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EXHIBIT 10.1
OPTION AGREEMENT III
BETWEEN
ADAPTEC MANUFACTURING (S) PTE. LTD.
AND
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
APRIL 21, 1997
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TABLE OF CONTENTS
1. DEFINITIONS.....................................................3
2. VOLUME COMMITMENT ..............................................4
3. WAFER PRICE.....................................................5
4. OTHER PURCHASE TERMS AND CONDITIONS ............................5
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY ...............6
6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL 7
7. TERM AND TERMINATION............................................7
8. BOARD APPROVAL .................................................8
9. LIMITATION OF LIABILITY ........................................8
10. NOTICE. ........................................................8
11. ENTIRE AGREEMENT................................................9
12. GOVERNING LAW...................................................9
13. ARBITRATION.....................................................10
14. ASSIGNMENT .....................................................10
15. CONFIDENTIALITY ................................................10
16. FORCE MAJEURE ..................................................10
17. NO AGENCY.......................................................11
18. GOVERNMENTAL APPROVAL ..........................................11
19. COUNTERPARTS ...................................................11
EXHIBIT A ..........................................................12
EXHIBIT B ..........................................................13
EXHIBIT B-1 ........................................................14
EXHIBIT C ..........................................................15
EXHIBIT D ..........................................................16
EXHIBIT E ..........................................................17
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OPTION AGREEMENT III
THIS AGREEMENT is made and becomes effective as of April 21, 1997 (the
"Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC"), a
company organized under the laws of the Republic of China with its registered
address at No. 121, Park Ave. 3, Science Based Industrial Park, Hsinchu, Taiwan,
and Adaptec Manufacturing (S) Pte. Ltd., ("Customer"), a company organized under
the laws of Singapore, with its registered address at Six Battery Road, 532-00,
Singapore 049909.
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers and Customer
wishes to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order to increase its output, TSMC must accelerate its ramp
up in Fab 4 and advance the start of Fab 5;
WHEREAS as a condition to TSMC;s acceleration of these facilities, TSMC
has asked that Customer make a capacity commitment and advance payment for the
right to buy additional capacity, and Customer is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
1. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the
annualized run rate that TSMC commits to Provide to Customer as
set forth in Exhibit B.
(b) "Option to Base Capacity" used in this Agreement shall mean
that capacity in addition to the Base Capacity that TSMC commits
to provide to Customer when the execution of an Option has been
completed as set forth in Exhibit B.
(C) "Customer Committed Capacity" used in this Agreement shall mean
the total capacity that Customer agrees to purchase from TSMC
pursuant to this Agreement, either itself or by an Affiliate,
and as set forth in Exhibit B.
(d) "Foundry Agreement" used in this Agreement shall mean the
Foundry Agreement between TSMC and Adaptec, Inc., dated October
29, 1993, together with any amendments thereto.
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(e) "Option Capacity" used in this Agreement shall mean the firm
capacity commitment made by Customer pursuant to this Agreement,
for which capacity Customer agrees to pay the Option Fee as
defined in Subsection 1 (f) below.
(f) "Option Fee" used in this Agreement shall mean the deposit
that Customer agrees to place with TSMC as the advance payment
for the wafers comprising the Option Capacity.
(g) "TSMC Committed Capacity" used in this Agreement shall mean
the total capacity that TSMC agrees to provide to Customer or
its Affiliates, consisting of Base Capacity and Option to Base
Capacity and option Capacity as set forth in Exhibit B.
(h) "Wafer Equivalent" used in this Agreement shall mean the number
of six-inch wafers, adjusted by the equivalency factor based on
1996 Base Capacity as set forth on Exhibit A, by which capacity
commitments are measured hereunder. An example of such
calculation is set forth on Exhibit B-1. Any and all capacity
commitments referred to in this Agreement shall be for the
calendar year and measured in Wafer Equivalents.
(i) "Affiliates" used in this Agreement shall mean a party which
holds at least a seventy-five percent (75%) ownership interest
in Customer or a party in which Customer's parent holds at least
a seventy-five percent (75%) ownership interest
2. VOLUME COMMITMENT
(a) Customer agrees to Purchase annually from TSMC, either itself
or through its Affiliates, the Customer Committed Capacity set
forth for such year on Exhibit B and, subject to the payment of
the Option Fee by Customer under Section 5 below, TSMC agrees to
provide to Customer the TSMC Committed Capacity, as set forth in
Exhibit B. In any calendar year, the orders placed by Customer
or its Affiliates shall first apply to fulfill the Base
Capacity and the Option to Base Capacity portions of the
Customer Committed Capacity, and then the Option Capacity
portion.
