[ARTICLE] 5
[MULTIPLIER] 1
[*] Denotes information for which confidential
treatment has been requested.
Confidential portions omitted have been filed
separately with the Commission.
FABVEN FOUNDRY CAPACITY AGREEMENT
This Foundry Capacity Agreement ("Foundry Capacity
Agreement") is entered into as of September __, 1995 ("the
Effective Date") by and amongst FabVen, a Taiwan corporation
having its principal place of business at No. 3 Li-Hsin Road,
Science-Based Industrial Park, Hsin Chu City, Taiwan, R.O.C.
("FabVen"), United Microelectronics Corporation, a Taiwan
corporation having its principal place of business at No. 13,
Innovation Road 1, Science-Based Industrial Park, Hsin Chu City,
Taiwan, R.O.C. ("UMC"), and Cirrus Logic, Inc., a corporation with
its headquarters in California ("Cirrus").
1. DEFINITIONS
1.1 "Foundry Products" and/or "Products" shall mean those
integrated circuits designed and/or licensed by one or more of the
Venturers and/or any of the subsidiaries of the Venturers which
FabVen manufactures for sale by the specific Venturer involved
under this Foundry Capacity Agreement.
1.2 "FabVen Production Capacity" and/or "Production Capacity"
shall mean commercial production capacity in FabVen's facilities
in quantities designated as 8-inch equivalent wafer starts during
the month involved.
1.3 "Proprietary Information" shall for purposes of this Foundry
Capacity Agreement have the same meaning as defined for
Confidential Information under the Foundry Venture Agreement.
1.4 "Technology Transfer and License Agreement," "Foundry
Venture Agreement," and "Foundry Venture Memorandum of
Understanding" shall mean the agreements having those titles as
entered by and between UMC and the other Venturers in connection
with the business of FabVen.
1.5 "Venturers" shall mean Cirrus and UMC, and such others
(collectively "OtherVen") as may be arranged by UMC to participate
in the Foundry Venture Agreement and Foundry Capacity Agreement
pursuant to the terms of paragraph 4.1(b) of the Foundry Venture
Memorandum of Understanding, provided that each OtherVen must
confirm in writing that they will be bound by and comply with the
terms of this Foundry Capacity Agreement as if they were expressly
named as a Venturer. Cirrus expressly consents to the
participation of OtherVen, and such participation of OtherVen
shall not in any manner relieve Cirrus of any obligations
hereunder.
2. PRODUCTION OF FOUNDRY PRODUCTS
2.1 Subject to the terms of this Foundry Capacity Agreement, and
for so long as such Venturer holds a minimum of [*] of their
initial ownership percentage of FabVen, such Venturer will have
the right of first refusal for FabVen Production Capacity in an
amount up to the maximum respective percentages shown in the table
below (each a "Production Capacity Percentage"):
Venturer Production Capacity Percentage
Cirrus [ * ] %
OtherVen TBD%
Provided however that during any period when any Venturer's total
FabVen shareholding falls below [*] of their initial percentage of
the total outstanding FabVen shares under the terms of the Foundry
Venture Agreement, such Venturer's Production Capacity Percentage
shall instead be equal to the percentage of the then total
outstanding shares of FabVen then held by such Venturer.
2.2 During the first seven calendar days of each month during
the term of this Foundry Capacity Agreement, FabVen will provide
by facsimile to the Venturers written rolling forecasts of
FabVen's anticipated Production Capacity for the next six full
calendar months. These Production Capacity forecasts will not be
commitments or representations that FabVen will achieve the
quantities stated, but will be FabVen's best estimates of the
quantities involved.
2.3 Subject to Paragraph 2.1, within fourteen calendar days of
receipt of each Production Capacity forecast under Paragraph 2.2
above during the term of this Foundry Capacity Agreement, each
Venturer will provide to FabVen by facsimile a written rolling
forecast of its wafer capacity requirements from FabVen for the
next six full calendar months ("forecast" and/or "six months wafer
start requirements forecast").
(a) Each such forecast shall show the quantity of wafer
starts and shall include the specific technology for the wafers
listed. Each Venturer shall make good faith efforts to ensure
that all such forecasts are reasonable estimates of their
respective anticipated needs. Subject to this obligation, and
except as expressly stated in this Paragraph 2.3, all such
forecasts (and any responses to them) will be for planning
purposes only, and will not create any obligation to purchase
and/or sell Products.
