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<SEC-DOCUMENT>0001012870-97-000533.txt : 19970321
<SEC-HEADER>0001012870-97-000533.hdr.sgml : 19970321
ACCESSION NUMBER: 0001012870-97-000533
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 19961229
FILED AS OF DATE: 19970320
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ADVANCED MICRO DEVICES INC
CENTRAL INDEX KEY: 0000002488
STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674]
IRS NUMBER: 941692300
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1227
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-07882
FILM NUMBER: 97559929
BUSINESS ADDRESS:
STREET 1: ONE AMD PL
STREET 2: P O BOX 3453
CITY: SUNNYVALE
STATE: CA
ZIP: 94088
BUSINESS PHONE: 4087322400
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7882
ADVANCED MICRO DEVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-1692300
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
ONE AMD PLACE 94086
SUNNYVALE, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (408) 732-2400
Securities registered pursuant to Section 12(b) of the Act:
(NAME OF EACH EXCHANGE
(TITLE OF EACH CLASS) ON WHICH REGISTERED)
--------------------- ----------------------
$.01 Par Value Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Aggregate market value of the voting stock
held by nonaffiliates as of February 25, 1997.
$5,068,372,307
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
138,952,155 shares as of February 25, 1997.
- -------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Stockholders for the fiscal year ended
December 29, 1996, are incorporated into Parts II and IV hereof.
(2) Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on April 24, 1997, are incorporated into Part III hereof.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ADVANCED MICRO DEVICES, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.............................................................................. 3
Item 2. Properties............................................................................ 14
Item 3. Legal Proceedings..................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................... 16
Executive Officers of the Registrant.................................................. 16
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............. 17
Item 6. Selected Financial Data............................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 18
Item 8. Financial Statements and Supplementary Data........................................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.. 18
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 18
Item 11. Executive Compensation................................................................ 18
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 18
Item 13. Certain Relationships and Related Transactions........................................ 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................... 19
</TABLE>
AMD, the AMD logo, and combinations thereof, Advanced Micro Devices and
NexGen, are either registered trademarks or trademarks of Advanced Micro
Devices, Inc. Other terms used to identify companies and products may be
trademarks of their respective owners. Am486, K86, K86 RISC SUPERSCALAR, AMD-
K5, AMD-K6, SLAC and Am29000 are trademarks of Advanced Micro Devices, Inc.
Microsoft, MS-DOS, Windows and Windows NT are either registered trademarks or
trademarks of Microsoft Corporation.
2
<PAGE>
PART I
ITEM 1. BUSINESS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
THE STATEMENTS IN THIS REPORT THAT ARE FORWARD-LOOKING ARE BASED ON CURRENT
EXPECTATIONS AND BELIEFS AND INVOLVE NUMEROUS RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. THE FORWARD-LOOKING
STATEMENTS RELATE TO OPERATING RESULTS, CASH FLOWS, REALIZATION OF NET
DEFERRED TAX ASSETS, CAPITAL EXPENDITURES AND ADEQUACY OF RESOURCES TO FUND
OPERATIONS AND CAPITAL INVESTMENTS; FUTURE BUSINESS PROSPECTS FOR
MICROPROCESSORS, FLASH MEMORY DEVICE PRODUCTS AND OTHER PRODUCT LINES; THE
EFFECT OF FOREIGN EXCHANGE CONTRACTS AND INTEREST RATE SWAPS; THE DEVELOPMENT,
VALIDATION, CERTIFICATION, INTRODUCTION, MARKET ACCEPTANCE AND PRICING OF THE
K86 PRODUCTS; THE COMPANY'S COMMITMENT TO RESEARCH AND DEVELOPMENT; THE
EFFECTIVE UTILIZATION OF FAB 25 (AS DEFINED BELOW); AND PROJECTS WHICH ARE
PROPOSED OR UNDER CONSTRUCTION IN JAPAN, GERMANY AND CHINA. FOR A DISCUSSION
OF THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, SEE SUCH
OTHER RISKS AND UNCERTAINTIES AS SET FORTH BELOW IN THIS REPORT OR DETAILED IN
THE COMPANY'S OTHER SECURITIES AND EXCHANGE COMMISSION REPORTS AND FILINGS.
GENERAL
Advanced Micro Devices, Inc. was incorporated under the laws of the state of
Delaware on May 1, 1969. The Company's mailing address and executive offices
are located at One AMD Place, Sunnyvale, California 94086, and its telephone
number is (408) 732-2400. Unless otherwise indicated, the terms "Company,"
"AMD" and "Registrant" in this report refer to Advanced Micro Devices, Inc.
and its subsidiaries.
AMD is a semiconductor manufacturer with manufacturing facilities in the
U.S. and Asia and sales offices throughout the world. The Company's products
include a wide variety of industry-standard integrated circuits (ICs) which
are used in many diverse product applications such as telecommunications
equipment, data and network communications equipment, consumer electronics,
personal computers (PCs) and workstations.
For a discussion of the risk factors related to the Company's business
operations please see the "Cautionary Statement Regarding Forward-Looking
Statements" and "Risk Factors" sections of Management's Discussion and
Analysis of Results of Operations and Financial Condition contained in the
1996 Annual Report to Stockholders.
INDUSTRY
The IC market has grown dramatically over the past ten years, driven
primarily by the demand for electronic business and consumer products. Today,
ICs are used in virtually all products involving electronics, including
personal computers and related peripherals, voice and data communications and
networking products, fax and copy machines, home entertainment equipment,
industrial control equipment and automobiles.
The market for ICs can be divided into separate markets for digital and
analog devices. AMD participates primarily in the market for digital ICs. The
three principal types of digital ICs used in most electronic systems are: (i)
memory circuits, (ii) logic circuits and (iii) microprocessors. Memory is used
to store data and programming instructions, logic is employed to manage the
interchange and manipulation of digital signals within a system, and
microprocessors are used for control and computing tasks. Set forth below is a
discussion of the principal segments of the digital IC market in which the
Company participates.
THE MEMORY MARKET
Memory ICs store data or programs and are characterized as either volatile
or non-volatile. Volatile devices lose their stored information after
electrical power is shut off, while non-volatile devices retain their stored
information. The three most significant categories of semiconductor memory are
(i) Dynamic Random Access Memory (DRAM) and (ii) Static Random Access Memory
(SRAM), both of which are volatile memories, and (iii) non-volatile memory,
which includes Read-Only Memory (ROM), Flash memory and Erasable Programmable
Read-Only Memory (EPROM) devices. DRAM provides large capacity "main" memory,
and
3
<PAGE>
SRAM provides specialized high speed memory. Flash and other non-volatile
memory devices are used in applications in which data must be retained after
power is turned off. The Company does not produce any DRAM products, the
largest and most commodity oriented segment of the memory market, or SRAM
products.
Several factors have contributed to an increasing demand for memory devices
during recent years including the expanding unit sales of personal computers
in the business and consumer market segments; the increasing use of personal
computers to perform memory-intensive graphics and multimedia functions; the
volume of memory required to support faster microprocessors; the proliferation
of increasingly complex personal computer software; and the increasing
performance requirements of workstations, servers and networking and
telecommunications equipment.
The Company believes that Flash memory devices will be one of the fastest
growing segments of the memory market in terms of both unit and dollar sales,
as an expanding range of applications utilize Flash memory in the computer,
telecommunications, networking, consumer electronics, automotive, industrial
control and instrumentation industries. The ability of Flash memory devices to
be electrically rewritten to update parameters or system software provides
greater flexibility and ease of use than other non-volatile memory devices,
such as ROM or EPROM devices. Flash memory can be used to provide storage of
control programs and system-critical data in communication devices such as
cellular phones and routers (devices used to transfer data between local area
networks). Another common application for Flash memory is in PC cards, which
are inserted into notebook and subnotebook computers or personal digital
assistants to provide added data storage.
THE LOGIC MARKET
Logic circuits contain interconnected groupings of simple logical circuits
commonly described as "gates." Typically, complex combinations of individual
gates are required to implement the specialized logic circuits required for
digital systems applications. While system designers use a relatively small
number of standard ICs to meet their microprocessor and memory needs, they
require a wide variety of logic circuits in order to differentiate their
products from those of their competitors.
Logic circuits are found in a wide range of today's electronic systems,
including communications equipment, computers, peripherals, instrumentation,
industrial control and military systems. The logic market encompasses, among
other segments, standard Transistor-to-Transistor Logic (TTL), custom designed
Application Specific ICs (ASICs), input/output (I/O), communications,
multimedia, networking and programmable logic devices. ASICs include
conventional gate-arrays, standard cells and full custom logic circuits. Logic
circuits are often classified by the number of gates per circuit, with TTL
circuits typically containing up to 100 gates. Conventional gate arrays and
custom logic circuits typically have up to several hundred thousand gates.
Programmable logic devices typically have up to 20,000 gates but may have
fewer gates in specialized applications.
Logic circuits are used extensively in networking and telecommunications
applications including Internet and intranet applications. Networking is a
method of connecting PCs to other PCs and closely related peripherals (e.g.,
printers), so that resources and information can be transferred and shared. In
large corporations today, most PCs are networked to improve productivity and
communication. Networking continues to spread to medium- and small-sized
companies and could eventually make inroads into the home market. The Ethernet
standard is the most commonly used method for networking workstations, network
servers, personal computers and related peripheral devices.
Telecommunications applications relate to the lines, switches, and routing
equipment required to provide connectivity among enterprises and homes that
are part of the public infrastructure. This infrastructure is owned and
operated by private companies such as AT&T and the regional Bell operating
companies in the U.S., and may be owned and operated by governments, private
companies, or some combination of these in other regions of the world. The
infrastructure for voice communications continues to expand throughout the
world, fueling demand for IC-based telecommunications line card solutions,
which convert signals from analog to digital for
4
<PAGE>
transmission, then convert signals back to analog on the receiving end. To
perform these tasks, line cards rely on integrated circuit logic products
called subscriber line interface circuits and subscriber line audio processing
circuits.
Logic devices are also used extensively with respect to I/O applications,
which involve the sending and receiving of data from the central processing
unit (CPU) of a PC to peripheral devices such as disk drives and printers, and
multimedia applications, which utilize combinations of sound, graphics,
animation and text.
Manufacturers of electronic systems are increasingly challenged to bring
differentiated products to market quickly. These competitive pressures
sometimes preclude the use of custom designed ASICs, which generally entail
significant design costs and time delay. Standard logic products, an
alternative to custom designed ASICs, limit a manufacturer's flexibility to
adequately optimize and customize an end system. Programmable logic addresses
this inherent dilemma. Programmable logic devices are standard products,
purchased by systems manufacturers in a "blank" state, which can be custom
configured into many specific logic circuits by programming the device with
electrical signals. Programmable logic devices give system designers the
ability to quickly create their own custom logic circuits to provide product
differentiation and rapid time to market. Certain programmable logic products,
including the Company's, are reprogrammable, which means that the logic
configuration can be modified, if needed, after the initial logic programming.
A recent technology development, in-system programmability, extends the
flexibility of standard programmable logic devices by allowing the system
designer to configure and reconfigure the logic functions of the programmable
logic device with a standard 3- or 5-volt power supply without removing the
programmable logic device from the system board.
Several common types of programmable logic devices currently coexist in the
marketplace, each offering customers a particular set of benefits. These
include simple programmable logic devices (SPLDs, less than 1,000 gates),
complex programmable logic devices (CPLDs, up to 20,000 gates) and field
programmable gate arrays (FPGAs, up to 100,000 gates). CPLDs are generally
preferred to FPGAs for control logic applications, such as state machines, bus
arbitration, encoders/decoders and sequencers. FPGAs are generally preferred
to CPLDs for register intensive and data path logic applications, such as
interface logic and arithmetic functions. The Company believes that a
substantial portion of programmable logic device customers utilize both CPLD
and FPGA architectures together to optimize overall system performance and
improve time to market for new products.
THE MICROPROCESSOR MARKET
IBM introduced its first PC in 1981 containing a microprocessor based upon
the x86 instruction set developed by Intel Corporation (Intel) and utilizing
the Microsoft MS-DOS operating system. The so-called IBM-compatible computer
has evolved over the years with each successive generation of x86
microprocessors. Each new generation of x86 microprocessors has delivered
increased performance and functionality while maintaining software, hardware
and peripheral compatibility for industry standard operating systems such as
Microsoft MS-DOS and Microsoft Windows. The microprocessor market is currently
dominated by Intel.
The microprocessor, an IC generally consisting of millions of transistors,
serves as the central processing unit, or "brain," of a computer system. The
microprocessor is typically the most critical component to the performance and
efficiency of a PC. The microprocessor is responsible for controlling data
flowing through the electronic system, manipulating such data as specified by
the hardware or software which controls the system. Microprocessors can be
divided into two broad categories: Reduced Instruction Set Computing (RISC)
and Complex Instruction Set Computing (CISC). Compared to CISC
microprocessors, RISC microprocessors employ an architectural approach that
requires a smaller number of simplified instructions to perform the
microprocessors' internal operations. Developments in circuit design and very
large scale integration process technology have resulted in dramatic advances
in microprocessor performance over the past ten years. Today, the greatest
demand for microprocessors is from personal computer manufacturers and, in
particular, for microprocessors which are Microsoft Windows compatible and are
based on the x86 instruction set. Improvements in the performance
characteristics of microprocessors, coupled with decreases in production costs
resulting from advances in process technology, have broadened the market for
PCs and increased the demand for microprocessors.
5
<PAGE>
Embedded processors are also an important segment of the microprocessor
market. Embedded processors are general purpose devices used to carry out a
single application with limited user interface and programmability. A system
designed around an embedded processor cannot usually be programmed by an end
user because the system is preprogrammed to execute a specific task. Key
markets for embedded processors include telecommunications, networking, office
automation, storage, automotive applications and industrial control.
The microprocessor business is characterized by short product life cycles,
intense price competition and rapid advances in product design and process
technology resulting in rapidly occurring product obsolescence. The early
stages of the life cycle of each generation of microprocessors is generally
characterized by high demand, prices and margins. Historically, as the product
life cycle progresses, prices and margins decrease rapidly and production
volume rapidly increases. Toward the end of the product life cycle, as the
life cycles of one or more future generations of microprocessors are
beginning, prices and margins decline further and demand for the product
ultimately ends.
The establishment of hardware and software standards for PCs and the
emergence of numerous PC suppliers have caused the PC industry to be extremely
competitive, with short product life cycles, limited product differentiation
and substantial price competition. To compete more effectively, many PC
suppliers have evolved from fully integrated manufacturers with proprietary
system designs to vendors focused on building brand recognition and
distribution capabilities. Many of these suppliers now rely either on Intel or
on third-party manufacturers for the major subsystems of their PCs, such as
the motherboard, and increasingly are outsourcing the design and manufacture
of complete systems. The third-party suppliers of these subsystems, based
primarily in Asia, are focused on providing PCs and motherboards that
incorporate the latest trends in features and performance at low prices.
Increasingly, these third-party suppliers are also supplying fully configured
PC systems through alternative distribution channels.
BUSINESS GROUPS; PRODUCTS
AMD participates in all three segments of the digital IC market - memory
circuits, logic circuits and microprocessors - through, collectively, its
Communications and Components Group (CCG), its Computation Products Group
(CPG) and its Programmable Logic Division (Vantis).
COMMUNICATIONS AND COMPONENTS GROUP
CCG products ($1,364 million, or 70%, of the Company's 1996 net sales)
include Flash memory devices, EPROM devices, voice and data communications
products, embedded processors, I/O devices and network products.
FLASH MEMORY. Flash memory devices are used in cellular telephones,
networking equipment and other applications which require memory to be non-
volatile and to be rewritten. Their ability to be rewritten electrically
provides greater flexibility and ease of use than EPROMs and other similar
integrated circuits which cannot be rewritten electrically. Communications
companies use Flash memory devices in cellular telephones and related
equipment to enable users to program and reprogram frequently called numbers
and manufacturers to preprogram other information. In networking applications,
Flash memory devices are used in hubs and routers to enable systems to store
programmed and reprogrammed Internet addresses and other routing information.
The market for Flash memory devices has recently experienced rapid growth and
is becoming increasingly competitive as additional manufacturers introduce
competitive products and production capacity in the industry increases. A
substantial portion of the Company's revenues are derived from sales of Flash
memory devices.
EPROMs. EPROMs represent an older generation of erasable programmable read-
only memory technology which is used primarily in the electronic equipment
industry. The devices are used in cellular phones and base stations,
telecommunication switching equipment, automotive applications, personal
computer hard disk drives and BIOS (basic input/output system software encoded
in read-only memory which controls access to
6
<PAGE>
devices connected to a PC, such as the monitor and the serial communications
port), printer controllers, industrial machine controls and numerous other
types of electronic equipment to store software which controls the equipment's
operation. The ability of EPROMs to be programmed electrically enables
equipment manufacturers to achieve shorter time to market for new products
than otherwise would be possible if they were required to have specific
integrated circuits manufactured containing their final software programs.
EPROMs are generally preferred to more expensive Flash memory devices in
applications in which it is not necessary to enable the end user to reprogram
the information stored on the integrated circuit. The market for EPROMs is
significantly smaller than the market for Flash memory devices and the Company
believes the market will decline as EPROMs are replaced in various
applications by Flash memory devices.
COMMUNICATIONS PRODUCTS. The Company's communications products are used in
public and private communications infrastructure systems. Specifically, the
products are used in such equipment as central office switches, private branch
exchange (PBX) equipment and voice/data terminals. Among the Company's more
significant products for the communications market are its logic products. In
modern telephone communications systems, voice communications are generally
transmitted between the speaker and the central office switch in analog
format, but are switched and transmitted over longer distances in digital
format. The AMD SLIC line cards connect the user's telephone wire to the
telephone company's digital switching equipment. The AMD SLAC line cards are
coder/decoders which convert analog voice signals to a digital format and
back.
EMBEDDED PROCESSORS. Embedded processors are general purpose devices,
consisting of an instruction control unit and an arithmetic and logic unit,
used to carry out a single application with limited user interface and
programmability. The Company offers a proprietary family of RISC processors,
known as its Am29000 products, which are used as embedded processors in
applications which include high-performance laser printer controllers, high-
resolution graphics controllers, communications controllers and accelerator
cards. The Company has discontinued development of new versions of its Am29000
products, but it continues to produce existing versions. The Company's current
product focus for embedded processors utilizes existing x86 microprocessor
designs which are customized for specific applications. The Company offers a
line of C186 and C188 processors for use as embedded processors in hard disk
drives. In the future, the Company expects to offer embedded processors based
upon third- and fourth-generation x86 microprocessor technology, the E86
family of processors, which are designed for use in hand-held computers and
voice and data communication devices.
NETWORK AND I/O PRODUCTS. The Company's network and I/O products are used
within personal computers to manage the connection of the personal computer to
local area networks and to manage selected input/output functions. The
Company's network products support voice and data communications and
internetworking and are used in hubs, routers and equipment used to connect
workstations and personal computers in local area network infrastructures. In
data communications, the Company is a supplier of network infrastructure ICs
for products including Ethernet hubs and switches.
The Company supplies integrated circuits for business applications utilizing
the 10-megabit-per-second and the 100-megabit-per-second Ethernet local area
network standards. The Company offers a range of integrated circuits that work
with central processing units to manage selected input/output functions such
as audio, small computer system interface disk drive controllers and
communications and networking devices. The Company also supplies a range of
products specially designed to add additional functions, improve performance
and reduce costs in computer peripheral, interface or mass storage
applications. These are generally special-purpose products which are designed
for a specific application. In the case of some large customers, these
products are tailored for specific customers' needs.
OTHER PRODUCTS. The Company also offers a wide variety of older standard
products, some of which are nearing the end of their product life cycles,
which are sold into various IC markets and require limited ongoing research
and development or capital expenditures.
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COMPUTATION PRODUCTS GROUP
CPG products ($341 million, or 17%, of 1996 net sales) include
microprocessors and the majority of CPG's net sales are derived from Microsoft
Windows compatible microprocessors which are used primarily in personal
computers.
The Company currently participates in the microprocessor market through its
fourth- and fifth-generation Microsoft Windows compatible microprocessors. In
1994 and 1995, the Company's most significant microprocessor product was the
Am486 microprocessor, a fourth-generation CISC x86 microprocessor. In 1996,
Am486 microprocessor sales decreased significantly due to average selling
price and unit volume declines. Accordingly, Am486 microprocessor revenues in
1996 were significantly below those of 1995 as the product life cycle of the
fourth-generation x86 products aged. The Company's fifth- and future
generations of microprocessor products, known as the K86 microprocessors, are
based on Superscalar RISC architecture. The K86 products are designed to be
compatible with operating system software such as Windows, UNIX, DOS and
Windows NT. In the first quarter of 1996, the Company began shipping the AMD-
K5PR75/1/ microprocessor, the first member of the K86 family, and during the
third quarter of 1996, the Company began shipping the AMD-K5PR100. The AMD-K5
is a fifth-generation, superscalar device that has been certified by Microsoft
as being fully compatible with its operating system. The Company introduced
PR133 and PR150 versions of its AMD-K5 microprocessor in the fourth quarter of
1996, and the PR166 version in January of 1997. The AMD-K5 microprocessor was
introduced relatively late in the life cycle of fifth-generation
microprocessor products and will not result in the levels of revenue for the
Company realized from the Am486 microprocessor.
The Company's ability to maintain or expand its current levels of revenues
from microprocessor products, and its ability to benefit fully from the
substantial financial commitments it has made to process technologies and
integrated circuit manufacturing facilities dedicated to the production of
microprocessors, depends primarily upon its success in developing and
marketing in a timely manner its sixth-generation microprocessor products, the
AMD-K6 processors. The AMD-K6 microprocessor has been designed as a
superscalar device to be competitive in performance to Intel Corporation's
forthcoming single chip version of its sixth-generation microprocessor, the
Pentium Pro, which is being designed by Intel specifically for desktop PCs and
is expected to be introduced in 1997. The Company intends to begin volume
shipments of the AMD-K6 products in the second quarter of 1997, although no
assurance can be given that such products will be successfully or timely
developed or that subsequent product orders or related shipments will occur. A
failure of the Company's K86 products, particularly the AMD-K6, to be timely
introduced or to achieve market acceptance, would have a material adverse
effect on the Company. AMD is also devoting substantial resources to the
development of its seventh-generation Microsoft Windows compatible
microprocessor, the AMD-K7 processor.
Intel has long held a dominant position in the market for microprocessors
used in PCs. Intel Corporation's dominant market position has allowed it to
set x86 microprocessor standards and thus dictate the type of product the
market requires of Intel Corporation's competitors. In addition, Intel
Corporation's financial strength has enabled it to reduce prices on its
microprocessor products within a short period of time following their
introduction, which reduces the margins and profitability of its competitors.
In addition to its dominant microprocessor market share, Intel also dominates
the PC platform. The Company does not have the financial resources to compete
with Intel on such a large scale.
As Intel has expanded its dominance in designing and setting standards for
PC systems, many PC original equipment manufacturers (OEMs) have reduced their
system development expenditures and have begun to purchase microprocessors in
conjunction with chip sets or in assembled motherboards. In marketing its
microprocessors to these OEMs and dealers, AMD is dependent upon companies
other than Intel for the design
- --------
/1"PR"/refers to the performance rating assigned to the microprocessors by AMD
based upon tests conducted employing the Ziff-Davis Winstone 96 benchmark,
which compares the systems performance provided by a microprocessor to the
systems performance provided by Pentium processors of various clock speeds.
A performance rating of 166, for example, indicates that the microprocessor
has been determined to deliver systems performance equal to or greater than
that provided by a 166 Megahertz Pentium.
8
<PAGE>
and manufacture of core logic chip sets, motherboards, BIOS software and other
components. In recent years, these third-party designers and manufacturers
have lost market share to Intel. To compete with Intel in this market in the
future, the Company intends to continue to form closer relationships with
third-party designers and manufacturers of core logic chip sets, motherboards,
BIOS software and other components. The Company similarly intends to continue
to expand its chip set and system design capabilities, and offer to OEMs a
portion of the Company's processors together with chip sets and licensed
system designs incorporating the Company's processors and companion products.
There can be no assurance, however, that such efforts by the Company will be
successful.
VANTIS
Vantis products ($248 million, or 13%, of the Company's 1996 net sales) are
high speed programmable logic devices which are used in a wide range of
electronic systems. Programmable logic devices are standard logic products
produced in a "blank" state that can be custom configured into specific logic
circuits by programming the devices with electrical signals.
The Company offers a full range of simple programmable logic devices and
complex programmable logic devices, but does not participate in the market for
field programmable gate arrays. Programmable logic devices are used in
telecommunications equipment, network infrastructures, hard disk drives,
printers, industrial machine control and numerous other types of electronic
equipment by third-party OEMs which seek to optimize the performance of their
products by custom configuring the logic IC while minimizing time to market
through the use of a standard logic product. The Company's programmable logic
devices are sold to a broad range of manufacturers of electronics systems.
Customers utilizing programmable logic devices must use special software
packages, generally provided by the suppliers of the programmable logic
devices, to program the programmable logic devices. AMD provides its
programmable logic device customers with software which it licenses from third
parties and is dependent upon third parties for the software and continuing
improvements in the software. An inability of AMD to continue to obtain
appropriate software and improvements from third parties, to license
alternative software from another third party, or to develop its own software
internally could materially adversely affect the Company's Vantis business,
including the timing of new or improved product introductions, which could
have a material adverse effect on the Company.
The Company is in the process of transferring its operations relating to the
design, development and marketing of programmable logic devices to a wholly
owned subsidiary, Vantis Corporation, dedicated solely to programmable logic
devices. Vantis Corporation will rely upon the Company for manufacturing
services. A dedicated programmable logic device sales force was formed from
members of the Company's existing sales force and began operating as a
separate unit in the second half of 1996.
RESEARCH AND DEVELOPMENT; MANUFACTURING TECHNOLOGY
The Company's expenses for research and development in 1994, 1995 and 1996,
were $295 million, $417 million and $401 million, respectively. Such expenses
represented 14%, 17% and 21% of net sales in 1994, 1995 and 1996,
respectively. The Company's research and development expenses are charged to
operations as incurred. Most of the Company's research and development
personnel are integrated into the engineering staff.
Manufacturing technology is the key determinant in the improvement in
semiconductor products. Each new generation of process technology has resulted
in products with higher speed and greater performance produced at lower cost.
AMD continues to make significant infrastructure investments to enable the
Company to continue to achieve high volume, high reliability and low cost
production using leading edge process technology.
The Company's efforts concerning process technologies are focused in three
major areas: non-volatile memory technology used by Flash memory and EPROM
products; logic technology used by the Company's microprocessors, embedded
processors, I/O, networking and communications products; and programmable
logic
9
<PAGE>
technology used in the Company's programmable logic products. The Company's
goals are to increase density and improve product performance, to reduce the
access time for non-volatile memory products and to increase the clock speed
for microprocessor products.
In order to remain competitive, the Company must make continuing substantial
investments in improving its process technologies. In particular, the Company
has made and continues to make significant research and development
investments in the technologies and equipment used in the fabrication of its
microprocessor products and in the fabrication of Flash memory devices.
Portions of these investments might not be recoverable if the Company's K86
microprocessors fail to gain market acceptance or if the market for its Flash
memory products should significantly deteriorate. This could have a material
adverse effect on the Company. In addition, any inability of the Company to
remain competitive with respect to process technology could have a material
adverse effect on the Company.
COMPETITION
The IC industry is intensely competitive and, historically, has experienced
rapid technological advances in product and system technologies together with
substantial price reductions in maturing products. After a product is
introduced, prices normally decrease over time as production efficiency and
competition increase, and as a successive generation of products is developed
and introduced for sale. Technological advances in the industry result in
frequent product introductions, regular price reductions, short product life
cycles and increased product capabilities that may result in significant
performance improvements. Competition in the sale of ICs is based upon
performance, product quality and reliability, price, adherence to industry
standards, software and hardware compatibility, marketing and distribution
capability, brand recognition, financial strength and ability to deliver in
large volumes on a timely basis.
In each particular market in which it participates, the Company faces
competition from different groups of companies. With respect to CCG's product
lines, the Company's principal competitors are Intel, Sharp, Atmel, SGS
Thomson, Texas Instruments, Siemens, NEC, LM Ericsson, Alcatel, National
Semiconductor, 3Com and Motorola. With respect to microprocessors, Intel holds
a dominant market position. In Vantis' market, the Company's principal
competitors are Altera, Lattice Semiconductor and other smaller companies
focused on programmable logic device development and production.
MANUFACTURING FACILITIES
The Company's current integrated circuit manufacturing facilities are
described in the chart set forth below:
<TABLE>
<CAPTION>
PRODUCTION APPROX.
WAFER SIZE TECHNOLOGY CLEAN ROOM
FACILITY LOCATION (DIAMETER IN INCHES) (IN MICRONS) (SQUARE FOOTAGE)
----------------- -------------------- ------------ ----------------
<S> <C> <C> <C>
Austin, TX
Fab 25.............. 8 0.35 89,700
Fab 15.............. 6 0.7 22,000
Fab 14.............. 6 0.8 22,000
Fab 10.............. 5 0.9 22,000
Aizu-Wakamatsu, Japan
FASL................ 8 0.35 70,000
Sunnyvale, CA
SDC................. 6 0.35 42,500
</TABLE>
10
<PAGE>
The Company's joint venture with Fujitsu Limited, Fujitsu AMD Semiconductor
Limited (FASL), is constructing a second manufacturing facility in Aizu-
Wakamatsu, Japan. In addition, the Company is planning to construct and
operate a manufacturing facility in Dresden, Germany, through a wholly owned
subsidiary of the Company. AMD also has foundry arrangements for the
production of its products by third parties.
The Company's current assembly and test facilities are described in the
chart set forth below:
<TABLE>
<CAPTION>
APPROX.
ASSEMBLY & TEST
FACILITY LOCATION SQUARE FOOTAGE ACTIVITY
----------------- --------------- ---------------
<S> <C> <C>
Penang, Malaysia.......................... 141,283 Assembly & Test
Bangkok, Thailand......................... 77,473 Assembly & Test
Singapore................................. 54,000 Test
</TABLE>
In addition to the assembly and test facilities described above, AMD has a
50 year land lease in Suzhou, China, and is constructing an additional
assembly and test facility there. Foreign manufacturing entails political and
economic risks, including political instability, expropriation, currency
controls and fluctuations, changes in freight and interest rates, and loss or
modification of exemptions for taxes and tariffs. For example, if AMD were
unable to assemble and test its products abroad, or if air transportation
between the United States and the Company's overseas facilities were
disrupted, there could be a material adverse effect on the Company.
CERTAIN MATERIAL AGREEMENTS. Set forth below are descriptions of certain
material contractual relationships of the Company relating to FASL and the
Company's planned facility in Dresden, Germany.
FASL. In 1993, the Company and Fujitsu Limited (Fujitsu) formed a joint
venture, FASL, for the development and manufacture of non-volatile memory
devices. Through FASL, the two companies have constructed and are operating an
advanced integrated circuit manufacturing facility in Aizu-Wakamatsu, Japan,
to produce Flash memory devices. The facility began volume production in the
first quarter of 1995, and utilizes eight-inch wafer processing technologies
capable of producing products with geometrics of 0.5 micron or smaller.
Pursuant to the terms of the joint venture, the Company and Fujitsu have each
agreed not to independently produce Flash memory devices with geometrics of
0.5 micron or smaller outside of the joint venture.
In the third quarter of 1995, FASL approved construction of a second Flash
memory integrated circuit manufacturing facility (FASL II) at a site
contiguous to the existing FASL facility. Groundbreaking for FASL II occurred
in the first quarter of 1996. The $1.1 billion in capital expenditures planned
for the construction of FASL II are expected to be funded by cash generated
from FASL operations and, if necessary, borrowings by FASL. To the extent that
FASL is unable to secure the necessary funds for FASL II, the Company may be
required to contribute cash or guarantee third party loans in proportion to
its 49.95% interest in FASL. As of January 26, 1997, the Company had
guarantees of $33 million outstanding with respect to such loans. The planned
FASL II costs are denominated in yen and, therefore, are subject to change due
to foreign exchange rate fluctuations.
In connection with FASL, the Company and Fujitsu have entered into various
joint development, cross-license and investment arrangements. Accordingly, the
Company and Fujitsu are providing their product designs and process and
manufacturing technologies to FASL. In addition, both companies are
collaborating in developing manufacturing processes and designing integrated
circuits for FASL. The right of each company to use the licensed intellectual
property of the other with respect to certain products is limited to certain
geographic areas. Consequently, the Company's ability to sell Flash memory
products incorporating Fujitsu intellectual property, whether or not produced
by FASL, is also limited in certain territories, including the United Kingdom
and Japan. Fujitsu is likewise limited in its ability to sell Flash memory
devices incorporating the Company's intellectual property, whether or not
produced by FASL, in certain territories including the United States and
Europe, other than the United Kingdom and Ireland.
11
<PAGE>
DRESDEN. AMD Saxony Manufacturing GmbH (AMD Saxony), a German subsidiary
wholly owned by the Company through a German holding company, is building a
900,000 square foot submicron integrated circuit manufacturing and design
facility in Dresden, in the State of Saxony, Germany (the Dresden Facility)
over the next five years at a presently estimated cost of approximately $1.5
billion. The Dresden Facility is being designed for the production of
microprocessors and other advanced logic products. The Federal Republic of
Germany and the State of Saxony have agreed to support the project in the form
of (i) a guarantee of 65% of the bank debt to be incurred by AMD Saxony up to
a maximum of Deutsche marks (DM) 1.65 billion, (ii) investment grants and
subsidies totaling DM500.5 million, and (iii) interest subsidies from the
State of Saxony totaling DM300 million. In March 1997, AMD Saxony will be
entering into a loan agreement with a consortium of banks led by Dresdner Bank
AG under which facilities totaling DM1.65 billion will be made available. In
connection with the financing, the Company has agreed to invest in AMD Saxony
over the next three years equity and subordinated loans in an amount totaling
approximately DM507.5 million. Until the Dresden Facility has been completed,
AMD has also agreed to guarantee AMD Saxony's obligations under the loan
agreement up to a maximum of DM217.5 million. After completion of the Dresden
Facility, AMD has agreed to make available to AMD Saxony up to DM145 million
if the subsidiary does not meet its fixed charge coverage ratio covenant.
Finally, AMD has agreed to undertake certain contingent obligations, including
various obligations to fund project cost overruns. The Company began site
preparation of the Dresden Facility in the fourth quarter of 1996, and plans
to commence construction during the second quarter of 1997. The planned
Dresden Facility costs are denominated in Deutsche marks and, therefore, are
subject to change due to foreign exchange rate fluctuations. The Company plans
to hedge future foreign exchange exposure for the Dresden Facility.
AMD is currently negotiating the final forms of all the agreements relating
to the operation and financing of the Dresden Facility. The negotiations
presently contemplate that, in addition to the obligations discussed above,
AMD (directly or indirectly) will be required to (1) return all federal and
state government grants, allowances and interest subsidies, or replace all
such subsidies that are not made available, if the Company or AMD Saxony fails
to meet certain material obligations to the Federal Republic of Germany or the
State of Saxony; (2) purchase the output of the Dresden Facility at transfer
prices to be set pursuant to specific formulas, and which adjust downwards
when the Dresden Facility is operating at less than 75% capacity because of a
lack of market demand for the products being fabricated there (the Company's
product purchase obligation can be terminated once the syndicated loan has
been repaid or under circumstances relating to a change of control of AMD
Saxony or the destruction or abandonment of the Dresden Facility); (3) cause
AMD Saxony to undertake bona fide research and development activities at the
design center of the Dresden Facility; and (4) grant a non-exclusive license
to AMD Saxony to use, at the Dresden Facility and in products manufactured at
the Dresden Facility, intellectual property developed at the Dresden design
center.
No assurance can be given that AMD will be able to negotiate final
agreements relating to the operation and financing of the Dresden Facility on
terms satisfactory to it, that the terms of any such agreements will not be
materially different from those described, or that the financial exposure of
AMD in connection with the Dresden Facility will not materially exceed the
proposed terms described herein.
MARKETING AND SALES
The Company's products are marketed and sold under the AMD trademark. AMD
employs a direct sales force through its principal facilities in Sunnyvale,
California, and field sales offices throughout the United States and abroad
(primarily Europe and Asia Pacific). In 1996, the Company established a
separate sales force dedicated to sales of programmable logic devices as a
part of the Company's process of transferring its operations relating to the
design, development and marketing of programmable logic devices to a wholly
owned subsidiary, Vantis Corporation. AMD also sells its products through
third-party distributors and independent representatives in both domestic and
international markets pursuant to nonexclusive agreements. The distributors
also sell products manufactured by the Company's competitors, including those
products for which AMD is an alternate source. One of the Company's
distributors, Arrow Electronics, Inc., accounted for approximately 13% of 1996
net sales. No other distributor or OEM customer accounted for 10% or more of
net sales in 1996.
12
<PAGE>
Distributors typically maintain an inventory of the Company's products.
Pursuant to the Company's agreements with distributors, AMD protects its
distributors' inventory of the Company's products against price reductions, as
well as products that are slow moving or have been discontinued. These
agreements, which may be canceled by either party on a specified notice,
generally contain a provision for the return of the Company's products in the
event the agreement with the distributor is terminated. The price protection
and return rights AMD offers to its distributors may materially adversely
affect the Company.
AMD derives a substantial portion of its revenues from its sales
subsidiaries located in Europe and Asia Pacific. AMD subsidiaries have offices
in Australia, Belgium, Brazil, Canada, China, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Singapore, Sweden, Switzerland, Taiwan and the
United Kingdom. (See Note 11 of Notes to Consolidated Financial Statements
contained in the 1996 Annual Report to Stockholders.) The international sales
force also works with independent sales representatives and distributors with
offices in approximately 37 countries, including those where AMD has sales
subsidiaries. The Company's international sales operations entail political
and economic risks, including expropriation, currency controls, exchange rate
fluctuations, changes in freight rates, and changes in rates and exemptions
for taxes and tariffs.
RAW MATERIALS
Certain of the raw materials used by the Company in the manufacture of its
products are available from a limited number of suppliers. For example,
several types of the integrated circuit packages purchased by AMD, as well as
by the majority of other companies in the semiconductor industry, are
principally supplied by Japanese companies. Shortages could occur in various
essential materials due to interruption of supply or increased demand in the
industry. If AMD were unable to procure certain of such materials, it would be
required to reduce its manufacturing operations which could have a material
adverse effect on the Company. To date, AMD has not experienced significant
difficulty in obtaining necessary raw materials.
ENVIRONMENTAL REGULATIONS
The failure to comply with present or future governmental regulations
related to the use, storage, handling, discharge or disposal of toxic,
volatile or otherwise hazardous chemicals used in the manufacturing process
could result in fines being imposed on the Company, suspension of production,
alteration of the Company's manufacturing processes or cessation of
operations. Such regulations could require the Company to acquire expensive
remediation equipment or to incur other expenses to comply with environmental
regulations. Any failure by the Company to control the use, disposal or
storage of, or adequately restrict the discharge of, hazardous substances
could subject the Company to future liabilities and could have a material
adverse effect on the Company.
INTELLECTUAL PROPERTY AND LICENSING
AMD and its subsidiaries have been granted over 1,165 United States patents,
and over 1,327 patent applications are pending in the United States. In
certain cases, the Company has filed corresponding applications in foreign
jurisdictions. The Company expects to file future patent applications in both
the United States and abroad on significant inventions as it deems
appropriate.
On January 11, 1995, the Company and Intel reached an agreement to settle
all previously outstanding legal disputes between the two companies. As part
of the settlement, in December 1995, the Company signed a five-year,
comprehensive cross-license agreement with Intel which expires on December 31,
2000. The agreement provides that after December 20, 1999, the parties will
negotiate in good faith a patent cross-license agreement to be effective
January 1, 2001. Effective January 1, 1996, the new agreement gives the
Company and Intel the right to use each others' patents and certain
copyrights, including copyrights to the x86 instruction sets but excluding
other microprocessor microcode copyrights beyond the Intel 486(TM) processor
code. The cross-license is royalty-bearing for the Company's products that use
certain Intel technologies. The Company is required to pay Intel minimum non-
refundable royalties during the years 1997 through 2000.
13
<PAGE>
In addition, AMD has entered into numerous cross-licensing and technology
exchange agreements with other companies under which it both transfers and
receives technology and intellectual property rights. Although the Company
attempts to protect its intellectual property rights through patents,
copyrights, trade secrets and other measures, there can be no assurance that
the Company will be able to protect its technology adequately or that
competitors will not be able to develop similar technology independently.
There can be no assurance that any patent applications that the Company may
file will be issued or that foreign intellectual property laws will protect
the Company's intellectual property rights. There can be no assurance that any
patent licensed by or issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will
provide competitive advantages to the Company. Furthermore, there can be no
assurance that others will not independently develop similar products,
duplicate the Company's products or design around the patents issued to or
licensed by the Company.
From time to time, AMD has been notified that it may be infringing
intellectual property rights of others. If any such claims are asserted
against the Company, the Company may seek to obtain a license under the third
party's intellectual property rights. The Company could decide, in the
alternative, to resort to litigation to challenge such claims. Such challenges
could be extremely expensive and time-consuming and could materially adversely
affect the Company. No assurance can be given that all necessary licenses can
be obtained on satisfactory terms, nor that litigation may always be avoided
or successfully concluded.
BACKLOG
AMD manufactures and markets standard lines of products. Consequently, a
significant portion of its sales are made from inventory on a current basis.
Sales are made primarily pursuant to purchase orders for current delivery, or
agreements covering purchases over a period of time, which are frequently
subject to revision and cancellation without penalty. Generally, in light of
current industry practice and experience, AMD does not believe that such
agreements provide meaningful backlog figures or are necessarily indicative of
actual sales for any succeeding period.
