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