(b) Each such six months wafer start requirements forecast
shall constitute a commitment by the Venturer to purchase a
minimum of the following percentages of the amounts indicated in
the forecast:
Month in the forecast First month of forecast Second month of
forecast Third month of forecast Fourth month of forecast Fifth
month of forecast Sixth month of forecast
Minimum percentage commitment for amounts forecast for that month
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
(c) FabVen shall provide a written response to each six
months wafer start requirements forecast within five (5) working
days of FabVen's receipt of such forecast. Subject to the other
terms of this Foundry Capacity Agreement, FabVen's response to
each such forecast shall accept the forecast for the quantities in
the first three months to the extent they are within the amounts
allowed for the Venturer involved pursuant to Paragraph 2.1.
FabVen's response may accept and/or reject in whole or in part any
additional forecast quantities for those months.
2.4 Subject to Paragraphs 2.7 and 9.5 of this Foundry
Capacity Agreement, to the extent that any forecast from any
Venturer pursuant to Paragraph 2.3 fails to forecast the full
"Production Capacity Percentage" of FabVen Production Capacity
allocated to that Venturer under Paragraph 2.1 above during any
one or more of the first [*] months of such forecast: (i) by
sending prompt written notice of the amount involved to the
Venturer affected, FabVen shall be entitled in its sole and
complete discretion to enter commitments with others for such
unexercised capacity for the applicable months and in the amounts
not so exercised, and (ii) such Venturer will not have the right
to require FabVen to provide that unexercised capacity to that
Venturer in the month(s) involved.
2.5 Notwithstanding anything to the contrary, FabVen will
have no obligation to offer additional capacity beyond that stated
in Paragraphs 2.1, 2.3 and 2.4 above and/or Paragraph 2.7 below to
any Venturer. Nevertheless, during the term of this Agreement,
each Venturer shall be entitled to negotiate with FabVen for such
capacity on the same basis as others are permitted to negotiate.
2.6 Each Venturer may exercise rights of first refusal for
foundry capacity under this Foundry Capacity Agreement solely for
Products, and not for the purpose of offering or providing foundry
capacity to others. Except as expressly provided below and/or in
the Foundry Venture Agreement, no Venturer may transfer and/or
assign its rights to capacity under this Foundry Capacity
Agreement.
2.7 The Venturers will discuss in good faith the capacity
needs of one another with respect to FabVen facilities and
Production Capacity.
2.8 Notwithstanding anything to the contrary, and in addition
to any other remedies or rights, in the event of any delays in
delivery, or any breach of any warranty provided by FabVen under
Section 5, any affected Venturer may adjust forecasted and/or
ordered Product amounts, and/or cancel orders for affected
Products, without breach of any minimum commitment obligations
hereunder to take into account the impact of such delay on the
Venturer's need for affected Products.
3. PRICING AND DELIVERY
3.1 All purchases of foundry services by the Venturers
pursuant to this Foundry Capacity Agreement will be subject to
FabVen's standard terms and conditions and its usual business
practices, subject to any contrary requirements expressly imposed
pursuant to the terms of this Foundry Capacity Agreement.
3.2 Except as expressly provided in this Foundry Capacity
Agreement, all purchases of foundry services by the Venturers
during the term of this Agreement will be at fair market value and
under fair market terms and conditions, as would be negotiated at
arm's length in an independent foundry relationship, without
regard to any preferences or privileges or other considerations
whatsoever; provided however that if all Venturers consent in
writing, FabVen may, prior to the completion of an offering of its
shares on a recognized securities exchange, offer foundry service
terms to the Venturers on such other terms as may be so expressly
agreed.
3.3 For so long as the Venturer involved has a right to
FabVen Production Capacity under Section 2.1 above, the prices and
other purchase terms to such Venturer for foundry services from
FabVen will be no less favorable than the prices and purchase
terms which FabVen offers to any other entity for comparable
processes and Products at comparable quantities; provided however
that UMC shall not be entitled to any volume discount.
3.4 FabVen shall make its best efforts to achieve on-time
delivery, and will make reasonable efforts to provide linear
shipments. To the extent that FabVen complies with its
commitments for wafer starts pursuant to the terms of this Foundry
Capacity Agreement, and thereafter makes such efforts, FabVen
shall not be liable to any Venturer for any delay in delivery.
4. RELIABILITY AND QUALITY
4.1 Subject to the terms of FabVen's standard Non-Disclosure
Agreement (the terms of which will be no more onerous than as
stated in the Foundry Venture Agreement), FabVen will provide,
upon written request of a Venturer, its available reliability and
quality data regarding Products for the purpose of maintaining
consistent quality and reliability standards for such Products
throughout the term of this Foundry Capacity Agreement.
