentence of Section 3.3.2.2 of the LLC Agreement, (E)
Section 3.5.4 of the LLC Agreement, where another Buyer failed
to guarantee Seller's debt and such failure was not a Dilution
Event, or (F) clause (i) of Section 10.5 of the LLC Agreement.
(c) On the Effective Date, the Basic Purchase Share
for Altera shall be [ ]; for ADI, [ ]; for ISSI, [ ]; and for TSMC, [ ].
1.1.4 "BUSINESS DAY" means a day, other than Saturday or
Sunday, on which banking institutions are open for business in Seattle,
Washington and San Jose, California.
1.1.5 "CALCULATED INSTALLED CAPACITY" means the physical
production capacity of the Foundry from time to time based on the installed
capital equipment which is actually in service, as determined in the reasonable,
good faith judgment of Seller's industrial engineers. The Foundry's production
capacity at any time shall take into account production of Risk Wafers, Test
Wafers, and Proven Products. The determination of Calculated Installed Capacity
may be adjusted from time to time based on the skills, training and other
organizational abilities of Seller. Since the number of Wafers that can be
produced at the Foundry depends on the Wafer specifications, the Calculated
Installed Capacity shall be calibrated in "Wafer Equivalents."
1.1.6 "CLAIM" means a claim, demand, cause of action, loss,
damage, liability, fine, penalty, cost or expense (including reasonable
attorneys' fees and litigation costs).
1.1.7 "DESIGN RULES" means the design rules and parametric
information for a particular Process.
1.1.8 "DEVICES" means good dies of a Buyer's integrated
circuits that are topologically identical (or similar) to those manufactured by
or for a Buyer.
1.1.9 "ELECTED PROPORTION" means a Buyer's elected portion of
Calculated Installed Capacity, as defined in Section 4.1.1.
1.1.10 "EVENT OF DEFAULT" has the meaning given in Section
14.1.
1.1.11 "FORCE MAJEURE" means any one or more of the following
to the extent outside of the reasonable control of a Party: acts of war declared
or undeclared, nationalization, expropriation, civil unrest or other public
disturbance, fire, storm, flood, typhoon, tidal wave,
4
FUTURE PURCHASE AGREEMENT
<PAGE> 108
hurricane, cyclone or other severe weather conditions, earthquake, or other Acts
of God, legal restraints, governmental or like interference, judicial action,
accidental damage to equipment, as well as any other cause outside the
reasonable control of a Party. "Force Majeure" also includes the failure to
obtain such license(s) and other governmental approvals as are required by
United States law or other applicable law for any equipment, technical
information, Proprietary Information, Intellectual Property Rights, Processes,
or Products to be provided pursuant to the terms of this Agreement.
1.1.12 "INTELLECTUAL PROPERTY RIGHTS" means (a) all patent
rights and all right, title and interest in and to all letters patent and
applications for letters patent, and all other government-issued or -granted
indicia of invention ownership, including any reissue, division, term
extensions, continuation or continuation-in-part applications; (b) all
copyrights and all other literary property and author rights, and all right,
title and interest in and to all copyrights, copyright registrations,
certificates of copyrights and copyrighted interests; (c) all trademarks, trade
names and service marks, and all rights, title and interest in and to all
applications, certifications and registrations therefor; (d) all mask work
rights, mask work applications, and mask work registrations; (e) all rights,
title and interest in and to all trade secrets and trade secret rights; and (f)
all licenses or license rights with respect to the foregoing.
1.1.13 "MAXIMUM PURCHASE SHARE" of a Buyer at a given time
means:
(a) in the case of a Regular Buyer, the product of
(i) 1.5 and (ii) the Regular Buyer's Basic Purchase Share at such time;
or
(b) in the case of TSMC, the difference of (i) one
minus (ii) the sum of the Regular Buyers' Elected Proportions of
Calculated Installed Capacity in effect at such time, provided each
Regular Buyer's Elected Proportion is no less than its Minimum Purchase
Share and no greater than the product described in clause (a) at such
time.
On the Effective Date, the Maximum Purchase Share for Altera
shall be [ ]; for ADI, [ ]; and for ISSI, [ ]. Assuming such Maximum Purchase
Shares for the Regular Buyers, and assuming they elect proportions of
Calculated Installed Capacity between their respective Minimum Purchase Shares
and Maximum Purchase Shares on the Effective Date, TSMC's Maximum Purchase
Share at any given time will be between [ ] and [ ].
1.1.14 "MEDIATION" has the meaning given in Section 17.2.
1.1.15 "MINIMUM PURCHASE SHARE" of a Buyer at a given time
means:
(a) in the case of a Regular Buyer, the product of (i)
0.85 and (ii) the Buyer's Basic Purchase Share at such time; or
(b) in the case of TSMC, the lesser of (i) 0.85 times its
Basic Purchase Share, or (ii) the difference of (A) one over (B) the
sum of the Regular Buyers' Elected
5
FUTURE PURCHASE AGREEMENT
<PAGE> 109
Proportions, provided each Regular Buyer's Elected Proportion is no
less than the product described in clause (a) and no greater than its
Maximum Purchase Share at such time.
On the Effective Date, the Minimum Purchase Share for Altera
shall be [_____]; for ADI, [_____]; and for ISSI, [_____]. Assuming such Minimum
Purchase Shares for the Regular Buyers, and assuming they elect proportions of
Calculated Installed Capacity between their respective Minimum Purchase Shares
and Maximum Purchase Shares on the Effective Date, TSMC's Minimum Purchase Share
at any given time will be between [____] and [____].
1.1.16 "MONTH" means (a) a calendar month that lies entirely
within the Term, or (b) in the case of a calendar month that lies partially
within the Term, the part of that month that so lies.
1.1.17 "PERSON" means a natural person, partnership (whether
general or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative capacity, in each case whether domestic or foreign.
1.1.18 "PRICING SCHEDULE" means the prices at which Seller
shall sell Proven Products, Test Wafers, and Risk Wafers to Buyers in accordance
herewith. The initial Pricing Schedule will be established in accordance with
Subsection 6.2.3(a) and shall be updated as provided in Subsections 6.2.3(b) and
6.2.3(c). Each such Pricing Schedule will be deemed to be attached hereto as
Exhibit "A".
1.1.19 "PROCESS" means the process used to manufacture
Products, or to have Products manufactured, which may either be a Buyer's (or
its customer's) process or Seller's process, including any those processes that
are disclosed to Seller under (a) the Technology License and Assistance
Agreement, dated February 20, 1996, originally entered into between TSMC and
TSMC Technology, Inc. and assigned by TSMC to Seller pursuant to the Assignment
and Assumption dated as of the date hereof or (b) the Advanced Process License
Agreement, dated April 10, 1996, originally entered into between TSMC and TSMC
International Investment Ltd. and assigned by TSMC to Seller pursuant to the
Assignment and Assumption.
1.1.20 "PROCESS QUALIFICATION" means the process flow, Design
Rules and SPICE models established by Seller or a Buyer (as the case may be)
which, in the reasonable judgment of Seller or Buyer define a Process that will
achieve a level of quality, consistency and reliability necessary to mass
produce Products at Wafer yields acceptable to Seller and the Buyer.
1.1.21 "PRODUCT QUALIFICATION PLAN" is that certain plan for
producing a Product with a Buyer's (or its customer's) mask sets using a
Qualified Process, which will be agreed to by Seller and the Buyer who decides
to order the Product in question, reduced to writing and signed by the ordering
Buyer and Seller, and shall be deemed to be attached hereto as Exhibit "B".
1.1.22 "PRODUCTION QUALIFICATION" has the meaning given in Subsection 4.2.4.
6
FUTURE PURCHASE AGREEMENT
<PAGE> 110
1.1.23 "PRODUCTION PLAN" means that certain production
schedule prepared by Seller, which delineates the projected production of the
Foundry expressed in Wafer Equivalents by Month and calendar year within the
schedule. The initial Production Plan is attached hereto as Exhibit "E". In
March and September of each calendar year during the Term (or more frequently at
the option of Seller), Seller shall issue to Buyers a projection, consistent
with the then current Business Plan, of the Calculated Installed Capacity of the
Foundry for each Month of the next six- (6-) Month period from July to December
(in the case of a projection issued in March) or from January to June (in the
case of a projection issued in September). With the exception of the Calculated
Installed Capacity calculation, the figures contained in the Production Plan,
expressed in Wafer Equivalents per Month, shall not vary from the Business Plan,
as it may be amended from time to time in accordance with the LLC Agreement.
1.1.24 "PRODUCTS" means Devices, Wafers and Units, as the case
may be.
1.1.25 "PROPRIETARY INFORMATION" means any information that is
controlled by a Party and is identified as proprietary and confidential and that
is disclosed by one Party to another under this Agreement. Written Proprietary
Information shall be clearly marked or labeled "PROPRIETARY" or "CONFIDENTIAL."
All oral disclosures of Proprietary Information shall be identified as such
prior to disclosure and confirmed, in writing, by the disclosing Party within
thirty (30) days of the oral disclosure. Proprietary Information of TSMC shall
include proprietary and confidential information of a customer of TSMC that (a)
is disclosed by that customer to a Party and (b) otherwise satisfies the
foregoing provisions of this Subsection.
1.1.26 "PROVEN PRODUCT" means a Product manufactured using a
Qualified Process that has verified functionality and yield and otherwise meets,
and continues to meet, the Product Qualification Plan as demonstrated in one or
more Qual Lot Runs.
1.1.27 "PURCHASE ORDER" means an order or other release
document issued by a Buyer to Seller in accordance herewith for the purpose of
purchasing Proven Products, Risk Wafers or Test Wafers.
1.1.28 "QUAL LOT RUN" means manufacture of one or more Wafer
lots using a Qualified Process to verify a Buyer's (or its customer's) mask
sets.
1.1.29 "QUALIFIED PROCESS" means a Process that has achieved
Process Qualification in the reasonable judgment of Seller.
1.1.30 "QUALITY AND RELIABILITY SPECIFICATIONS" with respect
to a Proven Product means the quality and reliability specifications, as well as
other standards or requirements, as agreed to by Seller and a Buyer which
intends to order that Proven Product. Once the Quality and Reliability
Specifications have been agreed to with respect to a Proven Product, they shall
be reduced to writing and signed by Seller and the Buyer, and shall constitute
the acceptance standards to be used by the Buyer for the Proven Product, and
shall be deemed to be attached hereto as Exhibit "C".
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1.1.31 "QUARTER" means (a) a calendar quarter that lies
entirely within the Term, or (b) in the case of a calendar quarter that lies
partially within the Term, the part of that quarter that so lies.
1.1.32 "RISK WAFER" means a Wafer which contains a non-Proven
Product and which has been run on either a Qualified Process or on a Process
that is not-yet qualified. Except as otherwise expressly provided herein with
respect to manufacturing defects (including, by way of illustration but without
limitation, Section 5.14), the Buyer takes full technical and financial
responsibility for and assumes all risks related to design and other defects, in
a Risk Wafer.
1.1.33 "TERM" means the term of this Agreement in accordance
with Article 2 below.
1.1.34 "TEST WAFER" means a Wafer that has been produced in a
Qual Lot Run.
1.1.35 "UNIT" means a Device which has been packaged and
marked in accordance with the requirements provided by a Buyer and accepted by
Seller.
1.1.36 "WAFER ACCEPTANCE CRITERIA" have the meaning given in
Section 5.13.
1.1.37 "WAFER" means an eight inch (8") diameter silicon wafer
containing integrated circuits.
1.1.38 "WAFER EQUIVALENT" has the meaning set forth in the
equivalency factor table attached hereto as Exhibit "D".
1.2 RULES OF INTERPRETATION. For the purpose of this Agreement:
1.2.1 Unless the context otherwise requires, (a) "or" is not
exclusive (i.e., it means either or both); (b) words in the singular include the
plural and vice versa; (c) words in the masculine gender include the feminine
and neuter gender and vice versa; (d) words such as "herein," "hereinafter,"
"hereto," "hereby," and "hereunder," when used in this Agreement, refer to this
Agreement as a whole, unless the context otherwise requires; (e) forms of the
verb "include" are not limiting; and (f) definitions of words in the singular
form apply also to the respective plural forms and conversely.
1.2.2 References to Articles, Sections , and Exhibits are to
Articles, Sections , and Exhibits of this Agreement unless stated otherwise.
Headings of subdivisions (including Articles, Sections , Subsections,
paragraphs, and Exhibits) used in this Agreement are for convenience of
reference only and shall not be used in construing or interpreting this
Agreement.
1.2.3 References herein to any agreement, schedule or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to the same as it may from
time to time be amended, modified or extended.
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1.2.4 Technical words and phrases not otherwise defined in
this Agreement shall have the meaning generally assigned to them in the
semiconductor foundry industry.
ARTICLE 2
TERM
2.1 TERM. This Agreement shall be effective upon the Effective Date and
shall continue in effect until terminated in accordance with any of the terms
below.
2.2 END OF FOUNDRY'S USEFUL LIFE. This Agreement shall terminate on the
date determined by Buyers holding 87 percent of the Basic Purchase Shares that
the Foundry's useful life has expired.
ARTICLE 3
WAFER SUPPLY; FOUNDRY OUTPUT RIGHTS AND OBLIGATIONS
3.1 MANUFACTURING CAPABILITY. During the Term, the Calculated Installed
Capacity of the Foundry is anticipated to be as shown in the initial Production
Plan attached hereto as Exhibit "E". Seller shall exert commercially reasonable
efforts to maintain production in accordance with the schedule set forth on
Exhibit "E" (as Exhibit "E" is updated from time to time); provided, however,
there is no guarantee that actual Foundry production will equal or exceed the
projected production levels or the Calculated Installed Capacity set forth in
the initial or any subsequent Production Plans, either at the time indicated
therein or at any time.
3.2 PRODUCTION AVAILABILITY.
3.2.1 During the Term, Seller shall be obligated to make
available to each Buyer at any given time a quantity of Products no less than
the Buyer's Elected Proportion of Calculated Installed Capacity in effect at
such time, provided that the Elected Proportion is between the Buyer's Minimum
Purchase Share and Maximum Purchase Share at such time.
3.2.2 During the Term, each Buyer shall have the right to
purchase Products in amounts up to its Maximum Purchase Share of Calculated
Installed Capacity in accordance with Subsection 3.3.1 and shall be obligated to
purchase only its Minimum Purchase Share of Calculated Installed Capacity in
accordance with Subsection 3.3.2.
3.2.3 In the event that Seller cannot provide a Buyer with the
quantity of Products set forth in the Buyer's Purchase Orders accepted by Seller
for any given Quarter during the Term (a "Quarterly Order Deficit") due to
inability or failure of Seller to deliver to the Buyer those Products that the
Buyer has ordered or due to Force Majeure, then the following shall apply: (a)
where Seller has been unable or fails to supply the Buyer for reasons other than
Force Majeure, Seller shall not be deemed to be in default hereunder so long as
Seller can make up the Quarterly
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Order Deficit in the following Quarter; and (b) where Seller's failure to fill
the Buyer's Purchase Orders is due to Force Majeure, the Buyer shall be excused
from its purchase obligations to the extent that the Buyer placed orders for
Products in amounts equal to or greater than the units of Products that Seller
is able to deliver for the Quarter in question, and Seller shall only invoice
the Buyer for the actual number of units Seller is able to ship for the Quarter
in question. With respect to clause (a) of this Subsection 3.2.3, to the extent
that Seller is unable to make up the Buyer's Quarterly Order Deficit in the
succeeding Quarter, Seller shall be responsible for any damages sustained by
such Buyer (or its customer), subject to the limitation on damages set forth in
Article 10 below. With respect to clause (b) of this Subsection 3.2.3, Seller
shall have no liability or obligation whatsoever to an affected Buyer where
Seller's inability to fill the Buyer's Purchase Order is due to an event of
Force Majeure.
3.2.4 As used in this Article 3, "Quarter" refers to a Quarter
covered (or partially covered) by a Buyer's six (6) Month forecast described in
Section 4.1.1 or 4.1.2.
3.3 BUYER'S PURCHASE RIGHTS AND OBLIGATIONS DURING THE TERM:
3.3.1 Each Buyer shall have the right to purchase a maximum
percentage of Calculated Installed Capacity in any given Quarter determined by
multiplying such Calculated Installed Capacity as shown in the applicable
Production Plan times the Buyer's respective Maximum Purchase Share; and
3.3.2 Each Buyer shall have the obligation to purchase a
minimum percentage of Calculated Installed Capacity in any given Quarter
determined by multiplying such Calculated Installed Capacity as shown in the
applicable Production Plan times the Buyer's Minimum Purchase Share. In each
Quarter, unless the applicable Buyer and Seller otherwise agree, a Buyer's
minimum purchase obligation is subject to the following limitation: a Buyer's
minimum purchase obligation in any given Month may not deviate more than ***
from the preceding Month's purchase obligation, unless Month-to-Month percentage
deviations shown in the applicable Production Plan exceed ***, in which case a
Buyer's minimum purchase obligation in any given Month may not deviate more than
the Month-to- Month percentage deviation shown in the applicable Production
Plan. If a Buyer requests an increase in the Month-to-Month *** percentage
deviation, Seller agrees to reasonably negotiate such increase with such Buyer
in good faith, provided, however, that each Buyer recognizes that Seller's
flexibility in negotiating an increase in the Month-to-Month *** percentage
deviation may be limited by commitments to other Buyers and Seller's other
customers.
3.3.3 A Buyer's purchase of Risk Wafers, Test Wafers, and
Proven Products shall be taken into account for purposes of (a) the Buyer's
satisfying its minimum purchase obligation under Subsection 3.3.2 and (b)
Seller's satisfying the Buyer's maximum purchase right under Subsection 3.3.1.
3.4 TAKE-OR-PAY OBLIGATION FOR UNUSED MINIMUM PURCHASE SHARE.
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*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 114
3.4.1 During each Quarter of the Term, each Buyer agrees that
it shall purchase Products from Seller in accordance with Subsection 3.3.2. If
in any Quarter during the Term a Buyer (a "Defaulting Buyer") is unable to
purchase the Products in accordance with Subsection 3.3.2 (the "Unused Minimum
Purchase Allocation"), such Defaulting Buyer shall give Seller and all other
Buyers (each such other Buyer, a "Non-Defaulting Buyer") written notice (a "UMPA
Notice") no later than ninety (90) days before the date that the Products in
question are to begin manufacture in accordance with the Defaulting Buyer's six
(6) Month rolling forecast. Each Non-Defaulting Buyer shall have a right of
first refusal to take the Unused Minimum Purchase Allocation, provided it
exercises such right by written notice to the Defaulting Buyer and the other
Non-Defaulting Buyers within thirty (30) days following receipt of the
Defaulting Buyer's written notice (the "RFR Deadline"). The apportionment of the
Unused Minimum Purchase Allocation among the Non-Defaulting Buyers electing to
take any part of it shall be determined by the method set forth in Exhibit "J"
hereto, unless the Non-Defaulting Buyers agree to another procedure at the time.
If the Non- Defaulting Buyers exercise their rights of first refusal, then the
Defaulting Buyer shall be excused from any Bill-Back Charges (as defined below)
applicable to that portion of the Unused Minimum Purchase Allocation that the
Non-Defaulting Buyers elect to take; subject, however, to the last sentence of
this Subsection 3.4.1. If the Non-Defaulting Buyers elect not to take (or fail
timely to elect) any part of the Unused Minimum Purchase Allocation, then the
Defaulting Buyer shall have no later than sixty (60) days following delivery of
its UMPA Notice to identify in writing third parties ready, willing and able to
purchase from Seller the unelected part of the Unused Minimum Purchase
Allocation. So long as (a) Seller approves such third parties or any other third
parties (collectively, "Such Third Parties"), which approval shall not be
unreasonably withheld or delayed (provided, that in no event shall Such Third
Parties be Prohibited Persons, (b) Such Third Parties purchase all of the
unelected part of the Unused Minimum Purchase Allocation within sixty (60) days
after the date that the Defaulting Buyer identifies Such Third Parties to Seller
in writing, and (c) Such Third Parties pay the invoice price in full to Seller
within thirty-five (35) days after the date of invoice, then the Defaulting
Buyer shall be exonerated from any Bill-Back Charges applicable to the Unused
Minimum Purchase Allocation. A Buyer's take-or-pay obligation shall be measured
on a Quarter-by-Quarter basis; accordingly, for a Defaulting Buyer to avoid
Bill-Back Charges applicable to a particular Quarter's Unused Minimum Purchase
Allocation, either the Non-Defaulting Parties or Such Third Parties must have
committed to purchase the Defaulting Buyer's Unused Minimum Purchase Allocation
during the Quarter in which the Defaulting Buyer is unable to purchase Products
in accordance with Subsection 3.4.2.
3.4.2 If any part of the Unused Minimum Purchase Allocation
(a) is not taken by the Non-Defaulting Buyers in accordance with Subsection
3.4.1 and (b) (i) is not sold to third parties or (ii) is not paid for by
purchasing third parties in accordance with that Subsection, then the Defaulting
Buyer shall compensate Seller for such part of the Unused Minimum Purchase
Allocation at the full price for the Products in question, less any avoided
costs (the "Bill-Back Charge"). Seller shall invoice any Bill-Back Charges once
each Quarter during the Term, and within 30 days following the end of the Term
by lapse of time or otherwise. Any Defaulting Buyer shall pay the Bill-Back
Charge within thirty (30) days after the date of invoice (the "Payment Date").
Any Bill-Back Charge not received by Seller within thirty-five (35) days after
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the date of invoice shall bear interest from the Payment Date until paid in full
by the Defaulting Buyer to Seller at the annual rate equal to 5% above the prime
or reference rate for commercial borrowing announced by Bank of America N.T. &
S.A., as such rate changes from time-to-time; provided, however, that in no
event shall such interest rate exceed the highest rate permissible under
applicable law. For the purpose of computing the Bill-Back Charge, the maximum
Calculated Installed Capacity shall not be deemed to exceed *** Wafer
Equivalents per month.
3.4.3 The provisions of Sections 3.4.1 and 3.4.2 shall be
Seller's sole remedy under this Agreement for any failure by a Buyer to purchase
its minimum quantities of Calculated Installed Capacity in any Quarter as set
forth in Subsection 3.3.2.
ARTICLE 4
PRODUCTION PLANNING AND QUALIFICATION
4.1 FORECASTS.
4.1.1 Concurrent with the execution and delivery hereof (or
promptly thereafter) in the case of the first Month of the Term and no later
than ten (10) Business Days before each succeeding Month of the Term, each
Regular Buyer shall provide Seller and TSMC in writing with a six- (6-) Month
rolling forecast of the Buyer's requirements for Products, with Product-mix
shown by Process and by geometry. Concurrent with the execution and delivery
hereof (or promptly thereafter) in the case of the first Month of the Term and
no later than the first Business Day of each succeeding Month of the Term, TSMC
shall provide Seller in writing with a six- (6-) Month rolling forecast of
TSMC's requirements for Products, with Product-mix shown by Process and
geometry. (Each Buyer's Product requirements at any given time as a proportion
of Calculated Installed Capacity at such time is referred to as the Buyer's
"Elected Proportion" for such time.) The first twelve (12) weeks of such
forecast shall be firm with respect to the quantity of Products to be purchased
or ordered within said period. If Seller's standard production lead time for a
particular Process or Product exceeds twelve (12) weeks, the Buyer's forecast
with respect to such Process or Product shall be firm for Seller's standard
production lead time plus two weeks.
4.1.2 Unless the Parties otherwise agree, the linear rate
deviation for each Regular Buyer's forecast for a given Month shall be *** of
the preceding Month forecast, unless Month-to-Month percentage deviations shown
in the applicable Production Plan exceed ***, in which case such Buyer's monthly
forecast may not deviate more than the Month-to- Month percentage deviation
shown in the applicable Production Plan. The foregoing linear rate deviation
applicable to a Regular Buyer's monthly forecast relates to the overall quantity
of Products set forth in the forecast and not to any one Process or to any
specific Product. If a Regular Buyer requests an increase in the Month-to-Month
***
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*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 116
percentage deviation, Seller agrees to reasonably negotiate such increase
with such Buyer in good faith, provided, however, that each Regular Buyer
recognizes that Seller's flexibility in negotiating an increase in the
Month-to-Month *** percentage deviation may be limited by commitments to other
Buyers and Seller's other customers.
4.2 PRODUCTION QUALIFICATION.
4.2.1 Seller shall advise the Buyers concerning each Process
loaded or to be loaded at the Foundry for use in the manufacture of Products.
Seller then shall engage in Process Qualification for each Process not already a
Qualified Process. Once Seller has determined, in its reasonable judgement, that
a Process has achieved Process Qualification, such Process shall be a Qualified
Process. Seller shall promptly notify the Buyers when a Process becomes a
Qualified Process.
4.2.2 For each Product a Buyer desires to order, Seller shall
furnish Design Rules for the applicable Process, which shall be deemed attached
hereto as Exhibit "F". For each Product a Buyer desires to order, Seller and the
Buyer who intends to order the Product in question (the "Relevant Buyer") shall
further agree to a Product Qualification Plan. Once Seller and the Relevant
Buyer have agreed to a Product Qualification Plan, it shall be reduced to
writing and signed by Seller and the Relevant Buyer and shall be deemed to be
attached hereto as Exhibit "B". Seller and the Relevant Buyer also shall agree
to the Quality and Reliability Specifications, which shall be reduced to writing
and signed by Seller and the Relevant Buyer and shall be deemed to be attached
hereto as Exhibit "C".
4.2.3 Upon a Buyer's request, Seller shall designate a mask
vendor, to whom the Buyer (or its customer) shall provide device database tapes
and to whom Seller shall provide mask alignment and test structure databases, or
the Buyer (or its customer) will provide mask sets or portions thereof. Each
Buyer shall bear all costs and expenses of producing the mask sets necessary for
the manufacture of Products it orders under this Agreement.
4.2.4 Using a Buyer's (or its customer's) mask sets and the
Design Rules, Seller shall perform one or more Qual Lot Runs. Seller will
provide the Buyer with such amount of Test Wafers produced in such Qual Lot Runs
as such Buyer may require for its qualification at the purchase prices specified
in the Pricing Schedule. Within ninety (90) days following receipt of the Test
Wafers, the Buyer shall inform Seller in writing of whether or not such Test
Wafers meet the applicable Quality and Reliability Specifications, and if
notification is in the affirmative, full qualification for that Product is
completed. If Seller does not receive notification from the Buyer during the
time period specified in the preceding sentence, full qualification for that
Product shall be deemed accomplished. In the event that the Test Wafers do not
meet the Quality and Reliability Specifications, Seller and the Relevant Buyers
will work together in good faith to achieve full qualification for that Product.
The successful completion of the procedures outlined in Subsections 4.2.1
through 4.2.4, inclusive, is herein referred to as "Production Qualification".
4.2.5 Prior to the completion of full Production Qualification
for each Product, a Buyer may, by giving at least five (5) Business Days' notice
to Seller, terminate the production of any Test Wafers specified in Subsection
4.2.4 or Risk Wafers, and Seller will do so following the
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*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 117
completion of the Process steps at which such Test Wafers or Risk Wafers reside
at the time Seller receives such notice. The terminating Buyer shall pay Seller
for all the Test Wafers or Risk Wafers so affected, and the prices for such Test
Wafers or Risk Wafers shall be the respective purchase prices specified in the
Pricing Schedule, equitably prorated based on the completed stage of production.
4.2.6 Once Production Qualification has been achieved for a
Product, such Product is a Proven Product, and Seller will produce that Proven
Product pursuant to Purchase Orders issued by Buyers and accepted by Seller
under Section 6.1 below.
ARTICLE 5
OTHER AGREEMENTS RELATING TO PRODUCTION AND SUPPLY
5.1 QUANTITY REQUIREMENT. Subject to the Buyers' Maximum Purchase
Shares, Seller agrees to use commercially reasonable efforts to meet all the
quantity requirements of the Buyers for Products.
5.2 ACCELERATE SUPPLY. It is anticipated that from time to time there
may be instances where an accelerated lead and cycle time is required to serve
the needs of a Buyer, and in such instances, Seller shall, upon mutually agreed
upon terms and conditions, use commercially reasonable efforts to accelerate the
schedule of production for Proven Products or Risk Wafers and/or increase the
manufacturing volume in order to meet that Buyer's needs.
5.3 MODIFICATIONS TO EXISTING PROCESSES OR SPECIFICATIONS. If a Buyer
desires that Seller make modifications to a Qualified Process or to the Quality
and Reliability Specifications, such Buyer shall give Seller written notice
thereof, and within a reasonable amount of time after Seller's receipt of
Buyer's notice, Seller shall notify the Buyer in writing of any additional costs
associated with making such modifications (including, without limitation,
retooling costs), any adjustments in price, production, delivery schedule, and
any other terms and conditions of this Agreement that are necessary to make such
modifications (collectively, the "Modification Costs"). Within thirty (30) days
of its receipt of Seller's written notification of any such Modification Costs,
such Buyer shall either agree in writing to accept the obligation to pay Seller
any such Modification Costs or the Buyer may, in the exercise of its sole and
absolute discretion, withdraw its request that such modifications be made.
Seller shall not incur any Modification Costs on behalf of a Buyer unless and
until Seller has received Buyer's written agreement to pay the Modification
Costs. In addition to the foregoing requirement, any such requested
modifications must be acceptable to Seller and further must pass the Production
Qualifications procedures set forth in Section 4.2. If a requested modification
is unacceptable to Seller, or if it fails to pass the qualifications procedures
set out in Section 4.2, then Seller will continue to manufacture the Proven
Product in question in accordance with the existing Qualified Process and/or the
existing Quality and Reliability Specifications, in which event the notifying
Buyer shall be obligated to continue to purchase such Proven Product as so
manufactured. Once a Buyer has agreed to pay Modification Costs, such Buyer
shall pay to Seller all such Modification Costs within thirty (30)
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days of Seller's invoice therefor. If Seller does not receive full payment of
Modification Costs within thirty-five (35) days after the date of invoice, the
invoice price shall bear interest from the date of invoice until paid in full at
the annual rate equal to 5% above the prime or reference rate for commercial
borrowing announced by Bank of America N.T. & S.A., as such rate changes from
time-to-time; provided, however, that in no event shall such interest rate
exceed the highest rate permissible under applicable law.
5.4 ADDITIONS OR SUBSTITUTIONS OF PRODUCTS. If a Buyer desires that
Seller add or substitute a similar Product type using a Qualified Process (i.e.,
one that has not been assigned a current product model number) such Buyer shall
give Seller written notice thereof. Within a reasonable amount of time after
Seller's receipt of a Buyer's notice, Seller shall notify the Buyer in writing
of any additional cost associated with adding or substituting a similar Product
type (the "Additional Costs"). Within thirty (30) days of its receipt of
Seller's written notification of Additional Costs, such Buyer shall either agree
in writing to accept the obligation to pay Seller all such Additional Costs or
the Buyer may, in the exercise of its sole and absolute discretion, withdraw the
request for such addition or substitution. Seller shall not incur any Additional
Costs on behalf of the Buyer unless and until Seller has received Buyer's
written agreement to pay the Additional Costs and Seller and the Buyer have
agreed upon the purchase price for such similar Product type. Thereafter, Seller
shall use commercially reasonable efforts to produce such similar Product type
as requested, subject to such similar Product type achieving Production
Qualification under the procedures set forth in Section 4.2. Once a Buyer has
agreed to pay Additional Costs, such Buyer shall pay to Seller all such
Additional Costs within thirty (30) days of Seller's invoice therefor. If Seller
does not receive full payment of Additional Costs within thirty-five (35) days
after the date of invoice, the invoice price shall bear interest from the date
of invoice until paid in full at the annual rate equal to 5% above the prime or
reference rate for commercial borrowing announced by Bank of America N.T. &
S.A., as such rate changes from time-to-time; provided, however, that in no
event shall such interest rate exceed the highest rate permissible under
applicable law.
5.5 VENDOR INFORMATION. Upon a Buyer's written request, Seller shall
provide the Buyer with (a) Process control information, including but not
limited to: Process and electrical test yield results, current Process
specifications, calibration schedules and logs for equipment, environmental
monitor information for air, gasses and DI water, documentation or operator
qualification and training, documentation of traceability through Seller's
operation, Process verification information, and Seller's trouble reports with
respect to Process control information; and (b) a status of work-in-process.
5.6 PROCESS RECORDS. Seller shall maintain, for a period of five (5)
years from the date that any Qualified Process was performed to produce Proven
Products, accurate records describing in detail such Qualified Process on a
by-die-lot basis. Seller shall give each Buyer the right, at any time during
Seller's normal business hours and upon reasonable notice, to inspect and make
copies of any of Seller's Qualified Process records.
5.7 TRADEMARKS. With respect to trademarks, the Parties agree as
follows:
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5.7.1 Except as authorized in Subsection 5.7.2, Seller shall
not, at any time, in any place, or in any manner, utilize the trademarks of the
Buyers, nor any name or logo confusingly similar thereto, in connection with
Seller's business activities, or in the manufacture, use, sale or other
disposition of Products, or in any other way whatsoever.
5.7.2 To the extent and only to the extent required by any
Buyer, such Buyer may give Seller written authorization to symbolize or
otherwise mark Proven Products with the authorizing Buyer's trademarks or other
proprietary logos.
5.7.3 No Buyer shall, at any time, in any place, or in any
manner utilize the trademarks of Seller or any of the other Buyers, or any name
or logo confusingly similar thereto, in connection with the Buyer's business
activities, or the use, sale or other disposition of Products, or in any other
way whatsoever.
5.8 MASK SET PROTECTION. Seller shall protect all mask sets, whether
transferred from a Buyer (or its customer) or obtained by Seller from a mask
vendor of a Buyer (or its customer), as trade secrets of each Buyer in
accordance with the confidentiality provisions of (a) Article 15 hereof, and (b)
any license or confidentiality agreement entered into between Seller and a Buyer
or any Affiliate thereof. Any masks generated by Seller from a Buyer's database
tapes shall be the property of the Buyer. When any mask set is no longer usable
by Seller for the purposes hereof, or upon the termination or expiration hereof,
Seller shall either immediately return such mask set to the appropriate party,
or upon such party's written instructions, destroy such mask set and provide
such party with written certification of such destruction. The Buyers understand
that mask sets, if not used for a specified period of time, will be handled in
accordance with Seller's idle mask policy then in effect. Seller agrees, upon
written request of a Buyer, to disclose its idle mask policy to such Buyer. It
shall be a Buyer's responsibility to advise its customers of Seller's idle mask
policy.
5.9 RIGHTS TO INSPECT AND MONITOR PRODUCTION. Each Buyer shall have the
following rights to inspect and monitor production at the Foundry:
5.9.1 Each Buyer (or, in the case of TSMC, any of its
customers) shall have the right to maintain at the Foundry, at its sole
discretion and expense, one or more resident representatives for the purpose of
ensuring compliance with the Quality and Reliability Specifications applicable
to Proven Products and otherwise aiding the Buyer in exercising its rights under
this Section 5.9. Seller shall provide suitable office space for use by such
representative(s) and shall provide access to the Foundry as is required for
assuring said compliance. Such inspectors may conduct independent source
inspections, at the Buyer's (or such customer's) expense, prior to shipment.
Office space provided to such inspectors, telephone, telecopy, photocopy and any
other office services used by such inspectors shall be billed to the Buyer (or
to such customers) on a full-cost-recovery basis, as determined by Seller's
management.
5.9.2 Seller agrees to allow each Buyer (or, in the case of
TSMC, any of its customers) to perform, upon reasonable written notice to
Seller, quality or yield audits of the
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Foundry. Any such audit shall be conducted (a) at the expense of the Buyer (or
such customer) and (b) in a manner designed to cause the least possible
disruption to production at the Foundry. Prior to commencing any such audit,
Buyer (or such customer) shall submit for Seller's prior approval an audit plan
specifying the scope of its audit, the personnel to be involved therein, and the
estimated time required to complete the audit. Seller shall not unreasonably
withhold its consent to such plan, provided that as conditions precedent to
Seller's consent to any such audits the Buyer or such customer, as the case may
be, and each individual involved in the audit shall execute and deliver a
confidentiality agreement in the form of Exhibit "J" attached hereto.
5.9.3 During completion of production lots, each Buyer (or any
of its customers) shall have the right to perform monitoring tests and may
recommend disposition/corrective action where variance from the Quality and
Reliability Specifications exists. Seller shall support this activity with
quality trend reports and such other documentation as shall be requested from
time to time by the Buyer (or such customer). In addition, if at any other time
the Buyer (or such customer) detects variances from Quality and Reliability
Specifications, the Buyer (or such customer) may recommend such corrective
actions to Seller.
5.9.4 Subject to a Buyer's customer signing a confidentiality
agreement with Seller substantially in the form of Exhibit "K," Seller shall
grant to such customer the right to inspect the Foundry, to conduct quality
audits of the Foundry, and to review Design Rules at the Foundry.
5.10 OBTAIN GRANT OF NON-EXCLUSIVE MANUFACTURING RIGHTS. To the extent
that the proposed manufacture of any Products ordered by a Buyer hereunder
requires, in the reasonable judgment of Supplier, the grant of non-exclusive
Intellectual Property Rights (including, by way of illustration but without
limitation, a nonexclusive grant in mask work rights, copyrights, patents,
utility models or design rights and applications for any of the foregoing) to
avoid infringement resulting from manufacture or sale of such Products, the
Buyer agrees to obtain and grant to Seller non-exclusive rights in such
Intellectual Property Rights relating to ordered Products, whether by way of
non-exclusive license, sublicense, have-made rights or otherwise, for the sole
purpose of manufacturing such Products for sale to the Buyer. Any such grant of
non-exclusive Intellectual Property Rights shall not confer the right on Seller
to grant rights to others under any of the foregoing (unless expressly provided
for in the granting instrument). Notwithstanding the foregoing, a Buyer may
decline to obtain a license in such Intellectual Property Rights if the Buyer
executes and delivers to Seller a written indemnification agreement
substantially in the form of Exhibit "L" attached hereto, whereby the Buyer
agrees to indemnify, defend and hold Seller harmless from any Claims of
infringement or misappropriation asserted by holders of such Intellectual
Property Rights. Seller will not manufacture or deliver Proven Products, Test
Wafers or Risk Wafers unless and until the Buyer has (a) obtained and granted
the necessary non-exclusive Intellectual Property Rights to Seller; or (b)
executed and delivered to Seller such indemnity agreement. The provisions of
this Section 5.10 shall not apply to any Process covered by Supplier's
indemnification obligations under Section 11.1 below.
5.11 UNIQUE PROCESSES, METHODS OR MATERIALS. If a Buyer desires that
Seller load a Process, method or materials at the Foundry that is unique to the
Buyer (i.e., one that (a) in the
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case of a Process, deviates from a Qualified Process that is then in use at the
Foundry, and (b) in the case of a method and materials, deviates from methods
and materials then in use or production at the Foundry), such Buyer shall give
Seller written notice thereof. If Seller agrees to load a unique Process, method
or materials at the Foundry, then within a reasonable amount of time after
Seller's receipt of the Buyer's notice, Seller shall notify the Buyer in writing
of any additional costs associated with such unique Process, method or
materials, including, without limitation, purchase part and work-in-process
inventory, supplies, tooling, and any equipment that is specific to such unique
Process, method or materials (collectively, "Unique Costs"). Within thirty (30)
days of its receipt of Seller's written notification of Unique Costs, such Buyer
shall either agree in writing to accept the obligation to pay Seller all such
Unique Costs or the Buyer may, in the exercise of its sole and absolute
discretion, withdraw the request for such unique Process, method or materials.
Seller shall not incur any Unique Costs on behalf of a Buyer unless and until
Seller has received Buyer's written agreement to pay such Unique Costs. Once a
Buyer has agreed to pay Unique Costs, such Buyer shall pay to Seller all such
Unique Costs within thirty (30) days of Seller's invoice therefor. If Seller
does not receive full payment of Unique Costs within thirty-five (35) days after
the date of invoice, the invoice price shall bear interest from the date of
invoice until paid in full at the annual rate equal to 5% above the prime or
reference rate for commercial borrowing announced by Bank of America N.T. &
S.A., as such rate changes from time-to-time; provided, however, that in no
event shall such interest rate exceed the highest rate permissible under
applicable law.
5.12 ADJUSTMENT IN CAPACITY RIGHTS AND OBLIGATIONS; ADMISSION OF NEW
BUYERS.
5.12.1 ADJUSTMENT. Unless otherwise agreed in writing by the
Parties, any adjustment in the Buyers' Percentage Interests which results in a
change in their Adjusted Percentage Interests (as defined in Subsection 1.1.3)
shall not become effective for purposes of the Buyers' Basic Purchase Shares
until the thirteenth (13th) week after the date upon which the adjustment in
Percentage Interests occurs pursuant to the LLC Agreement, and unless agreed
otherwise by Seller and each Buyer under a Purchase Order, no such adjustment in
Percentage Interests, when so effective, shall operate to cancel, amend or
otherwise affect any Purchase Orders accepted by Seller prior to the date that
such adjustment in Percentage Interests is so effective.
5.12.2 NEW BUYERS. A Person (a) which is admitted to
membership in Seller (i) pursuant to Section 3.3 or 10.5 of the LLC Agreement or
(ii) following a permitted Transfer of a Membership Interest or part thereof by
a member of Seller and (b) which acquires pursuant to the LLC Agreement (or any
amendment thereof) rights and obligations to purchase Products from Seller shall
be become a Buyer upon executing and delivering to the Board of Directors such
instruments, including an agreement to be bound by the terms hereof, as are
reasonably satisfactory in form and substance to the Board of Directors.