(b) Each month, Customer agrees to provide to TSMC a six-month
rolling forecast of the number of wafers that Customer will
purchase, with the volume for the first twelve weeks being
frozen (i.e., Customer must purchase all of the quantity
forecast for the delivery in the first twelve weeks of the
forecast). The forecast must be based on wafers out.
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(c) TSMC will use its best efforts to cause its fabs to be capable
of producing wafers of more advanced specifications, as set
forth in the TSMC Technology Road Map attached as Exhibit C (The
parties anticipate that the conversion factor for migration of
6" to 8" wafers will be 1.78.).
3. WAFER PRICE
(a) The prices for wafers purchased by Customer during the term of
this Agreement shall not be more than TSMC's average wafer
prices to the optionees (i.e., other customers that are parties
to option agreements similar to this Agreement) for the same
technology, the same fab and the same period of time, taking
into account Customer's total volume across all TSMC fabs. At
Customer's request, TSMC shall permit an independent third party
mutually agreed upon by the parties to audit such books and
records as may be required to verify TSMC's most favored
customer pricing obligations in the preceding sentence. Such
audits shall be at Customer's expense at any time during the
term of this Agreement upon at least one (1) month prior written
notice to TSMC. In the event that the wafer prices do not comply
with the first sentence, TSMC will make proper price changes for
all unfilled orders upon Customer's notice in writing.
(b) The parties shall negotiate in good faith each year the wafer
prices for the Option Capacity of the following year, and if no
agreement is reached by the parties before October of each year
for the succeeding calendar year, the parties agree to submit
the dispute to the binding arbitration pursuant to Section 13
below, and under such circumstances, neither party shall have
the right to terminate this Agreement under Section 7 below.
4. OTHER PURCHASE TERMS AND CONDITIONS
(a) Foundry Agreement, together with amendments thereto, will apply
to all purchases of wafers by Customer from TSMC, except that
the provisions of this Agreement will supersede the Foundry
Agreement with respect to the subject matter hereof.
(b) TSMC agrees to subcontract the manufacture of the wafers
provided to Customer pursuant to the Option III Capacity to
WaferTech, LLC, a Delaware limited liability company, with its
registered address at 2600 N.W. Lake Road, Camas, Washington,
98607-9526 ("WaferTech").
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(c) Customer commits to purchase its Option III Capacity from
WaferTech during the term of this Agreement, provided that the
processes and capacity available at WaferTech are compatible
with Customer's requirements. In the event WaferTech is unable
or otherwise fails to provide any portion of Customer's Option
III Capacity in any given year, for whatever reason (including,
but not limited to, incompatible processes, and/or inadequate
capacity), WaferTech and/or TSMC will provide Customer with
prompt written notice thereof. Upon notice of such inability or
failure, Customer may, at its sole option and as its sole
remedy, (I) be released from its obligation to purchase such
Option III Capacity and be refunded the Portion of the Option
Fee paid for that capacity, or (ii) Purchase such Option III
Capacity from TSMC. Customer will provide TSMC with notice of
its election of one of the foregoing options within thirty (30)
days of receipt of notice from WaferTech and/or TSMC.
(d) In the event the Option Fee is to be refunded pursuant to
Subsection 4(c) above, TSMC will refund the Option Fee within
thirty (30) days of receipt of Customer's notice, together with
interest at the Bank of America reference rate (or other rate
equivalent to "prime") as published by the "Wall Street Journal"
on the date of Customer's notice, calculated from the date of
receipt of such Option Fee by TSMC to the date the refund is
issued.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to Pay to TSMC the Option Fee in the amount of
of US [***] per Wafer Equivalent for the right to purchase the
Option Capacity pursuant to this Agreement. The Option Fee is
set forth in Exhibit D, and Customer agrees to pay the Option
Fee for the entire term of this Agreement (US $35.28M) as per
this Exhibit. The Option Fee, once paid, shall be
non-refundable, except as provided in Subsection 4(c), Section 6
and Subsection 7(d), and will be credited against payments due
for wafers purchased by Customer for the Option Capacity
provided by TSMC under this Agreement.
(b) Customer agrees to deliver to TSMC, within seven (7) days
following the Effective Date, two (2) promissory notes each in
an amount of the Option Fee due per the payment schedule in 1998
as specified in Exhibit D and evidencing the payment required
pursuant to Subsection 5(a), payable to TSMC or order, which
promissory notes shall be in the form of Exhibit E. The
promissory notes shall be canceled and returned by TSMC to
customer within seven (7) days after receipt of the
corresponding Option Fee by TSMC.