4.2 FabVen shall give the Venturers advance written notice of
any proposed change(s) ("Proposed Change Notice") in materials
and/or to its existing manufacturing process, which, to the best
of FabVen's knowledge, might affect the form, fit, performance,
maintainability, operation, function, reliability, interface,
interconnectability, compatibility, design rules, models, or size
of the chips for Products. Such Proposed Change Notice shall
describe the nature of the proposed change(s), including reasons
for the change(s), the anticipated schedule for implementation of
the change(s), and other relevant technical and logistic
considerations, including without limitation quality and
reliability data to the extent available. The Venturers shall
approve or disapprove any such proposed change promptly, but in no
event may any such change be disapproved later than five (5)
business days after receipt of the Proposed Change Notice. If any
Venturer disapproves such proposed change within the five business
day period allowed, FabVen shall continue to manufacture and
deliver to such Venturer unchanged Products in accordance with
this Foundry Capacity Agreement for a minimum of six (6) months
from the date FabVen issues the Proposed Change Notice. Upon the
expiration of three months after the following Proposed Change
Notice, FabVen, in its discretion and by then giving a minimum of
three months prior written notice to the Venturer, may stop
manufacture and delivery of the Product involved without
liability.
4.3 Subject to the other terms of this Foundry Capacity
Agreement, the Venturers reserve the right to make any changes
they deem appropriate to the design of Products to be fabricated
for them by FabVen, provided however that each such change must be
documented by the Venturer through written change notices.
Notwithstanding anything to the contrary, after process
qualification runs for a particular Product have been made and
approved by those involved, any changes to design, process or
materials for such Products requested by the Venturer shall be
subject to FabVen's consent (which will not be unreasonably
withheld) and payment by the Venturer of applicable reasonable
costs, if any, related to such change.
4.4 During the term of this Foundry Capacity Agreement,
FabVen shall maintain fab and test lot traceability for Products
manufactured hereunder.
4.5 FabVen will promptly after discovery advise the Venturers
involved of defects and/or non-conformity in Products already
shipped to and/or in lots currently in manufacture for such
Venturer(s). During the term of this Foundry Capacity Agreement,
FabVen will provide each Venturer with written quarterly quality
assurance reports regarding Products manufactured on behalf of
that Venturer.
4.6 Wafer acceptance will be subject to process control
monitor acceptance criteria to be mutually agreed upon between
FabVen and the applicable Venturer on a process-by-process basis.
Minimum yield and low yield lot criteria will be negotiated
between FabVen and the applicable Venturer on a Product-by-Product
basis.
5. WARRANTY AND ACCEPTANCE
5.1 FabVen warrants that the Products delivered will be free
from defects in material and workmanship for a period of sixty
days following delivery by FabVen, and will be processed according
to FabVen standard processing specifications as well as in
accordance with any additional processing requirements for such
Products as may be agreed-upon in writing by FabVen and the
Venturer. FabVen warrants that the Venturer will acquire good
title to the Products fee and clear of all liens, claims and
encumbrances (other than liens, claims and encumbrances relating
to alleged intellectual property infringement).
5.2 Upon receipt of written Stop Request, FabVen will
immediately stop shipment of Products which are subject to a
suspected failure to meet the criteria specified in Paragraph 5.1.
If FabVen is responsible for such failure, or the Products in
question are not in conformity with Paragraph 5.1, and FabVen is
unable to correct it within forty-five (45) days of receipt of
such a written Stop Request, then the Venturer involved may reject
non-conforming Products which are subject to the failure, and,
without penalty (including loss of capacity) cancel any
then-committed but not yet shipped purchase order for such
Products by sending written notice of cancellation to FabVen
within seventy-five (75) days of the written Stop Request. Such a
notice of cancellation shall be effective on receipt by FabVen.
5.3 Products which are the subject of warranty claims shall
be returned in component form (removed from boards where
applicable) to FabVen pursuant to FabVen standard return material
authorization procedures. No warranty claim concerning Products,
under this Foundry Capacity Agreement or otherwise, may be made
more than four months after delivery by FabVen of the Products
which are subject to the claim.