5.13 CERTAIN TERMS APPLICABLE TO TEST WAFERS. The provisions of
Section 6.2 through 6.5, inclusive, and Article 7 respecting Proven Products
shall be equally applicable to Test Wafers. There is no product warranty under
Article 9 for Test Wafers unless Seller and the
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applicable Buyer agree to such warranty in writing prior to shipment. If Seller
and the applicable Buyer do enter into such a written product warranty, then
Test Wafers covered by such warranty shall be treated as Proven Products under
the provisions of Article 9. Additionally, Test Wafers covered by such written
product warranty shall be treated as Proven Products under Article 8. If Test
Wafers are not covered by a written product warranty, then Seller shall provide
the applicable Buyer with Seller's Wafer acceptance test parameters and outgoing
visual acceptance criteria (such parameters and criteria, collectively, the
"Wafer Acceptance Criteria"). If on delivery of Test Wafers to such Buyer, the
Test Wafers fail an incoming test under the Wafer Acceptance Criteria, such Test
Wafers shall be deemed to be defective. Any such defective Test Wafers may be
returned within 120 days of the Buyer's receipt thereof to Seller, F.O.B. the
Foundry, and if such defective Test Wafers are indeed defective and not caused
by Abuse and Misuse (as defined below), then Seller shall, at its option, either
repair, replace or credit the Buyer for such defective Test Wafers; and
furthermore, Seller shall return any such Test Wafers repaired or replaced to
the applicable Buyer, transportation prepaid, and shall reimburse the Buyer for
the transportation charges paid by it for returning such defective Test Wafers
to Seller. Any dispute regarding whether Test Wafers fail an incoming test under
the applicable Wafer Acceptance Criteria or whether Test Wafers have been
subjected to Abuse and Misuse shall be resolved in accordance with Article 17.
5.14 CERTAIN TERMS APPLICABLE TO RISK WAFERS RUN ON A QUALIFIED
PROCESS. For any Risk Wafers run on a Qualified Process ("RWRQPs"), Seller shall
provide the applicable Buyer with Seller's Wafer Acceptance Criteria (as that
term is defined in Section 5.13). If on delivery of RWRQPs to such Buyer, the
RWRQPs fail an incoming test under the Wafer Acceptance Criteria, such RWRQPs
shall be deemed to be defective. Any such defective RWRQPs may be returned
within one hundred twenty (120) days of the Buyer's receipt thereof to Seller,
F.O.B. the Foundry, and if such defective RWRQPs are indeed defective and not
caused by Abuse and Misuse (as defined below), then Seller shall, at its option,
either repair, replace or credit the Buyer for such defective RWRQPs; and
furthermore, Seller shall return any such RWRQPs repaired or replaced to the
applicable Buyer, transportation prepaid, and shall reimburse the Buyer for the
transportation charges paid by the Buyer for returning such defective RWRQPs to
Seller. Any dispute regarding whether RWRQPs fail an incoming test under the
applicable Wafer Acceptance Criteria or whether RWRQPs have been subjected to
Abuse and Misuse shall be resolved in accordance with Article 17.
5.15 SALE OF RISK WAFERS. Seller shall sell Risk Wafers if so requested
by a Buyer, subject to the negotiation of a mutually acceptable risk start
agreement.
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ARTICLE 6
PURCHASES
6.1 PURCHASE ORDERS.
6.1.1 Subject to the provisions of Section 3.3 and 4.1, each
Buyer shall place Purchase Orders for such quantities of Products according to
the current Production Plan. The Purchase Orders shall (a) be open purchase
orders for fixed quantities of Products; (b) constantly cover a twelve (12) week
period (unless Seller's standard production lead time for a particular Product
exceeds twelve (12) weeks, in which case Purchase Orders for such Product shall
constantly cover a period that is two weeks longer than Seller's standard
production lead time for the Product in question); (c) be placed with Seller no
later than sixty (60) days prior to the shipment date specified in such Purchase
Order; (d) constitute firm purchase obligations on the part of each Buyer, and
(e) be final, subject only to acceptance by Seller, which acceptance shall not
be unreasonably withheld or delayed. Seller may accept a Buyer's Purchase
Order(s) either by written acknowledgement of the Purchase Order(s) placed or by
shipment of the Products ordered. On or before seven (7) Business Days prior to
the date that Seller commences production of Proven Products ordered by a Buyer,
such Buyer may substitute other Proven Products that have a currently-assigned
product model number for those actually ordered without incurring any
administrative cost therefor.
6.1.2 Purchase orders otherwise to be placed by TSMC in the
manner specified in Subsection 6.1.1 may be placed by any customer of TSMC
directly to Supplier. Supplier shall accept any such customer's purchase order
that otherwise conforms to the requirements hereof.
6.1.3 Seller shall notify a Buyer of any anticipated problems
in filling a Purchase Order within twenty-five (25) days following its receipt.
To the extent that the terms of any Purchase Order or any Seller corresponding
quotation, order acknowledgment, or invoice conflict herewith, this Agreement
shall be controlling unless Seller and the Buyer placing the Purchase Order
expressly agree to the contrary. To the extent that the terms of any Purchase
Order conflict with the terms of Seller's corresponding quotation, order
acknowledgment, or invoice (the so-called "battle of the forms"), Seller's
quotation, order acknowledgement or invoice shall be controlling unless Seller
and the Buyer placing the Purchase Order expressly agree to the contrary.
6.2 PRICE. Seller shall sell Proven Products, Test Wafers and Risk
Wafers to Buyers in accordance with the Pricing Schedule in effect at the time
of shipment, subject to the following:
6.2.1 The prices quoted in each Pricing Schedule shall be firm
and valid until the Pricing Schedule is amended in accordance with Subsections
6.2.3(b) or 6.2.3(c).
6.2.2 The Prices quoted in the Pricing Schedule are in U.S.
currency and net of any and all taxes and duties, including but not limited to
customs duties, sales tax, value added tax, use tax, and excise tax. Each Buyer
shall be responsible for all applicable taxes (including
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one or more of the above taxes), in addition to the prices quoted in the Pricing
Schedule that relate to a Buyer's order.
6.2.3 The initial pricing, quarterly pricing and annual
pricing shall be set as follows:
(a) The initial pricing under this Agreement shall be
the prices quoted on the Pricing Schedule attached to the Original
Purchase Agreement on the date that the Original Purchase Agreement
expired or terminated, which Pricing Schedule shall be deemed to be
attached hereto as Exhibit "A" as the initial Pricing Schedule
hereunder.
(b) On a Quarterly basis, Seller shall do the
following: For each Process loaded or to be loaded at the Foundry,
Seller shall exert its best efforts to obtain from TSMC Taiwan an
average price for such Process in use at all of TSMC Taiwan's and its
Affiliates' Taiwanese semiconductor-wafer manufacturing plants in the
previous calendar quarter, and such average price shall be the "Market
Price" for each such Process to be used to manufacture Products at the
Foundry. Within ten (10) Business Days after the beginning of each
Quarter, Seller shall provide each Buyer in writing with its
determination of the Market Price (based on the prior calendar quarter)
for each Process used to manufacture Products included in the Buyer's
then-current rolling six (6) Month forecasts ("Seller's Quarterly
Pricing Report"). If the Market Price (as set forth in Seller's
Quarterly Pricing Report) for the Process to be used to manufacture a
particular Product deviates, up or down, by more than three percent
(3%) from the price of such Process used to calculate pricing for
Products shown on the Pricing Schedule, the price for the Process and
for each Product in question shall be revised accordingly, and such
revised price shall be reduced to writing and signed by the Parties,
and shall be deemed to be attached hereto as an addendum to Exhibit
"A", which shall be the new Pricing Schedule in respect to that
Product. If any one or more of the Buyers objects to any Market Price
set by Seller in Seller's Quarterly Pricing Report, (the "Objecting
Buyers"), then the Objecting Buyers may request that Seller obtain
permission from TSMC Taiwan to conduct an audit of TSMC Taiwan's and
its Affiliates' books and records containing information necessary to
confirm Seller's calculation of such Market Price for each Process and
Product in question. If such permission is granted by TSMC Taiwan, the
audit shall be conducted by Price Waterhouse & Company or by another
public accounting firm nationally recognized in the United States of
America selected by the Objecting Buyers and reasonably acceptable to
TSMC Taiwan. Seller shall exert its best efforts to cause TSMC Taiwan
to cooperate in the audit, cause its Affiliates to do the same, and, if
requested by the auditors, shall request any subcontractor of TSMC
Taiwan or of a TSMC Taiwan Affiliate to likewise cooperate. The
Objecting Buyers shall pay the cost of the audit unless the audit
reveals a discrepancy of more than three percent (3%) from the Market
Price in the average price of any Process and the related Product in
question, which three percent (3%) discrepancy must result in a higher
Market Price quoted by Seller than calculated by the auditors based on
their audit of TSMC Taiwan's and its Affiliates' relevant books and
records. The auditor's calculations shall be based on TSMC
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Taiwan's standard procedures for translating pricing of Processes into
pricing for Products manufactured by such Processes. In the event of
such three percent (3%) discrepancy, Seller shall pay the cost of the
audit, the price for the Process in question as established by the
audit shall be the new price for such Process, and the auditors shall
calculate the pricing for Products to be manufactured using such
Process based upon TSMC Taiwan's standard procedures for translating
pricing of Processes into pricing for Products manufactured by such
Processes. The new prices as established by the auditors shall be
reduced to writing and signed by the Parties and shall be deemed to be
attached hereto as an addendum to Exhibit "A", which shall be the new
Pricing Schedule in respect to the Products in question. In no event
shall there be more than two (2) audits of Seller's Quarterly Pricing
Report figures in any calendar year.
(c) The Parties shall annually renegotiate the prices
for all Processes used to manufacture Products for each succeeding
calendar year, which annual price negotiation shall commence on or
about August 1 of the then-current year. In advance of the annual price
negotiation, Seller shall provide each Buyer in writing with its
determination of the Market Price for each Qualified Process used to
manufacture Products included in the Buyer's then-current rolling six
(6) Month forecast. Once the Parties have agreed upon the renegotiated
prices for a succeeding year, such renegotiated prices shall be reduced
to writing and signed by the Parties, and shall be deemed to be
attached hereto as Exhibit "A" as the Pricing Schedule in effect at the
beginning of such year such year. If no agreement can be reached with
respect to renegotiating prices by September 30 of the then-current
year, the Parties shall submit pricing to binding arbitration under
Section 17.3 through 17.7, inclusive; subject to the further provisions
of Subsection 6.2.3(d).
(d) With respect to binding arbitration conducted
pursuant to Subsection 6.2.3(a) and 6.2.3(c) above, in advance of the
hearing each Party shall submit to the arbitrator and exchange with the
other Parties their last best offers with respect to pricing. In
addition to the matters set forth in Section 17.3 through 17.7, the
arbitrator shall base his award on his determination of Market Price
(as defined in Subsection 6.2.3(b) above) for each Process to be used
for manufacture of Products hereunder, and on his determination of
price for each Product manufactured by means of such Process, based on
TSMC Taiwan's standard procedures for translating pricing of Processes
into pricing for Products manufactured by such Processes. The highest
price submitted by any Party for a specific Product shall be the
maximum price that the arbitrator shall be empowered to award for that
Product, and the lowest price for a specific Product submitted by any
Party shall be the minimum price that the arbitrator shall be empowered
to award for that Product. For each Product, it is understood among the
Parties that if the arbitrator awards an amount between (and including)
the minimum and maximum prices submitted by the Parties for such
Product, then the exact award amount shall be the price set for that
Product in the applicable year. The prices as so set by the arbitrator
thereafter shall be subject to quarterly adjustment as described in
Subsection 6.2.3(b) above.
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(e) All pricing for Products calculated or published
pursuant to this Section 6.2 shall be expressed as a price per Wafer.
6.3 INVOICE. Upon shipment of any Proven Products, Test Wafers or Risk
Wafers, Seller shall invoice the sale. Applicable taxes, freight, and insurance
paid by Seller shall be separately stated on the invoice.
6.4 PAYMENT. Unless otherwise agreed upon by Seller and the ordering
Buyer, payment terms shall be net due thirty (30) days after the date of
Seller's invoice (the "Invoice Payment Date"). For any invoice that is due and
owing under this Section 6.4 which is not paid within thirty-five (35) days
after the date of invoice, the invoice amount shall bear interest from the
Invoice Payment Date until paid in full at the annual rate equal to 5% above the
prime or reference rate for commercial borrowing announced by Bank of America
N.T. & S.A., as such rate changes from time to time; provided, however, that in
no event shall such interest rate exceed the highest rate permissible under
applicable law. Any payment made hereunder shall be in U.S. dollars.
6.5 NO LIMITATION ON BUYER'S PRICING. The prices charged by Seller to a
Buyer hereunder shall not limit in any way the prices that the Buyer may charge
its customers.
ARTICLE 7
DELIVERY
7.1 DELIVERY. Seller agrees to make all commercially reasonable efforts
so that Proven Products or Risk Wafers shall be delivered to a Buyer's
designated delivery point in accordance with its "route and ship to"
instructions on the date(s) set forth in any Purchase Order(s) accepted by
Seller.
7.2 SHIPMENTS F.O.B. Shipments shall be made F.O.B. the Buyer's
designated place of delivery point (the "F.O.B. Point") as designated in the
Buyer's "route and ship to" instructions. All title and risk of loss or damage
shall be borne by Seller from the time of Seller's delivery of Proven Products
or Risk Wafers to a common carrier at the Foundry until delivery to the F.O.B.
Point.
7.3 PACKAGING AND SHIP DATE. Seller shall package, or cause the
packaging of, Proven Products or Risk Wafers for secure shipment according to
good manufacturing practices in consideration of the method of shipment chosen.
The date of the bill of lading or other receipt issued by the carrier shall be
proof of the date and fact of shipment of Proven Products or Risk Wafers.
7.4 PARTIAL SHIPMENTS. Partial shipments are allowed, so long as full
shipment of the appropriate quantities are made by +/-10 days of delivery dates
specified in Purchase Orders
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accepted by Seller. Such partial shipments may be invoiced individually or in
combination with all the other partial shipments made for the same Purchase
Orders.
7.5 FAILURE TO MEET DELIVERY DATES. Delivery made within +/-10 days of
the delivery dates specified in Purchase Orders accepted by Seller are deemed
timely delivery. No Buyer shall be entitled to damages or specific performance
for any material failure by Seller, which failure is the direct result of any
act or omission of the Buyer, its employees or agents (or any act or omission of
the Buyer's customer or the customer's employees or agents). Seller shall not be
liable for any penalty or any indirect, special, incidental or consequential
damages imposed upon or incurred by a Buyer as a result of failure of Seller to
timely deliver Proven Products or Risk Wafers.
7.6 FORCE MAJEURE. Whenever any actual or potential event of Force
Majeure that reasonably can be anticipated (e.g., a labor dispute) delays or
threatens to delay the timely performance of any delivery under a Purchase
Order, Seller shall promptly give notice thereof to the impacted Buyer. Whenever
any actual or potential event of Force Majeure reasonably can be anticipated to
delay or threaten to delay a Buyer's ability to accept delivery under a Purchase
Order, such Buyer shall promptly give notice thereof to Seller.
ARTICLE 8
INCOMING TEST; ACCEPTANCE AND RETURNS
8.1 INCOMING TESTING. Seller and the Buyers ordering Proven Products in
question shall agree upon inspection and testing methods, which shall be signed
by Seller and such Buyers, and attached hereto as Exhibit "G". Each Buyer may
perform incoming inspection and testing on each shipment of Proven Products
received hereunder in accordance with the agreed-upon inspection and testing
methods. If such Proven Products fail to conform to the applicable Quality and
Reliability Specifications, or otherwise fail the inspection and testing
standards set forth on Exhibit "G", the Buyer shall have the right to return
such Proven Products to Seller for rework or replacement at no cost to Buyer or
for credit in accordance with the terms and conditions of Section 9.1 below.
Except as otherwise provided in Section 5.14, Risk Wafers may not be returned.
8.2 ACCEPTANCE. Buyers shall accept all conforming tenders of Proven
Products delivered under this Agreement, and shall notify Seller in writing,
within (a) thirty (30) days following the delivery of any Proven Products whose
individual dies have been functionally probed or (b) sixty (60) days following
the delivery of any other Proven Products, as to either acceptance or rejection
thereof. If no notification indicating rejection is received by Seller within
the above time period, then such Proven Products shall be deemed accepted.
Except as otherwise provided in Section 5.14, Risk Wafers must be accepted.
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8.3 RETURNS. Defective Proven Products (either detected by incoming
inspection and testing or during the warranty period) shall be returned to
Seller in accordance with the terms and conditions of Section 9.1 below.
ARTICLE 9
PRODUCT WARRANTY
9.1 SELLER'S WARRANTY. Seller warrants that the Proven Products
delivered hereunder shall meet the Quality and Reliability Specifications and
shall be free from defects in materials and workmanship under normal use for a
period of one (1) year from the date of shipment. If, during the one year
period, (a) Seller is notified promptly in writing upon discovery of any defect
in the Proven Products, including a detailed description of the alleged defect,
(b) such Proven Products are returned to Seller, F.O.B. the Foundry, and (c)
such Proven Products are indeed defective and not caused by accident, abuse,
misuse, neglect, improper installation or packaging, repair or alteration by
someone other than Seller, or improper testing or use contrary to any
instructions given by Seller (collectively, "Abuse or Misuse"), then Seller
shall, at its option, either repair, replace, or credit a Buyer for such
defective Proven Products. Seller shall return any Proven Products repaired or
replaced under this warranty to a Buyer transportation prepaid, and shall
reimburse a Buyer for the transportation charges paid by the Buyer for returning
such defective Proven Products to Seller. The performance of this warranty shall
not act to extend the one-year warranty period for any Proven Products repaired
or replaced beyond that period applicable to such Proven Products as originally
delivered. There is no warranty for Risk Wafers. Unless otherwise expressly
agreed to the contrary by Seller and a Buyer in writing prior to shipment, there
is no warranty for Test Wafers.
9.2 LIMITED WARRANTY. THE WARRANTIES HEREIN (A) ARE EXCLUSIVE AND
STATED IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, STATUTORY, OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED; AND (B)
NEITHER ASSUME NOR AUTHORIZE ANY OTHER PARTY TO ASSUME FOR SELLER ANY OTHER
LIABILITIES IN CONNECTION WITH THE MANUFACTURE OR SALE OF PROVEN PRODUCTS. THE
WARRANTIES SHALL NOT APPLY TO ANY PROVEN PRODUCTS WHICH HAVE BEEN SUBJECTED TO
ABUSE OR MISUSE (AS DEFINED IN SECTION 9.1 ABOVE).
9.3 SELLER'S INSPECTION RIGHTS. Notwithstanding the provisions of
Section 9.1 above, prior to any return of allegedly defective Proven Products by
a Buyer pursuant to Section 9.1, such Buyer shall first afford Seller the
opportunity, upon Seller's request, to inspect the allegedly defective Proven
Products at such Buyer's facilities. If Seller thereby determines that the
allegedly defective Proven Products are defective or non-conforming with the
applicable Quality and Reliability Specifications, or that such alleged defects
are caused by defects in material or workmanship of Seller, as the case may be,
then the Buyer shall be entitled to repair, replacement
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or credit under Section 9.1. If Seller determines that such allegedly defective
Proven Products are not defective or conform with the applicable Quality and
Reliability Specifications, the disagreement with respect to defectiveness or
non-conformity shall be resolved pursuant to Article 17. Inspection and
determination by Seller under this Section shall not be unreasonably withheld or
delayed.
ARTICLE 10
LIMITATION ON DAMAGES; CONTRACTUAL LIMITATIONS PERIOD
10.1 LIMITATION ON DAMAGES.
10.1.1 WITH THE EXCEPTION OF ANY LOSS, LIABILITY, DAMAGE OR
OBLIGATION ARISING OUT OF OR RELATING TO DISCLOSURE OF PROPRIETARY INFORMATION
IN VIOLATION OF ARTICLE 15, NO PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE (INCLUDING, WITHOUT LIMITATION, LOSS
OF PROFITS OR LOSS OF USE) SUFFERED BY ANY OTHER PARTY ARISING FROM OR RELATING
TO A PARTY'S PERFORMANCE, NON-PERFORMANCE, BREACH OF OR DEFAULT UNDER A
COVENANT, WARRANTY, REPRESENTATION, TERM OR CONDITION HEREOF. EXCEPT AS
SPECIFICALLY PROVIDED IN THE PRECEDING SENTENCE, EACH PARTY WAIVES AND
RELINQUISHES CLAIMS FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
NOTWITHSTANDING SUCH WAIVER AND RELINQUISHMENT, WITH RESPECT TO ANY LOSS,
LIABILITY, DAMAGE OR OBLIGATION ARISING OUT OF OR RELATING TO DISCLOSURE OF
PROPRIETARY INFORMATION IN VIOLATION OF ARTICLE 15, A PARTY SHALL BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE (INCLUDING WITHOUT
LIMITATION, LOSS OF PROFITS OR LOSS OF USE) SUFFERED BY ANY OTHER PARTY ARISING
FROM OR RELATING TO A PARTY'S NON-PERFORMANCE, BREACH OF OR DEFAULT UNDER SAID
ARTICLE 15.
10.1.2 NO PARTY SHALL HAVE THE RIGHT TO RECOVER PUNITIVE
DAMAGES FROM ANY OTHER PARTY, AND EACH PARTY HEREBY WAIVES AND RELINQUISHES
ANY AND ALL PUNITIVE DAMAGE CLAIMS.
10.1.3 THE LIMITATIONS ON LIABILITY AND DAMAGES SET FORTH IN
SUBSECTIONS 10.1.1 AND 10.1.2 APPLY TO ALL CAUSES OF ACTION THAT MAY BE ASSERTED
HEREUNDER, WHETHER SOUNDING IN BREACH OF CONTRACT, BREACH OF WARRANTY, TORT,
PRODUCT LIABILITY, NEGLIGENCE OR OTHERWISE.
10.2 CONTRACTUAL LIMITATIONS PERIOD. Any arbitration, litigation,
judicial reference, mediation, or other legal proceeding involving the Parties
shall be commenced within two (2) years after the accrual of the cause of
action, except (a) for arbitration, litigation, judicial
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reference, mediation, or other legal proceedings in respect to claims for
indemnification hereunder, which claims shall be commenced within the statutory
limitations period provided by applicable law; and (b) where there is an
affirmative misrepresentation of a material fact that was relied upon and the
relying Party was entitled to rely thereon, or where a Party fraudulently
concealed the existence of a cause of action, the claims shall be commenced
within two (2) years of the date that the aggrieved Party discovered the
material facts giving rise to the cause of action.
ARTICLE 11
INDEMNITIES
11.1 INTELLECTUAL PROPERTY INDEMNITY. Subject to the limitations set
forth in Article 10 and in Subsection 11.1.1 below, Seller shall, at its expense
and at a Buyer's request, defend or settle any Claim brought against the Buyer
to the extent that it is based solely on an allegation that a Process that is
normally specified and used by Seller in the manufacture of a Proven Product or
RWRQPs pursuant to this Agreement directly infringes any Intellectual Property
Rights of a third party, and Seller shall pay all costs and damages finally
awarded against such Buyer for such infringement, provided that such Buyer
complies with the provisions of Section 11.4 below.
11.1.1 Seller shall have no liability under this Agreement for
any Claim (a) where infringement is attributable, in whole or in part, to (i)
Seller's compliance with or implementation of any Buyer's instructions,
specifications, designs, mask works, utility models, or requirements, (ii) a
Process (insofar as a Process or any part thereof has been specified by a Buyer
to Seller and the deviation of the Buyer's specifications from Seller's normal
specifications causes direct or contributory infringement), or (iii) other
information or materials provided by a Buyer to Seller for the performance of
this Agreement, or (b) relating to Risk Wafers that are not run on a Qualified
Process, and the applicable Buyer shall indemnify, defend, protect and hold
Seller harmless from and against any and all such Claims, provided that Seller
complies with the provisions of Section 11.4 below.
11.1.2 If the court or a settlement enjoins the use of a
Process by Seller, or if, in Seller's opinion, a Process is likely to become the
subject of a claim of infringement, then the Party providing the Process shall
have the option to modify such Process so that it becomes non-infringing,
substitute a substantially equivalent non-infringing Process, or obtain the
right to continue using such Process. If the curative actions described in the
preceding sentence cannot be accomplished within a reasonable period of time,
Seller shall have the right to decline to manufacture or to continue to
manufacture Proven Products or Risk Wafers using such Process.
11.1.3 The foregoing states the entire liability and exclusive
remedies of Seller and each Buyer for infringement of a third party's
Intellectual Property Rights by Proven Products, Test Wafers, Risk Wafers or
Processes used to manufacture any Products furnished hereunder.
11.2 PERSONAL INJURY INDEMNITY. Each Buyer shall indemnify, defend,
protect and hold Seller harmless against any and all Claims arising out of
injury or death of any of such Buyer's
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personnel assigned to work at the Foundry, or while performing tasks at the
Foundry pursuant hereto or any other agreement or instrument to which a Buyer
and Seller are parties in connection herewith, notwithstanding that such
personnel are in Seller's care, custody or control while at the Foundry,
provided that this indemnity shall not apply in any instance in which such
Claims are based upon the gross negligence or willful misconduct of Seller or
its employees or agents.
11.3 PRODUCT LIABILITY.
11.3.1 Except as otherwise expressly provided herein:
(a) Seller shall have no liability under this
Agreement or otherwise for any product liability Claim with respect to
any of the Proven Products, Risk Wafers or Test Wafers, whether such
product liability Claim is based on alleged defects in the design,
manufacture, or packaging of Proven Products, Risk Wafers or Test
Wafers or on any other adverse conditions.
(b) Each Buyer, on behalf of itself and any of its
Affiliates that purchase or resell Proven Products, Risk Wafers or Test
Wafers, hereby waives, releases and discharges Seller from and against
any and all Claims arising from or relating to product liability,
including, without limitation, Claims based on alleged defects in the
design, manufacture or packing of Proven Products, Risk Wafers or Test
Wafers or on any other adverse conditions. The foregoing waiver,
release and discharge is intended to extend to any and all product
liability Claims of any kind or character, whether fixed or contingent,
known or unknown.
11.3.2 Seller's sole and exclusive liability and obligation
with respect to any defective Proven Product and any Test Wafers covered by a
written product warranty shall be as set forth in Section 9.1. Seller's sole and
exclusive liability and obligation with respect to defective Test Wafers not
covered by a written product warranty shall be as set forth in Section 5.13.
Seller's sole and exclusive liability and obligation with respect to defective
RWRQPs shall be as set forth in Section 5.14.
11.3.3 Each Buyer shall indemnify, defend, protect and hold
Seller, harmless against any and all product liability Claims brought by third
parties, including, without limitation, any of a Buyer's customers or any
ultimate end users of any product, system or subsystem into which a Proven
Product, Test Wafer or Risk Wafer (or any part thereof) has been incorporated.
The foregoing shall not apply, however, to the extent any such Claims result
from the negligence or willful misconduct of Seller.
11.4 GENERAL INDEMNITY PROVISIONS. Each Party's indemnification
obligations hereunder shall be subject to the following provisions:
11.4.1 Indemnitor's indemnification obligations also shall
extend to any one or more of indemnitee's officers, directors, managers,
shareholders, members, employees, and agents.
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11.4.2 Each Party's indemnification obligations hereunder
shall survive the early termination or expiration of the Term for the remainder
of the statutory limitations period governing actions on a written agreement.
11.4.3 Each Party's obligation to indemnify any other Party
hereunder shall be conditioned upon:
(a) Indemnitee's giving indemnitor prompt notice in
writing of any Claims giving rise to the obligation to indemnify and of
which indemnitee is aware;
(b) Indemnitee's permitting indemnitor, through
counsel of indemnitor's choice and reasonably acceptable to indemnitee,
to defend against, contest or settle the same; and
(c) Indemnitee's reasonably cooperating with
indemnitor and reasonably providing indemnitor with information and
assistance to enable indemnitor to defend, contest or settle same.
11.4.4 Unless expressly provided to the contrary, the
indemnification provisions herein shall be interpreted and construed as
indemnifying indemnitee against indemnitee's negligence, whether active or
passive.
ARTICLE 12
FORCE MAJEURE
12.1 FORCE MAJEURE. Subject to the limitations set forth in Section
12.4, should a Party be prevented from performing its obligations hereunder due
to a Force Majeure event, that Party shall not be liable to the other Parties
for any delay or failure of performance caused by such event; nor shall the
Party subject to such event be deemed to have committed an Event of Default
hereunder. Notwithstanding the foregoing, a Force Majeure event shall not excuse
a Party's obligation to pay money. However, a monetary obligation shall be
suspended until cessation of such Force Majeure event if, and only if, the Force
Majeure event actually and directly renders physically impossible a Party's
payment of money due hereunder.
12.2 NOTIFICATION. The Party prevented or delayed by an event of Force
Majeure in the performance of any obligation hereunder shall promptly notify the
affected Party or Parties of the occurrence of any Force Majeure event by cable,
telex or telecopier.
12.3 RESPONSE TO FORCE MAJEURE. Should the delay caused by a Force
Majeure event continue for more than ninety (90) days, the Parties shall settle
the problem of further performance of this Agreement through good faith
negotiations as soon as possible with the objective of restructuring the
relationship among themselves to minimize the effects of such event. If the
Parties cannot agree on a mutually acceptable solution within one hundred twenty
(120)
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days of a Party's request for such negotiations, any Party that is not
subject to the Force Majeure event may terminate this Agreement by notice to the
other Parties. If the Party giving notice of termination is a Buyer, the
termination shall be effective only as to such Buyer, and this Agreement shall
continue in full force and effect among Seller and the non- terminating Buyers.
Notwithstanding the foregoing, no Buyer shall be permitted to terminate this
Agreement due to the Buyer's inability to pay for its Minimum Purchase Share or
to otherwise meet its financial obligations due to a continuing Force Majeure
event.
12.4 LIMITATIONS ON APPLICABILITY OF FORCE MAJEURE. This Article shall
be void and inapplicable to any Party (a) if it fails to use reasonable
diligence to remedy any Force Majeure event that prevents or delays that Party's
performance hereunder by continuously pursuing such actions as that Party
reasonably can take under the circumstances; and (b) in the event of a strike,
lockout or other labor disruption, if the Party is found by the National Labor
Relations Board or other governmental agency having jurisdiction to have caused
such strike, lockout or labor disruption or if such Party refuses to enter into
bargaining with respect to such strike, lockout or labor disruption.
ARTICLE 13
GOVERNMENTAL INTERVENTION
13.1 GOVERNMENTAL INTERVENTION. Should any government or agency thereof
at any time during the Term hereof take any action which is material and adverse
to a Party or make recommendations to the Parties or any of them requiring
directly or indirectly, formally or informally, alteration or modification of
any term or condition hereof, or of the performance of the Parties hereunder,
including refusal to grant any necessary government approval, in a manner which
is material and adverse to one Party, then, if said one Party makes written
request (the "Requesting Party") to the other Parties within sixty (60) days
from said action or recommendation of the government or governmental agency, the
Parties shall enter into good faith negotiations with the objective of
restructuring the relationship among the Parties to minimize the adverse effect
of said alteration or modification. If the Parties cannot reach a reasonably
acceptable modification hereto within six (6) months from the date of dispatch
of said written request by the Requesting Party, or within such longer period of
time as mutually agreed upon, the Requesting Party shall have the right to
terminate this Agreement forthwith by giving notice to that effect to the other
Parties; provided, however, that if the Requesting Party giving notice of
termination is a Buyer, the termination shall be effective only as to such Buyer
and this Agreement shall continue in full force and effect among Seller and the
non- terminating Buyers. It is expressly understood and agreed by the Parties
that in the event of termination under this Article, no Party shall incur any
liability to the others for any alleged default or breach in the performance
hereof, arising from the exercise of the right herein provided to terminate this
Agreement. Termination under this Article 13 shall not be deemed to be a
termination for default.
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ARTICLE 14
DEFAULT AND TERMINATION
14.1 EVENTS OF DEFAULT. The occurrence or happening, at any time and
from time to time, of any one or more of the following shall be a breach or
default under this Agreement (an "EVENT OF DEFAULT"):
14.1.1 If any Party fails (a) to make any payment required to
be made pursuant to this Agreement when due, and such Party does not cure such
failure following thirty (30) days written notice thereof, or (b) to perform any
material obligation under this Agreement, and such Party does not cure such
failure following sixty (60) days written notice thereof.
14.1.2 If any Party breaches its obligations of non-disclosure
and confidentiality set forth in Subsection 15.1.1.
14.1.3 If any representation, warranty or statement made by
any Party under or pursuant to this Agreement, or under any affidavit,
certificate or other instrument executed in connection with this Agreement,
shall be false or misleading in any material respect as of the Effective Date or
shall become so at any time prior to the expiration of the Term, and such Party
does not cure (to the extent cure is possible) the same following thirty (30)
days written notice thereof.
14.1.4 If any Party files a certificate of dissolution or
otherwise dissolves, terminates or liquidates, or is merged with or is
consolidated into any other corporation, limited liability company, partnership,
or other entity other than an Affiliate of such Party, without the other
Parties' written consent (which consent shall not be unreasonably withheld);
provided that the following shall not be an Event of Default: (a) any
dissolution, liquidation, merger or consolidation that is permitted in
accordance with Section 18.14; and (b) any merger or consolidation not entered
into for the purpose of and not having the effect of changing or influencing the
control of the Party.
14.1.5 If any Party shall (a) be adjudicated as bankrupt or
insolvent; (b) make a general assignment for the benefit of its creditors; (c)
file a petition, answer or consent seeking, or have entered against it (or fail
reasonably to contest the material allegations of any petition for) an order for
relief (or any similar remedy) under any provision of Title 11 of the United
States Code or any other federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, or consent to the
institution of any proceedings thereunder; (d) convene a general meeting of its
creditors, or any class thereof, for the purpose of effecting a general
moratorium upon or general extension or composition of its debts; (e) fail to
pay its debts as they mature; (f) admit in writing that it is generally not able
to pay its debts as they mature; or (g) apply for or consent to the appointment
of a receiver, trustee, custodian, liquidator or other similar official of all
or a substantial portion of its assets.
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14.1.6 If (a) a petition is filed or any case or proceeding
described in Section 14.1.5 above is commenced against any Party, or against the
assets thereof, unless such petition and the case or proceeding initiated
thereby is dismissed within sixty (60) days from the date of the filing; (b) an
answer is filed by any Party admitting the allegations of any such petition; (c)
a court of competent jurisdiction enters an order, judgment or decree
appointing, without the consent of any Party, a custodian, trustee, agent or
receiver of it, or for all or a substantial part of its property, or authorizing
the taking possession by a custodian, trustee, agent or receiver of it, or of
all or a substantial part of its property unless such appointment is vacated or
dismissed or such possession is terminated within sixty (60) days from the date
of such appointment or commencement of such possession, but not later than 5
days before the proposed sale of any assets of such Party by such custodian,
trustee, agent or receiver.
14.1.7 If a Buyer is terminated as a member of Seller pursuant
to Section 3.3.1, 3.3.2.2, or 10.2 of the LLC Agreement.
14.2 REMEDIES FOR DEFAULT.
14.2.1 If the Party committing an Event of Default under
either Subsection 14.1.1, 14.1.3 or 14.1.4 above does not cure such Event of
Default within the applicable cure periods, then any non-breaching Party may,
subject to the procedures set forth in Article 17, seek:
(a) specific performance of the breaching Party's
obligations under this Agreement;
(b) damages suffered by said non-breaching Party as a
result of such Event of Default, limited, however, by the provisions of Article
10.
Except as otherwise expressly provided to the contrary herein, the non-breaching
Party shall not have a right to terminate the Agreement. If Seller is the
non-breaching Party and the Event of Default involves the non-payment of money
due to Seller from a Buyer, then Seller shall be entitled (in addition to any
other rights and remedies it may have hereunder, at law or in equity) to suspend
performance of all sales and services to that Buyer hereunder until all
delinquent amounts are paid in full. If the Event of Default is a breach by
Seller of its delivery obligations under Section 7.1, as qualified by Section
7.5, for any reason other than Force Majeure, then the affected Buyer may, in
lieu of the remedies of specific performance, elect to cancel the Purchase Order
to the extent of any undelivered Proven Products, Test Wafers or Risk Wafers;
provided, however, that such Buyer shall remain obligated to pay for any partial
deliveries under such Purchase Order.
14.2.2 Each of the Parties acknowledges that a breach or
default by it of its covenants regarding non-disclosure and confidentiality
contained in Subsection 15.1.1 will result in irreparable injury to the Party
making disclosure of its Proprietary Information, and consequently the
disclosing Party shall be entitled to temporary, preliminary and permanent
injunctive relief, or to a protective order for any threatened or actual
violation of the provisions of
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Subsection 15.1.1. Each Party agrees and consents to the entry of an injunction
or protective order by any court of competent jurisdiction upon a showing by the
disclosing Party of a reasonable belief that its Proprietary Information is
being used or disclosed contrary to the terms of Subsection 15.1.1. The
foregoing provisions are in addition to, and not in limitation of, the remedies
of specific performance, damages, and any other remedies at law, in equity or
otherwise, that the Parties may have upon breach of Subsection 14.1.2; provided,
however, that the non-breaching Party shall not have the right to terminate this
Agreement. The Parties stipulate that the provisions of Article 17 shall not
apply to any temporary restraining order, injunctive relief, protective order or
other provisional remedy sought to prohibit a breach or threatened breach of the
provisions of Subsection 15.1.1.
14.2.3 In the event of an Event of Default under Subsection
14.1.5 or 14.1.6, the non-breaching Party or Parties shall have the right, at
its (their) option, to terminate this Agreement by giving ten (10) days prior
written notice of termination. If Seller and one or more of the Buyers are
non-breaching Parties, they, or any one or more of them may terminate this
Agreement by giving such written notice to the breaching Buyer or Buyers, in
which event this Agreement shall continue in full force and effect between
Seller and each of the non-breaching Buyers.
14.2.4 If a Buyer's Percentage Interest is reduced to zero in
accordance with the LLC Agreement, this Agreement shall terminate with respect
to the Buyer, subject to Section 5.12.1 (including the effective date provided
therein for the corresponding reduction in the Buyer's Basic Purchase Share and
the effect, if any, on Purchase Orders prior to the adjustment date). So long as
any Buyer has a positive Percentage Interest, this Agreement shall continue in
full force and effect between Seller and any such Buyer.
14.3 EFFECTIVE DATE OF TERMINATION. Termination of this Agreement
pursuant to any notice of termination given under any provision of this
Agreement shall be effective ten (10) days following the date such termination
notice is deemed to be given pursuant to Section 18.3 below.
14.4 RIGHTS AND REMEDIES FOLLOWING TERMINATION. The termination of this
Agreement shall be without prejudice to (a) the right of Seller to receive upon
its request all payments accrued and unpaid hereunder; (b) the rights and
remedies of any Party with respect to any previous breach of any other
representations, warranties, covenants, terms, conditions or provisions of this
Agreement (provided that the limitation on liability set forth in Article 10
shall apply to such rights and remedies); (c) any rights to indemnification set
forth herein; and (d) any other provisions hereof which expressly or necessarily
call for performance after the termination of this Agreement.
14.5 REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. The Parties
shall have all rights, remedies and recourse granted in this Agreement, in any
other agreements entered into between the Parties, and available at law or in
equity, and except as otherwise provided in this Agreement the same (a) shall be
cumulative and concurrent; (b) may be pursued separately, successively or
concurrently; (c) may be exercised as often as occasions therefor shall arise,
it
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being agreed that the exercise or failure to exercise any right, remedy or
recourse shall in no event be construed as a waiver or release thereof; and (d)
are intended to be, and shall be, non-exclusive.
ARTICLE 15
PROPRIETARY INFORMATION
15.1 PROPRIETARY INFORMATION.
15.1.1 Each Party agrees to maintain the other Parties'
Proprietary Information in strict confidence, not to make use thereof other than
for the performance of this Agreement, to release it only to employees who have
reasonable need to know the same, and except as required by law, not to release
or disclose it to any third parties, without the prior written consent of the
disclosing Party. The obligations set forth in this Subsection shall not apply
to any information that: (a) is now or hereafter in the public domain or
otherwise becomes available to the public other than by breach of this Agreement
by the receiving Party, (b) has been rightfully in the receiving Party's
possession prior to receipt from the disclosing Party, (c) is rightfully
received by the receiving Party from a third party without restriction on
disclosure, (d) is independently developed by the receiving Party, (e) is
authorized in writing by the disclosing Party to be released or disclosed, or
(f) subject to the receiving Party's compliance with Section 15.4 below, is
required to be disclosed by the receiving Party pursuant to law, governmental
regulation or judicial order.
15.1.2 All Proprietary Information and any copies thereof
shall remain the property of the disclosing Party, and no license or other
rights therein is granted or implied hereby. The receiving Party shall, upon the
disclosing Party's request, return the original and all copies of tangible
Proprietary Information. Notwithstanding the foregoing, any of the Buyers'
Proprietary Information that is transmitted or disclosed to Seller by a Buyer
(or, in the case of TSMC, TSMC or its customer) in accordance with the
provisions of Subsection 15.1.1 and is thereafter incorporated into a Process or
manufacturing method used in the Foundry, may be retained by Seller in the form
so incorporated or used. Seller shall have the nonexclusive right to use such
Proprietary Information as so incorporated or used, and as such incorporation or
use may be modified or improved. TSMC shall obtain its customer's permission to
extend to Seller such nonexclusive right with respect to Proprietary Information
(of TSMC) provided by the customer.
15.2 OTHER CONFIDENTIALITY AGREEMENTS. This Article is supplemental
to and not in limitation of any confidentiality agreements to which the Parties
are signatories.
15.3 CONFIDENTIALITY AGREEMENTS FOR SPECIFIC PERSONS. Any Buyer's
officers, directors, employees, agents, representatives or contractors who are
assigned to or visit the Foundry pursuant to Section 5.9 shall execute and
deliver a confidentiality agreement in form of Exhibit "I" attached hereto.
