[ARTICLE] 5
[MULTIPLIER] 1
[*] Denotes information for which confidential
treatment has been requested.
Confidential portions omitted have been filed
separately with the Commission.
UNITED MICROELECTRONICS CORPORATION
No. 13 Innovation Road I
Science Based Industrial Park
Hsin Chu City, Taiwan, R.O.C.
telephone (035) 782-258; facsimile (035) 774-767
September 13, 1995
WRITTEN ASSURANCES RE: FOUNDRY VENTURE AGREEMENT
At the suggestion of several venturers, UMC is pleased to
confirm in writing the following points concerning the Foundry
Venture Agreement and the Foundry Capacity Agreement. Where these
commitments require the consent of FabVen, UMC will exercise its
influence and commit best faith efforts to secure that consent.
1. ALL VENTURERS ARE OFFERED EQUAL TERMS As stated in the
Foundry Venture Agreement, the terms of investment and of wafer
purchases to each Venturer under the Foundry Venture Agreement and
under the Foundry Capacity Agreement are the same, except for the
percentages of ownership and capacity rights of each Venturer
[capacity rights for Venturers are equal to [*] times the
percentage of ownership]; provided however that Venturers who
commit to a minimum of [*]% will have the right to appoint a
representative to a seat on the board of directors for the initial
three year term.
2. ACCESS TO BOARD MEETINGS & BOARD MEMBERS Subject to the
obligations of Confidentiality imposed under the Foundry Venture
Agreement, the Foundry Capacity Agreement, and/or the Technology
Transfer and License Agreement ("Venture Agreements"), and to the
requirements of law, each Venturer will be given reasonable notice
of meetings of the board of directors of FabVen, and the
opportunity to have a representative attend such meetings and
communicate at such meetings with the board members in connection
with matters concerning FabVen.
3. MEMBERSHIP ON FABVEN BOARD--FIRST THREE YEARS AND BEYOND
The board of directors of FabVen will be comprised of seven
members. Of these seven members, four will be appointed by UMC
for an initial three year term, one will be appointed by the
R.O.C. financial institutions which invest in FabVen for an
initial three year term, and the other two board members will be
appointed for an initial three year term by the Venturers other
than UMC under procedures to be mutually agreed upon by such
Venturers, provided that any Venturer who holds at least [*]% of
the shares of FabVen will be entitled to appoint one of such other
two board members. After the initial three year term, the board
will be elected by the shareholders pursuant to R.O.C. law in the
manner provided in the bylaws.
4. STRATEGIC ACTIONS SUBJECT TO SPECIAL BOARD APPROVALS
Subject to the other requirements of the law, and for so long as
the Venturer involved remains in compliance with all payment
obligations under the Foundry Venture Agreement and such Venturer
retains at least [*] of the ownership percentage in FabVen as
listed in Paragraph 4.1 of the Foundry Venture Agreement, all
board actions directly deciding strategic technical issues
[including without limitation, the type of process technology
(such as that used in the manufacture of logic, SRAM, DRAM, EPROM,
EEPROM, and/or FLASH) to be developed, implemented and/or offered
by FabVen, the amendment of the Technical Transfer and License
Agreement, and/or the transfer or licensing of technology
developed by FabVen to others (except as contemplated under the
Technology Transfer and License Agreement)] shall not be
effective unless and until approved by at least one of the board
members designated by the Venturers other than UMC, and (ii) all
board actions authorizing liquidation of FabVen, merger of FabVen,
sale of all or substantially all of FabVen or of FabVen's assets,
and/or the offering of any equity (except pursuant to a public
offering of FabVen shares on a recognized securities exchange)
shall not be effective unless and until approved by both board
members designated by the non-UMC Venturers under the terms of the
Foundry Venture Agreement.
5. NO UNAUTHORIZED CHANGES TO TECHNOLOGY ROADMAP For so
long as the Venturer involved remains in compliance with all
payment obligations under the Foundry Venture Agreement and such
Venturer retains at least [*] of the ownership percentage as
listed in Paragraph 4.1 of the Foundry Venture Agreement, FabVen
shall not make any material changes to the Technology Road Map as
shown in Attachment A which affect such Venturer's existing and/or
planned production without the consent of that Venturer.