EMPLOYEES
On January 28, 1997, AMD and its subsidiaries employed approximately 12,200
employees, none of whom are represented by collective bargaining arrangements.
The Company believes that its relationship with its employees is generally
good.
ITEM 2. PROPERTIES
The Company's principal engineering, manufacturing, warehouse and
administrative facilities comprise approximately 3.11 million square feet and
are located in Sunnyvale, California and Austin, Texas. Over 2.56 million
square feet of this space is in buildings owned by the Company.
The Company leases property containing two buildings with an aggregate of
approximately 360,000 square feet, located on 45.6 acres of land in Sunnyvale,
California (One AMD Place). These leases provide the Company with an option to
purchase One AMD Place for $40 million during the lease term. The lease term
ends in 1998. At the end of the lease term, the Company is obligated to either
purchase One AMD Place or to arrange for its sale to a third party with a
guarantee of residual value to the seller equal to the option purchase price.
In 1993, the Company entered into a lease agreement for approximately 175,000
square feet located adjacent to One AMD Place (known as AMD Square) to be used
in connection with One AMD Place.
The Company also owns or leases facilities containing approximately 804,000
square feet for its operations in Malaysia, Thailand and Singapore. The
Company leases approximately 15 acres of land in Suzhou, China. The Company
owns 74 undeveloped acres of land in the Republic of Ireland. The Company also
has an equity interest in 58 acres of land in Albuquerque, New Mexico. In
1996, the Company acquired approximately 103 acres of land in Dresden,
Germany. Fab 25 is encumbered by a lien securing the Company's $400 million
Senior Secured Notes and its $400 million bank credit arrangements. The
planned Dresden Facility will be encumbered by a lien securing borrowings of
AMD Saxony.
14
<PAGE>
AMD leases 28 sales offices in North America, 9 sales offices in Asia
Pacific, 12 sales offices in Europe and one sales office in South America for
its direct sales force. These offices are located in cities in major
electronics markets where concentrations of the Company's customers are
located.
Leases covering the Company's facilities expire over terms of generally one
to twenty years. The Company currently does not anticipate significant
difficulty in either retaining occupancy of any of its facilities through
lease renewals prior to expiration or through month-to-month occupancy, or
replacing them with equivalent facilities.
ITEM 3. LEGAL PROCEEDINGS
1. ENVIRONMENTAL MATTERS. Since 1981, the Company has discovered,
investigated and begun remediation of three sites where releases from
underground chemical tanks at its facilities in Santa Clara County,
California, adversely affected the groundwater. The chemicals released into
the groundwater were commonly in use in the semiconductor industry in the
wafer fabrication process prior to 1979. At least one of the released
chemicals (which is no longer used by the Company) has been identified as a
probable carcinogen.
In 1991, the Company received four Final Site Clean-up Requirements Orders
from the California Regional Water Quality Control Board, San Francisco Bay
Region, relating to the three sites. One of the orders named the Company as
well as TRW Microwave, Inc. and Philips Semiconductors Corporation. Another of
the orders named the Company as well as National Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If the Company fails to satisfy federal compliance requirements
or inadequately performs the compliance measures, the government (a) can bring
an action to enforce compliance, or (b) can undertake the desired response
actions itself and later bring an action to recover its costs, and penalties,
which is up to three times the costs of clean-up activities, if appropriate.
With regard to certain claims related to this matter the statute of
limitations has been tolled.
The Company has computed and recorded the estimated environmental liability
in accordance with applicable accounting rules and has not recorded any
potential insurance recoveries in determining the estimated costs of the
cleanup. The amount of environmental charges to earnings has not been material
during any of the last three fiscal years. The Company believes that the
potential liability, if any, in excess of amounts already accrued with respect
to the foregoing environmental matters will not have a material adverse effect
on the financial condition or results of operations of the Company.
2. MCDAID V. SANDERS, ET AL. (CASE NO. C-95-20750-JW, N.D. CAL.); KOZLOWSKI,
ET AL. V. SANDERS, ET AL. (CASE NO. C-95-20829-JW, N.D. CAL.). The McDaid
complaint was filed November 3, 1995 and the Kozlowski complaint was filed
November 15, 1995. Both actions allege violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against
the Company and certain individual officers and directors (the Individual
Defendants), and purportedly were filed on behalf of all persons who purchased
or otherwise acquired common stock of the Company during the period April 11,
1995 through September 22, 1995. The complaints seek damages allegedly caused
by alleged materially misleading statements and/or material omissions by the
Company and the Individual Defendants regarding the Company's development of
its AMD-K5, -K6 and -K7 microprocessors, which statements and omissions, the
plaintiffs claim, allegedly operated to inflate artificially the price paid
for the Company's common stock during the period. The complaints seek
compensatory damages in an amount to be proven at trial, fees and costs, and
extraordinary equitable and/or injunctive relief. The court has consolidated
both actions into one. Defendants filed answers in the consolidated action in
May, 1996 and discovery has begun. Based upon information presently known to
management, the Company does not believe that the ultimate resolution of this
lawsuit will have a material adverse effect on the financial condition or
results of operations of the Company.
15
<PAGE>
3. ADVANCED MICRO DEVICES, INC. V. ALTERA CORPORATION (CASE NO. C-94-20567-
RMW, N. D. CAL.). This litigation, which began in 1994, involves multiple
claims and counterclaims for patent infringement relating to the Company's and
Altera Corporation's programmable logic devices. On June 27, 1996, a jury
returned a verdict and found that four of the eight patents-in-suit were
licensed to Altera. The parties have stipulated that the court, not a jury,
will decide which of the remaining AMD patents-in-suit fall within the scope
of the license that the jury found. The court will hear the first of two
phases regarding the remaining patents in April, 1997. Based upon information
presently known to management, the Company does not believe that the ultimate
resolution of this lawsuit will have a material adverse effect on the
financial condition or results of operations of the Company.
4. INTEL CORPORATION V. ADVANCED MICRO DEVICES, INC., ET AL. (CASE NO. 97-
118, D. DEL.). On March 14, 1997, Intel Corporation (Intel) filed suit against
the Company and Cyrix Corporation in the United States District Court for the
District of Delaware alleging false designation of origin and false
advertising, trademark infringement and trademark dilution, and deceptive
trade practices arising out of alleged misuse by the Company of the term
"MMX," which Intel claims as a trademark. In a related matter filed by Intel
against the Company on March 14, 1997, in the regional Court of Braunschweig,
Germany (Case Ref. No. 9 0 89/97), Intel was granted a temporary injunction
prohibiting the Company from using the term "MMX" to identify, advertise or
market its processors. Based upon information presently known to management,
the Company does not believe that the ultimate resolution of these lawsuits
will have a material adverse effect upon the financial condition or results of
operation of the Company.
5. OTHER MATTERS. The Company is a defendant or plaintiff in various other
actions which arose in the normal course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the financial condition or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
HELD
NAME AGE POSITION SINCE
---- --- -------- -----
<C> <C> <S> <C>
W. J. Sanders III.... 60 Chairman of the Board and Chief Executive Officer. 1969
Richard Previte...... 62 Director, President and Chief Operating Officer. Mr. 1989
Previte became Chief Operating Officer in 1989 and
President in 1990. Mr. Previte was Chief Financial
Officer and Treasurer from 1969 to 1989.
Marvin D. Burkett.... 55 Senior Vice President, Chief Financial and 1989
Administrative Officer and Treasurer. Mr. Burkett was
Controller from 1972 until 1989.
Eugene D. Conner..... 53 Senior Vice President, Operations. Mr. Conner joined 1987
the Company in 1969, and was elected an executive
officer in 1981.
S. Atiq Raza......... 48 Director, Senior Vice President and Chief Technical 1996
Officer. Formerly, Mr. Raza was the Chairman of the
Board, President, Chief Executive Officer, and
Secretary of NexGen, Inc.
Stanley Winvick...... 57 Senior Vice President, Human Resources. Mr. Winvick had 1991
been Vice President, Human Resources since 1980.
Stephen J. Zelencik.. 62 Senior Vice President and Chief Marketing Executive. 1979
Mr. Zelencik joined the Company in 1970.
Thomas M. McCoy...... 46 Vice President, General Counsel and Secretary. Prior to 1995
joining the Company, Mr. McCoy was with the law firm of
O'Melveny and Myers where he had been a partner since
1985.
</TABLE>
There is no family relationship between any executive officers of the
Company.
16
<PAGE>
KEY EMPLOYEES
<TABLE>
<CAPTION>
HELD
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Donald M. Brettner... 60 Group Vice President, Manufacturing Services Group. Mr. 1996
Brettner joined the Company in 1982. Prior to joining
the Company, Mr. Brettner was Chief Operating Officer
at NBK Corporation and Vice President of Manufacturing
Services at Fairchild Semiconductor.
Vinod Dham........... 46 Group Vice President, Computation Products Group. Prior 1996
to joining the Company, Mr. Dham was Executive Vice
President and Chief Operating Officer of NexGen, Inc.
and held those positions from May, 1995, until it was
acquired by the Company on January 17, 1996. Before
joining NexGen, Mr. Dham was Vice President of the
Microprocessor Products Group and General Manager of
the Pentium Processor Division at Intel. Mr. Dham was
employed by Intel from July 1979 to April 1995.
Richard Forte........ 53 Group Vice President, Communications and Components 1996
Group, and President, Vantis. Mr. Forte joined the
Company in 1986. Prior to joining the Company, Mr.
Forte was Vice President of Monolithic Memories, Inc.
from 1986 until it was acquired by the Company in 1987.
Gary O. Heerssen..... 50 Group Vice President, Wafer Fabrication Group. Mr. 1996
Heerssen joined the Company in 1986. Prior to joining
the Company, Mr. Heerssen worked for Fairchild
Semiconductor and spent 15 years with Texas Instruments
in a variety of engineering and operations management
positions.
William T. Siegle.... 58 Group Vice President, Technology Development Group and 1990
Chief Scientist. Mr. Siegle joined the Company and was
elected Vice President and Chief Scientist in 1990.
Prior to joining the Company, Mr. Siegle was Director
of the Advanced Technology Center for IBM in East
Fishkill, New York.
Terryll R. Smith..... 47 Group Vice President, Sales and Marketing. Mr. Smith 1996
joined the Company in 1975. Prior to his current
position, Mr. Smith was Vice President of Sales &
Marketing for European Operations in Switzerland, Vice
President of International Sales & Marketing for AMD
Sunnyvale and Group Vice President of Applications
Solutions Products.
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is publicly traded on the New York Stock
Exchange. The information regarding market price range, dividend information
and number of holders of common stock of AMD appearing under the captions
"Supplementary Financial Data" and "Financial Summary" on pages 38 and 39 of
the Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
During 1996, the Company sold one million shares of its common stock to
Fujitsu which were not registered under the Securities Act of 1933 based upon
an exemption from the registration requirements of the Act for transactions
not involving public offerings. The Company sold 500,000 shares on April 1,
1996, at $19.00 per share and 500,000 shares on October 1, 1996, at $14.00 per
share. In each case, the consideration was cash.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information regarding selected financial data for the fiscal years 1992
through 1996, under the caption "Financial Summary" on page 39 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 8 through
17 of the Company's 1996 Annual Report to Stockholders is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements at December 29, 1996 and
December 31, 1995 and for each of the three years in the period ended December
29, 1996, and the report of independent auditors thereon, and the unaudited
quarterly financial data of AMD for the two-year period ended December 29,
1996, appearing on pages 18 through 38 of the Company's 1996 Annual Report to
Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing at the end of Item 4 in Part I of this report
under the caption "Executive Officers of the Registrant" and under the
captions "Proposal No. 1 Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for its
Annual Meeting of Stockholders to be held on April 24, 1997 (the 1997 Proxy
Statement) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Directors Fees and Expenses" under the
main caption "Committees and Meetings of the Board of Directors," and the
information under the captions "Executive Compensation," "Employment
Agreements, Compensation Agreements and Change in Control Agreements" and
"Compensation Committee Interlocks and Insider Participation" in the 1997
Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Principal Stockholders" and
"Stock Ownership Table" in the 1997 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Relationships and
Related Transactions" in the 1997 Proxy Statement is incorporated herein by
reference.
With the exception of the information specifically incorporated by reference
in Part III of this Annual Report on Form 10-K from the 1997 Proxy Statement,
the 1997 Proxy Statement shall not be deemed to be filed as part of this
report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee" and "Comparison of Five-Year Cumulative
Total Return Advanced Micro Devices, S&P 500 Composite Index and Technology-
500 Index" in the 1997 Proxy Statement is not incorporated by reference in
this Annual Report on Form 10-K.
18
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)
1. FINANCIAL STATEMENTS
The financial statements listed in the accompanying Index to Consolidated
Financial Statements and Financial Statement Schedule covered by Report of
Independent Auditors are filed or incorporated by reference as part of this
Annual Report on Form 10-K. The following is a list of such financial
statements:
<TABLE>
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PAGE REFERENCES
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
<S> <C> <C>
Report of Ernst & Young LLP, Independent Auditors......... -- 37
Consolidated Statements of Operations for the three years
in the period ended December 29, 1996.................... -- 18
Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995........................................ -- 19
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 29, 1996........ -- 20
Consolidated Statements of Cash Flows for the three years
in the period ended December 29, 1996.................... -- 21
Notes to Consolidated Financial Statements................ -- 22-36
</TABLE>
2. FINANCIAL STATEMENT SCHEDULE
The financial statement schedule listed in the accompanying Index to
Consolidated Financial Statements and Financial Statement Schedule covered by
the Report of Independent Auditors is filed as part of this Annual Report on
Form 10-K as follows:
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PAGE REFERENCES
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
<S> <C> <C>
Schedule II Valuation and Qualifying Accounts.............. F-3 --
</TABLE>
All other schedules have been omitted because the required information is
not present or is not present in amounts sufficient to require submission of
the schedules, or because the information required is included in the
Consolidated Financial Statements or Notes thereto. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, the 1996 Annual Report to Stockholders is not
to be deemed filed as part of this report.
19
<PAGE>
3. EXHIBITS
The exhibits listed in the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K. The
following is a list of such Exhibits:
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2.1 Agreement and Plan of Merger dated October 20, 1995, as amended,
between the Company and NexGen, Inc., filed as Exhibit 2 to the
Company's Quarterly Report for the period ended October 1, 1995, and
as Exhibit 2.2 to the Company's Current Report on Form 8-K dated
January 17, 1996, is hereby incorporated by reference.
2.2 Amendment No. 2 to the Agreement and Plan of Merger, dated January 11,
1996, among Advanced Micro Devices, Inc. and NexGen, Inc., filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K dated January
17, 1996, is hereby incorporated by reference.
3.1 Certificate of Incorporation, as amended, filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the period ended July 2,
1995, is hereby incorporated by reference.
3.2 By-Laws, as amended, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, is
hereby incorporated by reference.
4.1 Form of Advanced Micro Devices, Inc. 11% Senior Secured Notes due
August 1, 2003, filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.2 Indenture, dated as of August 1, 1996, between Advanced Micro Devices,
Inc. and United States Trust Company of New York, as trustee, filed as
Exhibit 4.2 to the Company's Current Report on Form 8-K dated August
13, 1996, is hereby incorporated by reference.
4.3 Intercreditor and Collateral Agent Agreement, dated as of August 1,
1996, among United States Trust Company of New York, as trustee, Bank
of America NT&SA, as agent for the banks under the Credit Agreement of
July 19, 1996, and IBJ Schroder Bank & Trust Company, filed as Exhibit
4.3 to the Company's Current Report on Form 8-K dated August 13, 1996,
is hereby incorporated by reference.
4.4 Payment, Reimbursement and Indemnity Agreement, dated as of August 1,
1996, between Advanced Micro Devices, Inc. and IBJ Schroder Bank &
Trust Company, filed as Exhibit 4.4 to the Company's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by reference.
4.5 Deed of Trust, Assignment, Security Agreement and Financing Statement,
dated as of August 1, 1996, among Advanced Micro Devices, Inc., as
grantor, IBJ Schroder Bank & Trust Company, as grantee, and Shelley W.
Austin as trustee, filed as Exhibit 4.5 to the Company's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.6 Security Agreement, dated as of August 1, 1996, between Advanced Micro
Devices, Inc. and IBJ Schroder Bank & Trust Company, as agent for
United States Trust Company of New York, as Trustee, and Bank of
America NT&SA, as agent for banks, filed as Exhibit 4.6 to the
Company's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.7 Lease, Option to Purchase and Put Option Agreement, dated as of August
1, 1996, between Advanced Micro Devices, Inc., as lessor, and AMD
Texas Properties, LLC, as lessee, filed as Exhibit 4.7 to the
Company's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.8 Reciprocal Easement Agreement, dated as of August 1, 1996, between
Advanced Micro Devices, Inc. and AMD Texas Properties, LLC, filed as
Exhibit 4.8 to the Company's Current Report on Form 8-K dated August
13, 1996, is hereby incorporated by reference.
4.9 Sublease Agreement, dated as of August 1, 1996, between Advanced Micro
Devices, Inc., as sublessee, and AMD Texas Properties, LLC, as
sublessor, filed as Exhibit 4.9 to the Company's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by reference.
</TABLE>
20
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4.10 The Company hereby agrees to file on request of the Commission a copy
of all instruments not otherwise filed with respect to long-term debt
of the Company or any of its subsidiaries for which the total amount
of securities authorized under such instruments does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated
basis.
*10.1 AMD 1982 Stock Option Plan, as amended, filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.2 AMD 1986 Stock Option Plan, as amended, filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.3 AMD 1992 Stock Incentive Plan, as amended, filed as Exhibit 10.3 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.4 AMD 1980 Stock Appreciation Rights Plan, as amended, filed as Exhibit
10.4 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.5 AMD 1986 Stock Appreciation Rights Plan, as amended, filed as Exhibit
10.5 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.6 Forms of Stock Option Agreements, filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, are hereby incorporated by reference.
*10.7 Form of Limited Stock Appreciation Rights Agreement, filed as Exhibit
4.11 to the Company's Registration Statement on Form S-8 (No. 33-
26266), is hereby incorporated by reference.
*10.8 AMD 1987 Restricted Stock Award Plan, as amended, filed as Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.9 Forms of Restricted Stock Agreements, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, are hereby incorporated by reference.
*10.10 Resolution of Board of Directors on September 9, 1981, regarding
acceleration of vesting of all outstanding stock options and
associated limited stock appreciation rights held by officers under
certain circumstances, filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1985, is
hereby incorporated by reference.
*10.11 Advanced Micro Devices, Inc. 1996 Stock Incentive Plan, as amended.
*10.12 Employment Agreement dated September 29, 1996, between the Company and
W. J. Sanders III, filed as Exhibit 10.11(a) to the Company's
Quarterly Report on Form 10-Q for the period ended September 29, 1996,
is hereby incorporated by reference.
*10.13 Management Continuity Agreement between the Company and W. J. Sanders
III, filed as Exhibit 10.14 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 29, 1991, is hereby incorporated
by reference.
*10.14 Bonus Agreement between the Company and Richard Previte, filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 29, 1991, is hereby incorporated by
reference.
*10.15 Executive Bonus Plan, as amended, filed as Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994, is hereby incorporated by reference.
</TABLE>
21
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NUMBER DESCRIPTION OF EXHIBITS
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<C> <S>
*10.16 Advanced Micro Devices, Inc. 1996 Executive Incentive Plan, filed
as Exhibit 10.14(b) to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996, is hereby incorporated by
reference.
*10.17 Form of Bonus Deferral Agreement, filed as Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 30, 1986, is hereby incorporated by reference.
*10.18 Form of Executive Deferral Agreement, filed as Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, is hereby incorporated by reference.
*10.19 Director Deferral Agreement of R. Gene Brown, filed as Exhibit
10.18 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, is hereby incorporated by reference.
10.20 Intellectual Property Agreements with Intel Corporation, filed as
Exhibit 10.21 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 29, 1991, are hereby incorporated by
reference.
*10.21 Form of Indemnification Agreements with former officers of
Monolithic Memories, Inc., filed as Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 27,
1987, is hereby incorporated by reference.
*10.22 Form of Management Continuity Agreement, filed as Exhibit 10.25 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, is hereby incorporated by reference.
**10.23(a) Joint Venture Agreement between the Company and Fujitsu Limited,
filed as Exhibit 10.27(a) to the Company's Amendment No. 1 to its
Annual Report on Form 10K/A for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
**10.23(b) Technology Cross-License Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(b) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
**10.23(c) AMD Investment Agreement between the Company and Fujitsu Limited,
filed as Exhibit 10.27(c) to the Company's Amendment No. 1 to its
Annual Report on Form 10K/A for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
**10.23(d) Fujitsu Investment Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(d) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
***10.23(e) First Amendment to Fujitsu Investment Agreement dated April 28,
1995.
10.23(f) Second Amendment to Fujitsu Investment Agreement, dated February
27, 1996.
**10.23(g) Joint Venture License Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(e) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
**10.23(h) Joint Development Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(f) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
**10.23(i) Fujitsu Joint Development Agreement Amendment, filed as Exhibit
10.23(g) to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1996, is hereby incorporated by reference.
10.24(a) Credit Agreement, dated as of July 19, 1996, among Advanced Micro
Devices, Inc., Bank of America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndication agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 99.1 to the Company's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
</TABLE>
22
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<CAPTION>
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NUMBER DESCRIPTION OF EXHIBITS
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<C> <S>
10.24(b) First Amendment to Credit Agreement, dated as of August 7, 1996,
among Advanced Micro Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO Bank N.V., as syndication
agent and lender, and Canadian Imperial Bank of Commerce, as
documentation agent and lender, filed as Exhibit 99.2 to the
Company's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
10.24(c) Second Amendment to Credit Agreement, dated as of September 9, 1996,
among Advanced Micro Devices, Inc., Bank of America NT&SA, as
administrative agent and lender, ABN AMRO Bank, N.V., as syndication
agent and lender, and Canadian Imperial Bank of Commerce, as
documentation agent and lender, filed as Exhibit 10.24(b) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 29, 1996, is hereby incorporated by reference.
10.25(a) Third Amended and Restated Guaranty, dated as of August 21, 1995,
made by the Company in favor of CIBC Inc. (replacing in entirety the
Amended and Restated Guaranty and the First Amendment thereto filed
as Exhibits 10.29(a) and 10.29(b), respectively, to the Company's
Annual Report on Form 10-K for the fiscal year ended December 25,
1994) filed as Exhibit 10.29(a) to the Company's Quarterly Report on
Form 10-Q for the period ended October 1, 1995, is hereby
incorporated by reference.
10.25(b) First Amendment to Third Amended and Restated Guaranty, dated as of
October 20, 1995, amending the Third Amended and Restated Guaranty
dated as of August 21, 1995, made by the Company in favor of CIBC
Inc. and filed as Exhibit 10.29(a), as filed as Exhibit 10.29(d) to
the Company's Quarterly Report on Form 10-Q for the period ended
October 1, 1995, is hereby incorporated by reference.
10.25(c) Second Amendment to Third Amended and Restated Guaranty, dated as of
January 12, 1996 (amending the Third Amended and Restated Guaranty
dated as of August 21, 1995, made by the Company in favor of CIBC
Inc.), filed as Exhibit 10.25(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, is hereby
incorporated by reference.
10.25(d) Third Amendment to Third Amended and Restated Guaranty, dated as of
May 10, 1996 (amending the Second Amendment to the Third Amended and
Restated Guaranty, dated as of January 12, 1996, made by the Company
in favor of CIBC Inc.), filed as Exhibit 10.25(n) to the Company's
Quarterly Report on Form 10-Q for the period ended September 29,
1996, is hereby incorporated by reference.
10.25(e) Fourth Amendment to Third Amended and Restated Guaranty, dated as of
June 20, 1996 (amending the Third Amendment to the Third Amended and
Restated Guaranty, dated as of May 10, 1996, made by the Company in
favor of CIBC Inc.), filed as Exhibit 10.25(o) to the Company's
Quarterly Report on Form 10-Q for the period ended September 29,
1996, is hereby incorporated by reference.
10.25(f) Fifth Amendment to Third Amended and Restated Guaranty, dated as of
August 1, 1996 (amending the Third Amended and Restated Guaranty,
dated as of August 25, 1995, made by the Company in favor of CIBC
Inc.), filed as Exhibit 99.3 to the Company's Current Report on Form
8-K dated August 13, 1996, is hereby incorporated by reference.
10.26(a) Building Lease by and between CIBC Inc. and AMD International Sales &
Service, Ltd., dated as of September 22, 1992, filed as Exhibit
10.28(b) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 27, 1992, is hereby incorporated by reference.
10.26(b) First Amendment to Building Lease dated December 22, 1992, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.28(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 27, 1992, is hereby incorporated by
reference.
10.26(c) Second Amendment to Building Lease dated December 17, 1993, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.29(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 25, 1994, is hereby incorporated by
reference.
</TABLE>
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NUMBER DESCRIPTION OF EXHIBITS
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10.26(d) Third Amendment to Building Lease dated August 21, 1995, by and
between CIBC Inc. and AMD International Sales and Service, Inc.
(amending the Building Lease filed as Exhibit 10.29(c) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994), filed as Exhibit 10.29(b) to the Company's
Quarterly Report on Form 10-Q for the period ended October 1, 1995,
is hereby incorporated by reference.
10.26(e) Fourth Amendment to Building Lease dated November 10, 1995, by and
between CIBC Inc. and AMD International Sales & Service, Inc.
(amending the Building Lease filed as Exhibit 10.29(c) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 24, 1994), filed as Exhibit 10.25(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is hereby incorporated by reference.
10.26(f) Fifth Amendment to Building Lease dated August 1, 1996 (amending the
Building Lease dated as of September 22, 1992, by and between AMD
International Sales & Service, Ltd. and CIBC Inc.), filed as Exhibit
99.4 to the Company's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
10.27(a) Land Lease by and between CIBC Inc. and AMD International Sales &
Service, Ltd., dated as of September 22, 1992, filed as Exhibit
10.28(d) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 27, 1992, is hereby incorporated by reference.
10.27(b) First Amendment to Land Lease dated December 22, 1992, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.28(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 27, 1992, is hereby incorporated by
reference.
10.27(c) Second Amendment to Land Lease dated December 17, 1993, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.29(h) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 25, 1994, is hereby incorporated by
reference.
10.27(d) Third Amendment to Land Lease dated August 21, 1995, by and between
CIBC Inc. and AMD International Sales & Service, Inc. (amending the
Land Lease filed as Exhibit 10.29(f) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 25, 1994), filed as
Exhibit 10.29(c) to the Company's Quarterly Report on Form 10-Q for
the period ended October 1, 1995, is hereby incorporated by
reference.
10.27(e) Fourth Amendment to Land Lease dated November 10, 1995, by and
between CIBC Inc. and AMD International Sales & Service, Ltd.
(amending the Land Lease filed as Exhibit 10.29(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 25,
1994), filed as Exhibit 10.25(m) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, is hereby
incorporated by reference.
10.27(f) Fifth Amendment to Land Lease dated as of August 1, 1996 (amending
the Land Lease dated as of September 22, 1992, by and between AMD
International Sales & Service, Ltd. and CIBC Inc.), filed as Exhibit
99.5 to the Company's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
*10.28 Executive Savings Plan, as amended, filed as Exhibit 10.30 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994, is hereby incorporated by reference.
*10.29 Form of Split Dollar Agreement, as amended, filed as Exhibit 10.31
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 25, 1994, is hereby incorporated by reference.
*10.30 Form of Collateral Security Assignment Agreement, filed as Exhibit
10.32 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 26, 1993, is hereby incorporated by reference.
*10.31 Forms of Stock Option Agreements to the 1992 Stock Incentive Plan,
filed as Exhibit 4.3 to the Company's Registration Statement on Form
S-8 (No. 33-46577), are hereby incorporated by reference.
</TABLE>
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*10.32 1992 United Kingdom Share Option Scheme, filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (No. 33-46577), is hereby
incorporated by reference.
**10.33 Compaq Computer Company/Advanced Micro Devices, Inc. Agreement, filed
as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994, is hereby incorporated by
reference.
*10.34 Form of indemnification agreements with current officers and directors
of the Company, filed as Exhibit 10.38 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 25, 1994, is hereby
incorporated by reference.
*10.35 Agreement to Preserve Goodwill dated January 15, 1996, between the
Company and S. Atiq Raza, filed as Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is hereby incorporated by reference.
*10.36 1995 Stock Plan of NexGen, Inc., as amended.
**10.37 Patent Cross-License Agreement dated December 20, 1995, between the
Company and Intel Corporation, filed as Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is hereby incorporated by reference.
10.38 Contract for Transfer of the Right to the Use of Land between Advanced
Micro Devices (Suzhou) Limited and China-Singapore Suzhou Industrial
Park Development Co., Ltd., filed as Exhibit 10.39 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is hereby incorporated by reference.
*10.39 NexGen, Inc. 1987 Employee Stock Plan, filed as Exhibit 99.3 to Post-
Effective Amendment No. 1 on Form S-8 to the Company's Registration
Statement on Form S-4 (No. 33-64911), is hereby incorporated by
reference.
*10.40 1995 Stock Plan of NexGen, Inc. (assumed by Advanced Micro Devices,
Inc.), as amended, filed as Exhibit 10.37 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1996, is hereby
incorporated by reference.
*10.41 Form of indemnity agreement between NexGen, Inc. and its directors and
officers, filed as Exhibit 10.5 to the Registration Statement of
NexGen, Inc. on Form S-1 (No. 33-90750), is hereby incorporated by
reference.
10.42 Series E Preferred Stock Purchase Warrant of NexGen, Inc. issued to
PaineWebber Incorporated, filed as Exhibit 10.14 to the Registration
Statement of NexGen, Inc. on Form S-1 (No. 33-90750), is hereby
incorporated by reference.
10.43 Series F Preferred Stock Purchase Warrant of NexGen, Inc., filed as
Exhibit 10.15 to the Registration Statement of NexGen, Inc. on Form S-
1 (No. 33-90750), is hereby incorporated by reference.
10.44 Series G Preferred Stock Purchase Warrant of NexGen, Inc., filed as
Exhibit 10.16 to the Registration Statement of NexGen, Inc. on Form S-
1 (No. 33-90750), is hereby incorporated by reference.
**10.45 Agreement for Purchase of IBM Products between IBM and NexGen, Inc.
dated June 2, 1994, filed as Exhibit 10.17 to the Registration
Statement of NexGen, Inc. on Form S-1 (No. 33-90750), is hereby
incorporated by reference.
</TABLE>
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*10.46 Letter Agreement dated as of September, 1988, between NexGen, Inc.
and S. Atiq Raza, First Promissory Note dated October 17, 1988,
and Second Promissory Note dated October 17, 1988, as amended,
filed as Exhibit 10.20 to the Registration Statement of NexGen,
Inc. on Form S-1 (No. 33-90750), are hereby incorporated by
reference.
10.47 Series B Preferred Stock Purchase Warrant of NexGen, Inc. issued
to Kleiner, Perkins, Caufield and Byers IV, as amended, filed as
Exhibit 10.23 to the Registration Statement of NexGen, Inc. on
Form S-1 (No. 33-90750), is hereby incorporated by reference.
***10.48 C-4 Technology Transfer and Licensing Agreement dated June 11,
1996, between the Company and IBM Corporation, filed as Exhibit
10.48 to the Company's Amendment No. 1 to its Quarterly Report on
Form 10-Q/A for the period ended September 29, 1996, is hereby
incorporated by reference.
***10.49(a) Design and Build Agreement dated November 15, 1996, between AMD
Saxony Manufacturing GmbH and Meissner and Wurst GmbH.
10.49(b) Amendment to Design and Build Agreement dated January 16, 1997,
between AMD Saxony Manufacturing GmbH and Meissner and Wurst GmbH.
11 Statement regarding computation of per share earnings.
13 1996 Annual Report to Stockholders, portions of which have been
incorporated by reference into Parts II and IV of this annual
report.
21 List of AMD subsidiaries.
23 Consent of Ernst & Young LLP, Independent Auditors, refer to page
F-2 herein.
24 Power of Attorney.
27 Financial Data Schedule.
</TABLE>
The Company will furnish a copy of any exhibit on request and payment of the
Company's reasonable expenses of furnishing such exhibit.
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with Item 14(a)(3).
** Confidential treatment has been granted as to certain portions of these
Exhibits.
*** Confidential treatment has been requested as to certain portions of these
Exhibits.
(B) REPORTS ON FORM 8-K.
The following report on Form 8-K was filed during the fourth quarter of the
Company's fiscal year ended December 29, 1996:
1. A Current Report on Form 8-K dated October 7, 1996, was filed
announcing the Company's third quarter revenues.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ADVANCED MICRO DEVICES, INC.
Registrant
March 17, 1997
By: /s/ Marvin D. Burkett
----------------------------------
Marvin D. Burkett
Senior Vice President, Chief
Financial and Administrative Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. J. Sanders III* Chairman of the Board and March 17, 1997
____________________________________ Chief Executive Officer
W. J. Sanders III (Principal Executive
Officer)
/s/ Friedrich Baur* Director March 17, 1997
____________________________________
Friedrich Baur
/s/ Charles M. Blalack* Director March 17, 1997
____________________________________
Charles M. Blalack
/s/ R. Gene Brown* Director March 17, 1997
____________________________________
R. Gene Brown
/s/ Marvin D. Burkett Senior Vice President, Chief March 17, 1997
____________________________________ Financial and Administrative
Marvin D. Burkett Officer and Treasurer
(Principal Financial
Officer)
/s/ Richard Previte* Director, President and March 17, 1997
____________________________________ Chief Operating Officer
Richard Previte
/s/ S. Atiq Raza* Director, Senior Vice March 17, 1997
____________________________________ President and Chief
S. Atiq Raza Technical Officer
/s/ Joe L. Roby* Director March 17, 1997
____________________________________
Joe L. Roby
/s/ Leonard Silverman* Director March 17, 1997
____________________________________
Leonard Silverman
*By: /s/ Marvin D. Burkett
________________________________
Marvin D. Burkett
(Marvin D. Burkett,
Attorney-in-Fact)
/s/ Geoff Ribar Vice President and March 17, 1997
____________________________________ Controller (Principal
Geoff Ribar Accounting Officer)
</TABLE>
27
<PAGE>
ADVANCED MICRO DEVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
COVERED BY THE REPORT OF INDEPENDENT AUDITORS
ITEM 14(A) (1) AND (2)
The information under the following captions, which is included in the
Company's 1996 Annual Report to Stockholders, a copy of which is attached
hereto as Exhibit 13, is incorporated herein by reference:
<TABLE>
<CAPTION>
PAGE REFERENCES
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
<S> <C> <C>
Report of Ernst & Young LLP, Independent Auditors.......... -- 37
Consolidated Statements of Operations for the three years
in the period ended December 29, 1996..................... -- 18
Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995......................................... -- 19
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 29, 1996......... -- 20
Consolidated Statements of Cash Flows for the three years
in the period ended December 29, 1996..................... -- 21
Notes to Consolidated Financial Statements................. -- 22-36
Schedule for the three years in the period ended December
29, 1996:
Schedule II Valuation and Qualifying Accounts............. F-3 --
</TABLE>
All other schedules have been omitted because the required information is
not present or is not present in amounts sufficient to require submission of
the schedules, or because the information required is included in the
Consolidated Financial Statements or Notes thereto. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, the 1996 Annual Report to Stockholders is not
to be deemed filed as part of this report.
F-1
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-
K) of Advanced Micro Devices, Inc. of our report dated January 9, 1997,
included in the 1996 Annual Report to Stockholders of Advanced Micro Devices,
Inc.
Our audits also included the financial statement schedule of Advanced Micro
Devices, Inc. listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-16095) pertaining to the Advanced Micro Devices,
Inc. 1987 Restricted Stock Award Plan, in the Registration Statement on Form
S-8 (No. 33-39747) pertaining to the Advanced Micro Devices, Inc. 1991
Employee Stock Purchase Plan, in the Registration Statements on Form S-8 (Nos.
33-10319, 33-36596 and 33-46578) pertaining to the Advanced Micro Devices,
Inc. 1982 and 1986 Stock Option Plans and the 1980 and 1986 Stock Appreciation
Rights Plans, in the Registration Statements on Form S-8 (Nos. 33-46577 and
33-55107) pertaining to the Advanced Micro Devices, Inc., 1992 Stock Incentive
Plan, in the Registration Statement on Form S-8 (No. 333-00969) pertaining to
the Advanced Micro Devices, Inc. 1991 Employee Stock Purchase Plan and to the
1995 Stock Plan of NexGen, Inc., in the Registration Statement on Form S-8
(No. 333-04797) pertaining to the Advanced Micro Devices Inc. 1996 Stock
Incentive Plan, in Post-Effective Amendment No. 1 to the Registration
Statement on Form S-8 (No. 33-95888) pertaining to the 1995 Stock Plan of
NexGen, Inc. and the NexGen, Inc. 1987 Employee Stock Plan, in Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8 (No. 33-92688)
pertaining to the 1995 Employee Stock Purchase Plan of NexGen, Inc. in Post-
Effective Amendment No. 1 on Form S-8 to the Registration Statement on Form S-
4 (No. 33-64911) pertaining to the 1995 Employee Stock Purchase Plan of
NexGen, Inc., the 1995 Stock Plan of NexGen, Inc. and the NexGen, Inc. 1987
Employee Stock Plan, and in Post-Effective Amendment No. 2 on Form S-3 to such
registration statement pertaining to common stock issuable to certain
warrantholders of our report dated January 9, 1997 with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Advanced
Micro Devices, Inc.
ERNST & YOUNG LLP
March 19, 1997
San Jose, California
F-2
<PAGE>
SCHEDULE II
ADVANCED MICRO DEVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 25, 1994, DECEMBER 31, 1995 AND DECEMBER 29, 1996
(THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED
(REDUCTIONS
BALANCE CREDITED) BALANCE
BEGINNING TO END OF
OF PERIOD OPERATIONS DEDUCTIONS(1) PERIOD
--------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Years ended:
December 25, 1994.............. $ 7,492 $3,873 $ (896) $10,469
December 31, 1995.............. 10,469 7,784 (2,635) 15,618
December 29, 1996.............. 15,618 2,000 (7,809) 9,809
</TABLE>
- --------
(1) Accounts (written off) recovered, net.
F-3
<PAGE>
AMD-90286
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>2
<DESCRIPTION>1996 STOCK INCENTIVE PLAN
<TEXT>
<PAGE>
EXHIBIT 10.11
ADVANCED MICRO DEVICES, INC.
1996 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to encourage key personnel, Outside
Directors and advisors whose long-term service is considered essential to the
Company's continued progress, to remain in the service of the Company or its
Affiliates. By means of the Plan, the Company also seeks to attract new key
employees, Outside Directors and advisors whose future services are necessary
for the continued improvement of operations. The Company intends future
increases in the value of securities granted under this Plan to form part of
the compensation for services to be rendered by such persons in the future. It
is intended that this purpose will be effected through the granting of
Options.
2. DEFINITIONS
The terms defined in this Section 2 shall have the respective meanings
set forth herein, unless the context otherwise requires.
(a) "AFFILIATE" The term "Affiliate" shall mean any corporation,
partnership, joint venture or other entity in which the Company holds an
equity, profits or voting interest of thirty percent (30%) or more.
(b) "BOARD" The term "Board" shall mean the Company's Board of
Directors or its delegate as set forth in Sections 3(d) and 3(e) below.
(c) "CHANGE OF CONTROL" Unless otherwise defined in a Participant's
employment agreement, the term "Change of Control" shall be deemed to
mean any of the following events: (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such person any securities acquired
directly from the Company or any of its Affiliates) representing more
than 20% of either the then outstanding shares of the Common Stock of the
Company or the combined voting power of the Company's then outstanding
voting securities; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board and
any new director (other than a director designated by a person who has
entered into an agreement or arrangement with the Company to effect a
transaction described in clause (i) or (ii) of this sentence) whose
appointment, election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning
of the period or whose appointment, election or nomination for election
was previously so approved, cease for any reason to constitute a majority
of the Board; or (iii) there is consummated a merger or consolidation of
the Company or subsidiary thereof with or into any other corporation,
other than a merger or consolidation which would result in the holders of
the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such
<PAGE>
merger or consolidation more than 50% of the combined voting power of the
voting securities of either the Company or the other entity which
survives such merger or consolidation or the parent of the entity which
survives such merger or consolidation; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or there is
consummated the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the Company's
assets to an entity, at least 80% of the combined voting power of the
voting securities of which are owned by persons in substantially the same
proportions as their ownership of the Company immediately prior to such
sale. Notwithstanding the foregoing (i) unless otherwise provided in a
Participant's employment agreement, no "Change of Control" shall be
deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders
of the Common Stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all
of the assets of the Company immediately prior to such transaction or
series of transactions and (ii) unless otherwise provided in a
Participant's employment agreement, "Change of Control" shall exclude the
acquisition of securities representing more than 20% of either the then
outstanding shares of the Common Stock of the Company or the combined
voting power of the Company's then outstanding voting securities by the
Company or any of its wholly owned subsidiaries, or any trustee or other
fiduciary holding securities of the Company under an employee benefit
plan now or hereafter established by the Company.
(d) "CODE" The term "Code" shall mean the Internal Revenue Code of
1986, as amended to date and as it may be amended from time to time.
(e) "COMPANY" The term "Company" shall mean Advanced Micro Devices,
Inc., a Delaware corporation.
(f) "CONSTRUCTIVE TERMINATION" The term "Constructive Termination"
shall mean a resignation by a Participant who has been elected by the
Board as a corporate officer of the Company due to diminution or adverse
change in the circumstances of such Participant's employment with the
Company, as determined in good faith by the Participant; including,
without limitation, reporting relationships, job description, duties,
responsibilities, compensation, perquisites, office or location of
employment. Constructive Termination shall be communicated by written
notice to the Company, and such termination shall be deemed to occur on
the date such notice is delivered to the Company.
