FORECAST AND OPTION AGREEMENT
Between
PMC-Sierra Corporation
And
PMC-Sierra Ltd.
And
Taiwan Semiconductor Manufacturing Co., Ltd.
October 14, 1999
*Confidential portions have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Commission.
TABLE OF CONTENTS
1. TERMINATION OF THE OPTION AGREEMENTS..............................3
2. DEFINITIONS.......................................................4
3. VOLUME and forecast COMMITMENT....................................4
4. WAFER PRICE.......................................................5
5. OTHER PURCHASE TERMS AND CONDITIONS...............................5
6. FAILURE TO PURCHASE THE CUSTOMERS COMMITTED CAPACITY;
FIRST RIGHT OF REFUSAL............................................6
7. TERM AND TERMINATION..............................................6
8. LIMITATION OF LIABILITY............................................7
9. NOTICE.........................................................7
10. ENTIRE AGREEMENT...............................................8
11. GOVERNING LAW..................................................8
12. ARBITRATION....................................................8
13. ASSIGNMENT.....................................................9
14. CONFIDENTIALITY................................................9
15. FORCE MAJEURE..................................................9
16. OBLIGATION OF FUTURE PURCHASE..................................9
Exhibit A.............................................................11
Exhibit B.............................................................12
FORECAST AND OPTION AGREEMENT
THIS TRI-PARTY AGREEMENT is made and becomes effective as of October 14,
1999(the "Effective Date") between:
1. Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC"), a company
organized under the laws of the Republic of China with its registered
address at Xx. 000, Xxxx Xxx. 0, Xxxxxxx-Xxxxx Xxxxxxxxxx Xxxx,
Xxxxxxx, Xxxxxx;
2. PMC-Sierra Inc. ("PMC-Sierra"), a company organized under the laws of
Delaware, with its registered address at 000-0000 Xxxxxx Xxxxx,
Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0, formerly known as Sierra
Semiconductor Corporation, a company organized under the laws of
California, with the registered address at 0000 Xxxx Xxxxx, Xxx Xxxx,
XX 00000; and
3. PMC-Sierra Ltd, a company organized under the laws of British Columbia,
with its registered address at 000-0000 Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxx X0X 0X0, formerly known as PMC-Sierra, Inc., a company
organized under the laws of Canada, with the same registered address as
PMC-Sierra Ltd.
RECITALS
WHEREAS PMC-Sierra and PMC-Sierra Ltd. understand that both entities are
jointly and severally obligated to all terms and conditions specified under
"Customers" and are collectively referred to as "Customers" herein;
WHEREAS TSMC currently supplies Customers with wafers and Customers wish
to increase the volume of wafers to be purchased from TSMC;
WHEREAS the parties wish to terminate the Option Agreement and the
Amendment to Option Agreement dated November 6, 1996 and July 21, 1997
respectively.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
1. TERMINATION OF THE OPTION AGREEMENTS
The parties agree to terminate the Option Agreement dated November 6, 1996
between Sierra Semiconductor Corporation and PMC-Sierra and TSMC and the
Amendment to Option Agreement dated July 21, 1997 upon the Effective Date. The
Parties agree that any rights and obligations accrued prior to the termination
shall remain in effective except the option fees due thereunder.
2. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the capacity that
TSMC agrees to provide, and Customers agree to purchase, in addition to
the Option Capacity, pursuant to this Agreement.
(b) "Customers Committed Capacity" used this Agreement shall mean the total
capacity that Customers agree to purchase from TSMC pursuant to this
Agreement, and is set forth in Exhibit A.
(c) "Option Capacity" used in this Agreement shall mean the firm capacity
commitment made by Customers pursuant to this Agreement, for which
Capacity Customers agrees to pay TSMC a deposit in the amount of * per
physical Wafer.
(d) "Option Fee" used in this Agreement shall mean the deposit, * in total,
that Customers have placed with TSMC.
(e) "TSMC Committed Capacity" used in this Agreement shall mean the total
capacity that TSMC agrees to provide to Customers pursuant to this
Agreement, and is set forth in Exhibit A.
(f) "Wafer" used in this Agreement shall mean the number of physical
wafers. Any and all capacity commitments referred to in this Agreement
shall be measured in physical Wafers.
3. VOLUME AND FORECAST COMMITMENT
(a) Monthly Forecast. Customers agree to provide to TSMC on a monthly basis
a six-month rolling forecast of the number of wafers that Customers
will purchase, with the committed volume for the first three (3)
months. That is, Customers must purchase all of the quantity forecast
for the delivery in the first three (3) months of the forecast. The
forecast must be based on wafers out or deliveries expected to be made
by TSMC.
(b) Quarterly Forecast. Customers agree to provide to TSMC on a quarterly
basis an eighteen-month (6 quarters) rolling forecast of the number of
wafers that Customers will purchase. Customers shall commit to the
volume quantity stated in the first quarter. Customers shall commit to
plus or minus ten percent (+10%) of the volume quantity stated in the
second quarter. - Customers future forecasts shall be limited to plus
or minus twenty-five percent (+25%) of the volume quantity stated in
the - previous forecast for next two (2) quarters. Customer may modify
its commitment on the remaining two (2) quarters at anytime subject to
TSMC's acceptance. The forecast must be based on wafers out or
deliveries expected to be made by TSMC. The last quarterly forecast
preceding the end of any year, subject to acceptance by TSMC, shall be
used to determine the final values of the Base Capacity and Option
Capacity for the next calendar year for Exhibits A.