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15.4 THIRD PARTY REQUEST FOR INFORMATION. Except as otherwise provided
herein, each Party shall immediately notify the other of any private or
governmental request for Proprietary Information or documents relating to Proven
Products, Risk Wafers, Test Wafers or this Agreement; provided, however, that
(a) a request for documents relating to Proven Products, Risk Wafers, or Test
Wafers received by any Buyer from its customers or prospective customers in the
ordinary course of business where disclosure of such information would not
contain Proprietary Information of Seller or any other Buyer shall be excluded
from the provisions of this Section 15.4 and (b) a Buyer may disclose to its
customer, upon the customer's request in the ordinary course of business, Design
Rules or reliability data relating to Proven Products, Risk Wafers, or Test
Wafers, if (i) the Buyer and its customer enter into a confidentiality agreement
substantially in the form of Exhibit "K" and (ii) the Buyer notifies Seller of
the disclosure before or promptly after it. Each Party shall have the right to
participate in the other Party's response to any such request. In the event that
a Party receives any subpoena or other legal process requiring the production of
information, documents, data, work papers, reports, or other materials relating
to Proprietary Information, Proven Products, Risk Wafers, Test Wafers or this
Agreement, that Party shall:
15.4.1 Give the affected Party, if possible, the opportunity to
participate in quashing, modifying or otherwise responding to any compulsory
process in an appropriate and timely manner; and
15.4.2 Cooperate fully with the affected Party's efforts to
narrow the scope of any such compulsory process, to obtain a protective order
limiting the use or disclosure of the information sought, or in any other lawful
way to obtain continued protection of such information.
15.5 REPORTING LOSS, THEFT OR MISAPPROPRIATION. If any Party becomes
aware of the loss, theft or misappropriation of Proprietary Information which is
in that Party's possession or control, that Party shall notify the other Party
whose Proprietary Information has been lost, stolen or misappropriated within
five (5) days after the discovery of such loss, theft or misappropriation.
ARTICLE 16
EXPORT COMPLIANCE
16.1 COMPLIANCE WITH EXPORT ADMINISTRATION REGULATIONS. Each Party
agrees that, unless prior authorization is obtained from the United States
Government, it shall not knowingly:
(a) Re-export, directly or indirectly, any technical data (as
defined in Part 779 of the Export Administration Regulations of the Department
of Commerce) received from the other Buyers, Seller, or their respective
Affiliates or customers to; or
(b) Disclose such technical data for use in; or
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(c) Export, directly or indirectly, any Proven Product, Risk
Wafer, Test Wafers, product containing a Proven Product, Risk Wafer, Test Wafers
or such technical data to any destination or country to which the re-export or
release of technical data or export of Proven Products, Risk Wafers, Test Wafers
or products containing Proven Products, Risk Wafers, Test Wafers or technical
data is prohibited by U.S. laws and regulations. These assurances are furnished
by each Party in compliance with Part 779 Technical Data of the Export
Administration Regulations of the Department of Commerce of the Government of
the United States of America.
16.2 U.S. EXPORT LICENSES. Each Party further agrees to obtain any
necessary export license or other documentation prior to exportation of any
Proven Product, Test Wafer or Risk Wafer, product containing a Proven Product,
Test Wafer or Risk Wafer, or technical data acquired from any other Party, its
Affiliates, or their respective customers hereunder. Accordingly, each Party
shall not sell, export, re-export, transfer, divert or otherwise dispose of any
Proven Product, Test Wafer or Risk Wafer or a product containing a Proven
Product, Test Wafer or Risk Wafer, directly or indirectly, to any person, entity
or country to which such disposal is prohibited by the laws or regulations of
the United States. Further, each Party shall notify any person or entity
obtaining any such Proven Product, Test Wafer or Risk Wafer or a product
containing a Proven Product, Test Wafer or Risk Wafer from such Party of the
need to comply with such laws or regulations. Each Party shall secure at its
sole expense such licenses and export and import documents as are necessary for
the Party to fulfill its obligations hereunder.
16.3 REPUBLIC OF CHINA EXPORT REGULATIONS. If Seller or Buyers are
subject to the national export control regulations of the Republic of China,
each Party shall take all appropriate measures to comply with such applicable
regulations.
ARTICLE 17
DISPUTE RESOLUTION; ARBITRATION
17.1 NEGOTIATION BETWEEN EXECUTIVES. The Parties shall attempt in good
faith to resolve any dispute, controversy or claim ("Dispute") arising out of or
relating to this Agreement promptly by negotiations between executives who have
authority to settle the Dispute. Any Party may give the other Parties written
notice of any Dispute not resolved in the normal course of business. Within
twenty (20) days after delivery of such a notice, executives of the Parties who
have authority to settle the Dispute shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the Dispute. If the matter has not been resolved within thirty (30)
days after such notice, unless extended by the agreement of the Parties in
writing (the "Negotiation Period"), the matter shall be subject to mediation as
provided in Section 17.2. If a Party intends to be accompanied at a meeting by
an attorney, the other Parties shall be given at least three (3) Business Days'
notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this provision are confidential and shall be treated as
compromise and settlement negotiations for purpose of the United States Federal
Rules of Evidence and state rules of evidence.
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17.2 MEDIATION. Any Dispute not settled pursuant to Section 17.1 shall
be submitted to mediation administered by the American Arbitration Association
under its Commercial Mediation Rules (such mediation, "Mediation"), before
resorting to arbitration as hereinafter provided. The Mediation shall be
completed within forty-five (45) days of its initiation pursuant to the
Commercial Mediation rules, unless the Parties otherwise agree. Executives of
the Parties with authority to resolve the Dispute shall participate in the
Mediation. The Mediation shall take place in San Jose, California. The Parties
shall attempt in good faith to reach agreement on the appointment of a mediator.
If they cannot so agree, the mediator shall be appointed pursuant to the
Commercial Mediation Rules; provided, however, that the mediator appointed shall
have a background in the semiconductor industry. The Parties shall each pay
their own expenses of Mediation, including attorney's fees, and shall share
equally the mediator's fees and expenses.
17.3 CLAIMS SUBJECT TO ARBITRATION. Except as otherwise specifically
provided herein, any Dispute arising out of or relating to this Agreement, or
the breach or termination hereof, and not resolved pursuant to Section 17.1 or
Section 17.2 shall be resolved by binding arbitration in accordance with the
Federal Arbitration Act, 9 U.S.C. Sections 1 et seq. (the "FAA"), and the
Commercial Arbitration Rules, and where the amount in controversy exceeds
$1,000,000, the Supplementary Procedures for Large Complex Disputes, of the AAA
(collectively, the "Rules"). In the event of a conflict between the FAA and the
Rules, the Rules shall govern. In the event of a conflict between this Article
and the FAA or the Rules, this Article shall govern. A court of competent
jurisdiction, upon application from any Party, may relieve the Parties of their
duty to arbitrate Disputes in whole or in part, or may stay any arbitration
hereunder in whole or in part, if ongoing litigation between one or more of the
Parties and a third party (or parties) involves issues of fact or law common
with those subject to arbitration hereunder and there exists the possibility of
inconsistent judgments if such relief is not granted. Each Party reserves the
right to file with a court of competent jurisdiction an application for
temporary or preliminary injunctive relief, a protective order or other
appropriate provisional remedy on grounds that (a) the arbitration award to
which the applicant may be entitled may be rendered ineffectual in the absence
of such relief; or (b) in the event of a breach or threatened breach of the
provisions of Subsection 15.1.1 prohibiting disclosure of Proprietary
Information.
17.4 VENUE. The venue for any arbitration proceeding hereunder shall
be San Jose, California.
17.5 SELECTION OF ARBITRATOR AND DETERMINATION OF CONTROVERSIES.
17.5.1 Any Dispute subject to arbitration shall be submitted
to a single neutral arbitrator, who, unless otherwise agreed by the Parties,
shall be a retired judge or other lawyer who is a member of the arbitration
panel of the Judicial Arbitration and Mediation Service ("JAMS") or the national
panel of arbitrators of the AAA, and who has substantial experience in the area
of the Dispute. The Parties shall confer concerning the selection of AAA or JAMS
with the objective of selecting one or the other within thirty (30) days of the
conclusion of the Mediation; provided, however, that, if all Parties to the
Dispute do not agree on one or the other within such thirty (30) day period, the
Dispute initially will be submitted simultaneously to both
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AAA and JAMS for the sole purpose of picking the arbitrator. If the Parties
select JAMS, then the term "Rules" as used herein shall mean the then-prevailing
JAMS rules. The AAA (or JAMS, as the case may be) simultaneously shall submit to
each Party an identical list of five proposed qualified arbitrators drawn from
the applicable panel of commercial arbitrators. If the Parties are unable to
agree upon an arbitrator within thirty (30) days from the date that AAA (or
JAMS, as the case may be) submits such list to each Party, then AAA (or JAMS, as
the case may be) shall simultaneously submit to each Party a second list of five
additional proposed qualified arbitrators drawn from the applicable panel of
commercial arbitrators. If for any reason, the appointment of an arbitrator
cannot be made from either list, AAA (or JAMS, as the case may be) may make the
appointment from among other qualified members of the panel without the
submission of additional lists to the Parties. If the Dispute is initially
submitted to both AAA and JAMS for the purpose of picking the arbitrator, then
both AAA and JAMS simultaneously shall submit to each Party lists of five
proposed qualified arbitrators drawn from the applicable panel (with each Party
receiving the identical list from AAA and the identical list from JAMS), and if
the Parties are unable to agree upon an arbitrator within thirty (30) days from
the date that both AAA and JAMS submit the first such lists to each Party, then
AAA and JAMS simultaneously shall submit to each Party second lists of five
additional proposed qualified arbitrators (with each Party receiving an
identical second list from AAA and an identical second list from JAMS). If the
Parties for any reason are unable to select an arbitrator from the first and
second lists submitted by AAA and by JAMS, then a majority of the Parties shall
select to arbitrate with either AAA or with JAMS, and the arbitration
organization so selected shall make the appointment from among other qualified
members of the arbitration panel of that organization without the submission of
additional lists to the Parties. Where the Parties have initially submitted the
Dispute to both JAMS and AAA, then once an arbitrator has been appointed, the
arbitration proceeding will be terminated with the arbitration organization that
has not been selected and the Parties shall equally share the costs and fees of
the arbitration organization so terminated. If for any reason the Parties to the
Dispute have not selected an arbitrator within ninety (90) days of the
conclusion of the Mediation, then the arbitration shall be conducted with the
AAA. No matter how selected, the arbitrator shall have no prior or existing
affiliation or relationship with any Party or its counsel and shall sign an oath
of impartiality upon appointment.
17.5.2 The Parties shall be entitled to obtain pre-hearing
discovery through depositions and requests for the inspection and copying of
documents and other items upon reasonable notice and to obtain the issuance of a
subpoena duces tecum therefor in accordance with applicable law, including
without limitation, 9 U.S.C. Section 7 and (notwithstanding Section 1297.17 of
the California Code of Civil Procedure) Section 1283.05 of the California Code
of Civil Procedure; provided that depositions shall not be taken unless leave to
do so is first granted by the arbitrator. As between the Parties, the arbitrator
shall have the power to enforce the rights, remedies, procedures, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions, consequences, sanctions and penalties as may be imposed in like
circumstances in a civil action by a U.S. Federal court.
17.6 ARBITRATION AWARD AND JUDICIAL REVIEW. The arbitrator, in
deciding any Dispute, shall base his decision on the record and in accordance
with this Agreement and applicable law.
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FUTURE PURCHASE AGREEMENT
<PAGE> 142
In no event shall the arbitrator make any ruling, finding or award that does not
conform to the terms and conditions of this Agreement, is not supported by the
weight of the evidence, or is contrary to statute, administrative regulations or
established judicial precedents. The arbitration award shall be a factually
detailed, reasoned opinion stating the arbitrator's findings of fact and
conclusions of law. Unless the arbitrator for good cause determines otherwise,
the final award shall include attorneys' fees, costs and expenses of the
prevailing Party, including expert and nonexpert witness fees and the prevailing
Party's share of the administrative fee and the arbitrator's fees and expenses,
if any. Notwithstanding any other provisions hereof, the arbitrator shall have
no jurisdiction to award damages in contravention of Article 10 hereof. The
arbitration award shall be subject to judicial review in accordance with 9
U.S.C. Sections 10-12; provided, however, that the arbitration award shall
also be vacated to the extent that the arbitrator exceeds his or her authority
as set forth in this Section 17.6, and, on balance, the Party seeking vacation
of the award has been materially and adversely affected thereby. Judgment may be
entered on the award by a United States District Court in accordance with 9
U.S.C. Section 9.
17.7 CONSOLIDATION AND JOINDER. It is the Parties' intent to avoid, to
the maximum extent possible, having to arbitrate claims arising out of this
Agreement in more than one proceeding. Accordingly, the Parties hereby consent
to the joinder of any person or entity sought to be joined where such or person
or entity is substantially involved in a common question of fact or law and its
or his presence is required for complete relief to be accorded in an arbitration
proceeding under this Article 17.
ARTICLE 18
GENERAL PROVISIONS
18.1 SEVERABILITY. If any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, such provision
shall be deemed amended to conform to applicable laws so as to be valid and
enforceable or, if it cannot be so amended without materially altering the
intention of the Parties, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
18.2 NEUTRAL INTERPRETATION; WAIVER OF CONFLICT. Each Party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. Each Party waives any real, apparent, possible or inchoate conflict in
connection with, arising out of or resulting from the representation of Seller,
TSMC and its Affiliates by the same law firm relative to the negotiation and
execution of this Agreement and any confidentiality agreement provided for
herein. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any Party based upon any attribution to such
Party as the source of the language in question.
18.3 NOTICES. Any notices, demands, requests, waivers, or other
communications required or permitted to be given to a Party hereunder shall be
in writing in the English language and shall be delivered or sent to such Party
at its address set forth on Exhibit "H" hereto, or such
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FUTURE PURCHASE AGREEMENT
<PAGE> 143
other address as such Party may hereafter specify, and shall be deemed given (a)
when personally delivered to such Party, (b) when transmitted by facsimile and
receipt of such transmission is confirmed by facsimile, (c) 24 hours after
dispatch via an established overnight courier service, or (d) three (3) days
after mailing by prepaid first class, certified mail with return receipt
requested.
18.4 TIME OF THE ESSENCE. Time is of the essence with respect to each
provision of this Agreement in which time is a factor.
18.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of America,
without regard to conflicts of laws principles. The Parties expressly reject any
application of the United Nations Convention on Contracts for the International
Sale of Goods.
18.6 ENTIRE AGREEMENT. This Agreement and the LLC Agreement constitute
and contain the entire agreement of the Parties. With the exception of the LLC
Agreement, this Agreement supersedes any and all prior or contemporaneous
negotiations, correspondence, understandings and agreements among the Parties,
written or oral, respecting the subject matter hereof. In case of any conflict
between the LLC Agreement and this Agreement, the LLC Agreement shall govern.
18.7 WAIVER; AMENDMENT. No waiver of any provision of this Agreement
shall be effective unless and until made in writing and signed by the Party to
be charged. No waiver, forbearance or failure by any Party hereto of its right
to enforce any provision of this Agreement shall constitute a waiver or estoppel
of such Party's right to enforce any other provision of this Agreement or a
continuing waiver by such Party of compliance with any provision. Any amendment
or modification of this Agreement shall be by unanimous written consent of the
Parties.
18.8 COOPERATION. Each Party shall cooperate with the other Parties
hereto and shall take such further action and shall execute and deliver such
further documents as may be reasonably necessary or desirable in order to carry
out the provisions and purposes of this Agreement.
18.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18.10 EXHIBITS AND SCHEDULES. All exhibits and schedules to which
reference is made in this Agreement are deemed to be incorporated by reference
into this Agreement, whether or not actually attached hereto.
18.11 ATTORNEYS' FEES. In the event of any litigation, arbitration,
judicial reference or other proceeding involving the Parties to this Agreement
to enforce any provision of this Agreement, to enforce any remedy available upon
default under this Agreement, or seeking a
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FUTURE PURCHASE AGREEMENT
<PAGE> 144
declaration of the rights of a Party under this Agreement, the prevailing
Party(ies) shall be entitled to recover from the other(s) such attorneys' fees
and costs as may be reasonably incurred, including the cost of reasonable
investigation, preparation and professional or expert consultation incurred by
reason of such litigation, arbitration, judicial reference or other proceeding.
Notwithstanding the foregoing, (a) in an arbitration proceeding the award of
attorneys' fees shall be governed by the provisions of Section 17.6; and (b) in
a Mediation under Section 17.2 each Party shall pay its own attorneys' fees and
expenses in accordance with Section 17.2.
18.12 DATE OF PERFORMANCE. If the date on which any performance
required hereunder is other than a Business Day, then such performance shall be
required as of the next following Business Day.
18.13 SURVIVAL. Following early termination or the expiration of this
Agreement, the provisions of Article I (Definitions and Rules of Construction),
Article 9 (Product Warranty), Article 10 (Limitation on Damages; Contractual
Limitations Period), Article 11 (Indemnities), Article 15 (Proprietary
Information) Article 16 (Export Compliance), Article 17 (Arbitration), Article
18 (General Provisions), Section 14.4 (Rights and Remedies Following
Termination), Section 14.5 (Remedies Cumulative, Concurrent and Non-Exclusive),
and the Buyers' payment obligations under Subsection 3.4.2 and Sections 5.3,
5.4, 5.11, and 6.4 shall survive and remain in full force and effect in
accordance with their terms.
18.14 ASSIGNMENT; PARTIES BOUND. Except as expressly permitted in this
Section 18.14, or as otherwise permitted elsewhere in this Agreement, neither
this Agreement nor any rights or obligations arising hereunder may be assigned
or transferred (by operation of law or otherwise) by any Party, in whole or in
part, without the prior written consent of the other Parties. Notwithstanding
the foregoing, (a) Seller may assign or transfer (by operation of law or
otherwise) this Agreement without the Buyers' consent (i) to any corporation or
limited liability company resulting from the merger, consolidation,
reincorporation or reorganization of Seller (excluding, however, a
reorganization in bankruptcy); or (ii) to an Affiliate of Seller; provided,
however, that Seller shall remain personally and primarily liable for all the
rights and obligations under this Agreement following any such assignment or
transfer (unless Seller is merged or consolidated with an Affiliate
contemporaneously with or subsequent to such assignment or transfer); and (b)
each Buyer may assign or transfer this Agreement to any Affiliate of a Buyer;
provided, however, that such Buyer shall remain personally and primarily liable
for all rights and obligations under this Agreement following any such
assignment or transfer (unless Buyer is merged or consolidated with an Affiliate
contemporaneously with or subsequent to such assignment or transfer). This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, permitted transferees, and permitted assigns.
18.15 THIRD-PARTY BENEFICIARIES. There are no third-party
beneficiaries of this Agreement, except as expressly provided with respect to
indemnitees under Section 11.4.1.
18.16 GOVERNING LANGUAGE OF AGREEMENT. This Agreement is in the English
language only, which language shall be controlling in all respects, and all
other versions thereof in any other
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FUTURE PURCHASE AGREEMENT
<PAGE> 145
language shall be for accommodation only and shall not be binding upon the
Parties. All communications to be made or given pursuant to this Agreement shall
be in the English language.
18.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each Party
irrevocably consents to the jurisdiction of the state and Federal courts located
in San Jose, California, agrees, subject to the provisions of Article 17 and
Article 10, that any action, suit or proceeding by or among the Parties (or any
of them) may be brought in any such court sitting in San Jose, California, and
waives any objection which the Party may now or hereafter have concerning
jurisdiction and venue, whether based on considerations of personal
jurisdiction, forum non conveniens or on any other ground. Each Party hereby
irrevocably designates, appoints and empowers the Secretary of State of
California to receive for and on behalf of such Party service of process in the
State of California and further irrevocably consents to the service of process
outside of the territorial jurisdiction of said courts by mailing copies thereof
by registered or certified United States mail, postage prepaid, to such Party's
last known address as established in accordance with Section 18.3 with the same
effect as if the Party were a resident of the State of California and had been
lawfully served in such state. Any process served on the California Secretary of
State in accordance with the preceding sentence shall also be noticed to the
Party's last known address established in accordance with Section 18.3 in a
manner permitted by said Section 18.3. Nothing in this Agreement shall affect
the right to service of process in any other manner permitted by law. Each Party
further agrees that final judgment against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction within or
outside the State of California by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and the
amount of such judgment.
18.18 AUTHORIZED REPRESENTATIVES. Each Party shall designate an
individual to act on behalf of the Party so designating him as its authorized
representative with full power and authority to speak for and bind such Party in
connection with all matters arising under this Agreement. Such designation shall
be by written notice delivered in accordance with Section 18.3. Each Party may
from time to time change its authorized representative hereunder by giving
written notice of such change to the other Party at least seven (7) Business
Days prior to the effective date of such change.
18.19 RELATIONSHIP OF THE PARTIES. The Parties intend that the
relationships between them hereunder shall be solely that between buyers and
seller. Nothing herein shall be construed (a) to create a partnership or joint
venture, (b) to constitute either Party an agent or legal representative of the
other Party; or (c) to create any fiduciary relationship between the Parties.
This Agreement does not grant any Party any right or authority to assume or
create any obligation or responsibility on behalf of any other Party, and no
Parties shall be in any way responsible for the debts of any other Party
incurred under or pursuant to the terms of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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FUTURE PURCHASE AGREEMENT
<PAGE> 146
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Parties have executed this Agreement
on the dates set forth below their respective names, effective as of the
Effective Date.
TAIWAN SEMICONDUCTOR ANALOG DEVICES, INC.
MANUFACTURING CO., LTD.
By: By:
-------------------------------- --------------------------------
Name: Donald W. Brooks Name:
---------------------------- ----------------------------
Title: President Title:
---------------------------- ----------------------------
Date: Date:
---------------------------- ----------------------------
ALTERA CORPORATION INTEGRATED SILICON SOLUTIONS,
INC.
By: By:
-------------------------------- ---------------------------------
Name: Name:
----------------------------- ------------------------------
Title: Title:
----------------------------- ------------------------------
Date: Date:
----------------------------- ------------------------------
<PAGE> 147
EXHIBIT "A"
Pricing Schedule
(To be subsequently determined)
FUTURE PURCHASE AGREEMENT
<PAGE> 148
EXHIBIT "B"
Product Qualification Plan
(To be subsequently determined)
FUTURE PURCHASE AGREEMENT
<PAGE> 149
EXHIBIT "C"
Quality and Reliability Specifications
(To be subsequently determined)
FUTURE PURCHASE AGREEMENT
<PAGE> 150
EXHIBIT "D"
Wafer Equivalents
(See Following Page)
FUTURE PURCHASE AGREEMENT
<PAGE> 151
EXHIBIT D
EQUIVALENCY FACTOR TABLE
***
*** Confidential treatment requested pursuant to a request for confidental
treatment filed with the Commission on August 14, 1996. The redacted
portions have been filed separately with the Commission.
<PAGE> 152
EXHIBIT "E"
Production Plan
(To be subsequently determined)
<PAGE> 153
EXHIBIT "F"
Design Rule and Parametric Information
(To be subsequently determined)
FUTURE PURCHASE AGREEMENT
<PAGE> 154
EXHIBIT "G"
Inspection and Testing Methods
(To be subsequently determined)
FUTURE PURCHASE AGREEMENT
<PAGE> 155
EXHIBIT "H"
Addresses for Notices
Seller:
WaferTech LLC
-----------------
Camas, Washington
TSMC:
Taiwan Semiconductor Manufacturing Co., Ltd.
121, Park Avenue 3, Science-Based Industrial Park,
Hsinchu, Taiwan, R.O.C.
ADI:
Analog Devices, Inc.
1 Technology Way
Norwood, Massachusetts 02062-2634
ALTERA:
Altera Corporation
2610 Orchard Parkway
San Jose, California 95134-2020
ISSI:
Integrated Silicon Solutions, Inc.
680 Alamanor Avenue
Sunnyvale, California 94086
FUTURE PURCHASE AGREEMENT
<PAGE> 156
EXHIBIT "I"
FORM OF
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the "Agreement") is made and entered
into as of _____________________________________ , by and between WaferTech,
L.L.C., a ________ ("Disclosing Party"), and ______________________________ , [a
______________________ corporation or other entity] [a natural person] (the
"Receiving Party").
WHEREAS, the Disclosing Party has agreed to give the Receiving Party
access to the Disclosing Party's semiconductor wafer-fabrication plant located
in ____________ (the "Foundry"), and as a result of granting such access the
Disclosing Party has disclosed or will disclose to the Receiving Party certain
Confidential Information (as defined below) regarding the Disclosing Party's
business operations and products (the "Business"); and
WHEREAS, the Disclosing Party's grant of access to the Foundry and its
disclosure of certain Confidential Information regarding the Disclosing Party's
Business is for the following purpose:__________________________________ (the
"Purpose"); and
WHEREAS, the Disclosing Party desires to maintain the secrecy of its
Confidential Information and accordingly has requested that the Receiving Party
execute this Agreement as a condition precedent to the granting of access to the
Foundry and the disclosure of such information to the Receiving Party; and
WHEREAS, this Agreement is made and entered into pursuant to that
certain Second Purchase Agreement by and between the Disclosing Party and the
Buyers named as parties therein, dated as of (the "Purchase
Agreement"), reference to which Purchase Agreement is here made for all
purposes, whereby each party agrees to grant access to facilities and
information to the other party's engineers, technicians and personnel so long as
they execute and deliver a copy of this Agreement.
NOW THEREFORE, in consideration of the above premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITION OF CONFIDENTIAL INFORMATION
As used herein, "Confidential Information" shall mean all
data, concepts, ideas, methods, processes, techniques, formulae, know-how,
mask-works, trade and industrial secrets and improvements relating to research,
development or manufacturing activities of the Disclosing Party and other
confidential and proprietary information concerning the Disclosing Party's
existing
I-1 FUTURE PURCHASE AGREEMENT
<PAGE> 157
or proposed business and marketing plans, operations, customers, and contact
lists, marketing expertise and strategies, the terms and conditions of the
Purchase Agreement, business development proposals and other information
compiled and developed by the Disclosing Party for use in semiconductor-wafer
fabrication operations. Confidential Information shall include not only written
information, but also (a) information transferred orally, visually,
electronically or by any other means, provided that the Disclosing Party
expressly indicates to the Receiving Party that such disclosures constitute
"Confidential Information" for purposes of this Agreement, and (b) all notes,
analyses, compilations, presentations or other documents (including materials
prepared by the Receiving Party), which contain or otherwise reflect such
information. Confidential Information shall include, if applicable, any
confidential or proprietary information of any subsidiary or other affiliate of
the Disclosing Party.
2. NON-CONFIDENTIAL INFORMATION
The term "Confidential Information" does not include
information which (a) becomes generally available to the public other than as
the result of a disclosure by the Receiving Party; (b) was available to the
Receiving Party on a nonconfidential basis (including, but not limited to
information developed by that party or, if applicable, its employer) prior to
its disclosure to the Receiving Party by the Disclosing Party and/or its
officers, directors, employees, representatives or agents; (c) becomes available
to the Receiving Party on a nonconfidential basis from a source other than the
Disclosing Party or its officers, directors, employees, representatives or
agents provided that such source is not bound by a confidentiality agreement
with the Disclosing Party or is not otherwise prohibited from transmitting the
information to the Receiving Party by a contractual, legal or fiduciary
obligation; or (d) is required to be disclosed by the Receiving Party pursuant
to law, governmental regulation or judicial order, provided that written notice
is given to the Disclosing Party prior to the required disclosure.
3. USE OF CONFIDENTIAL INFORMATION
The Receiving Party shall use the Confidential Information
solely for the Purpose and for no other purpose. In no event shall a Receiving
Party use Confidential Information in the Receiving Party's own business (or, if
applicable, in the business of its employer), or in the business of any other
entity, or in any other manner whatsoever except as may be expressly permitted
in this Agreement or in the Purchase Agreement. The Disclosing Party shall have
the right to review all documents prepared by the Receiving Party relating to
Confidential Information prior to any dissemination of such communication to
third parties. The Receiving Party shall delete any information from the
documents that the Disclosing Party requires to be deleted.
4. DISCLOSURE OF CONFIDENTIAL INFORMATION
Without the prior consent of the Disclosing Party, the
Receiving Party shall not disclose to any person (a) the fact that the
Confidential Information has been made available to the Receiving Party or that
the Receiving Party has inspected any portion of the Confidential Information,
or (b) any of the terms, conditions or other facts with respect to the Business
or the Disclosing Party, except to the extent the foregoing is required to be
disclosed by the Receiving Party pursuant to law,
I-2 FUTURE PURCHASE AGREEMENT
<PAGE> 158
governmental regulation or judicial order, provided that written notice is given
to the Disclosing Party prior to the required disclosure. The fact that such
information has been delivered to the Receiving Party and any discussions
regarding the Business or the Disclosing Party, are deemed Confidential
Information for the purposes of this Agreement, except to the extent the
foregoing is required to be disclosed by the Receiving Party pursuant to law,
governmental regulation or judicial order, provided that written notice is given
to the Disclosing Party prior to the required disclosure.
5. DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION
Upon request from the Disclosing Party to the Receiving Party
(a) the Receiving Party shall either destroy or return to the Disclosing Party
all Confidential Information which is in tangible form, including any copies of
which the Receiving Party may have made, destroy all abstracts, summaries
thereof or references thereto in the documents of the Receiving Party, and
certify to Disclosing Party that this has been done, and (b) the Receiving Party
shall not use any of the Confidential Information with respect to, or in
furtherance of, any of its businesses (or, if applicable, the business of its
employer) or in the business of anyone else, whether or not in competition with
the Disclosing Party, or for any other purpose whatsoever.
6. INDEMNIFICATION
The Receiving Party hereby agrees to indemnify, defend and
hold harmless the Disclosing Party from any damages, loss, cost or liability
(including legal fees and costs of enforcing this indemnity) arising out of or
resulting from any unauthorized use or disclosure by the Receiving Party of the
Confidential Information.
7. REMEDIES
Receiving Party acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by a
Receiving Party, and that such breach would cause Disclosing Party irreparable
harm. In addition to all other remedies available to Disclosing Party at law, in
equity or under this Agreement, the Disclosing Party will be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach, and the breaching party agrees to waive any requirement of
receiving or posting of any bond in connection with such remedy. Each party
agrees and consents to the entry of a preliminary injunction or protective order
by any court of competent jurisdiction upon a showing by the Disclosing Party
that its Confidential Information is being used or disclosed contrary to the
provisions of this Agreement. The arbitration provisions of Sections 17.3
through 17.7 of the Purchase Agreement shall not apply to any temporary
restraining order, preliminary injunctive relief, protective order or other
provisional remedy sought to prohibit a breach or threatened breach of the
provisions of this Agreement.
I-3 FUTURE PURCHASE AGREEMENT
<PAGE> 159
8. NO LICENSE
This Agreement does not imply any license to the Receiving
Party (or, if applicable, its employer) of Disclosing Party's Confidential
Information or any of its patents, copyrights, trademarks, mask-work rights or
applications therefor. All proprietary rights, including but not limited to
patent rights and trade and industrial secrets, in and to the Confidential
Information shall remain the Disclosing Party's property.
9. ADDITIONAL AGREEMENT IF RECEIVING PARTY IS A BUSINESS
ORGANIZATION
If the Receiving Party is a corporation, limited liability
company, or other business organization, it agrees (a) that it shall hold all
Confidential Information it receives from the Disclosing Party in strict
confidence and with the same degree of care that Receiving Party gives to
Receiving Party's own proprietary and confidential information, but not less
than a reasonable degree of care, and shall not disclose such Confidential
Information to others, except as may be required by law; (b) Receiving Party's
covenants and agreements set forth in this Agreement shall be binding upon its
officers, directors, employees, representatives and agents; and (c) the
Receiving Party shall cause its officers, directors, employees, representatives
and agents to abide by the provisions of this Agreement. Notwithstanding the
provisions of paragraph 4 above, the Receiving Party may disclose Confidential
Information without the prior consent of the Disclosing Party to its officers,
directors and employees who have a need to know such information in order to
perform their duties; provided, however, that each person to whom the
Confidential Information is disclosed must be advised of its confidential nature
and of the terms of this Agreement and must have entered into a written
agreement with the Receiving Party that obligates such person to abide by such
terms (a copy of which must be delivered to the Disclosing Party upon the
Disclosing Party's request).
10. WAIVERS
It is understood and agreed that no failure or delay by the
Disclosing Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any or further exercise or the exercise of any right, power or
privilege hereunder.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. CONSENT TO JURISDICTION; GOVERNING LAW
Except as otherwise provided herein, all disputes, differences
or controversies arising from this Agreement shall be settled by arbitration in
accordance with and pursuant to the arbitration provisions set forth in Sections
17.3 through 17.7 of the Purchase Agreement, a copy of which
I-4 FUTURE PURCHASE AGREEMENT
<PAGE> 160
Sections 17.3 through 17.7 are attached hereto as Exhibit "A" and is
incorporated by reference herein. Each Party reserves the right to file with a
court of competent jurisdiction an application for temporary or preliminary
injunctive relief, a protective order or other appropriate provisional remedy
(a) on grounds that the arbitration award to which the applicant may be entitled
may be rendered ineffectual in the absence of such relief, or (b) in the event
of a breach or threatened breach of the provisions of this Agreement prohibiting
disclosure of Confidential Information. This Agreement shall be governed by and
construed in accordance with the laws of Delaware.
13. DURATION
This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect for so long as the
Disclosing Party shall exist; provided, however, that the obligation of the
Receiving Party under paragraphs 3, 4, 5, 6, 7, 9 and 12 shall survive
indefinitely.
14. ENTIRE AGREEMENT; SURVIVAL; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the
parties hereto concerning the subject matter hereof and supersedes any prior
agreement or understanding of the parties. This Agreement shall survive the
execution of any other definitive document between the parties hereto and may
not be modified except in writing, duly signed by the party against whom
enforcement is sought. This Agreement shall inure to the benefit of and is
binding upon each of the parties hereto and their respective heirs, successors,
assigns and personal representatives.
15. COUNTERPARTS.
This Agreement is expected to be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. The facsimile signature
of a party to this Agreement is and shall be deemed to be an original execution
and is binding.
I-5 FUTURE PURCHASE AGREEMENT
<PAGE> 161
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
DISCLOSING PARTY: RECEIVING PARTY:
WAFERTECH L.L.C. _____________________________
By:_______________________________ By:_______________________________
Name:_______________________ Name:_______________________
Title:______________________ Title:______________________
Address for Notices: Address for Notices:
Telephone:________________________ Telephone:________________________
Facsimile:________________________ Facsimile:________________________
I-6 FUTURE PURCHASE AGREEMENT
<PAGE> 162
EXHIBIT "A" TO CONFIDENTIALITY AGREEMENT
ARBITRATION
Shown below is a copy of Sections 17.3 to 17.7 of that certain Purchase
Agreement, dated as of , by and among WaferTech, LLC, as Seller, and
[TSMC Development, Inc., Analog Devices, Inc., Altera Corporation, and
Integrated Silicon Solutions, Inc.], as Buyers (such copy, the "Copy"). The Copy
is an exact copy of the Purchase Agreement except for the insertion of the
phrase "by negotiation or mediation between the Parties" in the first sentence
of Section 17.3 of the Purchase Agreement, replacing a reference to Sections
17.1 to 17.2 of that agreement, which Sections are not applicable to this
Agreement. All references to Articles, Sections, and Subsections in the Copy are
to corresponding subdivisions of the Purchase Agreement. All undefined
capitalized terms in the Copy have the meanings given in the Purchase
Agreement.
17.3 CLAIMS SUBJECT TO ARBITRATION. Except as otherwise specifically
provided herein, any Dispute arising out of or relating to this Agreement, or
the breach or termination hereof, and not resolved by negotiation or mediation
between the Parties shall be resolved by binding arbitration in accordance with
the Federal Arbitration Act, 9 U.S.C. Sections 1 et seq. (the "FAA"), and
the Commercial Arbitration Rules, and where the amount in controversy exceeds
$1,000,000, the Supplementary Procedures for Large Complex Disputes, of the AAA
(collectively, the "Rules"). In the event of a conflict between the FAA and the
Rules, the Rules shall govern. In the event of a conflict between this Article
and the FAA or the Rules, this Article shall govern. A court of competent
jurisdiction, upon application from any Party, may relieve the Parties of their
duty to arbitrate Disputes in whole or in part, or may stay any arbitration
hereunder in whole or in part, if ongoing litigation between one or more of the
Parties and a third party (or parties) involves issues of fact or law common
with those subject to arbitration hereunder and there exists the possibility of
inconsistent judgments if such relief is not granted. Each Party reserves the
right to file with a court of competent jurisdiction an application for
temporary or preliminary injunctive relief, a protective order or other
appropriate provisional remedy on grounds that (a) the arbitration award to
which the applicant may be entitled may be rendered ineffectual in the absence
of such relief; or (b) in the event of a breach or threatened breach of the
provisions of Subsection 15.1.1 prohibiting disclosure of Proprietary
Information.
17.4 VENUE. The venue for any arbitration proceeding hereunder shall be
San Jose, California.
17.5 SELECTION OF ARBITRATOR AND DETERMINATION OF CONTROVERSIES.
17.5.1 Any Dispute subject to arbitration shall be submitted
to a single neutral arbitrator, who, unless otherwise agreed by the Parties,
shall be a retired judge or other lawyer who is a member of the arbitration
panel of the Judicial Arbitration and Mediation Service ("JAMS") or the national
panel of arbitrators of the AAA, and who has substantial experience in the area
of the Dispute. The Parties shall confer concerning the selection of AAA or JAMS
with the objective of selecting one or the other within thirty (30) days of the
conclusion of the Mediation; provided,
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however, that, if all Parties to the Dispute do not agree on one or the other
within such thirty (30) day period, the Dispute initially will be submitted
simultaneously to both AAA and JAMS for the sole purpose of picking the
arbitrator. If the Parties select JAMS, then the term "Rules" as used herein
shall mean the then-prevailing JAMS rules. The AAA (or JAMS, as the case may be)
simultaneously shall submit to each Party lists of five proposed qualified
arbitrators drawn from the applicable panel of commercial arbitrators. If the
Parties are unable to agree upon an arbitrator within thirty (30) days from the
date that AAA (or JAMS, as the case may be) submits such list to each Party,
then AAA (or JAMS, as the case may be) shall simultaneously submit to each Party
a second list of five additional proposed qualified arbitrators drawn from the
applicable panel of commercial arbitrators. If for any reason, the appointment
of an arbitrator cannot be made from either list, AAA (or JAMS, as the case may
be) may make the appointment from among other qualified members of the panel
without the submission of additional lists to the Parties. If the Dispute is
initially submitted to both AAA and JAMS for the purpose of picking the
arbitrator, then both AAA and JAMS simultaneously shall submit to each Party
lists of five proposed qualified arbitrators drawn from the applicable panel
(with each Party receiving the identical list from AAA and the identical list
from JAMS), and if the Parties are unable to agree upon an arbitrator within
thirty (30) days from the date that both AAA and JAMS submit the first such
lists to each Party, then AAA and JAMS simultaneously shall submit to each Party
second lists of five additional proposed qualified arbitrators (with each Party
receiving an identical second list from AAA and an identical second list from
JAMS). If the Parties for any reason are unable to select an arbitrator from the
first and second lists submitted by AAA and by JAMS, then a majority of the
Parties shall select to arbitrate with either AAA or with JAMS, and the
arbitration organization so selected shall make the appointment from among other
qualified members of the arbitration panel of that organization without the
submission of additional lists to the Parties. Where the Parties have initially
submitted the Dispute to both JAMS and AAA, then once an arbitrator has been
appointed, the arbitration proceeding will be terminated with the arbitration
organization that has not been selected and the Parties shall equally share the
costs and fees of the arbitration organization so terminated. If for any reason
the Parties to the Dispute have not selected an arbitrator within ninety (90)
days of the conclusion of the Mediation, then the arbitration shall be conducted
with the AAA. No matter how selected, the arbitrator shall have no prior or
existing affiliation or relationship with any Party or its counsel and shall
sign an oath of impartiality upon appointment.
17.5.2 The Parties shall be entitled to obtain pre-hearing
discovery through depositions and requests for the inspection and copying of
documents and other items upon reasonable notice and to obtain the issuance of a
subpoena duces tecum therefor in accordance with applicable law, including
without limitation, 9 U.S.C. Section 7 and (notwithstanding Section 1297.17 of
the California Code of Civil Procedure) Section 1283.05 of the California Code
of Civil Procedure; provided that depositions shall not be taken unless leave to
do so is first granted by the arbitrator. As between the Parties, the arbitrator
shall have the power to enforce the rights, remedies, procedures, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions, consequences, sanctions and penalties as may be imposed in like
circumstances in a civil action by a U.S. Federal court.
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17.6 ARBITRATION AWARD AND JUDICIAL REVIEW. The arbitrator, in deciding
any Dispute, shall base his decision on the record and in accordance with this
Agreement and applicable law. In no event shall the arbitrator make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement, is not supported by the weight of the evidence, or is contrary to
statute, administrative regulations or established judicial precedents. The
arbitration award shall be a factually detailed, reasoned opinion stating the
arbitrator's findings of fact and conclusions of law. Unless the arbitrator for
good cause determines otherwise, the final award shall include attorneys' fees,
costs and expenses of the prevailing Party, including expert and nonexpert
witness fees and the prevailing Party's share of the administrative fee and the
arbitrator's fees and expenses, if any. Notwithstanding any other provisions
hereof, the arbitrator shall have no jurisdiction to award damages in
contravention of Article 10 hereof. The arbitration award shall be subject to
judicial review in accordance with 9 U.S.C. Sections 10-12; provided, however,
that the arbitration award shall also be vacated to the extent that the
arbitrator exceeds his or her authority as set forth in this Section 17.6, and,
on balance, the Party seeking vacation of the award has been materially and
adversely affected thereby. Judgment may be entered on the award by a United
States District Court in accordance with 9 U.S.C. Section 9.