(g) "DISINTERESTED DIRECTOR" The term "Disinterested Director" shall
mean a member of the Board who has not, during the one year prior to
service as an administrator of the Plan, or during such service, been
granted or awarded equity securities of the Company pursuant to this Plan
(except for automatic grants of options to Outside Directors pursuant to
Section 8 hereof) or any other plan of the Company or any of its
Affiliates.
(h) "FAIR MARKET VALUE PER SHARE" The term "Fair Market Value per
Share" shall mean as of any day (i) the closing price for Shares on the
New York Stock Exchange as reported on the composite tape on the day as
of which such determination is being made or, if there was no sale of
Shares reported on the composite tape on such day, on the most recently
preceding day
<PAGE>
on which there was such a sale, or (ii) if the Shares are not listed or
admitted to trading on the New York Stock Exchange on the day as of which
the determination is made, the amount determined by the Board or its
delegate to be the fair market value of a Share on such day.
(i) "INSIDER" The term "Insider" means an officer or director of the
Company or any other person whose transactions in the Company's Common
Stock are subject to Section 16 of the Exchange Act.
(j) "ISO" The term "ISO" shall mean a stock option described in
Section 422(b) of the Code.
(k) "NSO" The term "NSO" shall mean a nonstatutory stock option not
described in Section 422(b) of the Code.
(l) "OPTION" The term "Option" shall mean (except as herein otherwise
provided) a stock option granted under this Plan.
(m) "OUTSIDE DIRECTOR" The term "Outside Director" shall mean a member
of the Board of Directors of the Company who is not also an employee of
the Company or an Affiliate.
(n) "PARTICIPANT" The term "Participant" shall mean any person who
holds an Option or Restricted Stock Award granted under this Plan.
(o) "PLAN" The term "Plan" shall mean this Advanced Micro Devices,
Inc. 1996 Stock Incentive Plan, as amended from time to time.
(p) "SHARES" The term "Shares" shall mean shares of Common Stock of
the Company and any shares of stock or other securities received as a
result of the adjustments provided for in Section 11 of this Plan.
3. ADMINISTRATION
(a) The Board, whose authority shall be plenary, shall administer the
Plan and may delegate part or all of its administrative powers with
respect to part or all of the Plan pursuant to Section 3(d); provided,
however, that the Board shall delegate administration of the Plan to the
extent required by Section 3(e).
(b) Except for automatic grants of Options to Outside Directors
pursuant to Section 8 hereof, the Board or its delegate shall have the
power, subject to and within the limits of the express provisions of the
Plan:
(1) To grant Options pursuant to the Plan.
(2) To determine from time to time which of the eligible persons
shall be granted Options under the Plan, the number of Shares for which
each Option shall be granted, the term of each granted Option and the
time or times during the term of each Option within which all or portions
of each Option may be exercised (which at the discretion of the Board of
its delegate may be accelerated.)
<PAGE>
(3) To prescribe the terms and provisions of each Option granted
(which need not be identical) and the form of written instrument that
shall constitute the Option agreement.
(4) To take appropriate action to amend any Option hereunder,
including to amend the vesting schedule of any outstanding Option, or to
cause any Option granted hereunder to cease to be an ISO, provided that
no such action adverse to a Participant's interest may be taken by the
Board or its delegate without the written consent of the affected
Participant.
(5) To determine whether and under what circumstances an Option
may be settled in cash or Shares.
(c) The Board or its delegate shall also have the power, subject to
and within the limits of the express provisions of this Plan:
(1) To construe and interpret the Plan and Options granted under
the Plan, and to establish, amend and revoke rules and regulations for
administration of the Plan. The Board or its delegate, in the exercise of
this power, shall generally determine all questions of policy and
expediency that may arise and may correct any defect, omission or
inconsistency in the Plan or in any Option agreement in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(2) Generally, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of the
Company.
(d) The Board may, by resolution, delegate administration of the Plan
(including, without limitation, the Board's powers under Sections 3(b) and
(c) above), under either or both of the following:
(1) with respect to the participation of or granting of Options
to an employee, consultant or advisor who is not an Insider, to a
committee of one or more members of the Board, whether or not such
members of the Board are Disinterested Directors;
(2) with respect to matters other than the selection for
participation in the Plan, substantive decisions concerning the timing,
pricing, amount or other material term of an Option, to a committee of
one or more members of the Board, whether or not such members of the
Board are Disinterested Directors, or to one or more Insiders.
(e) Unless each member of the Board is a Disinterested Director, the
Board shall, by resolution, delegate administration of the Plan with
respect to the participation in the Plan of employees who are Insiders,
including its powers to select such employees for participation in the
Plan, to make substantive decisions concerning the timing, pricing,
amount or any other material term of an Option, to a committee of two or
more Disinterested Directors who are also "outside directors" within the
meaning of Section 162(m) of the Code. Any committee to which
administration of the Plan is so delegated pursuant to this Section 3(e)
may also administer the Plan with respect to an employee described in
Section 3(d)(1) above.
<PAGE>
(f) Except as required by Section 3(e) above, the Board shall have
complete discretion to determine the composition, structure, form, term
and operations of any committee established to administer the Plan. If
administration is delegated to a committee, unless the Board otherwise
provides, the committee shall have, with respect to the administration of
the Plan, all of the powers and discretion theretofore possessed by the
Board and delegable to such committee, subject to any constraints which
may be adopted by the Board from time to time and which are not
inconsistent with the provisions of the Plan. The Board at any time may
revest in the Board any of its administrative powers under the Plan,
except under circumstances where a committee is required to administer
the Plan under Section 3(e) above.
(g) The determinations of the Board or its delegate shall be
conclusive and binding on all persons having any interest in this Plan or
in any awards granted hereunder.
4. SHARES SUBJECT TO PLAN
Subject to the provisions of Section 11 (relating to adjustments upon
changes in capitalization), the Shares which may be available for issuance
under the Plan shall not exceed in the aggregate 6,665,000 Shares of the
Company's authorized Common Stock and may be unissued Shares or reacquired
Shares or Shares bought on the market for the purposes of issuance under the
Plan. If any Options granted under the Plan shall for any reason be forfeited
or canceled, terminate or expire, the Shares subject to such Options shall be
available again for the purposes of the Plan. Shares which are delivered or
withheld from the Shares otherwise due on exercise of an Option shall become
available for future awards under the Plan. Shares that have actually been
issued under the Plan, upon exercise of an Option shall not in any event be
returned to the Plan and shall not become available for future awards under
the Plan.
5. ELIGIBILITY
Options may be granted only to full or part-time employees, officers,
directors, consultants and advisors of the Company and/or of any Affiliate;
provided such consultants and advisors render bona fide services not in
- --------
connection with the offer and sale of securities in a capital-raising
transaction. Outside Directors shall not be eligible for the benefits of the
Plan, except as provided in Section 8 hereof. Any Participant may hold more
than one Option at any time; provided that the maximum number of shares which
--------
are subject to Options granted to any individual shall not exceed in the
aggregate two million (2,000,000) Shares over the full ten-year life of the
Plan.
6. STOCK OPTIONS -- GENERAL PROVISIONS
(a) Except for automatic grants of Options to Outside Directors under
Section 8 hereof, each Option granted pursuant to the Plan may, at the
discretion of the Board, be granted either as an ISO or as an NSO. No
Option may be granted alternatively as an ISO and as an NSO.
(b) To the extent that the aggregate exercise price for ISOs which are
exercisable for the first time by a Participant during any calendar year
(under this Plan or any other plans of the
<PAGE>
Company or its subsidiaries or parent (as such terms are defined in
Section 424 of the Code) exceeds $100,000, such Options shall be treated
as NSOs.
(c) No ISO may be granted to a person who, at the time of grant, owns
stock possessing more than 10% of the total combined voting power of the
Company or any of its subsidiaries or parent (as such terms are defined
in Section 424 of the Code) unless the exercise price is at least 110% of
the Fair Market Value per Share of the stock subject to the Option and
the term of the Option does not exceed five (5) years from the date such
ISO is granted.
(d) Notwithstanding any other provision in this Plan, no term of this
Plan relating to ISOs will be interpreted, amended or altered, nor will
any discretion or authority granted under this Plan be exercised, so as
to disqualify this Plan under Section 422 of the Code or, without the
consent of the Participant affected, to disqualify an ISO under Section
422 of the Code.
7. TERMS OF OPTION AGREEMENT
Except as otherwise required by the terms of Section 8 hereof, each
Option agreement shall be in such form and shall contain such terms and
conditions as the Board from time to time shall deem appropriate, subject to
the following limitations:
(a) The term of any NSO shall not be greater than ten (10) years and
one day from the date it was granted. The term of any ISO shall not be
greater than ten (10) years from the date it was granted.
(b) The exercise price of each ISO shall be not less than the Fair
Market Value per Share of the stock subject to the Option on the date the
Option is granted. NSOs may be granted at an exercise price that is not
less than Fair Market Value per Share of the Shares at the time an NSO is
granted.
(c) Unless otherwise specified in the Option agreement, no Option
shall be transferable otherwise than by will, pursuant to the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, or as otherwise permitted by
regulations and interpretations under Section 16 of the Exchange Act.
(d) Except as otherwise provided in paragraph (e) of this Section 7 or
in a Participant's employment agreement, the rights of a Participant
(other than an Outside Director) to exercise an Option shall be limited
as follows:
(1) DEATH OR DISABILITY: If a Participant's service is terminated
by death or disability, then the Participant or the Participant's estate,
or such other person as may hold the Option, as the case may be, shall
have the right for a period of twelve (12) months following the date of
death or disability, or for such other period as the Board may fix, to
exercise the Option to the extent the Participant was entitled to
exercise such Option on the date of his death or disability, or to such
extent as may otherwise by specified by the Board (which may so specify
after the date of his death or disability but before expiration of the
Option), provided the actual date of exercise is in no event after
<PAGE>
the expiration of the term of the Option. A Participant's estate shall
mean his legal representative or any person who acquires the right to
exercise an Option by reason of the Participant's death or disability.
(2) MISCONDUCT: If a Participant is determined by the Board to
have committed on act of theft, embezzlement, fraud, dishonesty, a breach
of fiduciary duty to the Company (or Affiliate), or deliberate disregard
of the rules of the Company (or Affiliate), or if a Participant makes any
unauthorized disclosure of any of the trade secrets or confidential
information of the Company (or Affiliate), engages in any conduct which
constitutes unfair competition with the Company (or Affiliate), induces
any customer of the Company (or Affiliate) to break any contract with the
Company (or Affiliate), or induces any principal for whom the Company (or
Affiliate) acts as agent to terminate such agency relationship, then,
unless otherwise provided in a Participant's employment agreement,
neither the Participant, the Participant's estate nor such other person
who may then hold the Option shall be entitled to exercise any Option
with respect to any Shares whatsoever, after termination of service,
whether or not after termination of service the Participant may receive
payment from the Company (or Affiliate) for vacation pay, for services
rendered prior to termination, for services rendered for the day on which
termination occurs, for salary in lieu of notice, or for any other
benefits. In making such determination, the Board shall give the
Participant an opportunity to present to the Board evidence on his
behalf. For the purpose of this paragraph, unless otherwise provided in a
Participant's employment agreement, termination of service shall be
deemed to occur on the date when the Company dispatches notice or advice
to the Participant that his service is terminated.
(3) TERMINATION FOR OTHER REASONS: If a Participant's service is
terminated for any reason other than those mentioned above under "DEATH
OR DISABILITY" or "MISCONDUCT," the Participant, the Participant's
estate, or such other person who may then hold the Option may, within
three months following such termination, or within such longer period as
the Board may fix, exercise the Option to the extent such Option was
exercisable by the Participant on the date of termination of his
employment or service, or to the extent otherwise specified by the Board
(which may so specify after the date of the termination but before
expiration of the Option) provided the date of exercise is in no event
after the expiration of the term of the Option.
(4) EVENTS NOT DEEMED TERMINATIONS: Unless otherwise provided in a
Participant's employment agreement, the service relationship shall not be
considered interrupted in the case of (i) a Participant who intends to
continue to provide services as a director, employee, consultant or advisor
to the Company or an Affiliate; (ii) sick leave; (iii) military leave; (iv)
any other leave of absence approved by the Board, provided such leave is
--------
for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to formal policy adopted from time to time by
the Company and issued and promulgated to employees in writing; or (v) in
the case of transfer between locations of the Company or between the
Company or its Affiliates. In the case of any employee on an approved
leave of absence, the Board may make such provisions respecting suspension
of vesting
<PAGE>
of the Option while on leave from the employ of the Company or an
Affiliate as it may deem appropriate, except that in no event shall an
Option be exercised after the expiration of the term set forth in the
Option.
(e) Unless otherwise provided in a Participant's employment agreement,
if any Participant's employment is terminated by the Company for any
reason other than for Misconduct or, if applicable, by Constructive
Termination, within one year after a Change of Control has occurred, then
all Options held by such Participant shall become fully vested for
exercise upon the date of termination, irrespective of the vesting
provisions of the Participant's Option agreement. For purposes of this
subsection (e), the term "Change of Control" shall have the meaning
assigned by this Plan, unless a different meaning is defined in an
individual Participant's Option agreement or employment agreement.
(f) Options may also contain such other provisions, which shall not be
inconsistent with any of the foregoing terms, as the Board or its
delegate shall deem appropriate.
(g) The Board may modify, extend or renew outstanding Options and
authorize the grant of new Options in substitution therefor; provided
--------
that any such action may not, without the written consent of a
Participant, impair any such Participant's rights under any Option
previously granted.
8. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
(a) Each Outside Director shall be granted an Option to purchase
12,000 Shares under the Plan (the "FIRST OPTION") on the date such
Outside Director is first elected or appointed as a member of the Board;
provided that an Outside Director who has previously been elected as a
--------
member of the Board on the Effective Date set forth in Section 14 below
shall not be granted a First Option under the Plan. Thereafter, on the
first business day coincident with or following each annual meeting of
the Company's stockholders, each Outside Director reported as being
elected shall be granted an additional Option to purchase 3,000 Shares
under the Plan (the "ANNUAL OPTION"). Further, subject to the right of
any Outside Director who has not previously been elected as a member of
the Board to receive a First Option, if there are insufficient Shares
available under the Plan for each Outside Director who is eligible to
receive an Annual Option (as adjusted) in any year, the number of Shares
subject to each Annual Option in such year shall equal the total number
of available Shares then remaining under the Plan divided by the number
of Outside Directors who are eligible to receive an Annual Option on such
date, as rounded down to avoid fractional Shares. All Options granted to
Outside Directors shall be subject to the following terms and conditions
of this Section 8.
(b) All Options granted to Outside Directors pursuant to the Plan
shall be NSOs.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, may consist
entirely of (i) cash, (ii) certified or cashier's check, (iii) other
Shares which (x) either have been owned by the Participant for more than
six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value per Share
on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of
<PAGE>
a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of
sale or loan proceeds required to pay the exercise price, or (v) any
combination of the foregoing methods of payment.
(d) Each Option granted to an Outside Director shall be for a term of
ten years plus one day. Each First Option shall vest and become
exercisable on July 15 of subsequent calendar years, according to the
following schedule: 4,800 shares in the first calendar year following the
date of grant; 3,600 shares in the second such calendar year; 2,400
shares in the third such calendar year; and 1,200 shares in the fourth
such calendar year. Each Annual Option shall vest and become exercisable
on July 15 of subsequent calendar years according to the following
schedule: in equal installments of 1,000 shares each in the second, third
and fourth calendar years following the date of grant. Any Shares
acquired by an Outside Director upon exercise of an Option shall not be
freely transferable until six months after the date stockholder approval
referred to in Section 14 hereof is obtained.
(e) If an Outside Director's tenure on the Board is terminated for any
reason, then the Outside Director or the Outside Director's estate, as
the case may be, shall have the right for a period of twelve months
following the date such tenure is terminated to exercise the Option to
the extent the Outside Director was entitled to exercise such Option on
the date the Outside Director's tenure terminated; provided the actual
date of exercise is in no event after the expiration of the term of the
Option. An Outside Director's "estate" shall mean the Outside Director's
legal representative or any person who acquires the right to exercise an
Option by reason of the Outside Director's death or disability.
(f) Upon a Change of Control, all Options held by an Outside Director
shall become fully vested and exercisable upon such Change of Control,
irrespective of any other provisions of the Outside Director's Option
agreement.
(g) The automatic grants to Outside Directors pursuant to this Section
8 shall not be subject to the discretion of any person. The other
provisions of this Plan shall apply to the Options granted automatically
pursuant to this Section 8, except to the extent such other provisions
are inconsistent with this Section 8.
9. PAYMENTS AND LOANS UPON EXERCISE OF OPTIONS
With respect to Options other than Options granted to Outside Directors
pursuant to Section 8, the following provisions shall apply:
(a) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be
determined by the Board or its delegate (and, in the case of an ISO,
shall be determined at the time of grant) and may consist entirely of (i)
cash, (ii) certified or cashier's check, (iii) promissory note, (iv)
other Shares which (x) either have been owned by the Participant for more
than six months on the date of surrender or were not acquired, directly
or indirectly, from the Company, and (y) have a Fair Market Value per
Share on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (v) delivery of a
properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale or
<PAGE>
loan proceeds required to pay the exercise price, or (vi) any combination
of the foregoing methods of payment. Any promissory note shall be a full
recourse promissory note having such terms as may be approved by the
Board and bearing interest at a rate sufficient to avoid imputation of
income under Sections 483, 1274 or 7872 of the Code; provided that
--------
Participants who are not employees or directors of the Company will not
be entitled to purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares; provided further,
-------- -------
that the portion of the exercise price equal to the par value, if any, of
the Shares must be paid in cash;
(b) The Company may make loans or guarantee loans made by an appropriate
financial institution to individual Participants, including Insiders, on
such terms as may be approved by the Board for the purpose of financing the
exercise of Options granted under the Plan and the payment of any taxes
that may be due by reason of such exercise.
10. TAX WITHHOLDING
(a) Where, in the opinion of counsel to the Company, the Company has
or will have an obligation to withhold federal, state or local taxes
relating to the exercise of any Option, the Board may in its discretion
require that such tax obligation be satisfied in a manner satisfactory to
the Company. With respect to the exercise of an Option, the Company may
require the payment of such taxes before Shares deliverable pursuant to
such exercise are transferred to the holder of the Option.
(b) With respect to the exercise of an Option, a Participant may elect
(a "WITHHOLDING ELECTION") to pay his minimum statutory withholding tax
obligation by the withholding of Shares from the total number of Shares
deliverable pursuant to the exercise of such Option, or by delivering to
the Company a sufficient number of previously acquired Shares, and may
elect to have additional taxes paid by the delivery of previously
acquired Shares, in each case in accordance with rules and procedures
established by the Board. Previously owned Shares delivered in payment
for such additional taxes must have been owned for at least six months
prior to the delivery or must not have been acquired directly or
indirectly from the Company and may be subject to such other conditions
as the Board may require. The value of Shares withheld or delivered shall
be the Fair Market Value per Share on the date the Option becomes
taxable. All Withholding Elections are subject to the approval of the
Board must be made in compliance with rules and procedures established by
the Board.
11. ADJUSTMENTS OF AND CHANGES IN CAPITALIZATION
If there is any change in the Common Stock of the Company by reason of
any stock dividend, stock split, spin-off, split up, merger, consolidation,
recapitalization, reclassification, combination or exchange of Shares, or any
other similar corporate event, then the Board shall make appropriate
adjustments to the number of Shares theretofore appropriated or thereafter
subject or which may become subject to an Option under the Plan. Outstanding
Options shall also be automatically converted as to price and other terms if
necessary to reflect the foregoing events. No right to purchase fractional
Shares shall result from any adjustment in Options pursuant to this Section
11. In case of any such adjustment, the Shares subject to the Option shall be
rounded down to the nearest whole Share. Notice of any adjustment shall be
given by
<PAGE>
the Company to each holder of any Option which shall have been so adjusted and
such adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of the Plan.
12. PRIVILEGES OF STOCK OWNERSHIP
No Participant will have any rights of a stockholder with respect to
any Shares until the Shares are issued to the Participant. After Shares are
issued to the Participant, the Participant will be a stockholder and have all
the rights of a stockholder with respect to such Shares, including the right
to vote and receive all dividends or other distributions made or paid with
respect to such Shares.
13. EXCHANGE AND BUYOUT OF AWARDS; RULE 16b-3
The Board or its delegate may, at any time or from time to time,
authorize the Company, with the consent of the respective Participants, to
issue new Options in exchange for the surrender and cancellation of any or all
outstanding Options, except as otherwise provided in Section 7(i) with respect
to Insiders. The Board or its delegate may at any time buy from a Participant
an Option previously granted with payment in cash, Shares or other
consideration, based on such terms and conditions as the Board or its delegate
and the Participant may agree. Grants of Options to Insiders are intended to
comply with the applicable provisions of Rule 16b-3 and such Options shall
contain such additional conditions or restrictions, if any, as may be required
by Rule 16b-3 to be in the written agreement relating to such Options in order
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
14. EFFECTIVE DATE OF THE PLAN
This Plan will become effective when adopted by the Board (the "EFFECTIVE
DATE"). This Plan must be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months before or after the
Effective Date. Upon the Effective Date, the Board or its delegate may grant
Options pursuant to this Plan; provided that no Option may be exercised prior to
the initial stockholder approval of this Plan. In the event that stockholder
approval is not obtained within the time period provided herein, all Options
granted hereunder will be canceled. So long as Insiders are Participants, the
Company will comply with the requirements of Rule 16b-3 with respect to
stockholder approval.
15. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan;
provided that, except as provided in Section 11 (relating to adjustments
--------
upon changes in capitalization), no amendment for which stockholder
approval is required shall be effective unless such approval is obtained
within the required time period. Whether stockholder approval is required
shall be determined by the Board.
(b) It is expressly contemplated that the Board may, without seeking
approval of the Company's stockholders, amend the Plan in any respect
necessary to provide the Company's
<PAGE>
employees with the maximum benefits provided or to be provided under
Section 422 of the Code or Section 16 of the Exchange Act and the
regulations promulgated thereunder and/or to bring the Plan or Options
granted under it into compliance therewith.
(c) Rights and obligations under any Option granted before any
amendment of the Plan shall not be altered or impaired by amendment of
the Plan, except with the consent of the person who holds the Option,
which consent may be obtained in any manner that the Board or its
delegate deems appropriate.
(d) To the extent required by Rule 16b-3, the Board may not amend the
provisions of Section 8 hereof more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
16. REGISTRATION, LISTING, QUALIFICATION, APPROVAL OF STOCK AND OPTIONS
An award under this Plan will not be effective unless such award is in
compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock exchange
or automated quotation system upon which the Shares may then be listed or
quoted, as they are in effect on the date of grant of the award and also on the
date of exercise or other issuance. Notwithstanding any other provision in this
Plan, the Company will have no obligation to issue or deliver certificates for
Shares under this Plan prior to: (a) obtaining any approvals from governmental
agencies that the Company determines are necessary or advisable; and/or (b)
completion of any registration or other qualification of such Shares under any
state or federal law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the Securities and Exchange Commission or
to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO RIGHT TO EMPLOYMENT
Nothing in this Plan or in any Option shall be deemed to confer on any
employee any right to continue in the employ of the Company or any Affiliate
or to limit the rights of the Company or its Affiliates, which are hereby
expressly reserved, to discharge an employee at any time, with or without
cause, or to adjust the compensation of any employee.
18. MISCELLANEOUS
The use of any masculine pronoun or similar term is intended to be
without legal significance as to gender.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23E
<SEQUENCE>3
<DESCRIPTION>FIRST AMENDMENT TO FUJITSU INVESTMENT AGMT
<TEXT>
<PAGE>
EXHIBIT 10.23(e)
FIRST AMENDMENT TO
FUJITSU INVESTMENT AGREEMENT
This FIRST AMENDMENT TO FUJITSU INVESTMENT AGREEMENT (the "Amendment")
is made this 28 day of April, 1995, between FUJITSU LIMITED, a Japanese
stock company or kabushiki kaisha ("FUJITSU"), and ADVANCED MICRO DEVICES,
INC., a Delaware corporation ("AMD").
RECITALS
--------
WHEREAS, AMD AND FUJITSU are parties to an agreement entitled Fujitsu
Investment Agreement (the "Agreement") dated March 26, 1993, which provides
for the purchase by Fujitsu of common stock of AMD; and
Whereas, the parties desire to amend the Agreement as more fully set
forth below in this Amendment.
NOW, THEREFORE, it is hereby AGREED that:
1. The first sentence of Section 1.2 of the Agreement is amended in
its entirety to read as follows:
The AMD Shares shall be sold and purchased in nine (9) installments,
as follows: (i) an initial sale and purchase of 500,000 shares (the
"Initial Purchase") which was consummated within thirty (30) business
days following the Effective Date of the Joint Venture Agreement,
dated March 30, 1993, between the parties ("the Joint Venture
Effective Date"); (ii) three (3) additional sales and purchases of
500,000 shares each, which were consummated prior to the last business
day of the sixth (6th), twelfth (12th) and eighteenth (18th) months,
respectively, following the Joint Venture Effective Date; and (iii)
five additional sales and purchases [*] subject to Section 1.4, to be
consummated prior to the last business day of the thirty-
[* Confidential Treatment Requested]
<PAGE>
sixth (36th), forty-second (42nd), forty-eighth (48th), fifty-fourth
(54th) and sixtieth (60th) months, respectively, following the Joint
Venture Effective Date (all such sales and purchases other than the
Initial Purchase being referred to herein and the "Subsequent
Purchases," and individually as the "First Subsequent Purchase,"
through the "Eighth Subsequent Purchase" in accordance with their
scheduled order of occurrence).
2. Section 2.2(c) of the Agreement is amended in its entirety to read
as follows:
(c) Except as provided in subsections (d) and (e) below, the AMD
Shares may not be resold or transferred except in the following
manner. Up to [*] of the AMD Shares purchased in the Initial Purchase
or any of the First through the Third Subsequent Purchases may be
resold or transferred at any time after the [*] of the consummation of
such purchase. Up to an additional [*] of such shares may be resold or
transferred at any time after the [*] of the consummation of such
purchase. Up to [*] of the AMD Shares purchased in any of the Fourth
through the Eighth Subsequent Purchases may be resold or transferred at
any time after the [*] of the consummation of such purchase. Up to an
additional [*] of such shares may be resold or transferred at any time
after the [*] of the consummation of such purchase.
3. Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed. On
and after the date of this Amendment, each reference to the Agreement in the
Agreement itself or in any other agreement or document between the parties
shall mean and be a reference to the Agreement as amended by this Amendment.
4. This Amendment may be executed in any number of counterparts, each
of which may be executed by fewer than all of the parties, each of which shall
be enforceable against the parties actually executing such counterparts, and
all of which together shall constitute one instrument.
[* Confidential Treatment Requested]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized officers as of the day and year
first above written.
FUJITSU LIMITED
By /s/ Masamichi Ogura
--------------------------------------
Masamichi Ogura
Group Senior Vice President
Its Administration & Business Operations
------------------------------------
Electronic Devices Group
ADVANCED MICRO DEVICES, INC.
By /s/ Marvin D. Burkett
------------------------------------
Marvin D. Burkett
Senior Vice President
Chief Administrative Officer
Chief Financial Officer and
Treasurer
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23F
<SEQUENCE>4
<DESCRIPTION>SECOND AMENDMENT TO FUJITSU INVESTMENT AGMT
<TEXT>
<PAGE>
EXHIBIT 10.23(f)
SECOND AMENDMENT TO
FUJITSU INVESTMENT AGREEMENT
This SECOND AMENDMENT TO FUJITSU INVESTMENT AGREEMENT (the
"Amendment") is made this 27 day of February, 1996, between FUJITSU LIMITED,
a Japanese stock company or kabushiki kaisha ("FUJITSU"), and ADVANCED MICRO
DEVICES, INC., a Delaware corporation ("AMD").
RECITALS
--------
WHEREAS, AMD and FUJITSU are parties to an agreement entitled Fujitsu
Investment Agreement (the "Agreement") dated March 26, 1993, which provides
for the purchase by Fujitsu of common stock of AMD; and
WHEREAS, AMD and FUJITSU entered into First Amendment to Fujitsu
Investment Agreement (the "First Amendment") on April 28, 1995, which provides
for a change of schedule for purchase and resale by Fujitsu of common stock of
AMD; and
WHEREAS, the parties desire to amend the Agreement further as more
fully set forth below in this Amendment.
NOW, THEREFORE, it is hereby AGREED that:
1. The first sentence of Section 1.4 of the Agreement is amended in
its entirety to read as follows:
The purchase price of each installment of the AMD Shares shall be
payable in United States dollars by wire transfer or otherwise as AMD
shall reasonably request, and: (i) for the Initial Purchase, was equal
to the number of AMD Shares acquired in the installment times the
average of the closing sales prices of AMD common stock on the New
York Stock Exchange for the sixty (60) trading days ending on the
Joint Venture Effective Date, (ii) for the First through Third
Subsequent Purchases, the average of the closing sales prices on the
New York Exchange for the sixty (60) trading days ending on the
twentieth day of the month preceding the month in which the purchase
was consummated, or if the Exchange was not open for trading on such
date, on the trading day
<PAGE>
preceding such date, and (iii) for the Fourth through Eighth
Subsequent Purchases, the average of the closing sales prices on the
New York Exchange for the sixty (60) trading days ending on the
twentieth day of the month preceding the month in which the purchase
is required by the First Amendment, or if the Exchange is not open for
trading on such date, on the trading day preceding such date.
2. Except as specifically amended by this Amendment and the First
Amendment, the Agreement shall remain in full force and effect and is hereby
ratified and confirmed. On and after the date of this Amendment, each
reference to the Agreement in the Agreement itself or in any other agreement
or document between the parties shall mean and be a reference to the Agreement
as amended by this Amendment and the First Amendment.
3. This Agreement may be executed in any number of counterparts, each
of which may be executed by fewer than all of the parties, each of which shall
be enforceable against the parties actually executing such counterparts, and all
of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their authorized officers as of the day and year first above
written.
ADVANCED MICRO DEVICES, INC.
By /s/ Marvin D. Burkett
----------------------------------
Marvin D. Burkett
Senior Vice President
Its Chief Administrative Officer
----------------------------------
Chief Financial Officer and
Treasurer
FUJITSU LIMITED
By /s/ Masamichi Ogura
---------------------------------
Masamichi Ogura
Group Senior Vice President
Administration & Business Operations
Electronic Devices Group
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>5
<DESCRIPTION>1995 STOCK PLAN OF NEXGEN, INC.
<TEXT>
<PAGE>
EXHIBIT 10.36
1995 STOCK PLAN OF NEXGEN, INC.
-------------------------------
(As Amended October 2, 1996)
<PAGE>
TABLE OF CONTENTS
-----------------
Page
-----
SECTION 1. ESTABLISHMENT AND PURPOSE 1
SECTION 2. DEFINITIONS 1
SECTION 3. ADMINISTRATION 4
(a) Committee Membership 4
(b) Committee Procedures 5
(c) Committee Responsibilities 5
SECTION 4. ELIGIBILITY 6
(a) General Rules 6
(b) Outside Directors 6
(c) Ten-Percent Stockholders 8
(d) Attribution Rules 8
(e) Outstanding Stock 8
SECTION 5. STOCK SUBJECT TO PLAN 8
(a) Basic Limitation 8
(b) Additional Shares 9
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES 9
(a) Stock Purchase Agreement 9
(b) Duration of Offers and Nontransferability of Rights 9
(c) Purchase Price 9
(d) Withholding Taxes 9
2
<PAGE>
(e) Restrictions on Transfer of Shares 10
SECTION 7. TERMS AND CONDITIONS OF OPTIONS 10
(a) Stock Option Agreement 10
(b) Number of Shares 10
(c) Exercise Price 10
(d) Withholding Taxes 10
(e) Exercisability 11
(f) Term 11
(g) Nontransferability 11
(h) No Rights as a Stockholder 11
(i) Modification, Extension and Renewal of Options 11
(j) Restrictions on Transfer of Shares 12
SECTION 8. PAYMENT FOR SHARES 12
(a) General Rule 12
(b) Surrender of Stock 12
(c) Exercise/Sale 12
(d) Exercise/Pledge 13
(e) Services Rendered 13
(f) Promissory Note 13
SECTION 9. ADJUSTMENT OF SHARES
(a) General 13
(b) Reorganizations 14
3
<PAGE>
(c) Reservation of Rights 14
SECTION 10. SECURITIES LAWS 14
SECTION 11. NO RETENTION RIGHTS 14
SECTION 12. DURATION AND AMENDMENTS 15
(a) Term of the Plan 15
(b) Right to Amend or Terminate the Plan 15
(c) Effect of Amendment or Termination 15
4
<PAGE>
1995 STOCK PLAN OF NEXGEN, INC.
-------------------------------
SECTION 1. ESTABLISHMENT AND PURPOSE.
- -------------------------------------
The Plan was originally adopted by the Board of Directors of NexGen,
Inc. (The "NexGen Board") on March 12, 1995, and thereafter amended by the
NexGen Board on May 10, 1995 and December 8, 1995. Effective upon the merger of
NexGen, Inc. with and into Advanced Micro Devices, Inc. ("AMD") on January 17,
1996, AMD assumed the Plan as the successor to NexGen. The AMD Board of
Directors amended the Plan on February 7, 1996 and April 25, 1996. The purpose
of the Plan is to offer selected employees, consultants and promotional
representatives an opportunity to acquire a proprietary interest in the success
of the Company, or to increase such interest, by purchasing shares of the
Company's Common Stock. The Plan provides both for the direct award or sale of
Shares and for the grant of Options to purchase shares. Options granted under
the Plan may include Nonstatutory Options as well as ISOs intended to qualify
under section 422 of the Code.
The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act and shall be construed accordingly.
SECTION 2. DEFINITIONS.
- -----------------------
(a) "Board of Directors" shall mean the Board of Directors of the
------------------
Company, as constituted from time to time.
(b) "Change of Control" shall mean the occurrence of any of the
-----------------
following events or as otherwise defined in an Optionee or Offeree's employment
agreement:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly
from the Company or any of its affiliates) representing more than 20%
of either the then outstanding shares of the Common Stock of the
Company or the combined voting power of the Company's then outstanding
voting securities;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors and
any new director (other than a director designated by a person who has
entered into an agreement or arrangement with the Company to effect a
transaction described in clause (i) or (iii) of this sentence) whose
appointment, election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose appointment, election, or nomination
for election was previously
5
<PAGE>
so approved, cease for any reason to constitute a majority of the
Board of Directors;
(iii) there is consummated a merger or consolidation of the
Company or a Subsidiary thereof with or into any other corporation,
other than a merger or consolidation which would result in the holders
of the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such
merger or consolidation more than 50% of the combined voting power of
the voting securities of either the Company or the other entity which
survives such merger or consolidation or the parent of the entity
which survives such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or there is consummated the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 80% of the combined voting power of the voting securities of
which are owned by persons in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing (i) no "Change of Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
Common Stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately prior to such transaction or series of transactions and (ii) "Change
of Control" shall exclude the acquisition of securities representing more than
20% of either the then outstanding shares of the Common Stock of the Company or
the combined voting power of the Company's then outstanding voting securities by
the Company or any of its wholly owned subsidiaries, or any trustee or other
fiduciary holding securities of the Company under an employee benefit plan now
or hereafter established by the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(d) "Committee" shall mean a committee of the Board of Directors,
---------
as described in Section 3(a).
(e) "Company" shall mean NexGen, Inc., a Delaware corporation, its
-------
parent corporation, or its successor.
(f) "Employee" shall mean:
--------
(i) Any individual who is a common-law employee of the Company or
of a Subsidiary;
6
<PAGE>
(ii) An Outside Director; and
(iii) An independent contractor who performs services for the
Company or a Subsidiary and who is it not a member of the Board
of Directors.
Service as an Outsider Director or independent contractor shall be considered
employment for all purposes of the Plan, except as provided in Section 4(a).
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended.
(h) "Exercise Price" shall mean the amount for which one Share
--------------
may be purchased upon exercise of an Option, as specified by the Committee in
the applicable Stock Option Agreement.
(i) "Fair Market Value" shall mean the market price of Stock,
-----------------
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in question
but was not traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted
for such date by the principal automated inter-dealer quotation
system on which Stock is quoted or, if Stock is not quoted on any
such system, by the "Pink Sheets" published by the National
Quotation Bureau, Inc.;
(ii) If Stock was traded over-the-counter on the date in question
and was traded on the Nasdaq system or the Nasdaq National Market
System, then the Fair Market Value shall be equal to the last-
transaction price quoted for such date by the Nasdaq system or the
Nasdaq National Market System;
(iii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for
such date; and
(iv) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith
on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
(j) "IPO" means the initial offering of stock to the public
---
pursuant to a registration statement filed with the Securities and Exchange
Commission on Form S-1.
7
<PAGE>
(k) "ISO" shall mean an employee incentive stock option described
---
in section 422(b) of the Code.
(l) "Nonstatutory Option" shall mean a stock option not described
-------------------
in sections 422(b) or 423(b) of the Code.
(m) "Offeree" shall mean an individual to whom the Committee has
-------
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).
(n) "Option" shall mean an ISO or Nonstatutory Option granted under
------
the Plan and entitling the holder to purchase Shares.
(o) "Optionee" shall mean an individual who holds an Option.
--------
(p) "Outside Director" shall mean a member of the Board of
----------------
Directors who is not a common-law employee of the Company or of a Subsidiary.
(q) "Plan" shall mean this 1995 Stock Plan of NexGen, Inc., as it
----
may be amended from time to time.
(r) "Purchase Price" shall mean the consideration for which one
--------------
Share may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(s) "Service" shall mean service as an Employee.
-------
(t) "Share" shall mean one share of Stock, as adjusted in
-----
accordance with Section 9 (if applicable).
(u) "Stock" shall mean the Common Stock of the Company.
-----
(v) "Stock Option Agreement" shall mean the agreement between the
----------------------
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(w) "Stock Purchase Agreement" shall mean the agreement between the
------------------------
Company and an offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(x) "Subsidiary" shall mean any corporation, if the Company and/or
----------
one or more other Subsidiaries own not less than 50 percent of the total
combined voting power of all classes of outstanding stock of such corporation.
A corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
8
<PAGE>
(y) "Total and Permanent Disability" shall mean that the Optionee
------------------------------
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected to last, for a
continuous period of not less than one year.
(z) "Vesting Start Date," in the case of an Outside Director, shall
------------------
mean the latest of:
(i) The date of the IPO;
(ii) The earliest date when the Outside Director no longer
holds unexercisable options to purchase more than 10,000 Shares that
were granted to him or her by the Company prior to the IPO: or
(iii) The date when the Outside Director first joins the Board
of Directors.
SECTION 3. ADMINISTRATION.
- --------- --------------
(a) Committee Membership. The Plan shall be administered by the
--------------------
Committee. The Committee shall consist of two or more members of the Board of
Directors who meet the requirements established from time to time by:
(i) The Securities and Exchange Commission for plans intended
to qualify for exemptions under Rule 16b-3 (or its successor) under
the Exchange Act; and
(ii) The Internal Revenue Service for plans intended to qualify
for an exemption under section 162(m) (4) (C) of the Code.
An Outside Director shall not fail to meet such requirements solely because he
or she receives the Nonstatutory Options described in Section 4(b). The Board
of Directors may appoint a separate committee, consisting of one or more members
of the Board of Directors who need not meet such requirements. Such committee
may administer the Plan with respect to Employees who are not officers or
directors of the Company, may grant Shares and Options under the Plan to such
Employees and may determine the timing, number of Shares and other terms of such
grants.
(b) Committee Procedures. The Board of Directors shall designate one
--------------------
of the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The act as of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
(c) Committee Responsibilities. Subject to the provisions of the
--------------------------
Plan, the Committee shall have full authority and discretion to take the
following actions:
9
<PAGE>
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the
Plan;
(iv) To determine when Shares are to be awarded or offered for
sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each
Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase Price, and
to specify the provisions of the Stock Purchase Agreement relating to
such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, to determine
whether such Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the Stock Option Agreement
relating to such Option ;
(ix) To amend any outstanding Stock Purchase Agreement or Stock
Option Agreement, subject to applicable legal restrictions and to the
consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option
or other right under the Plan and to determine the sufficiency of such
consideration; and
(xi) To take any other actions deemed necessary or advisable for
the administration of the Plan.
All decisions, interpretations and other actions of the Committee shall be final
and binding on all Offerees, all Optionees, and all persons deriving their
rights from an Offeree or Optionee. No member of the Committee shall be liable
for any action that he or she has taken or has failed to take in good faith with
respect to the Plan, any Option, or any right to acquire Shares under the Plan.
10
<PAGE>
SECTION 4. ELIGIBILITY.
- --------- -----------
(a) General Rules. Only Employees (including, without limitation,
-------------
independent contractors who are not members of the Board of Directors) shall be
eligible for designation as Optionees or Offerees by the Committee. In
addition, only Employees who are common-law employees of the Company or a
Subsidiary shall be eligible for the grant of ISOs. Employees who are Outside
Directors shall only be eligible for the grant of the Nonstatutory Options
described in Subsection (b) below.
(b) Outside Directors. Any other provision of the Plan
-----------------
notwithstanding, Outside Directors shall not participate in the Plan after
February 7, 1996, although Options granted to Outside Directors prior to such
date shall continue to be governed by the Plan as in effect prior to February 7,
1996.
(c) Ten-Percent Stockholders. An Employee who owns more than 10
------------------------
percent of the total combined voting power of all classes of outstanding stock
of the Company or any of its Subsidiaries shall not be eligible for the grant of
an ISO unless:
(i) The Exercise Price is at least 110 percent of the Fair Market
Value of a Share on the date of grant; and
(ii) Such ISO by its terms is not exercisable after the
expiration of five years from the date of grant.
