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"[ ]" indicates that the
confidential portion has been
omitted and filed separately with
the Commission.
EXHIBIT 10.8
OPTION AGREEMENT
BETWEEN
CHIPS AND TECHNOLOGIES, INC.
AND
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
NOVEMBER 6, 1995
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TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. VOLUME COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. WAFER PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. OTHER PURCHASE TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. FAILURE TO PURCHASE THE OPTION CAPACITY; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. BOARD APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Confidential Treatment
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OPTION AGREEMENT
THIS AGREEMENT is made and becomes effective as of November 6, 1995 (the
"Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC", a
company organized under the laws of the Republic of China with its registered
address at No. 121, Park Ave. 3, Science-Based Industrial Park, Hsinchu, Taiwan,
and, Chips and Technologies, Inc., a company organized under the laws of
California, with its registered address at 2950 Zanker Road, San Jose,
California 95134 ("Customer").
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers and Customer wishes
to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order to increase its output, TSMC must [
]
WHEREAS, as a condition to TSMC's acceleration of these facilities, TSMC
has asked that Customer make a capacity commitment and advance payment for the
right to buy additional capacity, and Customer is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
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1. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the Best Effort
Capacity as defined in this Section 1(b) below.
(b) "Best Effort Capacity" used in this Agreement shall mean the capacity
commitment made by Customer and TSMC on the best effort basis pursuant
to an existing Agreement, if any.
(c) "Customer Committed Capacity" used this Agreement shall mean the total
capacity that Customer agrees to purchase from TSMC pursuant to this
Agreement, and is set forth in Exhibit B.
(d) "Option Capacity" used in this Agreement shall mean the firm capacity
commitment made by Customer pursuant to this Agreement, for which
Capacity Customer agrees to pay the Option Fee as defined in this
Section 1(f) below.
(e) "Option Fee" used in this Agreement shall mean the deposit that
Customer agrees to place with TSMC as the advance payment for the
Option Capacity.
(f) "TSMC Committed Capacity" used in this Agreement shall mean the total
capacity that TSMC agrees to provide to Customer pursuant to this
Agreement, and is set forth in Exhibit B.
(g) [
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2. VOLUME COMMITMENT
(a) Customer agrees to purchase from TSMC the Customer Committed Capacity,
and subject to the payment of the Option Fee by Customer under Section
5 below, TSMC agrees to provide to Customer the TSMC Committed
Capacity, as set forth in Exhibit B. [
]
(b) Each month, Customer agrees to provide to TSMC a six-month rolling
forecast of the number of wafers that Customer will purchase, [
] The forecast
must be based on wafers out or deliveries expected to be made by TSMC.
(c) TSMC will use its reasonable effort to cause its fabs to be capable of
producing wafers of more advanced specifications, as set forth in the
TSMC Technology Road Map attached as Exhibit C.
3. WAFER PRICE
(a) The wafer prices for the Customer Committed Capacity [
] for the same technology, the same fab and the
same period of time. In the event that the wafer prices for the
Customer Committed Capacity do not comply with the preceding sentence,
TSMC will make proper price changes for the unfilled orders, upon
Customer's notice in writing.
(b) The parties shall negotiate in good faith each year the wafer prices
for the Customer Committed Capacity of the following year, [
]
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4. OTHER PURCHASE TERMS AND CONDITIONS
The Customer/TSMC Wafer Foundry Agreement dated (to be completed) will
apply to all purchases of wafers by Customer from TSMC, except that the
provisions of this Agreement will supersede the above Agreement with
respect to the subject matter hereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to pay to TSMC the Option Fee in the amount of [ ]
per Wafer Equivalent for the right to purchase the Option Capacity
pursuant to this Agreement. The Option Fee is set forth in Exhibit D,
and shall be paid in cash by no later than dates specified in this
Exhibit. Except that TSMC exercises its first right of refusal and
accepts the Customer's offer pursuant to Section 6 below, the Option
Fee for any calendar year, once paid, shall be non-refundable except as
outlined in this contract, and will be credited against the wafer
prices for the Option Capacity provided by TSMC for that particular
year under this Agreement.
(b) Customer further agrees to deliver to TSMC, within seven (7) days
following the Effective Date, three (3) promissory notes each in an
amount of the Option Fee due and payable to TSMC or order, which
promissory notes are in the form of Exhibit E (1-3). The promissory
notes shall be returned by TSMC to Customer within seven (7) days upon
receipt of the corresponding Option Fee by TSMC.
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6. FAILURE TO PURCHASE THE OPTION CAPACITY;
FIRST RIGHT OF REFUSAL
[
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(b) Any of Customer's right or obligation set forth in Section 6(a) shall
not affect its obligation to pay the Option Fee pursuant to Section 5
above, except that if this Agreement is assigned to any third parties
acceptable to TSMC pursuant to this Section 6(a) above, such third
parties shall pay the Option Fee and abide by the terms and conditions
of this Agreement and Customer's obligations for that Option Capacity
shall terminate.
7. TERM AND TERMINATION
(a) The term of this Agreement shall commence from the Effective Date, and
continue until December 31, 1999.
(b) TERMINATION BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION FEE
TSMC may terminate this Agreement if Customer fails to pay the Option
Fee pursuant to Section 5 above, and does not cure
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or remedy such breach within thirty(30) days of receiving written
notice of such breach.
(c) TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY
Either party may terminate this Agreement if, (i) the other party
breaches any material provisions of this Agreement (other than the
breach of Section 5 above), and does not cure or remedy such breach
within sixty (60) days of receiving written notice of such breach, or
(ii) becomes the subject of a voluntary or involuntary petition in
bankruptcy or any proceeding relating to insolvency, receivership or
liquidation, if such petition or proceeding is not dismissed with
prejudice within sixty (60) days after filing.
