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EXHIBIT 10.24
UNITED MICROELECTRONICS CORPORATION
▇▇. ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ I
Science Based Industrial Park
▇▇▇▇ ▇▇▇ City, Taiwan, R.O.C.
telephone (035) 782-258; facsimile (035) 774-767
September 13, 1995
WRITTEN ASSURANCES RE: FOUNDRY VENTURE AGREEMENT
At the suggestion of several venturers, UMC is pleased to confirm in
writing the following points concerning the Foundry Venture Agreement and the
Foundry Capacity Agreement. Where these commitments require the consent of
FabVen, UMC will exercise its influence and commit best faith efforts to secure
that consent.
1. ALL VENTURERS ARE OFFERED EQUAL TERMS. As stated in the Foundry
Venture Agreement, the terms of investment and of wafer purchases to each
Venturer under the Foundry Venture Agreement and under the Foundry Capacity
Agreement are the same, except for the percentages of ownership and capacity
rights of each Venturer [capacity rights for Venturers are equal to 1.25 times
the percentage of ownership]; provided however that Venturers who commit to a
minimum of [*] will have the right to appoint a representative to a seat on the
board of directors for the initial three year term.
2. ACCESS TO BOARD MEETINGS & BOARD MEMBERS. Subject to the obligations
of Confidentiality imposed under the Foundry Venture Agreement, the Foundry
Capacity Agreement, and/or the Technology Transfer and License Agreement
("Venture Agreements"), and to the requirements of law, each Venturer will be
given reasonable notice of meetings of the board of directors of FabVen, and the
opportunity to have a representative attend such meetings and communicate at
such meetings with the board members in connection with matters concerning
FabVen.
3. MEMBERSHIP ON FABVEN BOARD--FIRST THREE YEARS AND
BEYOND. The board of directors of FabVen will be comprised of seven members. Of
these seven members, four will be appointed by UMC for an initial three year
term, one will be appointed by the R.O.C. financial institutions which invest in
FabVen for an initial three year term, and the other two board members will be
appointed for an initial three year term by the Venturers other than UMC under
procedures to be mutually agreed upon by such Venturers, provided that any
Venturer who holds at least [*] of the shares of FabVen will be entitled to
appoint one of such other two board members. After the initial three year term,
the board will be elected by the shareholders pursuant to R.O.C. law in the
manner provided in the bylaws.
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
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4. STRATEGIC ACTIONS SUBJECT TO SPECIAL BOARD APPROVALS.
Subject to the other requirements of the law, and for so long as the Venturer
involved remains in compliance with all payment obligations under the Foundry
Venture Agreement and such Venturer retains at least [*] of the ownership
percentage in FabVen as listed in Paragraph 4.1 of the Foundry Venture
Agreement, all board actions directly deciding strategic technical issues
[including without limitation, the type of process technology (such as that used
in the manufacture of logic, SRAM, DRAM, EPROM, EEPROM, and/or FLASH) to be
developed, implemented and/or offered by FabVen, the amendment of the Technical
Transfer and License Agreement, and/or the transfer or licensing of technology
developed by FabVen to others (except as contemplated under the Technology
Transfer and License Agreement)] shall not be effective unless and until
approved by at least one of the board members designated by the Venturers other
than UMC, and (ii) all board actions authorizing liquidation of FabVen, merger
of FabVen, sale of all or substantially all of FabVen or of FabVen's assets,
and/or the offering of any equity (except pursuant to a public offering of
FabVen shares on a recognized securities exchange) shall not be effective unless
and until approved by both board members designated by the non-UMC Venturers
under the terms of the Foundry Venture Agreement.
5. NO UNAUTHORIZED CHANGES TO TECHNOLOGY ROADMAP. For so
long as the Venturer involved remains in compliance with all payment obligations
under the Foundry Venture Agreement and such Venturer retains at least [*] of
the ownership percentage as listed in Paragraph 4.1 of the Foundry Venture
Agreement, FabVen shall not make any material changes to the Technology Road Map
as shown in Attachment A which affect such Venturer's existing and/or planned
production without the consent of that Venturer.