17.7 CONSOLIDATION AND JOINDER. It is the Parties' intent to avoid, to
the maximum extent possible, having to arbitrate claims arising out of this
Agreement in more than one proceeding. Accordingly, the Parties hereby consent
to the joinder of any person or entity sought to be joined where such or person
or entity is substantially involved in a common question of fact or law and its
or his presence is required for complete relief to be accorded in an arbitration
proceeding under this Article 17.
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EXHIBIT "J"
METHOD FOR APPORTIONING
THE UNUSED MINIMUM PURCHASE ALLOCATION
The Unused Minimum Purchase Allocation (the "UMPA") will be apportioned
among the Non-Defaulting Buyers (as defined in Subsection 3.4.1) in the
following manner, unless the Non-Defaulting Buyers otherwise agree. Following
the Defaulting Buyer's (as defined in Subsection 3.4.1) written notice to the
Non-Defaulting Buyers, as provided in Subsection 3.4.1, each Non-Defaulting
Buyer will notify the others of the proportion (between zero and one inclusive)
of the UMPA the Non-Defaulting Buyer elects to take (in this exhibit, such
proportion, as may be reduced by the method below, the Non-Defaulting Buyer's
"elected proportion," and the part (in Wafer Equivalents) of the UMPA
corresponding to the elected proportion, the Buyer's "election"). If a
Non-Defaulting Buyer fails to elect any part of the UMPA within thirty (30) days
following receipt of the Defaulting Buyer's written notice, the Non-Defaulting
Buyer is considered to have elected to take none of the UMPA.
NONTECHNICAL DESCRIPTION OF THE METHOD
If the Non-Defaulting Buyers elect in the aggregate to take all or only
part of the UMPA, each Non-Defaulting Buyer will be allowed to take exactly the
amount it elects. If, on the other hand, the Non-Defaulting Buyers
"oversubscribe" to the UMPA, some of their elections will be reduced as required
until their aggregate elections (the "election total") equal the UMPA. (Since a
Non-Defaulting Buyer's election can be reduced, but will not be increased, each
Non-Defaulting Buyer should elect the maximum amount of the UMPA the Buyer is
willing to take.)
In the oversubscribed case, the method will attempt to accommodate each
NonDefaulting Buyer's election within the available UMPA, yet will not permit
one Buyer to take more than a given multiple of its Basic Purchase Share to the
extent that other Buyers also seek at least the same multiple of their Basic
Purchase Shares. This fairness principal is operationalized through the
"election ratio," i.e., the ratio of a Buyer's elected proportion to its Basic
Purchase Share. For example, if one Buyer has an election ratio of 2, while
another has an election ratio of 1, the first Buyer has elected twice as much as
its Basic Purchase Share, while the second Buyer has elected its Basic Purchase
Share.
Any Non-Defaulting Buyer whose elected proportion is less than or equal
to the quotient of (a) the Buyer's Basic Purchase Share divided by (b) the sum
of the Basic Purchase Shares among the Non-Defaulting Buyers will be able to
take the Buyer's election without reduction.
Among the remaining Non-Defaulting Buyers, the method reduces the
elections of Buyers whose election ratios are higher than others' before
reducing the others' elections and continues until the election total is reduced
to the UMPA or until the election ratios among such Buyers are all equal. If the
elections of several Buyers with equal election ratios are to be reduced during
any step of the
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process, those elected proportions are reduced by the same percentage so as to
preserve the equality of those Buyers' election ratios after the reduction.
(When all the election ratios among the Buyers are equal, the election of each
such Buyer is proportionate to its Basic Purchase Share.) If the election total
still exceeds the UMPA after all election ratios among such Buyers are
equalized, the election of each such Buyer is further reduced by a percentage
(identical for each such Buyer) which yields an election total equal to the
UMPA.
For numerical examples of the method, see the section "Numerical
Examples" below.
MATHEMATICAL DESCRIPTION OF THE METHOD
A. ELECTION TOTAL LESS THAN OR EQUAL TO THE UMPA. If the election
total is less than or equal to the UMPA, then each Non-Defaulting Buyer will
take its election without further adjustment.
B. ELECTION TOTAL GREATER THAN THE UMPA. If the election total
exceeds the UMPA, then the following procedure is used to reduce the election
total to the UMPA:
Step 1: Assign to each Non-Defaulting Buyer whose elected proportion is
less than or equal to the ratio of (a) its Basic Purchase Share to (b) the sum
of the Non-Defaulting Buyers' Basic Purchase Shares that Buyer's election
without reduction.
Step 2: List the remaining Non-Defaulting Buyers in decreasing order of
their election ratios. Assume for purposes of the remaining steps that there are
four Buyers and thus at most three Non-Defaulting Buyers on the list. The steps
below can be generalized to the case where there are more than three
Non-Defaulting Buyers on the list.
Step 3:
(a) If only one Buyer is on the list, reduce its election
until the election total equals the UMPA.(1) The process stops at this
step and the Non-Defaulting Buyers will take their respective elections
(as adjusted) at the completion of this step.
(b) If two or more Buyers are on the list, reduce the first
Buyer's election until (1) the Buyer's election ratio equals that of
the second Buyer's or (2) the election total equals the UMPA.(2) If the
election total equals the UMPA, the process stops at this step and the
Buyers on the list will take their respective elections at the
completion of this step; otherwise, the process continues to the next
step.
Step 4 (when two or more Buyers are on the list):
- -------------
(1) The Buyer's election will be reduced to (1) the UMPA less (2) the
sum of the other Non-Defaulting Buyers' elections.
(2) The first Buyer's election will be reduced to the greater of (1)
(a) the UMPA less (b) the sum of the other Non-Defaulting Buyers'
elections or (2) the product of (a) the UMPA, (b) the Buyer's Basic
Purchase Share, and (c) the election ratio of the second Buyer on the
list.
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(a) If there are two Buyers on the list, reduce each of their
elections (as adjusted through step 3) by the same factor until the
election total equals the UMPA.(3) The process stops at this step and
the Buyers on the list will take their respective elections (as
adjusted) at the completion of this step.
(b) If there are three Buyers on the list, reduce each of the
first two Buyers' elections (as adjusted through step 3) by the same
factor until (1) the two Buyers' election ratios equal that of the
third Buyer's or (2) the election total equals the UMPA.(4) If the
election total equals the UMPA, the process stops at this step and the
Buyers on the list will take their respective elections at the
completion of this step; otherwise, the process continues to the next
step.
Step 5 (when there are three Buyers on the list): Reduce each of the
listed Buyers' elections (as adjusted through step 4) by the same factor until
the election total equals the UMPA.(5)
NUMERICAL EXAMPLES
As an illustration of the above method, suppose that the Buyers are
TSMC and three Regular Buyers (referred to below as Buyers No. 1 to No. 4,
respectively), with Basic Purchase Shares of 60%, 18%, 18%, and 4%,
respectively. Suppose further that Buyer No. 2 with an 18% Basic Purchase Share
is a Defaulting Buyer. Finally, suppose that the UMPA equals 100 Wafer
Equivalents. The table below shows three cases with the Non-Defaulting Buyers'
initial elections and final elections after adjustments by the above method.
- --------------
(3) The appropriate factor is the quotient of (1) (a) the UMPA less (b)
the election of the Non-Defaulting Buyer not on the list divided by (2)
the sum of the two elections before the reduction.
(4) The appropriate factor is the greater of (1) the quotient of (a)
the UMPA less the election of the third Buyer on the list divided by
(b) the sum of the two Buyers' elections before the reduction or (2)
the quotient of (a) the election ratio of the third Buyer on the list
divided by (b) the election ratio of the first Buyer on the list.
(5) The appropriate factor is the quotient of (1) the UMPA divided by
(2) the sum of the three elections before the reduction.
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<TABLE>
<CAPTION>
====================================================================================================================================
Col 1 2 3 4 5 6 7 8 9
- ------------------------------------------------------------------------------------------------------------------------------------
CASE 1 CASE 2 CASE 3
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC
PURCH BPS/
ELECTION ELECTION ELECTION SHARE TOTAL
ELECTION RATIO ELECTION RATIO ELECTION RATIO (BPS) BPS
====================================================================================================================================
Row INITIAL ELECTIONS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Buyer #1 70 1.167 100 1.667 100 1.667 0.60 0.732
2 Buyer #3 23 1.278 100 5.556 100 5.556 0.18 0.220
3 Buyer #4 0 0.000 4 1.000 100 25.000 0.04 0.049
------------------------------------------------------------------------------------------------------------------------
4 TOTAL 93 -- 204 -- 300 -- 0.82 1.000
====================================================================================================================================
FINAL ELECTIONS
- -----------------------------------------------------------------------------------------------------------------
5 Buyer #1 70 1.167 73.85 1.231 73.17 1.220
6 Buyer #3 23 1.278 22.15 1.231 21.95 1.220
7 Buyer #4 0 0.000 4.00 1.000 4.88 1.220
---------------------------------------------------------------------------------------------------
8 TOTAL 93 -- 100.00 -- 100.00 --
====================================================================================================================================
</TABLE>
Column 8 of the table lists the Basic Purchase Shares of the
Non-Defaulting Buyers. Column 9 expresses each Basic Purchase Share as a
proportion of the total of the NonDefaulting Buyers' Basic Purchase Shares.
Case 1: The Non-Defaulting Buyers elect 70, 93, and 0 Wafer
Equivalents, respectively (rows 1 to 3, column 2). Since the election total (93
Wafer Equivalents; row 4, column 2) is less than 100 Wafer Equivalents, each
Non-Defaulting Buyer will take its initial election (see rows 5 to 7, column 2).
Case 2: The Non-Defaulting Buyers elect 100, 100, and 4 Wafer
Equivalents, respectively (rows 1 to 3, column 4). Since the election total (204
Wafer Equivalents) exceeds the UMPA, some of the elections must be reduced.
Comparing columns 4 and 9 (rows 1 to 3), we see that Buyer No. 1's and Buyer No.
3's elected proportions exceed their respective Basic Purchase Shares as
proportions of the sum of the Non-Defaulting Buyers' Basic Purchase Shares.
Since that is not true for Buyer No. 4, it will take its entire election.
Buyer No. 1's and Buyer No. 3's elections must be reduced, since their
elections sum to 200. Buyer No. 3's election is reduced first, because its
election ratio (5.556) exceeds Buyer No. 1's (1.667). Even after Buyer No. 3's
election is reduced so that its election ratio equals Buyer No. 1's, the Buyers'
aggregate elections (130 Wafer Equivalents) are still too much (not shown in the
table), so each of their elections is (further) reduced (rows 5 to 6, column 4)
until their aggregate elections are 96 Wafer Equivalents. Note that at this
point, their election ratios have been reduced to 1.231 (rows 5 to 6, column 5).
Thus, once Buyer No. 3's election ratio is made equal to Buyer No. 1's, each
Buyer's election is reduced by the same factor until the two Buyers' aggregate
elections equal 96 Wafer Equivalents.
Case 3: The Non-Defaulting Buyers elect 100 Wafer Equivalents each.
Buyer No. 4 has the highest election ratio, followed by Buyer No. 3, then Buyer
No. 1 (rows 1 to 3, column 7). As shown in rows 5 to 7, columns 6 to 7, each
Non-Defaulting Buyer's election is reduced until their three Buyers' common
election ratio is 1.220 (rows 5 to 7, column 7). In terms of the above method,
Buyer No. 4's initial election ratio (25) is first reduced to Buyer No. 3's
(5.556). Because the election total
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still exceeds 100 Wafer Equivalents (not shown in the table), both Buyers'
election ratios are reduced to Buyer No. 1's (1.667). Because the election total
is still too high (not shown in the table), all Non-Defaulting Buyers' election
ratios are reduced to the final value of 1.220, at which point the election
total is 100 Wafer Equivalents.
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EXHIBIT "K"
FORM OF CONFIDENTIALITY AGREEMENT BETWEEN A BUYER AND ITS CUSTOMER
This Confidentiality Agreement (the "Agreement") is made and entered
into as of _________________________________ , by and between
___________________ [Buyer], a ______________________________ ("Disclosing
Party"), and ______________________________ , [a_____________ corporation [or
other entity] (the "Receiving Party").
WHEREAS, pursuant to that certain Purchase Agreement (as defined
below), the Disclosing Party purchases part of the wafer production manufactured
by WaferTech, LLC, a Delaware limited liability company (the "Company"), which
owns and operates a semiconductor wafer-fabrication plant in Camas, Washington
(such plant, the "Foundry"), and following such purchase, Disclosing Party uses
the wafer production in its own products for resale to its customers; and
WHEREAS, the Receiving Party is a customer of the Disclosing Party and
desires to obtain from the Company's design rules, parametric information, and
reliability data relating to Foundry products of interest to the Receiving Party
(such information, the "Information"); and
WHEREAS, the Receiving Party intends to use the Information to evaluate
products incorporating the wafer production for purchase from the Disclosing
Party (such purpose, the "Purpose"); and
WHEREAS, the Disclosing Party is willing to provide the Information to
the Receiving Party subject to the terms below; and
WHEREAS, the Disclosing Party is a party to that certain Purchase
Agreement, dated as of _________________, between the Company and other parties
which, together with the Disclosing Party, are named as "Buyers" under the
Purchase Agreement (the "Purchase Agreement"); and
WHEREAS, the Disclosing Party is obligated by the Purchase Agreement to
enter into this Agreement with the Receiving Party as a condition to the
disclosure of the Information; and
WHEREAS, the Receiving Party is willing to use such information and
preserve its confidentiality in the manner set forth below;
NOW THEREFORE, in consideration of the above premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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1. DEFINITION OF CONFIDENTIAL INFORMATION
As used herein, "Confidential Information" shall mean (a) all
data, concepts, ideas, methods, processes, techniques, formulae, know-how,
mask-works, trade and industrial secrets and improvements relating to research,
development or manufacturing activities of the Company or other parties to the
Purchase Agreement. Confidential Information shall include not only written
information, but also (a) information transferred orally, visually,
electronically or by any other means, provided that the Disclosing Party
expressly indicates to the Receiving Party that such disclosures constitute
"Confidential Information" for purposes of this Agreement, and (b) all notes,
analyses, compilations, presentations or other documents (including materials
prepared by the Receiving Party), which contain or otherwise reflect such
information. Confidential Information shall include the Information.
2. NON-CONFIDENTIAL INFORMATION
The term "Confidential Information" does not include
information which (a) becomes generally available to the public other than as
the result of a disclosure by the Receiving Party; (b) was available to the
Receiving Party on a nonconfidential basis (including, but not limited to
information developed by that party) prior to its disclosure to the Receiving
Party by the Disclosing Party; (c) becomes available to the Receiving Party on a
nonconfidential basis from a source other than the Disclosing Party provided
that such source is not bound by a confidentiality agreement with the Disclosing
Party or the Company or is not otherwise prohibited from transmitting the
information to the Receiving Party by a contractual, legal or fiduciary
obligation; or (d) is required to be disclosed by the Receiving Party pursuant
to law, governmental regulation or judicial order, provided that written notice
is given to the Disclosing Party and the Company prior to the required
disclosure.
3. USE OF CONFIDENTIAL INFORMATION
The Receiving Party shall use Confidential Information solely
for the Purpose and for no other purpose.
4. DISCLOSURE OF CONFIDENTIAL INFORMATION
Without the prior consent of the Disclosing Party, the
Receiving Party shall not disclose to any person the fact that Confidential
Information has been made available to the Receiving Party or that the Receiving
Party has inspected any Confidential Information, except to the extent the
foregoing is required to be disclosed by the Receiving Party pursuant to law,
governmental regulation or judicial order, provided that written notice is given
to the Disclosing Party and the Company prior to the required disclosure. The
fact that such information has been delivered to the Receiving Party is deemed
to be Confidential Information for the purposes of this Agreement, except to the
extent the foregoing is required to be disclosed by the Receiving Party pursuant
to law, governmental regulation or judicial order, provided that written notice
is given to the Disclosing Party and the Company prior to the required
disclosure.
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5. DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION
Upon request from the Disclosing Party to the Receiving Party
(a) the Receiving Party shall (i) either destroy or return to the Disclosing
Party all Confidential Information received in tangible form, including any
copies of which the Receiving Party may have made, (ii) destroy all abstracts,
summaries thereof or references thereto in the documents of the Receiving Party,
and (iii) certify to Disclosing Party that this has been done, and (b) the
Receiving Party shall not use any of the Confidential Information with respect
to, or in furtherance of, any of the Receiving Party's businesses or in the
business of anyone else, or for any other purpose whatsoever.
6. INDEMNIFICATION
The Receiving Party hereby agrees to indemnify, defend and
hold harmless the Disclosing Party, the other parties to the Purchase Agreement,
and the Company (each such indemnified party, an "Indemnitee") from any damages,
loss, cost or liability (including legal fees and costs of enforcing this
indemnity) arising out of or resulting from any unauthorized use or disclosure
by the Receiving Party of the Confidential Information.
7. REMEDIES
Receiving Party acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by a
Receiving Party, and that such breach would cause one or more Indemnitees
irreparable harm. In addition to all other remedies available to an Indemnitee
at law, in equity or under this Agreement, the Indemnitee will be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach, and the breaching party agrees to waive any requirement of
receiving or posting of any bond in connection with such remedy. The Receiving
Party agrees and consents to the entry of a preliminary injunction or protective
order by any court of competent jurisdiction upon a showing by an Indemnitee
that Confidential Information is being used or disclosed contrary to the
provisions of this Agreement to the detriment of the Indemnitee.
8. NO LICENSE
This Agreement does not imply any license to the Receiving
Party of Confidential Information or any of patents, copyrights, trademarks,
mask-work rights or applications therefor. All proprietary rights, including but
not limited to patent rights and trade and industrial secrets, in and to the
Confidential Information shall remain the property of its owner prior to
disclosure by the Disclosing Party to the Receiving Party.
9. DEGREE OF CARE, AGREEMENTS BINDING ON OFFICERS, EMPLOYEES,
ETC.
Receiving Party agrees (a) that it shall hold all Confidential
Information it receives from the Disclosing Party in strict confidence and with
the same degree of care that Receiving Party
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gives to Receiving Party's own proprietary and confidential information, but not
less than a reasonable degree of care, (b) Receiving Party's covenants and
agreements set forth in this Agreement shall be binding upon its officers,
directors, employees, representatives and agents; and (c) the Receiving Party
shall cause its officers, directors, employees, representatives and agents to
abide by the provisions of this Agreement.
10. WAIVERS
It is understood and agreed that no failure or delay by the
Disclosing Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any or further exercise or the exercise of any right, power or
privilege hereunder.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of Delaware.
13. DURATION
This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect for so long as the
Disclosing Party shall exist; provided, however, that the obligation of the
Receiving Party under paragraphs 3, 4, 5, 6, 7, 8, 9, 12, 14 and 15 shall
survive indefinitely.
14. ENTIRE AGREEMENT; SURVIVAL; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the
parties hereto concerning the subject matter hereof and supersedes any prior
agreement or understanding of the parties. This Agreement may not be modified
except in writing, duly signed by the party against whom enforcement is sought.
This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto and their respective heirs, successors, assigns and personal
representatives.
15. The Company is a third-party beneficiary under this Agreement.
Further, the parties intend the Indemnitees, other than the Disclosing Party, to
be third-party beneficiaries of the provisions of paragraph 6.
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16. COUNTERPARTS.
This Agreement is expected to be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. The facsimile signature
of a party to this Agreement is and shall be deemed to be an original execution
and is binding.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
DISCLOSING PARTY: RECEIVING PARTY:
__________________________________ _____________________________
By:_______________________________ By:_______________________________
Name:_______________________ Name:_______________________
Title:______________________ Title:______________________
Address for Notices: Address for Notices:
__________________________________ _________________________________
__________________________________ _________________________________
Telephone:________________________ Telephone:________________________
Facsimile:________________________ Facsimile:________________________
K-5 FUTURE PURCHASE AGREEMENT
<PAGE> 175
EXHIBIT "L"
FORM OF INDEMNITY AGREEMENT
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is entered into as of
______________ by [Buyer] , a ________________ corporation, as indemnifying
party hereunder ("Indemnitor"), and WaferTech LLC, a Delaware limited liability
company, as indemnified party ("Indemnitee").
RECITALS
A. Indemnitor and Indemnitee, among others, are parties, to that
certain Purchase Agreement, dated ___________________ (the "Purchase
Agreement").
B. Capitalized terms not otherwise defined in this Agreement have
the meanings given them in the Purchase Agreement.
C. Pursuant to the Purchase Agreement, Indemnitee will sell and
the other parties to that agreement will buy semiconductor wafers produced by
Indemnitee at the Foundry.
D. Under Section 5.10 of the Purchase Agreement, if Indemnitor
orders Products from Indemnitee that require the grant of non-exclusive
Intellectual Property Rights relating to the Products' manufacture or sale,
Indemnitor must, as a condition to Indemnitee's manufacturing and delivering
such Products, either grant the necessary Intellectual Property Rights to
Indemnitee or enter into this Agreement. Indemnitor wishes to order Products
under the Purchase Agreement from Indemnitee and declines to obtain and grant to
it non-exclusive rights in Intellectual Property Rights relating to such
Products. Accordingly, Indemnitor desires to enter into this Agreement.
E. The Product/Products covered by this Agreement is/are as
follows:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
NOW, THEREFORE, in consideration of the premises and covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties hereto agree as follows:
1. Except as expressly otherwise provided in Section 11.1 of the
Purchase Agreement, Indemnitor shall indemnify, defend, and hold harmless
Indemnitee, TSMC, and their respective Affiliates, employees, officers,
directors, shareholders, partners, members, and agents (collectively,
L-1 FUTURE PURCHASE AGREEMENT
<PAGE> 176
"Indemnified Persons") against or from any Claim of infringement or
misappropriation of a third party's Intellectual Property Rights arising out of,
related to, or connected with the Product or Products described in Recital E
above.
2. This Agreement shall be governed by Section 10.2(a) of the
Purchase Agreement.
3. Any payment hereunder shall be made in U.S. dollars. Any
amount due and payable to an Indemnified Person under paragraph 1 and not paid
within 30 days of written demand for payment shall accrue interest compounded
annually at a rate equal to the lesser of (a) the sum of (i) the prime or
reference rate for commercial borrowing announced by the Bank of America
N.T.&S.A. from time to time and (ii) 5% or (b) the maximum rate of interest
permitted by applicable law.
4. Indemnitor's obligation to Indemnitee under paragraph 1 shall
be conditioned upon:
a. Indemnitee's giving Indemnitor prompt notice in
writing of any Claims subject to the indemnity of paragraph 1 and of which
Indemnitee is aware;
b. Indemnitee's permitting Indemnitor, through counsel
of Indemnitor's choice and reasonably acceptable to Indemnitee, to defend
against, contest or settle the same; and
c. Indemnitee's reasonably cooperating with Indemnitor
and reasonably providing it with information and assistance to enable it to
defend, contest or settle same.
5. The indemnity of paragraph 1 shall be interpreted and
construed as indemnifying Indemnitee against its negligence, whether active or
passive.
6. Time is of the essence with respect to each provision of this
Agreement in which time is a factor.
7. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, United States of
America.
8. This Agreement integrates all the terms and conditions
mentioned herein or incidental hereto and supersedes all oral negotiations and
prior writings in respect to the subject matter hereof. This Agreement may be
modified, supplemented, superseded or canceled only by an instrument signed by
the parties hereto.
9. If any provision of this Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, such provision shall be
deemed amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so amended without materially altering the intention of the
parties, it shall be stricken and the remainder of this Agreement shall remain
in full force and effect.
L-2 FUTURE PURCHASE AGREEMENT
<PAGE> 177
10. No waiver of any provision hereof shall be effective unless
and until made in writing and signed by the party to be charged. No waiver,
forbearance or failure by any party hereto of its right to enforce any provision
of this Agreement shall constitute a waiver or estoppel of such party's right to
enforce any other provision of this Agreement or a continuing waiver by such
party of compliance with any provision.
11. In the event of any litigation, arbitration, judicial
reference or other proceeding involving the parties hereto to enforce any
provision hereof, to enforce any remedy available upon default hereunder, or
seeking a declaration of the rights of a party hereunder, the prevailing party
shall be entitled to recover from the other such attorneys' fees and costs as
may be reasonably incurred, including the cost of reasonable investigation,
preparation and professional or expert consultation incurred by reason of such
litigation, arbitration, judicial reference or other proceeding. Notwithstanding
the foregoing, (a) in an arbitration proceeding the award of attorneys' fees
shall be governed by the provisions of Section 17.6 in the Purchase Agreement;
and (b) in a mediation under Section 17.2 of the Purchase Agreement, each Party
shall pay its own attorneys' fees and expenses in accordance with said Section
17.2.
12. With the exception of Section 17.7, the dispute resolution and
arbitration provisions of Article 17 of the Purchase Agreement are incorporated
by reference herein; provided that the term "Parties" as used in said Article 17
refer to Indemnitor and Indemnitee hereunder.
13. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, transferees, and assigns.
14. Each party hereto irrevocably consents to the jurisdiction of
the state and Federal courts located in San Jose, California; agrees, subject to
the provisions of Article 17 of the Purchase Agreement, that any action, suit or
proceeding by or between the parties may be brought in any such court sitting in
San Jose, California; and waives any objection which the party may now or
hereafter have concerning jurisdiction and venue, whether based on
considerations of personal jurisdiction, forum non conveniens or on any other
ground. Each party hereby irrevocably designates, appoints and empowers the
Secretary of State of California to receive for and on behalf of such party
service of process in the State of California and further irrevocably consents
to the service of process outside of the territorial jurisdiction of said courts
by mailing copies thereof by registered or certified United States mail, postage
prepaid, to such party's last known address as established in accordance with
the Purchase Agreement with the same effect as if the Party were a resident of
the State of California and had been lawfully served in such state. Any process
served on the California Secretary of State in accordance with the preceding
sentence shall also be noticed to the party's last known address established in
accordance with the Purchase Agreement. Nothing in this Agreement shall affect
the right to service of process in any other manner permitted by law. Each party
further agrees that final judgment against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction within or
outside the State of California by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and the
amount of such judgment.
L-3 FUTURE PURCHASE AGREEMENT
<PAGE> 178
15. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
INDEMNITOR:
____________________________________,
a ___________________ corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
INDEMNITEE:
WAFERTECH, LLC, a Delaware limited
liability company
By: ______________________________
Name: ______________________________
Title: ______________________________
L-4 FUTURE PURCHASE AGREEMENT
<PAGE> 1
________________________________________________________________________________
PURCHASE AGREEMENT
BY AND BETWEEN
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.,
AS SELLER
AND
ANALOG DEVICES, INC.,
ALTERA CORPORATION,
AND
INTEGRATED SILICON SOLUTIONS, INC.,
AS BUYERS
________________________________________________________________________________
PURCHASE AGREEMENT
<PAGE> 2
EX. 10.48
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND RULES OF INTERPRETATION.............................. 2
1.1 Definitions.......................................................... 2
1.2 Rules of Interpretation.............................................. 8
ARTICLE 2 TERM................................................................. 8
2.1 Term................................................................. 8
2.2 Automatic Extension.................................................. 8
2.3 Termination of Manufacturing Agreement............................... 9
ARTICLE 3 WAFER SUPPLY; FOUNDRY OUTPUT RIGHTS AND
OBLIGATIONS.......................................................... 9
3.1 Facilities........................................................... 9
3.2 Manufacturing Capability............................................. 9
3.3 Production Availability.............................................. 9
3.4 ADI's, Altera's and ISSI's Maximum and Minimum Purchase Rights
and Obligations...................................................... 10
3.5 Take-Or-Pay Obligation for Unused Minimum Purchase Share............. 11
ARTICLE 4 PRODUCTION PLANNING.................................................. 12
4.1 Forecasts............................................................ 12
4.2 Production Qualification............................................. 13
ARTICLE 5 OTHER AGREEMENTS RELATING TO PRODUCTION.............................. 14
5.1 Quantity Requirement................................................. 14
5.2 Accelerate Supply.................................................... 14
5.3 Modifications to Existing Processes or Specifications................ 14
5.4 Additions or Substitutions of Products............................... 15
5.5 Vendor Information................................................... 15
5.6 Process Records...................................................... 15
5.7 Trademarks........................................................... 15
5.8 Mask Set Protection.................................................. 16
5.9 Rights to Inspect and Monitor Production............................. 16
5.10 Obtain Grant of Non-exclusive Manufacturing Rights................... 16
5.11 Unique Processes, Methods or Materials............................... 17
5.12 Adjustment in Capacity Rights and Obligations........................ 17
5.13 Certain Terms Applicable to Test Wafers.............................. 17
5.14 Sales Engineering Support............................................ 18
5.15 Supplemental Wafer Supply Arrangements............................... 18
5.16 Certain Terms Applicable to Risk Wafers Run on a Qualified Process... 19
5.17 Sale of Risk Wafers.................................................. 19
</TABLE>
i
PURCHASE AGREEMENT
<PAGE> 3
EX. 10.48
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 6 PURCHASES............................................................ 19
6.1 Purchase Orders...................................................... 19
6.2 Price................................................................ 20
6.3 Invoice.............................................................. 22
6.4 Payment.............................................................. 22
6.5 No Limitation On Buyer's Pricing..................................... 22
ARTICLE 7 DELIVERY............................................................. 22
7.1 Delivery............................................................. 22
7.2 Shipments F.O.B. ................................................... 22
7.3 Packaging and Ship Date.............................................. 22
7.4 Partial Shipments.................................................... 22
7.5 Failure to Meet Delivery Dates....................................... 22
7.6 Force Majeure........................................................ 23
ARTICLE 8 INCOMING TEST; ACCEPTANCE AND RETURNS ............................... 23
8.1 Incoming Testing..................................................... 23
8.2 Acceptance........................................................... 23
8.3 Returns.............................................................. 23
ARTICLE 9 PRODUCT WARRANTY..................................................... 23
9.1 TSMC's Warranty...................................................... 23
9.2 Limited Warranty..................................................... 24
9.3 TSMC's Inspection Rights............................................. 24
ARTICLE 10 LIMITATION ON DAMAGES; CONTRACTUAL
LIMITATIONS PERIOD.................................................. 24
10.1 Limitation on Damages................................................ 24
10.2 Contractual Limitations Period....................................... 25
ARTICLE 11 INDEMNITIES.......................................................... 25
11.1 Infringement of Intellectual Property Rights......................... 25
11.2 Personal Injury Indemnity. ......................................... 26
11.3 Product Liability. .................................................. 26
11.4 General Indemnity Provisions......................................... 27
</TABLE>
ii
PURCHASE AGREEMENT
<PAGE> 4
Exhibit 10.48
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 12 FORCE MAJEURE........................................................ 28
12.1 Force Majeure........................................................ 28
12.2 Notification......................................................... 28
12.3 Response to Force Majeure............................................ 28
12.4 Limitations on Applicability of Force Majeure........................ 28
ARTICLE 13 GOVERNMENTAL INTERVENTION............................................ 28
13.1 Governmental Intervention............................................ 28
ARTICLE 14 DEFAULT AND TERMINATION.............................................. 29
14.1 Events of Default.................................................... 29
14.2 Remedies for Default................................................. 30
14.3 Effective Date of Termination........................................ 31
14.4 Rights and Remedies Following Termination............................ 31
14.5 Remedies Cumulative, Concurrent and Non-Exclusive.................... 31
ARTICLE 15 PROPRIETARY INFORMATION.............................................. 32
15.1 Proprietary Information.............................................. 32
15.2 Other Confidentiality Agreements..................................... 32
15.3 Confidentiality Agreements for Specific Persons...................... 32
15.4 Third Party Request for Information.................................. 32
15.5 Reporting Loss, Theft or Misappropriation............................ 33
ARTICLE 16 EXPORT COMPLIANCE.................................................... 33
16.1 Compliance With Export Administration Regulations.................... 33
16.2 U.S. Export Licenses................................................. 33
16.3 Republic of China Export Regulations................................. 34
ARTICLE 17 DISPUTE RESOLUTION; ARBITRATION ..................................... 34
17.1 Negotiation Between Executives....................................... 34
17.2 Mediation............................................................ 34
17.3 Claims Subject to Arbitration........................................ 34
17.4 Venue................................................................ 35
17.5 Selection of Arbitrator and Determination of Controversies........... 35
17.6 Arbitration Award and Judicial Review................................ 36
17.7 Consolidation and Joinder............................................ 36
</TABLE>
iii
PURCHASE AGREEMENT
<PAGE> 5
Exhibit 10.48
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 18 GENERAL PROVISIONS................................................... 37
18.1 Severability......................................................... 37
18.2 Neutral Interpretation; Waiver of Conflict........................... 37
18.3 Notices.............................................................. 37
18.4 Time of the Essence.................................................. 37
18.5 Governing Law........................................................ 37
18.6 Entire Agreement..................................................... 37
18.7 Waiver; Amendment.................................................... 37
18.8 Cooperation.......................................................... 38
18.9 Counterparts......................................................... 38
18.10 Exhibits and Schedules............................................... 38
18.11 Attorneys' Fees...................................................... 38
18.12 Date of Performance.................................................. 38
18.13 Survival............................................................. 38
18.14 Assignment; Parties Bound............................................ 38
18.15 Third-Party Beneficiaries............................................ 39
18.16 Governing Language of Agreement...................................... 39
18.17 Consent to Jurisdiction and Service of Process....................... 39
18.18 Authorized Representatives........................................... 39
18.19 Relationship of the Parties.......................................... 39
18.20 Manufacturing Agreement.............................................. 40
</TABLE>
iv
PURCHASE AGREEMENT
<PAGE> 6
LIST OF EXHIBITS
Exhibit "A" -- Pricing Schedule
Exhibit "B" -- Product Qualification Plan
Exhibit "C" -- Quality and Reliability Specifications
Exhibit "D" -- Wafer Equivalents
Exhibit "E" -- Production Ramp-Up Plan
Exhibit "F" -- Buyer's Purchase Forecast
Exhibit "G" -- Design Rule and Parametric Information
Exhibit "H" -- Inspection and Testing Methods
Exhibit "I" -- Addresses for Notices
Exhibit "J" -- Form of Confidentiality Agreement
Exhibit "K" -- Method for Apportioning the Unused Minimum Purchase
Allocation
Exhibit "L" -- Form of Confidentiality Agreement Between a Buyer and Its
Customer
Exhibit "M" -- Form of Indemnity
v
PURCHASE AGREEMENT
<PAGE> 7
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is entered into as of the
Effective Date, by and among Taiwan Semiconductor Manufacturing Co., Ltd.,
incorporated in Taiwan, Republic of China, as seller hereunder ("TSMC"), and
Analog Devices, Inc. ("ADI"), incorporated in Massachusetts; Altera Corporation
("Altera"), incorporated in California; and Integrated Silicon Solutions, Inc.
("ISSI"), incorporated in Delaware; as buyers hereunder (each of whom is
individually referred to as a "Buyer," and two or more of whom are collectively
referred to as "Buyers"). TSMC, ADI, Altera and ISSI each are individually
sometimes referred to as a "Party", and two or more of them are collectively
sometimes referred to as "Parties".
RECITALS:
This Agreement is made with reference to the following facts and
circumstances:
A. Each capitalized term used herein (i) if defined herein, has the
meaning specified in these Recitals, in Article 1 below, or elsewhere
parenthetically herein or (ii) if not defined herein, has the meaning specified
(A) in the instrument or document that is referenced where the term is
introduced herein or (B) in the LLC Agreement, if no instrument or document is
so referenced.
B. TSMC is in the business of (i) manufacturing integrated circuits to
its customers' specifications; and (ii) selling its entire output to customers.
C. Each Buyer has been, and currently is, a customer of TSMC, and TSMC
has made, and currently is making, integrated circuits to each Buyer's
specifications at TSMC's existing wafer-fabrication plants.
D. In order to increase its output, TSMC has expanded its manufacturing
capacity by subcontracting with its Affiliate, TSMC Development, Inc., a
Delaware corporation ("TSMC Development"), to have integrated circuits made for
TSMC pursuant to that certain Manufacturing Agreement dated as of February 16,
1996 (the "Manufacturing Agreement").
E. Under the Manufacturing Agreement, (i) TSMC Development has agreed
to construct, or cause the construction of, a semiconductor wafer-fabrication
plant and related improvements in Camas, Washington (the "Foundry") for the
purpose of manufacturing integrated circuits; (ii) TSMC Development has agreed
to offer the entire Calculated Installed Capacity of the Foundry for purchase by
TSMC for a three (3) year period (as such period may be extended pursuant to
Section 2.2); and (iii) TSMC has agreed to purchase a minimum of eighty-five
percent (85%) of such Calculated Installed Capacity for said period, with the
optional ability to purchase up to one hundred percent (100%) of the Foundry's
Calculated Installed Capacity.
F. Each Buyer desires to purchase a portion of its TSMC-supplied
requirements for integrated circuits from the Foundry's Calculated Installed
Capacity. Accordingly, each of the Buyers
PURCHASE AGREEMENT
<PAGE> 8
desires to secure for itself a minimum and maximum percentage of Calculated
Installed Capacity of the Foundry.
G. TSMC is willing to sell, and each Buyer is willing to purchase, a
percentage of the Foundry's Calculated Installed Capacity upon and subject to
the terms and conditions set forth in this Agreement.
H. TSMC Development has entered into that certain Limited Liability
Company Agreement dated as of even date herewith (the "LLC Agreement"), with
ADI, Altera, ISSI, and each of the other persons or entities identified on the
signature page of the LLC Agreement as a third party investor, for the purpose
of forming WaferTech, LLC, a Delaware limited liability company, which will
construct, own and operate the Foundry. In connection with the formation of
WaferTech, LLC, TSMC Development has assigned its rights and duties under the
Manufacturing Agreement to WaferTech, LLC by written instrument dated as of even
date herewith.
I. The Parties intend that this Agreement shall be operative so long
as the Manufacturing Agreement is in effect, and that this Agreement shall
terminate upon termination of the Manufacturing Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
terms, covenants and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF INTERPRETATION
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following words and expressions shall have the meaning set forth
below.
1.1.1 "AAA" means the American Arbitration Association.
1.1.2 "AFFILIATE" of a Party means any corporation, limited
liability company, partnership or other business enterprise:
(a) Which owns or controls, directly or
indirectly, fifty percent (50%) or more of the voting rights
with respect to the election of directors or managers, or
which has practical control directly or indirectly, of the
Party;
(b) Of which fifty percent (50%) or more of
the voting rights with respect to the election of directors or
managers is owned or controlled, directly or indirectly, by,
or which is under the practical control directly or indirectly
of, the Party; or
(c) Of which fifty percent (50%) or more of
the total voting rights with respect to the election of
directors or managers is owned or controlled, directly or
indirectly, by, or which is under the practical control
directly or indirectly of, any
2
PURCHASE AGREEMENT
<PAGE> 9
corporation, limited liability company, partnership or other
business enterprise described by subsections (a) or (b) above.
Any corporation, limited liability company, partnership or other business
enterprise which would at any time be an Affiliate of a Party by reason of the
foregoing, shall be considered an Affiliate for purposes hereof only for so long
as the foregoing conditions are met. For purposes hereof, no Party shall be
considered an Affiliate of any other Party.
1.1.3 (a) "BASIC PURCHASE SHARE" of a Buyer at a given time
means the Buyer's "Adjusted Percentage Interest" expressed as a decimal fraction
(between zero and one inclusive).
(b) For purposes of paragraph (a), if no Percentage Interest
is held by any Person as a result of a grant under the Company's Executive
Incentive Plan, then the "Adjusted Percentage Interest" of a Buyer at a given
time means:
(i) the Buyer's Percentage Interest in effect pursuant
to the LLC Agreement at such time;
increased by
(ii) any prior reduction in the Buyer's Percentage
Interest attributable to operation of (A) the penultimate sentence of
Section 3.3.1.1 to the extent that (I) the Buyer has failed to
contribute that part of the Missing Capital that is not contributed by
any other Person and such failure reduces the capital contribution the
Buyer would otherwise have made and the total capital contributions
that the parties to the LLC Agreement would otherwise have made or (II)
any part of the Missing Capital is contributed by a member of the LLC
that is not an existing Party and does not become a Party at the time
of the contribution, (B) clause (i) of Section 3.3.1.4 of the LLC
Agreement, (C) Section 3.3.2.1 of the LLC Agreement, where the Buyer
failed to make an Additional Capital Contribution and such failure was
not a Dilution Event, (D) the last sentence of Section 3.3.2.2 of the
LLC Agreement, (E) Section 3.5.4 of the LLC Agreement, where the Buyer
failed to guarantee the Company's debt and such failure was not a
Dilution Event, or (F) clause (i) of Section 10.5 of the LLC Agreement;
and reduced by
(iii) any prior increase in the Buyer's Percentage
Interest attributable to operation of (A) the penultimate sentence of
Section 3.3.1.1 to the extent that (I) another party to the LLC
Agreement has failed to contribute that part of the Missing Capital
that is not contributed by any other Person and such failure reduces
the total capital contributions that the parties to the LLC Agreement
would otherwise have made or (II) any part of the Missing Capital is
contributed by a member of the LLC that is not an existing Party and
does not become a Party at the time of the contribution, (B) clause (i)
of Section 3.3.1.4 of the LLC Agreement, (C) Section 3.3.2.1 of the LLC
Agreement, where another party to the LLC Agreement failed to make an
Additional Capital Contribution and such failure was not a Dilution
Event, (D) the last sentence of Section 3.3.2.2 of the LLC Agreement,
(E) Section 3.5.4 of the LLC Agreement, where another party to the LLC
Agreement failed to guarantee the Company's debt and such failure was
not a Dilution Event, or (F) clause (i) of Section 10.5 of the LLC
Agreement.