(d) Attribution Rules. For purposes of Subsection (c) above, in
-----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for such Employee's brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.
(e) Outstanding Stock. For purposes of Subsection (c) above,
----------------
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- --------- ---------------------
(a) Basic Limitation. Shares offered under the Plan shall be
----------------
authorized but unissued Shares or treasury Shares. The aggregate number of
Shares which is issued under the Plan (upon exercise of Options or other rights
to acquire Shares) shall not exceed 2,250,741 Shares; provided that the number
of Shares which is issued under the Plan upon exercise of ISOs shall in no event
exceed 1,200,000 Shares during the entire term of the Plan. All limitations
under this Subsection (a) shall be subject to adjustment
11
<PAGE>
pursuant to Section 9. The number of Shares which are subject to Options or
other rights outstanding at any time under the Plan shall not exceed the number
of Shares which then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.
(b) Additional Shares. In the event that any outstanding option
-----------------
granted under this Plan or the 1987 Employee Stock Plan of NexGen, Inc. (the
"Prior Plan") for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such option shall become
available for the purposes of this Plan. In the event that Shares issued under
this Plan or the Prior Plan are reacquired by the Company pursuant to a
forfeiture provision, a right of repurchase or a right of first refusal, such
Shares shall become available for the purposes of this Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
- --------- ---------------------------------------
(a) Stock Purchase Agreement. Each award or sale of Shares under
------------------------
the Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights. Any right
---------------------------------------------------
to acquire Shares under the Plan (other than an Option) shall automatically
expire if not exercised by the Offeree within 30 days after the grant of such
right was communicated to the Offeree by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
(c) Purchase Price. The Purchase Price of Shares to be offered
--------------
under the Plan shall not be less than the par value of such Shares. Subject to
the preceding sentence, the Purchase Price shall be determined by the Committee
at its sole discretion. The Purchase Price shall be payable in a form described
in Section 8.
(d) Withholding Taxes. As a condition to the award, sale or
-----------------
vesting of Shares, the Offeree shall make such arrangements as the Committee may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that arise in connection with such Shares. The Committee may
permit the Offeree to satisfy all or part of his or her tax obligations related
to such Shares by having the Company withhold a portion of any Shares that
otherwise would be issued to him or her or by surrendering any Shares that
previously were acquired by him or her. The Shares withheld or surrendered
shall be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. The payment of taxes by assigning Shares to the
Company, if permitted
12
<PAGE>
by the Committee, shall be subject to such restrictions as the Committee may
impose, including any restrictions required by rules of the Securities and
Exchange Commission.
(e) Restrictions on Transfer of Shares. Any Shares awarded or sold
----------------------------------
under the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as of the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
- --------- -------------------------------
(a) Stock Option Agreement. Each grant of an Option under the Plan
----------------------
shall be evidenced by a Stock Option Agreement executed by the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify
----------------
the number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. Options granted to any
Optionee in a single calendar year shall in no event cover more than 400,000
Shares, subject to adjustment in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) Exercise Price. Each Stock Option Agreement shall specify the
--------------
Exercise Price. The Exercise Price of an ISO shall not be less than 100 percent
of the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(c). The Exercise Price of a Nonstatutory Option shall not
be less than the par value of a Share. Subject to the preceding two sentences,
the Exercise Price under any Option shall be determined by the Committee at its
sole discretion. The Exercise Price shall be payable in a form described in
Section 8.
(d) Withholding Taxes. As a condition to the exercise of an
-----------------
Option, the Optionee shall make such arrangements as the Committee may require
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that arise in connection with such exercise. The Optionee shall
also make such arrangements as the Committee may require for the satisfaction of
any federal, state, local or foreign withholding tax obligations that may arise
in connection with the disposition of Shares acquired by exercising an Option.
The Committee may permit the Optionee to satisfy all or part of his or her tax
obligations related to the Option by having the Company withhold a portion of
any Shares that otherwise would be issued to him or her or by her. Such Shares
shall be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. The payment of taxes by assigning Shares to the
Company, if permitted by the
13
<PAGE>
Committee, shall be subject to such restrictions as the Committee may impose,
including any restrictions required by rules of the Securities and Exchange
Commission.
(e) Exercisability. Each Stock Option Agreement shall specify the
--------------
date when all or any installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the Committee at its sole
discretion.
If the employment of any Optionee who is a common law employee of the
Company is terminated by the Company for any reason other than Misconduct or if
applicable, by Constructive Termination, within one year after a Change of
Control has occurred, then all Options held by such Optionee shall become fully
vested for exercise upon the date of termination, irrespective of the vesting
provisions of the Optionee's Stock Option Agreement unless otherwise provided in
an Optionee's employment agreement. For purposes of this paragraph, the
following definitions apply unless the following term or terms of similar effect
are otherwise defined in an Optionee's employment agreement: (i) "Change of
Control" shall have the meaning assigned by Section 2(b) of the Plan unless a
different meaning is defined in an Optionee's Stock Option Agreement or
employment agreement, (ii) "Misconduct" shall mean the commission of an act of
theft, embezzlement, fraud, dishonesty, breach of fiduciary duty to the Company
or any of its Subsidiaries (as determined by the Board of Directors), the
deliberate disregard of the rules of the Company or any of its Subsidiaries, any
unauthorized disclosure of any of the trade secrets or confidential information
of the Company or any of its Subsidiaries, engaging in any conduct which
constitutes unfair competition with the Company or any of its Subsidiaries, the
inducement of any customer of the company or any of its Subsidiaries, or the
inducement of any principal for whom the Company or any of its Subsidiaries acts
as agent to terminate such agency relationship; and (iii) "Constructive
Termination" shall mean a resignation by an Optionee who has been elected by the
Board of Directors as a corporate officer of the Company due to diminution of or
adverse change in the circumstances of the Optionee's employment with the
Company, as determined in good faith by the Optionee, including, without
limitation, reporting relationships, job description, duties, responsibilities,
compensation, perquisites, office or location of employment. Constructive
Termination shall be communicated by written notice to the Company, and such
termination shall be deemed to occur on the date such notice is delivered to the
Company.
A Stock Option Agreement or employment agreement may also provide for
accelerated exercisability in the event of the Optionee's death, Total and
Permanent Disability, retirement or upon other events.
(f) Term. Each Stock Option Agreement shall specify the term of
----
the Option. The term of an ISO shall not exceed 10 years from the date of
grant, except as otherwise provided in Section 4(c). Subject to the preceding
sentence, the Committee at its sole discretion shall determine when an Option is
to expire. A Stock Option Agreement may provide that the Option will expire
before the end of its normal term in the event that the Optionee's Service
terminates.
14
<PAGE>
(g) Nontransferability. During an Optionee's lifetime, such
------------------
Optionee's Option(s) shall be exercisable only by him or her and shall not be
transferable. In the event of an Optionee's death, such Optionee's Option(s)
shall not be transferable other than by will, by written beneficiary designation
or by the laws of descent and distribution.
(h) No Rights as a Stockholder. An Optionee, or a transferee of an
--------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided
in Section 9.
(i) Modification, Extension and Renewal of Options. Within the
----------------------------------------------
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of the outstanding options (to the extend
not previously exercised) in return for the grant of new Options at the same or
a different price. The foregoing notwithstanding, no modification of an Option
shall, without the consent of the Optionee, impair such Optionee's rights or
increase his or her obligations under such Option.
(j) Restrictions on Transfer of Shares. Any Shares issued upon
----------------------------------
exercise of an Option may be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as
the Committee may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any general
restrictions that may apply to all holders of Shares.
SECTION 8. PAYMENT FOR SHARES.
- --------- ------------------
(a) General Rule. The entire Purchase Price or Exercise Price of
------------
Shares issued under the Plan shall be payable in lawful money of the United
States of America at the time when such Shares are purchased, except as follows:
(i) Stock Purchases. In the case of Shares sold under the
---------------
terms of a Stock Purchase Agreement subject to the Plan, payment shall
be made only pursuant to the express provisions of such Stock Purchase
Agreement. However, the Committee (at its sole discretion) may specify
in the Stock Purchase Agreement that payment may be made in one or
both of the forms described in Subsections (e) and (f) below.
(ii) ISO's. In the case of an ISO granted under the Plan,
------
payment shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement. However, the Committee (at its sole
discretion) may specify in the Stock Option Agreement that payment may
be made pursuant to Subsections (b), (c), (d), or (f) below.
(iii) Nonstatutory Options. In the case of a Non-statutory
--------------------
Option granted under the Plan, the Committee (at its sole discretion)
may accept payment pursuant to Subsections (b), (c), (d) or (f) below.
15
<PAGE>
(b) Surrender of Stock. To the extent that this Subsection (b) is
------------------
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 12 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.
(c) Exercise/Sale. To the extent that this Subsection (c) is
-------------
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Shares and to deliver all or part of the sales proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
(d) Exercise/Pledge. To the extent that this Subsection (d) is
---------------
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Shares to a securities broker or
lender approved by the Company, as security for a loan, and to deliver all or
part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
(e) Services Rendered. To the extent that this Subsection (e) is
-----------------
applicable, Shares may be awarded under the Plan in consideration of services
rendered to the Company or a Subsidiary prior to the award. If Shares are
awarded without the payment of a Purchase Price in cash, the Committee shall
make a determination (at the time of the award) of the value of the services
rendered by the Offeree and the sufficiency of the consideration to meet the
requirements of Section 6(c).
(f) Promissory Note. To the extend that this Subsection (f) is
---------------
applicable, a portion of the Purchase Price or Exercise Price, as the case may
be, of Shares issued under the Plan may be payable by a full-recourse promissory
note, provided that (i) the part value of such Shares must be paid in lawful
money of the United States of America at the time when such Shares are
purchased, (ii) the Shares are security for payment of the principal amount of
the promissory note and interest thereon and (iii) the interest rate payable
under the terms of the promissory note shall be no less than the minimum rate
(if any) required to avoid the imputation of additional interest under the Code.
Subject to the foregoing, the Committee (at its sole discretion) shall specify
the term, interest rate, amortization requirements (if any) and other provisions
of such note.
SECTION 9. ADJUSTMENT OF SHARES.
- --------- --------------------
(a) General. In the event of a subdivision of the outstanding Stock,
-------
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the value of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of:
16
<PAGE>
(i) The number of Shares available under Section 5 for future
grants;
(ii) The limit set forth in Section 7(b);
(iii) The number of Nonstatutory Options to be granted to
Outside Directors under Section 4(b);
(iv) The number of Shares covered by each outstanding Option; or
(v) The Exercise Price under each outstanding Option.
(b) Reorganizations. Unless otherwise provided in an Optionee's
---------------
employment agreement, in the event that the Company is a party to a merger or
other reorganization, outstanding Options shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one Share under such agreement and the Exercise Price,
or for the acceleration of their exercisability followed by the cancellation of
Options not exercised, in all cases without the Optionees' consent. Any
cancellation shall not occur until after such acceleration is effective and
Optionees have been notified of such acceleration.
(c) Reservation of Rights. Except as provided in this Section 9,
---------------------
an Optionee or Offeree shall have not rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of share of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 10. SECURITIES LAWS.
- ---------- ---------------
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.
17
<PAGE>
SECTION 11. NO RETENTION RIGHTS.
- ---------- -------------------
Neither the Plan nor any Option shall be deemed to give any individual
a right to remain an employee or consultant of the Company or a Subsidiary. The
Company and its Subsidiaries reserve the right to terminate the service of any
employee or consultant at any time, with or without cause, subject to applicable
laws and a written employment agreement (if any).
SECTION 12. DURATION AND AMENDMENTS.
- ---------- -----------------------
(a) Term of the Plan. The Plan, as set forth herein, shall become
----------------
effective as of May 10, 1995. The Plan, if not extended, shall terminate
automatically on March 11, 2005. It may be terminated on any earlier date
pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors
------------------------------------
may amend, suspend or terminate the Plan at any time and for any reason, except
that the provisions of Section 4(b) relating to the amount, price and timing of
grants to Outside Directors shall not be amended more than once in any six-month
period. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws or
regulations.
(c) Effect of Amendment or Termination. No Shares shall be issued or
----------------------------------
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.49A
<SEQUENCE>6
<DESCRIPTION>DESIGN/BUILD AGMT DATED 11/15/96
<TEXT>
<PAGE>
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
EXHIBIT 10.49(a)
DESIGN/BUILD AGREEMENT
BETWEEN
AMD SAXONY MANUFACTURING GmbH
AND
MEISSNER + WURST GmbH + CO.
DATED AS OF NOVEMBER 15TH, 1996
PERTAINING TO
DESIGN AND CONSTRUCTION OF AMD FAB 30
DRESDEN, GERMANY
<PAGE>
<TABLE>
<CAPTION>
INDEX
<C> <S> <C>
Article 1
Scope of Work.................................... 1
1.1 Facility................................................................... 2
1.2 Project.................................................................... 2
1.3 Design And Engineering Services............................................ 2
1.3.1 Engineering Services................................................ 2
1.3.2 Design And Engineering By Contractor................................ 2
1.3.3 Latest Version Of Documents......................................... 4
1.3.4 Process Design...................................................... 4
1.4 Construction And Construction Administration And Supervision Services...... 5
1.4.1 Construction And Construction Management Services By Contractor..... 5
1.4.2 Standards For Completion............................................ 6
1.5 Nature Of Company's Approvals.............................................. 6
1.6 Definitions................................................................ 6
Article 2
Personnel...................................... 8
2.1 Employment By Contractor Of Qualified Personnel............................ 8
2.1.1 Qualified Design Professionals...................................... 8
2.1.2 Qualified Construction Professionals................................ 8
2.2 Contractor's Superintendents............................................... 8
2.2.1 Senior Project Construction Superintendent.......................... 8
2.2.2 Appointment Of Superintendents Required By Law...................... 9
2.3 Construction Personnel..................................................... 9
2.3.1 Supervision Of Construction Personnel............................... 9
2.3.2 Contractor's Responsibility For Personnel........................... 9
2.4 No Relationship With Company............................................... 9
2.5 Company's And Contractor's Representatives................................. 9
2.6 Personnel Proficiency In English........................................... 10
2.7 Employment Of Legal Workers................................................ 10
2.8 Compliance With Law and Promptitude In Hiring And Replacing Personnel...... 10
Article 3
Contract Documents.................................. 10
3.1 Contract Documents......................................................... 10
3.2 Resolution Of Conflicts.................................................... 10
3.3 Language Of Contract Documents............................................. 11
Article 4
Design Documents................................... 11
4.1 Detailed Design............................................................ 11
4.2 Pre-Contract Design........................................................ 11
4.3 Design Development Phase................................................... 11
4.4 Final Design Phase......................................................... 12
4.5 Specifications And Drawings................................................ 12
4.6 Data Sheets................................................................ 12
4.7 Quantities And Recipients Of Design Documents.............................. 12
4.8 As Built Documents......................................................... 12
4.9 Company Not Approving Or Waiving........................................... 13
4.10 Operating Manual........................................................... 13
4.11 Ownership Of Documents..................................................... 13
4.12 Obtaining Permits.......................................................... 13
4.13 Compliance With Code Requirements.......................................... 14
Article 5
Approval of Design Documents............................. 14
5.1 Approval By Company........................................................ 14
5.2 Schedule Of Submittals..................................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
5.3 Bulk Orders................................................................ 15
5.4 Return Of Design Documents To Contractor................................... 15
5.5 Nature Of Company's Approval Of Design Documents........................... 15
5.6 Delay By Contractor Or Company In Delivery Of Design Documents............. 16
5.6.1 Delay By Contractor In Delivery..................................... 16
5.6.2 Delay By Company In Delivery........................................ 16
Article 6
Site......................................... 16
6.1 Easements Provided By Company.............................................. 16
6.2 Condition Of Site.......................................................... 16
6.3 Benchmark.................................................................. 17
6.4 Underground Utilities...................................................... 17
Article 7
Acceptance of Site.................................. 17
7.1 Contractor's Inspection Of Site............................................ 17
Article 8
Conduct of the Construction Work.......................... 17
8.1 Construction In Accordance With Approved Design Documents.................. 17
8.2 Parties' Relationship...................................................... 17
8.3 Efficient Administration................................................... 17
8.4 "Build Clean" Protocol..................................................... 18
8.5 Equipment Standby.......................................................... 18
8.6 Construction By Company.................................................... 18
8.7 Compatible Labor........................................................... 18
8.8 Labor Agreement Practices.................................................. 18
8.9 Overtime Labor............................................................. 18
8.10 Identification............................................................. 18
8.11 Commencement And Prosecution Of Construction Work.......................... 19
8.12 Contractor Responsible For Construction Means.............................. 19
8.13 Specialized Construction Manager Required By Law........................... 19
8.14 Sanitation................................................................. 19
8.15 Safety And Security........................................................ 19
8.15.1 Contractor's Responsibility For Safety............................. 19
8.15.2 Safety Program..................................................... 20
8.15.3 Reporting And Investigating Accidents.............................. 20
8.15.4 Reporting Claims................................................... 20
8.15.5 Compliance With State Safety Requirements.......................... 20
8.15.6 Safety Of Tools.................................................... 20
8.15.7 Contractor's Safety Requirements In Facility....................... 20
8.15.8 Security........................................................... 21
8.16 Materials.................................................................. 21
8.16.1 New Materials...................................................... 21
8.16.2 Responsibility For Injury Caused By Equipment...................... 21
8.16.3 Substitution Of Materials.......................................... 21
8.16.4 Materials Objected To By Contractor................................ 22
8.17 Storage Of Materials....................................................... 22
8.18 Cleaning Up................................................................ 22
Article 9
Purchasing Materials, Subcontracting Work and Computers............. 22
9.1 Purchasing Materials....................................................... 22
9.2 Subcontracting Work........................................................ 22
9.2.1 Third Party Subcontracts And Vendors................................ 22
9.2.2 Contractor Bidding On Subcontracted Work............................ 23
9.3 Nature Of Company's Approval............................................... 23
9.4 Contractor Responsible For Subcontractors.................................. 23
9.5 Cost-Plus Subcontracts..................................................... 23
9.6 Computers.................................................................. 24
9.7 Import Requirements........................................................ 24
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Article 10
Changes, Additions, and Omissions in the Work.................... 24
10.1 Keeping Account Of Changes................................................. 24
10.2 Proposing And Approving Changes............................................ 24
10.3 Effect Of Change Order On Cost And Timing.................................. 25
10.4 No Effect On Contractor's Other Responsibilities........................... 26
Article 11
Inspection and Testing During Construction..................... 26
11.1 Contractor's Shop Inspections.............................................. 26
11.2 Measurements And Suitability............................................... 26
11.3 Inspection Reports......................................................... 26
11.4 Company's Inspections...................................................... 26
11.5 Company's Inspector........................................................ 27
11.6 Inspection Of Fabrication.................................................. 27
11.7 Testing.................................................................... 28
Article 12
Progress Reports and Progress Monitoring...................... 28
12.1 Progress Schedules......................................................... 28
12.2 Delivery Of Schedules To Company........................................... 28
12.3 Periodic Progress Reports.................................................. 28
12.4 Superintendent's Report.................................................... 28
12.5 Materials Status Reports................................................... 29
Article 13
Accounts and Records................................. 29
13.1 Detailed Accounts.......................................................... 29
13.2 SEMATECH Model............................................................. 29
13.3 Tax Accounting............................................................. 29
13.4 Audit By Company........................................................... 29
13.5 Audit Of Subcontractors And Vendors........................................ 29
Article 14
Time of Completion.................................. 30
14.1 Substantial Completion Date................................................ 30
14.2 Latest Date For Final Completion........................................... 30
14.3 Delays And Extensions Of Time.............................................. 30
14.3.1 Delays Caused By Change Order Or By Company Or By Force Majeure.... 30
14.3.2 Standard For Approving Extensions Of Time.......................... 31
14.4 Delays And Additional Costs................................................ 31
14.4.1 Additional Costs Caused By Company's Delay Or By Force Majeure..... 31
14.4.2 Notice Of Claim For Delay.......................................... 31
14.4.3 Limitation On Costs................................................ 31
14.4.4 Delays By Company In Granting Approvals............................ 31
Article 15
Substantial Completion, Final Completion and Final Acceptance........... 32
15.1 Substantial Completion..................................................... 32
15.2 Final Completion........................................................... 32
15.2.1 Completion Of Punch List Items..................................... 32
15.2.2 Contractor's Certification Of Completion Of Construction Work...... 33
15.3 Final Acceptance And Final Payment......................................... 33
15.3.1 Final Acceptance By Company........................................ 33
15.3.2 Final Payment...................................................... 34
15.4 Release Of Company......................................................... 34
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Article 16
Cost of the Work................................... 34
16.1 Basis Of Fee............................................................... 34
16.2 Reimbursable Costs......................................................... 34
16.2.1 Office Costs....................................................... 34
16.2.2 Field Costs........................................................ 37
16.2.3 Excluded Costs..................................................... 41
16.2.4 Principles Affecting Reimbursable Costs............................ 42
16.3 Contractor's Fee........................................................... 43
16.3.1 The Fee............................................................ 43
16.3.2 Calculate Incentive Changes In Fee................................. 43
16.3.3 Fee For Services................................................... 44
16.4 Total Contract Amount...................................................... 44
16.5 Costs Of Alterations....................................................... 44
16.6 Records Of Reimbursable Costs.............................................. 44
16.7 Discounts And Refunds...................................................... 45
16.8 Surplus.................................................................... 45
16.9 Lump Sum Subcontract....................................................... 45
16.10 Adjustment In Fee.......................................................... 46
Article 17
Terms of Payment................................... 46
17.1 Payment Of Contract Amount................................................. 46
17.2 Payment of Increases In Fee; Retainage..................................... 48
17.3 Partial Release Of Retainage............................................... 48
17.4 Payment Not A Waiver By Company............................................ 48
17.5 Payment Of Balance Of Retainage............................................ 48
17.6 Insurance Adjustments...................................................... 49
17.7 Stored Materials........................................................... 49
Article 18
Warranties And Guarantees.............................. 49
18.1 Contractor's Warranty And Guarantee........................................ 49
18.2 Company's Right To Repair.................................................. 50
18.3 Liability For Damages...................................................... 51
18.4 Capacities At Operating Conditions......................................... 51
18.6 Retaining Imperfect Materials.............................................. 51
18.7 No Release Of Other Claims 51
Article 19
Correction of Defective Construction Work....................... 51
19.1 Correction Of Work For Which Contractor Is Responsible..................... 51
19.2 Using New Materials For Repairs............................................ 52
19.3 Repair By Company.......................................................... 52
Article 20
Indemnity...................................... 52
20.1 Contractor's Indemnity..................................................... 52
20.2 Indemnification By Subcontractors And Vendors.............................. 53
20.3 Company's Indemnity........................................................ 53
20.4 Consequential Damages...................................................... 54
Article 21
Insurance And Bank Guarantees............................ 54
21.1 Contractor To Carry Insurance.............................................. 54
21.2 Contractor's Liability Insurance........................................... 55
21.2.1 Liability Coverage................................................. 55
21.2.2 Liability Limits................................................... 55
21.3 Insurance Certificates..................................................... 56
21.4 Company As Additional Insured.............................................. 56
21.5 Builders All Risk Insurance................................................ 56
21.6 Performance And Warranty Bank Guarantees................................... 56
21.7 Advance Payment Bank Guarantees............................................ 57
21.8 Assignment Of Subcontractors' Warranties And Bank Guarantees............... 57
</TABLE>
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Article 22
Casualty Causing Damage to the Facility....................... 58
22.1 Damage Before Substantial Completion Of Facility........................... 58
22.2 Damage After Substantial Completion Of Facility............................ 58
Article 23
Protection of Property............................... 58
23.1 Contractor's Protection Of Facility........................................ 58
Article 24
Preparation of the Facility for Occupancy and Testing.................. 58
24.1 Contractor's Preparation Of Facility....................................... 58
24.2 Calibration Of Instrumentation............................................. 59
24.3 Take Over For Installation Or Testing...................................... 59
Article 25
System Performance Tests............................... 60
25.1 Conduct Of System Performance Tests; Repairs............................... 60
25.2 Notice Of Satisfactory Completion.......................................... 60
25.3 Coordination Of Systems.................................................... 60
25.4 Standards Of Operation..................................................... 60
25.5 Shut Down Procedure........................................................ 61
Article 26
Use of Completed Portions of the Facility....................... 61
26.1 Use Of Completed Construction Phases....................................... 61
Article 27
Closing Report on Cost of the Facility........................ 61
27.1 Closing Report............................................................. 61
Article 28
Record Documents.................................. 61
28.1 Description Of Record Documents............................................ 61
28.2 Information On Record Documents............................................ 62
28.3 Recording Data............................................................. 62
28.4 Conduits, Pipes, Etc....................................................... 62
28.5 Finalization Of Documents Other Than Drawings.............................. 62
28.6 Finalization Of Drawings................................................... 62
28.7 Remedies Regarding Record Documents........................................ 62
Article 29
Operation and Maintenance Data.......................... 63
29.1 Submittal Of Operation And Maintenance Data................................ 63
29.2 Contents Of Data........................................................... 63
29.3 Data For Equipment And Systems............................................. 63
Article 30
Taxes........................................ 64
30.1 Taxes Assessed Against Facility............................................ 64
30.2 Taxes Affecting Employees.................................................. 64
30.3 Taxes Not Part of Budgeted Cost............................................ 64
Article 31
Liens [Pfandrecht]................................. 64
31.1 Liens [Pfandrecht]......................................................... 64
Article 32
Patents and Confidentiality.............................. 65
32.1 Contractor's Responsibility................................................ 65
32.2 Design Process............................................................. 65
32.3 Replacement Of Infringing Item............................................. 65
32.4 Confidentiality............................................................ 65
</TABLE>
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32.4.1 Proprietary Information............................................. 66
32.4.2 Hold In Confidence.................................................. 66
32.4.3 Announcements....................................................... 66
Article 33
Company's Right to Take Over the Work......................... 67
33.1 Company's Option........................................................... 67
33.2 Reimbursement Of Contractor................................................ 67
33.3 Guarantees................................................................. 67
Article 34
Company's Right to Suspend Work.......................... 67
34.1 Company's Right To Suspend Project......................................... 67
34.2 Suspension Upon Company's Notice........................................... 67
34.3 Compensation For Suspension................................................ 68
34.4 Resumption Of Work......................................................... 68
34.5 Termination Following Suspension........................................... 68
Article 35
Termination for Convenience of Company...................... 69
35.1 Termination By Company..................................................... 69
35.2 Actions Upon Receipt Of Notice............................................. 70
35.3 Guarantees Following Termination........................................... 70
Article 36
Default by the Contractor............................... 70
36.1 Events Of Default.......................................................... 70
36.2 Company's Right To Take Over Work.......................................... 71
36.3 Company's Right To Complete Work........................................... 71
36.4 Contractor's Action Upon Receipt of Notice................................. 71
36.5 Remedies Cumulative........................................................ 72
36.6 Limits On Amount Payable To Contractor..................................... 72
Article 37
Penalty Clause................................... 72
37.1 Damages For Delay In Substantial Completion Of Facility.................... 72
37.2 Payment Of Contract Penalty................................................ 72
37.3 Subcontract Penalty Clauses................................................ 72
37.4 Set-Off Of Contract Penalties.............................................. 72
Article 38
Compliance with Laws, Choice of Law, Choice of Forum, Contract Language.... 73
38.1 Compliance With Applicable Law............................................. 73
38.2 Indemnity For Violation.................................................... 73
38.3 Choice of Law.............................................................. 73
38.4 Disputes; Arbitration...................................................... 74
38.4.1 Resolution Of Disputes By Arbitration.............................. 74
38.4.2 Place Of Arbitration............................................... 74
38.4.3 Exclusive Jurisdiction............................................. 74
38.4.4 Selection Of Arbitrators........................................... 74
38.4.5 Language Of Proceedings............................................ 75
38.4.6 Applicable Law..................................................... 75
38.4.7 Arbitration Award.................................................. 75
38.4.8 Provisional Remedies............................................... 75
38.5 Contract Made In English................................................... 75
Article 39
Financing of Project................................ 75
39.1 Take Over By Project Lender................................................ 75
39.2 Approvals By Project Lender................................................ 75
39.3 Audit By Project Lender.................................................... 75
39.4 Amendment of Agreement..................................................... 76
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Article 40
Force Majeure.................................... 76
40.2 Effect On Time For Performing Obligation................................... 76
40.3 Effect On Compensation..................................................... 77
40.4 Obligation To Mitigate..................................................... 77
40.5 Notification............................................................... 77
40.6 Failure to Notify.......................................................... 77
Article 41
Waiver, Severability and Remedies........................... 77
41.1 Company's Rights Not Affected.............................................. 77
41.2 Contractor's Waiver........................................................ 77
41.3 No Waiver Of Breach........................................................ 77
41.4 Written Changes............................................................ 77
41.5 Severability............................................................... 77
41.6 Cumulative Remedies........................................................ 78
41.7 Captions................................................................... 78
Article 42
Notices and Addresses................................. 78
42.1 Notices.................................................................... 78
42.2 Change Of Address.......................................................... 79
Article 43
Entire Agreement; Successors............................ 79
43.1 Entire Agreement........................................................... 79
43.2 Successors And Assigns..................................................... 79
</TABLE>
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EXHIBITS AND SCHEDULES
Exhibit A Facility Performance Criteria
Schedule 7.1 Site Studies Furnished By Company To Contractor
Schedule 16.2.1.1 Range Of Hourly Rates Of Contractor's Employees And
Contractor's Established Travel And Living Expenses
Reimbursement Policies
Schedule 16.2.2.3 Schedule Of Equipment Rental Rates [To Be Attached Upon The
Parties' Mutual Agreement On Such Rates And To Be Revised
From Time To Time]
Schedule 16.2.4 Examples Of Qualifying And Non-Qualifying Reimbursable Costs
Schedule 21.6&21.7 Criteria For Bank Guarantees
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<CAPTION>
INDEX OF DEFINED TERMS
----------------------
Defined Term Section
- ------------ -------
<S> <C>
"Adjusted Multiplier"...................................................................... 16.10
"Advisors"................................................................................. 32.4.1
"Affiliate"................................................................................ 32.4.1
"Budgeted Cost of the Work"................................................................ 16.3.1
"Budgeted Fee"............................................................................. 16.3.1
"Change Order"............................................................................. 10.1
"Company".................................................................................. Preamble
"Company's Inspector"...................................................................... 11.5
"Company's Project Manager"................................................................ 2.5
"construction outfit"...................................................................... 1.6.1
"Construction Phase"....................................................................... 1.3.2.2
"Construction Work"........................................................................ 1.4.1
"Contract"................................................................................. Recitals
"Contract Amount".......................................................................... 16.1
"Contract Documents"....................................................................... 3.1
"Contractor"............................................................................... Preamble
"Cost of the Work"......................................................................... 1.3.2.2
"Default".................................................................................. 36.1
"Delay Week"............................................................................... 37.2, 37.3
"Design Documents"......................................................................... 1.3.2.1
"Estimate of Project Cost"................................................................. 1.3.2.2
"Event of Default"......................................................................... 36.1
"Fab 30 Preliminary Design"................................................................ 1.1
"Facility"................................................................................. 1.1
"Fee"...................................................................................... 16.3
"Final Acceptance"......................................................................... 15.3.1
"Final Completion Date".................................................................... 15.2
"Latest Date For Substantial Completion Of The Facility"................................... 14.1
"materials"................................................................................ 1.6.2
"Operation and Maintenance Data"........................................................... 29.1
"Original Multiplier"...................................................................... 16.10
"outfit"................................................................................... 1.6.1
"person"................................................................................... 1.6.3
"Project".................................................................................. 1.2
"Project Budget"........................................................................... 1.3.2.4
"Project Schedule"......................................................................... 1.3.2.3
"Proprietary Information".................................................................. 32.4.1
"Punch List"............................................................................... 15.1
"reasonable period of time"................................................................ 1.6.4
"Reimbursable Costs"....................................................................... 16.1
"Representative"........................................................................... 1.6.5
"Retainage"................................................................................ 17.2
"ROM"...................................................................................... 14.4.2
"Schedule Recovery Plan"................................................................... 1.4.1.1
"service the Facility"..................................................................... 1.6.6
"servicing the Facility"................................................................... 1.6.6
"Site"..................................................................................... Recitals
"Site Boundary Lines"...................................................................... 1.6.7
"Stored Materials"......................................................................... 17.1
"Subcontract Retainage".................................................................... 17.1
"subcontractor"............................................................................ 1.6.8
"supplies"................................................................................. 1.6.9
"system"................................................................................... 1.6.10
"System Performance Test".................................................................. 25.1
"vendor"................................................................................... 1.6.10
"Wafer Process Equipment".................................................................. 1.3.2
"Warranty Commencement Date:............................................................... 18.1
"work"..................................................................................... 1.6.11, 1.6.12
"working days"............................................................................. 1.6.13
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DESIGN/BUILD AGREEMENT
BETWEEN
AMD SAXONY MANUFACTURING GmbH
AND
MEISSNER + WURST GmbH + CO.
PERTAINING TO
DESIGN AND CONSTRUCTION OF AMD FAB 30, DRESDEN, GERMANY
Preamble
THIS DESIGN/BUILD AGREEMENT is made and entered into as of the 15th day of
November, 1996 by and between AMD SAXONY MANUFACTURING GmbH, having its home
office at AMD European Microelectronics Center, Grossehainer Strasse 92, 01127
Dresden, Germany, hereinafter referred to as "COMPANY", and MEISSNER + WURST
GmbH + CO., having its home office at Rossbachstrasse 38, 70499 Stuttgart,
Germany, hereinafter referred to as "CONTRACTOR".
R E C I T A L S
---------------
A. COMPANY owns certain land located in the City of Dresden, State
of Saxony, Germany (the "SITE").
B. COMPANY desires to obtain new state-of-the-art wafer fabrication
and associated support facilities to be located on the Site for the design and
production of integrated circuits.
C. CONTRACTOR desires to plan, design, construct, erect, install,
equip, start up, test, calibrate, adjust and turn over the facilities in
accordance with this Agreement and the Contract Documents (defined in Section
-------
3.1 below) (this Agreement and the Contract Documents are collectively called
- ---------
the "CONTRACT").
NOW, THEREFORE, for and in consideration of the payments hereinafter
specified to be made by COMPANY, and in consideration of the promises and mutual
covenants and agreements of the parties herein contained, the parties hereto do
hereby agree as follows:
ARTICLE 1
SCOPE OF WORK
1.1 FACILITY. The improvements and equipment to be planned, designed,
--------
engineered, developed, fabricated, constructed, furnished and/or installed,
started up, tested, calibrated, adjusted and turned over under the Contract
(which improvements and equipment are herein sometimes referred to collectively
as the "FACILITY") are as follows:
The Facility known as AMD European Microelectronics Center, located in
Dresden, Germany.
The Facility shall include the buildings, structures, building systems, site
improvements, roads, utilities, wastewater disposal, sewer and other
1
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improvements but shall exclude the acquisition and installation of the Wafer
Process Equipment (defined in Section 1.3.2 below). The Preliminary Design of
-------------
the Facility is represented or described in documents described in List of
Mechanical Drawings dated November 14, 1996 and List of Architect's Drawings
dated November 14, 1996 and in Preliminary Design Report dated November 14,
1996, which are incorporated herein by this reference (collectively referred to
as the "FAB 30 PRELIMINARY DESIGN"). In the event that any changes are made in
the scope of the Facility, any corresponding changes in the Fab 30 Preliminary
Design shall be made by Change Order (defined in Section 10.1 below).
------------
CONTRACTOR shall provide the design development, engineering, construction
management and all ancillary construction services, and appurtenances of every
description which are necessary to construct and start the Facility in
accordance with the Fab 30 Preliminary Design and the Contract.
1.2 PROJECT. The Project for which CONTRACTOR shall be responsible is the
-------
design development, engineering, construction management, furnishing,
fabrication, construction, erection, installation, equipping, starting up,
testing, calibrating, and adjusting of the Facility, including without
limitation all design services, all construction management services and all
construction services, together with all necessary appurtenances (collectively,
the "PROJECT"). The Project comprises the completed construction of the
Facility as designed by CONTRACTOR and approved by COMPANY and includes without
limitation (i) all labor, tools, construction equipment, fuel, transportation,
utilities, water and all other facilities and services necessary to ready the
Site for construction and to complete all site work (including without
limitation installation of all utilities, wastewater disposal and sewage
disposal systems) and to complete such construction and (ii) all materials
incorporated and to be incorporated in such construction and (iii) all building
systems and building equipment to be installed as an integral part of the
buildings, structures and other improvements comprising the Facility as
described in the Fab 30 Preliminary Design.
1.3 DESIGN AND ENGINEERING SERVICES.
-------------------------------
1.3.1 ENGINEERING SERVICES. CONTRACTOR shall furnish structural,
--------------------
mechanical, electrical, plumbing, civil engineering and landscaping services as
part of CONTRACTOR'S design services.
1.3.2 DESIGN AND ENGINEERING BY CONTRACTOR. Except for the process
------------------------------------
design referred to in Section 1.3.4, based upon the Fab 30 Preliminary Design,
-------------
CONTRACTOR shall furnish the completed design for the Facility. CONTRACTOR
shall make detailed checks of the design information furnished by COMPANY to
satisfy itself as to the accuracy thereof and shall be responsible for the
complete mechanical and electrical design of the Facility and of all systems
necessary for a complete and operational Facility with the exception of
furnishing tooling, equipment and machinery to be furnished and installed by
COMPANY for the manufacture and design of integrated circuits (the "WAFER
PROCESS EQUIPMENT"). CONTRACTOR shall be responsible for:
1.3.2.1 DESIGN DOCUMENTS. Developing and preparing for
----------------
COMPANY'S approval complete and coordinated plans, specifications, working
drawings, data sheets and other construction documents for the Project
which are necessary for the construction of the Facility (the "DESIGN
DOCUMENTS"). Each time the Design Documents are revised, the revised Design
Documents shall: (1) bear a sequential number (indicating the numerical
sequence of such revision), (2) show the changes from the prior revision,
(3) show the date of the revision, (4) show the date of COMPANY'S and
CONTRACTOR'S mutual approvals and (5) show the name(s) of COMPANY'S and
CONTRACTOR'S Representative(s) who approved the revision. The development
of the design of the Facility and the preparation of the Design Documents
are described in more detail in Article 4 below.
---------
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1.3.2.2 ESTIMATES OF PROJECT COST. Developing and preparing
-------------------------
for COMPANY'S review and approval at each stage of design development of design
estimates that define the estimated cost of the Project setting forth the total
estimated design / engineering and complete construction cost of each of the
following components of the Project and including as to each component the
common system costs:
Design/Engineering, Site Development, Office Design Center, Central
Utilities Building, Fab and Clean Room, Fab Support, Chemical and Bulk
Storage, and Construction Administration and Supervision (each
referred to as a "CONSTRUCTION PHASE").
These estimates (each an "ESTIMATE OF PROJECT COST") will be exclusive of
acquisition and installation cost for the Wafer Process Equipment but shall
include building support equipment acquisition and installation as necessary or
appropriate to implement the Fab 30 Preliminary Design and the Contract. Each
estimate shall be provided to COMPANY in the level of detail mutually agreed
upon by and between CONTRACTOR and COMPANY and shall be reconciled with
previously prepared design estimates. The estimates shall set forth the
estimated total of all Reimbursable Costs (the "COST OF THE WORK ") (as
described in Article 16 below), and the CONTRACTOR'S estimated Budgeted Fee (as
----------
defined in Article 16 below).
----------
1.3.2.3 PROJECT SCHEDULE. Developing for COMPANY'S approval a
----------------
detailed Critical Path Method Schedule for the performance of the engineering
and design work and the construction of each Construction Phase (the "PROJECT
SCHEDULE"), which Project Schedule is incorporated herein by this reference.
With respect to the Project Schedule, COMPANY'S approval will be required for
every change in the Project Schedule which may affect the Critical Path of any
Construction Phase or may affect any milestone established for any part of the
Project. Additionally, COMPANY shall have the right to change the Critical
Path of any Construction Phase, and CONTRACTOR shall thereupon revise the
Project Schedule for COMPANY'S approval, and CONTRACTOR shall submit all
additional costs resulting from such change to COMPANY and shall obtain
COMPANY'S approval (including approval of changes in the Project Budget) before
such change in such critical path is implemented. However, COMPANY'S approval
shall not be construed to relieve CONTRACTOR of any responsibility and/or
liability which CONTRACTOR may have with respect to delays and/or additional
costs not encompassed by COMPANY'S approval. The Project Schedule shall be
prepared, updated and revised in Prima Vera Project Planner for Windows (P3 Win)
or equivalent acceptable to both CONTRACTOR and COMPANY. The Project Schedule
shall be developed so as to permit CONTRACTOR and COMPANY to monitor the
progress and monetary cost of all aspects of the work including without
limitation each Construction Phase, to identify the points in time at which
specified events must occur and to anticipate potential problems in achieving
scheduled completion dates. The Project Schedule shall show the respective
dates upon which CONTRACTOR proposes to commence and complete the following sub-
phases of each Construction Phase: Phase Summary, Phase Milestones, Delays
Encountered, Conceptual Design, Schematic Design, Construction Design
Development, Preparation of Tenders, Tendering-Negotiation & Award, Notice to
Proceed, Submittals and Shop Drawings and Review and Approval thereof by
COMPANY, Fabrication and Delivery, Site Mobilization, Construction, Punchlist,
Calibration, Adjustment, Turnover to COMPANY, and Site Demobilization. Each
Construction Phase will be further detailed to reflect the elements of the
Project Schedule and the logical activities or line items planned to accomplish
each Construction Phase in accordance with the Project Schedule. Each schedule
activity or line item will be identified, along with the estimated quantity of
units of work and the cost thereof, to be
3
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accomplished or installed, man hours planned per unit, together with the
cost thereof, any special construction equipment or other constraining
appurtenances required for construction (e.g., heavy-lift cranes, site
concrete batching plants, wide-load road permits, etc.), and scheduled
progress anticipated on each of said items in order to complete the entire
Facility within the contract time in accordance with the Project Schedule.