6. CONDITIONAL "PUT" RIGHT. To the extent that FabVen fails (i) to
qualify silicon manufactured with [*] and [*] processes each having a minimum of
0.35u feature sizes under a test vehicle to be agreed upon by FabVen, UMC and a
majority of the Venturers other than UMC (including without limitation, a test
vehicle from a Venturer, provided that such qualification under a test vehicle
from a Venturer is commercially reasonable and within industry standards)
("First Qualification") on or before the end of December 31, 1998, and/or (ii)
to achieve the ability to manufacture a minimum of [*] wafer outs per month for
such [*] process and [*] wafer outs per month for such [*] process on or before
December 31, 1998 for reasons attributable to UMC, FabVen and/or the Licensed
Processes, the Venturers (one or more of them) will have the option to sell
their shares (and their corresponding rights to capacity in FabVen) to UMC for
the total amount they paid for such shares by sending written demand to UMC as
follows:
(a) No such demand shall be effective unless it is made on or
before April 1, 1999; and
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
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(b) Within ninety days of such written demand from the Venturer
involved, UMC will buy the shares (and capacity rights) involved, and/or arrange
another buyer willing to purchase such shares (and capacity rights) under the
terms and conditions as stated in this heading.
7. RELEASE OF SHARE TRANSFER RESTRICTION IF NO PUBLIC
OFFERING. To the extent that FabVen does not offer its shares in a public
offering on a recognized securities exchange on or before December 31, 2006, and
notwithstanding anything to the contrary, each Venturer other than UMC will have
the right to transfer its entire right and interests in FabVen as follows:
(a) The Venturer wishing to transfer ("Transferring Venturer")
shall send the other Venturers (including UMC) written notice of its intention
to transfer, stating in such notice the general terms and payment contemplated
by such Transferring Venturer;
(b) Within thirty days (the "Transfer Notice Period") of such
notice, any one or more such other Venturers may send a written offer to
purchase such Transferring Venturer's interest under terms to be stated in the
written offer [for purposes of this Paragraph, each other Venturer making such
an offer shall be referred to as the "Offering Venturer"];
(c) If no other Venturer makes such an offer within the Transfer
Notice Period, then, subject to subpart (g) below, the Transferring Venturer
shall be allowed to transfer its entire interest and ownership in FabVen to
other purchasers;
(d) If any Offering Venturer makes such an offer within the
Transfer Notice Period, the Transferring Venturer and the Offering Venturer will
negotiate in good faith concerning each such offer for not less than thirty days
(the "Transfer Negotiation Period");
(e) If by the end of the Transfer Negotiation Period and despite
such negotiations, the Transferring Venturer has not reached agreement with the
Offering Venturer(s) for sale of the Transferring Venturer's interest, then,
subject to this Paragraph (and all of its subparts), the Transferring Venturer
shall be allowed to transfer its entire interest and ownership in FabVen to
other purchasers;
(f) Notwithstanding anything to the contrary, no Transferring
Venturer shall be allowed to accept from any third party any offer with price
and terms, taken together, which are less favorable than last offered in writing
by an Offering Venturer during the Transfer Notice and/or Transfer Negotiation
Periods, unless such Transferring Venturer first offers the same price terms to
such Offering Venturer in writing, and allows such Offering Venturer ten
business days to accept or reject such price and terms;
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(g) Except as permitted in paragraph 4.1(f) of the Foundry
Venture Agreement and/or in Paragraph 15 of this Written Assurance, no Venturer
may transfer its interest or right in FabVen under this paragraph or otherwise
in any manner to any competitor of UMC or to any entity in the business of
fabricating integrated circuits except under terms (i) in which such Venturer
first relinquishes and releases all rights to FabVen capacity and to designate
membership on the FabVen board of directors under this and any and all other
agreements, and (ii) in which such entity and/or competitor expressly consents
in writing that they have no such interest or right to such capacity and/or
designation.