3
PURCHASE AGREEMENT
<PAGE> 10
(c) For purposes of paragraph (a), if any Percentage Interest
is held by a Person as a result of a grant under the Company's Executive
Incentive Plan, then the "Adjusted Percentage Interest" of a Buyer at a given
time means the quotient of (i) the quantity described as the "Adjusted
Percentage Interest" in paragraph (b) divided by (ii) (A) one minus (B) the
total Percentage Interests held by all Persons as a result of grants under the
Company's Executive Incentive Plan.
(d) On the Effective Date, the Basic Purchase Share for
Altera is 0.18; for ADI, 0.18; and for ISSI, 0.04.
1.1.4 "BUSINESS DAY" means a day, other than Saturday or
Sunday, on which banking institutions are open for business in Seattle,
Washington and San Jose, California.
1.1.5 "CALCULATED INSTALLED CAPACITY" means the physical
production capacity of the Foundry from time to time based on the installed
capital equipment which is actually in service, as determined in the reasonable,
good faith judgment of the Company's industrial engineers. The Foundry's
production capacity at any time shall take into account production of Risk
Wafers, Test Wafers, and Proven Products. The determination of Calculated
Installed Capacity may be adjusted from time to time based on the skills,
training and other organizational abilities of the Company. Since the number of
Wafers that can be produced at the Foundry depends on the Wafer Specifications,
the Calculated Installed Capacity shall be calibrated in "Wafer Equivalents."
1.1.6 "COMPANY" means WaferTech, LLC.
1.1.7 "CLAIM" means a claim, demand, cause of action, loss,
damage, liability, fine, penalty, cost or expense (including reasonable
attorneys' fees and litigation costs).
1.1.8 "COMMENCEMENT OF PRODUCTION" means the date upon which
the Foundry is deemed to have commenced manufacturing operations, which date
shall be the date, as certified in writing by TSMC to the Buyers, that TSMC
determines, in the exercise of its reasonable judgment, that one or more
Products have attained the status of a Proven Product.
1.1.9 "COMMENCEMENT OF PURCHASE RIGHTS" means the later of (a)
the Commencement of Production or (b) the date on which the Company achieves the
capability of producing Products at an aggregate yield rate of *** Wafer
Equivalents per month for a period of thirty (30) consecutive days, as
determined by TSMC in the exercise of its reasonable judgment, or if there is an
objection from one or more Buyers, as such date is fixed by the Company's board
of directors.
1.1.10 "DESIGN RULES" means the design rules and parametric
information for a particular Process.
1.1.11 "DEVICES" means good dies of a Buyer's integrated
circuits that are topologically identical (or similar) to those manufactured by
or for a Buyer.
1.1.12 "EFFECTIVE DATE" means June 25, 1996.
1.1.13 "EVENT OF DEFAULT" has the meaning given in Section
14.1.
4
PURCHASE AGREEMENT
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 11
1.1.14 "FORCE MAJEURE" means any one or more of the following
to the extent outside of the reasonable control of a Party: acts of war declared
or undeclared, nationalization, expropriation, civil unrest or other public
disturbance, fire, storm, flood, typhoon, tidal wave, hurricane, cyclone or
other severe weather conditions, earthquake, or other Acts of God, legal
restraints, governmental or like interference, judicial action, accidental
damage to equipment, inability of the Foundry to deliver Proven Products to TSMC
under the Manufacturing Agreement due to a Force Majeure event defined in the
Manufacturing Agreement, as well as any other cause outside the reasonable
control of a Party. "Force Majeure" also includes the failure to obtain such
license(s) and other governmental approvals as are required by United States law
or other applicable law for any equipment, technical information, Proprietary
Information, Intellectual Property Rights, Processes, or Products to be provided
pursuant to the terms of this Agreement.
1.1.15 "INTELLECTUAL PROPERTY RIGHTS" means (a) all patent
rights and all right, title and interest in and to all letters patent and
applications for letters patent, and all other government-issued or -granted
indicia of invention ownership, including any reissue, division, term
extensions, continuation or continuation-in-part applications; (b) all
copyrights and all other literary property and author rights, and all right,
title and interest in and to all copyrights, copyright registrations,
certificates of copyrights and copyrighted interests; (c) all trademarks, trade
names and service marks, and all rights, title and interest in and to all
applications, certifications and registrations therefor; (d) all mask work
rights, mask work applications, and mask work registrations; (e) all rights,
title and interest in and to all trade secrets and trade secret rights; and (f)
all licenses or license rights with respect to the foregoing.
1.1.16 "MAXIMUM PURCHASE SHARE" of a Buyer at a given time
means, the product of (i) 1.5 times (ii) the Buyer's Basic Purchase Share at
such time. On the Effective Date, ADI's Maximum Purchase Share is 0.27, Altera's
Maximum Purchase Share is 0.27, and ISSI's Maximum Purchase Share is 0.06.
1.1.17 "MEDIATION" has the meaning given in section 17.2.
1.1.18 "MINIMUM PURCHASE SHARE" of a Buyer at a given time
means the product of (i) 0.85 times (ii) the Buyer's Basic Purchase Share at
such time. On the Effective Date, ADI's Minimum Purchase Share is 0.153,
Altera's Minimum Purchase Share is 0.153, and ISSI's Minimum Purchase Share is
0.034.
1.1.19 "MONTH" means (a) a calendar month that lies entirely
within the Purchase Period, or (b) in the case of a calendar month that lies
partially within the Purchase Period, the part of that month that so lies.
1.1.20 "OBLIGATION PERIOD" means, with respect to each Buyer,
the period (a) commencing on either (i) the Commencement of Purchase Rights, or,
(ii) if later, the date on which the Foundry first achieves Process
Qualification for a Process and Production Qualification for a Product of use to
the Buyer, provided the Buyer designates a Process for Process Qualification and
a Product for Production Qualification on or before Commencement of Production,
such Product to be substantially the same as one already being purchased by the
Buyer from another foundry of TSMC or of an Affiliate of TSMC at the time of
designation, and (b) ending on the termination or expiration hereof.
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PURCHASE AGREEMENT
<PAGE> 12
1.1.21 "PERCENTAGE INTEREST" has the meaning given in
Subsection 1.1.51 of the LLC Agreement.
1.1.22 "PERSON" means a natural person, partnership (whether
general or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative capacity, in each case whether domestic or foreign.
1.1.23 "PRICING SCHEDULE" means the prices at which TSMC shall
sell Proven Products, Test Wafers, and Risk Wafers to Buyers in accordance
herewith. The initial Pricing Schedule will be established in accordance with
Subsection 6.2.3(a) and shall be updated as provided in Subsections 6.2.3(b) and
6.2.3(c). Each such Pricing Schedule will be deemed to be attached hereto as
Exhibit "A".
1.1.24 "PROCESS" means the process used to manufacture
Products, or have Products manufactured, which may either be a Buyer's process,
TSMC's process, or the Company's process, including those processes that are
disclosed to the Company under (a) the Technology License and Assistance
Agreement, dated February 20, 1996, originally entered into between TSMC
Development and TSMC Technology, Inc. and assigned by TSMC Development to the
Company pursuant to the Assignment and Assumption dated as of the date hereof
and (b) the Advanced Process License Agreement, dated April 10, 1996, originally
entered into between TSMC Development and TSMC International Investment Ltd. and
assigned by TSMC Development to the Company pursuant to the Assignment and
Assumption.
1.1.25 "PROCESS QUALIFICATION" means the process flow, Design
Rules and SPICE models established by TSMC or the Company (as the case may be)
which, in the reasonable judgment of TSMC or the Company define a Process that
will achieve a level of quality, consistency and reliability necessary to mass
produce Products at Wafer yields acceptable to TSMC and the Company.
1.1.26 "PRODUCT QUALIFICATION PLAN" is that certain plan for
producing a Product with a Buyer's mask sets using a Qualified Process, which
will be agreed to by TSMC and the Buyer who decides to order the Product in
question, acting in conjunction with the Company, reduced to writing and signed
by TSMC, the ordering Buyer and the Company, and shall be deemed to be attached
hereto as Exhibit "B".
1.1.27 "PRODUCTION QUALIFICATION" has the meaning given in
Subsection 4.2.4.
1.1.28 "PRODUCTION RAMP-UP PLAN" means that certain ramp-up
schedule prepared by TSMC in conjunction with the Company, which delineates the
projected production of the Foundry expressed in Wafer Equivalents by Month and
calendar year within the schedule. The initial Production Ramp-up Plan is
attached hereto as Exhibit "E". In March and September of each calendar year
during the Purchase Period (or more frequently at the option of TSMC), TSMC
shall issue to Buyers a projection, consistent with the Business Plan of the
Calculated Installed Capacity of the Foundry for each Month of the next six-
(6-) Month period from July to December (in the case of a projection issued in
March) or from January to June (in the case of a projection issued in
September). With the exception of the Calculated Installed Capacity calculation,
the ramp-up figures contained in the Production Ramp-Up Plan, expressed in Wafer
Equivalents per Month, shall not vary from the ramp-up plan set forth in the
Business Plan (as such term is defined in Subsection 1.1.11 of the LLC
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PURCHASE AGREEMENT
<PAGE> 13
Agreement), as the Business Plan may be amended from time to time in accordance
with the LLC Agreement.
1.1.29 "PRODUCTS" means Devices, Wafers and Units, as the case
may be.
1.1.30 "PROPRIETARY INFORMATION" means any information that is
controlled by a Party and is identified as proprietary and confidential and that
is disclosed by one Party to another under this Agreement. Written Proprietary
Information shall be clearly marked or labeled "PROPRIETARY" or "CONFIDENTIAL."
All oral disclosures of Proprietary Information shall be identified as such
prior to disclosure and confirmed, in writing, by the disclosing Party within
thirty (30) days of the oral disclosure.
1.1.31 "PROVEN PRODUCT" means a Product manufactured using a
Qualified Process that has verified functionality and yield and otherwise meets,
and continues to meet, the Product Qualification Plan as demonstrated in one or
more Qual Lot Runs.
1.1.32 "PURCHASE ORDER" means an order or other release
document issued by a Buyer to TSMC in accordance herewith for the purpose of
purchasing Proven Products, Risk Wafers or Test Wafers.
1.1.33 "PURCHASE PERIOD" means that period of time beginning
with the Commencement of Purchase Rights and ending with the termination or
expiration of this Agreement.
1.1.34 "QUAL LOT RUN" means manufacture of one or more Wafer
lots using a Qualified Process to verify a Buyer's mask sets.
1.1.35 "QUALIFIED PROCESS" means a Process that has achieved
Process Qualification in the reasonable judgment of TSMC.
1.1.36 "QUALITY AND RELIABILITY SPECIFICATIONS" means the
quality and reliability specifications, as well as other standards or
requirements, that the Parties deem necessary, as agreed to by TSMC and those
Buyers who intend to order a Proven Product. Once the Quality and Reliability
Specifications have been agreed to with respect to each Proven Product, they
shall be reduced to writing and signed by TSMC and such Buyers, and shall
constitute the acceptance standards to be used by a Buyer for Proven Products,
and shall be deemed to be attached hereto as Exhibit "C".
1.1.37 "QUARTER" means (a) a calendar quarter that lies
entirely within the Purchase Period, or (b) in the case of a calendar quarter
that lies partially within the Purchase Period, the part of that quarter that so
lies.
1.1.38 "RISK WAFER" means a Wafer containing a non-Proven
Product and which has been run on either a Qualified Process or on a Process
that is not-yet qualified. Except as otherwise expressly provided herein with
respect to manufacturing defects (including, by way of illustration but without
limitation, Section 5.16), the Buyer takes full technical and financial
responsibility for, and assumes all risks related to design and other defects in
a Risk Wafer.
1.1.39 "TERM" means the term of this Agreement in accordance
with the provisions of Article 2 below.
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PURCHASE AGREEMENT
<PAGE> 14
1.1.40 "TEST WAFER" means a Wafer that has been produced in a
Qual Lot Run.
1.1.41 "UNIT" means a Device which has been packaged and
marked in accordance with the requirements provided by a Buyer and accepted by
TSMC and the Company.
1.1.42 "WAFER ACCEPTANCE CRITERIA" have the meaning given in
Section 5.13.
1.1.43 "WAFER" means an eight inch (8") diameter silicon wafer
containing integrated circuits.
1.1.44 "WAFER EQUIVALENT" has the meaning set forth in the
equivalency factor table attached hereto as Exhibit "D".
1.2 RULES OF INTERPRETATION. For the purpose of this Agreement:
1.2.1 Unless the context otherwise requires, (a) "or" is not
exclusive (i.e., it means either or both); (b) words in the singular include the
plural and vice versa; (c) words in the masculine gender include the feminine
and neuter gender and vice versa; (d) words such as "herein," "hereinafter,"
"hereto," "hereby," and "hereunder," when used in this Agreement, refer to this
Agreement as a whole, unless the context otherwise requires; and (e) forms of
the verb "include" are not limiting.
1.2.2 References to Articles and Sections are to Articles and
Sections of this Agreement unless stated otherwise. Article and Section headings
used in this Agreement are for convenience of reference only and shall not be
used in construing or interpreting this Agreement.
1.2.3 References herein to any agreement, schedule or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to the same as it may from
time to time be amended, modified or extended.
1.2.4 Technical words and phrases not otherwise defined in
this Agreement shall have the meaning generally assigned to them in the
semiconductor foundry industry.
ARTICLE 2
TERM
2.1 TERM. Unless sooner terminated pursuant to Section 2.3 or other
early termination provisions hereof or unless extended pursuant to Section 2.2,
this Agreement shall be effective upon the Effective Date and shall continue in
effect through the close of business on the calendar day immediately preceding
the third anniversary of the Commencement of Production.
2.2 AUTOMATIC EXTENSION.
2.2.1 If Calculated Installed Capacity does not equal or
exceed thirty thousand (30,000) Wafer Equivalents per month by December 31,
2000, as determined by the Company in the exercise of its reasonable judgment,
then this Agreement shall be extended automatically for an additional one year
period, terminating upon the close of business on the calendar day immediately
preceding the fourth anniversary of the Commencement of Production.
8
PURCHASE AGREEMENT
<PAGE> 15
2.2.2 If TSMC desires to exercise its optional extension
rights under the Manufacturing Agreement, it shall notify the Buyers in writing
of this fact at least sixty (60) days prior to the date that TSMC intends to do
so. Each Buyer shall have thirty (30) days from the date it is deemed to have
received such notice under Section 18.3 to notify TSMC in writing whether each
Buyer desires to continue to purchase Proven Products, Risk Wafers and Test
Wafers under this Agreement during the option extension period or whether each
Buyer declines to do so. If any one of the Buyers notifies TSMC that it declines
to continue purchasing Proven Products, Risk Wafers and Test Wafers under this
Agreement, then TSMC will not exercise the applicable extension option under the
Manufacturing Agreement. Failure of a Buyer to respond to TSMC in writing within
said thirty (30) day period shall constitute such Buyer's consent to continue
purchasing Proven Products, Risk Wafers and Test Wafers under this Agreement for
the extension period in question. If all Buyers either notify TSMC that they
desire to continue purchasing Proven Products, Risk Wafers and Test Wafers as
aforesaid, or are deemed to have consented to do so, then TSMC shall exercise
its optional extension rights under the Manufacturing Agreement, and this
Agreement shall be extended for a period equal to the extended term of the
Manufacturing Agreement. TSMC shall give Buyers written notice of TSMC's
exercise of its optional extension rights under the Manufacturing Agreement
within ten (10) days following the date that it has exercised such extension
rights, which notice shall specify the termination date of this Agreement, as so
extended.
2.2.3 Upon automatic extension of this Agreement under either
Subsection 2.2.1 or 2.2.2, all terms and conditions of this Agreement shall
continue in full force and effect.
2.3 TERMINATION OF MANUFACTURING AGREEMENT. This Agreement shall
terminate automatically upon termination of the Manufacturing Agreement by lapse
of time or otherwise.
ARTICLE 3
WAFER SUPPLY; FOUNDRY OUTPUT RIGHTS AND OBLIGATIONS
3.1 FACILITIES.
3.1.1 TSMC shall promptly notify Buyers in writing of the date
upon which the Foundry has achieved Commencement of Production.
3.1.2 TSMC shall notify Buyers in writing at least sixty (60)
days in advance of the date on which TSMC expects the Foundry to achieve
Commencement of Purchase Rights and shall keep Buyers apprised of any expected
delay in such achievement.
3.2 MANUFACTURING CAPABILITY. During the Purchase Period, the
Calculated Installed Capacity of the Foundry is anticipated to increase as shown
in the initial Production Ramp-Up Plan attached hereto as Exhibit "E". TSMC
shall exert commercially reasonable efforts to cause the Company to ramp
production in accordance with the schedule set forth on Exhibit "E" (as Exhibit
"E" is updated from time to time); provided, however, there is no guarantee that
actual Foundry production will achieve the projected production levels or the
Calculated Installed Capacity set forth in the initial or any subsequent
Production Ramp-Up Plans, either at the time indicated therein or at any time.
3.3 PRODUCTION AVAILABILITY.
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PURCHASE AGREEMENT
<PAGE> 16
3.3.1 During the Obligation Period applicable to each Buyer,
TSMC shall have an obligation to make available to each Buyer a quantity of
Products ranging between its Minimum Purchase Share and its Maximum Purchase
Share of Calculated Installed Capacity.
3.3.2 During the Obligation Period applicable to each Buyer,
each Buyer shall have the right to purchase Products in amounts up to its
Maximum Purchase Share of Calculated Installed Capacity in accordance with
Subsection 3.4.1, and each Buyer shall be obligated to purchase only its Minimum
Purchase Share of Calculated Installed Capacity in accordance with Subsection
3.4.2.
3.3.3 In the event that TSMC cannot provide each Buyer with
the quantity of Products set forth in a Buyer's Purchase Orders accepted by TSMC
for any given Quarter during the Obligation Period (a "Quarterly Order Deficit")
due to inability or failure of the Company to deliver to TSMC those Products
that TSMC has ordered from the Company or due to Force Majeure, then the
following shall apply: (a) where the Company has been unable or fails to supply
TSMC for reasons other than Force Majeure, TSMC shall not be deemed to be in
default hereunder so long as TSMC can make up the Quarterly Order Deficit in the
following Quarter from Products supplied by the Company; and (b) where TSMC's
failure to fill the Buyer's Purchase Orders is due to Force Majeure, the
affected Buyer shall be excused from its purchase obligations to the extent that
the Buyer placed orders for Products in amounts equal to or greater than the
units of Products that TSMC is able to deliver for the Quarter in question, and
TSMC shall only invoice the Buyer for the actual number of units TSMC is able to
ship for the Quarter in question. With respect to clause (a) of this Subsection
3.3.3, to the extent that TSMC is unable to make up the Buyer's Quarterly Order
Deficit in the succeeding Quarter, TSMC shall be responsible for any damages
sustained by such Buyer, subject to the limitation on damages set forth in
Article 10 below. With respect to clause (b) of this Subsection 3.3.3, TSMC
shall have no liability or obligation whatsoever to an affected Buyer where
TSMC's inability to fill a Buyer's Purchase Order is due to an event of Force
Majeure.
3.3.4 As used in this Article 3, "Quarter" refers to a Quarter
covered (or partially covered) by each Buyer's six (6) Month forecast described
in Section 4.1.2 or 4.1.3.
3.4 ADI'S, ALTERA'S AND ISSI'S MAXIMUM AND MINIMUM PURCHASE RIGHTS AND
OBLIGATIONS.
3.4.1 During the Obligation Period applicable to each Buyer,
such Buyer shall have the right to purchase a maximum percentage of Calculated
Installed Capacity in any given Quarter determined by multiplying such
Calculated Installed Capacity as shown in the applicable Production Ramp-Up Plan
times each Buyer's respective Maximum Purchase Share; and
3.4.2 During the Obligation Period applicable to each Buyer,
such Buyer shall have the obligation to purchase a minimum percentage of
Calculated Installed Capacity in any given Quarter determined by multiplying
such Calculated Installed Capacity as shown in the applicable Production Ramp-Up
Plan times each Buyer's respective Minimum Purchase Share. In each Quarter,
unless the applicable Buyer and TSMC otherwise agree, a Buyer's minimum purchase
obligation is subject to the following limitation: a Buyer's minimum purchase
obligation in any given Month may not deviate more than *** from the
preceding Month's purchase obligation, unless Month-to-Month percentage
deviations shown in the applicable Production Ramp-Up Plan exceed ***, in which
case a Buyer's minimum purchase obligation in any given Month may not deviate
more than the Month-to-Month percentage deviation shown in the applicable
Production Ramp-Up Plan. If a Buyer requests an
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PURCHASE AGREEMENT
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted portions
have been filed separately with the Commission.
<PAGE> 17
increase in the Month-to-Month *** percentage deviation, TSMC agrees to
reasonably negotiate such increase with such Buyer in good faith, provided,
however, that each Buyer recognizes that TSMC's flexibility in negotiating an
increase in the Month-to-Month *** percentage deviation may be limited by
commitments to other Buyers and TSMC's other customers.
3.4.3 A Buyer's purchase of Risk Wafers, Test Wafers, and
Proven Products shall be taken into account for purposes of (a) the Buyer's
satisfying its minimum purchase obligation under Subsection 3.4.2 and (b) TSMC's
satisfying the Buyer's maximum purchase right under Subsection 3.4.1.
3.5 TAKE-OR-PAY OBLIGATION FOR UNUSED MINIMUM PURCHASE SHARE.
3.5.1 During each Quarter of the Obligation Period applicable
to each Buyer, such Buyer agrees that it shall purchase Products from TSMC in
accordance with Subsection 3.4.2. If in any Quarter during its Obligation Period
a Buyer (a "Defaulting Buyer") is unable to purchase the Products in accordance
with Subsection 3.4.2 (the "Unused Minimum Purchase Allocation"), such
Defaulting Buyer shall give TSMC and all other Buyers written notice (a "UMPA
Notice") no later than ninety (90) days before the date that the Products in
question are to begin manufacture in accordance with the Defaulting Buyer's six
(6) Month rolling forecast. TSMC and the other Buyers (collectively, the
"Non-Defaulting Parties") shall each have a right of first refusal to take the
Unused Minimum Purchase Allocation, provided they exercise such right by written
notice to the Defaulting Buyer and the other Non-Defaulting Parties within
thirty (30) days following receipt of the Defaulting Buyer's written notice (the
"RFR Deadline"). The apportionment of the Unused Minimum Purchase Allocation
among the Non-Defaulting Parties electing to take any part of it shall be
determined by the method set forth in Exhibit "K" hereto, unless the
Non-Defaulting Parties agree to another procedure at the time. If the
Non-Defaulting Parties exercise their rights of first refusal, then the
Defaulting Buyer shall be excused from any Bill-Back Charges (as defined below)
applicable to that portion of the Unused Minimum Purchase Allocation that the
Non-Defaulting Parties elect to take; subject, however, to the last sentence of
this Subsection 3.5.1. If the Non-Defaulting Parties elect not to take (or fail
timely to elect) any part of the Unused Minimum Purchase Allocation, then the
Defaulting Buyer shall have no later than sixty (60) days following delivery of
its UMPA Notice to identify in writing third parties ready, willing and able to
purchase from TSMC the unelected part of the Unused Minimum Purchase Allocation.
So long as (a) TSMC approves such third parties or any other third parties
(collectively, "Such Third Parties"), which approval shall not be unreasonably
withheld or delayed (provided, that in no event shall Such Third Parties be
"Prohibited Persons", as that term is defined in the LLC Agreement), (b) Such
Third Parties purchase all of the unelected part of the Unused Minimum Purchase
Allocation within sixty (60) days after the date that the Defaulting Buyer
identifies Such Third Parties to TSMC in writing, and (c) Such Third Parties pay
the invoice price in full to TSMC within thirty-five (35) days after the date of
invoice, then the Defaulting Buyer shall be exonerated from any Bill-Back
Charges applicable to the Unused Minimum Purchase Allocation. A Buyer's
take-or-pay obligation shall be measured on a Quarter- by-Quarter basis;
accordingly, for a Defaulting Buyer to avoid Bill-Back Charges applicable to a
particular Quarter's Unused Minimum Purchase Allocation, either the
Non-Defaulting Parties or Such Third Parties must have committed to purchase the
Defaulting Buyer's Unused Minimum Purchase Allocation during the Quarter in
which the Defaulting Buyer is unable to purchase Products in accordance with
Subsection 3.4.2.
3.5.2 If any part of the Unused Minimum Purchase Allocation
(a) is not taken by the Non-Defaulting Parties in accordance with Subsection
3.5.1 and (b) (i) is not sold to third parties or (ii)
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PURCHASE AGREEMENT
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 18
is not paid for by purchasing third parties in accordance with that Subsection,
then the Defaulting Buyer shall compensate TSMC for such part of the Unused
Minimum Purchase Allocation at the full price for the Products in question, less
any avoided costs (the "Bill-Back Charge"). TSMC shall invoice any Bill-Back
Charges once each Quarter during the Purchase Period, and within 30 days
following the end of the Purchase Period by lapse of time or otherwise. Any
Defaulting Buyer shall pay the Bill-Back Charge within thirty (30) days after
the date of invoice (the "Payment Date"). Any Bill-Back Charge not received by
TSMC within thirty-five (35) days after the date of invoice shall bear interest
from the Payment Date until paid in full by the Defaulting Buyer to TSMC at the
annual rate equal to 5% above the prime or reference rate for commercial
borrowing announced by Bank of America N.T.& S.A., as such rate changes from
time-to-time; provided, however, that in no event shall such interest rate
exceed the highest rate permissible under applicable law. For the purpose of
computing the Bill- Back Charge, the maximum Calculated Installed Capacity shall
not be deemed to exceed *** Wafer Equivalents per month. The damage
limitation excluding lost profits set forth in Section 10.1 shall in no way be
deemed to limit or qualify the calculation of the Bill-Back Charge or a Buyer's
liability therefor.
3.5.3 The provisions of Sections 3.5.1 and 3.5.2 shall be
TSMC's sole remedy under this Agreement for any failure by the Buyers to
purchase their respective minimum quantities of Calculated Installed Capacity in
any Quarter as set forth in Subsection 3.4.2.
ARTICLE 4
PRODUCTION PLANNING AND QUALIFICATION
4.1 FORECASTS.
4.1.1 On or before April 1, 1998, Buyers shall deliver to TSMC
their initial forecasts of Buyers' anticipated purchases of Products during the
first six (6) Months following the Commencement of Purchase Rights. The Parties
recognize that these initial forecasts are provisional in nature because no
Process has achieved Process Qualification. Such initial forecasts shall be
deemed to be attached hereto as Exhibit "F."
4.1.2 Each Buyer shall, at the time of TSMC's notice of
Commencement of Purchase Rights, provide TSMC with a six (6) Month purchase
forecast according to the Foundry's projected output by Month set forth in the
initial Production Ramp-Up Plan, with Product-mix shown by Process and by
geometry. The first fourteen (14) weeks of such forecast shall be firm with
respect to the quantity of the Proven Products to be purchased or ordered within
said period.
4.1.3 Each Month during the Purchase Period, Buyers shall
provide TSMC in writing with a six (6) Month rolling forecast of the respective
Buyers' requirements for Products, with Product-mix shown by Process and by
geometry. The first fourteen (14) weeks of such forecast shall be firm with
respect to the quantity of Products to be purchased or ordered within said
period. If the Company's standard production lead time for a particular Process
or Product exceeds twelve (12) weeks, the Buyers' forecast with respect to such
Process or Product shall be firm for the Company's standard production lead time
plus two weeks. Unless the applicable Buyer and TSMC otherwise agree, the linear
rate deviation for each Buyer's forecast for a given Month shall be *** of
the preceding Month's forecast, unless Month-to-Month percentage deviations
shown in the applicable Production Ramp-Up Plan exceed ***, in which case a
Buyer's monthly forecast may not deviate more than the Month-to-Month percentage
deviation shown in the applicable Production Ramp-Up Plan.
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PURCHASE AGREEMENT
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 19
The foregoing linear rate deviation applicable to Buyer's monthly forecast
relates to the overall quantity of Products set forth in the forecast and not to
any one Process or to any specific Product. If a Buyer requests an increase in
the Month-to-Month *** percentage deviation, TSMC agrees to reasonably negotiate
such increase with such Buyer in good faith, provided, however, that each Buyer
recognizes that TSMC's flexibility in negotiating an increase in the
Month-to-Month *** percentage deviation may be limited by commitments to other
Buyers and TSMC's other customers.
4.2 PRODUCTION QUALIFICATION.
4.2.1 TSMC shall advise the Buyers concerning each Process to
be loaded at the Foundry for use in the manufacture of Products. TSMC then shall
cause the Company to engage in Process Qualification. Once TSMC has determined,
in its reasonable judgement, that a Process has achieved Process Qualification,
such Process shall be a Qualified Process. TSMC shall promptly notify the Buyers
when a Process becomes a Qualified Process.
4.2.2 For each Product a Buyer desires to order, TSMC shall
cause the Company to furnish Design Rules for the applicable Process, which
shall be deemed attached hereto as Exhibit "G". For each Product a Buyer desires
to order, TSMC and the Buyer who intends to order the Product in question (the
"Relevant Buyer") shall further agree, in conjunction with the Company, to a
Product Qualification Plan. Once TSMC and the Relevant Buyer have agreed, in
conjunction with the Company, to a Product Qualification Plan, it shall be
reduced to writing and signed by TSMC, the Relevant Buyer and the Company and
shall be deemed to be attached hereto as Exhibit "B". TSMC and the Relevant
Buyer also shall agree, in conjunction with the Company, to the Quality and
Reliability Specifications, which shall be reduced to writing and signed by
TSMC, the Relevant Buyer and the Company and shall be deemed to be attached
hereto as Exhibit "C".
4.2.3 Upon a Buyer's request, TSMC will cause the Company to
designate a mask vendor, to whom a Buyer shall provide device database tapes and
to whom TSMC shall cause the Company to provide mask alignment and test
structure databases, or the Buyer will provide mask sets or portions thereof.
Buyer shall bear all costs and expenses of producing the mask sets necessary for
the manufacture of Products under this Agreement.
4.2.4 Using a Buyer's mask sets and the Design Rules, TSMC
shall cause the Company to perform one or more Qual Lot Runs. TSMC will provide
each Buyer with such amount of Test Wafers produced in such Qual Lot Runs as
such Buyer may require for its qualification at the purchase prices specified in
the Pricing Schedule. Within ninety (90) days following receipt of the Test
Wafers, each Buyer shall inform TSMC in writing of whether or not such Test
Wafers meet the applicable Quality and Reliability Specifications, and if
notification is in the affirmative, full qualification for that Product is
completed. If TSMC does not receive notification from the Buyers during the time
period specified in the preceding sentence, full qualification for that Product
shall be deemed accomplished. In the event that the Test Wafers do not meet the
Quality and Reliability Specifications, TSMC and the Relevant Buyers will work
together in good faith to achieve full qualification for that Product. The
successful completion of the procedures outlined in Subsections 4.2.1 through
4.2.4, inclusive, is herein referred to as "Production Qualification".
4.2.5 Prior to the completion of full Production Qualification
for each Product, each Buyer may, by giving at least seven (7) Business Days
notice to TSMC, terminate the production of any Test Wafers specified in
Subsection 4.2.4 or Risk Wafers, and TSMC will cause the Company to do so
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PURCHASE AGREEMENT
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 20
following the completion of the Process steps at which such Test Wafers or Risk
Wafers reside at the time TSMC receives such notice. The terminating Buyer shall
pay TSMC for all the Test Wafers or Risk Wafers so affected, and the prices for
such Test Wafers or Risk Wafers shall be the respective purchase prices
specified in the Pricing Schedule, equitably prorated based on the completed
stage of production.
4.2.6 Once Production Qualification has been achieved for a
Product, such Product is a Proven Product, and TSMC will proceed to cause the
Company to produce that Proven Product pursuant to Purchase Orders issued by
Buyers and accepted by TSMC under Section 6.1 below.
ARTICLE 5
OTHER AGREEMENTS RELATING TO PRODUCTION AND SUPPLY
5.1 QUANTITY REQUIREMENT. Subject to the Buyers' Maximum Purchase
Shares, TSMC agrees to use commercially reasonable efforts to cause the Company
to meet all the quantity requirements of the Buyers for Products.
5.2 ACCELERATE SUPPLY. It is anticipated that from time to time there
may be instances where an accelerated lead and cycle time is required to serve
the needs of a Buyer, and in such instances, TSMC shall, upon mutually agreed
upon terms and conditions, use commercially reasonable efforts to cause the
Company to accelerate the schedule of production for Proven Products or Risk
Wafers and/or increase the manufacturing volume in order to meet that Buyer's
needs.
5.3 MODIFICATIONS TO EXISTING PROCESSES OR SPECIFICATIONS. If a Buyer
desires that TSMC cause the Company to make modifications to a Qualified Process
or to the Quality and Reliability Specifications, such Buyer shall give TSMC
written notice thereof, and within a reasonable amount of time after TSMC's
receipt of Buyer's notice, TSMC shall confer with the Company and thereafter
notify the Buyer in writing of any additional costs associated with making such
modifications (including, without limitation, retooling costs), any adjustments
in price, production, delivery schedule, and any other terms and conditions of
this Agreement that are necessary to make such modifications (collectively, the
"Modification Costs"). Within thirty (30) days of its receipt of TSMC's written
notification of any such Modification Costs, such Buyer shall either agree in
writing to accept the obligation to pay TSMC or the Company (as the case may be)
any such Modification Costs or the Buyer may, in the exercise of its sole and
absolute discretion, withdraw its request that such modifications be made. TSMC
and the Company shall not incur any Modification Costs on behalf of a Buyer
unless and until TSMC has received Buyer's written agreement to pay the
Modification Costs. In addition to the foregoing requirement, any such requested
modifications must be acceptable to TSMC and the Company and further must pass
the Production Qualifications procedures set forth in Section 4.2. If a
requested modification is unacceptable to TSMC or the Company, or if it fails to
pass the qualifications procedures set out in Section 4.2, then TSMC will
instruct the Company to continue to manufacture the Proven Product in question
in accordance with the existing Qualified Process and/or the existing Quality
and Reliability Specifications, in which event the notifying Buyer shall be
obligated to continue to purchase such Proven Product as so manufactured. Once a
Buyer has agreed to pay Modification Costs, such Buyer shall pay to TSMC or to
the Company (as the case may be) all such Modification Costs within thirty (30)
days of TSMC's invoice therefor. If TSMC or the Company (as the case may be)
does not receive full payment of Modification Costs within thirty-five (35) days
after the date of invoice, the invoice price shall bear interest from the date
of invoice until paid in full at the
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annual rate equal to 5% above the prime or reference rate for commercial
borrowing announced by Bank of America N.T.& S.A., as such rate changes from
time-to-time; provided, however, that in no event shall such interest rate
exceed the highest rate permissible under applicable law.
5.4 ADDITIONS OR SUBSTITUTIONS OF PRODUCTS. If a Buyer desires that
TSMC cause the Company to add or substitute a similar Product type using a
Qualified Process (i.e., one that has not been assigned a current product model
number) such Buyer shall give TSMC written notice thereof. Within a reasonable
amount of time after TSMC's receipt of a Buyer's notice, TSMC shall confer with
the Company and thereafter notify the Buyer in writing of any additional cost
associated with adding or substituting a similar Product type (the "Additional
Costs"). Within thirty (30) days of its receipt of TSMC's written notification
of Additional Costs, such Buyer shall either agree in writing to accept the
obligation to pay TSMC or the Company (as the case may be) all such Additional
Costs or the Buyer may, in the exercise of its sole and absolute discretion,
withdraw the request for such addition or substitution. TSMC and the Company
shall not incur any Additional Costs on behalf of the Buyer unless and until
TSMC has received Buyer's written agreement to pay the Additional Costs and TSMC
and the Buyer have agreed upon the purchase price for such similar Product type.
Thereafter, TSMC shall use commercially reasonable efforts to cause the Company
to produce such similar Product type as requested, subject to such similar
Product type achieving Production Qualification under the procedures set forth
in Section 4.2. Once a Buyer has agreed to pay Additional Costs, such Buyer
shall pay to TSMC or to the Company (as the case may be) all such Additional
Costs within thirty (30) days of TSMC's invoice therefor. If TSMC or the Company
(as the case may be) does not receive full payment of Additional Costs within
thirty-five (35) days after the date of invoice, the invoice price shall bear
interest from the date of invoice until paid in full at the annual rate equal to
5% above the prime or reference rate for commercial borrowing announced by Bank
of America N.T.& S.A., as such rate changes from time-to-time; provided,
however, that in no event shall such interest rate exceed the highest rate
permissible under applicable law.
5.5 VENDOR INFORMATION. Upon Buyer's written request, TSMC shall cause
the Company to provide Buyer with (a) Process control information, including but
not limited to: Process and electrical test yield results, current Process
specifications, calibration schedules and logs for equipment, environmental
monitor information for air, gasses and DI water, documentation or operator
qualification and training, documentation of traceability through the Company's
operation, Process verification information, and the Company's trouble reports
with respect to Process control information; and (b) a status of
work-in-process.
5.6 PROCESS RECORDS. TSMC shall cause the Company to maintain, for a
period of five (5) years from the date that any Qualified Process was performed
to produce Proven Products, accurate records describing in detail such Qualified
Process on a by-die-lot basis. TSMC shall cause the Company to give each Buyer
the right, at any time during the Company's normal business hours and upon
reasonable notice, to inspect and make copies of any of the Company's Qualified
Process records.
5.7 TRADEMARKS. With respect to trademarks, the Parties agree as
follows:
5.7.1 Except as authorized in Subsection 5.7.2, TSMC shall
not, at any time, in any place, or in any manner, utilize the trademarks of the
Buyers, nor any name or logo confusingly similar thereto, in connection with
TSMC's business activities, or in the manufacture, use, sale or other
disposition of Products, or in any other way whatsoever. TSMC shall exert
commercially reasonable efforts to cause the Company to comply with the
prohibitions set forth in this Subsection 5.7.1.
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5.7.2 To the extent and only to the extent required by any
Buyer, such Buyer may give TSMC and the Company written authorization to
symbolize or otherwise mark Proven Products with the authorizing Buyer's
trademarks or other proprietary logos.
5.7.3 The Buyers shall not, at any time, in any place, or any
manner, utilize the trademarks of TSMC, its Affiliates, or the Company, or any
name or logo confusingly similar thereto, in connection with the Buyers'
business activities, or the use, sale or other disposition of Products, or in
any other way whatsoever.
5.8 MASK SET PROTECTION. TSMC shall cause the Company to protect all
mask sets, whether transferred from a Buyer or obtained by TSMC or the Company
from a mask vendor of a Buyer, as trade secrets of each Buyer in accordance with
the confidentiality provisions of (a) Article 15 hereof, and (b) any license or
confidentiality agreement entered into between TSMC and a Buyer or any Affiliate
thereof. Any masks generated by TSMC or the Company from Buyer's database tapes
shall be the property of Buyer. When any mask set is no longer usable by the
Company for the purposes hereof, or upon the termination or expiration hereof,
TSMC shall cause the Company either to immediately return such mask set to the
appropriate Party, or upon such Party's written instructions, to destroy such
mask set and provide such Party with written certification of such destruction.
The Parties understand that mask sets, if not used for a specified period of
time, will be handled in accordance with the Company's idle mask policy then in
effect. TSMC agrees, upon written request of a Buyer, to cause the Company to
disclose its idle mask policy to such Buyer.
5.9 RIGHTS TO INSPECT AND MONITOR PRODUCTION. TSMC shall cause the
Company to grant to each Buyer (a) the right to inspect and monitor production
at the Foundry, (b) the right to maintain one or more resident representatives
at the Foundry for the purpose of insuring compliance with the Quality and
Reliability Specifications applicable to Proven Products and otherwise aiding
the Buyer in exercising its rights under this Section, (c) the right to conduct
quality and yield audits of the Foundry, and (d) the right to perform monitoring
tests and to recommend disposition/corrective action, to the same extent, and
subject to the same terms and conditions, that TSMC enjoys such rights under the
Manufacturing Agreement with the Company. At the request of a Buyer, TSMC shall
provide such Buyer with a copy of those provisions of the Manufacturing
Agreement that confer such rights upon TSMC. Subject to a Buyer's end customer
signing a confidentiality agreement with the Company substantially in the form
of Exhibit "J," TSMC shall cause the Company to grant to each Buyer's end
customers the right to inspect the Foundry, to conduct quality audits of the
Foundry, and to review Design Rules at the Foundry.
5.10 OBTAIN GRANT OF NON-EXCLUSIVE MANUFACTURING RIGHTS. To the extent
that the proposed manufacture of any Products ordered by the Buyers hereunder
requires, in the reasonable judgment of TSMC and/or the Company, the grant of
non-exclusive Intellectual Property Rights (including, by way of illustration
but without limitation, a non-exclusive grant in mask work rights, copyrights,
patents, utility models or design rights and applications for any of the
foregoing) to avoid infringement resulting from manufacture or sale of such
Products, the Buyers agree to obtain and grant to TSMC and/or the Company
non-exclusive rights in such Intellectual Property Rights relating to ordered
Products, whether by way of non-exclusive license, sublicense, have-made rights
or otherwise, for the sole purpose of manufacturing such Products for sale to
the respective Buyers. Any such grant of non-exclusive Intellectual Property
Rights shall not confer the right on TSMC or the Company to grant rights to
others under any of the foregoing (unless expressly provided for in the granting
instrument). Notwithstanding the foregoing, a Buyer may decline to obtain a
license in such Intellectual
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Property Rights if the Buyer executes and delivers to TSMC a written
indemnification agreement substantially in the form of Exhibit "M" attached
hereto, whereby the Buyer agrees to indemnify, defend and hold TSMC and the
Company harmless from any Claims of infringement or misappropriation asserted by
holders of such Intellectual Property Rights. TSMC will neither deliver nor
cause the delivery of Proven Products, Test Wafers or Risk Wafers unless and
until the Buyers have (a) obtained and granted the necessary non-exclusive
Intellectual Property Rights to TSMC and/or the Company; or (b) executed and
delivered to TSMC such indemnity agreement. The provisions of this Section 5.10
shall not apply to any Process covered by the Company's indemnification
obligations assigned to Buyers under Subsection 11.1.1 below.