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*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL
If, in any calendar year, for any reason, Customer is not able to use
or purchase all or a portion of the Customer Committed Capacity for
that year, Customer shall promptly notify TSMC of such in writing and
first offer TSMC such Capacity for sales to any third parties. TSMC
may, at its option, accept such offer, in whole or in part, within
thirty (30) days following Customer's notification, and if TSMC so
accepts, the Option Fee attributable to that capacity will be refunded
to Customer without interest. In the event that TSMC decides not to
accept such offer, Customer may sell such unused capacity to third
parties reasonably acceptable to TSMC (given the processes and
capacity then available in its fabs), within two months after TSMC's
written notice that it will not accept such offer. If Customer fails
to sell such unused Customer Committed Capacity, TSMC shall not be
required to refund any portion of the unapplied Option Fee applicable
to that unused capacity. TSMC is entitled to sell or use any such
capacity thereafter. Forfeiture of the applicable Option Fee shall be
TSMC's sole remedy for Customer's failure to purchase the Customer
Committed Capacity in any calendar year.
7. TERM AND TERMINATION
(a)TERM The term of this Agreement shall commence from the
Effective Date, and continue until December 31, 2001.
(b)TERMINATI0N BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION
FEE TSMC may terminate this Agreement if Customer fails to pay
the Option Fee pursuant to Section 5 above, and does not cure or
remedy such breach within thirty (30) days of receiving written
notice of such breach.
(c)TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY Either party may
terminate this Agreement if, (i) the other party breaches any
material provisions of this Agreement (other than Customer's
breach of Section 5 above), and does not cure or remedy such
breach within one hundred and twenty (120) days of receiving
written notice of such breach, or (ii) becomes the subject of a
voluntary or involuntary petition in bankruptcy or any
proceeding relating to insolvency, receivership or liquidation,
if such petition or proceeding is not dismissed with prejudice
within sixty (60) days after filing.
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(d)EFFECT OF TERMINATION
In the event of termination of this Agreement, each party shall
remain liable to the other party for any outstanding and matured
rights and obligations at the time Of termination, including
Payment Of the Option Fee applicable to the used Option Capacity
and for the wafers already ordered and shipped to Customer. Any
wafers then in process pursuant to a Customer order may be
completed and shipped to Customer and the applicable Option Fee
amount applied against such wafers. In the event Customer
terminates this Agreement pursuant to the terms of Subsection
7(c), any portion of the Option Fee then remaining, which has
not been applied against purchases of wafers, will be refunded
to Customer within thirty (30) days of termination of this
Agreement.
8. BOARD APPROVAL
Customer shall obtain the approval by its board of directors of this
Agreement, and submit to TSMC, at the time of executing this
Agreement, an authentic copy of it's board resolution authorizing the
representative designated below to execute this Agreement.
9. LIMITATION OF LIABILITIES
In no event shall either party be liable for any indirect, special,
incidental consequential damages (including loss of profits and loss
of use) resulting from, arising out of or in connection with such
party's performance or failure to perform under this Agreement, or
resulting from, arising out of or in connection with the production,
supply and/or purchase and sale of the wafers, whether due to a breach
of contract, breach of warranty, tort, or negligence of such party, or
otherwise.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
postage prepaid, or by personal delivery, or by fax. Any notice given
by fax shall be followed by a confirmation copy within ten (10) days.
Unless changed by written notice given by either party to the other,
the addresses and fax numbers of the respective parties shall be as
follows:
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To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
No. 121 Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China FAX: 886-35-781545
To Customer:
ADAPTEC MANUFACTURING (S) PTE. LTD.
Block 1001
Jalan Bukit Merah #07/01-20
Singapore 0315
With a copy to:
ADAPTEC, INC.
ATTN: Vice President, Procurement
691 South Milpitas Blvd.
Milpitas, CA 95035 FAX: (408) 262-2533
11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, and together with the Foundry
Agreement, constitutes the entire Agreement between the parties with
respect to the subject matter hereof, and supersedes and replaces all
prior or contemporaneous understandings, agreements, dealings and
negotiations, oral or written, regarding the subject matter hereof. No
modification, alteration or amendment of this Agreement shall be
effective unless in writing and signed by both parties. No waiver of
any breach or failure by either party to enforce any provision of this
Agreement shall be deemed a waiver of any other or subsequent breach,
or a waiver of future enforcement of that or any other provision.
12. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the State of California.