8. TECHNOLOGY TRANSFER AND LICENSE CONDITION TO FIRST PAYMENT.
Notwithstanding anything to the contrary, the execution of the Technology
Transfer and License Agreement in the form presented to the Venturers as of
September 15, 1995 shall be a condition precedent to any payment of investment
amounts pursuant to the Foundry Venture Agreement.
9. CLARIFICATION OF FAB RAMP-UP CONDITION TO THIRD
INSTALLMENT. Notwithstanding anything to the contrary, the milestone for the
third investment payment milestone shall be on or before "fab production
ramp-up" as that phrase is generally understood and interpreted in the industry.
10. USE OF INVESTMENT MONIES. Unless otherwise agreed by each
Venturer, FabVen will use all funds invested by the Venturers pursuant to
paragraph 4.1(b) of the Foundry Venture Agreement solely as outlined in and
consistent with the FabVen Business Plan.
11. RIGHTS OF FIRST REFUSAL ON SUBSEQUENT OFFERINGS. FabVen
will provide the Venturers with notice reasonable under the circumstances in
order to enable them to exercise their rights of first refusal in connection
with equity offerings pursuant to paragraph 4.1(g) of the Foundry Venture
Agreement.
12. VESTING OF TECHNICAL SHARES. UMC's technical shares will not vest
under paragraph 4.1(d) of the Foundry Venture Agreement until FabVen produces
wafers with the 0.35u process (as that phrase is defined in general industry
usage) with sufficient yield to be recognized as "production ready" within
general industry usage.
13. AUDIT RIGHTS. The specific wording of the provisions contemplated
under paragraph 4.2 of the Foundry Venture Agreement with respect audit rights
and financial information will be as stated by Price Waterhouse, with their
commitment to prepare the reports as promptly as possible under the
circumstances. The exact language for the audit rights will be modeled on
whatever Price Waterhouse and the other accountants agree upon in connection
with the joint venture announced with UMC, Alliance and S3. Currently, it is
contemplated that the financials will be prepared in a manner consistent with
that imposed on U.S. public companies for minority interests.
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14. TERMS FOR RIGHTS OF FIRST REFUSAL UNDER PARAGRAPH
4.1(f)(iv). The rights of first refusal under Paragraph 4.1(f)(iv) of the
Foundry Venture Agreement are intended to extend to and benefit all other
eligible Venturers. To avoid any ambiguity, 4.1(f)(iv)(cc) and 4.1(f)(iv)(dd)
are to be interpreted as follows:
(cc) if any such eligible other Venturer elects not to exercise
any portion or all of such right of first refusal within 30 days
of the independent appraisal, such portion of such right of first
refusal will be subject to exercise by the other eligible other
Venturers in proportion to their then existing shareholdings in
FabVen, and the shares involved will be subject to a right of
such other eligible other Venturers to purchase on the same terms
as outlined above; and
(dd) if any such other eligible other Venturer does not commit to
purchase such shares within 60 days of the independent appraisal,
all rights under this Paragraph 4.1(f)(iv) will expire as to such
unpurchased shares.
15. TRANSFERS OF SHARES AFTER PUBLIC OFFERING. Nothing in
Paragraph 6.2(c)(i) of the Foundry Venture Agreement or elsewhere shall prohibit
a Venturer from offering and/or selling its shares in FabVen on the public
market to a competitor of UMC, provided however that such competitor must
relinquish all rights to representation and access to Board information under
the Foundry Venture Agreement and under this Written Assurance, and provided
that the restrictions of Paragraph 6.2(c)(ii) of the Foundry Venture Agreement
and of Paragraph 7 of this Written Assurance shall still apply, and provided
further that the other restrictions concerning transfers of capacity and
reductions in capacity on a proportional basis with reductions in ownership will
also apply.
