Foundry Agreement, Dated May 22, 1997.

FOUNDRY AGREEMENT


between


PIXTECH S.A.


and


UNIPAC OPTOELECTRONICS CORP.


May 22, 1997


TABLE OF CONTENTS
-----------------


1. DEFINITIONS. ....................................................... 1


1.1 Affiliate ........................................................ 1 1.2 Agreement ........................................................ 1 1.2A Agreed Upon Forecast ............................................. 2 1.3 Anode Panel ...................................................... 2 1.4 Anode Plate or Anode Substrate ................................... 2 1.5 Cathode Panel .................................................... 2 1.6 Cathode Plate or Cathode Substrate ............................... 2 1.7 Confidential Information ......................................... 2 1.8 Depreciated Value ................................................ 2 1.9 Dispute .......................................................... 2 1.10 Equipment ........................................................ 2 1.11 Equipment Qualification .......................................... 2 1.12 Exclusivity Period ............................................... 2 1.13 Feasibility Phase ................................................ 2 1.14 FEDs ............................................................. 2 1.15 FED Components ................................................... 2 1.16 FED Device ....................................................... 3 1.17 FED Equipment .................................................... 3 1.18 [Deleted] ........................................................ 3 1.19 FED Field ........................................................ 3 1.20 FED Module ....................................................... 3 1.21 FED Panel ........................................................ 3 1.22 FED Process Flows or FED Processes ............................... 3 1.23 FED Products ..................................................... 3 1.23A First Agreed Forecast ............................................ 3 1.23B Foundry Service Fee .............................................. 3 1.24 Glass Plates ..................................................... 3 1.25 AAA .............................................................. 4 1.26 Improvements ..................................................... 4 1.27 Initial Foundry Products ......................................... 4 1.28 Intellectual Property Rights ..................................... 4 1.29 LCD .............................................................. 4 1.30 LCD/FED Equipment ................................................ 4 1.31 Material Breach .................................................. 4 1.32 Mask Work ........................................................ 5 1.32A Minimum Capacity Percentage ...................................... 5 1.33 Original Purchase Price .......................................... 5 1.34 Patent Rights .................................................... 5 1.35 Person ........................................................... 5 1.36 PixTech .......................................................... 5 1.36A PixTech Equipment ................................................ 5 1.36B PixTech Forecast ................................................. 5 1.37 PixTech Industrial Partner ....................................... 5 1.38 PixTech Patents .................................................. 5 1.38A PixTech Technology ............................................... 5 1.39 Preliminary Matters .............................................. 6 1.40 Pre-Production Phase ............................................. 6 1.41 Pre-Production Steering Committee ................................ 6 1.42 Process Qualification ............................................ 6 1.43 Product Qualification ............................................ 6 1.44 Production Phase ................................................. 6 1.44A Production Capacity .............................................. 6


1.45 Production Steering Committee .................................... 6 1.46 Prototype ........................................................ 6 1.47 Repurchase Price ................................................. 6 1.48 Selected Mask Vendor.............................................. 6 1.49 Senior Executives ................................................ 7 1.50 Specifications ................................................... 7 1.51 Steering Committee ............................................... 7 1.52 Technology ....................................................... 7 1.53 UMC .............................................................. 7 1.54 Unipac ........................................................... 7 1.55 Unipac Processes ................................................. 7 1.55A Unipac Projected Capacity Forecast ............................... 7 1.56 Unipac Patents ................................................... 7 1.56A Unipac Technology ................................................ 7 1.57 Warranty Period .................................................. 7


2. LICENSES GRANTED; NATURE OF AGREEMENT .............................. 7


2.1 Grant of License ................................................. 7 2.2 Nature of Agreement .............................................. 8


3. THE PRE-PRODUCTION PHASE ........................................... 8


3.1 Completion of Feasibility Phase;
Commencement of Pre-Production Phase ............................ 8 3.2 The Pre-Production Steering Committee ............................ 8 3.3 Delivery of Technology with Respect to FED Processes ............. 9 3.4 Operations During Pre-Production Phase ........................... 9 3.5 Technical Assistance ............................................. 9 3.6 Engineering and Other Costs ..................................... 10 3.7 Engineering and Other Costs -- Other FED Devices ................ 10