(c) Semi-Annual Forecast. Customers agree to provide to TSMC on a
semi-annual basis a three (3) year rolling forecast of the number of
wafers that Customers will purchase. The parties understand that there
is no volume commitment tied to this semi-annual forecast and it shall
be used for planning purposes only.
4. WAFER PRICE
(a) The wafer prices for the Option Capacity shall not be more than TSMC's
average wafer prices to other TSMC customers that are parties to option
agreements similar to this Agreement) for the same technology, the same
fab and the same period of time. In the event that the wafer prices for
the Customers Committed Capacity do not comply with the preceding
sentence, TSMC will make proper price changes for the unfilled orders,
upon Customers' notice in writing.
(b) The parties shall negotiate in good faith each year the wafer prices
for the Option Capacity for the following year, and if no agreement may
be reached by the parties before October each 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.
5. OTHER PURCHASE TERMS AND CONDITIONS
(a) Customers agree to purchase from TSMC the Customers Committed Capacity.
TSMC agrees to provide to Customers the TSMC Committed Capacity, as set
forth in Exhibit A. The parties agree that the Customers Committed
Capacity and TSMC Committed Capacity shall be apportioned as set forth
in Exhibit A. Customers agree that in any calendar year, the orders
placed by Customers shall first apply to fulfill the Base Capacity
portion of the Customers Committed Capacity, and then the Option
Capacity portion thereof
(b) Customers have deposited a total sum of * with TSMC as set forth in the
Option Agreement. TSMC hereby acknowledged receipt of the total sum as
an Option Fee.
(c) TSMC will use commercially reasonable 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 B.
(d) The Option Fee shall be repaid to Customers at the rate of * for each
physical Wafer purchased in excess of 70% of the Base Capacity up to a
maximum of 100% of the Base Capacity in any given twelve months of this
Agreement, as shown in Exhibit A. The repayment of the Option Fee shall
terminate upon (1) depletion of the amount of the Option Fee; (2)
termination of this Agreement. Upon termination of this Agreement,
except for cause, TSMC shall return to Customers any remaining amount
of the Option Fee, or, Customers may at their option and with TSMC's
agreement roll over any remaining amount of the Option Fee in any year
to secure Wafer capacity in the year following the then last year of
this Agreement. TSMC shall make applicable repayment on annual basis
sixty (60) days after the year-end.
6. FAILURE TO PURCHASE THE CUSTOMERS COMMITTED CAPACITY; FIRST RIGHT OF REFUSAL
(a) Customers shall notify TSMC of any changes from the annual total wafer
requirement during the applicable year. TSMC has the right to use a
third party to conduct audits on Customers' annual total wafer
requirements with a thirty (30) days written notice to Customers.
(b) Customers have the right to carry forward any portion of the Customers
Committed Capacity in the years 1998 through 2003 to the year 2004 with
a three month written notice; provided that, the Customers' annual
orders to TSMC represents at least 60% of the Customers total annual
wafer requirement from outside sources. If Customers are unable to use
any of the Customers Committed Capacity or TSMC's Committed Capacity in
any year, Customers shall so notify TSMC immediately and TSMC shall
have the right to sell such unneeded Capacity to third parties and such
sale shall not result in or be construed as a breach of the terms of
this Agreement.
7. TERM AND TERMINATION
(a) The term of this Agreement shall commence from the Effective Date, and
continue until December 31, 2003. Subject to TSMC's approval, Customers
may elect to extend this Agreement for a full five year period by
giving notice to TSMC at least thirty days prior to the anniversary
date or the expiration date of this Agreement. In the event that any of
the Customers Committed Capacity is carried forward to the year of 2004
pursuant to Subsection 6, this Agreement shall be extended to December
31, 2004 or until the full amount of the Option Fee has been refunded
under the terms of this Agreement, whichever is the later.
(b) The parties shall review this Agreement annually within thirty days
preceding the anniversary of this Agreement or at such time as is
mutually agreed between TSMC and Customers. At such review, this
Agreement may be amended by mutual agreement between TSMC and
Customers, such amendment being reduced to writing and signed by both
TSMC and Customers.
(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, and does not cure
such breach within sixty (60) days from the date the breaching party
receives a written notice of such breach, or (ii) becomes the subject
of a voluntary or involuntary petition in bankruptcy or any proceeding
relating to insolvency, receivership or liquidation, if such petition
or proceeding is not dismissed with prejudice within sixty (60) days
after filing.