6. CONDITIONAL "PUT" RIGHT To the extent that FabVen fails
(i) to qualify silicon manufactured with [*] and [*] processes
each having a minimum of 0.35 feature sizes under a test vehicle
to be agreed upon by FabVen, UMC and a majority of the Venturers
other than UMC (including without limitation, a test vehicle from
a Venturer, provided that such qualification under a test vehicle
from a Venturer is commercially reasonable and within industry
standards) ("First Qualification") on or before the end of
December 31, 1998, and/or (ii) to achieve the ability to
manufacture a minimum of [*] wafer outs per month for such [*]
process and [*] wafer outs per month for such [*] process on or
before December 31, 1998 for reasons attributable to UMC, FabVen
and/or the Licensed Processes, the Venturers (one or more of them)
will have the option to sell their shares (and their corresponding
rights to capacity in FabVen) to UMC for the total amount they
paid for such shares by sending written demand to UMC as follows:
(a) No such demand shall be effective unless it is made on
or before April 1, 1999; and (b) Within ninety days of such
written demand from the Venturer involved, UMC will buy the shares
(and capacity rights) involved, and/or arrange another buyer
willing to purchase such shares (and capacity rights) under the
terms and conditions as stated in this heading.
7. RELEASE OF SHARE TRANSFER RESTRICTION IF NO PUBLIC OFFERING
To the extent that FabVen does not offer its shares in a
public offering on a recognized securities exchange on or before
December 31, 2006, and notwithstanding anything to the contrary,
each Venturer other than UMC will have the right to transfer its
entire right and interests in FabVen as follows:
(a) The Venturer wishing to transfer ("Transferring
Venturer") shall send the other Venturers (including UMC) written
notice of its intention to transfer, stating in such notice the
general terms and payment contemplated by such Transferring
Venturer;
(b) Within thirty days (the "Transfer Notice Period") of
such notice, any one or more such other Venturers may send a
written offer to purchase such Transferring Venturer's interest
under terms to be stated in the written offer [for purposes of
this Paragraph, each other Venturer making such an offer shall be
referred to as the "Offering Venturer''];
(c) If no other Venturer makes such an offer within the
Transfer Notice Period, then, subject to subpart (g) below, the
Transferring Venturer shall be allowed to transfer its entire
interest and ownership in FabVen to other purchasers.
(d) If any Offering Venturer makes such an offer within the
Transfer Notice Period, the Transferring Venturer and the Offering
Venturer will negotiate in good faith concerning each such offer
for not less than thirty days (the "Transfer Negotiation
Period").
(e) If by the end of the Transfer Negotiation Period and
despite such negotiations, the Transferring Venturer has not
reached agreement with the Offering Venturer(s) for sale of the
Transferring Venturer's interest, then, subject to this Paragraph
(and all of its subparts), the Transferring Venturer shall be
allowed to transfer its entire interest and ownership in FabVen to
other purchasers.
(f) Notwithstanding anything to the contrary, no
Transferring Venturer shall be allowed to accept from any third
party any offer with price and terms, taken together, which are
less favorable than last offered in writing by an Offering
Venturer during the Transfer Notice and/or Transfer Negotiation
Periods, unless such Transferring Venturer first offers the same
price terms to such Offering Venturer in writing, and allows such
Offering Venturer ten business days to accept or reject such price
and terms.
(g) Except as permitted in paragraph 4.1(f) of the Foundry
Venture Agreement and/or in Paragraph 15 of this Written
Assurance, no Venturer may transfer its interest or right in
FabVen under this paragraph or otherwise in any manner to any
competitor of UMC or to any entity in the business of fabricating
integrated circuits except under terms (i) in which such Venturer
first relinquishes and releases all rights to FabVen capacity and
to designate membership on the FabVen board of directors under
this and any and all other agreements, and (ii) in which such
entity and/or competitor expressly consents in writing that they
have no such interest or right to such capacity and/or
designation.
8. TECHNOLOGY TRANSFER AND LICENSE CONDITION TO FIRST PAYMENT
Notwithstanding anything to the contrary, the execution of the
Technology Transfer and License Agreement in the form presented to
the Venturers as of September 15, 1995 shall be a condition
precedent to any payment of investment amounts pursuant to the
Foundry Venture Agreement.
9. CLARIFICATION OF FAB RAMP-UP CONDITION TO THIRD INSTALLMENT
Notwithstanding anything to the contrary, the milestone for
the third investment payment milestone shall be on or before "fab
production ramp-up" as that phrase is generally understood and
interpreted in the industry.
10. USE OF INVESTMENT MONIES Unless otherwise agreed by each
Venturer, FabVen will use all funds invested by the Venturers
pursuant to paragraph 4.1 (b) of the Foundry Venture Agreement
solely as outlined in and consistent with the FabVen Business
Plan.
11. RIGHTS OF FIRST REFUSAL ON SUBSEQUENT OFFERINGS FabVen
will provide the Venturers with notice reasonable under the
circumstances in order to enable them to exercise their rights of
first refusal in connection with equity offerings pursuant to
paragraph 4.1(g) of the Foundry Venture Agreement.