5.11 UNIQUE PROCESSES, METHODS OR MATERIALS. If a Buyer desires that
TSMC cause the Company to load a Process, method or materials at the Foundry
that is unique to a Buyer (i.e., one that (a) in the case of a Process, deviates
from a Qualified Process that is then in use at the Foundry, and (b) in the case
of a method and materials, deviates from methods and materials then in use or
production at the Foundry), such Buyer shall give TSMC written notice thereof.
If TSMC agrees to cause the Company to load a unique Process, method or
materials at the Foundry, then within a reasonable amount of time after TSMC's
receipt of Buyer's notice, TSMC shall confer with the Company and thereafter
notify the Buyer in writing of any additional costs associated with such unique
Process, method or materials, including, without limitation, purchase part and
work-in-process inventory, supplies, tooling, and any equipment that is specific
to such unique Process, method or materials (collectively, "Unique Costs").
Within thirty (30) days of its receipt of TSMC's written notification of Unique
Costs, such Buyer shall either agree in writing to accept the obligation to pay
TSMC or the Company (as the case may be) all such Unique Costs or the Buyer may,
in the exercise of its sole and absolute discretion, withdraw the request for
such unique Process, method or materials. TSMC and the Company shall not incur
any Unique Costs on behalf of a Buyer unless and until TSMC has received Buyer's
written agreement to pay such Unique Costs. Once a Buyer has agreed to pay
Unique Costs, such Buyer shall pay to TSMC or to the Company (as the case may
be) all such Unique Costs within thirty (30) days of TSMC's invoice therefor. If
TSMC or the Company (as the case may be) does not receive full payment of Unique
Costs within thirty-five (35) days after the date of invoice, the invoice price
shall bear interest from the date of invoice until paid in full at the annual
rate equal to 5% above the prime or reference rate for commercial borrowing
announced by Bank of America N.T.& S.A., as such rate changes from time-to-time;
provided, however, that in no event shall such interest rate exceed the highest
rate permissible under applicable law.
5.12 ADJUSTMENT IN CAPACITY RIGHTS AND OBLIGATIONS. Unless otherwise
agreed in writing by the Parties, any adjustment in the Buyers' Percentage
Interests which results in a change in their Adjusted Percentage Interests (as
defined in Subsection 1.1.3), shall not become effective for purposes of the
Buyers' Basic Purchase Shares until the thirteenth (13th) week after the date
upon which the adjustment in Percentage Interests occurs pursuant to the LLC
Agreement, and unless agreed otherwise by TSMC and each Buyer under a Purchase
Order, no such adjustment in Percentage Interests, when so effective, shall
operate to cancel, amend or otherwise affect any Purchase Orders accepted by
TSMC prior to the date that such adjustment in Percentage Interests is so
effective.
5.13 CERTAIN TERMS APPLICABLE TO TEST WAFERS. The provisions of Section
6.2 through 6.5, inclusive, and Article 7 respecting Proven Products shall be
equally applicable to Test Wafers. There is no product warranty under Article 9
for Test Wafers unless TSMC and the applicable Buyer agree to such warranty in
writing prior to shipment. If TSMC and the applicable Buyer do enter into such a
written product warranty, then Test Wafers covered by such warranty shall be
treated as Proven
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Products under the provisions of Article 9. Additionally, Test Wafers covered by
such written product warranty shall be treated as Proven Products under Article
8. If Test Wafers are not covered by a written product warranty, then TSMC shall
provide (or cause the Company to provide) the applicable Buyers with the
Company's Wafer acceptance test parameters and outgoing visual acceptance
criteria (such parameters and criteria, collectively, the "Wafer Acceptance
Criteria"). If on delivery of Test Wafers to such Buyer, the Test Wafers fail an
incoming test under the Wafer Acceptance Criteria, such Test Wafers shall be
deemed to be defective. Any such defective Test Wafers may be returned within
120 days of Buyer's receipt thereof to TSMC in care of the Foundry, F.O.B. the
Foundry, and if such defective Test Wafers are indeed defective and not caused
by Abuse and Misuse (as defined below), then TSMC shall, at its option, either
repair, replace or credit Buyer for such defective Test Wafers; and furthermore,
TSMC shall return any such Test Wafers repaired or replaced to the applicable
Buyer, transportation prepaid, and shall reimburse the Buyer for the
transportation charges paid by Buyer for returning such defective Test Wafers to
TSMC. Any dispute regarding whether Test Wafers fail an incoming test under the
applicable Wafer Acceptance Criteria or whether Test Wafers have been subjected
to Abuse and Misuse shall be resolved in accordance with Article 17.
5.14 SALES ENGINEERING SUPPORT. TSMC shall provide the Buyers with
sales engineering support in respect to all Purchase Orders placed hereunder in
the same manner and to the same extent as TSMC provides engineering sales
support in respect to Products manufactured at TSMC's existing
semiconductor-wafer fabrication plants. The cost of such sales engineering
support is included in the prices quoted in the Pricing Schedule. TSMC, at its
election, may provide such sales engineering support through any of its
Affiliates.
5.15 SUPPLEMENTAL WAFER SUPPLY ARRANGEMENTS. Under that certain
Technology License and Assistance Agreement (as that term is defined in the LLC
Agreement) and that certain Advanced Process License Agreement (as that term is
defined in the LLC Agreement), Affiliates of TSMC have agreed to provide the
Company with as-yet-to-be-developed process technologies no later than such
process technologies are reduced to practice and released into production at
other semiconductor-wafer fabrication plants owned by TSMC or its Affiliates. In
the event that any of these as-yet-to-be-developed process technologies are in
fact reduced to practice and released into production at any such other
semiconductor-wafer fabrication plants during the Purchase Period before being
loaded at the Foundry, and the Company notifies TSMC that it desires to load
such new process technologies at the Foundry, then any Buyer that intends to
have Wafers manufactured at the Foundry using such new process technologies may
place orders on TSMC until such new process technologies are loaded at the
Foundry for the purpose of having Risk Wafers or Test Wafers manufactured at
those other semiconductor-wafer fabrication plants owned by TSMC or its
Affiliates at which such new process technologies have been loaded. For any such
Buyers, TSMC shall provide the Design Rules for the new process technologies.
The terms and conditions of said sale of such Risk Wafers or Test Wafers
(including, without limitation, price, delivery, and the granting of
non-exclusive Intellectual Property Rights that relate to manufacture or sale of
Products produced using the new process technology), shall be documented by
separate purchase agreements or wafer supply agreements which shall be
negotiated in good faith by and between TSMC and those Buyers who desire to have
early access to new process technologies that are intended to be loaded at the
Foundry. Any such separate purchase or wafer supply agreements shall contain, as
a general proposition, terms and conditions customarily contained in TSMC's
standard purchase or wafer supply agreements.
5.15.2 A Buyer's purchase of Risk Wafers or Test Wafers
pursuant to Subsection 5.15.1 shall be taken into account for purposes of (a)
the Buyer's satisfying its minimum
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purchase obligation under Subsection 3.4.2 and (b) TSMC's satisfying the Buyer's
maximum purchase right under Subsection 3.4.1.
5.16 CERTAIN TERMS APPLICABLE TO RISK WAFERS RUN ON A QUALIFIED
PROCESS. For any Risk Wafers run on a Qualified Process ("RWRQPs"), TSMC shall
provide (or cause the Company to provide) the applicable Buyers with the
Company's Wafer Acceptance Criteria (as that term is defined in Section 5.13).
If on delivery of RWRQPs to such Buyer, the RWRQPs fail an incoming test under
the Wafer Acceptance Criteria, such RWRQPs shall be deemed to be defective. Any
such defective RWRQPs may be returned within one hundred twenty (120) days of
Buyer's receipt thereof to TSMC in care of the Foundry, F.O.B. the Foundry, and
if such defective RWRQPs are indeed defective and not caused by Abuse and Misuse
(as defined below), then TSMC shall, at its option, either repair, replace or
credit Buyer for such defective RWRQPs; and furthermore, TSMC shall return any
such RWRQPs repaired or replaced to the applicable Buyer, transportation
prepaid, and shall reimburse the Buyer for the transportation charges paid by
Buyer for returning such defective RWRQPs to TSMC. Any dispute regarding whether
RWRQPs fail an incoming test under the applicable Wafer Acceptance Criteria or
whether RWRQPs have been subjected to Abuse and Misuse shall be resolved in
accordance with Article 17.
5.17 SALE OF RISK WAFERS. TSMC shall sell Risk Wafers if so requested
by a Buyer, subject to the negotiation of a mutually acceptable risk start
agreement.
ARTICLE 6
PURCHASES
6.1 PURCHASE ORDERS.
6.1.1 Subject to the provisions of Section 3.4 and 4.1, each
Buyer shall place Purchase Orders for such quantities of Products according to
the current Production Ramp-Up Plan. The Purchase Orders shall (a) be open
purchase orders for fixed quantities of Products; (b) constantly cover a
fourteen (14) week period (unless the Company's standard production lead time
for a particular Product exceeds thirteen (13) weeks, in which case Purchase
Orders for such Product shall constantly cover a period that is two weeks longer
than the Company's standard production lead time for the Product in question);
(c) be placed with TSMC no later than ninety (90) days prior to the shipment
date specified in such Purchase Order; (d) constitute firm purchase obligations
on the part of each Buyer, and (e) be final, subject only to acceptance by TSMC,
which acceptance shall not be unreasonably withheld or delayed. TSMC may accept
a Buyer's Purchase Order(s) either by written acknowledgement of the Purchase
Order(s) placed or by shipment of the Products ordered. On or before seven (7)
Business Days prior to the date that the Company commences production of Proven
Products ordered by a Buyer, such Buyer may substitute other Proven Products
that have a currently-assigned product model number for those actually ordered
without incurring any administrative cost therefor.
6.1.2 TSMC shall notify a Buyer of any anticipated problems in
filling a Purchase Order within twenty-five (25) days following its receipt. To
the extent that the terms of any Purchase Order or any TSMC corresponding
quotation, order acknowledgment, or invoice conflict herewith, this Agreement
shall be controlling unless TSMC and the Buyer placing the Purchase Order
expressly agree to the contrary. To the extent that the terms of any Purchase
Order conflict with the terms of TSMC's corresponding quotation, order
acknowledgment, or invoice (the so-called "battle of the forms"),
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PURCHASE AGREEMENT
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TSMC's quotation, order acknowledgement or invoice shall be controlling unless
TSMC and the Buyer placing the Purchase Order expressly agree to the contrary.
6.2 PRICE. TSMC shall sell Proven Products, Test Wafers and Risk Wafers
to Buyer in accordance with the Pricing Schedule in effect at the time of
shipment, subject to the following:
6.2.1 The prices quoted in each Pricing Schedule shall be firm
and valid until the Pricing Schedule is amended in accordance with Subsections
6.2.3(b) or 6.2.3(c).
6.2.2 The Prices quoted in the Pricing Schedule are in U.S.
currency and net of any and all taxes and duties, including but not limited to
customs duties, sales tax, value added tax, use tax, and excise tax. Each Buyer
shall be responsible for all applicable taxes (including one or more of the
above taxes), in addition to the prices quoted in the Pricing Schedule that
relate to a Buyer's order.
6.2.3 The initial pricing, quarterly pricing and annual
pricing shall be set as follows:
(a) During the first calendar quarter of 1998, the
initial Pricing Schedule shall be established as follows: For each
Process planned for initial loading at the Foundry, TSMC shall
calculate an average price for such Process in use at all of TSMC's and
its Affiliates' Taiwanese semiconductor-wafer manufacturing plants in
the previous calendar quarter, and such average price shall be the
"Market Price" for each such Process to be used to manufacture Products
at the Foundry. Using TSMC's standard procedures for translating
pricing of Processes into pricing for Products manufactured by means of
such Processes, TSMC shall calculate a price for each Product. If the
Parties agree upon the initial prices, such prices shall be reduced to
writing and signed by the Parties, and shall be deemed to be attached
hereto as Exhibit "A" as the initial Pricing Schedule. If any one or
more of the Buyers objects to the initial pricing, TSMC and such Buyers
shall attempt to negotiate the initial pricing in good faith. If no
agreement can be reached with respect to initial prices by April 30,
1998, the Parties shall submit pricing to binding arbitration under
Section 17.3 through 17.6, inclusive; subject to the further provisions
of Subsection 6.2.3(d).
(b) Within ten (10) Business Days after the beginning
of each Quarter, TSMC shall provide each Buyer in writing with its
determination of the Market Price (based on the prior calendar quarter)
for each Process used to manufacture Products included in the Buyer's
then-current rolling six (6) Month forecasts ("TSMC's Quarterly Pricing
Report"). If the Market Price (as set forth in TSMC's Quarterly Pricing
Report) for the Process to be used to manufacture a particular Product
deviates, up or down, by more than three percent (3%) from the price of
such Process used to calculate pricing for Products shown on the
Pricing Schedule, the price for the Process and for each Product in
question shall be revised accordingly, and such revised price shall be
reduced to writing and signed by the Parties, and shall be deemed to be
attached hereto as an addendum to Exhibit "A", which shall be the new
Pricing Schedule in respect to that Product. If any one or more of the
Buyers objects to any Market Price set by TSMC in TSMC's Quarterly
Pricing Report, (the "Objecting Buyers"), then the Objecting Buyers may
request an audit of TSMC's and its Affiliates' books and records
containing information necessary to confirm TSMC's calculation of such
Market Price for each Process and Product in question. The audit shall
be conducted by Price Waterhouse & Company or by another public
accounting firm nationally recognized in the United States of America
selected by the Objecting Buyers and reasonably acceptable to TSMC.
TSMC shall cooperate in the
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PURCHASE AGREEMENT
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audit, cause its Affiliates' to do the same, and, if requested by the
auditors, shall request any subcontractor of TSMC or a TSMC Affiliate
to likewise cooperate. The Objecting Buyers shall pay the cost of the
audit unless the audit reveals a discrepancy of more than three percent
(3%) from the Market Price in the average price of any Process and the
related Product in question, which three percent (3%) discrepancy must
result in a higher Market Price quoted by TSMC than calculated by the
auditors based on their audit of TSMC's and its Affiliates' relevant
books and records. The auditor's calculations shall be based on TSMC's
standard procedures for translating pricing of Processes into pricing
for Products manufactured by such Processes. In the event of such three
percent (3%) discrepancy, TSMC shall pay the cost of the audit, the
price for the Process in question as established by the audit shall be
the new price for such Process, and the auditors shall calculate the
pricing for Products to be manufactured using such Process based upon
TSMC's standard procedures for translating pricing of Processes into
pricing for Products manufactured by such Processes. The new prices as
established by the auditors shall be reduced to writing and signed by
the Parties and shall be deemed to be attached hereto as an addendum to
Exhibit "A", which shall be the new Pricing Schedule in respect to the
Products in question. In no event shall there be more than two (2)
audits of TSMC's Quarterly Pricing Report figures in any calendar year.
(c) The Parties shall annually renegotiate the prices
for all Processes used to manufacture Products for each succeeding
calendar year, which annual price negotiation shall commence on or
about August 1 of the then-current year. In advance of the annual price
negotiation, TSMC shall provide each Buyer in writing with its
determination of the Market Price for each Qualified Process used to
manufacture Products included in the Buyer's then-current rolling six
(6) Month forecast. Once the Parties have agreed upon the renegotiated
prices for a succeeding year, such renegotiated prices shall be reduced
to writing and signed by the Parties, and shall be deemed to be
attached hereto as Exhibit "A" as the Pricing Schedule in effect at the
beginning of such year. If no agreement can be reached with respect to
renegotiating prices by September 30 of the then-current year, the
Parties shall submit pricing to binding arbitration under Section 17.3
through 17.6, inclusive; subject to the further provisions of
Subsection 6.2.3(d).
(d) With respect to binding arbitration conducted
pursuant to Subsection 6.2.3(a) and 6.2.3(c) above, in advance of the
hearing each Party shall submit to the arbitrator and exchange with the
other Parties their last best offers with respect to pricing. In
addition to the matters set forth in Section 17.3 through 17.6, the
arbitrator shall base his award on his determination of Market Price
(as defined in Subsection 6.2.3(a) above) for each Process to be used
for manufacture of Products hereunder, and on his determination of
price for each Product manufactured by means of such Process, based on
TSMC's standard procedures for translating pricing of Processes into
pricing for Products manufactured by such Processes. The highest price
submitted by any Party for a specific Product shall be the maximum
price that the arbitrator shall be empowered to award for that Product,
and the lowest price for a specific Product submitted by any Party
shall be the minimum price that the arbitrator shall be empowered to
award for that Product. For each Product, it is understood among the
Parties that if the arbitrator awards an amount between (and including)
the minimum and maximum prices submitted by the Parties for such
Product, then the exact award amount shall be the price set for that
Product in the applicable year. The prices as so set by the arbitrator
thereafter shall be subject to quarterly adjustment as described in
Subsection 6.2.3(b) above.
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(e) All pricing for Products calculated or published
pursuant to this Section 6.2 shall be expressed as a price per Wafer.
6.3 INVOICE. Upon shipment of any Proven Products, Test Wafers or Risk
Wafers, TSMC shall invoice the sale. Applicable taxes, freight, and insurance
paid by TSMC shall be separately stated on the invoice.
6.4 PAYMENT. Unless otherwise agreed upon by TSMC and the ordering
Buyer, payment terms shall be net due thirty (30) days after the date of TSMC's
invoice (the "Invoice Payment Date"). For any invoice that is due and owing
under this Section 6.4 which is not paid within thirty-five (35) days after the
date of invoice, the invoice amount shall bear interest from the Invoice Payment
Date until paid in full at the annual rate equal to 5% above the prime or
reference rate for commercial borrowing announced by Bank of America N.T.& S.A.,
as such rate changes from time to time; provided, however, that in no event
shall such interest rate exceed the highest rate permissible under applicable
law. Any payment made hereunder shall be in U.S. dollars.
6.5 NO LIMITATION ON BUYER'S PRICING. The prices charged by TSMC to
a Buyer hereunder shall not limit in any way the prices that a Buyer may charge
its customers.
ARTICLE 7
DELIVERY
7.1 DELIVERY. TSMC agrees to make all commercially reasonable efforts
so that the Proven Products or Risk Wafers shall be delivered to Buyer's
designated delivery point in accordance with its "route and ship to"
instructions on the date(s) set forth in any Purchase Order(s) accepted by TSMC.
7.2 SHIPMENTS F.O.B. Shipments shall be made F.O.B. Buyer's designated
place of delivery point (the "F.O.B. Point") as designated in Buyer's "route and
ship to" instructions. All title and risk of loss or damage shall be borne by
TSMC from the time of the Company's delivery of Proven Products or Risk Wafers
to a common carrier at the Foundry until delivery to the F.O.B. Point.
7.3 PACKAGING AND SHIP DATE. TSMC shall package, or cause the packaging
of, the Proven Products or Risk Wafers for secure shipment according to good
manufacturing practices in consideration of the method of shipment chosen. The
date of the bill of lading or other receipt issued by the carrier shall be proof
of the date and fact of shipment of the Proven Products or Risk Wafers.
7.4 PARTIAL SHIPMENTS. Partial shipments are allowed, so long as full
shipment of the appropriate quantities are made by +/-10 days of delivery dates
specified in Purchase Orders accepted by TSMC. Such partial shipments may be
invoiced individually or in combination with all the other partial shipments
made for the same Purchase Orders.
7.5 FAILURE TO MEET DELIVERY DATES. Delivery made within +/-10 days of
the delivery dates specified in Purchase Orders accepted by TSMC are deemed
timely delivery. Buyer shall not be entitled to damages or specific performance
for any material failure by TSMC to timely meet such delivery schedules (a) when
such failure is the result of any act or omission of Buyer, its employees or
agents, or (b) except to the extent otherwise provided in Subsection 3.3.3, when
such failure is the result of the Company's failure to timely deliver Proven
Products or Risk Wafers to TSMC where
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TSMC has timely placed purchase orders with the Company for Proven Products or
Risk Wafers ordered by Buyers hereunder and the Company's failure to deliver is
not attributable to the acts or omissions of TSMC, its employees or agents. TSMC
shall not be liable for any penalty or any indirect, special, incidental or
consequential damages imposed upon or incurred by a Buyer as a result of failure
of TSMC to timely deliver Proven Products or Risk Wafers.
7.6 FORCE MAJEURE. Whenever any actual or potential event of Force
Majeure that reasonably can be anticipated (e.g., a labor dispute) delays or
threatens to delay the timely performance of any delivery under a Purchase
Order, TSMC shall promptly give notice thereof to the impacted Buyer. Whenever
any actual or potential event of Force Majeure reasonably can be anticipated to
delay or threaten to delay a Buyer's ability to accept delivery under a Purchase
Order, such Buyer shall promptly give notice thereof to TSMC.
ARTICLE 8
INCOMING TEST; ACCEPTANCE AND RETURNS
8.1 INCOMING TESTING. TSMC, the Buyers ordering Proven Products in
question, and the Company shall agree upon inspection and testing methods, which
shall be signed by TSMC and such Buyers, and attached hereto as Exhibit "H".
Each Buyer may perform incoming inspection and testing on each shipment of
Proven Products received hereunder in accordance with the agreed-upon inspection
and testing methods. If such Proven Products fail to conform to the applicable
Quality and Reliability Specifications, or otherwise fail the inspection and
testing standards set forth on Exhibit "H", the Buyer shall have the right to
return such Proven Products to TSMC for rework or replacement at no cost to
Buyer or for credit in accordance with the terms and conditions of Section 9.1
below. Except as otherwise provided in Section 5.16, Risk Wafers may not be
returned.
8.2 ACCEPTANCE. Buyers shall accept all conforming tenders of Proven
Products delivered under this Agreement, and shall notify TSMC in writing,
within (a) thirty (30) days following the delivery of any Proven Products whose
individual dies have been functionally probed or (b) sixty (60) days following
the delivery of any other Proven Products, as to either acceptance or rejection
thereof. If no notification indicating rejection is received by TSMC within the
above time period, then such Proven Products shall be deemed accepted. Except as
otherwise provided in Section 5.16, Risk Wafers must be accepted.
8.3 RETURNS. Defective Proven Products (either detected by incoming
inspection and testing or during the warranty period) shall be returned to TSMC
in accordance with the terms and conditions of Section 9.1 below.
ARTICLE 9
PRODUCT WARRANTY
9.1 TSMC'S WARRANTY. TSMC warrants that the Proven Products delivered
hereunder shall meet the Quality and Reliability Specifications and shall be
free from defects in materials and workmanship under normal use for a period of
one (1) year from the date of shipment. If, during the one year period, (a) TSMC
is notified promptly in writing upon discovery of any defect in the Proven
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Products, including a detailed description of the alleged defect, (b) such
Proven Products are returned to TSMC in care of the Foundry, F.O.B. the Foundry,
and (c) such Proven Products are indeed defective and not caused by accident,
abuse, misuse, neglect, improper installation or packaging, repair or alteration
by someone other than TSMC, or improper testing or use contrary to any
instructions given by TSMC (collectively, "Abuse or Misuse"), then TSMC shall,
at its option, either repair, replace, or credit a Buyer for such defective
Proven Products. TSMC shall return any Proven Products repaired or replaced
under this warranty to a Buyer transportation prepaid, and shall reimburse a
Buyer for the transportation charges paid by the Buyer for returning such
defective Proven Products to TSMC in care of the Foundry. The performance of
this warranty shall not act to extend the one-year warranty period for any
Proven Products repaired or replaced beyond that period applicable to such
Proven Products as originally delivered. There is no warranty for Risk Wafers.
Unless otherwise expressly agreed to the contrary by Seller and a Buyer in
writing prior to shipment, there is no warranty for Test Wafers.
9.2 LIMITED WARRANTY. THE WARRANTIES HEREIN (A) ARE EXCLUSIVE AND
STATED IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, STATUTORY, OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED; AND (B)
NEITHER ASSUME NOR AUTHORIZE ANY OTHER PARTY TO ASSUME FOR TSMC ANY OTHER
LIABILITIES IN CONNECTION WITH THE MANUFACTURE OR SALE OF PROVEN PRODUCTS. THE
WARRANTIES SHALL NOT APPLY TO ANY PROVEN PRODUCTS WHICH HAVE BEEN SUBJECTED TO
ABUSE OR MISUSE (AS DEFINED IN SECTION 9.1 ABOVE).
9.3 TSMC'S INSPECTION RIGHTS. Notwithstanding the provisions of Section
9.1 above, prior to any return of allegedly defective Proven Products by a Buyer
pursuant to Section 9.1, such Buyer shall first afford TSMC (and the Company if
the Company so desires) the opportunity, upon TSMC's request, to inspect the
allegedly defective Proven Products at such Buyer's facilities. If TSMC thereby
determines that the allegedly defective Proven Products are defective or
non-conforming with the applicable Quality and Reliability Specifications, or
that such alleged defects are caused by defects in material or workmanship of
the Company or TSMC, as the case may be, then the Buyer shall be entitled to
repair, replacement or credit under Section 9.1. If TSMC determines that such
allegedly defective Proven Products are not defective or conform with the
applicable Quality and Reliability Specifications, the disagreement with respect
to defectiveness or non-conformity shall be resolved pursuant to Article 17.
Inspection and determination by TSMC (and by the Company, if applicable) under
this Section shall not be unreasonably withheld or delayed.
ARTICLE 10
LIMITATION ON DAMAGES; CONTRACTUAL LIMITATIONS PERIOD
10.1 LIMITATION ON DAMAGES.
10.1.1 WITH THE EXCEPTION OF ANY LOSS, LIABILITY, DAMAGE OR
OBLIGATION ARISING OUT OF OR RELATING TO DISCLOSURE OF PROPRIETARY INFORMATION
IN VIOLATION OF ARTICLE 15, NO PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE (INCLUDING, WITHOUT LIMITATION, LOSS
OF PROFITS OR LOSS OF USE) SUFFERED BY ANY OTHER PARTY ARISING FROM OR RELATING
TO A PARTY'S PERFORMANCE, NON-
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PERFORMANCE, BREACH OF OR DEFAULT UNDER A COVENANT, WARRANTY, REPRESENTATION,
TERM OR CONDITION HEREOF. EXCEPT AS SPECIFICALLY PROVIDED IN THE PRECEDING
SENTENCE, EACH PARTY WAIVES AND RELINQUISHES CLAIMS FOR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES. NOTWITHSTANDING SUCH WAIVER AND
RELINQUISHMENT, WITH RESPECT TO ANY LOSS, LIABILITY, DAMAGE OR OBLIGATION
ARISING OUT OF OR RELATING TO DISCLOSURE OF PROPRIETARY INFORMATION IN VIOLATION
OF ARTICLE 15, A PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGE (INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS OR LOSS OF
USE) SUFFERED BY ANY OTHER PARTY ARISING FROM OR RELATING TO A PARTY'S
NON-PERFORMANCE, BREACH OF OR DEFAULT UNDER SAID ARTICLE 15.
10.1.2 NO PARTY SHALL HAVE THE RIGHT TO RECOVER PUNITIVE
DAMAGES FROM ANY OTHER PARTY, AND EACH PARTY HEREBY WAIVES AND RELINQUISHES ANY
AND ALL PUNITIVE DAMAGE CLAIMS.
10.1.3 THE LIMITATIONS ON LIABILITY AND DAMAGES SET FORTH IN
SUBSECTIONS 10.1.1 AND 10.1.2 APPLY TO ALL CAUSES OF ACTION THAT MAY BE ASSERTED
HEREUNDER, WHETHER SOUNDING IN BREACH OF CONTRACT, BREACH OF WARRANTY, TORT,
PRODUCT LIABILITY, NEGLIGENCE OR OTHERWISE.
10.2 CONTRACTUAL LIMITATIONS PERIOD. Any arbitration, litigation,
judicial reference, mediation, or other legal proceeding involving the Parties
shall be commenced within two (2) years after the accrual of the cause of
action, except (a) for arbitration, litigation, judicial reference, mediation,
or other legal proceedings in respect to claims for indemnification hereunder,
which claims shall be commenced within the statutory limitations period provided
by applicable law; and (b) where there is an affirmative misrepresentation of a
material fact that was relied upon and the relying Party was entitled to rely
thereon, or where a Party fraudulently concealed the existence of a cause of
action, the claims shall be commenced within two (2) years of the date that the
aggrieved Party discovered the material facts giving rise to the cause of
action.
ARTICLE 11
INDEMNITIES
11.1 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.
11.1.1 TSMC assigns to the Buyers (and to each of them) TSMC's
rights, remedies and interests in, to, or under Section 11.1 of the
Manufacturing Agreement, pursuant to which and subject to whose terms TSMC is
indemnified by the Company against Claims based solely on an allegation that a
Process that is normally specified and used by the Company in the manufacture of
a Proven Product or RWRQPs directly infringes a third party's Intellectual
Property Rights. This assignment is made without recourse against TSMC.
11.1.2 Each Buyer acknowledges that the Company shall have no
liability for any Claim (a) where infringement is attributable, in whole or in
part, to (i) the Company's compliance with or implementation of any of the
Buyer's instructions, specifications, designs, mask works, utility models or
requirements, (ii) a Process (insofar as a Process or any part thereof has been
specified by the Buyer
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PURCHASE AGREEMENT
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and supplied by TSMC or such Buyer to the Company and the deviation of the
Buyer's specifications from the Company's normal specifications causes direct or
contributory infringement), or (iii) other information or materials provided by
the Buyer and supplied by TSMC or such Buyer to the Company for the performance
of this Agreement; or (b) relating to Risk Wafers that are not run on a
Qualified Process. Each Buyer shall indemnify, defend, protect and hold TSMC and
the Company harmless from and against any and all such Claims, provided that
TSMC complies with the provisions of Section 11.4 below and that the Company
complies with the provisions of the Manufacturing Agreement that are comparable
to Section 11.4 below.
11.1.3 If the court or a settlement enjoins the use of a
Process by the Company, or if, in TSMC's or the Company's opinion, a Process is
likely to become the subject of a claim of infringement, then the Party
providing the Process shall have the option to modify such Process so that it
becomes non-infringing, substitute a substantially equivalent non-infringing
Process, or obtain the right to continue using such Process. If the curative
actions described in the preceding sentence cannot be accomplished within a
reasonable period of time, the Company or TSMC shall have the right to decline
to continue to manufacture or sell Proven Products or Risk Wafers using such
Process.
11.1.4 The foregoing states the entire and exclusive remedies
of each Buyer for infringement of a third party's Intellectual Property Rights
by the Proven Products, Test Wafers, Risk Wafers or the Processes used to
manufacture any Products furnished hereunder. TSMC shall not be liable to any
Buyer for any third-party Claim for the type of Intellectual Property Rights
infringement described in Subsections 11.1.1 or 11.1.2.
11.2 PERSONAL INJURY INDEMNITY. Each Buyer shall indemnify, defend,
protect and hold TSMC harmless against any and all Claims arising out of injury
or death of any of such Buyer's personnel assigned to work at the Foundry, or
while performing tasks at the Foundry pursuant hereto or any other agreement or
instrument to which a Buyer and TSMC are parties in connection herewith,
notwithstanding that such personnel are in TSMC's or the Company's care, custody
or control while at the Foundry, provided that this indemnity shall not apply in
any instance in which such Claims are based upon the gross negligence or willful
misconduct of TSMC or its employees or agents.
11.3 PRODUCT LIABILITY.
11.3.1 Except as otherwise expressly provided herein:
(a) TSMC and the Company shall have no liability
under this Agreement or otherwise for any product liability Claim with
respect to any of the Proven Products, Risk Wafers or Test Wafers,
whether such product liability Claim is based on alleged defects in the
design, manufacture, or packaging of Proven Products, Risk Wafers or
Test Wafers or on any other adverse conditions.
(b) Buyers (and each of them), on behalf of
themselves and any of their Affiliates that purchase or resell Proven
Products, Risk Wafers or Test Wafers, hereby waive, release and
discharge TSMC and the Company from and against any and all Claims
arising from or relating to product liability, including, without
limitation, Claims based on alleged defects in the design, manufacture
or packing of Proven Products, Risk Wafers or Test Wafers or on any
other adverse conditions. The foregoing waiver, release and discharge
is intended to
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extend to any and all product liability Claims of any kind or
character, whether fixed or contingent, known or unknown.
11.3.2 TSMC's and the Company's sole and exclusive liability
and obligation with respect to any defective Proven Product and any Test Wafers
covered by a written product warranty shall be as set forth in Section 9.1.
TSMC's and the Company's sole and exclusive liability and obligation with
respect to defective Test Wafers not covered by a written product warranty shall
be as set forth in Section 5.13. TSMC's and the Company's sole and exclusive
liability and obligation with respect to defective RWRQPs shall be as set forth
in Section 5.16.
11.3.3 Each Buyer shall indemnify, defend, protect and hold
TSMC and/or the Company, as the case may be, harmless against any and all
product liability Claims brought by third parties, including, without
limitation, any of Buyer's customers or any ultimate end users of any product,
system or subsystem into which a Proven Product, Test Wafer or Risk Wafer (or
any part thereof) has been incorporated. The foregoing shall not apply, however,
to the extent any such Claims result from the negligence or willful misconduct
of TSMC and/or the Company.
11.4 GENERAL INDEMNITY PROVISIONS. Each Party's indemnification
obligations hereunder shall be subject to the following provisions:
11.4.1 Indemnitor's indemnification obligations also shall
extend to any one or more of indemnitee's officers, directors, managers,
shareholders, members, employees, and agents.
11.4.2 Each Party's indemnification obligations hereunder
shall survive the early termination or expiration of the Term for the remainder
of the statutory limitations period governing actions on a written agreement.
11.4.3 Each Party's obligation to indemnify any other Party
hereunder shall be conditioned upon:
(a) Indemnitee's giving indemnitor prompt notice in
writing of any Claims giving rise to the obligation to indemnify and of
which indemnitee is aware;
(b) Indemnitee's permitting indemnitor, through
counsel of indemnitor's choice and reasonably acceptable to indemnitee,
to defend against, contest or settle the same; and
(c) Indemnitee's reasonably cooperating with
indemnitor and reasonably providing indemnitor with information and
assistance to enable indemnitor to defend, contest or settle same.
11.4.4 Unless expressly provided to the contrary, the
indemnification provisions herein shall be interpreted and construed as
indemnifying indemnitee against indemnitee's negligence, whether active or
passive.
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ARTICLE 12
FORCE MAJEURE
12.1 FORCE MAJEURE. Subject to the limitations set forth in Section
12.4, should a Party be prevented from performing its obligations hereunder due
to a Force Majeure event, that Party shall not be liable to the other Parties
for any delay or failure of performance caused by such event; nor shall the
Party subject to such event be deemed to have committed an Event of Default
hereunder. Notwithstanding the foregoing, a Force Majeure event shall not excuse
a Party's obligation to pay money. However, a monetary obligation shall be
suspended until cessation of such Force Majeure event if, and only if, the Force
Majeure event actually and directly renders physically impossible a Party's
payment of money due hereunder.
12.2 NOTIFICATION. The Party prevented or delayed by an event of Force
Majeure in the performance of any obligation hereunder shall promptly notify the
affected Party or Parties of the occurrence of any Force Majeure event by cable,
telex or telecopier.
12.3 RESPONSE TO FORCE MAJEURE. Should the delay caused by a Force
Majeure event continue for more than ninety (90) days, the Parties shall settle
the problem of further performance of this Agreement through good faith
negotiations as soon as possible with the objective of restructuring the
relationship among them to minimize the effects of such event. If the Parties
cannot agree on a mutually acceptable solution within one hundred twenty (120)
days of a Party's request for such negotiations, any Party that is not subject
to the Force Majeure event may terminate this Agreement by notice to the other
Parties. If the Party giving notice of termination is a Buyer, the termination
shall be effective only as to such Buyer, and this Agreement shall continue in
full force and effect among TSMC and the non-terminating Buyers. Notwithstanding
the foregoing, no Buyer shall be permitted to terminate this Agreement due to
the Buyer's inability to pay for its Minimum Purchase Share or to otherwise meet
its financial obligations due to a continuing Force Majeure event.
12.4 LIMITATIONS ON APPLICABILITY OF FORCE MAJEURE. This Article shall
be void and inapplicable to any Party (a) if it fails to use reasonable
diligence to remedy any Force Majeure event that prevents or delays that Party's
performance hereunder by continuously pursuing such actions as that Party
reasonably can take under the circumstances; and (b) in the event of a strike,
lockout or other labor disruption, if the Party is found by the National Labor
Relations Board or other governmental agency having jurisdiction to have caused
such strike, lockout or labor disruption or if such Party refuses to enter into
bargaining with respect to such strike, lockout or labor disruption.
ARTICLE 13
GOVERNMENTAL INTERVENTION
13.1 GOVERNMENTAL INTERVENTION. Should any government or agency thereof
at any time during the Term hereof take any action which is material and adverse
to a Party or make recommendations to the Parties or any of them requiring
directly or indirectly, formally or informally, alteration or modification of
any term or condition hereof, or of the performance of the Parties hereunder,
including refusal to grant any necessary government approval, in a manner which
is material and adverse to one Party, then, if said one Party makes written
request (the "Requesting Party") to the
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<PAGE> 35
other Parties within sixty (60) days from said action or recommendation of the
government or governmental agency, the Parties shall enter into good faith
negotiations with the objective of restructuring the relationship among the
Parties to minimize the adverse effect of said alteration or modification. If
the Parties cannot reach a reasonably acceptable modification hereto within six
(6) months from the date of dispatch of said written request by the Requesting
Party, or within such longer period of time as mutually agreed upon, the
Requesting Party shall have the right to terminate this Agreement forthwith by
giving notice to that effect to the other Parties; provided, however, that if
the Requesting Party giving notice of termination is a Buyer, the termination
shall be effective only as to such Buyer and this Agreement shall continue in
full force and effect among TSMC and the non-terminating Buyers. It is expressly
understood and agreed by the Parties that in the event of termination under this
Article, no Party shall incur any liability to the others for any alleged
default or breach in the performance hereof, arising from the exercise of the
right herein provided to terminate this Agreement. Termination under this
Article 13 shall not be deemed to be a termination for default.
ARTICLE 14
DEFAULT AND TERMINATION
14.1 EVENTS OF DEFAULT. The occurrence or happening, at any time and
from time to time, of any one or more of the following shall be a breach or
default under this Agreement (an "EVENT OF DEFAULT"):
14.1.1 If any Party fails (a) to make any payment required to
be made pursuant to this Agreement when due, and such Party does not cure such
failure following thirty (30) days written notice thereof, or (b) to perform any
material obligation under this Agreement, and such Party does not cure such
failure following sixty (60) days written notice thereof.
14.1.2 If any Party breaches its obligations of non-
disclosure and confidentiality set forth in Subsection 15.1.1.
14.1.3 If any representation, warranty or statement made by
any Party under or pursuant to this Agreement, or under any affidavit,
certificate or other instrument executed in connection with this Agreement,
shall be false or misleading in any material respect as of the Effective Date or
shall become so at any time prior to the expiration of the Term, and such Party
does not cure (to the extent cure is possible) the same following thirty (30)
days written notice thereof.
14.1.4 If any Party files a certificate of dissolution or
otherwise dissolves, terminates or liquidates, or is merged with or is
consolidated into any other corporation, limited liability company, partnership,
or other entity other than an Affiliate of such Party, without the other
Parties' written consent (which consent shall not be unreasonably withheld);
provided that the following shall not be an Event of Default: (a) any
dissolution, liquidation, merger or consolidation that is permitted in
accordance with Section 18.14; and (b) any merger or consolidation not entered
into for the purpose of and not having the effect of changing or influencing the
control of the Party.
14.1.5 If any Party shall (a) be adjudicated as bankrupt or
insolvent; (b) make a general assignment for the benefit of its creditors; (c)
file a petition, answer or consent seeking, or have entered against it (or fail
reasonably to contest the material allegations of any petition for) an order for
relief (or any similar remedy) under any provision of Title 11 of the United
States Code or any other federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, or consent to
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PURCHASE AGREEMENT
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the institution of any proceedings thereunder; (d) convene a general meeting of
its creditors, or any class thereof, for the purpose of effecting a general
moratorium upon or general extension or composition of its debts; (e) fail to
pay its debts as they mature; (f) admit in writing that it is generally not able
to pay its debts as they mature; or (g) apply for or consent to the appointment
of a receiver, trustee, custodian, liquidator or other similar official of all
or a substantial portion of its assets.
14.1.6 If (a) a petition is filed or any case or proceeding
described in Section 14.1.5 above is commenced against any Party, or against the
assets thereof, unless such petition and the case or proceeding initiated
thereby is dismissed within sixty (60) days from the date of the filing; (b) an
answer is filed by any Party admitting the allegations of any such petition; (c)
a court of competent jurisdiction enters an order, judgment or decree
appointing, without the consent of any Party, a custodian, trustee, agent or
receiver of it, or for all or a substantial part of its property, or authorizing
the taking possession by a custodian, trustee, agent or receiver of it, or of
all or a substantial part of its property unless such appointment is vacated or
dismissed or such possession is terminated within sixty (60) days from the date
of such appointment or commencement of such possession, but not later than 5
days before the proposed sale of any assets of such Party by such custodian,
trustee, agent or receiver.