Each schedule activity or line item will be identified as a direct work or
indirect work activity and have the planned equipment, material, labor, and
equipment rental cost associated with the activity identified separately.
1.3.2.4 PROJECT BUDGET. Developing and preparing for COMPANY'S
--------------
approval a detailed budget for the Project based on the latest Estimate of
Project Cost approved by COMPANY that reflects the elements of the Project
Schedule and sets forth separately the projected costs for each
Construction Phase and breaks down those projected costs into each element
of the Project Schedule applicable to such Construction Phase (the "PROJECT
BUDGET"), which Project Budget is incorporated herein by this reference.
The Project Budget will be coded and identify quantifiable elements to
relate directly to the Project Schedule and Project work breakdown
structure for cash flow and progress monitoring. The Project Budget will be
capable of being summarized by phase and in total to the SEMATECH Facility
Cost Model. After the Project Budget is finalized, it will not be changed
except pursuant to a Change Order approved and signed by the two
Representatives of COMPANY described in Clause (x) of Section 10.2 and by
---------- ------- ----
the COMPANY Representative described in Clause (y) of Section 10.2 hereof,
---------- ------------
as well as approved and signed by CONTRACTOR'S Representative described in
Clause (z) of Section 10.2. The Project Budget will be maintained
--------- ------------
continuously, and the status of the Project Budget and a forecast shall be
reported to COMPANY on a monthly basis, in such format as COMPANY and
CONTRACTOR mutually agree upon, and the Project Budget will monitor the
following categories of data: planned budget, approved changes, operating
budget, commitments against operating budget, cost incurred to date, cost
to complete commitment, current Estimate of Project Cost, variance of
operating budget to Budgeted Cost of the Work (defined in Section 16.3.1
--------------
below), earned value of work completed to date, quantity of units budgeted,
estimated cost per unit, actual cost per unit and such other information as
COMPANY may request or CONTRACTOR recommend and COMPANY accept.
Additionally, COMPANY may request simplified interim status reports and
forecasts on a weekly or bi-weekly basis in such other format or formats as
COMPANY may prescribe, and any associated, additional cost shall be
reimbursed by COMPANY either as office costs pursuant to Section 16.2.1 if
--------------
prepared in CONTRACTOR'S home office or as field costs pursuant to Section
-------
16.2.2 if prepared in CONTRACTOR'S field office.
------
1.3.3 LATEST VERSION OF DOCUMENTS. For purposes of this Agreement,
---------------------------
the defined terms "DESIGN DOCUMENTS", "ESTIMATE OF PROJECT COST", "PROJECT
SCHEDULE" and "PROJECT BUDGET" shall mean the latest version of each of these
developed and approved by COMPANY in accordance with this Agreement.
1.3.4 PROCESS DESIGN. COMPANY shall supply certain process design
--------------
requirements for the tools used in the manufacturing process in the form of
performance requirements and certain other design information as shown
in the Contract Documents, including the Facility Performance Criteria described
in Exhibit A attached hereto and made a part hereof. Any additional sizing and
---------
selection of materials not specified by COMPANY is to be furnished by CONTRACTOR
with COMPANY'S approval in the form of prescribed specifications. Except for
the process design requirements, CONTRACTOR shall make detailed checks of the
design information furnished by COMPANY to satisfy itself as to the accuracy
thereof and shall be responsible for the complete design of the Facility and all
building systems, with the exception of the
4
<PAGE>
Wafer Process Equipment, the procurement and installation of which shall be
determined by COMPANY.
1.4 CONSTRUCTION AND CONSTRUCTION ADMINISTRATION AND SUPERVISION SERVICES.
---------------------------------------------------------------------
1.4.1 CONSTRUCTION AND CONSTRUCTION MANAGEMENT SERVICES BY
----------------------------------------------------
CONTRACTOR. The acquisition and installation of the Wafer Process Equipment is
- ----------
COMPANY'S responsibility. Except for the Wafer Process Equipment and other
things that the provisions of the Contract expressly require or provide for
COMPANY to furnish for the Facility, CONTRACTOR shall furnish and provide all
construction management services and all construction for the entire Facility,
including without limitation all require) at least monthly providing such
updated reports, invoices and materials to be incorporated into the buildings,
structures and other improvements and all labor, fuel, transportation,
construction equipment, tools, utilities, water, wastewater disposal, sewage
disposal, supplies, outfit, and appurtenances of every sort which may be
necessary for or in connection with the scheduling, delivery, handling,
construction, erection, installation, performance, calibration, adjustment and
turnover of the Facility, and for the start up and performance testing of the
Facility and for the execution of all other construction work included as a
part of the Project. All such construction management services and all
construction work are collectively referred to as the "CONSTRUCTION WORK".
CONTRACTOR shall be responsible for all Construction Work, including without
limitation the following:
1.4.1.1 UPDATING BUDGET AND SCHEDULE. During construction,
----------------------------
revising and updating continuously, and reporting to COMPANY on a monthly
basis the Project Budget and the Project Schedule, as described in Section
-------
1.3.2.4 and Article 12, subject to COMPANY'S approval and effected by
------- ----------
issuance of a Change Order; submitting CONTRACTOR'S monthly Application
for Payment (described in Section 17.1 below) and invoices and other
------------
supporting documentation, as required herein at least monthly; and
providing COMPANY with a summary of the status of the Project and a report
on the percentage of completion of the Project (both in such form and
containing such information, including then current aerial photographs, as
COMPANY may reasonably require) at least monthly. Providing such updated
reports, invoices and documents on a timely basis shall be a condition
precedent to payment of CONTRACTOR'S Budgeted Fee. Should the Project fall
behind schedule or be projected to fall behind schedule, CONTRACTOR shall
prepare and submit for COMPANY'S approval, a plan or plans for recovering
the lost time showing such actions as may be required to restore the
Project Schedule to the complete satisfaction of COMPANY and showing the
costs associated with such actions (a "SCHEDULE RECOVERY PLAN"). A Schedule
Recovery Plan may include, without limitation, one or more of the following
courses of action:
-- Increase the size of the work force; or
-- Place activities on shift work; or
-- Provide and utilize additional equipment; or
-- Place activities on overtime for a specified period of time but only
if approved by COMPANY.
The party who shall bear any additional costs to the Project occurring as a
result of such delay(s) or the effort(s) necessary to recover therefrom
shall be determined in accordance with Sections 10.3, 14.4 and 16.2.4. The
------------- ---- ------
Budgeted Cost of the Work shall be increased only by means of Change Order
approved by COMPANY in writing pursuant to Article 10 or Article 14.
---------- ----------
5
<PAGE>
1.4.1.2 SUPPORT EQUIPMENT PROCUREMENT. Developing a support
-----------------------------
equipment procurement schedule and plan so as to obtain the support
equipment required for the Project in accordance with the Project Schedule
and the Project Budget.
1.4.1.3 SELECTING SUBCONTRACTORS AND VENDORS. Selecting
------------------------------------
subcontractors and vendors in accordance with this Agreement and
supervising and enforcing the requirements of the Contract on the
performance of subcontracts and purchase orders (exclusive of litigation,
unless first approved in writing by COMPANY or unless the cost of such
litigation is paid for entirely by CONTRACTOR). Ensuring that as a
condition of all subcontracts and purchase orders that subcontractors and
vendors are required to comply with all scheduling procedures, accounting
and auditing procedures, billing procedures, performance reporting
procedures, safety procedures, dispute resolution procedures and procedures
established in the Project Procedures Manual established for the Contract
between CONTRACTOR and COMPANY. CONTRACTOR will coordinate construction
schedules and shop and working drawing development, and insure that same
are communicated to all of CONTRACTOR'S subcontractors.
1.4.2 STANDARDS FOR COMPLETION. It is the intent of the Contract that the
------------------------
Facility shall be complete with all needful appurtenances for satisfactory
operation as identified in the Design Documents, including, without limitation,
comfort-controlled interior environment, proper coordination and control,
safety, reasonably easy access and maintenance, fire defense, life safety, and
the like. Any work or materials not specifically described in or expressly
covered by the Contract but which may be fairly implied as being required
thereby or necessary to make the Facility complete as aforesaid shall be
considered within the purview of the Contract and all such work shall be
performed and all such materials shall be furnished by CONTRACTOR the same as if
specifically described in or expressly covered by the Contract. Such work and
such materials shall be of a quality comparable to the remainder of the Facility
and subject to COMPANY'S approval.
1.5 NATURE OF COMPANY'S APPROVALS. Notwithstanding any review, revision,
-----------------------------
testing, comment or approval by COMPANY of any Design Document, Construction
Work, materials or other aspect of the Project, CONTRACTOR is and shall remain
solely responsible for the plan, design, construction, erection, installation,
equipping, start up, testing, calibration, adjustment and turning over of the
completed Facility to COMPANY in accordance with the terms of the Contract. The
provisions of Sections 4.9, 5.5 and 9.3 shall apply to all such review,
------------ --- ---
revision, testing, comment or approval by COMPANY.
1.6 DEFINITIONS.
-----------
1.6.1 The terms "CONSTRUCTION OUTFIT" and "OUTFIT" where used herein
shall be understood to refer to the equipment, tools, and implements (whether
already owned by CONTRACTOR or rented or purchased by CONTRACTOR expressly for
this job) needed for or in connection with the performance of CONTRACTOR'S work
on the Site, but which do not enter permanently into the construction of the
Facility and will not be needed by COMPANY for or in connection with the
servicing, operation, or protection of the completed Facility.
1.6.2 The word "MATERIALS" where used herein shall mean those goods
or commodities (including equipment) which are intended to enter directly and
permanently into the construction of the Facility, or are required for or in
connection with the servicing, operation, or protection of the completed
Facility as, for example: cement, stone, sand, lumber, millwork, hardware,
brick, concrete, mortar, pipe, tubing, valves, fittings,
6
<PAGE>
castings, structural steel, steel plate, exchangers, condensers, coolers,
insulation, paint, welding rod, instruments, instrument charts, pumps, motors,
compressors, generators, furnaces, air conditioning, ventilating, fans,
transformers, conduit, wiring, switch gear, panel boards, hoists, tube cleaners,
wrenches, fire extinguisher, and the like.
1.6.3 The term "PERSON" where used herein shall mean an individual,
corporation, association, partnership, joint venture, limited liability company,
trust or other business entity or government or governmental agency, court,
department or officer.
1.6.4 The term "REASONABLE PERIOD OF TIME" when used herein in
connection with any testing by, or any consent or approval of COMPANY shall mean
a period of time equal to ten (10) working days or, if the circumstances then
prevailing require a longer period of time, COMPANY will justify to CONTRACTOR
such longer period of time in which COMPANY may commence its testing or grant or
deny its consent or approval.
1.6.5 The term "REPRESENTATIVE" when used herein shall mean a person
designated by one of the parties hereto as its representative and authorized to
represent or act on behalf of, and to make decisions that are binding on, the
party such person is representing for the purposes for which such person has
been appointed and when used herein as applying to COMPANY, for purposes of
inspection and approval of Construction Work, shall include any person
representing or acting on behalf of any lender of COMPANY. A person designated
as a representative for a limited purpose, e.g., to conduct audits, shall not be
---
a representative for any other purpose. COMPANY'S Representatives shall include
any independent Person retained by COMPANY to implement financial and cost
controls or to examine and advise COMPANY regarding financial or cost matters.
1.6.6 Expressions such as "SERVICE THE FACILITY" and "SERVICING THE
FACILITY" where used herein shall be understood as requiring or referring to the
performance of such work as is normally needed to recondition the equipment for
resuming operation after a shutdown thereof as, for example, routine purging,
unplugging, cleaning or plating up of equipment; installing fresh operating
supplies; making such routine pressure tests as are needed before resuming
operation; and the like.
1.6.7 The term "SITE BOUNDARY LINES" where used herein shall be
understood to refer to the boundaries of the Site designated as such in the
Contract Documents.
1.6.8 The term "SUBCONTRACTOR" where used herein shall mean a
corporation, association, partnership, joint venture, limited liability company,
trust or other business entity or individual (other than an employee) who
contracts with CONTRACTOR (or with any subcontractor) to (i) perform part of
CONTRACTOR'S work, whether at the Site or elsewhere, or (ii) furnish materials
for the Facility and also erect or install same at the Site.
1.6.9 The term "SUPPLIES" where used herein shall mean those goods or
commodities which enter into the construction of the temporary structures or
temporary lines that are needed at the Site in connection with work on the
Facility, and goods or commodities of a rapidly consumable nature that are used
by the mechanical or building trades at the Site for work on the Facility.
1.6.10 The term "SYSTEM" where used herein shall include, without
limitation (i) a functionally related group of elements, such as a group of
interacting mechanical or electrical components such as the ultra pure water
system or the HVAC system for the Fab and Clean Room, or (ii) a structurally
related group of elements, such as a building.
7
<PAGE>
1.6.11 The term "VENDOR" where used herein shall mean a corporation,
association, partnership, joint venture, limited liability company, trust or
other business entity or individual (other than an employee) who furnishes, or
is qualified to furnish, materials or construction supplies for the Facility but
does not erect or install said materials at the job site. However, vendors may
in some cases furnish erection engineers to supervise such erection or
installation.
1.6.12 The term "WORK" where used herein shall mean all design
development work, engineering work and Construction Work necessary or desirable
to perform the Contract and complete the Facility.
1.6.13 The term "WORKING DAYS" where used herein shall mean Monday
through and including Friday of each week but excluding all such days that are
recognized as holidays by the State of Saxony.
ARTICLE 2
PERSONNEL
2.1 EMPLOYMENT BY CONTRACTOR OF QUALIFIED PERSONNEL. CONTRACTOR shall
-----------------------------------------------
assign its senior personnel and professional and technical staff to the Project
to the extent necessary to assure that CONTRACTOR'S obligations under the
Contract are carried out. These personnel shall be identified in the Project
Procedures Manual. CONTRACTOR shall not remove or replace such individuals
without COMPANY'S prior written consent unless COMPANY requests such removal or
replacement. Company shall not unreasonably withhold its consent to such
removal or replacement.
2.1.1 QUALIFIED DESIGN PROFESSIONALS. Design services shall be
------------------------------
performed by qualified architects, engineers and other professionals licensed
(if required by the laws of Saxony or of Germany) to provide such services in
the State of Saxony, Germany.
2.1.2 QUALIFIED CONSTRUCTION PROFESSIONALS. Construction services
------------------------------------
shall be performed by qualified subcontractors and vendors licensed (if required
by the laws of Saxony or of Germany) to provide such services and materials in
the State of Saxony, Germany.
2.2 CONTRACTOR'S SUPERINTENDENTS
----------------------------
2.2.1 SENIOR PROJECT CONSTRUCTION SUPERINTENDENT. CONTRACTOR shall
------------------------------------------
appoint the individual identified in the Project Procedures Manual as the senior
Project construction superintendent to act as the full-time senior Project
construction superintendent on the Project, fully authorized to give such orders
as may be necessary for the proper execution and continuance of the Construction
Work. CONTRACTOR'S senior Project construction superintendent shall have the
authority to make decisions that are binding on Contractor, and all decisions
made by CONTRACTOR'S senior Project construction superintendent shall be binding
on CONTRACTOR. Written notice from COMPANY to said senior Project construction
superintendent of the existence of any imperfections in workmanship or
materials, or of the use by CONTRACTOR of any unsafe methods in any or all of
its various activities in connection with the Construction Work at the Site, or
of any other matter relating to the performance of the Construction Work, shall
be considered to be notice to CONTRACTOR. The individual acting as CONTRACTOR'S
senior Project construction superintendent shall not be changed during the
course of the Construction Work, except with the written consent or at the
request of COMPANY. COMPANY shall not unreasonably withhold its consent to such
change. If such individual proves to be unsatisfactory to CONTRACTOR or ceases
to be employed by CONTRACTOR, COMPANY agrees to act reasonably in consenting to
his replacement. Any individual acting as senior Project construction
superintendent shall be experienced and competent. The senior Project
construction
8
<PAGE>
superintendent shall act as a Representative of CONTRACTOR, and shall have
complete authority to represent and to act for CONTRACTOR.
2.2.2 APPOINTMENT OF SUPERINTENDENTS REQUIRED BY LAW. CONTRACTOR
----------------------------------------------
directly or by subcontractor acceptable to COMPANY shall provide a respective
superintendent [Bauleiter] and technical superintendent [Fachbauleiter] as
required by the law applicable to the Site.
2.3 CONSTRUCTION PERSONNEL.
----------------------
2.3.1 SUPERVISION OF CONSTRUCTION PERSONNEL. CONTRACTOR shall give
-------------------------------------
efficient supervision to the work, using its best skill and attention.
CONTRACTOR shall keep on the Construction Work, during its progress, competent
supervisory personnel. COMPANY shall have the right to approve the assignment
of supervisory personnel to the Project, and COMPANY shall not unreasonably
withhold its approval of any such assignment.
2.3.2 CONTRACTOR'S RESPONSIBILITY FOR PERSONNEL. CONTRACTOR shall be
-----------------------------------------
responsible to COMPANY for CONTRACTOR'S employees and for the subcontractors,
vendors and other persons retained by CONTRACTOR, including their agents,
subcontractors and employees. CONTRACTOR shall replace any officer, employee or
agent of CONTRACTOR, or any officer, employee or agent of any subcontractor or
vendor, assigned to the Project upon COMPANY'S reasonable request. CONTRACTOR
shall remove any individual from the Project when requested to do so by
COMPANY'S Representative. CONTRACTOR shall employ in the Construction Work only
competent persons fit and skilled for the work assigned and shall at all times
enforce strict discipline and good order. Whenever any person shall appear to
be incompetent or to act in a disorderly or improper manner, CONTRACTOR shall
immediately or within the shortest reasonable time remove such person from the
Construction Work.
2.4 NO RELATIONSHIP WITH COMPANY. Nothing contained in the Contract shall
----------------------------
create any obligation or contractual relationship between COMPANY on the one
hand and the architects, engineers, subcontractors, vendors and other persons
retained or employed by CONTRACTOR on the other hand. COMPANY shall not have
any right under this Agreement or the other Contract Documents (defined in
Section 3.1) to direct subcontractors or vendors to take or omit to take any
- ------------
action. COMPANY shall deal only with CONTRACTOR, and CONTRACTOR shall be
responsible for determining whether or not any subcontractor or vendor is
required to take or omit to take any action and for determining the nature of
any action that must be taken or omitted by any subcontractor or vendor.
CONTRACTOR shall assure that every subcontractor and vendor is aware of these
limitations on COMPANY. If any provision of the Contract requires any
subcontractor, vendor or other third person to take, or refrain from
taking some action, such provision shall be interpreted to mean that CONTRACTOR
shall cause such third person to take, or refrain from taking, such action.
2.5 COMPANY'S AND CONTRACTOR'S REPRESENTATIVES. CONTRACTOR and COMPANY
------------------------------------------
shall each designate in writing one Representative who shall have the full
authority to represent and to act on behalf of, and to make decisions that are
binding on CONTRACTOR or COMPANY, respectively, in all matters arising under the
Contract. COMPANY'S Representative is sometimes referred to herein as
"COMPANY'S PROJECT MANAGER." CONTRACTOR and COMPANY shall each notify the other
of the name of their respective Representative and of any changes in the
individual who holds that position. CONTRACTOR'S and COMPANY'S respective
Representatives shall have the authority to delegate to other individuals all or
part of their full authority (except that COMPANY'S Project Manager may not
------
delegate his authority to approve increases or decreases in the Budgeted Cost of
the Work (defined in Section 16.3.1 hereof)). If Contractor's senior Project
--------------
construction superintendent is not Contractor's
9
<PAGE>
Representative, then Contractor's Representative shall delegate to the senior
Project construction superintendent the authority specified in Section 2.2.1. It
-------------
is understood that only one Representative of COMPANY shall have authority to
approve increases or decreases in the Budgeted Cost of the Work.
2.6 PERSONNEL PROFICIENCY IN ENGLISH. The senior Project construction
--------------------------------
superintendent, the superintendent [Bauleiter], the technical superintendent
[Fachbauleiter] and all other senior construction personnel shall be able to
speak and write English with a reasonable degree of fluency considering the
nature and requirements of the Project.
2.7 EMPLOYMENT OF LEGAL WORKERS. CONTRACTOR shall be responsible for
---------------------------
assuring that all of CONTRACTOR'S and its subcontractors' and vendors' employees
have necessary visas and have the legal right to be present at the Site or
anywhere else where the work is being performed and to be employed in the work
and that none of such employees are illegal immigrants.
2.8 COMPLIANCE WITH LAW AND PROMPTITUDE IN HIRING AND REPLACING PERSONNEL.
---------------------------------------------------------------------
The removal, replacement and hiring of personnel by CONTRACTOR shall be done in
accordance with the laws of the State of Saxony or other applicable law.
Replacements for removed personnel shall be hired for the Project within a
period of time that does not affect the Cost of the Work or the Project
Schedule.
ARTICLE 3
CONTRACT DOCUMENTS
3.1 CONTRACT DOCUMENTS. The "CONTRACT DOCUMENTS" consist of this
------------------
Agreement (including the Exhibit and Schedules attached or to be attached hereto
and the documents incorporated herein by reference), the Project Schedule, the
Project Budget, each Estimate of Project Cost, the Project Safety Manual and the
Project Procedures Manual which are currently being prepared, the Design
Documents to be prepared by CONTRACTOR and approved by COMPANY pursuant to
Article 4 hereof, any Addenda to this Agreement entered into between COMPANY and
- ---------
CONTRACTOR and any Change Orders pursuant to Article 10 hereof. This Agreement
----------
and the other Contract Documents shall constitute the Contract between the
parties. The Project Safety Manual and the Project Procedures Manual and the
Estimate of Project Cost and the Design Documents to be prepared by CONTRACTOR
and approved by COMPANY pursuant to Article 4 hereof and any Change Orders
---------
pursuant to Article 10 hereof, are hereby made a part hereof as effectively as
----------
if actually set forth herein in full. It is understood and agreed that whenever
the term "CONTRACT DOCUMENTS" is used in this Agreement, it shall mean the
Contract Documents as approved by COMPANY except that, in the event the parties
hereto mutually agree to any modifications of the Contract Documents, it shall
mean the Contract Documents as so modified.
3.2 RESOLUTION OF CONFLICTS. If any of the other Contract Documents
-----------------------
(other than any Addenda to this Agreement) are found to conflict with this
Agreement, then this Agreement shall control. Furthermore, should there be a
conflict between any of the other Contract Documents (other than any Addenda to
this Agreement), the Contract Document bearing the later date shall control.
Notwithstanding the foregoing, if a document with a later date adversely affects
another portion of the Facility covered by a document with an earlier date, the
parties shall cooperate to remove the adverse effect. In cases where a conflict
exists between any parts of the Contract Documents after application of the
foregoing provisions, and adoption of one of the conflicting alternatives would
jeopardize CONTRACTOR'S warranties and guarantees hereunder while adoption of
the other would not, the alternative which would not jeopardize CONTRACTOR'S
warranties and guarantees shall control unless the construction involved therein
would be unsafe in which case the parties hereto shall cooperate in revising one
of the aforesaid alternatives to remove the objections of jeopardy to warranties
and guarantees
10
<PAGE>
and hazards to safety and such revised alternative shall then control.
3.3 LANGUAGE OF CONTRACT DOCUMENTS. The Contract Documents shall be in
------------------------------
English. CONTRACTOR may utilize a German translation of the Contract Documents,
but, as provided in Section 38.5 below, the English version shall be
------------
controlling.
ARTICLE 4
DESIGN DOCUMENTS
4.1 DETAILED DESIGN. CONTRACTOR shall prepare a detailed design of the
---------------
Facility based on the Fab 30 Preliminary Design and conforming to the
requirements set forth in the Contract. It is agreed that, in regard to matters
which are not covered in the Contract, the design and specifications for the
Facility shall be based on and conform to COMPANY'S Facility Performance
Criteria and the Fab 30 Preliminary Design.
4.2 PRE-CONTRACT DESIGN. CONTRACTOR commenced its design services prior
-------------------
to execution of this Agreement. For all of such work performed prior to the
date of this Agreement, CONTRACTOR shall be paid on the basis of CONTRACTOR'S
cost, determined pursuant to Article 16, plus a fee as set forth in Article 16.
---------- ----------
All design work performed prior to the execution of this Agreement shall be
incorporated into and become a part of the design development work to be
performed by CONTRACTOR under this Agreement. CONTRACTOR'S obligations
contained in the Contract, including without limitation CONTRACTOR'S warranties
and guarantees, shall encompass such pre-Contract design work.
4.3 DESIGN DEVELOPMENT PHASE. CONTRACTOR shall review the Fab 30
------------------------
Preliminary Design to ascertain the requirements of the Facility and shall
review the understanding of such requirements with COMPANY. CONTRACTOR shall
submit to COMPANY a proposal based upon the Fab 30 Preliminary Design that shall
consist of preliminary design drawings, outline specifications and other
documents to preliminarily describe the size and character of the entire
Facility, its architectural, structural, plumbing, mechanical and electrical
systems, and the materials and such other elements of the Facility as may be
appropriate. During the design development phase, CONTRACTOR shall prepare for
COMPANY'S approval: (i) overall site plans and building layouts indicating the
location, placement and interrelationship of proposed structures, parking
facilities, on-site egress and ingress, service areas, utilities, water,
wastewater disposal, sewage disposal and other applicable site improvements to
establish the basic scope of the Facility; (ii) typical floor plans, major
building sections, and elevations in sufficient detail to indicate the layout,
basic architectural character, and design treatment of the Facility; (iii) an
itemized gross area tabulation for all structures, site development, and other
improvements included in the Facility; (iv) perspective renderings delineating
the overall design concept of the Facility; and (v) if COMPANY requests, a block
study model of the Facility as a means of further illustrating the general
layout and design intent. The foregoing shall be provided for each Construction
Phase. At that time, CONTRACTOR shall also submit on a preliminary basis an
Estimate of Project Cost, a proposed Project Budget, a proposed Project Schedule
for completion of the Construction Work and other preliminary information
necessary to design and budget the Facility.
4.3.1 CONTRACTOR shall provide a preliminary evaluation of the
program and the Project Budget requirements.
4.3.2 CONTRACTOR shall review with COMPANY alternative approaches to
design and construction of the Project. CONTRACTOR shall engage in such
"Value Engineering" with reasonable diligence and effort throughout the
duration of the Project. However, COMPANY shall not be obligated to accept
changes resulting from CONTRACTOR'S Value Engineering.
11
<PAGE>
Based on the approved design documents, approved program and approved Project
Budget requirements, and any adjustments authorized by COMPANY in the program or
Project Budget or Project Schedule, CONTRACTOR shall prepare, for approval by
COMPANY, design documents to fix and describe the size, quality and character of
the entire Facility, its architectural, structural, plumbing, mechanical and
electrical systems, materials and such other elements of the Facility as may be
appropriate. CONTRACTOR shall submit to COMPANY a further Estimate of Project
Cost.
4.4 FINAL DESIGN PHASE. Based on the approved design documents and any
------------------
further adjustments in the scope or quality of the Facility or in the Project
Budget and Project Schedule, CONTRACTOR shall prepare, for approval by COMPANY,
construction documents consisting of specifications, drawings and data sheets
setting forth in detail the requirements for the construction of the Facility.
Drawings shall be in sufficient detail to define layouts and routings of the
required work for all construction disciplines involved so as to avoid field
construction conflicts and field rework. CONTRACTOR shall advise COMPANY of any
adjustments to previously submitted Project Schedule, Project Budget and
Estimate of Project Cost indicated by changes in requirements or changes in
market conditions. CONTRACTOR shall consult with and coordinate the preparation
of the Project Schedule, Project Budget and Estimate of Project Cost with
COMPANY.
4.5 SPECIFICATIONS AND DRAWINGS. CONTRACTOR shall prepare or obtain any
---------------------------
and all specifications and drawings that are needed for obtaining proper
materials and constructing and erecting the Facility. In addition to all other
requirements of the Contract relating to specifications and drawings, CONTRACTOR
shall submit to COMPANY two sets in electronic media form of all drawings and
specifications developed by CONTRACTOR or any subcontractor or vendor. COMPANY
shall review and approve CONTRACTOR'S job specifications, CONTRACTOR'S planning
drawings, plot plans, process flow diagrams, instrumentation drawings, equipment
layout sketches, mechanical diagrams, electrical diagrams, instrument control
drawings, and any other plans, drawings, and diagrams as well as all equipment
data sheets and specifications. As far as possible, the use of untried or
unproved innovations in design, materials and construction shall be avoided and
in no event shall such innovations be incorporated in the Facility without the
written consent of COMPANY, which consent may be withheld in COMPANY'S business
judgment exercised in good faith.
4.6 DATA SHEETS. CONTRACTOR shall furnish to COMPANY the data sheets
-----------
(including subcontractors' and vendors' drawings, design data, etc.) that may be
needed for COMPANY'S use in checking or approval of specifications and drawings
pertaining to the Facility. These data sheets and related material shall be
subject to COMPANY'S approval and shall be delivered to COMPANY along with or in
advance of the specifications and drawings to which they apply. However, the
parties understand that data sheets are a part of the specifications to which
they apply.
4.7 QUANTITIES AND RECIPIENTS OF DESIGN DOCUMENTS. CONTRACTOR shall
---------------------------------------------
furnish to COMPANY all plans, specifications, drawings, data sheets, reports,
requisitions, purchase orders, subcontracts, calculations, etc., as listed in
COMPANY'S "DISTRIBUTION SUMMARY SHEET" and in the quantities specified therein.
The Distribution Summary Sheet shall be jointly developed by CONTRACTOR and
COMPANY and included in the Project Procedures Manual.
4.8 AS BUILT DOCUMENTS. Upon completion of the Facility, and prior to
------------------
Final Acceptance (as defined in Section 15.3.1 below), CONTRACTOR shall deliver
--------------
to COMPANY the final plans, specifications, drawings and data sheets on paper
and in electronic media form; the said final plans, specifications, drawings and
data sheets shall be the complete and correct description of all
12
<PAGE>
workmanship and materials as finally installed in the Facility. CONTRACTOR shall
also furnish a complete set of "as built" reproducible tracings on paper and in
electronic media form of all drawings which CONTRACTOR has prepared specifically
for and used on this job. CONTRACTOR shall also furnish to COMPANY all other
plans, specifications, drawings, data sheets, manuals, reports and other
documents required by the Articles 28 and 29 below.
----------- --
4.9 COMPANY NOT APPROVING OR WAIVING. Neither COMPANY'S receipt of Design
--------------------------------
Documents or of copies of purchase orders, subcontracts or other documents nor
its failure to comment on provisions thereof shall be construed as an approval
of any such provisions or operate as a waiver of, or in any way modify, any of
CONTRACTOR'S obligations and responsibilities hereunder or thereunder. However,
COMPANY shall respond to all Design Documents within the time periods specified
in Article 5 and to all purchase orders and subcontracts within the time periods
---------
specified in Section 9.2.1.
-------------
4.10 OPERATING MANUAL. CONTRACTOR shall furnish COMPANY as soon as
----------------
possible (but in any event at least 30 calendar days prior to the System
Performance Test (defined in Section 25.1) for each system within the Facility)
------------
the material relating to such system required from CONTRACTOR for the operating
manual which COMPANY shall prepare for use in the operation of the Facility -C
said material to be of the kind and in the quantities specified in COMPANY'S
DISTRIBUTION SUMMARY SHEET which shall be part of the Project Procedures Manual.
The drawings for the operating manual shall be made from CAD and text files
furnished by CONTRACTOR. It is understood that CONTRACTOR shall review the
operating manual and either approve it or offer suggestions for improving it.
4.11 OWNERSHIP OF DOCUMENTS. CONTRACTOR hereby transfers to COMPANY and
----------------------
any Affiliate (defined in Section 32.4.1) of COMPANY the right to use or modify,
--------------
during or after the term of this agreement and free of charge, all documents,
electronic media and other design items prepared or developed by CONTRACTOR in
connection with or associated with the performance of the Contract, including
but not limited to all Design Documents, plans, specifications, drawings, data
sheets, photos, negatives, film, diskettes, programs, copies, reports,
calculations, summaries, maps, models and samples, in connection with the
Facility or any other facility owned by COMPANY or any Affiliate of COMPANY, for
any purpose, including without limitation, construction, modification or
reconstruction of the Facility or other facilities. COMPANY'S or COMPANY'S
Affiliate's use shall include the right to make copies or reproductions. Any
intellectual property provided by CONTRACTOR, including but not limited to know
how, copyrights, or other legally protectable rights, used or developed by
Contractor in connection with or in the course of the performance of the
Contract shall remain the property of CONTRACTOR and CONTRACTOR may elect to
seek protection for such intellectual property at its discretion. In particular,
CONTRACTOR may use such intellectual property in connection with the
construction of other facilities. To the extent any subcontractor or vendor
shall be preparing or developing documents, electronic media or other design
items referenced in this Section, CONTRACTOR shall use its best efforts to
include in all such subcontracts or purchase orders and consulting agreements
entered into by CONTRACTOR appropriate clauses to ensure COMPANY'S foregoing
rights of use. (For example, but without limiting the foregoing, CONTRACTOR
shall use its best efforts to ensure that all subcontractors and vendors convey
and grant to COMPANY the foregoing rights of use of the documents, electronic
media or other design items developed in connection with or associated with the
performance of the Contract.)
4.12 OBTAINING PERMITS. CONTRACTOR shall apply for, secure and pay for the
-----------------
building permit and any other permits, governmental approval of Design
Documents, licenses and inspections by governmental agencies with jurisdiction
over the Project as may be necessary to commence, prosecute and complete the
13
<PAGE>
Construction Work and use and occupy the Facility. CONTRACTOR shall comply with
and give notices required by law and lawful orders of public authorities bearing
on performance of the Construction Work. CONTRACTOR shall apply for the
building permit and other permits in sufficient time to receive them by the time
called for in the Project Schedule. Any delay in the Project Schedule caused by
CONTRACTOR'S late application for a permit (that CONTRACTOR has the
responsibility of obtaining) that results in an increase in the Cost of the Work
shall be paid by CONTRACTOR.
4.13 COMPLIANCE WITH CODE REQUIREMENTS. CONTRACTOR shall review
---------------------------------
applicable zoning ordinances and building codes and shall prepare the Design
Documents in conformance to all applicable legal requirements and design
restrictions.
ARTICLE 5
APPROVAL OF DESIGN DOCUMENTS
5.1 APPROVAL BY COMPANY. COMPANY will designate in writing one
-------------------
Representative who shall have full authority to approve or disapprove on behalf
of COMPANY all Design Documents which CONTRACTOR is required to submit to
COMPANY for approval in accordance with the provisions of Article 4 hereof.
---------
Except as provided to the contrary in Section 5.3 below, CONTRACTOR shall not
-----------
release orders to vendors, to subcontractors, to CONTRACTOR'S shops, or to
CONTRACTOR'S field construction department until COMPANY has approved all
specifications, drawings, and data sheets that apply to such orders. CONTRACTOR
shall furnish to COMPANY plans, specifications, drawings, data sheets, Project
Schedule, Project Budget and Estimate of Project Cost not later than the dates
set forth in the document entitled "AMD Fab 30 Dresden", plot date 10/10/96,
which by this reference is made a part hereof. COMPANY shall have ten (10)
working days after its receipt of plans, specifications, drawings and data
sheets to approve or comment on such plans, specifications, drawings and data
sheets submitted by CONTRACTOR to COMPANY for approval or comment. COMPANY
shall have ten (10) working days after its receipt of the Project Schedule,
Project Budget and then current Estimate of Project Cost to approve or comment
thereon. In the event of force majeure, the time for approval shall be extended
by the period of time COMPANY has been prevented from acting. In cases where
COMPANY submits comments on any such plans, specifications, drawings, data
sheets or other documents, CONTRACTOR shall make the revisions necessary to
obtain COMPANY'S approval thereof and shall submit in writing the amount of any
additional costs associated with the changes requested by COMPANY. Such revised
plans, specifications, drawings, data sheets and other documents shall be
submitted to COMPANY for approval currently as the revisions are made. In the
event that COMPANY fails to approve or comment on any of the aforesaid plans,
specifications, drawings, data sheets or other documents within ten (10) working
days and CONTRACTOR has fulfilled all its obligations in connection with
securing approval thereof, then CONTRACTOR may notify COMPANY in writing if
COMPANY'S delay would have an effect on the critical path set forth in the
Project Schedule or would increase the Budgeted Cost of the Work set forth in
the Project Budget. In such a case, if COMPANY requests, CONTRACTOR shall
prepare a Schedule Recovery Plan (including associated costs) for COMPANY'S
consideration. COMPANY may authorize CONTRACTOR to begin Construction Work
depicted on those Design Documents as to which Company's approval has been
delayed and any rework costs caused by COMPANY'S delay in approval shall become
Reimbursable Costs (defined in Section 16.1), and the Budgeted Cost of the Work
------------
shall be adjusted pursuant to Section 14.4. If COMPANY is delayed in acting on
------------
any plans, specifications, drawings, or data sheets by reason of CONTRACTOR'S
failure to fulfill any of its obligations in connection with securing approval
thereof, COMPANY shall notify CONTRACTOR of such failure within the aforesaid
allotted time; and the aforesaid time allowed COMPANY for acting on the plans,
specifications, drawings, and data sheets involved in the delay shall then be
14
<PAGE>
deemed to commence after CONTRACTOR rectifies such failure. The periods herein
allowed COMPANY for acting on plans, specifications, drawings and data sheets
shall be understood to refer to the time during which such plans,
specifications, drawings, and data sheets are actually in the possession of the
Representative designated by COMPANY to act on such matters (or in possession of
his office or deputy, in case of said Representative's absence); and shall not
include any time during which said plans, specifications, drawings, data sheets,
or notices of approval or disapproval of them, are in transit. CONTRACTOR is
deemed to have included sufficient time periods for review and approval by
COMPANY, of all Design Documents and shop drawings and submittals within the
Project Schedule. As regards all other engineering work performed by CONTRACTOR
hereunder, COMPANY shall have the right to review said engineering work
currently to the extent COMPANY finds desirable, and if any question shall arise
as to design adequacy, CONTRACTOR shall satisfy COMPANY of the soundness of its
proposed design and specifications. CONTRACTOR shall make such modifications in
its engineering work as are necessary to conform with the approved plans,
specifications, drawings, and data sheets and to correct errors or faulty
design.
5.2 SCHEDULE OF SUBMITTALS. To avoid overtaxing COMPANY'S facilities for
----------------------
reviewing and checking plans, specifications, drawings, data sheets, Project
Schedule, Project Budget and Estimate of Project Cost, CONTRACTOR shall plan and
publish a schedule defining when CONTRACTOR will submit said plans,
specifications, drawings, data sheets, Project Schedule, Project Budget and
Estimate of Project Cost. Such plan shall be consistent with the document
entitled "AMD Fab 30 Dresden" referred to in Section 5.1. To expedite such
-----------
work, as rapidly as CONTRACTOR prepares or obtains said documents, CONTRACTOR
shall, when and if requested to do so, furnish COMPANY (for information purposes
only) preliminary issues of those documents that CONTRACTOR is preparing, in
advance of their final completion.
5.3 BULK ORDERS. Any provision in Section 5.1 of this Article 5 to the
----------- ----------- ---------
contrary notwithstanding, CONTRACTOR may release bulk orders for such
materials as pipe, ordinary valves and fittings, reinforcing steel, electrical
wire, conduit and fittings, brick, and the like without COMPANY'S prior approval
of the drawings and data sheets applying to said materials, provided COMPANY
--------
shall have approved such bulk orders and their release in writing prior to the
release and said materials are ordered in accordance with applicable
specifications approved by COMPANY.
5.4 RETURN OF DESIGN DOCUMENTS TO CONTRACTOR. One copy each of all plans,
----------------------------------------
specifications, drawings, and data sheets submitted to COMPANY for approval
shall be returned to CONTRACTOR marked either "APPROVED," "APPROVED AS MARKED,"
or "REVISE AS INDICATED." However, CONTRACTOR shall not release orders or begin
work covered by any plans, specifications, drawings, or data sheets that are
returned to it marked "REVISE AS INDICATED"; and all such plans, specifications,
drawings, and data sheets shall be first revised by CONTRACTOR and resubmitted
to COMPANY for its approval and such approval obtained before any orders are
released or work is begun thereunder. All requirements hereinbefore set forth
pertaining to the approval of plans, specifications, drawings, and data sheets
shall apply with equal force to any and all revisions of plans, specifications,
drawings, and data sheets. COMPANY'S marking any plans, specifications,
drawings and data sheets as aforesaid shall not relieve CONTRACTOR of its
responsibilities under the Contract, and all approvals or revisions by COMPANY
shall be subject to the limitations expressed in Section 5.5.
-----------
5.5 NATURE OF COMPANY'S APPROVAL OF DESIGN DOCUMENTS. COMPANY'S approval
------------------------------------------------
or revision of plans, specifications, drawings, or data sheets, or of any other
material submitted to it for approval pursuant to Article 4 hereof, is not
---------
intended to replace or supersede in any way CONTRACTOR as the architect
15
<PAGE>
and engineer of the Project, will not relieve CONTRACTOR of its full and sole
responsibility to provide the design and engineering services for the Project,
will not operate as a waiver of, or in any modify, any of CONTRACTOR'S
obligations and responsibilities hereunder or thereunder and will not in any way
alter the complete and sole responsibility of CONTRACTOR to design and engineer
a Facility of lawful, satisfactory design, construction, and operation. If
COMPANY insists upon a design that CONTRACTOR states in writing is unsuitable
and states CONTRACTOR'S reasons for so concluding, CONTRACTOR shall not be
liable for any problems caused by such design. As stated in Section 1.3.4,
-------------
CONTRACTOR is not responsible for the design of the Wafer Process Equipment.