4. EQUIPMENT ......................................................... 10


4.1 Equipment to Be Purchased ....................................... 10 4.2 Selection, Purchase and Guaranty of FED Equipment ............... 11 4.3 Selection, Purchase and Guaranty of LCD/FED Equipment ........... 12 4.4 Installation and Qualification of Equipment ..................... 13 4.5 Maintenance; Insurance .......................................... 13 4.6 Obligation to Repurchase Equipment .............................. 13 4.7 Release of Guaranty and Purchase by
Unipac of PixTech's LCD/FED Equipment .......................... 13 4.8 Purchase by Pixtech and Release of Unipac for FED Equipment ..... 14 4.9 Use of Unipac Equipment ......................................... 15 4.10 PixTech Equipment to Be Used Only on PixTech's Behalf ........... 15 4.11 Purchase of Additional Equipment by Unipac ...................... 16 4.12 Foundry Service Fee ............................................. 16 4.13 Tax Credit ...................................................... 16


5. THE PRODUCTION PHASE .............................................. 17


5.1 Commencement of Production Phase ................................ 17 5.2 Production Steering Committee ................................... 17 5.3 Product Design .................................................. 17 5.4 Mask Vendors .................................................... 18 5.5 Process Qualification ........................................... 18 5.6 Product Qualification ........................................... 18


6. MANUFACTURE AND SUPPLY OF FED DEVICES ............................. 19


6.1 Exclusivity ..................................................... 19 6.2 Forecasts and Minimum Commitments ............................... 19 6.3 Second Source of Supply ......................................... 22 6.4 [Deleted] ....................................................... 24 6.5 Restrictions on Unipac Competition .............................. 24 6.6 Reserved Capacity; Minimum Load ................................. 25 6.7 Orders .......................................................... 25 6.8 Rejected Goods/Shortages ........................................ 26 6.9 [Deleted] ....................................................... 26 6.10 Modifications; Changes; Substitutions ........................... 26 6.11 Parametrical Failure ............................................ 27 6.12 Production Reports; Process Control ............................. 27 6.13 On-Site Inspection and Vendor Information ....................... 28 6.14 Book of Accounts ................................................ 28 6.15 Manufacture and Sale to PixTech Industrial Partners ............. 28 6.16 Most Favored UMC Customer Status ................................ 29


7. PAYMENT; PRICING .................................................. 29


7.1 Terms of Payment ................................................ 29 7.2 Manner of Payment ............................................... 29 7.3 Annual Adjustment of Pricing Formula ............................ 29 7.4 Customs Duties, Taxes, Etc. ..................................... 29 7.5 Pricing Philosophy .............................................. 29


8. SHIPMENT; TITLE AND RISK OF LOSS .................................. 30


8.1 Shipping Standards .............................................. 30 8.2 Title; Risk of Loss ............................................. 30 8.3 Default or Delay in Shipment .................................... 30


9. PROPRIETARY RIGHTS; NONDISCLOSURE
AND CONFIDENTIALITY OBLIGATIONS .................................. 30


9.1 Ownership of and Rights in Technology ........................... 30 9.2 Ownership of and Rights in Mask Works ........................... 31 9.3 Definition and Ownership of and Rights in Improvements .......... 31 9.4 Confidential Information ........................................ 34 9.5 Non-Disclosure Agreements ....................................... 35 9.6 Agreement Not to Solicit Employees .............................. 35 9.7 Publicity Restrictions .......................................... 35


9.8 Exceptions, Duration and Special Requirements ................... 35


10. TERM AND TERMINATION .............................................. 36


10.1 Term ............................................................ 36 10.2 Termination for Cause ........................................... 36 10.3 Effect of Expiration or Termination ............................. 36 10.4 Prior Obligations ............................................... 37 10.5 Survival ........................................................ 37


11. INJUNCTIVE RELIEF ................................................. 37


12. WARRANTIES; QUALITY ASSURANCE, RETURN PROCEDURES .................. 37


12.1 Warranty with Respect to FED Devices ............................ 37 12.2 Procedures for Return of Defective or Nonconforming FED Devices . 38 12.3 Unipac's Responsibility to Notify ............................... 38 12.4 Return Procedures ............................................... 38


13. INDEMNIFICATION ................................................... 38


13.1 Indemnification by Unipac ....................................... 38 13.2 Indemnification by PixTech ...................................... 39 13.3 Conditions of Indemnification ................................... 39 13.4 Other Indemnifications .......................................... 39 13.5 Third Party Claims .............................................. 39


