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EXHIBIT 10.43
OPTION AGREEMENT 2
BETWEEN
ALTERA CORPORATION
AND
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
OCTOBER 1, 1995
2
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. VOLUME COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. WAFER PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. OTHER PURCHASE TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL . . . . . . . . . . . . . . . . . . . 4
7. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. BOARD APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
14. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
15. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
16. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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OPTION AGREEMENT 2
THIS AGREEMENT is made and becomes effective as of October 1, 1995 (the
"Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC", a
company organized under the laws of the Republic of China with its registered
address at No. 000, Xxxx Xxx. 3, Science Based Industrial Park, Hsinchu, Taiwan,
and Altera Corporation, a company organized under the laws of the State of
California, with its registered address at 0000 Xxxxxxx Xxxxxxx, Xxx Xxxx,
Xxxxxxxxxx 00000-0000 ("Customer").
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers pursuant to a
Wafer Supply Agreement dated June 26, 1995 (the "Supply Agreement") and an
Option Agreement dated June 26, 1995 ("Option Agreement 1"), relating to option
capacity through 1999, 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;
WHEREAS, to implement the foregoing, as of the Effective Date, the
parties are entering into this Option Agreement 2 (this "Agreement") relating to
option capacity through 2000, as well as "Option Agreement 3" relating to option
capacity through 2001 and "Amendment No. 1 to Supply Agreement and Option
Agreement 1" for purposes of coordinating all of these documents.
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 has committed to the Customer as
set forth in Exhibit B.
(b) "Customer Committed Capacity" used in this Agreement shall mean
the total capacity that Customer agrees to purchase from TSMC
pursuant to this Agreement, as set forth in Exhibit B, subject
to the applicable provisions of this Agreement and the Supply
Agreement.
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(c) "Option Capacity" used in this Agreement shall mean the firm
capacity commitment made by Customer pursuant to this
Agreement, identified as "Option 2" on Exhibit B, for which
capacity Customer agrees to pay the Option Fee as defined in
Section 1(d) below.
(d) "Option Fee" used in this Agreement shall mean the deposit
that Customer agrees to place with TSMC as the advance payment
for the Option Capacity.
(e) "TSMC Committed Capacity" used in this Agreement shall mean
the total capacity that TSMC agrees to provide to Customer
pursuant to this Agreement, and as set forth in Exhibit B.
(f) "Wafer Equivalent" used in this Agreement shall mean the
number of six-inch wafers based on the equivalency factor for
TSMC's 0.5 micron, single poly, triple level metal process.
For details of the equivalency factor, please refer to Exhibit
A. Any and all capacity commitments referred to in this
Agreement shall be measured in Wafer Equivalent. For an
example of the application of the equivalency factor refer to
Exhibit A-1.
2. VOLUME COMMITMENT
(a) Subject to the applicable provisions of this Agreement and the
Supply Agreement , Customer agrees to purchase from TSMC , and
TSMC agrees to supply , the Customer Committed Capacity, and
subject to the payment of the Option Fee by Customer under
Section 5, 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 shall first apply
to fulfill the Base Capacity portion of the Customer Committed
Capacity (identified as "Base Commit" in Exhibit B), then to
the Option Capacity of Option Agreement 1 (identified as
"Option 1" in Exhibit B), then the Option Capacity of this
Option Agreement 2 (identified as "Option 2" in Exhibit B),
and then the Option Capacity of Option Agreement 3 (identified
as "Option 3" in Exhibit B).
(b) Each month, Customer agrees to provide to TSMC a six-month
rolling forecast of the number of wafers that Customer expects
to 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 or
deliveries expected to be made by TSMC.
(c) TSMC will use its reasonable effort to cause its fabs to be
capable of producing wafers of more advanced
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specifications, as set forth in the TSMC Technology Road Map
attached as Exhibit C.
3. WAFER PRICE
(a) The wafer prices for the Customer Committed Capacity shall not
be more than TSMC's average wafer prices to optionees (i.e.
customers that are parties to option agreements similar to
this Agreement) for the same or comparable technology, same
wafer fab and the same period of time. Customer shall have
the right at any time, but no more frequently than once per
year, on at least thirty days prior written notice, to have an
independent party acceptable to TSMC (such acceptance not to
be unreasonably delayed or withheld) examine TSMC's records
relating to the above pricing. Any price change will apply to
the unfilled and future orders only and may not apply
retroactively.