12. VESTING OF TECHNICAL SHARES UMC's technical shares will
not vest under paragraph 4.1(d) of the Foundry Venture Agreement
until FabVen produces wafers with the 0.35 process (as that
phrase is defined in general industry usage) with sufficient yield
to be recognized as "production ready" within general industry
usage.
13. AUDIT RIGHTS The specific wording of the provisions
contemplated under paragraph 4.2 of the Foundry Venture Agreement
with respect audit rights and financial information will be as
stated by Price Waterhouse, with their commitment to prepare the
reports as promptly as possible under the circumstances. The exact
language for the audit rights will be modeled on whatever Price
Waterhouse and the other accountants agree upon in connection with
the joint venture announced with UMC, Alliance and S3. Currently,
it is contemplated that the financials will be prepared in a
manner consistent with that imposed on U.S. public companies for
minority interests.
14. TERMS FOR RIGHTS OF FIRST REFUSAL UNDER PARAGRAPH 4.1(f)(iv)
The rights of first refusal under Paragraph 4.1 (f)(iv) of the
Foundry Venture Agreement are intended to extend to and benefit
all other eligible Venturers. To avoid any ambiguity, 4.1
(f)(iv)(cc) and 4.1 (f)(iv)(dd) are to be interpreted as follows:
(cc) if any such eligible other Venturer elects not to
exercise any portion or all of such right of first
refusal within 30 days of the independent appraisal, such portion
of such right of first refusal will be subject to
exercise by the other eligible other Venturers in
proportion to their then existing shareholdings in FabVen, and the
shares involved will be subject to a right of such other
eligible other Venturers to purchase on the same terms
as outlined above; and
(dd) if any such other eligible other Venturer does not
commit to purchase such shares within 60 days of the
independent appraisal, all rights under this Paragraph 4.1
(f)(iv) will expire as to such unpurchased shares.
15. TRANSFERS OF SHARES AFTER PUBLIC OFFERING Nothing in
Paragraph 6.2(c)(i) of the Foundry Venture Agreement or elsewhere
shall prohibit a Venturer from offering and/or selling its shares
in FabVen on the public market to a competitor of UMC, provided
however that such competitor must relinquish all rights to
representation and access to Board information under the Foundry
Venture Agreement and under this Written Assurance, and provided
that the restrictions of Paragraph 6.2(c)(ii) of the Foundry
Venture Agreement and of Paragraph 7 of this Written Assurance
shall still apply, and provided further that the other
restrictions concerning transfers of capacity and reductions in
capacity on a proportional basis with reductions in ownership will
also apply.
16. TRANSFERS OF CAPACITY AMONGST VENTURERS Notwithstanding
anything to the contrary, the Venturers in Module C may each
transfer their respective capacities (whether or not previously
forecast) as stated in Paragraph 2.1 of the Foundry Capacity
Agreement to and between one another by written notice to FabVen
and the other Venturers, provided that such written notice must
state the capacity amounts so transferred and the months in which
such transfer will apply and provided that FabVen's consent (which
must not be unreasonably withheld) shall be required for a
transfer of quantities previously committed under Paragraph 2.3(b)
of the Foundry Capacity Agreement. To the extent that FabVen
receives such written notices forty-five or more days prior to the
beginning of each month in which such capacity is to be
transferred, such capacity will be treated as if allocated to the
Venturer to whom it has been transferred for all purposes for the
period of the transfer involved, including, without limitation,
for purposes of forecasts, commitments, and the right of FabVen to
commit to others any capacity unexercised by the Venturers.
17. ONE YEAR WARRANTY The warranty period as stated in
Paragraph 5.1 of the Foundry Capacity Agreement, and the claim
period as stated in Paragraph 5.3 of the Foundry Capacity
Agreement shall each be one year.
18. CLARIFICATION OF PARAGRAPH 5.4 OF THE FOUNDRY CAPACITY
AGREEMENT The limitations of paragraph 5.4 of the Foundry
Capacity Agreement are intended to limit the remedies under the
Warranty provisions, Section 5 of the Foundry Capacity Agreement.
Thus, the Paragraph will be understood and interpreted as
follows:
THIS PARAGRAPH 5.4 STATES THE ONLY AND EXCLUSIVE REMEDY FOR ANY
AND ALL CLAIMS MADE AGAINST FABVEN UNDER THIS SECTION 5 OF THIS
FOUNDRY CAPACITY AGREEMENT.