14. DISPUTE RESOLUTION ................................................ 39


14.1 Steering Committee Negotiations ................................. 40 14.2 Senior Executive Negotiations ................................... 40 14.3 Binding Arbitration ............................................. 40


15. GENERAL PROVISIONS ................................................ 41


15.1 Notices ......................................................... 41 15.2 Entire Agreement; Amendment ..................................... 42 15.3 Force Majeure ................................................... 42 15.4 Consequential Damages ........................................... 42 15.5 Waiver .......................................................... 42 15.6 Assignment ...................................................... 42 15.6A Mutual Re-evaluation ............................................ 43 15.7 Binding Effect .................................................. 43 15.8 Severability .................................................... 43 15.9 Headings, Interpretation ........................................ 43 15.10 Attachments ..................................................... 43


15.11 Independent Parties ............................................. 43 15.12 Governing Law ................................................... 43


EXHIBITS - --------


EXHIBIT A - List of FED Alliance Members


EXHIBIT B - Preliminary Matters Remaining from Feasibility Phase;
FED Processes to Be Installed During Pre-Production Phase;
FED Components to Be Fabricated During Pre-Production Phase


EXHIBIT C - List of FED Products to Be Fabricated
(Including Initial Foundry Products)


EXHIBIT D - Specifications--Product Qualification;
Specifications--Parametric and Process Flow;
Acceptance Testing Criteria


EXHIBIT E - FED Equipment to Be Purchased; LCD/FED Equipment to Be Purchased;
Equipment Qualification Criteria


EXHIBIT F - Pricing Formula


FOUNDRY AGREEMENT
-----------------


This Foundry Agreement (together with the exhibits attached hereto, the "Agreement") is entered into as of May 22, 1997, by and between PixTech S.A., a corporation organized under the laws of France having its principal place of business at Avenue Perroy, 13790 Rousset, France ("PixTech"), and Unipac Optoelectronics Corp., a corporation organized under the laws of the Republic of China having its principal place of business at No. 3, Industry E. Road III, Science-Based Industrial Park, Hsin-Chu City, Republic of China ("Unipac").


RECITALS
--------


WHEREAS, PixTech is in the business of designing, manufacturing, and marketing field emission displays ("FEDs") and associated products;


WHEREAS, PixTech owns or licenses rights to technology necessary and sufficient for the design and manufacture of FED Components and FED Products, as those terms are defined herein;


WHEREAS, Unipac is in the business of designing, marketing, and manufacturing liquid crystal displays ("LCD") and possesses foundry capabilities suitable for the manufacture of FED Components and FED Products;


WHEREAS, PixTech and Unipac entered into a Non-Disclosure Agreement dated as of August 5, 1996 pursuant to which each party agreed to maintain the confidentiality of any proprietary information disclosed to it by the other party;


WHEREAS, PixTech and Unipac entered into a Memorandum of Understanding dated as of November 14, 1996 (the "Memorandum of Understanding") pursuant to which the parties agreed to evaluate the feasibility of fabrication of certain FED Components by Unipac for PixTech; and


WHEREAS, PixTech now desires that Unipac manufacture and supply FED Components and FED Products, and Unipac is willing to manufacture and supply FED Components and FED Products, upon the terms and conditions hereof;


NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows:


1. DEFINITIONS.
-----------


1.1 "AFFILIATE" shall mean any Person which controls, is controlled by, or is under common control with a party to this Agreement. A Person shall be regarded as in control of another Person if it owns or directly or indirectly controls more than fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person or the power to elect or appoint fifty percent (50%) or more of the members of the governing body of the other Person, provided however that such Person shall be an Affiliate within the meaning of this Agreement only so long as such ownership, control and/or power continues.


1.2 "AGREEMENT" shall have the meaning set forth in the preamble hereto.


1.2A "AGREED UPON FORECAST" shall have the meaning stated in Section


1


6.2.8(d) below.


1.3 "ANODE PANEL" shall mean an Anode Plate cut to the dimensions set forth in the Specifications for such FED Product.


1.4 "ANODE PLATE" OR "ANODE SUBSTRATE" shall mean a Glass Plate used in building an Anode Panel.


1.5 "CATHODE PANEL" shall mean a Cathode Plate cut to the dimensions set forth in the Specifications for such FED Product.


1.6 "CATHODE PLATE" OR "CATHODE SUBSTRATE" shall mean a Glass Plate used in building a Cathode Panel.