5.4 To the extent that any Product delivered under this
Foundry Capacity Agreement fails to meet the warranties and/or
requirements provided herein, and FabVen shall either (a) replace
such Product not meeting the warranty with an equivalent number of
replacement Products without charge, or (b) refund the payments
made to FabVen for such Product, all within sixty (60) calendar
days of receipt by FabVen of written notice from the Venturer of
such non-conforming Products. The parties will discuss in good
faith which of these two remedies is the most appropriate;
provided however that if they cannot agree, FabVen shall have the
option to choose in its sole discretion between the two remedies,
and provided further that no refund and/or replacement shall be
required unless the Products for which refund and/or replacement
is sought are returned to FabVen pursuant to FabVen's return
material authorization procedures. THIS PARAGRAPH 5.4 STATES THE
ONLY AND EXCLUSIVE REMEDY FOR ANY AND ALL CLAIMS MADE AGAINST
FABVEN UNDER THIS FOUNDRY CAPACITY AGREEMENT.
5.5 FabVen shall not be responsible for defects to the extent
caused by assembly not performed by FabVen or by design or
application, or by combination of Products with other components.
5.6 The exclusions and warranties in this Section 5 will
survive the termination of this Foundry Capacity Agreement, and
the exclusions and limitations of liability and of remedies shall
apply notwithstanding any claim of a failure of any one or more
remedies to accomplish their purpose. THE PARTIES EXPRESSLY WAIVE
AND RELINQUISH ANY CONTRARY RIGHTS WITH RESPECT TO THE SUBJECT
MATTER OF THIS SECTION 5 UNDER ANY APPLICABLE LAW, DECISION,
AND/OR CUSTOM OR PRACTICE.
5.7 Upon written request from a Venturer and subject to
satisfactory arrangements for payment to FabVen for the reasonable
cost involved, FabVen will perform failure analysis of Products
returned to FabVen pursuant to its standard return material
authorization procedures. If such analysis shows the existence of
material defects in breach of FabVen's warranties under this
Foundry Capacity Agreement, FabVen will not be entitled to payment
for the cost of the failure analysis concerning such defects for
the specific Products which were subject to them.
5.8 If a Venturer requests FabVen to stop shipment of any
Products which the Venturer is obligated to purchase pursuant to
this Foundry Capacity Agreement, and the Products are subsequently
determined in good faith by FabVen to have been processed in
accordance with the requirements of this Foundry Capacity
Agreement, FabVen shall be entitled to full payment for completed
wafers and, in addition, for its reasonable direct costs for up to
one month worth of work in progress. Under this Section 5.8,
payment for completed wafers will be at the purchase order price,
and payment for work in progress shall allow FabVen to recover all
reasonable direct costs involved. All such payments will be paid
in full within forty-five days of the date of FabVen's invoice for
the amounts involved.
6. SHIPMENT AND TERMS OF PAYMENTS
6.1 Each Venturer guarantees the payment of any and all
obligations accrued pursuant to purchase orders from such Venturer
under this Foundry Capacity Agreement. Invoices for Products
shall be paid at net forty-five (45) days after the end of the
month of invoice date. Subject to contrary written agreement,
invoices for Products delivered shall show the number of wafers
and extended price in U.S. dollars.
6.2 FabVen shall deliver all Products to a freight forwarder
in the R.O.C. as designated by the Venturer involved. Such
delivery shall be F.O.B. (IncoTerms 1990) at FabVen's facility.
6.3 In the event that any payment under this Foundry Capacity
Agreement becomes restricted for any reason, the party whose
payment obligation is restricted agrees, at its own expense, to
immediately take whatever steps or actions may be necessary to
assure such payment.
7. REPRESENTATIONS AND WARRANTIES
The Venturers and FabVen each represent and warrant that
they have the right and power to enter into this Foundry Capacity
Agreement, and adequate resources to fulfill their respective
obligations hereunder.
8. TERM AND TERMINATION
8.1 This Foundry Capacity Agreement shall remain in effect
until July 1, 2005, unless sooner terminated as provided herein.
This Foundry Capacity Agreement may be terminated only as
described below and/or in Paragraphs 6.1 and 6.2 of the Foundry
Venture Agreement, the terms of which Paragraphs are incorporated
by reference.