19. CONFIRMATION OF"COVER" REMEDY To the extent an
intentional breach by FabVen of its obligations concerning wafer
start and/or delivery under the Foundry Capacity Agreement results
in a delay of more than 60 days in delivery of Wafers to a
Venturer, then, notwithstanding anything to the contrary, at the
election of the Venturer, FabVen will compensate such Venturer for
reasonable damages of such Venturer in securing substitute or
cover Wafers for those involved in the breach, subject to the
limitation stated below. In addition, to the extent that FabVen
breaches its warranties under Section 5 of the Foundry Capacity
Agreement, and fails, for reasons attributable to a breach by
FabVen or the Licensed Process to correct such breach after two
successive attempts to do so, then, at the election of the
Venturer, FabVen will compensate such Venturer for reasonable
damages of such Venturer in securing substitute or cover Wafers
for those involved in the breach, subject to the limitation stated
below. Notwithstanding anything to the contrary, for purposes of
this commitment in Paragraph 19 of this Written Assurance, the
recoverable substitute and/or cover damages shall be (i) the
reasonable and necessary costs to replace mask sets for the
products involved, together with (ii) the difference between (aa)
the price which the Venturer would have paid for the Wafers had
FabVen fully performed (the "contract price"), and (bb) all direct
and reasonable costs (up to a maximum of [*]% of the contract
price) incurred by the Venturer in securing substitutes and/or
cover.
20. LEASE TERM AND LEASEHOLD IMPROVEMENTS Notwithstanding
anything to the contrary under any local real estate or other law,
custom or practice, UMC will consider all investments,
improvements and fixtures purchased by FabVen to be the property
of FabVen, and UMC will not request higher rents under the lease
of Module C as a result of any such investment, improvement and/or
fixture. In addition, at the request of FabVen, UMC will
negotiate in good faith with FabVen over additional extensions of
the lease term beyond the fifteen year period contemplated under
the Foundry Venture Agreement, and, to the extent that UMC retains
the underlying right to do so, UMC will renew the lease to FabVen
for the land of Module C for subsequent five year terms continuing
until the term (or partial term) ending August 31, 2044. Without
limiting the terms of the Foundry Venture Agreement, the lease
rate for the land for Module C will be proportional to the amount
paid by UMC to the Park Administration for the respective square
footage involved, plus a reasonable amount to cover overhead
directly related to the lease (not to exceed [*]% of the rate for
the respective share).
21. CONTINUED ASSISTANCE BY UMC Notwithstanding anything to
the contrary, UMC will continue to provide technical assistance to
FabVen with respect to the Licensed Processes to the extent and
for the period reasonably necessary to permit each Venturer to
qualify its products on each Licensed Process which is suitable
for the production of such products. In addition, UMC will make
good faith efforts to improve and develop UMC technology so as to
enable UMC to provide that technology to be provided to FabVen by
UMC as shown in the Technology RoadMap.
22. CHOICE OF LAW--NO "HIDDEN" MEANINGS To the extent any
aspect of Taiwan law purports to alter the express meaning of any
term of the Technology Transfer and License Agreement, such term
will not be governed by Taiwan law, but instead will be governed
by California law so as to give effect to the express intention of
the parties as stated in that agreement.
23. CONFIRMATION OF SCOPE OF LICENSE All licenses granted
and/or to be granted under the Technology Transfer and License
Agreement are intended to include rights to import, to offer to
sell, and to otherwise dispose of Wafers, Die and product made
using the Wafers made, together with all other rights stated.
24. NO KNOWN INFRINGEMENTS--UMC UMC represents and warrants
to the Venturers and to FabVen that UMC has no actual knowledge
that the Licensed Process (as defined in the Technology Transfer
and License Agreement) infringes any Patent Claims (as defined
below).