1.7 "CONFIDENTIAL INFORMATION" shall mean all confidential, proprietary, or secret information, including without limitation components, parts, drawings, data, sketches, plans, programs, specifications, techniques, processes, algorithms, inventions, and other information and materials that are owned, possessed, or used by either PixTech or Unipac that is at any time so designated by such party in writing at and/or prior to the time any such Confidential Information is disclosed to the other party. In addition, information that is orally or visually disclosed to the other party or which is not designated in writing as confidential, proprietary, or secret at the time of disclosure shall constitute Confidential Information if orally designated as confidential at the time of first disclosure and if within thirty (30) days after such disclosure, the disclosing party delivers to the receiving party a written document describing such Confidential Information in sufficient detail so as to give reasonable notice of what is to be treated as confidential, and referencing the place and date of such disclosure and the names of the employees of the party to whom such disclosure was made.


1.8 "DEPRECIATED VALUE" shall mean, with respect to an item of Equipment, the Original Purchase Price therefor, adjusted for depreciation based on a * linear depreciation model, such * period to begin on the date of final acceptance of such Equipment, pursuant to Section 4.4 hereof.


1.9 "DISPUTE" shall have the meaning assigned to it in Section 14.1 hereof.


1.10 "EQUIPMENT" shall have the meaning assigned to it in Section 4.1 hereof.


1.11 "EQUIPMENT QUALIFICATION" shall have the meaning assigned to it in Section 4.4 hereof.


1.12 "EXCLUSIVITY PERIOD" shall mean the time period beginning with the date of execution of this Agreement and ending on *.


1.13 "FEASIBILITY PHASE" shall have the meaning set forth in Section 3.1 hereof.


1.14 "FEDS" shall have the meaning set forth in the Recitals hereto.


1.15 "FED COMPONENTS" shall mean Glass Plates, Anode Plates, Anode Panels, Cathode Plates, Cathode Panels, controlling and driving electronic boards, or any other elements that may be contained in an FED Module.


1.16 "FED DEVICE" shall mean an FED Component, an FED Panel, an FED Module, or an FED Product.


*Confidential Treatment has been requested for marked portions of this agreement.


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1.17 "FED EQUIPMENT" shall have the meaning assigned to it in Section 4.1 hereof.


1.18 [DELETED]


1.19 "FED FIELD" shall mean any and all applications of the technology of electron field emission to displays.


1.20 "FED MODULE" shall mean an FED Panel together with electronic circuitry.


1.21 "FED PANEL" shall mean the glass display panel formed by sealing together a Cathode Plate and an Anode Plate, prior to addition of any electronic circuitry.


1.22 "FED PROCESS FLOWS" OR "FED PROCESSES" with respect to any FED Product shall mean:


1.22.1 Flow 1: *;


1.22.2 Flow 2: *;


1.22.3 Flow 3: *;


1.22.4 Flow 4: *;


1.22.5 Flow 5: *; and


1.22.6 Flow 6: *.


1.23 "FED PRODUCTS" shall mean those products listed on Exhibit C hereto, as such Exhibit may be modified from time to time by the mutual written agreement of the parties hereto.


1.23A "FIRST AGREED FORECAST" shall be the first mutually agreed forecast of monthly Glass Plate substrate starts which Unipac agrees to commit to supply and which PixTech forecasts for its needs pursuant to Sections 6.2.1 and 6.2.2 below. The First Agreed Forecast will be both a Unipac Projected Capacity Forecast and a PixTech Forecast.


1.23B "FOUNDRY SERVICE FEE" shall have the meaning described in Section 4.12.


1.24 "GLASS PLATES" shall mean glass plates processed by Unipac for the fabrication of Anode Panels or Cathode Panels.


1.25 "AAA" shall have the meaning assigned to it in Section 14.3.3 hereof.


1.26 "IMPROVEMENTS" shall mean any ideas, methods, inventions, processes, or techniques which, pursuant to this Agreement arise from the use of the FED Processes and/or the manufacture of FED Devices, and/or are otherwise based on or derived from the PixTech Technology pursuant to this Agreement. For purposes of this Agreement, Improvements will be classified as one of the following types:
(a) TYPE 1 IMPROVEMENTS are Improvements which are based on use of PixTech Technology. There are two subtypes of Type 1 Improvements:


*Confidential Treatment has been requested for marked portions of this agreement.