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13. ARBITRATION
Each party will use its best efforts to resolve amicably any disputes
or claims under this Agreement between the parties. In the event that
a resolution is not reached among the parties within thirty (30) days
after written notice by any party of the dispute or claim, the dispute
or claim shall be finally settled by binding arbitration in the San
Francisco Bay Area, California, under the Rules of Commercial
Arbitration of the American Arbitration Association by three (3)
arbitrators appointed in accordance with such rules. The arbitration
proceeding shall be conducted in English. Judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its permitted successors and assigns. Customer may assign
its purchase rights and obligations under this Agreement (a) to third
parties in accordance with Section 6 above, and (b) to its Affiliates.
Except as provided in Section 6, neither party shall assign any of its
rights hereunder, nor delegate its obligations hereunder, to any third
party, without the prior written consent of the other.
15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this
Agreement except as required by Customer's assignment of this
Agreement to any third parties pursuant to Sections 6 and 14 above, in
confidence to its advisers, as required by applicable law, or
otherwise with the prior written consent of the other party.
16. FORCE MAJEURE
Neither party shall be responsible for delays or failure in
performance resulting from acts beyond the reasonable control of such
party. Such acts shall include but not be limited to acts of God, war,
riot, labor stoppages, governmental actions, fires, floods, and
earthquakes. If such delays or failures on the part of either party
continue for a period of more than one hundred twenty (120) days, the
other party may terminate this Agreement upon written notice, subject
to Subsection 7(d).
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17. NO AGENCY
No agency, partnership, joint venture, teaming agreement or other
joint relationship is created hereby and neither party, nor any of its
agents or representatives, has any authority of any kind to bind the
other party in any respect whatsoever.
18. GOVERNMENTAL APPROVAL
TSMC represents and warrants to Customer that no govenmental approval
or registration by or with the ROC is required for this Agreement or
for the transactions contemplated hereby. In the event any such
approval or registration is required, TSMC agrees to indemnify and
hold Customer harmless from any and all loss or damage to Customer
which may result from the failure to procure such approval or effect
such registration.
19. COUNTERPARTS
This Agreement may be executed in two counterparts, together which
will constitute a fully executed Agreement.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the
Effective Date by their duly authorized representatives.
TAIWAN SEMICONDUCTOR ADAPTEC MANUFACTURING.
MANUFACTURING CO., LTD. (S) PTE. LTD.
BY:/s/DON BROOKS BY:/s/ F. GRANT SAVIERS
-------------------- --------------------
Donald Brooks F. Grant Saviers
President Director &
Attorney-In-Fact
-------------------- --------------------
Date Date
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EXHIBIT A
EQUIVALENCY FACTOR TABLE
- ---------------------------------------------------------------------------------------
Masking W-Plug Complexity Equivalency
Generic Technology Layers(A) Layers(B) Index(C) Factor(D)
(w/o ESD or
Polyimide)
- ---------------------------------------------------------------------------------------
1.5um SPDM (BiCMOS) 16 16 1.23
1.2um SPDM (Logic) 13 13 1.00
1.0um SPDM (Logic) 13 13 1.00
1.0um DPDM (BiCMOS) 18 18 1.38
0.8um SPDM (Logic) 13 13 1.00
0.8um DPDM (MixMode) 14 14 1.08
0.8um SPTM (Logic Salicide) 17 17 1.31
0.8um DPDM (BiCMOS) 22 22 1.69
0.6um SPDM (Logic) 14 1 14.5 1.12
0.6um SPTM (Logic) 16 1 16.5 1.27
0.6um DPDM (MixMode) 15 1 15.5 1.19
0.6um DPDM (SRAM) 20 20 1.54
0.6um TPSM (DRAM) 15 1 15.5 1.19
0.6um QPDM (DRAM) 18 1 18.5 1.42
0.5um SPDM (Logic) 14 2 15 1.15
0.5um SPTM (Logic SACVD) 16 3 17.5 1.35
0.5um SPTM (E'2PLD-SACVD) 21 3 22.5 1.73
0.5um SPTM (Logic-CMP) 21 3 22.5 1.73
0.5um DPDM (SRAM) 20 1 20.5 1.58
0.5um QPDM (DRAM) 21 1 21.5 1.65
0.35um SPTM (Logic-CMP) 21 3 22.5 1.73
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Remarks: (1) Masking Layer of w/i ESD (or Polyimide) = Masking Layer of
w/o ESD (or Polyimide) + 1
(2) Masking Layer of Mixed-Mode(DP) = Masking Layer of
Logic(SP) + 1
(3) Complexity Index (C) = (A) + (B) / 2
(4) Equivalency Factor (D) = (C) / 13, normalized to 0.8um SPDM
as 1
Date of issue: 11/14/95
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EXHIBIT B
ADAPTEC/TSMC
COMMITTED CAPACITY
Unit: K 6" Wafer Equivalent
- ----------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
============================================================================
Take or Pay Capacity [*] [*]
============================================================================
Base Capacity [*] [*] [*] [*] [*] [*]
(For Options)
============================================================================
% of Base Commit 90% 80% 70% 60% 50% 50%
============================================================================
% X Base Capacity [*] [*] [*] [*] [*] [*]
============================================================================
Option to Base Capacity [*] [*]
============================================================================
Option I Capacity [*] [*] [*] [*]
- ----------------------------------------------------------------------------
Option II Capacity [*] [*] [*] [*]
- ----------------------------------------------------------------------------
Option III Capacity [*] [*] [*] [*]
- ----------------------------------------------------------------------------
Total Option Capacity [*] [*] [*] [*] [*] [*]
============================================================================
TSMC Committed [*] [*] [*] [*] [*] [*]
Capacity (Base Capacity
+ Option to Base Capacity
+ Option Capacity)
============================================================================
Customer Committed [*] [*] [*] [*] [*] [*]
Capacity (X% Base
Capacity + Option to Base
Capacity + Option Capacity)
- ----------------------------------------------------------------------------
* The parties agree to maintain linear run rate throughout any calendar year.