16. TRANSFERS OF CAPACITY AMONGST VENTURERS. Notwithstanding anything
to the contrary, the Venturers in Module C may each transfer their respective
capacities (whether or not previously forecast) as stated in Paragraph 2.1 of
the Foundry Capacity Agreement to and between one another by written notice to
FabVen and the other Venturers, provided that such written notice must state the
capacity amounts so transferred and the months in which such transfer will apply
and provided that FabVen's consent (which must not be unreasonably withheld)
shall be required for a transfer of quantities previously committed under
Paragraph 2.3(b) of the Foundry Capacity Agreement. To the extent that FabVen
receives such written notices forty-five or more days prior to the beginning of
each month in which such capacity is to be transferred, such capacity will be
treated as if allocated to the Venturer to whom it has been transferred for all
purposes for the period of the transfer involved, including, without limitation,
for purposes of forecasts, commitments, and the right of FabVen to commit to
others any capacity unexercised by the Venturers.
17. ONE YEAR WARRANTY. The warranty period as stated in Paragraph 5.1
of the Foundry Capacity Agreement, and the claim period as stated in Paragraph
5.3 of the Foundry Capacity Agreement shall each be one year.
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18. CLARIFICATION OF PARAGRAPH 5.4 OF THE FOUNDRY CAPACITY AGREEMENT.
The limitations of paragraph 5.4 of the Foundry Capacity Agreement are intended
to limit the remedies under the Warranty provisions, Section 5 of the Foundry
Capacity Agreement. Thus, the Paragraph will be understood and interpreted as
follows:
THIS PARAGRAPH 5.4 STATES THE ONLY AND EXCLUSIVE REMEDY FOR ANY AND ALL CLAIMS
MADE AGAINST FABVEN UNDER THIS SECTION 5 OF THIS FOUNDRY CAPACITY AGREEMENT.
19. CONFIRMATION OF "COVER" REMEDY. To the extent an intentional breach
by FabVen of its obligations concerning wafer start and/or delivery under the
Foundry Capacity Agreement results in a delay of more than 60 days in delivery
of Wafers to a Venturer, then, notwithstanding anything to the contrary, at the
election of the Venturer, FabVen will compensate such Venturer for reasonable
damages of such Venturer in securing substitute or cover Wafers for those
involved in the breach, subject to the limitation stated below. In addition, to
the extent that FabVen breaches its warranties under Section 5 of the Foundry
Capacity Agreement, and fails, for reasons attributable to a breach by FabVen or
the Licensed Process to correct such breach after two successive attempts to do
so, then, at the election of the Venturer, FabVen will compensate such Venturer
for reasonable damages of such Venturer in securing substitute or cover Wafers
for those involved in the breach, subject to the limitation stated below.
Notwithstanding anything to the contrary, for purposes of this commitment in
Paragraph 19 of this Written Assurance, the recoverable substitute and/or cover
damages shall be (i) the reasonable and necessary costs to replace mask sets for
the products involved, together with (ii) the difference between (aa) the price
which the Venturer would have paid for the Wafers had FabVen fully performed
(the "contract price"), and (bb) all direct and reasonable costs (up to a
maximum of [*] of the contract price) incurred by the Venturer in securing
substitutes and/or cover.
20. LEASE TERM AND LEASEHOLD IMPROVEMENTS. Notwithstanding anything to
the contrary under any local real estate or other law, custom or practice, UMC
will consider all investments, improvements and fixtures purchased by FabVen to
be the property of FabVen, and UMC will not request higher rents under the lease
of Module C as a result of any such investment, improvement and/or fixture. In
addition, at the request of FabVen, UMC will negotiate in good faith with FabVen
over additional extensions of the lease term beyond the fifteen year period
contemplated under the Foundry Venture Agreement, and, to the extent that UMC
retains the underlying right to do so, UMC will renew the lease to FabVen for
the land of Module C for subsequent five year terms continuing until the term
(or partial term) ending August 31, 2044. Without limiting the terms of the
Foundry Venture Agreement, the lease rate for the land for Module C will be
proportional to the amount paid by UMC to the Park Administration for the
respective square footage involved, plus a reasonable amount to cover overhead
directly related to the lease (not to exceed [*] of the rate for the respective
share).