(b) The parties shall negotiate in good faith each year the wafer
prices for the Customer Committed Capacity of the following
year in coordination with the annual negotiation under the
Supply Agreement. In the course of such negotiations, TSMC
will make available relevant information in its possession
regarding wafer market prices and TSMC's average wafer prices
for the same or comparable technology in the same fab. If no
agreement on these prices is reached by the parties within
three months following written notice of request for
negotiation by either party (the "Negotiation Request"), 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
The Supply Agreement will apply to all purchases of wafers by Customer
from TSMC, except that the provisions of this Agreement will supersede the
Supply Agreement with respect to the subject matter hereof, and the provisions
of Option Agreement 1 and Option Agreement 3 will supersede the Supply
Agreement as to the respective subject matter thereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to pay to TSMC the Option Fee in the amount of
*** for the right to purchase the Option Capacity pursuant to
this Agreement, which TSMC hereby agrees to supply. The
Option Fee is set forth in Exhibit D, and Customer agrees
to pay the
*** Confidential treatment requested. Omitted portions have been filed
separately with the Commission.
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Option Fees for the entire term of this Agreement (U.S.$57.12M
in total) in cash by Jan. 31, 1996. Except that TSMC
exercises its first right of refusal or the Customer assigns
its purchase rights and obligations, pursuant to Section 6
below, the Option Fee, once paid, shall be non-refundable
except as provided in Section 7(d), but will be credited
against payments due for wafers purchased by Customer from the
Option Capacity provided by TSMC under this Agreement.
(b) Customer further agrees to deliver to TSMC, within seven (7)
days following the Effective Date, one promissory note in the
amount of the Option Fee due (U.S. $57.12M), and payable to
TSMC or order, which promissory note is in the form of Exhibit
E. The promissory note shall be returned by TSMC to Customer
within seven (7) days upon receipt of the Option Fee by TSMC.
(c) Neither the payment of the Option Fee nor the delivery of the
promissory note shall prejudice Customer's right to any
damages or other remedy to which Customer may be entitled by
law.
6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL
(a) 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 of that year, or any other year(s) during the term of
this Agreement, Customer shall promptly notify TSMC of such in
writing and first offer TSMC such Capacity or portion thereof
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, or if TSMC, in fact, sells such capacity or portion
thereof to third parties, the corresponding Option Fee, if
paid, will be returned without interest (notwithstanding
Section 6(b)). In the event that TSMC decides not to accept
such offer, Customer may assign its right to purchase the
Customer Committed Capacity or portion thereof for all or part
of the remaining term of this Agreement to any third parties
acceptable to TSMC (such acceptance not to be unreasonably
delayed or withheld), within two months upon TSMC's written
notice that it will not accept such offer, and if Customer
fails to do so, Customer shall remain liable for the Option
Fee for the remaining term of this Agreement under Section 5
above, and so long as Customer continues to pay the Option Fee
it shall (regardless of any prior notification) retain the
right to purchase the Option Capacity pursuant to this
Agreement.
--------
*** Confidential treatment requested. Omitted portions have been filed
separately with the Commission.
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(b) Any of Customer's rights or obligations set forth in Section
6(a) shall not affect its obligation to pay the Option Fee
pursuant to Section 5 above, except that if the right to
purchase all or part of the Option Capacity is assigned to any
third parties acceptable to TSMC pursuant to Section 6(a)
above, such third parties shall then have the exclusive
obligation to pay the corresponding Option Fee and abide by
the applicable terms and conditions of this Agreement.
7. TERM AND TERMINATION
(a) The term of this Agreement shall commence from the Effective
Date, and continue until December 31, 2000.
(b) TERMINATION BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION
FEE
TSMC may terminate this Agreement if Customer fails to pay the
Option Fee pursuant to Section 5 above, and does not cure 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 breach of Section 5 above), and does not cure or
remedy such breach within sixty (60) days of receiving written
notice of such breach, or (ii) becomes the subject of a
voluntary or involuntary petition in bankruptcy or any
proceeding relating to insolvency, receivership or
liquidation, if such petition or proceeding is not dismissed
with prejudice within sixty (60) days after filing.
(d) EFFECT OF TERMINATION
Both parties shall remain liable to the other party for any
outstanding and matured rights and obligations at the time of
termination, including all outstanding payments of the Option
Fee applicable to the used Option Capacity and for the wafers
already ordered and/or shipped to Customer. In the event
Altera terminates this Agreement pursuant to Section 7(c) or
Section 16, any advance payment of the Option Fee applicable
to the unused and/or unprovided Option Capacity shall be
refunded and any promissory note therefor shall be returned.
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8. LIMITATION OF LIABILITY
In no event shall either 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 its 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,
or otherwise.