Deposits Required: $35.28M - [*]
Payment Schedule: $17.64M - January 31, 1998
$17.64M - June 30, 1998
- ------
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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EXHIBIT B-1
WAFER EQUIVALENT CALCULATION EXAMPLE
TO CALCULATE THE WEIGHTED CAPACITY FACTOR
WEIGHTED
CAPACITY WAFER PERCENTAGE CAPACITY
PROCESS FACTOR CAPACITY OF VOLUME FACTOR
------- ------ -------- --------- ------
.8um SPDM [*] [*] [*] [*]
.6um SPTM [*] [*] [*] [*]
TOTAL VOLUME [*] [*]
- ----------------------------------------------------------------------------------------------------------
1996 WEIGHTED CAPACITY FACTOR [*]
- ----------------------------------------------------------------------------------------------------------
.6um SPTM [*] [*] [*] [*]
TOTAL VOLUME
[*] [*]
- ----------------------------------------------------------------------------------------------------------
1997 WEIGHTED CAPACITY FACTOR [*]
- ----------------------------------------------------------------------------------------------------------
TO CALCULATE THE EQUIVALENT CAPACITY
1997 COMMITTED CAPACITY [*]
- ----------------------------------------------------------------------------------------------------------
1997 EQUIVALENT CAPACITY=[*] [*]
- ----------------------------------------------------------------------------------------------------------
1997 EQUIVALENT CAPACITY = 1997 COMMITED CAPACITY * (1996 WEIGHTED
CAPACITY FACTOR / 1997 WEIGHTED CAPACITY FACTOR)
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*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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EXHIBIT C
TSMC CMOS TECHONOLOGY ROADMAP
TSMC CMOS Technology Roadmap
MIXED 0.6um 0.5um 0.35um
MODE 2P3M 2P3M 2P4M
3V 3V
LOGIC 0.6um 0.5um 0.35um
1P3M 1P3M 1P4M
3V
1P3M
3V
SRAM 0.6um 0.5um 0.45um 0.35UM
3V 3V 3V
[*]
- ------
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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EXHIBIT D
OPTION FEE (OPTION III)
Years Total Option Option Fee
Due Date
Capacity (unit (Unit: US$)
Wafer Equivalent)
- -------------------------------------------------------------------------
1997- [*] $17.64M January 31, 1998
2001
$17.64M June 30, 1998
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*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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EXHIBIT E
STANDARD FORM OF PROMISSORY NOTE
Amount: US$ Due Date:
-------------------- --------------------
The Undersigned, _____________________ (the "Maker"), unconditionally
promise to pay to Taiwan Semiconductor Co., Ltd. or its order the sum of
US Dollars __________________ ($__________), plus interest calculated from the
Due date stated herein to the date of full payment at the rate of 10% per annum
on any unpaid portion of the principal amount stated herein, and said payment
will be made to such account as Maker may direct.
This Note shall be governed in all respects by the laws of the State of
California.
The Maker of this Note agrees to waive protests and notice of whatever kind
in connection with the delivery, acceptance, performance, default or enforcement
of this note.
Issue Date:
-----------------------
Issue Place:
-----------------------
Signature:
-----------------------
Title:
-----------------------
Address:
-----------------------
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