5.6 DELAY BY CONTRACTOR OR COMPANY IN DELIVERY OF DESIGN DOCUMENTS.
--------------------------------------------------------------
5.6.1 DELAY BY CONTRACTOR IN DELIVERY. In the event CONTRACTOR fails to
-------------------------------
deliver any Design Documents or other items, including without limitation
submittals or shop drawings, to COMPANY by the dates agreed upon, CONTRACTOR
shall develop a Schedule Recovery Plan. Should any additional costs to the
Project occur as a result of such delay(s) or the effort(s) necessary to recover
therefrom, all such costs shall be solely for CONTRACTOR'S account. Such delays
shall not result in a change in the Project Schedule.
5.6.2 DELAY BY COMPANY IN DELIVERY. In the event COMPANY fails to respond
----------------------------
to such Design Documents or other items within ten (10) working days in
accordance with Section 5.1, then (a) CONTRACTOR shall have the right to give
-----------
COMPANY'S Representative 24-hours notice of such failure in accordance with
Section 14.4.4.
- --------------
ARTICLE 6
SITE
6.1 EASEMENTS PROVIDED BY COMPANY. Subject to the understanding that
-----------------------------
CONTRACTOR shall procure all business licenses and business permits that it may
need in connection with its work under the Contract, and will obtain all
building permits and other governmental authorizations and approvals, COMPANY
shall obtain all rights and easements required in connection with the
development of the Site; and CONTRACTOR shall comply with all the provisions
thereof insofar as said provisions apply to the execution of CONTRACTOR'S work
under the Contract. Both parties shall cooperate in assisting in the other
party's efforts to obtain such permits, licenses and easements.
6.2 CONDITION OF SITE. The Site upon which the Facility is to be located
-----------------
will be turned over to CONTRACTOR "As Is" in the condition it is in on the date
of such delivery. CONTRACTOR shall perform such geotechnical, meteorological,
soil and other tests as CONTRACTOR deems necessary during the design of the
Facility. CONTRACTOR shall be responsible for all conditions which are known,
or reasonably should have been known, to be affecting the Site, except pre-
existing environmental contaminants, pollutants and hazardous and solid wastes,
located on or under the Site, unless CONTRACTOR or any of its subcontractors,
vendors, agents or representatives released or otherwise caused any
environmental contaminants, pollutants or waste to be present at the Site, in
which case CONTRACTOR'S indemnity set forth in Section 20.1 shall apply to such
------------
environmental contaminants, pollutants or waste. In the course of performing
the Construction Work, CONTRACTOR shall execute all work related to the Site
such as excavating, trenching, back-filling, filling, compacting, grading and
landscaping. If CONTRACTOR is requested by COMPANY to perform the work, such
work shall also include any work necessary to remedy environmental problems
which may be discovered in the course of carrying out the project (such as,
e.g., the removal of contaminated soil and the removal of underground tanks,
chemicals or munitions). The public law responsibility of COMPANY as owner of
the Site vis-a-vis the State of Saxony and the City of
16
<PAGE>
Dresden shall not be affected hereby. To the extent that additional fill
material is needed for this work, CONTRACTOR shall provide same. CONTRACTOR
shall remove the excess spoil and back-fill material from the job site and
dispose of it, in a manner satisfactory to COMPANY, as required by law
applicable to the Site and as specified in the Contract Documents. All net
proceeds from the disposition of soil taken from the Site shall be applied to
pay CONTRACTOR'S excavation and other costs hereunder and shall be shown as a
credit on the next Application for Payment submitted by CONTRACTOR pursuant to
Section 17.1 below.
- ------------
6.3 BENCHMARK. COMPANY and CONTRACTOR shall agree on a suitable bench-
---------
mark and reference points for locating the Facility and the Site boundary lines.
CONTRACTOR shall thereafter establish from said bench-mark and reference points
the elevations and lines required for the proper location of all materials to be
installed by CONTRACTOR. It shall be CONTRACTOR'S responsibility to preserve
the aforesaid bench-mark and reference points in an undisturbed condition.
6.4 UNDERGROUND UTILITIES. CONTRACTOR shall determine the exact locations
---------------------
of existing underground utility and service lines indicated on the drawings
before starting work and shall make suitable provisions for their protection.
CONTRACTOR shall install all utility and service lines and facilities required
as a part of the Facility.
Article 7
Acceptance of Site
7.1 CONTRACTOR'S INSPECTION OF SITE. CONTRACTOR'S delivery to COMPANY of
-------------------------------
the Design Documents, the Project Schedule and the Project Budget shall be
deemed an acknowledgment that it has examined and is familiar with the Site
upon which the Facility is to be erected and has, by careful investigation
satisfied itself as to the location of the Site and the areas assigned to it for
its uses, the conformation of the ground, sub-surface, environmental and other
soil conditions, the difficulties attending the execution of the Construction
Work, the general and local labor conditions, and all other matters which can in
any way affect the execution of the Construction Work. A list of the site
studies furnished by COMPANY to CONTRACTOR, which CONTRACTOR has reviewed, is
attached hereto as Schedule 7.1 and made a part hereof. CONTRACTOR shall be
------------
responsible for all conditions which is known, or reasonably should have been
known, to exist below the surface of the ground, excluding pre-existing
environmental contaminants, pollutants and waste.
ARTICLE 8
CONDUCT OF THE CONSTRUCTION WORK
8.1 CONSTRUCTION IN ACCORDANCE WITH APPROVED DESIGN DOCUMENTS. CONTRACTOR
---------------------------------------------------------
shall construct the Facility on the Site and in accordance with the Design
Documents approved by COMPANY.
8.2 PARTIES' RELATIONSHIP. Both parties hereto undertake to cooperate
---------------------
with each other. CONTRACTOR will therefore furnish its best skill and judgment
in fulfillment of its contractual obligations.
8.3 EFFICIENT ADMINISTRATION. CONTRACTOR shall furnish efficient business
------------------------
administration and supervision, shall use every effort to keep engaged in the
Construction Work at all times an adequate supply of qualified workmen and
materials, and shall execute the Construction Work in the most expeditious
manner consistent with the interests of COMPANY and the provisions of the
Contract. If the services of vendors' erection engineers are required for
supervising the installation of any materials, CONTRACTOR shall arrange for said
services promptly as needed.
17
<PAGE>
8.4 "BUILD CLEAN" PROTOCOL. CONTRACTOR shall prepare an effective and
----------------------
efficient "Build Clean" protocol that shall insure that all clean areas of the
Facility shall meet COMPANY'S requirements for particulate-free, clean areas
during construction and after completion of construction. CONTRACTOR shall
submit the Build Clean protocol to COMPANY for approval, shall make such changes
in the protocol as COMPANY may require, and after COMPANY has approved the
protocol, shall implement and observe this protocol at all times. CONTRACTOR
shall comply with the Build Clean protocol at all times during construction of
the Facility.
8.5 EQUIPMENT STANDBY. In the event of a suspension of Construction Work
-----------------
pursuant to Article 34, CONTRACTOR shall submit to COMPANY, by 12:00 noon of
----------
each working day, a complete listing of all equipment on standby. Said listing
is to specify the exact location of each item of equipment. All items of
equipment shall be made available for inspection by COMPANY on the same day as
listed. Items not listed on the standby equipment listing and/or items not
available for inspection and/or items not in a condition to be used in pursuit
of completion of the construction activities on the same day as listed shall not
be eligible for standby consideration.
8.6 CONSTRUCTION BY COMPANY. COMPANY reserves the right to enter the Site
-----------------------
for the purpose of constructing, with its own forces or through other
contractors, such collateral work for the Facility as COMPANY may desire to
construct. Such collateral work shall be carried on in such manner and
constructed at such times that it will not unreasonably interfere with the work
of CONTRACTOR; and, subject to this proviso, CONTRACTOR hereby agrees that it
will not interfere with or prevent (nor allow its subcontractors to interfere
with or prevent) the construction of such collateral work. In the event the
construction of such collateral work causes CONTRACTOR to incur additional
costs, COMPANY shall pay such additional costs.
8.7 COMPATIBLE LABOR. CONTRACTOR shall undertake reasonable efforts to
----------------
furnish labor that is compatible with other labor in the area of the Facility.
8.8 LABOR AGREEMENT PRACTICES. CONTRACTOR shall keep itself and COMPANY
-------------------------
fully advised as to all pertinent local and regional labor agreement practices,
including any labor contract negotiations occurring during the term of this
Contract. In the event CONTRACTOR has a collective bargaining agreement, either
locally or nationally with a labor union engaged in local negotiations or if
CONTRACTOR will be affected, either directly or indirectly, by the outcome of
said local negotiations, CONTRACTOR agrees to join in said negotiations, if
legally permissible, and participate or associate itself with any local
contractors involved in said negotiations in an endeavor to resolve the labor
dispute.
8.9 OVERTIME LABOR. In case COMPANY requests CONTRACTOR in writing to
--------------
employ any overtime labor at the Project, CONTRACTOR shall comply with such
request provided the requisite labor and materials are available. However,
except at the written request of COMPANY or with COMPANY'S prior written
approval, neither CONTRACTOR nor any of its subcontractors shall adopt any
schedule of wages and hours for work on the Project which involves the routine
use of overtime labor or the payment of bonuses in addition to the prevailing
wage scales. Such request for prior approval will not be a prerequisite for the
performance of unscheduled overtime work in those non-routine situations which
may arise from time to time requiring the use of overtime (as, for example,
finishing a pour of concrete). COMPANY acknowledges that the current Project
Budget anticipates some overtime and shift work.
8.10 IDENTIFICATION. CONTRACTOR'S and all subcontractors' and vendors'
--------------
officers and employees shall display proper identification at all times when
entering the Site and while on the Site. CONTRACTOR shall establish a system
18
<PAGE>
that permits only those persons with proper identification to enter or to remain
upon the Site.
8.11 COMMENCEMENT AND PROSECUTION OF CONSTRUCTION WORK. CONTRACTOR shall
-------------------------------------------------
commence the Construction Work not later than the date scheduled for
commencement in the Project Schedule and shall prosecute the Construction Work
to completion in accordance with the Project Schedule. The Construction Work on
the Project as a whole and on each Construction Phase shall be prosecuted at
such time, and in or on such part or parts of the Project or a Construction
Phase as may be required, to complete the Project or such Construction Phase as
contemplated in the Contract Documents and as prescribed by the Project
Schedule. Prosecution of the Construction Work to completion shall be monitored
with reference to the Project Schedule. In the event any part of the
Construction Work falls in arrears of the Project Schedule, CONTRACTOR shall
prepare a Schedule Recovery Plan and present it to COMPANY for discussion and
review. If requested by COMPANY, CONTRACTOR shall implement a Schedule Recovery
Plan. CONTRACTOR shall remain on such course of action until such time as the
degree of completion of the Construction Work complies with the Project
Schedule. Increased costs associated with the Schedule Recovery Plan shall be
Reimbursable Costs, except that (i) the Budgeted Cost of the Work and the
-----------
Project Budget shall not be increased, and (ii) any increased costs attributable
to delay caused by the mismanagement or willful act or neglect of CONTRACTOR,
its subcontractors or vendors or their respective officers, agents,
representatives or employees shall be paid by CONTRACTOR.
8.12 CONTRACTOR RESPONSIBLE FOR CONSTRUCTION MEANS. CONTRACTOR shall be
---------------------------------------------
solely and completely responsible for all construction means, methods,
techniques, and procedures, and for providing adequate safety precautions and
coordinating all portions of the Construction Work under the Contract.
CONTRACTOR shall perform all tasks in a skilled and workman-like manner and
shall supervise the Construction Work in an efficient and skillful manner.
CONTRACTOR shall be responsible for coordinating work done by the various trades
involved and for the installation of equipment and special items as specified.
In no event shall the lack of objection by COMPANY to any action or inaction
upon the part of CONTRACTOR, be construed to make COMPANY in any manner
whatsoever responsible for CONTRACTOR'S construction means, methods, techniques,
procedures or impose any other liability or responsibility on COMPANY
whatsoever.
8.13 SPECIALIZED CONSTRUCTION MANAGER REQUIRED BY LAW. CONTRACTOR assumes,
------------------------------------------------
with respect to the services to be provided by CONTRACTOR hereunder, the
function of a responsible specialized construction manager in accordance with
the provisions of the Building Code of Saxony.
8.14 SANITATION. CONTRACTOR shall erect and maintain sanitary conveniences
----------
conforming to state and local codes at all times while workers are employed at
the Site.
8.15 SAFETY AND SECURITY.
-------------------
8.15.1 CONTRACTOR'S RESPONSIBILITY FOR SAFETY. CONTRACTOR shall be
--------------------------------------
solely and completely responsible for conditions of the job site, including
safety of all persons (including employees) and property during performance of
the Construction Work. This requirement shall apply continuously and not be
limited to normal working hours. Safety provisions shall conform to those
applicable within the framework of social insurance for occupational accidents,
and all other applicable federal, state, and local laws, ordinances, codes, the
requirements set forth below, and any regulations that may be detailed in other
parts of the Contract Documents. Where any of these are in conflict, the more
stringent requirement shall be followed.
19
<PAGE>
8.15.2 SAFETY PROGRAM. CONTRACTOR shall develop and maintain for the
--------------
duration of the Contract, a safety program that will effectively incorporate and
implement all required safety provisions. CONTRACTOR, as a part of the safety
program, shall maintain at its office or other well-known place at the Site,
safety equipment applicable to the Construction Work as prescribed by the
aforementioned authorities, all articles necessary for giving first aid to the
injured, and shall establish the procedure for the immediate removal to a
hospital or a doctor's care of persons (including employees) who may be injured
on the Site. CONTRACTOR shall appoint an employee who is qualified and
authorized to supervise and enforce compliance with the safety program. Such
employee shall report directly to CONTRACTOR'S senior Project construction
superintendent who shall assure that the safety program is implemented and
observed. Any duty of COMPANY to conduct a construction review of CONTRACTOR'S
performance is not intended to include a review or approval of the adequacy of
CONTRACTOR'S safety supervisor, the safety program, or any safety measures taken
in, on, or near the Site.
8.15.3 REPORTING AND INVESTIGATING ACCIDENTS. If death or serious
-------------------------------------
injuries or serious damages are caused, the accident shall be reported
immediately by telephone or messenger to COMPANY. In addition, CONTRACTOR must
promptly (but in not less than five (5) calendar days after the occurrence of
the accident) report in writing to COMPANY all accidents whatsoever arising out
of, or in connection with, the performance of the Construction Work whether on,
or adjacent to, the Site, giving full details and statements of witnesses.
Contractor shall investigate any such accident and provide to COMPANY a written
report within thirty (30) calendar days after the occurrence of the accident
describing in full detail the corrective actions that Contractor has implemented
to avoid or reduce the likelihood of a recurrence of the accident.
8.15.4 REPORTING CLAIMS. If a claim is made by anyone against
----------------
CONTRACTOR or any subcontractor on account of any accident, CONTRACTOR shall
promptly report the facts in writing to COMPANY, giving full details of the
claim.
8.15.5 COMPLIANCE WITH STATE SAFETY REQUIREMENTS. The completed
-----------------------------------------
Facility shall include all necessary permanent safety devices, such as machinery
guards and similar ordinary safety items required by the state or federal
authorities and applicable local and national codes or requirements, or the
safety requirements of a recognized agency. Further, any features of the
Construction Work subject to such safety regulations shall be fabricated,
furnished and installed in compliance with these requirements. CONTRACTOR shall
require all subcontractors and vendors to comply with these requirements.
8.15.6 SAFETY OF TOOLS. CONTRACTOR'S equipment and tools used on
---------------
the Construction Work shall be of a capacity and a type that will safely perform
the work specified, and shall be maintained and used in a manner that will not
create a hazard to persons or property, or cause a delay in the progress of the
Construction Work.
8.15.7 CONTRACTOR'S SAFETY REQUIREMENTS IN FACILITY. From and after
--------------------------------------------
the time CONTRACTOR begins preparing and conditioning the Facility or any system
within the Facility for testing or operation pursuant to the provisions of
Article 24 hereof, CONTRACTOR and its subcontractors, while engaged in any
- ----------
activity in the Facility, shall observe and abide by all of CONTRACTOR'S safety
requirements applicable in the Facility, which shall be reviewed and reasonably
approved in advance by COMPANY.
20
<PAGE>
8.15.8 SECURITY. CONTRACTOR shall be solely and completely
--------
responsible for the security of the job site, including protection of personnel,
the work and materials.
8.16 MATERIALS.
---------
8.16.1 NEW MATERIALS. All materials (including equipment) shall be
-------------
new, unless otherwise agreed by COMPANY in writing.
8.16.2 RESPONSIBILITY FOR INJURY CAUSED BY EQUIPMENT. CONTRACTOR
---------------------------------------------
shall be responsible for injury or claims resulting from failure of the
equipment (other than equipment procured by COMPANY) to comply with applicable
safety requirements of state or federal authorities and applicable local and
national safety codes or requirements, or the safety requirements of a
recognized agency, or failure due to faulty design concepts, or defective
workmanship and materials.
8.16.3 SUBSTITUTION OF MATERIALS. Whenever any material or equipment
-------------------------
process is indicated or specified by patent or proprietary name, by name of
manufacturer, or by catalog number, such specifications shall be deemed to be
used for the purpose of establishing a standard of quality and facilitating the
description of the material, equipment or process desired. This procedure is not
to be construed as eliminating from competition other products of equal or
better quality by other manufacturers where fully suitable in design. CONTRACTOR
may, after completing its design services, recommend to COMPANY the
consideration of another material, equipment or process which shall be
substantially equal in every respect to that so indicated or specified.
Substitute materials, equipment or processes shall not be used unless approved
in writing by COMPANY. Such approval shall be pursuant to Section 4.3.2. If
-------------
CONTRACTOR recommends a substitute material, equipment or process, CONTRACTOR
shall be deemed to have agreed with, and represented and warranted to COMPANY,
the following:
8.16.3.1 The proposed substitute will perform adequately the
functions required by the design, is of substance equal to that specified,
and is suited to the same use and capable of performing the same function
as that specified, and will provide the same degree of capacity and
performance flexibility as indicated by the scheduled or specified
performance data.
8.16.3.2 Required connections (electrical, piping, and other)
can be properly made and adjunctive work can be properly accomplished.
8.16.3.3 The item can be installed in the space available and in
the manner shown or CONTRACTOR will provide at no cost to COMPANY an
acceptable redesign and all modifications necessary to accommodate the
substitute item.
8.16.3.4 CONTRACTOR shall assume full responsibility for any and
all problems arising from the use of the substitute material, equipment or
process.
8.16.3.5 CONTRACTOR shall assume full responsibility for any
delay in the Project Schedule resulting from the use of the substitution.
8.16.3.6 CONTRACTOR shall pay all costs of changes in other
elements or parts of the Construction Work which result from the
installation of the substitution.
21
<PAGE>
8.16.3.7 CONTRACTOR shall provide the same guarantees and
warranties for the substitute as for the specified product.
8.16.3.8 Motors for proposed alternate equipment shall have the
same minimum differential between motor brake horsepower and motor name
plate horsepower as for specified equipment.
8.16.4 MATERIALS OBJECTED TO BY CONTRACTOR. If COMPANY insists upon
-----------------------------------
the use of certain materials or processes that CONTRACTOR states in writing is
unsuitable and states CONTRACTOR'S reasons for so concluding, CONTRACTOR shall
not be liable for any defects caused by such materials or processes.
8.17 STORAGE OF MATERIALS. CONTRACTOR shall store materials delivered
--------------------
to the Site in an orderly and suitable manner and shall protect them against
theft and damage.
8.18 CLEANING UP. CONTRACTOR shall, at all times, keep the Site and all
-----------
adjacent property free from accumulations of waste material or rubbish caused by
CONTRACTOR'S or any subcontractor's employees or by the Construction Work. Upon
completion of the Construction Work, CONTRACTOR shall remove all temporary
structures, rubbish, and waste materials resulting from its operations.
CONTRACTOR shall adhere to and implement the Clean Build protocol. Should
CONTRACTOR, in COMPANY'S opinion, not comply in this matter, COMPANY may give
CONTRACTOR written notice of such non-compliance. If CONTRACTOR fails to cure
its non-compliance within ten (10) working days, COMPANY reserves the right to
deduct any and all costs incurred in maintaining cleanliness from the next
monthly payment.
ARTICLE 9
PURCHASING MATERIALS, SUBCONTRACTING WORK AND COMPUTERS
9.1 PURCHASING MATERIALS. CONTRACTOR shall notify COMPANY if any purchase
--------------------
of materials will increase the cost of the work beyond the amount approved by
COMPANY in the Project Budget.
9.2 SUBCONTRACTING WORK.
-------------------
9.2.1 THIRD PARTY SUBCONTRACTS AND VENDORS. CONTRACTOR and COMPANY
------------------------------------
shall each submit to the other the names of all subcontractors and vendors which
either party proposes for the Construction Work and information regarding them
as COMPANY or CONTRACTOR may reasonably request. CONTRACTOR and COMPANY shall
mutually approve the list of prospective subcontractors and vendors from whom
CONTRACTOR shall solicit bids. CONTRACTOR shall select the subcontractors and
vendors for the Project that CONTRACTOR intends to utilize from the approved
bidders list. As described below in this Section, COMPANY shall review and
approve the subcontractors and vendors selected by CONTRACTOR. If COMPANY
requests CONTRACTOR to enter into a subcontract or purchase order with a person
whose bid exceeded the bid of a person that CONTRACTOR desires to employ, and
CONTRACTOR would not otherwise agree to award a subcontract or purchase order to
such higher bidder, the parties shall issue a Change Order for the amount of the
difference between the two bids, the Budgeted Cost of the Work and the Project
Budget shall be increased by the amount of such difference, and CONTRACTOR shall
utilize such higher bidder. CONTRACTOR and COMPANY shall mutually agree on the
vendors of the systems for chemicals, specialty gases and ultra pure water who
shall be included on the approved bidders list, but COMPANY shall have the sole
right to select the vendor of each such system. CONTRACTOR shall not employ any
subcontractors and vendors that are not on the list of approved bidders.
CONTRACTOR shall not enter into any purchase orders or subcontract any work
pertaining to the Project, nor permit any of its subcontractors to do so,
without first
22
<PAGE>
obtaining COMPANY'S written approval as to the kind and extent of
the Construction Work to be included in the purchase order or subcontract; the
type of purchase order or subcontract and payment schedule; the person to be
favored with the Construction Work; and the amount or amounts to be paid under
each purchase order or subcontract. COMPANY'S approval shall be granted or
denied within ten (10) working days after receipt of the purchase order or
subcontract. If COMPANY fails to approve or disapprove within said period of
ten (10) working days, CONTRACTOR shall have the right to give COMPANY'S
Representative 24-hours notice of COMPANY'S failure in accordance with Section
--------
14.4.4. CONTRACTOR will require and insure that all vendors and
- -------
subcontractors, and their subcontractors, comply with and participate in, all
schedule reporting, performance reporting, cost reporting and dispute resolution
requirements of this Agreement. All subcontracts and purchase orders shall
contain provisions requiring the subcontractors and vendors, upon receipt of
COMPANY'S written demand, or the written demand of any lender providing part or
all of the financing for the Facility, to perform their obligations under such
subcontracts and purchase orders for COMPANY or for such lender, if COMPANY or
such lender takes over the work or terminates the Contract, as hereinafter
provided. CONTRACTOR shall provide to COMPANY or such lender and shall update,
at least monthly, a list of all subcontractors and vendors involved in the
Project.
9.2.2 CONTRACTOR BIDDING ON SUBCONTRACTED WORK. If CONTRACTOR
----------------------------------------
desires to perform any part of the Construction Work (including without
limitation supplying any materials) on a cost plus fee basis, CONTRACTOR shall
do so and the provisions of this Agreement shall apply thereto. If CONTRACTOR
desires to perform any part of the Construction Work (including without
limitation supplying any materials) on a lump sum basis, CONTRACTOR may submit a
bid to COMPANY but only upon the following conditions: (i) all other persons
bidding on such part of the Construction Work shall be informed that CONTRACTOR
will also be bidding; and (ii) COMPANY alone shall select the bidder who shall
perform such part of the Construction Work. If COMPANY selects a bidder other
than CONTRACTOR, CONTRACTOR shall enter into a subcontract or purchase order
with such bidder and shall manage that part of the Construction Work as if
CONTRACTOR had not participated in such bidding. If COMPANY selects CONTRACTOR,
CONTRACTOR shall perform such part of the Construction Work in accordance with
CONTRACTOR'S bid and, to the extent not inconsistent with CONTRACTOR'S bid, in
accordance with the Contract. All warranties and guarantees contained herein
shall apply to such work, whether or not performed by CONTRACTOR.
9.3 NATURE OF COMPANY'S APPROVAL. COMPANY'S approval of any purchase
----------------------------
order or subcontract shall be construed to apply only to the items mentioned in
Sections 9.1 and 9.2 above, unless otherwise expressly stated in such approval,
- ------------ ---
and such approval shall not be construed to alter, amend, or waive any provision
of the Contract.
9.4 CONTRACTOR RESPONSIBLE FOR SUBCONTRACTORS. CONTRACTOR shall be fully
-----------------------------------------
responsible to COMPANY for the acts and omissions (including without limitation
negligence) of its vendors and subcontractors and of persons either directly or
indirectly employed by them. Nothing contained in the Contract Documents shall
create any contractual relation between any subcontractor or vendor and COMPANY.
9.5 COST-PLUS SUBCONTRACTS. Subcontracts and purchase orders may be
----------------------
compensated on a "cost reimbursable" basis only with the prior written consent
of COMPANY. COMPANY may grant or deny its consent based upon COMPANY'S business
judgment exercised in good faith. COMPANY shall grant or deny its consent
within a reasonable period of time.
23
<PAGE>
9.6 COMPUTERS. All of CONTRACTOR'S personal computers, work stations and
---------
printers shall operate in the same computing environment that COMPANY maintains,
including without limitation PCs running Microsoft Windows, MS Word and MS
Excel. The version of any software used by CONTRACTOR shall be totally
compatible with COMPANY'S software and equipment. CONTRACTOR must insure that
all computer files and other data and disks given to COMPANY, and all computer
files used in the field, are virus-free by routine, daily use of a virus-
detecting program.
9.7 Import Requirements. Contractor shall be responsible for securing all
-------------------
necessary import licenses and permits and for complying with all applicable
customs and other import requirements applicable to the Construction Work.
ARTICLE 10
CHANGES, ADDITIONS, AND OMISSIONS IN THE WORK
10.1 KEEPING ACCOUNT OF CHANGES. The Fab 30 Preliminary Design, including
--------------------------
all documents which have been agreed upon by the parties on or before the date
of execution of this Contract and that define modifications to the Fab 30
Preliminary Design, shall serve as the basis for keeping account of changes,
additions, and omissions in the Facility. The effect of all changes, additions
and omissions on the Project Budget and the Project Schedule shall be accounted
for separately so that a record will be maintained of the initial Project Budget
and the initial Project Schedule. As to any change, addition or omission that
must be incorporated into the Project Budget or Project Schedule, the effect on
the Project Budget and Project Schedule (and on CONTRACTOR'S Budgeted Fee) will
be reflected in the document reflecting COMPANY'S approval of the change,
addition or omission (the "CHANGE ORDER").
10.2 PROPOSING AND APPROVING CHANGES. Both parties hereto may from time to
-------------------------------
time suggest modifications in the design of the Facility or the performance of
the Construction Work which (i) involve changes or additions in the construction
(which as used in this Article 10 shall mean materials or work to be performed)
----------
required by the Contract, or (ii) involve the omission of certain work or
materials from said construction, or (iii) involve acceleration or delay of the
milestones for substantial completion of one or more Construction Phases set
forth in the Project Schedule. However, no such change, addition, or omission
shall be made in the construction unless authorized in writing by COMPANY at the
time when the suggested modification in design or performance of the work or
acceleration or delay of the Project Schedule is under consideration except in
an emergency endangering life or property. In case COMPANY authorizes any such
change, addition, or omission as aforesaid, COMPANY shall execute a Change
Order, and CONTRACTOR shall incorporate same in the final construction unless
CONTRACTOR can show, and it is mutually agreed, that said change, addition, or
omission would (a) place CONTRACTOR'S guarantees in jeopardy, (b) make it
impossible for CONTRACTOR to comply with other provisions of the Contract
relating to the original construction not disturbed by nor involved in said
change, addition, or omission, or (c) make the Facility or any part thereof
unsafe. If it is agreed that said change, addition, or omission would jeopardize
CONTRACTOR'S guarantees or would make it impossible for CONTRACTOR to comply
with said other provisions of the Contract (but would not make the Facility or
any part thereof unsafe), COMPANY may, at its option, authorize the substitution
of mutually acceptable revised guarantees or mutually acceptable revised
provisions for the existing ones and insist that the change, addition, or
omission be made in the construction. However, if it is agreed that said change,
addition, or omission would make the Facility or any part thereof unsafe and
cannot be satisfactorily modified to eliminate the hazard to safety, the matter
shall be dropped. In order to be binding on COMPANY and CONTRACTOR, (x) every
Change Order, whether or not it increases or decreases the Budgeted Cost of the
Work or accelerates or delays the Project Schedule,
24
<PAGE>
must be signed by two COMPANY Representatives who are expressly authorized to
approve all changes, additions or omissions, and (y) every Change Order that
increases or decreases the Budgeted Cost of the Work must be signed by the two
COMPANY Representatives referred to in Clause (x) of this sentence, and also by
----------
the single COMPANY Representative having express authority to approve increases
or decreases in the Budgeted Cost of the Work and (z) every Change Order,
whether or not it increases or decreases the Budgeted Cost of the Work or
accelerates or delays the Project Schedule, must be signed by CONTRACTOR'S
Representative. COMPANY shall negotiate in good faith all of CONTRACTOR'S
requests to change the Project Budget or the Project Schedule.
10.3 EFFECT OF CHANGE ORDER ON COST AND TIMING. Whenever either party
-----------------------------------------
proposes a change, addition, or omission which would make the Facility more or
less expensive than the construction required by the Contract, or would
accelerate or delay the milestones for substantial completion of one or more
Construction Phases set forth in the Project Schedule or accelerate or extend
the Latest Date For Substantial Completion Of The Facility (defined in Section
-------
14.1 below) or otherwise affect the critical path set forth in the Project
- ----
Schedule, CONTRACTOR shall thereupon submit a detailed estimate to COMPANY
showing what effect the proposed change, addition, or omission is estimated to
have on the cost of the Facility reflected in the Project Budget and on the time
for substantial completion and final completion of the Facility or any
Construction Phase reflected in the Project Schedule or otherwise have on the
critical path; and, if COMPANY does not concur therewith, the parties hereto
shall cooperate to develop an estimate on which both parties do agree. However,
it shall be understood that the aforesaid estimates are intended to be for
COMPANY'S use in considering the desirability of the proposed change, addition,
or omission and for use in determining the adjustment in CONTRACTOR'S Budgeted
Fee (defined in Section 16.3.1 below) on account thereof or in determining an
--------------
acceleration or extension of the Latest Date For Substantial Completion Of The
Facility or of the latest date by which the Facility shall be finally completed
(as set forth in Section 14.2) or a revision of the Project Schedule -- and for
-------------
such use only. If such change, addition, or omission is authorized by COMPANY
and actually incorporated in the construction, then: (x) all costs added or
eliminated thereby which are of the character of Reimbursable Costs shall be
added to or deducted from the Budgeted Cost of the Work (defined in Section
-------
16.3.1) set forth in the Project Budget, and any adjustment of CONTRACTOR'S
- ------
Budgeted Fee by reason of such changes, additions, or omissions shall be
effected by COMPANY and CONTRACTOR pursuant to Section 16.10 and shall be
-------------
subject to the provisions of this Contract relating thereto, and (y) any
acceleration or delay in the progress of the Construction Work that affects the
critical path as set forth in the Project Schedule shall be deducted from or
added to the Project Schedule, and any adjustment in the Latest Date For
Substantial Completion Of The Facility and the latest date by which the Facility
shall be finally completed shall be mutually agreed upon by COMPANY and
CONTRACTOR. Agreements as to the amount and nature (i.e., whether an increase
or a decrease) of the effect on the Budgeted Cost of the Work set forth in the
Project Budget or on the critical path set forth in the Project Schedule or the
Latest Date For Substantial Completion Of The Facility or the latest date by
which the Facility shall be finally completed shall be made when the change,
addition, or omission constituting the basis for the adjustment is under
consideration; and said agreements shall be confirmed in writing by COMPANY'S
Representatives and CONTRACTOR'S Representative when the change, addition, or
omission is authorized. A proposal for a change, addition, or omission shall be
accepted, rejected, or returned for correction within the time periods specified
in Article 5 for review and approval of Design Documents or such other time as
---------
the parties may mutually agree upon in any particular instance. No extension of
time shall be granted in connection with a change, addition or omission unless
the change, addition or omission affects the critical path or extends the amount
of time required to substantially complete or finally complete the Facility as
described in Section 14.3.
------------
25
<PAGE>
10.4 NO EFFECT ON CONTRACTOR'S OTHER RESPONSIBILITIES. Unless expressly
------------------------------------------------
agreed to the contrary and confirmed in writing at the time when any change,
addition, or omission is authorized, it is understood that with respect to all
changes, additions and omissions in the Construction Work, and all modifications
in the design of the Facility or work thereon from that described in the final
Design Documents, Project Schedule and Project Budget, (i) any and all work and
materials required for said change or addition (or, in the case of an omission,
required to accomplish said omission) shall be subject to the same warranties
and guarantees as the balance of the work and materials covered by the Contract;
and (ii) all other obligations and responsibilities of CONTRACTOR with respect
to the construction originally planned shall be held to apply to the work and
materials required for, or to accomplish, said change, addition, or omission.
ARTICLE 11
INSPECTION AND TESTING DURING CONSTRUCTION
11.1 CONTRACTOR'S SHOP INSPECTIONS. CONTRACTOR shall inspect at its own
-----------------------------
shops or at the shops of subcontractors and vendors those materials for the
Facility that are designated in the Contract Documents to be tested by non-
destructive means pursuant to a testing plan that will be developed by COMPANY
and CONTRACTOR. CONTRACTOR shall insure that the testing plan is developed
prior to CONTRACTOR'S purchasing materials or equipment that would reasonably
require testing or entering into any subcontracts or purchase orders.
CONTRACTOR shall upon COMPANY'S request provide the test results to COMPANY.
CONTRACTOR shall also make necessary field inspections of materials after same
are delivered to the job site and while field fabrication operations are being
performed thereon.
11.2 MEASUREMENTS AND SUITABILITY. CONTRACTOR'S inspection shall in all
----------------------------
cases include making all necessary measurements and records for establishing the
suitability and soundness of the materials.
11.3 INSPECTION REPORTS. CONTRACTOR shall furnish COMPANY or COMPANY'S
------------------
Inspector (defined in Section 11.5 below) if one is appointed, six (6) copies
------------
each of (i) certified results of all tests, (ii) certificates of inspection, and
(iii) routine inspection reports for all materials which CONTRACTOR inspects.
These shall in each case be delivered to COMPANY or COMPANY'S Inspector as soon
as possible (preferably, within six (6) working days) after CONTRACTOR'S
inspection of the materials involved is made.
11.4 COMPANY'S INSPECTIONS. COMPANY shall have the right to inspect, at
---------------------
its own expense, any and all materials which CONTRACTOR furnishes and provides
for the Facility; and, at its election, may exercise said right either at
CONTRACTOR'S shops or, subject to Section 11.5 below, subcontractors' or
------------
vendors' shops or at the Site or both at CONTRACTOR'S shops or, subject to
Section 11.5 below, subcontractors' or vendors' shops and at the Site.
- ------------
CONTRACTOR shall, and shall require its subcontractors and vendors to, at all
times, provide COMPANY and COMPANY'S Inspector (defined in Section 11.5 below)
------------
with safe access to the Construction Work wherever it is in preparation or
progress, including maintenance of temporary and permanent access, and
CONTRACTOR shall, and shall require its subcontractors and vendors to, at all
times, furnish COMPANY'S Inspector sufficient, safe, and proper facilities for
the inspection of work that they perform and materials that they furnish; and
shall also furnish COMPANY'S Inspector with test reports, analyses, and the like
pertaining to the materials involved in the inspection not later than the times
when such work and materials are submitted to COMPANY'S Inspector for
inspection. CONTRACTOR shall furnish, without extra charge, the necessary test
pieces and samples, including facilities and labor for obtaining the same, as
detailed in the specifications. When required, CONTRACTOR shall furnish
certificates of tests of materials made at the point
26
<PAGE>
of manufacture by a recognized testing laboratory. COMPANY, COMPANY'S Inspector
or any other authorized Representative of COMPANY, may reject improper,
inferior, defective, or unsuitable workmanship or materials at any stage of the
Construction Work; and, in accordance with the provisions of Article 19 hereof,
----------
all workmanship and materials so rejected shall be repaired or replaced
forthwith by CONTRACTOR. If any work should be covered up without approval or
consent of COMPANY, it shall, if required by COMPANY, be uncovered for
examination at CONTRACTOR'S expense. Reexamination of questioned Construction
Work, not specifically required to be tested or approved, may be ordered by
COMPANY and, if so ordered, the Construction Work shall be uncovered by
CONTRACTOR. If such Construction Work is found to be in accordance with the
Contract Documents, COMPANY will pay the cost of reexamination and replacement.
If such Construction Work is found to be not in accordance with the Contract
Documents, CONTRACTOR shall correct the defective Construction Work, and the
cost of reexamination and correction of the defective Construction Work shall be
paid by CONTRACTOR. Any defective Construction Work, performed or furnished by
CONTRACTOR, that may be discovered by COMPANY before the Final Acceptance of the
Facility or before final payment has been made, shall be removed and replaced or
patched, in a manner as approved by COMPANY at the expense of CONTRACTOR and
prior to Final Acceptance and payment for all work. COMPANY'S exercise of its
right of inspection shall not relieve CONTRACTOR of any of its obligations set
forth herein above in this Article 11.
----------
11.5 COMPANY'S INSPECTOR. COMPANY may select one or more persons to act as
-------------------
its Representative in matters of inspection ("COMPANY'S INSPECTOR"); and
COMPANY'S Inspector shall have free entry to the shops of CONTRACTOR, and to the
Site at all times while any work on the Facility or on materials therefor is
being performed. CONTRACTOR shall direct its subcontractors and vendors to
provide such free entry to the shops of any subcontractors or vendors for
COMPANY'S Inspector. All work and materials furnished under the Contract shall
be subject to the approval of COMPANY'S Inspector, but his approval shall not
relieve CONTRACTOR of any responsibility for improper, inferior, defective, or
unsuitable workmanship or materials. Furthermore, no failure or omission of
COMPANY'S Inspector to condemn any improper, inferior, defective, or unsuitable
workmanship or materials shall release CONTRACTOR from its obligations to
correct same as soon as discovered. Neither COMPANY nor COMPANY'S Inspector
shall have any right under Section 11.4 or this Section 11.5 to direct
------------ ------------
subcontractors or vendors to take or omit to take any action. COMPANY and
COMPANY'S Inspector shall deal only with CONTRACTOR, and CONTRACTOR shall be
responsible for determining whether or not any subcontractor or vendor is
required to take or omit to take any action and for determining the nature of
any action that must be taken or omitted by any subcontractor or vendor.
CONTRACTOR shall assure that every subcontractor and vendor is aware of these
limitations on COMPANY and COMPANY'S Inspector.
11.6 INSPECTION OF FABRICATION. Except in cases where COMPANY shall have
-------------------------
previously waived in writing its inspection at the point of manufacture or
supply, CONTRACTOR shall give COMPANY'S Inspector not less than ten (10) working
days' notice in advance of the start of fabrication, and such additional notices
as he may need regarding the progress of fabrication and intended shipping dates
for materials which CONTRACTOR is to furnish hereunder in order to allow him
ample time in which to witness any part of the fabrication or manufacture, make
any measurements, witness any tests and carry out any other inspection which he
deems advisable. No materials which COMPANY inspects at the point of
manufacture or supply shall be shipped without the prior written approval of
COMPANY'S Inspector. COMPANY'S Inspector shall grant or deny his approval,
based upon his good faith business judgment that the requirements of the
Contract have been achieved, within a reasonable period of time. If COMPANY'S
Inspector fails to approve or disapprove inspected materials within a reasonable
period of time, CONTRACTOR shall have
27
<PAGE>
the right to give COMPANY'S Inspector 24-hours notice of such failure in
accordance with Section 14.4.4.
--------------
11.7 TESTING. CONTRACTOR shall make or cause to be made all chemical,
-------
physical, hydrostatic, air, structural, magnetic, radiographic, welders'
qualifications, and other tests required by the Contract Documents or by
specifications approved by COMPANY which apply to the Facility, in accordance
with approved Design Documents and other Contract Documents. In addition, if
any question shall arise as to the acceptability of any materials for the
Facility from the standpoint of safety or mechanical integrity, CONTRACTOR shall
make such additional tests as are necessary for determining the acceptability of
said materials.