9. BOARD APPROVAL
Customer shall obtain the approval of its Board of Directors of this
Agreement, and submit to TSMC, at the time of executing this Agreement, an
authentic copy of its Board resolution authorizing the representative
designated below to execute this Agreement.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail postage
prepaid, or by personal delivery, or by fax. Any notice given by fax shall be
followed by a confirmation copy within ten (10) days. Unless changed by
written notice given by either party to the other, the addresses and fax
numbers of the respective parties shall be as follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
Xx. 000, Xxxx Xxxxxx 0
Xxxxxxx-Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxx
Xxxxxxxx of China FAX: 000-00-000000
To Customer:
Altera Corporation
0000 Xxxxxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
XXX FAX: 000-000-0000
11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understandings,
agreements, dealings and negotiations, oral or written, regarding the subject
matter hereof. No modification,
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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 as set forth in
Section 18.0 of the Supply Agreement.
13. ARBITRATION
If the parties fail to agree on the wafer prices within three months
of any Negotiation Request given pursuant to Section 3, each party shall submit
a written proposal to the other within 15 days following said three month
period setting forth proposed prices and reasons in support thereof. If upon a
review of these proposals, the parties are unable to reach agreement on the
prices within thirty days following said three month period, the matter will be
submitted to arbitration under the rules of the American Arbitration
Association, but subject to the following special provisions. The arbitration
shall be conducted by a panel of three arbitrators, one appointed by each
Party, and the third selected by the two appointed arbitrators. The
arbitrators shall decide which proposal is the most reasonable and the selected
proposal shall thereupon become binding on both parties. The arbitrators shall
not select any other prices nor decide any other issue, unless otherwise agreed
in writing by both parties. All other disputes shall be resolved in accordance
with Section 20.0 of the Supply Agreement.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its successors, and except that Customer may assign its purchase
rights and obligations under this Agreement pursuant to Section 6 above,
neither party shall assign any of its rights hereunder, nor delegate its
obligations hereunder, to any third party, without the prior written consent of
the other.
15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this
Agreement except as required by Customer's assignment of rights and obligations
under this Agreement to any third parties pursuant to Section 6 above, in
confidence to its advisers, as required by applicable law, or otherwise with
the prior written consent of the other party.
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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 Section 7(d).
IN WITNESS WHEREOF, the parties, have executed this Agreement as of
the date first stated above.
TAIWAN SEMICONDUCTOR ALTERA CORPORATION
MANUFACTURING CO., LTD.
BY: /s/ XXXXXX XXXXXX BY: /s/ XXXXXX XXXXX
----------------------- -----------------------
Xxxxxx Xxxxxx Xxxxxx Xxxxx
President President
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EXHIBIT A ***
***
Confidential Treatment Requested. Omitted portions have been filed
separately with the Commission.
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EXHIBIT A-1
***
*** Confidential Treatment Requested. Omitted portions have been filed
separately with the Commission.
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EXHIBIT B
----------------------------------------------------------------------------------------------------------
95 96 97 98 99 2000 2001
----------------------------------------------------------------------------------------------------------
BASE 0 *** *** *** *** *** ***
-------------------------------
%
Commit *** *** *** *** *** ***
-------------------------------
Base Commit *** *** *** *** *** ***
-------------------------------
Option1 *** *** *** *** *** ***
-------------------------------
Option2 *** *** *** *** *** ***
-------------------------------
Option3 *** *** *** *** *** ***
-------------------------------
Tot Opt *** *** *** *** *** ***
-------------------------------
TSMC Commit *** *** *** *** *** ***
-------------------------------
Cust. Commit *** *** *** *** *** ***
-------------------------------
UNITS: K 6" WAFER EQUIVALENT
***
*** Confidential Treatment Requested. Omitted portions have been filed
separately with the Commission.
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EXHIBIT C
***
*** Confidential Treatment Requested.
Omitted portions have been filed
separately with the Commission***
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EXHIBIT D
OPTION FEE
Year Option Capacity Option Fee Due Date
(Unit: Wafer Equivalent) (Unit: US$)
--------------------------------------------------------------------------------------------------
1996 *** *** Jan. 31, 1996
1997
1998
1999
2000
*** Confidential Treatment Requested. Omitted portions have been filed
separately with the Commission.
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EXHIBIT E
STANDARD FORM OF PROMISSORY NOTE
Amount: US$_______________ Due Date: _____________
The undersigned, _____________________ (the "Maker"), unconditionally
(except as otherwise provided in the Option Agreement between TSMC and Maker
dated _________________) promises to pay to Taiwan Semiconductor Manufacturing
Co., Ltd. or its order the sum of US Dollars ___________________
($____________), 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 at __________
(Place of Payment).
This Note shall be governed in all respects by the laws of the State of
California, U.S.A.
The Maker of this Note agrees to waive protests and notice of whatever
kind.
Issue Date: ___________________
Issue Place: __________________
Makers Signature: _________________
Makers Address: ___________________
___________________________________
___________________________________