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
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21. CONTINUED ASSISTANCE BY UMC. Notwithstanding anything to the
contrary, UMC will continue to provide technical assistance to FabVen with
respect to the Licensed Processes to the extent and for the period reasonably
necessary to permit each Venturer to qualify its products on each Licensed
Process which is suitable for the production of such products. In addition, UMC
will make good faith efforts to improve and develop UMC technology so as to
enable UMC to provide that technology to be provided to FabVen by UMC as shown
in the Technology RoadMap.
22. CHOICE OF LAW--NO "HIDDEN" MEANINGS. To the extent any aspect of
Taiwan law purports to alter the express meaning of any term of the Technology
Transfer and License Agreement, such term will not be governed by Taiwan law,
but instead will be governed by California law so as to give effect to the
express intention of the parties as stated in that agreement.
23. CONFIRMATION OF SCOPE OF LICENSE. All licenses granted and/or to be
granted under the Technology Transfer and License Agreement are intended to
include rights to import, to offer to sell, and to otherwise dispose of Wafers,
Die and product made using the Wafers made, together with all other rights
stated.
24. NO KNOWN INFRINGEMENTS--UMC. UMC represents and warrants to the
Venturers and to FabVen that UMC has no actual knowledge that the Licensed
Process (as defined in the Technology Transfer and License Agreement) infringes
any Patent Claims (as defined below).
25. NO KNOWN INFRINGEMENTS--FABVEN. FabVen represents to each of the
Venturers that, to its or UMC's actual knowledge as of August 29, 1995, the
technology, processes, masks and other information transferred or licensed to
FabVen under the Technology Transfer and License Agreement or otherwise used in
the manufacture of products pursuant to the terms of this Foundry Venture
Agreement and/or the Venture Agreements will not infringe any valid patent
rights enforceable under R.O.C. and/or U.S. law ("Patent Claims"), provided
however that "Patent Claims" shall not include claims arising out of and/or in
connection with patents licensed to UMC by third parties as of August 29, 1995.
FabVen shall indemnify and hold harmless each of the Venturers from and against
any such Patent Claims (i) to the extent arising out of a breach of this
representation, and/or (ii) to the extent and proportional to any claim that
such Venturer is liable as a direct and/or indirect result (aa) of its execution
of this Foundry Venture Agreement or any of the Venture Agreements, and/or (bb)
of its investment in FabVen and/or any actions under such agreements on any
agency, express or implied partnership or joint venture, respondent superior,
piercing the corporate veil, conspiracy or other legal theory whereby liability
is asserted against such Venturer for or on account of actions of FabVen. Under
no circumstances shall FabVen have any obligation under this Paragraph with
respect to any Venturer who conspires and/or cooperates, other than pursuant to
process of law, with the person raising the Patent Claim for which indemnity is
sought, with respect to such Patent
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Claim. Notwithstanding anything to the contrary, and except for breaches of the
representation of FabVen in the first sentence of this Paragraph, FabVen will
not indemnify or hold any Venturer harmless from or against any Patent Claim to
the extent arising out of the manufacture for such Venturer and/or the purchase,
use and/or sale of products by that Venturer, provided however that with respect
to such Patent Claims the Venturer shall be entitled to the same replace or
refund remedy as is set forth in Paragraph 5.4 of the Foundry Capacity Agreement
with respect to defectively manufactured product, provided however that unless
otherwise agreed, replacement product shall not satisfy FabVen's obligations
under this Paragraph 25 unless that replacement is non-infringing.
26. CLARIFICATION OF PURPOSE. As is clear from the documents involved,
FabVen shall be in the business of fabricating integrated circuits and
developing related processes and know-how. In doing so, FabVen will sell Wafers
to the Venturers and others as described in more detail in the Foundry Capacity
Agreements.