ARTICLE 12
PROGRESS REPORTS AND PROGRESS MONITORING
12.1 PROGRESS SCHEDULES. CONTRACTOR shall furnish COMPANY periodic
------------------
progress schedules (at the frequency described in Section 12.2 below) showing
------------
Critical Path Method logic and updating the information contained in the Project
Schedule to show the respective dates upon which CONTRACTOR proposes to commence
and complete engineering, drafting, purchasing, and construction on each
Construction Phase. Each Construction Phase will be defined to reflect the
logical activities required to execute the work. This definition shall be in
sufficient detail to allow monitoring of progress on a daily basis. Each
schedule will be developed reflecting a planned logical approach which will
identify critical path, near term activities in detail, and activities that are
farther out on the schedule in broader terms, if they cannot be completely
defined. As the work progresses, the schedules will be continuously refined, on
a monthly basis, to define detailed short interval activities planned for the
next twelve week period. Each schedule activity or line item will be identified
by CONTRACTOR or the responsible subcontractor, along with the estimate of the
quantity of units of work to be accomplished or installed, man hours planned per
unit, and scheduled progress anticipated on each of said items in order to
complete the entire Facility within the contract time in accordance with the
Project Schedule. Each schedule activity or line item will be identified as a
direct work or indirect work activity and have the required resources, material,
and labor costs associated with the activity identified separately.
12.2 DELIVERY OF SCHEDULES TO COMPANY. The schedules described in Section
-------------------------------- -------
12.1 shall be made available to COMPANY as soon as practical.
- ----
12.3 PERIODIC PROGRESS REPORTS. Subsequent to the release of the schedules
-------------------------
referred to in Section 12.1 above, CONTRACTOR shall furnish COMPANY monthly
------------
progress reports in a form satisfactory to COMPANY. Progress reports will
update progress schedules and will indicate actual man hours expended by
activity and show the work units or man hours of progress earned in relation to
the planned total amount of work or man hours in each of the various
subdivisions shown in said schedules which CONTRACTOR and its subcontractors
have completed up to the last day of each reporting period. The monthly
progress reports will indicate actual progress accomplished during the month.
The beginning and cut off dates of the monthly progress reports will be the same
dates as used for CONTRACTOR'S monthly progress billing and as used for the
Project Cost Report referred to in Section 13.1 below. COMPANY shall have the
------------
right to require CONTRACTOR to submit simplified interim progress reports on a
weekly or bi-weekly basis in such other format or formats as COMPANY may
require. Additionally, CONTRACTOR shall give COMPANY interim notice of all
significant changes in the progress of the work.
12.4 SUPERINTENDENT'S REPORT. CONTRACTOR shall furnish COMPANY, by mid-day
-----------------------
of the first working day following the last day worked, a copy of CONTRACTOR'S
senior Project construction superintendent's daily works report
28
<PAGE>
and the Project engineer's works report, showing the total number of men engaged
by CONTRACTOR and the subcontractors under the Contract at the job site or in
the engineering office during such last day worked, itemized by crafts or work
classifications.
12.5 MATERIALS STATUS REPORTS. In addition to the purchasing progress
------------------------
reports which are furnished by CONTRACTOR, CONTRACTOR shall furnish COMPANY,
currently as issued, copies of all Materials Status Reports that it prepares
covering materials for the Facility.
ARTICLE 13
ACCOUNTS AND RECORDS
13.1 DETAILED ACCOUNTS. CONTRACTOR shall keep full and detailed accounts
-----------------
and records and exercise such controls as may be necessary for proper financial
management under this Agreement. The accounting and control systems shall be
satisfactory to COMPANY. A monthly Project Cost Report will be issued by
CONTRACTOR with beginning and cut off dates that are the same as the monthly
progress report referred to in Section 12.3 above.
------------
13.2 SEMATECH MODEL. Accounts will be maintained in such detail as to
--------------
comply with and directly relate to the SEMATECH Facilities Cost Model, current
as of the date of this Agreement. The accounts will also be maintained to
directly relate to the schedule activities required in Article 12 above.
----------
13.3 TAX ACCOUNTING. All value added taxes, sales taxes, use taxes, excise
--------------
taxes and other taxes charged to COMPANY'S account shall be separately stated
and broken out as separate line items on all invoices, Applications For Payment
and accounting reports. CONTRACTOR shall require all subcontractors and vendors
to comply with this requirement.
13.4 AUDIT BY COMPANY. The COMPANY, and any Person retained by COMPANY to
----------------
act as one of the COMPANY'S Representatives and COMPANY'S accountants shall have
the right at any time, including without limitation following final payment to
CONTRACTOR, to audit the books and records of CONTRACTOR, and of all
subcontractors and vendors with whom CONTRACTOR has entered into a subcontract
or purchase order on a cost reimbursable basis, and shall be afforded access to
CONTRACTOR'S records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda, and other data relating to
this Agreement and to the Project, and CONTRACTOR shall preserve these for a
period of three years after final payment, or for such longer period as may be
required by tax law. In the event COMPANY conducts an audit of CONTRACTOR'S
Project cost accounting information, and such audit reveals that CONTRACTOR has
billed COMPANY on any one billing an amount which exceeds the actual amount
which CONTRACTOR should have billed COMPANY on such billing, by five percent
(5%) or more of the amount Contractor should have billed COMPANY, then
CONTRACTOR shall be responsible for reimbursing COMPANY for the cost of the
audit. In other events, COMPANY shall be responsible for the cost of the audit.
In all events, CONTRACTOR shall be responsible for reimbursing COMPANY for any
overpayment, regardless of the amount of the overpayment. In the event that the
audit reveals that CONTRACTOR has under-billed COMPANY, COMPANY shall reimburse
CONTRACTOR for the amount under-billed.
13.5 AUDIT OF SUBCONTRACTORS AND VENDORS. CONTRACTOR shall provide in each
-----------------------------------
subcontract entered into with a subcontractor and in each purchase order entered
into with a vendor on a cost reimbursable, service or unit price basis the right
for COMPANY or COMPANY'S Representatives to audit all books, records, accounts
and other data relating to Reimbursable Costs or to work of any kind done by the
subcontractor or materials provided by the vendor in respect of the Project.
CONTRACTOR will not enter into any subcontract or
29
<PAGE>
purchase order on a cost reimbursable basis which does not contain this right to
audit.
ARTICLE 14
TIME OF COMPLETION
14.1 SUBSTANTIAL COMPLETION DATE. The Project Schedule shall set forth
---------------------------
milestone dates which shall be the dates that the parties determine shall be the
dates by which the Facility and each Construction Phase and other aspects of the
Project shall be substantially completed as described in Section 15.1. The
------------
latest date for substantial completion of the Facility (excluding substantial
completion of the Site Development Construction Phase) shall be 15 May, 1998, as
adjusted pursuant to the provisions of this Agreement (the "LATEST DATE FOR
SUBSTANTIAL COMPLETION OF THE FACILITY"). CONTRACTOR shall prosecute all phases
of the work to be performed hereunder with all possible promptness and diligence
and shall use its best efforts to substantially complete the entire Facility and
each Construction Phase on or ahead of the Project Schedule, but CONTRACTOR
shall substantially complete the Facility not later than the Latest Date For
Substantial Completion Of The Facility. The Latest Date For Substantial
Completion Of The Facility may be extended only for COMPANY'S delay or for force
-----
majeure pursuant to Section 14.3 or for changes, additions or omissions in the
- ------- ------------
Project pursuant to Section 10.3 and Section 14.3.
------------ ------------
14.2 LATEST DATE FOR FINAL COMPLETION. The Project Schedule shall set
--------------------------------
forth the date upon which the Facility shall be finally completed (as described
in Section 15.2.1). As of the date of this Agreement, the latest date by which
--------------
the Facility shall be finally completed shall be June 15, 1998.
14.3 DELAYS AND EXTENSIONS OF TIME.
-----------------------------
14.3.1 DELAYS CAUSED BY CHANGE ORDER OR BY COMPANY OR BY FORCE MAJEURE.
---------------------------------------------------------------
If any change, addition or omission would affect the critical path set forth in
the Project Schedule or extend the amount of time required to substantially
complete or finally complete the Facility, the effect on the Project Schedule
and on the Latest Date For Substantial Completion Of The Facility and on the
latest date by which the Facility shall be finally completed as set forth in
Section 14.2 shall be acknowledged in writing and incorporated into the Project
- ------------
Schedule by approved Change Order in accordance with Section 10.3 above. If
------------
CONTRACTOR is delayed in the progress of the Construction Work by any act or
neglect of COMPANY, including any delay by COMPANY in commenting upon or
approving Design Documents or in granting or denying its consent or approval,
and such delay would affect the critical path, CONTRACTOR shall, within 72 hours
of the start of the occurrence, give notice to COMPANY of the cause of the
potential delay, the reasons why the delay will affect the critical path set
forth in the Project Schedule and an estimate of the duration of the delay and
the possible time extension involved. Within seven (7) working days after the
cause of delay has been remedied, in the case of a delay caused by COMPANY'S act
or neglect, CONTRACTOR shall give notice to COMPANY of any actual time extension
requested as a result of the aforementioned occurrence and any additional costs
incurred as a result of such delay. The corresponding change in the Project
Schedule shall be implemented by an approved Change Order pursuant to Section
-------
10.3 above. Failure to give either of the above notices shall be sufficient
- ----
ground for denial of an extension of time hereunder on account of any act or
neglect of COMPANY. If CONTRACTOR is delayed in the progress of the
Construction Work by force majeure, and such delay would affect the critical
path, CONTRACTOR shall, within 72 hours of the start of the occurrence, give
notice to COMPANY of the cause of the potential delay, the reasons why the delay
will affect the critical path set forth in the Project Schedule and an estimate
of the duration of the delay. Within seven (7) working days after the cause of
delay has been remedied, in the case of a delay caused by force majeure,
CONTRACTOR
30
<PAGE>
shall prepare a Schedule Recovery Plan for COMPANY'S approval to recover the
time lost as a result of such force majeure for COMPANY'S approval. If COMPANY
approves such Schedule Recovery Plan, COMPANY shall pay the additional
Reimbursable Costs incurred in carrying out such Schedule Recovery Plan, and the
Budgeted Cost of the Work shall be increased by the amount of such additional
Reimbursable Costs.
14.3.2 STANDARD FOR APPROVING EXTENSIONS OF TIME. No extension of time
-----------------------------------------
shall be granted to CONTRACTOR for delays that do not affect the critical path
set forth in the Project Schedule nor for delays caused by CONTRACTOR'S
mismanagement or caused by the willful act or neglect of CONTRACTOR, its
subcontractors or vendors or any of their respective officers, agents or
employees. Changes in the Project Schedule shall be effected only by approved
Change Order in accordance with Section 10.3 above.
------------
14.4 DELAYS AND ADDITIONAL COSTS.
---------------------------
14.4.1 ADDITIONAL COSTS CAUSED BY COMPANY'S DELAY OR BY FORCE MAJEURE.
--------------------------------------------------------------
COMPANY shall pay additional Reimbursable Costs incurred by CONTRACTOR and
caused by COMPANY'S delay only if COMPANY'S delay affects the critical path set
forth in the then current Project Schedule. The Budgeted Cost of the Work shall
not be adjusted for any delay caused by COMPANY except in accordance with
Section 14.4.2. COMPANY shall pay additional Reimbursable Costs incurred by
- --------------
CONTRACTOR and caused by force majeure except to the extent that the delay
resulting from the force majeure event is caused by CONTRACTOR, any
subcontractor or vendor or any of their respective agents or representatives.
The Budgeted Cost of the Work shall be increased by the amount of additional
Reimbursable Costs incurred for any delay caused by force majeure, except to the
extent that the delay resulting from the force majeure event is caused by
CONTRACTOR, any subcontractor or vendor or any of their respective officers,
agents, representatives or employees.
14.4.2 NOTICE OF CLAIM FOR DELAY. If CONTRACTOR intends to file a claim
-------------------------
for an increase in the Budgeted Cost of the Work for a delay caused by COMPANY
that affects the critical path, CONTRACTOR shall file a notice of claim with
COMPANY within seven (7) working days of the beginning of the occurrence or
event giving rise to such delay. The notice of claim shall be in duplicate, in
writing, shall state the circumstances and the reasons for the claim, and shall
provide a Rough Order of Magnitude ("ROM") for the amount of the claim. No
claim for an increase in the Budgeted Cost of the Work will be considered unless
the notices from CONTRACTOR required by Section 14.3 have been delivered, and a
------------
notice of claim has been filed with COMPANY in writing. CONTRACTOR and COMPANY
shall act reasonably in presenting and satisfying any such claim. Any increase
in the Budgeted Cost of the Work shall be implemented by an approved Change
Order.
14.4.3 LIMITATION ON COSTS. In no event shall CONTRACTOR be entitled to
-------------------
collect or recover any costs, damages, losses, or expenses incurred by reason of
any delay other than delay caused by COMPANY in accordance with this Section
-------
14.4 or as agreed upon by COMPANY and CONTRACTOR pursuant to Section 10.3.
- ---- ------------
14.4.4 DELAYS BY COMPANY IN GRANTING APPROVALS. In the event COMPANY
---------------------------------------
fails to respond to any Design Documents within the time period prescribed by
Section 5.6.2 or delays in granting or denying its approval beyond the time
- -------------
period prescribed by Section 9.2 or COMPANY'S Inspector fails to approve or
-----------
disapprove inspected materials within the time period prescribed by Section 11.6
------------
or COMPANY otherwise fails to grant or deny its consent or fails to approve or
disapprove within any other time period prescribed by this Agreement, then (i)
CONTRACTOR shall have the right to give COMPANY'S Representative (or COMPANY'S
Inspector where COMPANY'S Inspector has caused
31
<PAGE>
the delay) 24-hours notice of such failure, and (ii) if COMPANY'S failure
continues beyond one working day after receipt of said 24-hour notice, (a)
COMPANY shall pay all additional costs incurred by CONTRACTOR as a result of
COMPANY'S delay if (but only if) COMPANY'S delay affected the critical path set
forth in the Project Schedule and the Budgeted Cost of the Work set forth in the
then current Project Budget shall be adjusted, and (b) if COMPANY'S delay
affects the critical path set forth in the then current Project Schedule,
CONTRACTOR shall obtain an extension of the then current Project Schedule
pursuant to Section 14.3 above.
------------
ARTICLE 15
SUBSTANTIAL COMPLETION, FINAL COMPLETION AND FINAL ACCEPTANCE
15.1 SUBSTANTIAL COMPLETION. The Facility or a system within the Facility
----------------------
shall be substantially complete when (i) construction of the Facility or of such
system shall have been sufficiently completed in accordance with the Contract
Documents and temporary occupancy permits have been issued, so COMPANY can
occupy or utilize the Facility or such system for the use for which it is
intended, (ii) all Construction Work (including Punch List items as described in
Section 15.2.1, other than minor cosmetic matters which do not require the shut
- --------------
down of any system to correct) shall have been completed in accordance with the
Contract Documents, (iii) CONTRACTOR shall have fully performed its obligations
under Article 24 hereof, and (iv) the System Performance Test (as defined in
----------
Article 25) for such system shall have been completed pursuant to Article 25.
- ---------- ----------
CONTRACTOR shall give COMPANY written notice at least sixty (60) days prior to
the dates when each system and each Construction Phase within the Facility and
when the entire Facility shall have been substantially completed, except for
conducting the System Performance Test for such system, and COMPANY'S
Representative or Inspector shall inspect the Construction Work. If COMPANY'S
Inspector confirms that the system within the Facility is ready for the System
Performance Test, then the parties shall prepare for and conduct the System
Performance Test. Substantial completion of any system within the Facility
shall not have occurred until after completion of the System Performance Test
for such system and after CONTRACTOR shall have fulfilled all of its obligations
with respect to the System Performance Test for such system. COMPANY agrees to
start the System Performance Test for each system within a reasonable period of
time after CONTRACTOR turns such system over to COMPANY for testing, except that
if COMPANY is prevented from doing so by any cause or causes for which
CONTRACTOR is responsible, then said reasonable period of time shall be extended
by such period of time as is attributable to such cause or causes. Substantial
completion of the Facility shall not have occurred until after completion of the
System Performance Tests for all systems constituting the Facility and after
CONTRACTOR shall have fulfilled all of its obligations with respect to the
System Performance Tests for all systems constituting the Facility.
15.2 Final Completion.
----------------
15.2.1 COMPLETION OF PUNCH LIST ITEMS. Following substantial
------------------------------
completion of each system within the Facility and of all of the Construction
Work under this Contract, including without limitation, completion of the System
Performance Tests, CONTRACTOR shall notify COMPANY, in writing, that it has
substantially completed each system or the Facility and shall request final
inspection of such system or of the Facility. Upon receipt of CONTRACTOR'S
request for a final inspection, CONTRACTOR and COMPANY will inspect such system
or the Facility and prepare a list of items not completed or needing repair or
replacement (the "PUNCH LIST"). CONTRACTOR will correct the deficient
Construction Work on the Punch List. This Punch List may not be exhaustive and
the failure to include an item on it does not relieve CONTRACTOR of the
responsibility to complete all of the Construction Work in accordance with the
Contract Documents. CONTRACTOR shall notify COMPANY in writing when all items on
the Punch List have been completed. If, after
32
<PAGE>
COMPANY'S inspection of the Punch List items, it is found that CONTRACTOR has
not completed all of the items listed, or other Construction Work not listed is
found to be deficient, COMPANY shall prepare a further Punch List and submit to
CONTRACTOR. This list may not be exhaustive and the failure to include an item
on it does not relieve CONTRACTOR of the responsibility to complete all of the
Construction Work in accordance with the Contract. If, after inspection of the
further Punch List items, it is found that CONTRACTOR has not completed all of
the items listed, or other Construction Work not listed is found to be
deficient, the cost of all further inspections required by COMPANY to determine
if the Construction Work has been completed in accordance with the Design
Documents and authorized Change Orders will be charged to CONTRACTOR. Punch
List items that could not lead to malfunction of a system or could not limit any
of such system's functions or could not affect COMPANY'S continuous use of such
system shall not delay COMPANY'S acceptance of such system. COMPANY may have
the beneficial or partial use of a system prior to substantial completion and
acceptance of such system due to Punch List items that affect the system's
functions or the system's ability to meet specifications or Facility criteria,
but such beneficial or partial use shall not relieve CONTRACTOR of its
obligation to correct or complete such Punch List items, shall not trigger the
Warranty Commencement Date (defined in Section 18.1) applicable to such system
------------
and shall not constitute acceptance of such system.
15.2.2 CONTRACTOR'S CERTIFICATION OF COMPLETION OF CONSTRUCTION WORK.
-------------------------------------------------------------
When CONTRACTOR has completed all of the Construction Work, including the items
of the Punch List(s), on each system or on the Facility, CONTRACTOR shall
certify to COMPANY (i) that such Construction Work has been completed in
accordance with the approved Design Documents and (ii) that all materials and
workmanship are in accordance with the Design Documents. If COMPANY'S
Representative or Inspector agrees with CONTRACTOR'S certification, then such
Construction Work shall be deemed to have been completed. If COMPANY'S
Representative or Inspector disagrees, COMPANY'S Representative or Inspector
shall identify the matters that have not yet been completed, and CONTRACTOR
shall complete such matters. When CONTRACTOR has completed such Construction
Work to COMPANY'S satisfaction, then such Construction Work shall be deemed to
have been completed.
15.2.3 CONDITIONS CONSTITUTING FINAL COMPLETION. The Facility shall
----------------------------------------
be finally complete when (i) CONTRACTOR shall have completed the Construction
Work as described in Section 15.2.1 above, (ii) CONTRACTOR shall have certified
--------------
such completion as described in Section 15.2.2 above and COMPANY'S Inspector
--------------
shall have determined in accordance with Section 15.2.2 that all of the
--------------
Construction Work (including Punch List items) to be performed in connection
with the Facility has been performed to the satisfaction of COMPANY'S Inspector,
(iii) the construction of the Facility shall have been completed free of liens
and free of retention of title to any materials, and (iv) the Facility is
undamaged and has been available for regular use and occupancy. The date upon
which such matters have been completed to COMPANY'S satisfaction shall be the
"FINAL COMPLETION DATE". The parties shall enter into a written memorandum
memorializing the Final Completion Date. It is understood that COMPANY'S Final
Acceptance of the Facility pursuant to Section 15.3 hereof shall occur after the
------------
Final Completion Date.
15.3 FINAL ACCEPTANCE AND FINAL PAYMENT.
----------------------------------
15.3.1 FINAL ACCEPTANCE BY COMPANY. When all of the conditions
---------------------------
hereinafter set forth in this Section 15.3.1 shall have been fulfilled, COMPANY
--------------
shall give CONTRACTOR its final acceptance of the Facility (the "FINAL
ACCEPTANCE") in writing. The aforesaid Final Acceptance shall be contingent
upon the following conditions: (i) the Final Completion Date shall have
33
<PAGE>
occurred; (ii) CONTRACTOR shall have delivered to COMPANY all documents required
by Article 27, Article 28 and Article 29; and (iii) CONTRACTOR has performed all
---------- ---------- ----------
other tasks, furnished all other materials, if any, and rendered all services
required of it by the Contract, but excluding those tasks, materials, or
services necessary for the correction (in compliance with the provisions of
Article 18 hereof) of imperfections or other unsatisfactory qualities which may
- ----------
be discovered after the date of Final Completion. Final Acceptance of the
Facility by COMPANY shall in no way relieve CONTRACTOR of any obligations under
the Contract which extend beyond the date of Final Acceptance.
15.3.2 FINAL PAYMENT. Following Final Acceptance, CONTRACTOR shall
-------------
submit its final Application for Payment. COMPANY shall make the final payment
after COMPANY has reviewed and approved the final Application for Payment.
Payment of the Retainage and the unpaid portion of the increases in the Fee
shall be made thirty (30) calendar days following receipt of the final
Application for Payment if the final Application for Payment satisfies all
prerequisites for payment pursuant to Section 17.5.
------------
15.4 RELEASE OF COMPANY. The acceptance by CONTRACTOR of the final payment
------------------
shall release COMPANY from all claims and all liability to CONTRACTOR for all
things done or furnished in connection with the Project, and every act of
COMPANY and others relating to or arising out of Project. No payment, however,
final or otherwise, shall operate to release CONTRACTOR from obligations under
this Contract, including without limitation, subsequent audits, and warranties
and guarantees, as herein provided.
ARTICLE 16
COST OF THE WORK
16.1 BASIS OF FEE. COMPANY shall pay CONTRACTOR for CONTRACTOR'S
------------
performance of the Contract an amount (the "CONTRACT AMOUNT") consisting of (i)
the CONTRACTOR'S Fee described in Section 16.3 below plus (ii) the actual and
------------
reasonable and documented costs necessarily incurred by CONTRACTOR in the
performance of the Contract, including performance of Pre-Contract design
services, as detailed in Section 16.2 below (the "REIMBURSABLE COSTS"), plus
------------
(iii) all value added taxes due upon (i) and (ii) above.
16.2 REIMBURSABLE COSTS. Subject to (i) the understanding that
------------------
reimbursement for any cost or expense or payment of any charge under the
provisions of any one of the items herein below enumerated shall preclude
reimbursement of such cost or expense or payment of such charge under the
provisions of any other of said items, and (ii) the principles set forth in
Section 16.2.4, COMPANY shall reimburse CONTRACTOR for the following items, all
- --------------
of which shall be subject to COMPANY'S rights of audit:
16.2.1 OFFICE COSTS.
------------
16.2.1.1 HOME OFFICE WAGES AND SALARIES. Reimbursement for the
------------------------------
services performed hereunder by CONTRACTOR'S permanent employees in CONTRACTOR'S
home office Engineering, Purchasing, Construction, and Estimating Departments
for the time actually and necessarily expended in performing the work hereunder
in CONTRACTOR'S home offices for the time such employees are directly engaged in
the work hereunder including time spent by said employees at the job site or on
trips in connection with the work hereunder will be at the hourly rates
established for the job classification for the service such employees are
providing as set forth in Schedule 16.2.1.1 attached hereto and made a part
-----------------
hereof, as said Schedule is revised from time to time, but as to those employees
who are members of an organized collective bargaining unit, shall not exceed the
level of wages collectively bargained for in the area in which the work is being
performed. These hourly rates were calculated for each job
34
<PAGE>
classification using the weighted average actual hourly salary and social
benefits costs of all employees assigned to the work hereunder within each job
classification, and the application of an overhead rate to this weighted actual
hourly salary and social benefits cost. The method followed in calculating this
overhead rate is included herein as an addendum to Schedule 16.2.1.1. The
-----------------
initial hourly rates and job classifications and all revisions of Schedule
--------
16.2.1.1 shall be based on CONTRACTOR'S current salary schedules and job
- --------
classifications and shall in each instance be approved by COMPANY before
establishing or revising Schedule 16.2.1.1. COMPANY shall have the right to
-----------------
audit such of CONTRACTOR'S books and records as may be reasonably necessary to
enable COMPANY to approve such salary schedules and job classifications.
Included as part of the hourly rates set forth in Schedule 16.2.1.1 are amounts
-----------------
paid by CONTRACTOR for sick leave, vacation and holiday pay, CONTRACTOR'S
contributions to its employee pension and medical hospitalization plans, if any,
and any other statutory social security expenditure such as employer's
contribution to social insurance and unemployment insurance as well as social
expenditure on the basis of collective bargaining agreements. Also included in
the hourly rates are all overhead costs provided for in Clause 16.2.1.4 (Prints
---------------
and Reproductions), Clause 16.2.1.6 (Shipping And Providing Offices), Clause
--------------- ------
16.2.1.7 (Communications), (Clause 16.2.1.8 (Indirect Overhead) and Clause
- -------- --------------- ------
16.2.1.10 (Other Direct Home Office Costs). The standard work week schedule at
- ---------
CONTRACTOR'S home office is eight (8) hours per day, forty (40) hours per week.
COMPANY shall reimburse CONTRACTOR for those employees who are paid on an hourly
basis, where applicable, for all hours worked over forty (40) hours per week on
a scheduled overtime basis per Schedule 16.2.1.1. Furthermore, CONTRACTOR shall
-----------------
be reimbursed at the applicable hourly rate for all scheduled overtime hours
worked by CONTRACTOR'S salaried employees on the work hereunder but only if
those employees customarily receive overtime payments. Any additional overtime
shall be subject to COMPANY'S prior approval. It is understood that if
established rates for overtime are not available for any of CONTRACTOR'S
employees, the wages or salaries which are paid to employees therefor shall be
subject to COMPANY'S prior written approval.
16.2.1.2 HOME OFFICE TRAVEL. The actual and reasonable amounts paid
------------------
by CONTRACTOR for traveling and living expenses to employees whose salaries and
wages are chargeable to COMPANY under the provisions of Clause 16.2.1.1 above,
---------------
for trips made in connection with the work hereunder-- it being understood that
(i) payment of such traveling and living expenses shall be in accordance with
CONTRACTOR'S travel reimbursement policies, which are detailed on Schedule
--------
16.2.1.1 attached hereto, and which shall in all cases be consistent with
- --------
COMPANY'S policies on travel and on traveling and living expenses and said
expenses shall be approved by the senior Project construction superintendent or
his designee in CONTRACTOR'S organization before being billed to COMPANY, (ii)
in those cases where an employee divides his time between this and other jobs,
the aforesaid expenses for the period involved shall be prorated to the
respective jobs on the basis of the number of such employee's working hours
properly chargeable to each job, and this job shall be charged only its proper
share of such expenses, and (iii) all such trips shall be subject to COMPANY'S
prior written approval. The traveling and living expenses for any individual or
classification of employee shall in no event exceed the corresponding amounts
authorized by COMPANY'S policy for individuals or classifications of employees
at the same or an equivalent level. If any expense of CONTRACTOR at any time
exceeds COMPANY'S authorized amount, the expense of CONTRACTOR shall be
retroactively reduced to an amount not exceeding COMPANY'S authorized amount.
16.2.1.3 CONSULTANTS. The actual and reasonable amounts paid by
-----------
35
<PAGE>
CONTRACTOR to outside consultants and/or temporary employees for services
furnished by them on the work hereunder, with COMPANY'S prior written approval.
16.2.1.4 PRINTS AND REPRODUCTIONS. Charges for direct prints and
------------------------
reproductions produced in CONTRACTOR'S home office for the work hereunder are
included in the hourly rates set forth in Schedule 16.2.1.1.
-----------------
16.2.1.5 MODEL. Actual and reasonable out-of-pocket costs to
-----
CONTRACTOR for supplies and materials necessary to construct a model of the
Facility, if such a model is authorized by COMPANY.
16.2.1.6 SHIPPING AND PROVIDING OFFICES. Out-of-pocket costs to
------------------------------
CONTRACTOR for shipping drawings, specifications, and the like in connection
with the work hereunder, as well as CONTRACTOR'S out-of-pocket costs for
CONTRACTOR providing office services and facilities for COMPANY'S employees in
residence in CONTRACTOR'S home office are included in the hourly rates set forth
in Schedule 16.2.1.1.
-----------------
16.2.1.7 COMMUNICATIONS. Out-of-pocket costs for (i) postage
--------------
charges, (ii) home office stationery and equipment, and (iii) telephone and
facsimile charges are included in the hourly rates set forth in Schedule
--------
16.2.1.1.
- --------
16.2.1.8 INDIRECT OVERHEAD. CONTRACTOR'S indirect home office and
-----------------
overhead costs are included in the overhead rate used to establish the hourly
rates set forth in Schedule 16.2.1.1. The Addendum to Schedule 16.2.1.1 sets
----------------- -----------------
forth the method used to calculate the overhead rate. Foreign branch office
selling expenses are excluded from this calculation. These costs include, but
not by way of limitation, (i) costs of office rent, furniture, light, heat, and
depreciation, and (ii) wages and salaries of CONTRACTOR'S executive management
personnel, sales personnel, janitors, messengers and other personnel, having job
classifications other than those included in Schedule 16.2.1.1.
-----------------
16.2.1.9 FEES, PREMIUMS, LEGAL COSTS, PROTECTIVE WORK. The actual
--------------------------------------------
and reasonable out-of-pocket costs incurred for: (i) premiums for insurance and
bonds required under the Contract; (ii) fees and assessments for the building
permit and for other permits, licenses and inspections for which CONTRACTOR is
required by the Contract Documents to pay; (iii) fees of testing laboratories
for tests required by the Contract Documents, except those related to defective
or non-conforming work; (iv) royalties and license fees approved in writing by
COMPANY and paid for the use of a particular design, process or product required
by the Contract Documents; and (v) taking action to prevent threatened damage,
injury or loss in case of an emergency affecting the safety of persons and
property, as provided in the Contract.
16.2.1.10 OTHER DIRECT HOME OFFICE COSTS. The out-of-pocket amounts
------------------------------
paid by CONTRACTOR for such other direct home office costs necessarily incurred
in the performance of the work hereunder but not specifically mentioned above
are included in the hourly rates set forth in Schedule 16.2.1.1.
-----------------
16.2.1.11 LIMITS ON OVERTIME PAY. Overtime premium pay which is not
----------------------
a result of CONTRACTOR'S failure to meet the Project Schedule shall be
considered as a valid cost to be reimbursed under Article 16 if CONTRACTOR has
----------
received COMPANY'S prior written approval to incur such overtime. Such approval
shall specify a maximum number of overtime hours CONTRACTOR shall be allowed to
incur before additional approval is required.
36
<PAGE>
16.2.2 FIELD COSTS.
-----------
16.2.2.1 MATERIALS. The actual and reasonable amounts paid by
---------
CONTRACTOR to vendors for materials furnished by CONTRACTOR which enter directly
into the construction of the Facility or which are furnished for construction
but are left over as surplus on COMPANY'S premises when construction is
completed (excluding the cost of surplus remaining from unreasonably large
orders and excluding the cost of surplus ordered in bulk), and including such
materials as may be furnished by CONTRACTOR as accessories or spare parts for
use with, or maintenance of, the completed Facility. Also, the actual and
reasonable cost for materials manufactured or fabricated by CONTRACTOR in its
shops and furnished for the Facility. Surplus material will be disposed of
according to Section 16.8.
------------
16.2.2.2 CONSTRUCTION EQUIPMENT AND TOOLS EXCLUSIVE TO THE SITE. The
------------------------------------------------------
actual and reasonable cost to CONTRACTOR of all construction equipment and tools
(but not small tools, i.e., those having a value when new of less then DEM800)
----
and other items in CONTRACTOR'S construction outfit which are purchased by
CONTRACTOR for use exclusively at the Site for or in connection with the
construction of the Facility and that are not usable in the construction of
other plants and facilities but not to exceed the reasonable value of such
equipment and tools. CONTRACTOR shall not purchase any such construction
equipment and tools until CONTRACTOR has obtained COMPANY'S written consent.
Such items purchased by CONTRACTOR shall become COMPANY'S property when
construction is completed.
16.2.2.3 CONSTRUCTION EQUIPMENT AND TOOLS NOT EXCLUSIVE TO THE SITE.
----------------------------------------------------------
Rental charges on construction equipment and tools (but not small tools) and
other items in CONTRACTOR'S construction outfit that are owned by CONTRACTOR and
furnished for the job in first-class working condition, computed on the basis of
rental rates mutually agreed upon before the items involved are furnished, but
in no event more than the then prevailing rates in the general area of the Site
for such items. Upon reaching agreement on such rental rates, the parties shall
set forth such rental rates in a schedule and attach that schedule to this
Agreement as Schedule 16.2.2.3. Whenever such rental rates are revised, the
-----------------
parties shall revise Schedule 16.2.2.3 and attach such revised schedule to this
-----------------
Agreement. The rental term of any such item owned by CONTRACTOR shall commence
when said item is shipped to the Site and shall terminate when said item is
shipped away from the Site or at such time as the item is no longer needed or
necessarily kept at the Site for the proper and economical prosecution of the
job, except that the periods when the item is out of use for making major
overhauls or major repairs shall not be included in such rental term. If the
rental rates exclude the costs of minor repairs, then COMPANY will reimburse
CONTRACTOR for the actual and reasonable amounts paid by CONTRACTOR for minor
repairs to, and minor repair parts for, any such construction equipment and
tools owned by CONTRACTOR as shall be made necessary during the rental term of
said equipment on this job (such as routine replacement of spark plugs,
distributor points, oil filters, or other parts), but CONTRACTOR shall bear all
costs for major repairs to, and major repair parts for said items (such as
replacement of the generator or alternator on an automotive vehicle, an engine
overhaul, replacement of tractor treads, or other equipment reconditioning).
CONTRACTOR shall not furnish any of the aforesaid items owned by it on a rental
basis without having secured COMPANY'S prior written approval in each instance
and CONTRACTOR shall also keep COMPANY advised as to when each such item of
rented construction equipment and tools used on the Construction Work is not in
usable condition or is no longer required for the job, and the
37
<PAGE>
dates on which rental charges begin and end. Also, the actual and reasonable
rentals paid by CONTRACTOR to others for such construction equipment and tools
for the time said items are actually used or necessarily maintained at the job
site for the prosecution of the work hereunder, but in no event more than the
then prevailing rates in the general area of the Site for such items, including
in the case of such construction equipment and tools which are rented from
others on a "bare rental" basis, the actual and reasonable amounts necessarily
paid by CONTRACTOR for repairs to, and repair parts for, said construction
equipment and tools as shall be necessary to keep and maintain them in good
working order during the period of their use on the job, provided such items are
delivered to the Site in first-class working condition. If the total projected
or actual rental costs for a given item are equal to or greater than seventy-
five percent (75%) of the purchase cost of such item in its then present
condition, CONTRACTOR shall extend to COMPANY the opportunity to purchase such
item in lieu of rental.
16.2.2.4 BASIS FOR FURNISHING CONSTRUCTION OUTFIT. CONTRACTOR shall
----------------------------------------
recommend to COMPANY from time to time the basis upon which the various items in
the construction outfit are to be furnished, (i.e., whether purchased outright,
furnished by CONTRACTOR on a rental basis, or rented from a third party), and
COMPANY shall, in each case, be privileged to choose the basis most advantageous
to it under the prevailing circumstances.
16.2.2.5 TEMPORARY STRUCTURES. The actual and reasonable cost to
--------------------
CONTRACTOR of procuring, constructing, moving, maintaining and operating
buildings, structures, and facilities erected at the Site by or on behalf of
CONTRACTOR and required for the storage and protection of materials and
construction equipment and tools, for the field office, or for other purposes in
connection with the work at the job site, including all temporary structures,
such as, but not limited to, scaffolding, forms, cribbing, temporary supports,
and other items of indirect materials required for the job but excluding
temporary living quarters for foreign workers.
16.2.2.6 SUPPLIES. The actual and reasonable cost to CONTRACTOR of
--------
construction supplies (other than those included under Clause 16.2.2.5 above)
---------------------
and utilities, gasoline, oil, and grease used at and around the Site for the
Construction Work and testing, and the cost of fire-fighting facilities
furnished by CONTRACTOR and required for the protection of the Construction Work
during the course of construction, including any items of the kinds covered in
this Clause 16.2.2.6 that are left over at the Site as surplus when construction
---------------
is complete.
16.2.2.7 FIELD CRAFT WAGES. The actual and reasonable straight-time
-----------------
wages, including the actual straight-time portion of overtime wages, paid by
CONTRACTOR to craft foreman, craftsmen, and other craft employees hired
specifically for this job and used by CONTRACTOR at the Site for or in
connection with the construction of the Facility, for the time said employees
are engaged in the field construction hereunder, including the wages paid to
workmen for making repairs to construction equipment furnished on a bare rental
basis during their period of use on the job, provided such construction
equipment is delivered to the Site in first-class working condition, and also
provided such repairs are not reimbursable by insurance. Also, any reasonable
fringe benefits actually paid by CONTRACTOR either directly to the aforesaid
employees or to their unions, pursuant to collective bargaining agreements, or
to any governmental agency. Such wages and benefits shall not exceed the levels
established by collective bargaining agreements in effect in the area in which
the work is being performed and shall be within the range of rates set forth in
Schedule 16.2.1.1 attached hereto, subject to
- -----------------
38
<PAGE>
adjustment of those rates as provided in Clause 16.2.1.1 above.
---------------
16.2.2.8 FIELD WAGES AND SALARIES. The services performed by
------------------------
CONTRACTOR'S field staff employees who are permanent employees of CONTRACTOR,
including, but not limited to, Field Construction Superintendent, Assistant
Superintendent, Construction Engineer, Field Office Manager, Field Accountant,
Material Supervisor, Construction Planner, Field Inspector, Craft Supervisor,
Field Buyer, Safety Engineer, and Clerical personnel who are from CONTRACTOR'S
home office and are permanently assigned to the job site for the actual time
such employees reasonably devote to the work hereunder, shall be reimbursed at
the hourly rates set forth in Schedule 16.2.1.1 attached hereto, subject to
-----------------
adjustment of these rates as provided in Clause 16.2.1.1 above. All such
---------------
employees shall be identified on a list entitled "Field Assigned Personnel"
provided by CONTRACTOR to COMPANY and updated as necessary to keep the list
current.
16.2.2.9 LOCALLY HIRED FIELD STAFF. The actual and reasonable
-------------------------
straight-time wages and salaries, subject to COMPANY'S review and approval,
including the actual straight-time portion of overtime wages and salaries paid
by CONTRACTOR to field supervisory and other field staff employees who are hired
locally specifically for this Project, as distinguished from those who are
permanent employees of CONTRACTOR as mentioned in Clause 16.2.2.8 above, for the
---------------
time said employees are directly and necessarily engaged in the Construction
Work hereunder. Also, any reasonable employee benefits actually paid by
CONTRACTOR either directly to the aforesaid employees pursuant to CONTRACTOR'S
established personnel policies or, if they are union members, to their unions
pursuant to collective bargaining agreement, or to any governmental agency.
16.2.2.10 FIELD TRAVEL. The actual and reasonable amounts paid by
------------
CONTRACTOR for travel and living expenses of the personnel in Clause 16.2.2.8
---------------
above, but not to exceed the amounts specified in Schedule 16.2.1.1 attached
-----------------
hereto for each classification of employee, to the extent that it has been
CONTRACTOR'S normal practice to pay such allowances and not to exceed the levels
of allowances which are the normal practice to pay in the area in which the
employee who is traveling is based. All of the provisions of Clause 16.2.1.2
---------------
applicable to travel and living expenses of home office employees shall apply to
travel and living expenses of field staff employees.
16.2.2.11 UNEMPLOYMENT TAXES. The actual amounts paid by CONTRACTOR
------------------
under the Gesetzliche Sozialaufwendungen, wie Arbeitgeberbeitrage zur
Sozialversicherung und zur Arbeitslosenversicherung, und tarifliche
Sozialaufwendungen [statutory social security expenditure such as employer's
contribution to social insurance and unemployment insurance as well as social
expenditure on the basis of collective bargaining agreements] in connection with
the salaries and wages included under Clauses 16.2.2.7 and 16.2.2.9, but
-----------------------------
excluding (i) all contributions assessed under such laws if not computed
directly on said salaries or wages, (ii) interest and penalties of all kinds
connected with such taxes and contributions, and (iii) any such contributions
and taxes based on salaries or wages for which CONTRACTOR is reimbursed by an
insurance carrier.
16.2.2.12 OVERTIME FIELD WAGES. The premium portion of overtime
--------------------
wages and salaries paid by CONTRACTOR to the employees referred to in Clauses
-------
16.2.2.7, 16.2.2.8 and 16.2.2.9 above, for overtime worked by CONTRACTOR
- -------------------------------
pursuant to the provisions of Clause 16.2.1.11 hereof. It is understood that if
----------------
established rates for overtime are not available for any of CONTRACTOR'S
employees, the wages or salaries which are paid to
39
<PAGE>
employees therefor shall be subject to COMPANY'S prior written approval.
16.2.2.13 SMALL TOOLS. An allowance to cover the cost of providing
-----------
small tools in an amount equal to one and three-tenths percent (1.3%) of the
field craft wages (excluding fringe benefits) paid by CONTRACTOR to CONTRACTOR'S
employees engaged in field construction (excluding supervisory and clerical
personnel and excluding laborers employed by subcontractors and vendors).