(d) EFFECT OF TERMINATION
Both parties shall remain liable to the other party for any outstanding
and matured rights and obligations at the time of termination,
including all outstanding payments of the Option Fee and for the wafers
already ordered and/or shipped to Customer.
In addition, if this Agreement is terminated by Customer due to a
breach by TSMC, then TSMC shall refund to Customer any portion of the
Option Fee already paid by Customer to TSMC but not yet credited to the
purchase prices of wafers in accordance with Section 5 above.
(e) Customer may terminate this Agreement in the event that TSMC is more
than twelve months late with respect to the Technology Roadmap attached
as Exhibit C.
8. BOARD APPROVAL
Customer shall obtain the approval by its Board of Directors of this
Agreement, and submit to TSMC, at the time of executing this Agreement,
an authentic copy of it's board resolution authorizing the
representative designated below to execute this Agreement.
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9. LIMITATION OF LIABILITY
In no event shall TSMC be liable for any indirect, special, incidental
or consequential damages (including loss of profits and loss of use)
resulting from, arising out of or in connection with TSMC's performance
or failure to perform under this Agreement, or resulting from, arising
out of or in connection with TSMC's producing, supplying, and/or sale
of the wafers, whether due to a breach of contract, breach of warranty,
tort, or negligence of TSMC, or otherwise.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
postage prepaid, or by personal delivery, or by fax. Any notice given
by fax shall be followed by a confirmation copy within ten (10) days.
Unless changed by written notice given by either party to the other,
the addresses and fax numbers of the respective parties shall be as
follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
No. 121, Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China FAX: 886-35-781545
To Customer:
CHIPS AND TECHNOLOGIES, INC.
2950 Zanker Road
San Jose, CA 95134 FAX: (408) 894-2086
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11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces all prior or contemporaneous
understandings, agreements, dealings and negotiations, oral or written,
regarding the subject matter hereof. No modification, alteration or
amendment of this Agreement shall be effective unless in writing and
signed by both parties. No waiver of any breach or failure by either
party to enforce any provision of this Agreement shall be deemed a
waiver of any other or subsequent breach, or a waiver of future
enforcement of that or any other provision.
12. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the Republic of China.
13. ARBITRATION
Each party will make best efforts to resolve amicably any disputes or
claims under this Agreement among the parties. In the event that a
resolution is not reached among the parties within thirty (30) days
after written notice by any party of the dispute or claim, the dispute
or claim shall be finally settled by binding arbitration in Taipei
under The Rules of Arbitration of the International Chamber of Commerce
by three (3) arbitrators appointed in accordance with such rules. The
arbitration proceeding shall be conducted in English. Judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its successors, and except that Customer may assign this
Agreement under Section 6 above, neither party shall assign any of its
rights hereunder, nor delegate its obligations hereunder, to any third
party, without the prior written consent of the other.
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15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this
Agreement except as required by Customer's assignment of this Agreement
to any third parties pursuant to Section 6 above, in confidence to its
advisers, as required by applicable law, or otherwise with the prior
written consent of the other party.
16. FORCE MAJEURE
Neither party shall be responsible for delays or failure in performance
resulting from acts beyond the reasonable control of such party. Such
acts shall include but not limited to acts of God, war, riot, labor
stoppages, governmental actions, fires, floods, and earthquakes.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the date
first stated above.
TAIWAN SEMICONDUCTOR CHIPS AND
MANUFACTURING CO., LTD. TECHNOLOGIES, INC.
BY:____________________ BY:_________________
Donald Brooks Jim Stafford
President President
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EXHIBIT A
CAPACITY FACTOR TABLE
[
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EXHIBIT B
CHIPS & TECHNOLOGY/TSMC
COMMITTED CAPACITY
[
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EXHIBIT C
TSMC CMOS TECHNOLOGY ROADMAP
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EXHIBIT D
OPTION FEES
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EXHIBIT E(1)
PROMISSORY NOTE ONE (1)
Amount: US$______________ Due Date: January 31, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before January 31, 1996, pay the Option Fee due in full on or before January
31, 1996, plus interest calculated from the Due date stated herein to the date
of full payment at the rate of 10% per annum on any unpaid portion of the
principal amount stated herein, and said payment will be made at
________________ (Place of Payment).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
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Issue Place:
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Maker's Signature:
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Maker's Address:
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EXHIBIT E(2)
PROMISSORY NOTE TWO (2)
Amount: US$_____________ Due Date: July 31, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before July 31, 1996, pay the Option Fee due in full on or before July 31,
1996, plus interest calculated from the Due date stated herein to the date of
full payment at the rate of 10% per annum on any unpaid portion of the principal
amount stated herein, and said payment will be made at ________________ (Place
of Payment).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
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Issue Place:
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Maker's Signature:
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Maker's Address:
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EXHIBIT E(3)
PROMISSORY NOTE THREE (3)
Amount: US$_______________ Due Date: November 1, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before November 1, 1996, elect one of the following alternatives: (i) to pay
the Option Fee due in full on or before November 1, 1996; (ii) to execute full
recourse promissory notes for the amount of the Option Fee due, payable in equal
installments on January 31, 1997 and July 31, 1997; or (iii) to not pay the
Option Fee and to thereby release TSMC from that portion of the capacity
commitment relating to the Option Fee. In the event Chips does not elect one of
the alternatives set forth in clauses (i) and (ii) above, Chips shall be deemed
to have elected the alternative set forth in clause (iii).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
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Issue Place:
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Maker's Signature:
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Maker's Address:
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