25. NO KNOWN INFRINGEMENTS--FABVEN FabVen represents to each
of the Venturers that, to its or UMC's actual knowledge as of
August 29, 1995, the technology, processes, masks and other
information transferred or licensed to FabVen under the Technology
Transfer and License Agreement or otherwise used in the
manufacture of products pursuant to the terms of this Foundry
Venture Agreement and/or the Venture Agreements will not infringe
any valid patent rights enforceable under R.O.C. and/or U.S. law
("Patent Claims"), provided however that "Patent Claims" shall not
include claims arising out of and/or in connection with patents
licensed to UMC by third parties as of August 29, 1995. FabVen
shall indemnify and hold harmless each of the Venturers from and
against any such Patent Claims (i) to the extent arising out of a
breach of this representation, and/or (ii) to the extent and
proportional to any claim that such Venturer is liable as a direct
and/or indirect result (aa) of its execution of this Foundry
Venture Agreement or any of the Venture Agreements, and/or (bb) of
its investment in FabVen and/or any actions under such agreements
on any agency, express or implied partnership or joint venture,
respondent superior, piercing the corporate veil, conspiracy or
other legal theory whereby liability is asserted against such
Venturer for or on account of actions of FabVen. Under no
circumstances shall FabVen have any obligation under this
Paragraph with respect to any Venturer who conspires and/or
cooperates, other than pursuant to process of law, with the person
raising the Patent Claim for which indemnity is sought, with
respect to such Patent Claim. Notwithstanding anything to the
contrary, and except for breaches of the representation of FabVen
in the first sentence of this Paragraph, FabVen will not indemnify
or hold any Venturer harmless from or against any Patent Claim to
the extent arising out of the manufacture for such Venturer and/or
the purchase, use and/or sale of products by that Venturer,
provided however that with respect to such Patent Claims the
Venturer shall be entitled to the same replace or refund remedy as
is set forth in Paragraph 5.4 of the Foundry Capacity Agreement
with respect to defectively manufactured product, provided however
that unless otherwise agreed, replacement product shall not
satisfy FabVen's obligations under this Paragraph 25 unless that
replacement is non-infringing.
26. CLARIFICATION OF PURPOSE As is clear from the documents
involved, FabVen shall be in the business of fabricating
integrated circuits and developing related processes and know-how.
In doing so, FabVen will sell Wafers to the Venturers and others
as described in more detail in the Foundry Capacity Agreements.
27. CONFIRMATION OF COMMITMENTS BY FABVEN FabVen will
undertake its reasonable best efforts to implement the Technology
Road Map attached to the Foundry Venture Agreement as Attachment
A, to achieve the goals described in the FabCo Business Plan, and
to achieve the [*] wafer out minimums with respect to each of the
[*] and the [*] processes described in Paragraph 6 above. In
addition, and subject to the terms of this Foundry Venture
Agreement, the Foundry Capacity Agreement and the Technology
Transfer and License Agreement, FabVen will cooperate with each
Venturer in a commercially reasonable manner to qualify products
of such Venturer under the processes involved.
28. LIMITED DISCOVERY IN CONNECTION WITH ARBITRATION
Notwithstanding anything to the contrary in the Foundry Venture
Agreement, the arbitrators will have the power to require
discovery in connection with any dispute within their jurisdiction
pursuant to the Federal Rules of Civil Procedure to the extent
they find such discovery necessary to achieve a fair and equitable
result, and subject to reasonable orders from the arbitrators to
minimize the burdens involved and to focus the discovery on those
areas necessary. All reasonable costs of such discovery (including
attorneys' fees) incurred by a party which prevails in the
arbitration in connection with the issue involved in the discovery
will be recoverable by that party against the party which
requested the discovery.
29. CONFIRMATION OF OBLIGATIONS CONCERNING PROPRIETARY PROCESSES
Without limiting the obligations under the confidentiality
provisions of the Foundry Venture Agreement, and at the written
request of a Venturer, FabVen will treat as confidential all
processes provided by a Venturer which are designated by that
Venturer ;as "Confidential" under the Foundry Venture Agreement,
and, without the written consent of the Venturer which provided
the process, FabVen shall not use or otherwise disclose any such
process for any purpose other than the fabrication of Wafers for
such Venturer.
30. RATIFICATION BY FABVEN UMC shall exert best faith
efforts to have FabVen ratify in writing the commitments and
obligations under this Written Assurance which apply to FabVen.
31. APPROPRIATE PUBLIC OFFERING ROADMAP Promptly upon
incorporation of FabVen, the parties will use reasonable best
efforts to pursue discussions with mutually acceptable investment
bankers or other appropriate people to attempt to establish the
appropriate roadmap to an initial public offering.
32. APPROPRIATE RESOLUTION MECHANISM FOR DISPUTES Promptly
upon incorporation of FabVen, the parties will use reasonable best
efforts to discuss and evaluate dispute and conflict resolution
mechanisms and procedures in an attempt to anticipate and
hopefully resolve matters.
We request that each Venturer countersign this Written
Assurance below to signify their approval and assent to its terms,
and to confirm that we each will hold this Written Assurance as an
integral and material part of our Foundry Venture Agreements.
Yours sincerely,
/s/ John Hsuan
John Hsuan, President
AGREED ON BEHALF OF Cirrus Logic, Inc
Name of Venturer As of
September 29, 1995
/s/ Michael Hackworth
Authorized signature
RATIFIED BY FABVEN
Authorized signature