3


(i) TYPE 1A IMPROVEMENTS are Type 1 Improvements made and/or conceived by PixTech.


(ii) TYPE 1B IMPROVEMENTS are Type 1 Improvements made and/or conceived by Unipac, provided however that notwithstanding anything to the contrary, Type 1b Improvements and/or "PixTech Technology" shall not include any Improvement based on PixTech Confidential Information to the extent the underlying confidential information and/or matter involved at the time of the proposed use or disclosure: (aa) is no longer confidential (through no breach of confidentiality by Unipac, its employees or representatives with respect to such information) and (bb) is not within the scope of any valid claim of any PixTech
--- Patent and/or pending application for such a PixTech Patent.
(b) TYPE 2 IMPROVEMENTS are those (i) made and/or conceived by Unipac based on Unipac Technology and (ii) used by Unipac for FED Devices (other than for experimental and/or pre-qualification purposes) delivered to PixTech during the term of the Agreement.
(c) TYPE 3 IMPROVEMENTS are those developed by Unipac independently of PixTech Technology.
(d) If the parties do not agree as to the appropriate classification of a specific Improvement or element of Intellectual Property (including whether such a thing has been developed independently by Unipac), the matter will be exclusively resolved by a mutually agreeable expert who will make a binding determination on this point pursuant to procedures to be agreed upon in good faith.


1.27 "INITIAL FOUNDRY PRODUCTS" shall mean the initial FED Devices Unipac agrees to manufacture for PixTech, the PixTech Industrial Partners, and their respective Affiliates, as set forth on Exhibit C hereto.


1.28 "INTELLECTUAL PROPERTY RIGHTS" with respect to any FED Device, FED Process, Improvement, or Technology subject to this Agreement, means Patent Rights, mask work rights, copyrights, trade secret rights, trademark rights, service mark rights, and other intellectual property rights of a similar nature (including all registration and renewals thereof and applications for registration or renewal therefor).


1.29 "LCD" shall have the meaning set forth in the Recitals hereto.


1.30 "LCD/FED EQUIPMENT" shall have the meaning assigned to it in Section 4.1 hereof.


1.31 "MATERIAL BREACH " shall mean a breach as defined in Section 4.8.4 below, provided that where the term "material breach" is used without capitalization, it shall include those breaches which give rise to a right of termination as provided in Section 10.2 below and provided further that for purposes of Section 6.3, "material breach" shall be only as defined in Section 6.3.4.


1.32 "MASK WORK" shall mean any mask set or work created and produced by or for Unipac, based on PixTech Technology, and utilized in the fabrication of an FED Device, and shall include both physical mask works and any electronic form thereof.


1.32A "MINIMUM CAPACITY PERCENTAGE" shall mean that percentage agreed upon between the parties pursuant to Section 6.2.3.


1.33 "ORIGINAL PURCHASE PRICE" means, with respect to Equipment, the actual price paid to the vendor thereof, less all rebates, plus all freight, shipping, duty, insurance (prior to the time of acceptance), hook-up, and installation charges, plus the cost of any major modifications required during installation thereof, to the extent incurred and/or expended on or before acceptance of such Equipment by Unipac and PixTech, provided however that the "Original Purchase Price" does not include (i) the cost of any spare parts for such Equipment, and/or (ii) any hook-up and/or installation charges in excess of * of


*Confidential Treatment has been requested for marked portions of this agreement.


4


the price which would be charged by the vendor or supplier for such equipment without such hook-up and/or installation.


1.34 "PATENT RIGHTS" means the rights under properly interpreted claims of all patent applications and patents (including divisions, continuations, continuations-in-part, re-issues, re-examination certificates, extensions, renewals, utility models, design patents, and the like) in any country of the world, but only for so long as, in the case of any patent, the patent is valid and enforceable, and in the case of application(s), the application is pending.


1.35 "PERSON" shall mean any individual, corporation, partnership, limited liability company, firm, association, unincorporated organization, joint venture, trust, or other entity.


1.36 "PIXTECH" shall have the meaning set forth in the preamble hereto.


1.36A "PIXTECH EQUIPMENT" shall include all Equipment (both the FED Equipment and the LCD/FED Equipment) subject to PixTech's repurchase/Guaranty obligations under this Agreement, provided however that such equipment shall be considered PixTech Equipment only for so long as PixTech has not been released from those obligations pursuant the terms of this Agreement.


1.36B "PIXTECH FORECAST" ...