14.1.7 If a Buyer is terminated as a member of the Company
pursuant to Section 3.3.1, 3.3.2.2, or 10.2 of the LLC Agreement.
14.2 REMEDIES FOR DEFAULT.
14.2.1 If the Party committing an Event of Default under
either Subsection 14.1.1, 14.1.3 or 14.1.4 above does not cure such Event of
Default within the applicable cure periods, then any non-breaching Party may,
subject to the procedures set forth in Article 17, seek:
(a) specific performance of the breaching Party's
obligations under this Agreement;
(b) damages suffered by said non-breaching Party as a
result of such Event of Default, limited, however, by the provisions of Article
10.
Except as otherwise expressly provided to the contrary herein, the non-breaching
Party shall not have a right to terminate the Agreement. If TSMC is the
non-breaching Party and the Event of Default involves the non-payment of money
due to TSMC from a Buyer, then TSMC shall be entitled (in addition to any other
rights and remedies it may have hereunder, at law or in equity) to suspend
performance of all sales and services to that Buyer hereunder until all
delinquent amounts are paid in full. If the Event of Default is a breach by TSMC
of its delivery obligations under Section 7.1, as qualified by Section 7.5, for
any reason other than the Company's inability or failure to deliver Calculated
Installed Capacity to TSMC or Force Majeure, then the affected Buyer may, in
lieu of the remedies of specific performance, elect to cancel the Purchase Order
to the extent of any undelivered Proven Products, Test Wafers or Risk Wafers;
provided, however, that such Buyer shall remain obligated to pay for any partial
deliveries under such Purchase Order.
14.2.2 Each of the Parties acknowledges that a breach or
default by it of its covenants regarding non-disclosure and confidentiality
contained in Subsection 15.1.1 will result in irreparable injury to the Party
making disclosure of its Proprietary Information, and consequently the
disclosing Party shall be entitled to temporary, preliminary and permanent
injunctive relief, or to a protective
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PURCHASE AGREEMENT
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order for any threatened or actual violation of the provisions of Subsection
15.1.1. Each Party agrees and consents to the entry of an injunction or
protective order by any court of competent jurisdiction upon a showing by the
disclosing Party of a reasonable belief that its Proprietary Information is
being used or disclosed contrary to the terms of Subsection 15.1.1. The
foregoing provisions are in addition to, and not in limitation of, the remedies
of specific performance, damages, and any other remedies at law, in equity or
otherwise, that the Parties may have upon breach of Subsection 14.1.2; provided,
however, that the non-breaching Party shall not have the right to terminate this
Agreement. The Parties stipulate that the provisions of Article 17 shall not
apply to any temporary restraining order, injunctive relief, protective order or
other provisional remedy sought to prohibit a breach or threatened breach of the
provisions of Subsection 15.1.1.
14.2.3 In the event of an Event of Default under Subsection
14.1.5 or 14.1.6, the non-breaching Party or Parties shall have the right, at
its (their) option, to terminate this Agreement by giving ten (10) days prior
written notice of termination. If TSMC and one or more of the Buyers are
non-breaching Parties, they, or any one or more of them may terminate this
Agreement by giving such written notice to the breaching Buyer or Buyers, in
which event this Agreement shall continue in full force and effect between TSMC
and each of the non- breaching Buyers.
14.2.4 If a Buyer's Percentage Interest is reduced to zero in
accordance with the LLC Agreement, this Agreement shall terminate with respect
to the Buyer, subject to Section 5.12 (including the effective date provided
therein for the corresponding reduction in the Buyer's Basic Purchase Share and
the effect, if any, on Purchase Orders prior to the adjustment date). So long as
any Buyer has a positive Percentage Interest, this Agreement shall continue in
full force and effect between TSMC and any such Buyer.
14.3 EFFECTIVE DATE OF TERMINATION. Termination of this Agreement
pursuant to any notice of termination given under any provision of this
Agreement shall be effective ten (10) days following the date such termination
notice is deemed to be given pursuant to Section 18.3 below.
14.4 RIGHTS AND REMEDIES FOLLOWING TERMINATION. The termination of this
Agreement shall be without prejudice to (a) the right of TSMC to receive upon
its request all payments accrued and unpaid hereunder; (b) the rights and
remedies of any Party with respect to any previous breach of any other
representations, warranties, covenants, terms, conditions or provisions of this
Agreement (provided that the limitation on liability set forth in Article 10
shall apply to such rights and remedies); (c) any rights to indemnification set
forth herein; and (d) any other provisions hereof which expressly or necessarily
call for performance after the termination of this Agreement.
14.5 REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. The Parties
shall have all rights, remedies and recourse granted in this Agreement, in any
other agreements entered into between the Parties, and available at law or in
equity, and except as otherwise provided in this Agreement the same (a) shall be
cumulative and concurrent; (b) may be pursued separately, successively or
concurrently; (c) may be exercised as often as occasions therefor shall arise,
it being agreed that the exercise or failure to exercise any right, remedy or
recourse shall in no event be construed as a waiver or release thereof; and (d)
are intended to be, and shall be, non-exclusive.
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PURCHASE AGREEMENT
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ARTICLE 15
PROPRIETARY INFORMATION
15.1 PROPRIETARY INFORMATION.
15.1.1 Each Party agrees to maintain the other Parties'
Proprietary Information in strict confidence, not to make use thereof other than
for the performance of this Agreement, to release it only to employees who have
reasonable need to know the same, and except as required by law, not to release
or disclose it to any third parties, without the prior written consent of the
disclosing Party. The obligations set forth in this Subsection shall not apply
to any information that: (a) is now or hereafter in the public domain or
otherwise becomes available to the public other than by breach of this Agreement
by the receiving Party, (b) has been rightfully in the receiving Party's
possession prior to receipt from the disclosing Party, (c) is rightfully
received by the receiving Party from a third party without restriction on
disclosure, (d) is independently developed by the receiving Party, (e) is
authorized in writing by the disclosing Party to be released or disclosed, or
(f) subject to the receiving Party's compliance with Section 15.4 below, is
required to be disclosed by the receiving Party pursuant to law, governmental
regulation or judicial order.
15.1.2 Notwithstanding the provisions of Subsection 15.1.1,
TSMC shall be entitled to transmit or disclose a Buyer's Proprietary Information
to the Company if TSMC determines, in the exercise of its reasonable good faith
judgment, that the Company requires access to or disclosure of the Buyer's
Proprietary Information in order to enable TSMC to comply with its obligations
to such Buyer under this Purchase Agreement. In effecting such transmission or
disclosure to the Company, TSMC shall identify Buyer's information as
"Proprietary" and "Confidential" so that it will be protected under the
proprietary information provisions of the Manufacturing Agreement.
15.1.3 All Proprietary Information and any copies thereof
shall remain the property of the disclosing Party, and no license or other
rights therein is granted or implied hereby. The receiving Party shall, upon the
disclosing Party's request, return the original and all copies of tangible
Proprietary Information. Notwithstanding the foregoing, any of the Buyers'
Proprietary Information that is transmitted or disclosed to the Company by TSMC
in accordance with the provisions of Subsection 15.1.2 and is thereafter
incorporated into a Process or manufacturing method used in the Foundry, may be
retained by the Company in the form so incorporated or used, and the Company
shall have the nonexclusive right to use such Proprietary Information as so
incorporated or used, and as such incorporation or use may be modified or
improved.
15.2 OTHER CONFIDENTIALITY AGREEMENTS. This Article is supplemental
to and not in limitation of any confidentiality agreements to which the Parties
are signatories.
15.3 CONFIDENTIALITY AGREEMENTS FOR SPECIFIC PERSONS. Any of Buyers'
officers, directors, employees, agents, representatives or contractors who are
assigned to or visit the Foundry pursuant to Section 5.9 shall execute and
deliver a confidentiality agreement in form of Exhibit "J" attached hereto.
15.4 THIRD PARTY REQUEST FOR INFORMATION. Except as otherwise provided
herein, each Party shall immediately notify the other of any private or
governmental request for Proprietary Information or documents relating to the
Proven Products, Risk Wafers, Test Wafers or this Agreement; provided, however,
that (a) a request for documents relating to Proven Products, Risk Wafers, or
Test Wafers received by any Buyer from its customers or prospective customers in
the ordinary course of business
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PURCHASE AGREEMENT
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where disclosure of such information would not contain Proprietary Information
of TSMC, the Company, or any other Buyer shall be excluded from the provisions
of this Section 15.4 and (b) a Buyer may disclose to its customer, upon the
customer's request in the ordinary course of business, Design Rules or
reliability data relating to Proven Products, Risk Wafers, or Test Wafers, if
(i) the Buyer and its customer enter into a confidentiality agreement
substantially in the form of Exhibit "L" and (ii) the Buyer notifies TSMC of the
disclosure before or promptly after it. Each Party shall have the right to
participate in the other Party's response to any such request. In the event that
a Party receives any subpoena or other legal process requiring the production of
information, documents, data, work papers, reports, or other materials relating
to Proprietary Information, Proven Products, Risk Wafers, Test Wafers or this
Agreement, that Party shall:
15.4.1 Give the affected Party, if possible, the opportunity
to participate in quashing, modifying or otherwise responding to any compulsory
process in an appropriate and timely manner; and
15.4.2 Cooperate fully with the affected Party's efforts to
narrow the scope of any such compulsory process, to obtain a protective order
limiting the use or disclosure of the information sought, or in any other lawful
way to obtain continued protection of such information.
15.5 REPORTING LOSS, THEFT OR MISAPPROPRIATION. If any Party becomes
aware of the loss, theft or misappropriation of Proprietary Information which is
in that Party's possession or control, that Party shall notify the other Party
whose Proprietary Information has been lost, stolen or misappropriated within
five (5) days after the discovery of such loss, theft or misappropriation.
ARTICLE 16
EXPORT COMPLIANCE
16.1 COMPLIANCE WITH EXPORT ADMINISTRATION REGULATIONS. Each Party
agrees that, unless prior authorization is obtained from the United States
Government, it shall not knowingly:
(a) Re-export, directly or indirectly, any technical data (as
defined in Part 779 of the Export Administration Regulations of the Department
of Commerce) received from the other Buyers, TSMC or the Company, their
Affiliates, or their respective customers to; or
(b) Disclose such technical data for use in; or
(c) Export, directly or indirectly, any Proven Product, Risk
Wafer, Test Wafers, product containing a Proven Product, Risk Wafer, Test Wafers
or such technical data to any destination or country to which the re-export or
release of technical data or export of Proven Products, Risk Wafers, Test Wafers
or products containing Proven Products, Risk Wafers, Test Wafers or technical
data is prohibited by U.S. laws and regulations. These assurances are furnished
by each Party in compliance with Part 779 Technical Data of the Export
Administration Regulations of the Department of Commerce of the Government of
the United States of America.
16.2 U.S. EXPORT LICENSES. Each Party further agrees to obtain any
necessary export license or other documentation prior to exportation of any
Proven Product, Test Wafer or Risk Wafer, product containing a Proven Product,
Test Wafer or Risk Wafer, or technical data acquired from any other
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PURCHASE AGREEMENT
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Party, its Affiliates, or their respective customers hereunder. Accordingly,
each Party shall not sell, export, re-export, transfer, divert or otherwise
dispose of any Proven Product, Test Wafer or Risk Wafer or a product containing
a Proven Product, Test Wafer or Risk Wafer, directly or indirectly, to any
person, entity or country to which such disposal is prohibited by the laws or
regulations of the United States. Further, each Party shall notify any person or
entity obtaining any such Proven Product, Test Wafer or Risk Wafer or a product
containing a Proven Product, Test Wafer or Risk Wafer from such Party of the
need to comply with such laws or regulations. Each Party shall secure at its
sole expense such licenses and export and import documents as are necessary for
the Party to fulfill its obligations hereunder.
16.3 REPUBLIC OF CHINA EXPORT REGULATIONS. If TSMC or Buyers are
subject to the national export control regulations of the Republic of China,
each Party shall take all appropriate measures to comply with such applicable
regulations.
ARTICLE 17
DISPUTE RESOLUTION; ARBITRATION
17.1 NEGOTIATION BETWEEN EXECUTIVES. The Parties shall attempt in good
faith to resolve any dispute, controversy or claim ("Dispute") arising out of or
relating to this Agreement promptly by negotiations between executives who have
authority to settle the Dispute. Any Party may give the other Parties written
notice of any Dispute not resolved in the normal course of business. Within
twenty (20) days after delivery of such a notice, executives of the Parties who
have authority to settle the dispute shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the Dispute. If the matter has not been resolved within thirty (30)
days after such notice, unless extended by the agreement of the Parties in
writing (the "Negotiation Period"), the matter shall be subject to mediation as
provided in Section 17.2. If a Party intends to be accompanied at a meeting by
an attorney, the other Parties shall be given at least three (3) Business Days'
notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this provision are confidential and shall be treated as
compromise and settlement negotiations for purpose of the United States Federal
Rules of Evidence and state rules of evidence.
17.2 MEDIATION. Any Dispute not settled pursuant to Section 17.1 shall
be submitted to mediation administered by the American Arbitration Association
under its Commercial Mediation Rules (such mediation, "Mediation"), before
resorting to arbitration as hereinafter provided. The Mediation shall be
completed within forty-five (45) days of its initiation pursuant to the
Commercial Mediation rules, unless the Parties otherwise agree. Executives of
the Parties with authority to resolve the Dispute shall participate in the
Mediation. The Mediation shall take place in San Jose, California. The Parties
shall attempt in good faith to reach agreement on the appointment of a mediator.
If they cannot so agree, the mediator shall be appointed pursuant to the
Commercial Mediation Rules; provided, however, that the mediator appointed shall
have a background in the semiconductor industry. The Parties shall each pay
their own expenses of Mediation, including attorney's fees, and shall share
equally the mediator's fees and expenses.
17.3 CLAIMS SUBJECT TO ARBITRATION. Except as otherwise specifically
provided herein, any Dispute arising out of or relating to this Agreement, or
the breach or termination hereof, and not resolved pursuant to Section 17.1 or
Section 17.2 shall be resolved by binding arbitration in accordance with the
Federal Arbitration Act, 9 U.S.C. SectionSection 1 et seq. (the "FAA"), and the
Commercial Arbitration
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PURCHASE AGREEMENT
<PAGE> 41
Rules, and where the amount in controversy exceeds $1,000,000, the Supplementary
Procedures for Large Complex Disputes, of the AAA (collectively, the "Rules").
In the event of a conflict between the FAA and the Rules, the Rules shall
govern. In the event of a conflict between this Article and the FAA or the
Rules, this Article shall govern. A court of competent jurisdiction, upon
application from any Party, may relieve the Parties of their duty to arbitrate
Disputes in whole or in part, or may stay any arbitration hereunder in whole or
in part, if ongoing litigation between one or more of the Parties and a third
party (or parties) involves issues of fact or law common with those subject to
arbitration hereunder and there exists the possibility of inconsistent judgments
if such relief is not granted. Each Party reserves the right to file with a
court of competent jurisdiction an application for temporary or preliminary
injunctive relief, a protective order or other appropriate provisional remedy on
grounds that (a) the arbitration award to which the applicant may be entitled
may be rendered ineffectual in the absence of such relief; or (b) in the event
of a breach or threatened breach of the provisions of Subsection 15.1.1
prohibiting disclosure of Proprietary Information.
17.4 VENUE. The venue for any arbitration proceeding hereunder shall
be San Jose, California.
17.5 SELECTION OF ARBITRATOR AND DETERMINATION OF CONTROVERSIES.
17.5.1 Any Dispute subject to arbitration shall be submitted
to a single neutral arbitrator, who, unless otherwise agreed by the Parties,
shall be a retired judge or other lawyer who is a member of the arbitration
panel of the Judicial Arbitration and Mediation Service ("JAMS") or the national
panel of arbitrators of the AAA, and who has substantial experience in the area
of the Dispute. The Parties shall confer concerning the selection of AAA or JAMS
with the objective of selecting one or the other within thirty (30) days of the
conclusion of the Mediation; provided, however, that, if all Parties to the
Dispute do not agree on one or the other within such thirty (30) day period, the
Dispute initially will be submitted simultaneously to both AAA and JAMS for the
sole purpose of picking the arbitrator. If the Parties select JAMS, then the
term "Rules" as used herein shall mean the then-prevailing JAMS rules. The AAA
(or JAMS, as the case may be) simultaneously shall submit to each Party an
identical list of five proposed qualified arbitrators drawn from the applicable
panel of commercial arbitrators. If the Parties are unable to agree upon an
arbitrator within thirty (30) days from the date that AAA (or JAMS, as the case
may be) submits such list to each Party, then AAA (or JAMS, as the case may be)
shall simultaneously submit to each Party a second list of five additional
proposed qualified arbitrators drawn from the applicable panel of commercial
arbitrators. If for any reason, the appointment of an arbitrator cannot be made
from either list, AAA (or JAMS, as the case may be) may make the appointment
from among other qualified members of the panel without the submission of
additional lists to the Parties. If the Dispute is initially submitted to both
AAA and JAMS for the purpose of picking the arbitrator, then both AAA and JAMS
simultaneously shall submit to each Party lists of five proposed qualified
arbitrators drawn from the applicable panel (with each Party receiving the
identical list from AAA and the identical list from JAMS), and if the Parties
are unable to agree upon an arbitrator within thirty (30) days from the date
that both AAA and JAMS submit the first such lists to each Party, then AAA and
JAMS simultaneously shall submit to each Party second lists of five additional
proposed qualified arbitrators (with each Party receiving an identical second
list from AAA and an identical second list from JAMS). If the Parties for any
reason are unable to select an arbitrator from the first and second lists
submitted by AAA and by JAMS, then a majority of the Parties shall select to
arbitrate with either AAA or with JAMS, and the arbitration organization so
selected shall make the appointment from among other qualified members of the
arbitration panel of that organization without the submission of additional
lists to the Parties. Where the Parties have initially submitted the Dispute to
both JAMS and AAA, then once an arbitrator has been appointed, the
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PURCHASE AGREEMENT
<PAGE> 42
arbitration proceeding will be terminated with the arbitration organization that
has not been selected and the Parties shall equally share the costs and fees of
the arbitration organization so terminated. If for any reason the Parties to the
Dispute have not selected an arbitrator within ninety (90) days of the
conclusion of the Mediation, then the arbitration shall be conducted with the
AAA. No matter how selected, the arbitrator shall have no prior or existing
affiliation or relationship with any Party or its counsel and shall sign an oath
of impartiality upon appointment.
17.5.2 The Parties shall be entitled to obtain pre-hearing
discovery through depositions and requests for the inspection and copying of
documents and other items upon reasonable notice and to obtain the issuance of a
subpoena duces tecum therefor in accordance with applicable law, including
without limitation, 9 U.S.C. Section 7 and (notwithstanding Section 1297.17 of
the California Code of Civil Procedure) Section 1283.05 of the California Code
of Civil Procedure; provided that depositions shall not be taken unless leave to
do so is first granted by the arbitrator. As between the Parties, the arbitrator
shall have the power to enforce the rights, remedies, procedures, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions, consequences, sanctions and penalties as may be imposed in like
circumstances in a civil action by a U.S. Federal court.
17.6 ARBITRATION AWARD AND JUDICIAL REVIEW. The arbitrator, in deciding
any Dispute, shall base his decision on the record and in accordance with this
Agreement and applicable law. In no event shall the arbitrator make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement, is not supported by the weight of the evidence, or is contrary to
statute, administrative regulations or established judicial precedents. The
arbitration award shall be a factually detailed, reasoned opinion stating the
arbitrator's findings of fact and conclusions of law. Unless the arbitrator for
good cause determines otherwise, the final award shall include attorneys' fees,
costs and expenses of the prevailing Party, including expert and nonexpert
witness fees and the prevailing Party's share of the administrative fee and the
arbitrator's fees and expenses, if any. Notwithstanding any other provisions
hereof, the arbitrator shall have no jurisdiction to award damages in
contravention of Article 10 hereof. The arbitration award shall be subject to
judicial review in accordance with 9 U.S.C. SectionSection 10-12; provided,
however, that the arbitration award shall also be vacated to the extent that the
arbitrator exceeds his or her authority as set forth in this Section 17.6, and,
on balance, the Party seeking vacation of the award has been materially and
adversely affected thereby. Judgment may be entered on the award by a United
States District Court in accordance with 9 U.S.C. Section 9.
17.7 CONSOLIDATION AND JOINDER. It is the Parties' intent to avoid, to
the maximum extent possible, having to arbitrate claims arising out of this
Agreement in more than one proceeding. Accordingly, the Parties hereby consent
to the joinder of the Company and any other person or entity sought to be joined
where the Company or other person or entity is substantially involved in a
common question of fact or law and its or his presence is required for complete
relief to be accorded in an arbitration proceeding under this Article 17. Should
the Company arbitrate a claim or dispute by or against TSMC under the
Manufacturing Agreement involving similar issues of law or fact arising out of
this Agreement, each of the Buyers hereby consents to consolidation of such
arbitration with any arbitration brought under this Article 17. Thus, by way of
illustration but without limitation, the Parties consent to the foregoing
joinder and consolidation in respect to Disputes arising out of or relating to
Production Qualification under Section 4.2, production and supply issues under
Article 5, purchase orders and pricing issues under Article 6, delivery issues
under Article 7, production warranty issues under Article 9, and indemnity
issues under Article 11.
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PURCHASE AGREEMENT
<PAGE> 43
ARTICLE 18
GENERAL PROVISIONS
18.1 SEVERABILITY. If any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, such provision
shall be deemed amended to conform to applicable laws so as to be valid and
enforceable or, if it cannot be so amended without materially altering the
intention of the Parties, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
18.2 NEUTRAL INTERPRETATION; WAIVER OF CONFLICT. Each Party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. Each Party waives any real, apparent, possible or inchoate conflict in
connection with, arising out of or resulting from the representation of TSMC and
its Affiliates by the same law firm relative to the negotiation and execution of
this Agreement, the LLC Agreement, the Manufacturing Agreement, the Advanced
Process License Agreement, the Technology License and Assistance Agreement, the
Side Letter (as defined below), and any confidentiality agreement provided for
herein. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any Party based upon any attribution to such
Party as the source of the language in question.
18.3 NOTICES. Any notices, demands, requests, waivers, or other
communications required or permitted to be given to a Party hereunder shall be
in writing in the English language and shall be delivered or sent to such Party
at its address set forth on Exhibit "I" hereto, or such other address as such
Party may hereafter specify, and shall be deemed given (a) when personally
delivered to such Party, (b) when transmitted by facsimile and receipt of such
transmission is confirmed by facsimile, (c) 24 hours after dispatch via an
established overnight courier service, or (d) three (3) days after mailing by
prepaid first class, certified mail with return receipt requested.
18.4 TIME OF THE ESSENCE. Time is of the essence with respect to each
provision of this Agreement in which time is a factor.
18.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of America,
without regard to conflicts of laws principles. The Parties expressly reject any
application of the United Nations Convention on Contracts for the International
Sale of Goods.
18.6 ENTIRE AGREEMENT. This Agreement, the LLC Agreement and a letter
agreement dated as of the date hereof between the Parties (the "Side Letter")
constitute and contain the entire agreement of the Parties, and supersede any
and all prior or contemporaneous negotiations, correspondence, understandings
and agreements among the Parties, written or oral, respecting the subject matter
hereof. In case of any conflict between the LLC Agreement and this Agreement,
the LLC Agreement shall govern.
18.7 WAIVER; AMENDMENT. No waiver of any provision of this Agreement
shall be effective unless and until made in writing and signed by the Party to
be charged. No waiver, forbearance or failure by any Party hereto of its right
to enforce any provision of this Agreement shall constitute a waiver or estoppel
of such Party's right to enforce any other provision of this Agreement or a
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PURCHASE AGREEMENT
<PAGE> 44
continuing waiver by such Party of compliance with any provision. Any amendment
or modification of this Agreement shall be by unanimous written consent of the
Parties.
18.8 COOPERATION. Each Party shall cooperate with the other Parties
hereto and shall take such further action and shall execute and deliver such
further documents as may be reasonably necessary or desirable in order to carry
out the provisions and purposes of this Agreement.
18.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18.10 EXHIBITS AND SCHEDULES. All exhibits and schedules to which
reference is made in this Agreement are deemed to be incorporated by reference
into this Agreement, whether or not actually attached hereto.
18.11 ATTORNEYS' FEES. In the event of any litigation, arbitration,
judicial reference or other proceeding involving the Parties to this Agreement
to enforce any provision of this Agreement, to enforce any remedy available upon
default under this Agreement, or seeking a declaration of the rights of a Party
under this Agreement, the prevailing Party(ies) shall be entitled to recover
from the other(s) such attorneys' fees and costs as may be reasonably incurred,
including the cost of reasonable investigation, preparation and professional or
expert consultation incurred by reason of such litigation, arbitration, judicial
reference or other proceeding. Notwithstanding the foregoing, (a) in an
arbitration proceeding the award of attorneys' fees shall be governed by the
provisions of Section 17.6; and (b) in a Mediation under Section 17.2 each Party
shall pay its own attorneys' fees and expenses in accordance with Section 17.2.
18.12 DATE OF PERFORMANCE. If the date on which any performance
required hereunder is other than a Business Day, then such performance shall be
required as of the next following Business Day.
18.13 SURVIVAL. Following early termination or the expiration of this
Agreement, the provisions of Article I (Definitions and Rules of Construction),
Article 9 (Product Warranty), Article 10 (Limitation on Damages; Contractual
Limitations Period), Article 11 (Indemnities), Article 15 (Proprietary
Information) Article 16 (Export Compliance), Article 17 (Arbitration), Article
18 (General Provisions), Section 14.4 (Rights and Remedies Following
Termination), Section 14.5 (Remedies Cumulative, Concurrent and Non-Exclusive),
and the Buyers' payment obligations under Subsection 3.5.2 and Sections 5.3,
5.4, 5.11, and 6.4 shall survive and remain in full force and effect in
accordance with their terms.
18.14 ASSIGNMENT; PARTIES BOUND. Except as expressly permitted in this
Section 18.14, or as otherwise permitted elsewhere in this Agreement, neither
this Agreement nor any rights or obligations arising hereunder may be assigned
or transferred (by operation of law or otherwise) by any Party, in whole or in
part, without the prior written consent of the other Parties. Notwithstanding
the foregoing, (a) TSMC may assign or transfer (by operation of law or
otherwise) this Agreement without the Buyers' consent (i) to any corporation or
limited liability company resulting from the merger, consolidation,
reincorporation or reorganization of TSMC (excluding, however, a reorganization
in bankruptcy); or (ii) to an Affiliate of TSMC; provided, however, that TSMC
shall remain personally and primarily liable for all the rights and obligations
under this Agreement following any such assignment or transfer
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PURCHASE AGREEMENT
<PAGE> 45
(unless TSMC is merged or consolidated with an Affiliate contemporaneously with
or subsequent to such assignment or transfer); and (b) each Buyer may assign or
transfer this Agreement to any Affiliate of a Buyer; provided, however, that
such Buyer shall remain personally and primarily liable for all rights and
obligations under this Agreement following any such assignment or transfer
(unless Buyer is merged or consolidated with an Affiliate contemporaneously with
or subsequent to such assignment or transfer). This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors,
permitted transferees, and permitted assigns.
18.15 THIRD-PARTY BENEFICIARIES. There are no third-party
beneficiaries of this Agreement, except as expressly provided with respect to
indemnitees under Section 11.4.1.
18.16 GOVERNING LANGUAGE OF AGREEMENT. This Agreement is in the English
language only, which language shall be controlling in all respects, and all
other versions thereof in any other language shall be for accommodation only and
shall not be binding upon the Parties. All communications to be made or given
pursuant to this Agreement shall be in the English language.
18.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each Party
irrevocably consents to the jurisdiction of the state and Federal courts located
in San Jose, California, agrees, subject to the provisions of Article 17 and
Article 10, that any action, suit or proceeding by or among the Parties (or any
of them) may be brought in any such court sitting in San Jose, California, and
waives any objection which the Party may now or hereafter have concerning
jurisdiction and venue, whether based on considerations of personal
jurisdiction, forum non conveniens or on any other ground. Each Party hereby
irrevocably designates, appoints and empowers the Secretary of State of
California to receive for and on behalf of such Party service of process in the
State of California and further irrevocably consents to the service of process
outside of the territorial jurisdiction of said courts by mailing copies thereof
by registered or certified United States mail, postage prepaid, to such Party's
last known address as established in accordance with Section 18.3 with the same
effect as if the Party were a resident of the State of California and had been
lawfully served in such state. Any process served on the California Secretary of
State in accordance with the preceding sentence shall also be noticed to the
Party's last known address established in accordance with Section 18.3 in a
manner permitted by said Section 18.3. Nothing in this Agreement shall affect
the right to service of process in any other manner permitted by law. Each Party
further agrees that final judgment against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction within or
outside the State of California by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and the
amount of such judgment.
18.18 AUTHORIZED REPRESENTATIVES. Each Party shall designate an
individual to act on behalf of the Party so designating him as its authorized
representative with full power and authority to speak for and bind such Party in
connection with all matters arising under this Agreement. Such designation shall
be by written notice delivered in accordance with Section 18.3. Each Party may
from time to time change its authorized representative hereunder by giving
written notice of such change to the other Party at least seven (7) Business
Days prior to the effective date of such change.
18.19 RELATIONSHIP OF THE PARTIES. The Parties intend that the
relationship between them hereunder shall be solely that of buyer and seller.
Nothing herein shall be construed (a) to create a partnership or joint venture,
(b) to constitute either Party an agent or legal representative of the other
Party; or (c) to create any fiduciary relationship between the Parties. This
Agreement does not grant any Party any right or authority to assume or create
any obligation or responsibility on behalf of any
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PURCHASE AGREEMENT
<PAGE> 46
other Party, and no Parties shall be in any way responsible for the debts of any
other Party incurred under or pursuant to the terms of this Agreement.
18.20 MANUFACTURING AGREEMENT. TSMC agrees to exercise its rights
under the Manufacturing Agreement so as to comply with its obligations to Buyers
under this Purchase Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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PURCHASE AGREEMENT
<PAGE> 47
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
dates set forth below their respective names, effective as of the Effective
Date.
TAIWAN SEMICONDUCTOR ANALOG DEVICES, INC.
MANUFACTURING CO., LTD.
By: /s/ Donald W. Brooks By: /s/ Joseph E. McDonough
-------------------------------- ----------------------------------
Name: Donald W. Brooks Name: Joseph E. McDonough
------------------------------ --------------------------------
Title: President Title: Vice President Finance & CFO
----------------------------- -------------------------------
Date: June 25, 1996 Date: June 25, 1996
------------------------------ --------------------------------
ALTERA CORPORATION INTEGRATED SILICON SOLUTIONS, INC.
By: /s/ Rodney Smith By: /s/ Jimmy S.M. Lee
-------------------------------- ---------------------------------
Name: Rodney Smith Name: Jimmy S.M. Lee
------------------------------ --------------------------------
Title: President, Chief Executive Title: Chairman, President and Chief
----------------------------- ------------------------------
Officer and Chairman Executive Officer
----------------------------- ------------------------------
Date: June 25, 1996 Date: June 25, 1996
------------------------------ ------------------------------
<PAGE> 48
EXHIBIT "A"
Pricing Schedule
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 49
EXHIBIT "B"
Product Qualification Plan
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 50
EXHIBIT "C"
Quality and Reliability Specifications
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 51
EXHIBIT "D"
Wafer Equivalents
(See Following Page)
PURCHASE AGREEMENT
<PAGE> 52
EXHIBIT D
EQUIVALENCY FACTOR TABLE
***
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Commission on August 14, 1996. The omitted
portions have been filed separately with the Commission.
<PAGE> 53
EXHIBIT "E"
Production Ramp-Up Plan
(See Following Page)
PURCHASE AGREEMENT
<PAGE> 54
EXHIBIT E
I.3 JV COMPANY IN USA CAPACITY RAMP UP PLAN
(8" WAFER 30K/MONTH)
Unit: 8: Kpcs
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
1999 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2000 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2001 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2002 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Jan: Annual Maintenance 6 days = [greater than sign] Working
day = 25 days
Feb: Working day = 28 days
Dec: Christmas Holiday 4 days = [greater than sign] Working
day = 27 days
*** Confidential treatment requested pursuant to a request for
confidential treatment filed with the Commission on August 14,
1996. The redacted portions have been filed separately with the
Commission.
<PAGE> 55
EXHIBIT "F"
Buyers' Purchase Forecasts
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 56
EXHIBIT "G"
Design Rule and Parametric Information
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 57
EXHIBIT "H"
Inspection and Testing Methods
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
<PAGE> 58
EXHIBIT "I"
Addresses for Notices
TSMC:
Taiwan Semiconductor Manufacturing Co., Ltd.
121, Park Avenue 3, Science-Based Industrial Park,
Hsinchu, Taiwan, R.O.C.
ADI:
Analog Devices, Inc.
1 Technology Way
Norwood, Massachusetts 02062-2634
ALTERA:
Altera Corporation
2610 Orchard Parkway
San Jose, California 95134-2020
ISSI:
Integrated Silicon Solutions, Inc.
680 Alamanor Avenue
Sunnyvale, California 94086
PURCHASE AGREEMENT
<PAGE> 59
EXHIBIT "J"
FORM OF
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the "Agreement") is made and entered
into as of _____________, by and between WaferTech, L.L.C., a _____________
("Disclosing Party"), and __________________________, [a _____________
corporation or other entity] [a natural person] (the "Receiving Party").
WHEREAS, the Disclosing Party has agreed to give the Receiving Party
access to the Disclosing Party's semiconductor wafer-fabrication plant located
in _____________ (the "Foundry"), and as a result of granting such access the
Disclosing Party has disclosed or will disclose to the Receiving Party certain
Confidential Information (as defined below) regarding the Disclosing Party's
business operations and products (the "Business"); and
WHEREAS, the Disclosing Party's grant of access to the Foundry and its
disclosure of certain Confidential Information regarding the Disclosing Party's
Business is for the following purpose: __________________________(the
"Purpose"); and
WHEREAS, the Disclosing Party desires to maintain the secrecy of its
Confidential Information and accordingly has requested that the Receiving Party
execute this Agreement as a condition precedent to the granting of access to the
Foundry and the disclosure of such information to the Receiving Party; and
WHEREAS, this Agreement is made and entered into pursuant to that
certain Purchase Agreement by and between Taiwan Semiconductor Manufacturing
Co., Ltd., incorporated in Taiwan, Republic of China and the Buyers named as
parties therein, dated as of , 1996 (the "Purchase Agreement"),
reference to which Purchase Agreement is here made for all purposes, whereby
each party agrees to grant access to facilities and information to the other
party's engineers, technicians and personnel so long as they execute and deliver
a copy of this Agreement.
NOW THEREFORE, in consideration of the above premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITION OF CONFIDENTIAL INFORMATION
As used herein, "Confidential Information" shall mean all data,
concepts, ideas, methods, processes, techniques, formulae, know-how, mask-works,
trade and industrial secrets and improvements relating to research, development
or manufacturing activities of the Disclosing Party and other confidential and
proprietary information concerning the Disclosing Party's existing or proposed
business and marketing plans, operations, customers, and contact lists,
marketing expertise and strategies, the terms and conditions of the Purchase
Agreement, business development proposals and other information compiled and
developed by the Disclosing Party for use in semiconductor- wafer fabrication
operations. Confidential Information shall include not only written information,
but also (a) information transferred orally, visually, electronically or by any
other means, provided that the Disclosing Party expressly indicates to the
Receiving
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PURCHASE AGREEMENT
<PAGE> 60
Party that such disclosures constitute "Confidential Information" for purposes
of this Agreement, and (b) all notes, analyses, compilations, presentations or
other documents (including materials prepared by the Receiving Party), which
contain or otherwise reflect such information. Confidential Information shall
include, if applicable, any confidential or proprietary information of any
subsidiary or other affiliate of the Disclosing Party.
2. NON-CONFIDENTIAL INFORMATION
The term "Confidential Information" does not include information which
(a) becomes generally available to the public other than as the result of a
disclosure by the Receiving Party; (b) was available to the Receiving Party on a
nonconfidential basis (including, but not limited to information developed by
that party or, if applicable, its employer) prior to its disclosure to the
Receiving Party by the Disclosing Party and/or its officers, directors,
employees, representatives or agents; (c) becomes available to the Receiving
Party on a nonconfidential basis from a source other than the Disclosing Party
or its officers, directors, employees, representatives or agents provided that
such source is not bound by a confidentiality agreement with the Disclosing
Party or is not otherwise prohibited from transmitting the information to the
Receiving Party by a contractual, legal or fiduciary obligation; or (d) is
required to be disclosed by the Receiving Party pursuant to law, governmental
regulation or judicial order, provided that written notice is given to the
Disclosing Party prior to the required disclosure.
3. USE OF CONFIDENTIAL INFORMATION
The Receiving Party shall use the Confidential Information solely for
the Purpose and for no other purpose. In no event shall a Receiving Party use
Confidential Information in the Receiving Party's own business (or, if
applicable, in the business of its employer), or in the business of any other
entity, or in any other manner whatsoever except as may be expressly permitted
in this Agreement or in the Purchase Agreement. The Disclosing Party shall have
the right to review all documents prepared by the Receiving Party relating to
Confidential Information prior to any dissemination of such communication to
third parties. The Receiving Party shall delete any information from the
documents that the Disclosing Party requires to be deleted.
4. DISCLOSURE OF CONFIDENTIAL INFORMATION
Without the prior consent of the Disclosing Party, the Receiving Party
shall not disclose to any person (a) the fact that the Confidential Information
has been made available to the Receiving Party or that the Receiving Party has
inspected any portion of the Confidential Information, or (b) any of the terms,
conditions or other facts with respect to the Business or the Disclosing Party,
except to the extent the foregoing is required to be disclosed by the Receiving
Party pursuant to law, governmental regulation or judicial order, provided that
written notice is given to the Disclosing Party prior to the required
disclosure. The fact that such information has been delivered to the Receiving
Party and any discussions regarding the Business or the Disclosing Party, are
deemed Confidential Information for the purposes of this Agreement, except to
the extent the foregoing is required to be disclosed by the Receiving Party
pursuant to law, governmental regulation or judicial order, provided that
written notice is given to the Disclosing Party prior to the required
disclosure.
5. DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION
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PURCHASE AGREEMENT
<PAGE> 61
Upon request from the Disclosing Party to the Receiving Party (a) the
Receiving Party shall either destroy or return to the Disclosing Party all
Confidential Information which is in tangible form, including any copies of
which the Receiving Party may have made, destroy all abstracts, summaries
thereof or references thereto in the documents of the Receiving Party, and
certify to Disclosing Party that this has been done, and (b) the Receiving Party
shall not use any of the Confidential Information with respect to, or in
furtherance of, any of its businesses (or, if applicable, the business of its
employer) or in the business of anyone else, whether or not in competition with
the Disclosing Party, or for any other purpose whatsoever.
6. INDEMNIFICATION
The Receiving Party hereby agrees to indemnify, defend and hold
harmless the Disclosing Party from any damages, loss, cost or liability
(including legal fees and costs of enforcing this indemnity) arising out of or
resulting from any unauthorized use or disclosure by the Receiving Party of the
Confidential Information.
7. REMEDIES
Receiving Party acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by a
Receiving Party, and that such breach would cause Disclosing Party irreparable
harm. In addition to all other remedies available to Disclosing Party at law, in
equity or under this Agreement, the Disclosing Party will be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach, and the breaching party agrees to waive any requirement of
receiving or posting of any bond in connection with such remedy. Each party
agrees and consents to the entry of a preliminary injunction or protective order
by any court of competent jurisdiction upon a showing by the Disclosing Party
that its Confidential Information is being used or disclosed contrary to the
provisions of this Agreement. The arbitration provisions of Sections 17.3
through 17.7 of the Purchase Agreement shall not apply to any temporary
restraining order, preliminary injunctive relief, protective order or other
provisional remedy sought to prohibit a breach or threatened breach of the
provisions of this Agreement.
8. NO LICENSE
This Agreement does not imply any license to the Receiving Party (or,
if applicable, its employer) of Disclosing Party's Confidential Information or
any of its patents, copyrights, trademarks, mask-work rights or applications
therefor. All proprietary rights, including but not limited to patent rights and
trade and industrial secrets, in and to the Confidential Information shall
remain the Disclosing Party's property.
9. ADDITIONAL AGREEMENT IF RECEIVING PARTY IS A BUSINESS ORGANIZATION
If the Receiving Party is a corporation, limited liability company, or
other business organization, it agrees (a) that it shall hold all Confidential
Information it receives from the Disclosing Party in strict confidence and with
the same degree of care that Receiving Party gives to Receiving Party's own
proprietary and confidential information, but not less than a reasonable degree
of care, and shall not disclose such Confidential Information to others, except
as may be required by law; (b) Receiving Party's covenants and agreements set
forth in this Agreement shall be binding upon its officers, directors,
employees, representatives and agents; and (c) the Receiving Party shall cause
its officers, directors,
J-3
PURCHASE AGREEMENT
<PAGE> 62
employees, representatives and agents to abide by the provisions of this
Agreement. Notwithstanding the provisions of paragraph 4 above, the Receiving
Party may disclose Confidential Information without the prior consent of the
Disclosing Party to its officers, directors and employees who have a need to
know such information in order to perform their duties; provided, however, that
each person to whom the Confidential Information is disclosed must be advised of
its confidential nature and of the terms of this Agreement and must have entered
into a written agreement with the Receiving Party that obligates such person to
abide by such terms (a copy of which must be delivered to the Disclosing Party
upon the Disclosing Party's request).