8.2 Without limiting the foregoing:
(a) If any party fails to perform or violates any material
obligation under Paragraph 6.1 of this Foundry Capacity Agreement
or Paragraph 4.1(c) of the Foundry Venture Agreement, upon thirty
(30) days' written notice to the breaching party specifying such
default (the "Default Notice"), any non-breaching party affected
by such failure and/or violation may terminate this Foundry
Capacity Agreement as to its responsibilities and obligations as
between FabVen and that particular non-breaching party, without
liability (subject to paragraphs 8.3 and 8.4 below), unless:
(i) The breach specified in the Default Notice has been
cured within the thirty (30) day period, or if the breach is
disputed, the amount in dispute is placed in a reasonably secure
third party escrow account pending resolution of the dispute; or
(ii) The default reasonably requires more than (30)
days to correct (specifically excluding any failure to pay money),
and the defaulting party has begun substantial corrective action
to remedy the default within such thirty (30) day period and
diligently pursues such action, in which event, termination shall
not be effective unless sixty (60) days has expired from the date
of the defaulting party's receipt of the Default Notice without
such corrective action being completed and the default remedied.
(b) In the event of a breach of a material provision of this
Foundry Capacity Agreement, each of the non-breaching parties
shall promptly provide in writing a detailed description of the
breach to the extent it affects such party as well as any
available information reasonably useful and/or necessary to enable
a cure (the "Notice of Breach"). The breaching party shall meet
with each such non-breaching party within seven (7) working days
following receipt of this Notice of Breach, and shall submit a
plan to cure the breach within twenty (20) days of receipt of such
notice. The non-breaching party will accept or reject the plan in
writing (giving written reasons in the event of rejection) within
five days of receipt, provided however that no rejection of such a
plan will be determinative as to whether a cure has been
effectuated.
8.3 If a Venturer terminates this Foundry Capacity Agreement
for any reasons stated in Paragraphs 8.1 and/or 8.2, FabVen will:
(i) if so requested in writing by the Venturer involved cease all
Production required by such Venturer's purchase orders under this
Foundry Capacity Agreement; and (ii) if so requested by the
Venturer involved otherwise complete and deliver all Products
pursuant to such Venturer's purchase orders and invoice such
Venturer for the Products.
8.4 If FabVen terminates this Agreement as to any Venturer
pursuant to Section 8.1 and/or 8.2, FabVen shall be entitled to
payment in full upon delivery of all completed Products
manufactured to outstanding purchase orders issued by such
Venturer under this Foundry Capacity Agreement, as well as to
reimbursement for all reasonable direct costs incurred for up to
one month's work then in progress for such Venturer.
8.5 FabVen and each Venturer will cooperate in connection
with any issue raised by any one or more of them with respect to
intellectual property rights of third parties. Without limiting
the foregoing, upon written notice to the others, any Party hereto
may suspend (i) performance of its obligations, (ii) exercise of
its rights of first refusal with respect to capacity and/or (iii)
providing capacity to the extent that such Party has reasonable
concerns that its future performance in connection with such
matters will subject it to claims by others with respect to such
matters, provided however that no such suspension will affect any
obligation to pay for Product delivered and/or manufactured prior
to the date of written notice concerning such matters. In the
event that FabVen exercises any of its rights pursuant to this
Paragraph 8.5, FabVen will negotiate in good faith to minimize the
liability of the Venturer involved to others.
9. PROPRIETARY RIGHTS
All discoveries, improvements and inventions, conceived
or first reduced to practice, as those terms are used before the
U.S. Patent Office, in the performance of this Foundry Capacity
Agreement solely by one party and without reliance upon
Confidential Information or Proprietary Information of any other
party shall be the sole and exclusive property of such party and
such party shall retain any and all rights to file at its sole
discretion any patent applications thereon.
10. MISCELLANEOUS
10.1 All terms and conditions of Paragraphs 7 to 9 inclusive
of the Foundry Venture Agreement are incorporated by reference.
10.2 This Foundry Capacity Agreement shall become effective
only upon execution by all parties and approval, to the extent
necessary, by the Government of Taiwan. Each party agrees to make
its best faith efforts to cooperate and to obtain such approval as
soon as possible.
10.3 Nothing in this Foundry Capacity Agreement shall
prohibit any Venturer from purchasing Products and/or foundry
services from other suppliers nor, subject to Paragraph 2,
prohibit FabVen from offering wafers and/or foundry services to
others.
10.4 The provisions of Paragraph 3.4 and Paragraphs 5, 6, 7,
8, 9 and 10 shall survive the expiration and/or termination of
this Foundry Capacity Agreement.
ACCORDINGLY, each Party to this Foundry Capacity Agreement
represents and warrants that the representatives signing on their
respective behalf is authorized to enter into this Foundry
Capacity Agreement and to bind that Party to its terms.
CIRRUS LOGIC, INC.
_____/s/ Michael Hackworth______________
UNITED MICROELECTRONICS CORPORATION
_____/s/ John Hsuan___________________________________
FABVEN
_________________________________________