27. CONFIRMATION OF COMMITMENTS BY FABVEN. FabVen will undertake its
reasonable best efforts to implement the Technology Road Map attached to the
Foundry Venture Agreement as Attachment A, to achieve the goals described in
the FabCo Business Plan, and to achieve the [*] wafer out minimums with respect
to each of the [*] and the [*] processes described in Paragraph 6 above. In
addition, and subject to the terms of this Foundry Venture Agreement,
the Foundry Capacity Agreement and the Technology Transfer and License
Agreement, FabVen will cooperate with each Venturer in a commercially reasonable
manner to qualify products of such Venturer under the processes involved.
28. LIMITED DISCOVERY IN CONNECTION WITH ARBITRATION. Notwithstanding
anything to the contrary in the Foundry Venture Agreement, the arbitrators will
have the power to require discovery in connection with any dispute within their
jurisdiction pursuant to the Federal Rules of Civil Procedure to the extent they
find such discovery necessary to achieve a fair and equitable result, and
subject to reasonable orders from the arbitrators to minimize the burdens
involved and to focus the discovery on those areas necessary. All reasonable
costs of such discovery (including attorneys' fees) incurred by a party which
prevails in the arbitration in connection with the issue involved in the
discovery will be recoverable by that party against the party which requested
the discovery.
29. CONFIRMATION OF OBLIGATIONS CONCERNING PROPRIETARY PROCESSES.
Without limiting the obligations under the confidentiality provisions
of the Foundry Venture Agreement, and at the written request of a Venturer,
FabVen will treat as confidential all processes provided by a Venturer which are
designated by that Venturer as "Confidential" under the Foundry Venture
Agreement, and, without the written consent of the Venturer which provided the
process, FabVen shall not use or otherwise disclose any such process for any
purpose other than the fabrication of Wafers for such Venturer.
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*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
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30. RATIFICATION BY FABVEN. UMC shall exert best faith efforts to have
FabVen ratify in writing the commitments and obligations under this Written
Assurance which apply to FabVen.
31. APPROPRIATE PUBLIC OFFERING ROADMAP. Promptly upon incorporation
of FabVen, the parties will use reasonable best efforts to pursue discussions
with mutually acceptable investment bankers or other appropriate people to
attempt to establish the appropriate roadmap to an initial public offering.
32. APPROPRIATE RESOLUTION MECHANISM FOR DISPUTES. Promptly upon
incorporation of FabVen, the parties will use reasonable best efforts to discuss
and evaluate dispute and conflict resolution mechanisms and procedures in an
attempt to anticipate and hopefully resolve matters.
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We request that each Venturer countersign this Written Assurance below
to signify their approval and assent to its terms, and to confirm that we each
will hold this Written Assurance as an integral and material part of our Foundry
Venture Agreements.
Yours sincerely,
/s/ ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇, President
AGREED ON BEHALF OF
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/s/ ▇▇▇ ▇▇▇▇▇▇
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Name of Venturer
As of September _____, 1995
SanDisk
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Authorized signature
RATIFIED BY FABVEN
/s/ I.D. LIU
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Authorized signature
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ACCORDING TO SECTION 232.304 OF REGISTRATION S-T, THE FOLLOWING NARRATIVE
DESCRIPTIONS REPRESENT A GOOD FAITH EFFORT TO FAIRLY AND ACCURATELY DESCRIBE
THE GRAPHICAL IMAGE(S) ATTACHED TO THE PAPER FORMAT OF THIS AGREEMENT.
I. USI Technology Transfer Schedule
This graphical image represents the project schedule for decreasing the
production line widths of the new fabrication facility. The time-line
represented in the graphical image begins at the first quarter of 1998 and ends
at the third quarter of 1999. The milestones represented on this graphical image
are confidential information for which Confidential Treatment has been
requested. Confidential portions omitted have been filed with the Commission.