(d) EFFECT OF TERMINATION
The parties shall remain liable to the other party for any outstanding
and matured rights and obligations at the time of termination. If
termination is not for cause, or if customers terminate for cause, TSMC
shall return applicable Option Fee pro-rated for that year in
accordance to Section 5(d) of this Agreement within sixty (60) days
following the date of termination. If TSMC terminates this Agreement
due to material breach, TSMC shall have the sole discretion in
determining either to refund the outstanding part of the Option Fee (i)
in accordance to Section 5(d) of this Agreement or (ii) without
interest within a period to be determined by TSMC but no later than two
(2) years from the date of such material breach.
8. LIMITATION OF LIABILITY
In no event shall any party be liable for any indirect, special,
incidental or consequential damages (including loss of profits and loss
of use) resulting from, arising out of or in connection with either
party's performance or failure to perform under this Agreement, or
resulting from, arising out of or in connection with either party's
producing, supplying, and/or sale of the wafers, whether due to a
breach of contract, breach of warranty, tort, negligence, or otherwise.
9. 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. A confirmation
copy shall follow any notice given by fax within ten (10) days. Unless
changed by written notice given by either party to the other, the
addresses and fax numbers of the respective parties shall be as
follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
Xx. 000, Xxxx Xxxxxx 0
Xxxxxxx-Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxx
Xxxxxxxx of China FAX: 000-00-000000
To Customers:
PMC-Sierra Ltd.
000-0000 Xxxxxx Xxxxx
Xxxxxxx, XX Xxxxxx X0X 0X0 FAX: 000-000-0000
PMC-Sierra Inc.
000-0000 Xxxxxx Xxxxx
Xxxxxxx, XX Xxxxxx X0X 0X0 FAX: 000-000-0000
10. ENTIRE AGREEMENT
This Agreement, including Exhibits A and B, 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 all 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.
11. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the Republic of China.
12. ARBITRATION
Each party will make best efforts to resolve amicably any disputes or
claims under this Agreement among the parties. In the event that a
resolution is not reached among the parties within thirty (30) days
after written notice by any party of the dispute or claim, the dispute
or claim shall be finally settled by binding arbitration in Taipei
under The Rules of Arbitration of the International Chamber of Commerce
by three (3) arbitrators appointed in accordance with such rules. The
arbitration proceeding shall be conducted in Republic of China in
English. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
13. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each party
and its successors. No 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.
14. CONFIDENTIALITY
The parties shall keep in strict confidence the existence and contents of
this Agreement, and take every precaution possible to prevent any
unauthorized disclosure or use thereof. In the event disclosure is
required by laws or governmental regulations, the disclosing party shall
provide the opportunity to protest, participate in preparing disclosure or
make reasonable changes hereto. Notwithstanding anything to the contrary
stated in this Paragraph 14 Customers may disclose to their customer the
general terms of this Agreement without quantifying the volumes, prices or
delivery terms in this Agreement. All such disclosures by Customer shall
be covered by a non-disclosure agreement between the Customer and its
customer of substantially similar force and effect as the non-disclosure
agreement signed between Customer and TSMC. Both parties agree that no
disclosure of this Agreement or any matter relating hereto may be made
without the disclosing party first providing the proposed disclosure to
the other party two weeks in advance for written consent.
Further, Customer may disclose to Customer's investors the fact that TSMC
and Customer have amended and extended the former contract existing
between them whereby TSMC has contracted to supply Customer which,
according to Customers forecast and estimates, should substantially meet
the needs of Customer through the calendar year 2003. In no event shall
any specific quantities be disclosed to anyone without TSMC's prior
written consent.
15. FORCE MAJEURE
Neither party shall be responsible for delays nor failure in performance
resulting from acts beyond the reasonable control of such party. Such acts
shall include but not limited to acts of God, war, riot, labor stoppages,
governmental actions, fires, typhoons, floods, and earthquakes.
16. OBLIGATION OF FUTURE PURCHASE
Customers agree to tape out one hundred per cent (100%) of all new
tapeouts until Customers purchase 60% of their total Wafer requirements
from TSMC, including the Customers Committed Capacity requirement of this
Agreement. Notwithstanding anything to the contrary in this Agreement, in
the year prior to the expiration hereof, the parties agree to negotiate in
good faith to enter into a new agreement under which Customers agree to
contract TSMC to provide a minimum of 60% of Customers' total wafer
requirements, provided that TSMC is able to continue to offer competitive
technology, pricing, quality and delivery.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the
date first stated above.
TAIWAN SEMICONDUCTOR PMC-SIERRA CORPORATION
MANUFACTURING CO., LTD.
BY:____________________ BY:____________________
Xxx Xxxxxx Name:
Sr. Vice President Title:
TSMC Ltd
PMC-SIERRA Ltd.
BY:_________________
Name:
Title:
Exhibit A
CUSTOMERS'/TSMC
COMMITTED CAPACITY *
Unit: K Physical Wafers
1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ----
Base Capacity
(For Options)
% of Base Commit
% X Base Capacity
Option Capacity
TSMC Committed Capacity
(Base Capacity +
Option Capacity)
Customers Committed
Capacity
(X % Base Capacity +
Option Capacity)
*Confidential portions have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Commission.
EXHIBIT B *
*Confidential portions have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Commission.
