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
2
EX. 10.48
TABLE OF CONTENTS
PAGE
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
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PURCHASE AGREEMENT
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EX. 10.48
PAGE
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
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PURCHASE AGREEMENT
4
Exhibit 10.48
PAGE
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
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PURCHASE AGREEMENT
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Exhibit 10.48
PAGE
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
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PURCHASE AGREEMENT
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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
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PURCHASE AGREEMENT
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
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
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.
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PURCHASE AGREEMENT
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.
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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.
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
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
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
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
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
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.
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.
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.
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
13
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.
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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PURCHASE AGREEMENT
21
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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PURCHASE AGREEMENT
22
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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PURCHASE AGREEMENT
23
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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PURCHASE AGREEMENT
24
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 AGREEMENT
25
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
26
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
27
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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PURCHASE AGREEMENT
28
(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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PURCHASE AGREEMENT
29
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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PURCHASE AGREEMENT
30
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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PURCHASE AGREEMENT
31
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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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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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
36
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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37
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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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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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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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
34
PURCHASE AGREEMENT
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
35
PURCHASE AGREEMENT
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.
36
PURCHASE AGREEMENT
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
37
PURCHASE AGREEMENT
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
38
PURCHASE AGREEMENT
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
39
PURCHASE AGREEMENT
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]
40
PURCHASE AGREEMENT
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
------------------------------ ------------------------------
48
EXHIBIT "A"
Pricing Schedule
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
49
EXHIBIT "B"
Product Qualification Plan
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
50
EXHIBIT "C"
Quality and Reliability Specifications
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
51
EXHIBIT "D"
Wafer Equivalents
(See Following Page)
PURCHASE AGREEMENT
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.
53
EXHIBIT "E"
Production Ramp-Up Plan
(See Following Page)
PURCHASE AGREEMENT
54
EXHIBIT E
I.3 JV COMPANY IN USA CAPACITY RAMP UP PLAN
(8" WAFER 30K/MONTH)
Unit: 8: Kpcs
- ----------------------------------------------------------------------------------------------------------------
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
- ----------------------------------------------------------------------------------------------------------------
1998 *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
1999 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2000 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2001 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
2002 *** *** *** *** *** *** *** *** *** *** *** *** ***
- ----------------------------------------------------------------------------------------------------------------
* 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.
55
EXHIBIT "F"
Buyers' Purchase Forecasts
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
56
EXHIBIT "G"
Design Rule and Parametric Information
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
57
EXHIBIT "H"
Inspection and Testing Methods
(To be determined subsequent to the date of this Agreement)
PURCHASE AGREEMENT
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
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
J-1
PURCHASE AGREEMENT
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
J-2
PURCHASE AGREEMENT
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,
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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.
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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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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:________________________
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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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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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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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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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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.
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====================================================================================================================================
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 ---
====================================================================================================================================
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
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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.
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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:
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PURCHASE AGREEMENT
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.
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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 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
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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.
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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:
------------------------- --------------------------
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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
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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.
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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.
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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: ____________________________________
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