10. WAIVERS
It is understood and agreed that no failure or delay by the Disclosing
Party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any or
further exercise or the exercise of any right, power or privilege hereunder.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
12. CONSENT TO JURISDICTION; GOVERNING LAW
Except as otherwise provided herein, all disputes, differences or
controversies arising from this Agreement shall be settled by arbitration in
accordance with and pursuant to the arbitration provisions set forth in Sections
17.3 through 17.6 of the Purchase Agreement, a copy of which Sections 17.3
through 17.6 are attached hereto as Exhibit "A" and is incorporated by reference
herein. Each Party reserves the right to file with a court of competent
jurisdiction an application for temporary or preliminary injunctive relief, a
protective order or other appropriate provisional remedy (a) on grounds that the
arbitration award to which the applicant may be entitled may be rendered
ineffectual in the absence of such relief, or (b) in the event of a breach or
threatened breach of the provisions of this Agreement prohibiting disclosure of
Confidential Information. This Agreement shall be governed by and construed in
accordance with the laws of Delaware.
13. DURATION
This Agreement shall become effective upon execution and delivery
hereof and shall continue in full force and effect for so long as the Disclosing
Party shall exist; provided, however, that the obligation of the Receiving Party
under paragraphs 3, 4, 5, 6, 7, 9 and 12 shall survive indefinitely.
14. ENTIRE AGREEMENT; SURVIVAL; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the parties hereto
concerning the subject matter hereof and supersedes any prior agreement or
understanding of the parties. This Agreement shall survive the execution of any
other definitive document between the parties hereto and may not be modified
except in writing, duly signed by the party against whom enforcement is sought.
This Agreement shall inure to the benefit of and is binding upon each of the
parties hereto and their respective heirs, successors, assigns and personal
representatives.
J-4
PURCHASE AGREEMENT
<PAGE> 63
15. COUNTERPARTS.
This Agreement is expected to be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. The facsimile signature of a party to
this Agreement is and shall be deemed to be an original execution and is
binding.
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PURCHASE AGREEMENT
<PAGE> 64
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
DISCLOSING PARTY: RECEIVING PARTY:
WAFERTECH L.L.C. __________________________________
By:_______________________________ By:_______________________________
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
Address for Notices: Address for Notices:
__________________________________ __________________________________
__________________________________ __________________________________
Telephone:________________________ Telephone:________________________
Facsimile:________________________ Facsimile:________________________
J-6
PURCHASE AGREEMENT
<PAGE> 65
EXHIBIT "A" TO CONFIDENTIALITY AGREEMENT
ARBITRATION
Shown below is a copy of Sections 17.3 to 17.7 of that certain Purchase
Agreement, dated as of June 25, 1996, by and among Taiwan Semiconductor
Manufacturing Co., Ltd., as Seller, and Analog Devices, Inc., Altera
Corporation, and Integrated Silicon Solutions, Inc., as Buyers (such copy, the
"Copy"). The Copy is an exact copy of the Purchase Agreement except for the
insertion of the phrase "by negotiation or mediation between the Parties" in the
first sentence of Section 17.3 of the Purchase Agreement, replacing a reference
to Sections 17.1 to 17.2 of that agreement, which Sections are not applicable to
this Agreement. All references to Articles, Sections, and Subsections in the
Copy are to corresponding subdivisions of the Purchase Agreement. All undefined
capitalized terms in the Copy have the meanings given in the Purchase Agreement.
17.3 CLAIMS SUBJECT TO ARBITRATION. Except as otherwise specifically
provided herein, any Dispute arising out of or relating to this Agreement, or
the breach or termination hereof, and not resolved by negotiation or mediation
between the Parties shall be resolved by binding arbitration in accordance with
the Federal Arbitration Act, 9 U.S.C. Sections 1 et seq. (the "FAA"), and
the Commercial Arbitration Rules, and where the amount in controversy exceeds
$1,000,000, the Supplementary Procedures for Large Complex Disputes, of the AAA
(collectively, the "Rules"). In the event of a conflict between the FAA and the
Rules, the Rules shall govern. In the event of a conflict between this Article
and the FAA or the Rules, this Article shall govern. A court of competent
jurisdiction, upon application from any Party, may relieve the Parties of their
duty to arbitrate Disputes in whole or in part, or may stay any arbitration
hereunder in whole or in part, if ongoing litigation between one or more of the
Parties and a third party (or parties) involves issues of fact or law common
with those subject to arbitration hereunder and there exists the possibility of
inconsistent judgments if such relief is not granted. Each Party reserves the
right to file with a court of competent jurisdiction an application for
temporary or preliminary injunctive relief, a protective order or other
appropriate provisional remedy on grounds that (a) the arbitration award to
which the applicant may be entitled may be rendered ineffectual in the absence
of such relief; or (b) in the event of a breach or threatened breach of the
provisions of Subsection 15.1.1 prohibiting disclosure of Proprietary
Information.
17.4 VENUE. The venue for any arbitration proceeding hereunder shall be
San Jose, California.
17.5 SELECTION OF ARBITRATOR AND DETERMINATION OF CONTROVERSIES.
17.5.1 Any Dispute subject to arbitration shall be submitted
to a single neutral arbitrator, who, unless otherwise agreed by the Parties,
shall be a retired judge or other lawyer who is a member of the arbitration
panel of the Judicial Arbitration and Mediation Service ("JAMS") or the national
panel of arbitrators of the AAA, and who has substantial experience in the area
of the Dispute. The Parties shall confer concerning the selection of AAA or JAMS
with the objective of selecting one or the other within thirty (30) days of the
conclusion of the Mediation; provided, however, that, if all Parties to the
Dispute do not agree on one or the other within such thirty (30) day period, the
Dispute initially will be submitted simultaneously to both AAA and JAMS for the
sole purpose of picking the arbitrator. If the Parties select JAMS, then the
term "Rules" as used herein shall mean the then-prevailing JAMS rules. The AAA
(or JAMS, as the case may be) simultaneously shall submit to each Party an
identical list of five proposed qualified arbitrators drawn from the applicable
panel of commercial arbitrators. If the Parties are unable to agree upon an
arbitrator within thirty (30) days from the date that AAA (or JAMS, as the case
may be)
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PURCHASE AGREEMENT
<PAGE> 66
submits such list to each Party, then AAA (or JAMS, as the case may be)
shall simultaneously submit to each Party a second list of five additional
proposed qualified arbitrators drawn from the applicable panel of commercial
arbitrators. If for any reason, the appointment of an arbitrator cannot be made
from either list, AAA (or JAMS, as the case may be) may make the appointment
from among other qualified members of the panel without the submission of
additional lists to the Parties. If the Dispute is initially submitted to both
AAA and JAMS for the purpose of picking the arbitrator, then both AAA and JAMS
simultaneously shall submit to each Party lists of five proposed qualified
arbitrators drawn from the applicable panel (with each Party receiving the
identical list from AAA and the identical list from JAMS), and if the Parties
are unable to agree upon an arbitrator within thirty (30) days from the date
that both AAA and JAMS submit the first such lists to each Party, then AAA and
JAMS simultaneously shall submit to each Party second lists of five additional
proposed qualified arbitrators (with each Party receiving an identical second
list from AAA and an identical second list from JAMS). If the Parties for any
reason are unable to select an arbitrator from the first and second lists
submitted by AAA and by JAMS, then a majority of the Parties shall select to
arbitrate with either AAA or with JAMS, and the arbitration organization so
selected shall make the appointment from among other qualified members of the
arbitration panel of that organization without the submission of additional
lists to the Parties. Where the Parties have initially submitted the Dispute to
both JAMS and AAA, then once an arbitrator has been appointed, the
arbitration proceeding will be terminated with the arbitration organization that
has not been selected and the Parties shall equally share the costs and fees of
the arbitration organization so terminated. If for any reason the Parties to the
Dispute have not selected an arbitrator within ninety (90) days of the
conclusion of the Mediation, then the arbitration shall be conducted with the
AAA. No matter how selected, the arbitrator shall have no prior or existing
affiliation or relationship with any Party or its counsel and shall sign an oath
of impartiality upon appointment.
17.5.2 The Parties shall be entitled to obtain pre-hearing
discovery through depositions and requests for the inspection and copying of
documents and other items upon reasonable notice and to obtain the issuance of a
subpoena duces tecum therefor in accordance with applicable law, including
without limitation, 9 U.S.C. Section 7 and (notwithstanding Section 1297.17 of
the California Code of Civil Procedure) Section 1283.05 of the California Code
of Civil Procedure; provided that depositions shall not be taken unless leave to
do so is first granted by the arbitrator. As between the Parties, the arbitrator
shall have the power to enforce the rights, remedies, procedures, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions, consequences, sanctions and penalties as may be imposed in like
circumstances in a civil action by a U.S. Federal court.
17.6 ARBITRATION AWARD AND JUDICIAL REVIEW. The arbitrator, in deciding
any Dispute, shall base his decision on the record and in accordance with this
Agreement and applicable law. In no event shall the arbitrator make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement, is not supported by the weight of the evidence, or is contrary to
statute, administrative regulations or established judicial precedents. The
arbitration award shall be a factually detailed, reasoned opinion stating the
arbitrator's findings of fact and conclusions of law. Unless the arbitrator for
good cause determines otherwise, the final award shall include attorneys' fees,
costs and expenses of the prevailing Party, including expert and nonexpert
witness fees and the prevailing Party's share of the administrative fee and the
arbitrator's fees and expenses, if any. Notwithstanding any other provisions
hereof, the arbitrator shall have no jurisdiction to award damages in
contravention of Article 10 hereof. The arbitration award shall be subject to
judicial review in accordance with 9 U.S.C. Sections 10-12; provided, however,
that the arbitration award shall also be vacated to the extent that the
arbitrator exceeds his or her authority as set forth in this Section 17.6, and,
on balance, the Party seeking vacation of the award has been materially and
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PURCHASE AGREEMENT
<PAGE> 67
adversely affected thereby. Judgment may be entered on the award by a United
States District Court in accordance with 9 U.S.C. Section 9.
17.7 CONSOLIDATION AND JOINDER. It is the Parties' intent to avoid, to
the maximum extent possible, having to arbitrate claims arising out of this
Agreement in more than one proceeding. Accordingly, the Parties hereby consent
to the joinder of the Company and any other person or entity sought to be joined
where the Company or other person or entity is substantially involved in a
common question of fact or law and its or his presence is required for complete
relief to be accorded in an arbitration proceeding under this Article 17. Should
the Company arbitrate a claim or dispute by or against TSMC under the
Manufacturing Agreement involving similar issues of law or fact arising out of
this Agreement, each of the Buyers hereby consents to consolidation of such
arbitration with any arbitration brought under this Article 17. Thus, by way of
illustration but without limitation, the Parties consent to the foregoing
joinder and consolidation in respect to Disputes arising out of or relating to
Production Qualification under Section 4.2, production and supply issues under
Article 5, purchase orders and pricing issues under Article 6, delivery issues
under Article 7, production warranty issues under Article 9, and indemnity
issues under Article 11.
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PURCHASE AGREEMENT
<PAGE> 68
EXHIBIT "K"
METHOD FOR APPORTIONING
THE UNUSED MINIMUM PURCHASE ALLOCATION
The Unused Minimum Purchase Allocation (the "UMPA") will be apportioned
among the Non-Defaulting Parties (as defined in Subsection 3.5.1) in the
following manner, unless the Non- Defaulting Parties otherwise agree. Following
the Defaulting Buyer's (as defined in Subsection 3.5.1) written notice to the
Non-Defaulting Parties, as provided in Subsection 3.5.1, each Non-Defaulting
Party will notify the others of the proportion (between zero and one inclusive)
of the UMPA the Non-Defaulting Party elects to take (in this exhibit, such
proportion, as may be reduced by the method below, the Non-Defaulting Party's
"elected proportion," and the part (in Wafer Equivalents) of the UMPA
corresponding to the elected proportion, the Party's "election"). If a
Non-Defaulting Party fails to elect any part of the UMPA within thirty (30) days
following receipt of the Defaulting Buyer's written notice, that Party is
considered to have elected to take none of the UMPA.
NONTECHNICAL DESCRIPTION OF THE METHOD
If the Non-Defaulting Parties elect in the aggregate to take all or
only part of the UMPA, each Non-Defaulting Party will be allowed to take exactly
the amount it elects. If, on the other hand, the Non-Defaulting Parties
"oversubscribe" to the UMPA, some of their elections will be reduced as required
until their aggregate elections (the "election total") equal the UMPA. (Since a
Non- Defaulting Party's election can be reduced, but will not be increased, each
Non-Defaulting Party should elect the maximum amount of the UMPA the Party is
willing to take.)
In the oversubscribed case, the method will attempt to accommodate each
Non-Defaulting Party's election within the available UMPA, yet will not permit
one Party to take more than a given multiple of its Basic Purchase Share to the
extent that other Parties also seek at least the same multiple of their Basic
Purchase Shares. (For purposes of this exhibit, TSMC will be considered to have
a Basic Purchase Share equal to the difference of (a) one minus (b) the sum of
the Basic Purchase Shares of the Buyers.) This fairness principal is
operationalized through the "election ratio," i.e., the ratio of a Party's
elected proportion to its Basic Purchase Share. For example, if one Party has an
election ratio of 2, while another has an election ratio of 1, the first Party
has elected twice as much as its Basic Purchase Share, while the second Party
has elected its Basic Purchase Share.
Any Non-Defaulting Party whose elected proportion is less than or equal
to the quotient of (a) the Party's Basic Purchase Share divided by (b) the sum
of the Basic Purchase Shares among the Non-Defaulting Parties will be able to
take the Party's election without reduction.
Among the remaining Non-Defaulting Parties, the method reduces the
elections of Parties whose election ratios are higher than others' before
reducing the others' elections and continues until the election total is reduced
to the UMPA or until the election ratios among such Parties are all equal. If
the elections of several Parties with equal election ratios are to be reduced
during any step of the process, those elected proportions are reduced by the
same percentage so as to preserve the equality of those Parties' election ratios
after the reduction. (When all the election ratios among the Parties are equal,
the election of each such Party is proportionate to its Basic Purchase Share.)
If the election total still exceeds the UMPA after
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PURCHASE AGREEMENT
<PAGE> 69
all election ratios among such Parties are equalized, the election of each such
Party is further reduced by a percentage (identical for each such Party) which
yields an election total equal to the UMPA.
For numerical examples of the method, see the section "Numerical
Examples" below.
MATHEMATICAL DESCRIPTION OF THE METHOD
A. ELECTION TOTAL LESS THAN OR EQUAL TO THE UMPA. If the election
total is less than or equal to the UMPA, then each Non-Defaulting Party will
take its election without further adjustment.
B. ELECTION TOTAL GREATER THAN THE UMPA. If the election total
exceeds the UMPA, then the following procedure is used to reduce the election
total to the UMPA:
Step 1: Assign to each Non-Defaulting Party whose elected proportion is
less than or equal to the ratio of (a) its Basic Purchase Share to (b) the sum
of the Non-Defaulting Parties' Basic Purchase Shares that Party's election
without reduction.
Step 2: List the remaining Non-Defaulting Parties in decreasing order
of their election ratios. There will be at most three Non-Defaulting Parties on
the list: TSMC and two Buyers.
Step 3:
(a) If only one Party is on the list, reduce its election
until the election total equals the UMPA.(1) The process stops at this
step and the Non-Defaulting Parties will take their respective
elections (as adjusted) at the completion of this step.
(b) If two or more Parties are on the list, reduce the first
Party's election until (1) the Party's election ratio equals that of
the second Party's or (2) the election total equals the UMPA.(2) If the
election total equals the UMPA, the process stops at this step and the
Parties on the list will take their respective elections at the
completion of this step; otherwise, the process continues to the next
step.
Step 4 (when two or more Parties are on the list):
- ----------------------------
(1) The Party's election will be reduced to (1) the UMPA less (2) the
sum of the other Non- Defaulting Parties' elections.
(2) The first Party's election will be reduced to the greater of (1)
(a) the UMPA less (b) the sum of the other Non-Defaulting Parties' elections or
(2) the product of (a) the UMPA, (b) the Party's Basic Purchase Share, and (c)
the election ratio of the second Party on the list.
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(a) If there are two Parties on the list, reduce each of their
elections (as adjusted through step 3) by the same factor until the election
total equals the UMPA.(3) The process stops at this step and the Parties on the
list will take their respective elections (as adjusted) at the completion of
this step.
(b) If there are three Parties on the list, reduce each of the
first two Parties' elections (as adjusted through step 3) by the same
factor until (1) the two Parties' election ratios equal that of the
third Party's or (2) the election total equals the UMPA.(4) If the
election total equals the UMPA, the process stops at this step and the
Parties on the list will take their respective elections at the
completion of this step; otherwise, the process continues to the next
step.
Step 5 (when there are three Parties on the list): Reduce each of the
listed Parties' elections (as adjusted through step 4) by the same factor until
the election total equals the UMPA.(5)
NUMERICAL EXAMPLES
As an illustration of the above method, suppose that the three Buyers'
Basic Purchase Shares are, respectively, 18%, 18%, and 4%. Then TSMC's Basic
Purchase Share for purposes of this exhibit is 100% - 40% = 60%. Suppose
further that Buyer No. 1 with an 18% Basic Purchase Share is a Defaulting Buyer
and the remaining Buyers (Buyers No. 2 and No. 3) are not. Finally, suppose that
the UMPA equals 100 Wafer Equivalents. The table below shows three cases with
the Non- Defaulting Parties' initial elections and final elections after
adjustments by the above method.
- ----------------------------
(3) The appropriate factor is the quotient of (1) (a) the UMPA less (b)
the election of the Non- Defaulting Party not on the list divided by (2) the sum
of the two elections before the reduction.
(4) The appropriate factor is the greater of (1) the quotient of (a)
the UMPA less the election of the third Non-Defaulting party on the list divided
by (b) the sum of the two Parties' elections before the reduction or (2) the
quotient of (a) the election ratio of the third Party on the list divided by (b)
the election ratio of the first Party on the list.
(5) The appropriate factor is the quotient of (1) the UMPA divided by
(2) the sum of the three elections before the reduction.
K-3
PURCHASE AGREEMENT
<PAGE> 71
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Col 1 2 3 4 5 6 7 8 9
- ------------------------------------------------------------------------------------------------------------------------------------
CASE 1 CASE 2 CASE 3
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC
PURCH BPS/
ELECTION ELECTION ELECTION SHARE TOTAL
ELECTION RATIO ELECTION RATIO ELECTION RATIO (BPS) BPS
- ------------------------------------------------------------------------------------------------------------------------------------
Row INITIAL ELECTIONS
- ---------------------------------------------------------------------------------------------------------
1 TSMC 70 1.167 100 1.667 100 1.667 0.60 0.732
2 Buyer #2 23 1.278 100 5.556 100 5.556 0.18 0.220
3 Buyer #3 0 0.000 4 1.000 100 25.000 0.04 0.049
---------------------------------------------------------------------------------------------------------------------------
4 TOTAL 93 --- 204 --- 300 --- 0.82 1.000
====================================================================================================================================
FINAL ELECTIONS
- ---------------------------------------------------------------------------------------------------------
5 TSMC 70 1.167 73.85 1.231 73.17 1.220
6 Buyer #2 23 1.278 22.15 1.231 21.95 1.220
7 Buyer #3 0 0.000 4.00 1.000 4.88 1.220
------------------------------------------------------------------------------------------------
8 TOTAL 93 --- 100.00 --- 100.00 ---
====================================================================================================================================
</TABLE>
Column 8 of the table lists the Basic Purchase Shares of the
Non-Defaulting Parties. Column 9 expresses each Basic Purchase Share as a
proportion of the total of the Non-Defaulting Parties' Basic Purchase Shares.
Case 1: The Non-Defaulting Parties elect 70, 93, and 0 Wafer
Equivalents, respectively (rows 1 to 3, column 2). Since the election total (93
Wafer Equivalents; row 4, column 2) is less than 100 Wafer Equivalents, each
Non-Defaulting Party will take its initial election (see rows 5 to 7, column 2).
Case 2: The Non-Defaulting Parties elect 100, 100, and 4 Wafer
Equivalents, respectively (rows 1 to 3, column 4). Since the election total (204
Wafer Equivalents) exceeds the UMPA, some of the elections must be reduced.
Comparing columns 4 and 9 (rows 1 to 3), we see that TSMC's and Buyer No. 2's
elected proportions exceed their respective Basic Purchase Shares as proportions
of the sum of the Non-Defaulting Parties' Basic Purchase Shares. Since that is
not true for Buyer No. 3, it will take its entire election.
TSMC's and Buyer No. 2's elections must be reduced, since their
elections sum to 200. Buyer No. 2's election is reduced first, because its
election ratio (5.556) exceeds TSMC's (1.667). Even after Buyer No. 2's election
is reduced so that its election ratio equals TSMC's, the Parties' aggregate
elections (130 Wafer Equivalents) are still too much (not shown in the table),
so each of their elections is (further) reduced (rows 5 to 6, column 4) until
their aggregate elections are 96 Wafer Equivalents. Note that at this point,
their election ratios have been reduced to 1.231 (rows 5 to 6, column 5). Thus,
once Buyer No. 2's election ratio is made equal to TSMC's, each Party's election
is reduced by the same factor until the two Parties' aggregate elections equal
96 Wafer Equivalents.
Case 3: The Non-Defaulting Parties elect 100 Wafer Equivalents each.
Buyer No. 3 has the highest election ratio, followed by Buyer No. 2, then TSMC
(rows 1 to 3, column 7). As shown in rows 5 to 7, columns 6 to 7, each
Non-Defaulting Party's election is reduced until their three Parties' common
election ratio is 1.220 (rows 5 to 7, column 7). In terms of the above method,
Buyer No. 3's initial election ratio (25) is first reduced to Buyer No. 2's
(5.556). Because the election total still
K-4
PURCHASE AGREEMENT
<PAGE> 72
exceeds 100 Wafer Equivalents (not shown in the table), both Buyers' election
ratios are reduced to TSMC's (1.667). Because the election total is still too
high (not shown in the table), all Non-Defaulting Parties' election ratios are
reduced to the final value of 1.220, at which point the election total is 100
Wafer Equivalents.
K-5
PURCHASE AGREEMENT
<PAGE> 73
EXHIBIT "L"
FORM OF CONFIDENTIALITY AGREEMENT BETWEEN A BUYER AND ITS CUSTOMER
This Confidentiality Agreement (the "Agreement") is made and
entered into as of________________ , by and between_________________
[Buyer], a______________________ ("Disclosing Party"), and ____________________,
a___________________ corporation [or other entity] (the "Receiving Party").
WHEREAS, pursuant to that certain Purchase Agreement (as
defined below), the Disclosing Party purchases part of the wafer production
manufactured by WaferTech, LLC, a Delaware limited liability company (the
"Company"), which owns and operates a semiconductor wafer-fabrication plant in
Camas, Washington (such plant, the "Foundry"), and following such purchase,
Disclosing Party uses the wafer production in its own products for resale to its
customers; and
WHEREAS, the Receiving Party is a customer of the Disclosing
Party and desires to obtain from the Company design rules, parametric
information, and reliability data relating to Foundry products of interest to
the Receiving Party (such information, the "Information"); and
WHEREAS, the Receiving Party intends to use the Information to
evaluate products incorporating the wafer production for purchase from the
Disclosing Party (such purpose, the "Purpose"); and
WHEREAS, the Disclosing Party is willing to provide the
Information to the Receiving Party subject to the terms below; and
WHEREAS, the Disclosing Party is a party to that certain
Purchase Agreement, dated as of June 25, 1996, between (i) Taiwan Semiconductor
Manufacturing Co., Ltd., a corporation formed under the laws of Taiwan, Republic
of China ("TSMC") and (ii) other parties which, together with the Disclosing
Party, are named as "Buyers" under the Purchase Agreement (the "Purchase
Agreement"); and
WHEREAS, the Disclosing Party is obligated by the Purchase
Agreement to enter into this Agreement with the Receiving Party as a condition
to the disclosure of the Information; and
WHEREAS, the Receiving Party is willing to use such
information and preserve its confidentiality in the manner set forth below;
NOW THEREFORE, in consideration of the above premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
L-1
PURCHASE AGREEMENT
<PAGE> 74
1. DEFINITION OF CONFIDENTIAL INFORMATION
As used herein, "Confidential Information" shall mean (a) all
data, concepts, ideas, methods, processes, techniques, formulae, know-how,
mask-works, trade and industrial secrets and improvements relating to research,
development or manufacturing activities of the Company or other parties to the
Purchase Agreement. Confidential Information shall include not only written
information, but also (a) information transferred orally, visually,
electronically or by any other means, provided that the Disclosing Party
expressly indicates to the Receiving Party that such disclosures constitute
"Confidential Information" for purposes of this Agreement, and (b) all notes,
analyses, compilations, presentations or other documents (including materials
prepared by the Receiving Party), which contain or otherwise reflect such
information. Confidential Information shall include the Information.
2. NON-CONFIDENTIAL INFORMATION
The term "Confidential Information" does not include
information which (a) becomes generally available to the public other than as
the result of a disclosure by the Receiving Party; (b) was available to the
Receiving Party on a nonconfidential basis (including, but not limited to
information developed by that party) prior to its disclosure to the Receiving
Party by the Disclosing Party; (c) becomes available to the Receiving Party on a
nonconfidential basis from a source other than the Disclosing Party provided
that such source is not bound by a confidentiality agreement with the Disclosing
Party or the Company or is not otherwise prohibited from transmitting the
information to the Receiving Party by a contractual, legal or fiduciary
obligation; or (d) is required to be disclosed by the Receiving Party pursuant
to law, governmental regulation or judicial order, provided that written notice
is given to the Disclosing Party and the Company prior to the required
disclosure.
3. USE OF CONFIDENTIAL INFORMATION
The Receiving Party shall use Confidential Information solely
for the Purpose and for no other purpose.
4. DISCLOSURE OF CONFIDENTIAL INFORMATION
Without the prior consent of the Disclosing Party, the
Receiving Party shall not disclose to any person the fact that Confidential
Information has been made available to the Receiving Party or that the Receiving
Party has inspected any Confidential Information, except to the extent the
foregoing is required to be disclosed by the Receiving Party pursuant to law,
governmental regulation or judicial order, provided that written notice is given
to the Disclosing Party and the Company prior to the required disclosure. The
fact that such information has been delivered to the Receiving Party is deemed
to be Confidential Information for the purposes of this Agreement, except to the
extent the foregoing is required to be disclosed by the Receiving Party pursuant
to law, governmental regulation or judicial order, provided that written notice
is given to the Disclosing Party and the Company prior to the required
disclosure.
L-2
PURCHASE AGREEMENT
<PAGE> 75
5. DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION
Upon request from the Disclosing Party to the Receiving Party
(a) the Receiving Party shall (i) either destroy or return to the Disclosing
Party all Confidential Information received in tangible form, including any
copies of which the Receiving Party may have made, (ii) destroy all abstracts,
summaries thereof or references thereto in the documents of the Receiving Party,
and (iii) certify to Disclosing Party that this has been done, and (b) the
Receiving Party shall not use any of the Confidential Information with respect
to, or in furtherance of, any of the Receiving Party's businesses or in the
business of anyone else, or for any other purpose whatsoever.
6. INDEMNIFICATION
The Receiving Party hereby agrees to indemnify, defend and
hold harmless the Disclosing Party, the other parties to the Purchase Agreement,
and the Company (each such indemnified party, an "Indemnitee") from any damages,
loss, cost or liability (including legal fees and costs of enforcing this
indemnity) arising out of or resulting from any unauthorized use or disclosure
by the Receiving Party of the Confidential Information.
7. REMEDIES
Receiving Party acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by a
Receiving Party, and that such breach would cause one or more Indemnitees
irreparable harm. In addition to all other remedies available to an Indemnitee
at law, in equity or under this Agreement, the Indemnitee will be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach, and the breaching party agrees to waive any requirement of
receiving or posting of any bond in connection with such remedy. The Receiving
Party agrees and consents to the entry of a preliminary injunction or protective
order by any court of competent jurisdiction upon a showing by an Indemnitee
that Confidential Information is being used or disclosed contrary to the
provisions of this Agreement to the detriment of the Indemnitee.
8. NO LICENSE
This Agreement does not imply any license to the Receiving
Party of Confidential Information or any of patents, copyrights, trademarks,
mask-work rights or applications therefor. All proprietary rights, including but
not limited to patent rights and trade and industrial secrets, in and to the
Confidential Information shall remain the property of its owner prior to
disclosure by the Disclosing Party to the Receiving Party.
9. DEGREE OF CARE, AGREEMENTS BINDING ON OFFICERS, EMPLOYEES,
ETC.
Receiving Party agrees (a) that it shall hold all Confidential
Information it receives from the Disclosing Party in strict confidence and with
the same degree of care that Receiving Party gives to Receiving Party's own
proprietary and confidential information, but not less than a reasonable degree
of care, (b) Receiving Party's covenants and agreements set forth in this
Agreement shall be
L-3
PURCHASE AGREEMENT
<PAGE> 76
binding upon its officers, directors, employees, representatives and agents; and
(c) the Receiving Party shall cause its officers, directors, employees,
representatives and agents to abide by the provisions of this Agreement.
10. WAIVERS
It is understood and agreed that no failure or delay by the
Disclosing Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any or further exercise or the exercise of any right, power or
privilege hereunder.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of Delaware.
13. DURATION
This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect for so long as the
Disclosing Party shall exist; provided, however, that the obligation of the
Receiving Party under paragraphs 3, 4, 5, 6, 7, 8, 9, 12, 14 and 15 shall
survive indefinitely.
14. ENTIRE AGREEMENT; SURVIVAL; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the
parties hereto concerning the subject matter hereof and supersedes any prior
agreement or understanding of the parties. This Agreement may not be modified
except in writing, duly signed by the party against whom enforcement is sought.
This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto and their respective heirs, successors, assigns and personal
representatives.
15. The Company and TSMC are third-party beneficiaries under this
Agreement. Further, the parties intend the Indemnitees, other than the
Disclosing Party, to be third-party beneficiaries of the provisions of paragraph
6.
L-4
PURCHASE AGREEMENT
<PAGE> 77
16. COUNTERPARTS.
This Agreement is expected to be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. The facsimile signature
of a party to this Agreement is and shall be deemed to be an original execution
and is binding.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
DISCLOSING PARTY: RECEIVING PARTY:
- ----------------------------------- ------------------------------------
By: By:
-------------------------------- ---------------------------------
Name: Name:
------------------------ -------------------------
Title: Title:
----------------------- ------------------------
Address for Notices: Address for Notices:
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
Telephone: Telephone:
------------------------- --------------------------
Facsimile: Facsimile:
------------------------- --------------------------
L-5
PURCHASE AGREEMENT
<PAGE> 78
EXHIBIT "M"
FORM OF INDEMNITY AGREEMENT
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is entered into as of
______________ by [Buyer] , a ________________ corporation, as indemnifying
party hereunder ("Indemnitor"), and Taiwan Semiconductor Manufacturing Co., Ltd.
("TSMC"), a corporation organized under the laws of Taiwan, Republic of China,
and WaferTech LLC, a Delaware limited liability company (the "Company"), as
indemnified parties (collectively "Indemnitees").
RECITALS
A. Indemnitor and TSMC, among others, are parties, to that
certain Purchase Agreement, dated June 25, 1996 (the "Purchase Agreement").
B. Capitalized terms not otherwise defined in this Agreement have
the meanings given them in the Purchase Agreement.
C. Pursuant to the Purchase Agreement, TSMC will sell and the
other parties will buy semiconductor wafers produced by the Company at the
Foundry.
D. Under Section 5.10 of the Purchase Agreement, if Indemnitor
orders Products from TSMC that require the grant of non-exclusive Intellectual
Property Rights relating to the Products' manufacture or sale, Indemnitor must,
as a condition to TSMC's ordering such Products from the Foundry, either grant
the necessary Intellectual Property Rights to TSMC and/or the Company or enter
into this Agreement. Indemnitor wishes to order Products under the Purchase
Agreement from TSMC and declines to obtain and grant to TSMC and/or the Company
non-exclusive rights in Intellectual Property Rights relating to such Products.
Accordingly, Indemnitor desires to enter into this Agreement.
E. The Product/Products covered by this Agreement is/are as
follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------.
NOW, THEREFORE, in consideration of the premises and covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties hereto agree as follows:
1. Except as expressly otherwise provided in Section 11.1 of the
Purchase Agreement, Indemnitor shall indemnify, defend, and hold harmless TSMC,
the Company, and their respective
M-1
PURCHASE AGREEMENT
<PAGE> 79
Affiliates, employees, officers, directors, shareholders, partners, members, and
agents (collectively, "Indemnified Persons"), against or from any Claim of
infringement or misappropriation of a third party's Intellectual Property Rights
arising out of, related to, or connected with the Product or Products described
in Recital E above.
2. This Agreement shall be governed by Section 10.2(a) of the
Purchase Agreement.
3. Any payment hereunder shall be made in U.S. dollars. Any
amount due and payable to an Indemnified Person under paragraph 1 and not paid
within 30 days of written demand for payment shall accrue interest compounded
annually at a rate equal to the lesser of (a) the sum of (i) the prime or
reference rate for commercial borrowing announced by the Bank of America
N.T.&S.A. from time to time and (ii) 5% or (b) the maximum rate of interest
permitted by applicable law.
4. Indemnitor's obligation to an Indemnitee under paragraph 1
shall be conditioned upon:
a. Indemnitee's giving Indemnitor prompt notice in
writing of any Claims subject to the indemnity of paragraph 1 and of which
Indemnitee is aware;
b. Indemnitee's permitting Indemnitor, through counsel
of Indemnitor's choice and reasonably acceptable to Indemnitee, to defend
against, contest or settle the same; and
c. Indemnitee's reasonably cooperating with Indemnitor
and reasonably providing it with information and assistance to enable it to
defend, contest or settle same.
5. The indemnity of paragraph 1 shall be interpreted and
construed as indemnifying Indemnitee against its negligence, whether active or
passive.
6. Time is of the essence with respect to each provision of this
Agreement in which time is a factor.
7. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, United States of
America.
8. This Agreement integrates all the terms and conditions
mentioned herein or incidental hereto and supersedes all oral negotiations and
prior writings in respect to the subject matter hereof. This Agreement may be
modified, supplemented, superseded or canceled only by an instrument signed by
the parties hereto.
9. If any provision of this Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, such provision shall be
deemed amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so amended without materially altering the intention of the
parties, it shall be stricken and the remainder of this Agreement shall remain
in full force and effect.
M-2
PURCHASE AGREEMENT
<PAGE> 80
10. No waiver of any provision hereof shall be effective unless
and until made in writing and signed by the party to be charged. No waiver,
forbearance or failure by any party hereto of its right to enforce any provision
of this Agreement shall constitute a waiver or estoppel of such party's right to
enforce any other provision of this Agreement or a continuing waiver by such
party of compliance with any provision.
11. In the event of any litigation, arbitration, judicial
reference or other proceeding involving the parties hereto to enforce any
provision hereof, to enforce any remedy available upon default hereunder, or
seeking a declaration of the rights of a party hereunder, the prevailing party
shall be entitled to recover from the other such attorneys' fees and costs as
may be reasonably incurred, including the cost of reasonable investigation,
preparation and professional or expert consultation incurred by reason of such
litigation, arbitration, judicial reference or other proceeding. Notwithstanding
the foregoing, (a) in an arbitration proceeding the award of attorneys' fees
shall be governed by the provisions of Section 17.6 in the Purchase Agreement;
and (b) in a mediation under Section 17.2 of the Purchase Agreement, each Party
shall pay its own attorneys' fees and expenses in accordance with said Section
17.2.
12. With the exception of Section 17.7, the dispute resolution and
arbitration provisions of Article 17 of the Purchase Agreement are incorporated
by reference herein; provided that the term "Parties" as used in said Article 17
refer to Indemnitor and Indemnitees hereunder.
13. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, transferees, and assigns.
14. Each party hereto irrevocably consents to the jurisdiction of
the state and Federal courts located in San Jose, California; agrees, subject to
the provisions of Article 17 of the Purchase Agreement, that any action, suit or
proceeding by or between the parties may be brought in any such court sitting in
San Jose, California; and waives any objection which the party may now or
hereafter have concerning jurisdiction and venue, whether based on
considerations of personal jurisdiction, forum non conveniens or on any other
ground. Each party hereby irrevocably designates, appoints and empowers the
Secretary of State of California to receive for and on behalf of such party
service of process in the State of California and further irrevocably consents
to the service of process outside of the territorial jurisdiction of said courts
by mailing copies thereof by registered or certified United States mail, postage
prepaid, to such party's last known address as established in accordance with
the Purchase Agreement with the same effect as if the Party were a resident of
the State of California and had been lawfully served in such state. Any process
served on the California Secretary of State in accordance with the preceding
sentence shall also be noticed to the party's last known address established in
accordance with the Purchase Agreement. Nothing in this Agreement shall affect
the right to service of process in any other manner permitted by law. Each party
further agrees that final judgment against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction within or
outside the State of California by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and the
amount of such judgment.
15. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
M-3
PURCHASE AGREEMENT
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
INDEMNITOR:
_____________________________________________,
a ___________________ corporation
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
INDEMNITEES:
TAIWAN SEMICONDUCTOR
MANUFACTURING CO., LTD., a corporation
incorporated under the laws of the Republic of
China
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
WAFERTECH, LLC, a Delaware limited
liability company
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
M-4
PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.49
RESCISSION OF OPTION AGREEMENT 1
WHEREAS, the undersigned, TSMC and Customer, hereby enter into this
RESCISSION OF OPTION AGREEMENT 1 on this 25th day of June, 1996.
WHEREAS, the undersigned, TSMC and Customer, are parties to a Wafer
Supply Agreement dated June 26, 1995 and amended October 1, 1995, an Option
Agreement 1 dated June 26, 1995 and amended October 1, 1995, an Option Agreement
2 dated October 1, 1995, and an Option Agreement 3 dated October 1, 1995.
WHEREAS, in consideration of the execution concurrently herewith of a
Limited Liability Agreement of Wafer Tech LLC, and Ancillary Agreements
identified therein, by the parties and/or their affiliates, the parties have
agreed to rescind Option Agreement No. 1.
NOW, THEREFORE, do the undersigned parties agree as follows:
1. Option Agreement 1 is hereby rescinded ab initio in its entirety.
---------
2. TSMC hereby returns to Customer the following three promissory
notes delivered under Option Agreement 1:
Date Amount
---- ------
June 30, 1996 $4,800,000
June 30, 1997 $4,800,000
June 30, 1998 $4,800,000
3. TSMC hereby refunds the amount of $2,400,000 previously paid under
Option Agreement 1, by paying said amount to Wafer Tech LLC as part of Altera's
capital contribution under the Limited Liability Agreement.
4. All references to Option Agreement 1 contained in the Wafer Supply
Agreement (as amended), Option Agreement 2 and Option Agreement 3 are hereby
deleted. The Wafer Supply Agreement (as amended), Option Agreement 2 and Option
Agreement 3 otherwise continue in full force and effect, subject to a
Memorandum of Intent dated October 1, 1995 with respect to Altera's right to
supersede Option Agreement 3.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
<PAGE> 2
[SIGNATURE PAGE TO RESCISSION OF OPTION AGREEMENT 1]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
TAIWAN SEMICONDUCTOR ALTERA CORPORATION
MANUFACTURING CO., LTD. ("CUSTOMER")
("TSMC")
By: /s/ Donald W. Brooks By: /s/ Rodney Smith
------------------------------ ---------------------------------
Name: Donald W. Brooks Name: Rodney Smith
----------------------- ---------------------------------
Title: President Title: President, Chief Executive
----------------------- --------------------------
Officer and Chairman
<PAGE> 1
EXHIBIT 11
ALTERA CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
PRIMARY:
<S> <C> <C> <C> <C>
Weighted average shares outstanding 43,706 43,289 43,667 43,193
Net effect of dilutive stock options 2,068 2,235 2,222 2,146
------- ------- ------- -------
Total 45,774 45,524 45,889 45,339
======= ======= ======= =======
Net income $24,265 $19,632 $55,705 $34,729
======= ======= ======= =======
Income per share $ 0.53 $ 0.43 $ 1.21 $ 0.77
======= ======= ======= =======
FULLY DILUTED:
Weighted average shares outstanding 43,706 43,289 43,667 43,193
Net effect of dilutive stock options 2,068 2,299 2,211 2,350
Assumed conversion of convertible
subordinated notes 4,495 489 4,495 248
------- ------- ------- -------
Total 50,269 46,077 50,373 45,791
======= ======= ======= =======
Net income $24,265 $19,632 $55,705 $34,729
Add:
Convertible subordinated notes interest, net
of income taxes 1,896 367 3,816 367
------- ------- ------- -------
Adjusted net income $26,161 $19,999 $59,521 $35,096
======= ======= ======= =======
Income per share $ 0.52 $ 0.43 $ 1.18 $ 0.77
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 104,067
<SECURITIES> 187,284
<RECEIVABLES> 40,048
<ALLOWANCES> 1,662
<INVENTORY> 101,124
<CURRENT-ASSETS> 479,613
<PP&E> 110,171
<DEPRECIATION> 46,104
<TOTAL-ASSETS> 762,310
<CURRENT-LIABILITIES> 160,606
<BONDS> 286,160
0
0
<COMMON> 88,095
<OTHER-SE> 227,449
<TOTAL-LIABILITY-AND-EQUITY> 762,310
<SALES> 253,393
<TOTAL-REVENUES> 253,393
<CGS> 97,903
<TOTAL-COSTS> 97,903
<OTHER-EXPENSES> 69,760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,342
<INCOME-PRETAX> 87,040
<INCOME-TAX> 31,335
<INCOME-CONTINUING> 55,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,705
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.18
</TABLE>