16.2.2.14 FIELD OVERHEAD. The actual and reasonable amounts paid by
--------------
CONTRACTOR for temporary field offices located on the Site suitable for housing
CONTRACTOR'S field engineering and construction management staff and for a
reasonable number of COMPANY'S field engineering staff. Also, the actual and
reasonable cost to CONTRACTOR of all necessary items of office furniture and
equipment such as desks, tables, filing cabinets, chairs, waste baskets,
personal computers, work stations, software, printers and copiers all of a
reasonable number and cost and capability but only as approved by COMPANY prior
to their acquisition, fire extinguisher, and the like which are purchased by
CONTRACTOR for equipping and maintaining its construction office and other
temporary buildings needed at the Site for or in connection with the work to be
performed hereunder-- it being understood that such office furniture and
equipment purchased by CONTRACTOR shall become COMPANY'S property when
construction is completed; the actual and reasonable rentals paid by CONTRACTOR
to others for such office furniture and equipment used at the Site for equipping
and maintaining said buildings; and actual and reasonable rental charges for
such office furniture and equipment, owned by CONTRACTOR and furnished by it for
use as aforesaid at the Site. Also, the actual and reasonable cost to
CONTRACTOR of miscellaneous office expenses and supplies in said construction
office, including medical supplies for a first-aid room (if required), telephone
calls made and courier deliveries sent from the construction office at the Site;
postage and other transportation costs on outgoing correspondence, or other such
matter sent out from said construction office; Post Office box rental; and
blueprinting and photocopying costs at the rates specified in Clause 16.2.1.4
---------------
above. The costs of any medical supplies for which CONTRACTOR is reimbursed by
an insurance carrier shall be excluded from the above costs. The rental rates
for office furniture and equipment owned by CONTRACTOR and used on the work
hereunder as aforesaid shall be subject to COMPANY'S approval and the rental
terms of any such item shall commence when said item goes into service at the
Site and shall terminate upon shipment of the item away from the Site. It is
agreed that all costs and rentals under this Clause 16.2.2.14 shall be subject
----------------
to COMPANY'S prior approval. In no event shall COMPANY be liable for tools and
equipment lost or damaged due to CONTRACTOR'S negligent or intentional actions
or inactions.
16.2.2.15 FREIGHT CHARGES. The actual and reasonable freight,
---------------
express and trucking charges paid by CONTRACTOR for delivering to the Site, the
materials, construction supplies, construction equipment and tools (including
repair parts for construction equipment and tools furnished on a "bare rental"
basis), office furniture and equipment, medical supplies, office supplies, and
other things which are included under the provisions of Clauses 16.2.2.1,
-----------------
16.2.2.2, 16.2.2.3, 16.2.2.5, 16.2.2.6, and 16.2.2.14 above; and for returning
- -----------------------------------------------------
construction equipment and tools and office furniture and equipment owned by
CONTRACTOR or rented from others to the warehouse or storage places or other
places of origin from which said items of equipment were brought to the job site
(it being understood that insofar as equipment owned by CONTRACTOR is concerned,
CONTRACTOR shall be reimbursed only for transporting such equipment from its
equipment storage yard or if from another job for a distance not to exceed
transportation from said storage yard, to the job
40
<PAGE>
site, and for return to said storage yard). Also, in cases where transportation
costs on construction equipment, tools and other items are chargeable to COMPANY
as aforesaid, the actual and reasonable costs incurred by CONTRACTOR for crating
and loading such items at the point of shipment.
16.2.2.16 SUBCONTRACTS. The actual amounts paid by CONTRACTOR to
------------
subcontractors approved by COMPANY pursuant to Article 9 hereof in connection
---------
with the construction of the Facility pursuant to subcontracts entered into by
CONTRACTOR; also, the actual and reasonable amounts paid by CONTRACTOR to
vendors for the services of vendors' service representatives in cases where same
are required at the Site and are not included in the purchase price of the
materials involved.
16.2.2.17 INSURANCE. The amounts paid by CONTRACTOR for insurance
---------
which is a unique requirement of this Contract, which M&W does not normally
carry and which COMPANY has approved in writing before CONTRACTOR procures such
insurance. The amounts paid by CONTRACTOR for all other insurance to be
maintained by CONTRACTOR as specified in this Contract are included in the
hourly rates set forth in Schedule 16.2.1.1.
16.2.2.18 OTHER DIRECT FIELD COSTS. The actual and reasonable
------------------------
amounts paid by CONTRACTOR for such other direct field costs and expenses
necessarily incurred in the performance of the Construction Work hereunder, but
not specifically mentioned above as the parties may mutually agree are
reimbursable by COMPANY.
16.2.2.19 SALES, USE AND OTHER TAXES The actual amounts necessarily
--------------------------
paid by CONTRACTOR for sales taxes, use taxes and excise taxes on the materials
and other commodities chargeable to COMPANY under the above provisions, and such
other taxes and governmental charges described in Article 30, but excluding any
----------
interest or penalties in connection with any such taxes and other charges, any
taxes on motor fuels used in construction equipment to the extent recoverable
from the State by reason of the fact that the equipment is not operated on
public thoroughfares, and also excluding taxes set forth in Section 16.2.3.10.
-----------------
The preceding sentence shall apply only to the extent that the Project or
----
COMPANY is not exempt from such taxes. CONTRACTOR shall (and shall require each
subcontractor and vendor to) account for all taxes separately as individual line
items on each invoice, on each Application For Payment and in each Project cost
report submitted to COMPANY.
16.2.3 EXCLUDED COSTS. Reimbursable Costs shall not include:
-------------- ---
16.2.3.1 OTHER OVERHEAD. Overhead and general expenses of
--------------
CONTRACTOR'S principal office and offices other than the Site office, except as
may be expressly included in Sections 16.2.1 and 16.2.2.
--------------- ------
16.2.3.2 CAPITAL EXPENSES. CONTRACTOR'S capital expenses, including
----------------
interest on CONTRACTOR'S capital employed for the Project, excepting capital
expenses incurred solely due to COMPANY'S delay.
16.2.3.3 NEGLIGENCE. Costs due to the fault or negligence of
----------
CONTRACTOR, subcontractors, anyone directly or indirectly employed by any of
them, or for whose acts any of them may be liable, including but not limited to
costs for the correction of damaged, defective or non-conforming work, disposal
and replacement of materials incorrectly ordered or supplied, and making good
damage to property not forming part of the Construction Work.
16.2.3.4 OTHER COSTS. Any cost not specifically and expressly
-----------
41
<PAGE>
described in Sections 16.2.1 and 16.2.2.
--------------- ------
16.2.3.5 OVERTIME TO MEET PROJECT SCHEDULE. Cost of overtime premium
---------------------------------
required to meet the Project Schedule if the delay was caused by the
mismanagement or willful act or neglect of CONTRACTOR, its subcontractors and
vendors, or their respective officers, agents, representatives or employees.
16.2.3.6 DELINQUENT CHARGES. Any kind of late charge, interest,
------------------
penalty, taxes or extra charge for late payments, excepting late charges,
interest, penalties, taxes or extra charges incurred solely due to COMPANY'S
delay.
16.2.3.7 HOME OFFICE COMPUTERS. Costs of personal computers, work
---------------------
stations, printers, software and related computer equipment used in CONTRACTOR'S
home office. Depreciation related to such computer equipment is included in the
hourly rates set forth in Schedule 16.2.1.1.
16.2.3.8 SECTION 648A, BGB. The cost of any bond obtained by
-----------------
CONTRACTOR under Section 648a of the German Civil Code (Bauhandwerkersicherung)
shall, in the relationship between CONTRACTOR and COMPANY, be borne by
CONTRACTOR, up to a maximum of two percent (2%) of the Face Value of the bond,
pursuant to Section 648a, subparagraph 3 of the German Civil Code. This cost
shall not be a Reimbursable Cost.
16.2.3.9 VIOLATIONS OF LAW. Any cost incurred as a result of the
-----------------
failure of CONTRACTOR or any subcontractor or vendor or their respective
officers, agents, representatives or employees comply with applicable law.
16.2.3.10 TAXES. Income taxes or taxes based on income paid by
-----
CONTRACTOR, all value added taxes (including the Import Turnover Tax) paid by
CONTRACTOR to its subcontractors and vendors, net assets taxes, trade capital
taxes and real property taxes.
16.2.4 PRINCIPLES AFFECTING REIMBURSABLE COSTS. COMPANY shall
--------------------------------------
reimburse Contractor for the items described in Sections 16.2.1 and 16.2.2,
--------------- ------
subject, however, to the following principles.
16.2.4.1 QUALIFYING COSTS. COMPANY shall pay all Reimbursable Costs
----------------
actually incurred that were set forth in the original Project Budget as part of
the original Budgeted Cost of the Work and all additional Reimbursable Costs
actually incurred that were necessary to plan, design, construct, erect,
install, equip, start up, test, calibrate, adjust and turn over the Facility in
accordance with the Contract, assuming proper design and construction. A cost
incurred due to force majeure shall be a Reimbursable Cost. A cost incurred due
to a change in the scope of the work approved by Change Order shall be a
Reimbursable Cost. The cost of procuring and installing a part of the Facility
that was inadvertently omitted (excluding redesign and re-engineering costs)
shall be a Reimbursable Cost. A cost incurred to increase the capacity or size
of a part that was inadvertently designed with a capacity or size insufficient
for the Facility (excluding redesign and re-engineering costs and excluding the
costs of procuring, installing and removing the undersized part) shall be a
Reimbursable Cost. A cost incurred to avoid an unforeseen obstruction, such as
subsurface granite, shall be a Reimbursable Cost. Examples of these and other
costs that qualify as Reimbursable Costs are set forth in Schedule 16.2.4
---------------
attached hereto and made a part hereof. Such examples shall be utilized in the
interpretation and application of the principles set forth in this Section
-------
16.2.4.
- ------
42
<PAGE>
16.2.4.2 NON-QUALIFYING COSTS. Items that otherwise would qualify as
--------------------
Reimbursable Costs shall be excluded from Reimbursable Costs if such costs
duplicate previous work or were incurred to correct errors or omissions.
Injuries to persons at the Site do not qualify as Reimbursable Costs.
Examples of these and other costs excluded from Reimbursable Costs are set
forth in
Schedule 16.2.4. Such examples shall be utilized in the interpretation and
---------------
application of the principles set forth in this Section 16.2.4.
--------------
16.2.4.3 SPECIFIED COSTS. Costs which are specifically identified in
---------------
other provisions of the Contract as being the responsibility of either
COMPANY or CONTRACTOR shall be paid by the responsible party.
16.2.4.4 CHANGES IN PROJECT BUDGET. Additional Reimbursable Costs
-------------------------
incurred as a result of a change in the scope of the work approved by
Change Order shall be added to the Budgeted Cost of the Work. Additional
Reimbursable Costs incurred as a result of an unforeseen event or condition
(excluding price or cost increases) or force majeure shall be paid by
COMPANY and will result in an adjustment of the Budgeted Cost of the Work.
16.3 CONTRACTOR'S FEE. COMPANY shall pay CONTRACTOR a fee (the "FEE")
----------------
which shall consist of the Budgeted Fee set forth in Section 16.3.1 and as
--------------
increased by incentives, if any, earned by CONTRACTOR'S cost savings or as
decreased by overruns, if any, caused by CONTRACTOR'S overruns pursuant
to Section 16.3.2, and adjusted by adjustments in the Fee pursuant to
--------------
Section 16.10.
- -------------
16.3.1 THE FEE. The Budgeted Fee (the "BUDGETED FEE") shall be
-------
DEM8,120,000, adjusted as set forth in Section 16.10 (which does not include
-------------
value added taxes associated with such Fee). At the time that the Project
Budget is finalized prior to commencement of the Construction Work, the total
budgeted Cost of the Work will be determined. That total budgeted Cost of the
Work shall be referred to herein as the "BUDGETED COST OF THE WORK". If the
parties revise the Project Budget due to changes, additions or omissions
pursuant to Section 10.3 or Section 14.3.1 or due to COMPANY'S delay pursuant to
------------ --------------
Section 14.4, the Budgeted Cost of the Work shall also be revised
- ------------
accordingly, but the Budgeted Fee shall only be adjusted in accordance with
Section 16.10. As of the date of this Agreement, the Budgeted Cost of the Work
- -------------
is DEM460,544,936 (which does not include value added taxes associated with
such Fee).
16.3.2 CALCULATE INCENTIVE CHANGES IN FEE. If, upon completion of
----------------------------------
the Project, the actual Cost of the Work equals the Budgeted Cost of the Work,
the Fee shall be the original Budgeted Fee. If, upon completion of the Project,
the actual Cost of the Work is less than the Budgeted Cost of the Work, the Fee
shall be increased by twenty percent (20%) of the amount of savings up to, but
not exceeding a maximum total Fee (i.e., Budgeted Fee plus cost savings) of
---
DEM16,675,000 (which does not include value added taxes associated with such
Fee). For purposes of calculating the foregoing increase in the Fee, if
CONTRACTOR performs directly (i.e., without any subcontractor) the Construction
---
Work for the Clean Room, that portion of the total Budgeted Cost of the Work
attributable to the Construction Work performed directly by CONTRACTOR for the
Clean Room shall be subtracted from the total Budgeted Cost of the Work, and
that portion of the actual Cost of the Work attributable the Construction Work
performed directly by CONTRACTOR for the Clean Room shall be subtracted from the
actual Cost of the Work, so that any savings attributable to the Construction
Work performed directly by CONTRACTOR for the Clean Room shall be excluded in
determining the amount of the savings upon which increases in the Fee are to be
calculated. If, upon completion of the
43
<PAGE>
Project, the actual Cost of the Work exceeds the Budgeted Cost of the Work, the
Fee shall be reduced by twenty percent (20%) of the amount that exceeds the
Budgeted Cost of the Work, until the amount of the reduction equals fifty
percent (50%) of the Budgeted Fee. From that point further, there shall be no
more reductions in the Fee.
16.3.3 FEE FOR SERVICES. The parties intend that all costs and
----------------
expenses incurred by CONTRACTOR in connection with the Project not specifically
provided to be reimbursed to CONTRACTOR in Section 16.2 including, but not by
------------
way of limitation, CONTRACTOR'S profit and the cost of performing CONTRACTOR'S
guarantees and warranties, shall be covered by the Budgeted Fee.
16.4 TOTAL CONTRACT AMOUNT. Except for such payments as may become due
---------------------
CONTRACTOR under other provisions of this Contract, the summation of the
Reimbursable Costs enumerated in Section 16.2 above and the Fee set forth in
------------
Section 16.3 above shall constitute the total Contract Amount which COMPANY
- ------------
shall pay to CONTRACTOR for the true and faithful performance of all of
CONTRACTOR'S obligations under the Contract.
16.5 COSTS OF ALTERATIONS. CONTRACTOR'S charges under Section 16.2 above
-------------------- ------------
shall not include charges of the kinds covered therein incurred by CONTRACTOR
for making the alterations, adjustments, repairs, replacements and other
corrections described in Article 19 hereof. Moreover, in the event the costs of
----------
such work are compensated to CONTRACTOR by insurance carried hereunder, there
shall be no adjustment made in CONTRACTOR'S Fee as a consequence of any
insurance proceeds paid to CONTRACTOR. All alterations, adjustments, repairs,
replacements and other corrections which CONTRACTOR may be required to make on
the Facility in fulfilling the guarantees set forth in Article 18 hereof after
----------
COMPANY takes over the Facility for operation or use shall be borne by
CONTRACTOR without reimbursement from COMPANY. Furthermore, in cases where
COMPANY makes any alterations, adjustments, repairs, replacements or other
corrections of the kind herein above considered in this Section 16.5 with its
------------
own forces as provided for in Section 19.4 hereof, CONTRACTOR shall reimburse
------------
COMPANY for the actual costs to COMPANY of all materials and labor used therefor
and all other expenses such as overhead, taxes, insurance, freight, equipment
rental and the like applicable thereto.
16.6 RECORDS OF REIMBURSABLE COSTS. Following each month's work hereunder,
-----------------------------
CONTRACTOR shall prepare a summary of the total hours expended by job or worker
classification of all employees who have performed work hereunder during the
preceding month whose time is chargeable to COMPANY under the provisions of
Section 16.2 above. (CONTRACTOR shall maintain individual time cards and rate
- ------------
sheets for all of its personnel who have performed work hereunder showing the
time actually spent by each individual as part of CONTRACTOR'S records of
Reimbursable Costs.) CONTRACTOR shall transmit copies of this summary as soon
as possible thereafter to COMPANY'S Project Manager. All fringe benefits
included in labor charges shall be accounted for as a separate line item. In
addition, CONTRACTOR shall keep accurate and detailed accounts of all other
Reimbursable Costs chargeable to COMPANY under Section 16.2 above. All material
------------
costs shall be verified by the actual payment vouchers. In case any subcontract
is let, or purchase is made, on a "cost-plus" basis pursuant to Section 9.5
-----------
hereof, CONTRACTOR shall, if COMPANY so requests, make an audit of all
expenditures made thereunder prior to final settlement with such subcontractor
or vendor. Furthermore, CONTRACTOR shall provide COMPANY'S Inspector and other
Representatives continuous access to the Site and other locations where work on
this Contract is being performed and shall give COMPANY'S Inspector and other
Representatives and auditors access to CONTRACTOR'S books and other records at
any and all reasonable times to the extent necessary to determine the accuracy
of all of CONTRACTOR'S charges entered into the accounts referred to above and
the number of hours entered in
44
<PAGE>
the summaries referred to in the first sentence of this Section 16.6. CONTRACTOR
------------
shall furnish COMPANY with such statements, invoices, receipts, vouchers, and
other information as may be required to enable COMPANY to audit CONTRACTOR'S
books and other records. All time cards for time chargeable to COMPANY in the
summaries referred to in the first sentence of this Section 16.6 must bear the
------------
signature of the person's department head or division head. Also, any "cost-
plus" subcontract or purchase order which CONTRACTOR may (with COMPANY'S prior
written consent) enter into in connection with its Construction Work hereunder
shall contain provisions (i) requiring that accurate and detailed accounts be
kept of the Reimbursable Costs thereunder, (ii) permitting the Representatives
and auditors of CONTRACTOR and COMPANY to have access for audit purposes at any
and all reasonable times to the subcontractor's or vendor's books and other
records pertaining to costs thereunder, and (iii) requiring that each such
subcontractor or vendor furnish CONTRACTOR and COMPANY (if requested) with such
statements, invoices, receipts, vouchers, and other information as may be needed
to enable CONTRACTOR and COMPANY to audit the books and records pertaining to
said costs.
16.7 DISCOUNTS AND REFUNDS. CONTRACTOR shall promptly apply for and obtain
---------------------
all discounts (including discounts due to payment of bills on a "cash" basis),
refunds, deductions (including tax collection allowances) and the like to which
CONTRACTOR may be entitled with respect to the items charged to COMPANY under
this Article 16. COMPANY shall be entitled to a credit in the amount of each
----------
such discount, refund, deduction and the like and CONTRACTOR shall make
reasonable and timely efforts to see that they are secured.
16.8 SURPLUS. COMPANY shall be entitled to all surplus materials, surplus
-------
construction supplies, and surplus items for which it shall have reimbursed
CONTRACTOR at actual cost. Upon completion of its Construction Work hereunder,
CONTRACTOR shall remove all of said materials, supplies, and items to places of
storage or disposal to be designated by COMPANY; however, if requested by
COMPANY, CONTRACTOR shall make a reasonable effort to arrange with vendors to
take back (or otherwise dispose of) such left over items and if successful,
shall credit COMPANY with the amounts refunded or credited by vendors. The
amounts of such refunds or credits obtained from vendors for returning such left
over items shall in each instance be subject to COMPANY'S approval. As to those
surplus materials and supplies that are not taken back by the vendors,
CONTRACTOR shall, to the extent requested by COMPANY, endeavor to sell the same
to third parties subject to COMPANY'S prior approval as to the amounts to be
received therefor. CONTRACTOR shall use its best efforts, consistent with
meeting its obligations under the Contract, to keep surplus materials to a
minimum. In those instances where because of delivery instructions, CONTRACTOR
finds it necessary to order materials on an estimated basis prior to completing
the engineering design, CONTRACTOR shall review such orders promptly after the
design is completed and adjust the quantities involved to conform to actual
material take-off. After its field operations begin, CONTRACTOR shall make a
periodic review of materials on hand and on order for the purpose of identifying
any surplus materials that are beyond its needs. CONTRACTOR shall furnish
COMPANY reports listing any such surplus materials thus disclosed and showing
its recommendations as to whether the surplus should be returned to vendors for
credit or made available for sale to other parties. COMPANY shall promptly
review such reports and advise CONTRACTOR as to the actions to be taken with
respect to disposal of surplus materials.
16.9 LUMP SUM SUBCONTRACT. It is agreed that in those instances where
--------------------
COMPANY feels that it would be in its best interests to have CONTRACTOR
subcontract any of the field work hereunder on a lump-sum price basis instead of
having such work performed by CONTRACTOR'S forces on the basis herein provided
for, COMPANY shall have the right to require CONTRACTOR to do so.
45
<PAGE>
Costs of the kinds covered in Section 16.2.1 above that are incurred by
--------------
CONTRACTOR in connection with field work performed under lump sum subcontracts
referred to in this Section 16.9 shall merge with or be reflected by the
------------
charges under said lump sum subcontracts. Provided, however, that the amount
-------- -------
of any lump sum subcontract shall exclude applicable value added taxes
(including the Import Turnover Tax) and other applicable taxes and all value
added taxes and other applicable taxes shall be calculated and identified
separately on all invoices from a subcontractor under a lump sum contract and on
CONTRACTOR'S Application for Payment.
16.10 ADJUSTMENT IN FEE. The Fee is firm and shall not be subject to
-----------------
adjustment except (i) in cases where it is mutually agreed that CONTRACTOR'S
services and general overhead costs are significantly increased as a result of
an act or omission of COMPANY not authorized by the Contract or if the Facility
is destroyed or suffers major damage and CONTRACTOR is required to rebuild or
repair same pursuant to Article 22 hereof, or (ii) if major changes, additions
----------
or omissions are made in the scope of the work pursuant to Section 10.2 and
------------
approved by Change Order or (iii) if it is determined that restructuring of the
Fee would be in the best interest of COMPANY and CONTRACTOR agrees to such
restructuring. A major change, addition or omission in the scope of the work
shall not be construed to have occurred unless it involves a change in the scope
of the work that increases or decreases the Budgeted Cost of the Work by more
than twenty percent (20%). In the event of a major change, addition or omission
in the scope of the work as described in Clause (ii) of this Section, the
Budgeted Fee shall be adjusted according to the following formula: (a) the
original Budgeted Fee shall be divided by the original Budgeted Cost of the
Work, and the quotient of such division is herein referred to as the "ORIGINAL
MULTIPLIER"; (b) the Original Multiplier shall be multiplied by 0.75, and the
product of such multiplication is herein referred to as the "ADJUSTED
MULTIPLIER"; (c) that portion of the increase or decrease in the Budgeted Cost
of the Work that exceeds 20% of the then current Budgeted Cost of the Work shall
be determined: (d) that portion of the increase or decrease in the Budgeted Cost
of the Work that exceeds 20% of the then current Budgeted Cost of the Work shall
be multiplied by the Adjusted Multiplier; and (e) the product of the
multiplication in Clause (d) shall be added to or subtracted from the Budgeted
Fee. For example, as an illustration only, if the original Budgeted Cost of the
Work is $1,000,000, the original Budgeted Fee is $10,000 and the scope of the
work is increased so that the Budgeted Cost of the Work is now $1,300,000, the
Budgeted Fee would be adjusted as follows:
(A) 10,000/1,000,000 = 0.01;
(B) 0.01 x 0.75 = 0.0075;
(C) $1,000,000 x 0.20 = $200,000;
$1,300,000 - $1,200,000 = $100,000;
(D) $100,000 x 0.0075 = $750;
(E) $10,000 + $750 = $10,750.
======
Upon the occurrence of an event described in Clause (i) or Clause (iii) of this
---------- ------------
Section, any increase or decrease in the Fee shall be mutually agreed to by the
parties, and such agreement shall be evidenced in writing. If there is any
increase or decrease in the Fee, the Budgeted Fee shall be adjusted accordingly.
ARTICLE 17
TERMS OF PAYMENT
17.1 PAYMENT OF CONTRACT AMOUNT. Based upon Applications for Payment
--------------------------
46
<PAGE>
submitted to COMPANY by CONTRACTOR, COMPANY shall make progress payments on
account of the Contract Amount to CONTRACTOR pursuant to this Article 17. The
----------
period covered by each Application for Payment shall be one calendar month
ending on the last day of the month. In all instances, the period covered by
the Application for Payment must coincide with the corresponding period set
forth in the Project Schedule. Near the end of each calendar month, CONTRACTOR
shall prepare a fully itemized Application for Payment showing in detail and as
completely as possible (i) invoices actually received from subcontractors,
vendors and other third parties and expenses and charges actually paid for
Reimbursable Costs chargeable to COMPANY under the provisions of Section 16.2
------------
hereof (less sums for which CONTRACTOR has previously received reimbursement);
and (ii) the portion of CONTRACTOR'S Budgeted Fee that is then payable to
CONTRACTOR, as stated in Section 17.2 below. The Application for Payment shall
------------
show the actual mathematical calculations by which such portion of the Budgeted
Fee was determined. The Application for Payment shall be broken down by
Reimbursable Costs and Budgeted Fee attributable to each Construction Phase.
Each Application for Payment will show the total hours worked by employees in
each classification set forth in Schedule 16.2.1.1 multiplied by the
corresponding hourly rate in Schedule 16.2.1.1. As soon as each such
Application for Payment shall have been prepared, CONTRACTOR shall submit it to
COMPANY along with all substantiating invoices, payrolls, petty cash accounts,
freight bills, etc., not previously submitted and, at the same time, shall also
send COMPANY an invoice for the amount by which the summation of the amounts
entered in the aforesaid Application for Payment exceeds the aggregate of all
payments previously made by COMPANY under the provisions of this Section 17.1
------------
and Section 17.2. Each Application for Payment shall show (1) Reimbursable
------------
Costs for the Project and for each Construction Phase and (2) the percentage
completion of the Construction Work for the Project and for each Construction
Phase as of the end of the period covered by the Application for Payment.
CONTRACTOR shall certify to COMPANY the aforesaid percentages of completion,
and COMPANY and COMPANY'S Inspector shall have the right to verify such
percentages. Each Application for Payment and the progress payment made by
COMPANY to CONTRACTOR shall exclude all amounts that CONTRACTOR retains from its
subcontractors (such amount retained being hereinafter referred to as the
"SUBCONTRACT RETAINAGE"). Applications for Payment shall show the portion of
Reimbursable Costs properly allocable to materials delivered and suitably stored
at the Site for subsequent incorporation in the Facility ("STORED MATERIALS")
and shall show that the requirements of Section 17.7 have been satisfied as a
------------
condition precedent to payments for Stored Materials. In taking action on
CONTRACTOR'S Applications for Payment, COMPANY shall be entitled to rely on the
accuracy and completeness of the information furnished by CONTRACTOR and shall
not be deemed to represent that COMPANY has made a detailed examination, audit
or arithmetic verification of the documentation submitted or other supporting
data. In no event shall any Application for Payment seek reimbursement of
Reimbursable Costs previously reimbursed to CONTRACTOR or payment of any part of
the Budgeted Fee previously paid to CONTRACTOR. Subject to the provisions of
Article 31 hereof, if COMPANY finds the Application for Payment and invoices to
- ----------
be proper and in accord with the provisions hereof and if no Default or Event of
Default then exists hereunder, COMPANY shall pay CONTRACTOR the entire amount of
said Application for Payment within thirty (30) calendar days after receiving
the Application for Payment, the invoices and other matters hereinabove
specified to be submitted therewith. Any errors or discrepancies discovered in
the Application for Payment shall not be cause for COMPANY to withhold payment
of the balance of the Application for Payment as to which there is no error or
discrepancy. If any part of the Project (including any Construction Work)
covered by any monthly Application for Payment has been rejected by COMPANY or
COMPANY'S Inspector or Representative (including any Person acting on behalf of
any lender of COMPANY) or is being repaired or replaced by CONTRACTOR, the
portion of Reimbursable Costs for which CONTRACTOR seeks reimbursement and the
portion of the Budgeted Fee attributable to such part of the Project shall be
withheld
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until all necessary repair or replacement has been completed and approved
by COMPANY. COMPANY shall not be obligated to make payment for any
Construction Work that is not covered by an invoice or that has been rejected by
COMPANY or COMPANY'S Inspector or Representative or that exceeds the maximum
amount budgeted for the affected Construction Phase. If payment is sought for
Stored Materials, CONTRACTOR shall satisfy the conditions to payment for Stored
Materials set forth in Section 17.7 below. In no event shall any payment exceed
------------
the difference between (y) the cost of Construction Work in place, payments for
Stored Materials, if any, the portion of the Budgeted Fee payable to date, and
any other costs, expenses and fees actually paid by CONTRACTOR for Project costs
as of the date of the Application for Payment, and (z) any required Retainage
(defined in Section 17.2 below) and the sum of all prior payments. Each advance
------------
for CONTRACTOR'S Budgeted Fee shall be subject to the Retainage.
17.2 PAYMENT OF INCREASES IN FEE; RETAINAGE. No portion of the Fee above
--------------------------------------
the Budgeted Fee shall become due and payable until the Project has been finally
completed and Final Acceptance of the Facility has occurred. Progress payments
shall be made only on the Budgeted Fee. Each Application for Payment shall show
the percentage of the Project that has been completed to COMPANY'S satisfaction,
and CONTRACTOR shall be paid (subject to Retainage) the same percentage of the
Budgeted Fee. Out of each payment of the Budgeted Fee, COMPANY shall retain
fifteen percent (15%) of the portion of the Budgeted Fee then due under the
Contract. The amount retained by COMPANY is referred to as the "RETAINAGE".
The Application for Payment shall show the portion of the Budgeted Fee that is
then due and payable, including the method used to calculate such portion, under
clause (ii) in Section 17.1, above, and shall show the eighty-five percent (85%)
------------
portion payable to CONTRACTOR, the fifteen percent (15%) portion to be retained
by COMPANY and the cumulative amount retained by COMPANY. In no event shall
COMPANY be obligated to pay to CONTRACTOR on account of CONTRACTOR'S Budgeted
Fee an amount greater than the amount that bears the same ratio to the entire
Budgeted Fee as the then percentage of completion of the Facility bears to one
hundred percent (100%) completion of the Facility.
17.3 PARTIAL RELEASE OF RETAINAGE. It is agreed that COMPANY will release
----------------------------
one-half of the Retainage for payment to CONTRACTOR if the Facility is finally
completed prior to or on the date for Final Completion set forth in Section
-------
14.2. CONTRACTOR shall submit a separate invoice to COMPANY covering such
payment at the time the Facility is taken over for operation and maintenance as
aforesaid, and COMPANY shall pay CONTRACTOR the amount of said invoice within
thirty (30) calendar days after COMPANY'S receipt thereof.
17.4 PAYMENT NOT A WAIVER BY COMPANY. No payments made by COMPANY pursuant
-------------------------------
to a monthly Application for Payment as hereinabove provided shall be deemed to
signify or imply acceptance of the materials or workmanship covered by such
Application for Payment; and none of them shall operate as an admission on the
part of COMPANY as to the propriety or accuracy of any of the amounts entered in
the aforesaid Application for Payment, or as a waiver of COMPANY'S right to
audit provided for herein. Furthermore, when computing subsequent payments,
COMPANY shall not be bound by any entries in previous Applications for Payment
and shall be permitted to make corrections for errors therein. COMPANY'S final
payment for the Facility shall in no way relieve CONTRACTOR of any obligations
or responsibilities under the Contract which extend beyond the date of such
final payment.
17.5 PAYMENT OF BALANCE OF RETAINAGE. Within thirty (30) calendar days
-------------------------------
after COMPANY has given CONTRACTOR its Final Acceptance of the Facility as
provided for in Article 15 hereof and received a proper Application for Payment
----------
and supporting invoices from CONTRACTOR covering the payment hereinafter
specified in this Section 17.5 and has received from CONTRACTOR
------------
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all other documents and other items required from CONTRACTOR hereunder
(including without limitation documents required by Section 4.11 and Section
------------
27.1 and Articles 28 and 29), COMPANY shall pay CONTRACTOR the balance of the
----------- --
Contract Amount due on the cost of the Facility as of the date of Final
Acceptance (as verified by COMPANY'S Representatives and accountants) less the
summation of all credits and refunds then due COMPANY under the provisions of
the Contract; provided, however, that in case the aforesaid summation of credits
and refunds due COMPANY shall be found to exceed the aforesaid unpaid balance of
the Contract Amount, CONTRACTOR shall remit the difference between said
summation and said unpaid balance to COMPANY within thirty (30) calendar days
after the amount of such difference is determined. Such determination shall be
made with reasonable dispatch. Except as provided in Section 17.6 next below,
------------
the payment hereinabove specified shall be the final payment due CONTRACTOR
under the Contract; and before said final payment is made, CONTRACTOR shall
submit evidence satisfactory to COMPANY that all payrolls, bills, and other
indebtedness theretofore incurred in connection with the Contract have been
paid, and all subcontractors and vendors have been paid in full and all
governmental inspections and approvals required to permanently occupy and
operate the Facility have been completed and issued and the Contract has
otherwise been fully performed by CONTRACTOR.
17.6 INSURANCE ADJUSTMENTS. The hourly rates in Schedule 16.2.1.1 shall
---------------------
not be adjusted in the event of any insurance premium adjustments resulting from
audits by Contractor's insurers or for any other reason.
17.7 STORED MATERIALS. As a condition precedent to payment for Stored
----------------
Materials (i) the Stored Materials shall be included in the coverage of the
insurance policies required under this Agreement; (ii) CONTRACTOR shall deliver
a certification that no subcontractor, vendor, or other person has retained
title, or has liens on or security interests in, the Stored Materials and shall
deliver paid invoices or other documentation evidencing title to the Stored
Materials vested in CONTRACTOR; (iii) CONTRACTOR shall have delivered such
documentation as shall be effective to transfer, upon payment, ownership of the
Stored Materials to COMPANY; and (iv) the Stored Materials are satisfactorily
stored at the Site to protect against theft or damage. Except with COMPANY'S
prior written approval, CONTRACTOR shall not make advance payments to vendors
for materials which have not been delivered and stored at the Site.
ARTICLE 18
WARRANTIES AND GUARANTEES
18.1 CONTRACTOR'S WARRANTY AND GUARANTEE. CONTRACTOR warrants and
-----------------------------------
guarantees (i) that all of CONTRACTOR'S, its subcontractors' and vendors' design
and engineering work for the Facility, as well as the selection of materials for
the Facility, will be properly performed; (ii) that the Facility and all
workmanship and materials therein will be (and perform) as specified and
described in the Contract Documents and in applicable plans, specifications,
drawings, data sheets and other Contract Documents approved by COMPANY; (iii)
that all said workmanship and materials will be of the best quality for the
grades specified, free from objectionable defects, and suitable for the
respective uses intended; (iv) that CONTRACTOR'S work and design possesses at
the time of Final Acceptance the characteristics assured in the Contract; (v)
that the work and design conform with the recognized rules of sound engineering
practice and are free from defects which would nullify or diminish the value or
usefulness of the Facility for normal purposes or for the purpose intended in
the Contract; and (vi) that the work and design shall satisfy COMPANY
requirements for clean room air quality, process equipment, vibration,
particulate, air, water and other quality requirements of COMPANY. The
foregoing warranties and guarantees exclude the Wafer Process Equipment and
materials purchased directly by COMPANY. If any failures of the Facility or any
Construction Phase or any system within the
49
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Facility to conform to the foregoing warranties and guarantees (excepting,
however, any such failures resulting from ordinary wear and tear, ordinary
corrosion, or improper operation after COMPANY takes over the Facility for
operation if such improper operation is not attributable to some act or omission
of CONTRACTOR, its subcontractors or vendors) are found by COMPANY within the
applicable period of time specified hereinafter in this Section, beginning on
the Warranty Commencement Date (defined in this Section) applicable to the
Facility or to the Construction Phase or to such system, COMPANY shall promptly
notify CONTRACTOR thereof in writing; and, in accordance with the provisions of
Article 19 hereof, CONTRACTOR shall thereupon make all alterations,
- ----------
adjustments, repairs, replacements and other corrections and do all things
needful to make the Facility or such Construction Phase or such system and all
workmanship and materials therein conform to the warranties and guarantees
herein specified in every particular. The warranty and guarantee periods for the
Facility or any Construction Phase or system are as follows:
Electrical [Electrical 1 year
generating or transmitting
equipment such as trans-
formers, switchgear,
generators, etc.]
Rotating Parts 1 year
Piping And Static 5 years
Mechanical Systems
Any Other Portion Of 5 years
The Facility
Furthermore, it is agreed that all alterations, adjustments, repairs,
replacements and other corrections that CONTRACTOR is required to make within
the guarantee period specified above in this Section 18.1 shall, in each case,
------------
be warranted and guaranteed by CONTRACTOR for an additional period of time equal
to the applicable period of time specified above in this Section, dating from
the date that the alteration, adjustment, repair, replacement and other
corrections have been completed. CONTRACTOR'S warranties and guarantees shall
exclude liability for ordinary wear and tear, ordinary corrosion or improper
operation after Company takes over the Facility for operation if such improper
operation is not attributable to some act or omission of CONTRACTOR, its
subcontractors or vendors. The "WARRANTY COMMENCEMENT DATE" shall be (i) in the
case of a system, the date upon which such system has been completed in its
entirety and all Punch List items that could lead to a malfunction of the system
or could limit any of such system's functions or could affect COMPANY'S
continuous use of such system have been corrected and the system satisfies the
specifications for the operation of such system and such system has satisfied
the System Performance Test and COMPANY has given CONTRACTOR notice of
satisfactory completion of the System Performance Test pursuant to Section 25.2;
------------
and (ii) in the case of any other part of the Facility, upon Final Completion of
the Facility.
18.2 COMPANY'S RIGHT TO REPAIR. If CONTRACTOR fails or refuses to comply
-------------------------
with a demand to repair defects within a reasonable time set by COMPANY or
unreasonably postpones such repair, then COMPANY shall be entitled to have the
defects repaired at the expense of CONTRACTOR by COMPANY'S own forces as
provided in Section 19.3. Furthermore, in that case COMPANY shall be entitled
------------
to claim from CONTRACTOR an anticipated payment on the estimated expense to
repair the defects. In such event, COMPANY shall use reasonable efforts to
avoid unnecessary expenditures and shall maintain reasonably detailed records of
the costs COMPANY incurs.
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18.3 LIABILITY FOR DAMAGES. If a defect is attributable to a fault of
---------------------
CONTRACTOR or its agents, subcontractors or vendors, CONTRACTOR shall also be
obliged to compensate COMPANY for all liability, loss, damage, cost and expense
arising therefrom.
18.4 CAPACITIES AT OPERATING CONDITIONS. It is expressly understood that
----------------------------------
compliance with the aforesaid warranties and guarantees will require, but not by
way of limitation, that all materials will have capacities (in terms of heat
capacities, duty cycles, rates of flow, volumes, and the like) at operating
conditions as set forth in the plans, specifications, drawings, data sheets and
other Construction Documents approved by COMPANY, under which said items of
material are furnished, not less than the respective capacities set forth in
said plans, specifications, drawings, data sheets and other Construction
Documents and, further, that said items will operate satisfactorily (that is,
will be free from defects in design and will operate particulate free and
without excessive noise, vibration, strain, and deterioration) at all capacities
set forth in said plans, specifications, drawings, data sheets and other
Construction Documents. Furthermore, CONTRACTOR warrants and guarantees that
the Facility shall meet the conditions of temperature, pressure, cleanliness,
vibration and other operating conditions specified in COMPANY'S process design
requirements.
18.5 Coordination Of Functions. CONTRACTOR further warrants and guarantees
-------------------------
that the Facility and all portions thereof will be suitably coordinated as to
functions and interrelations, properly responsive to controls and sufficiently
stable in operation to avoid objectionable fluctuations in operating
temperatures, pressures, cleanliness, vibration and other operating conditions
and the like during all stages of operation; and will operate satisfactorily
without depending upon the routine use of spare equipment or upon the added
capacity of any spare equipment and with no more attention than is consistent
with good facility operating practice.
18.6 RETAINING IMPERFECT MATERIALS. In the event that any workmanship or
-----------------------------
materials are found to be not as above warranted or guaranteed and the parties
hereto mutually agree to permit same to remain in the Facility, the retention of
such workmanship or materials shall not operate as a waiver of CONTRACTOR'S
responsibility therefor and, in the absence of a written agreement to the
contrary, CONTRACTOR'S responsibility for the safety and serviceability of such
workmanship and materials shall be the same as though such imperfections had not
been discovered. However, the parties shall not allow a known unsafe condition
to continue to exist.
18.7 NO RELEASE OF OTHER CLAIMS. This Article 18 shall not constitute, or
-------------------------- ----------
be interpreted to constitute, a release or discharge by COMPANY of any right,
claim or remedy COMPANY may have against CONTRACTOR or any subcontractor or
vendor under the Contract or under applicable law in respect of the matters
encompassed by this Article 18 or in respect of any defects or failure to meet
----------
specifications or failure of capacities at operating conditions or improper,
inferior, defective, unsuitable or damaged workmanship or materials or Defaults
or Events of Default or other disputed claim or cause of action whatsoever.
ARTICLE 19
CORRECTION OF DEFECTIVE CONSTRUCTION WORK
19.1 CORRECTION OF WORK FOR WHICH CONTRACTOR IS RESPONSIBLE. Subject to
------------------------------------------------------
the conditions hereinafter set forth in this Article 19 and in Article 22
---------- ----------
hereof, CONTRACTOR at no charge to COMPANY shall make or cause to be made all
alterations, adjustments, repairs, replacements and other corrections to the
Construction Work that shall be, or become, necessary (i) by reason of the
rejection of improper, inferior, defective, unsuitable or damaged workmanship
51
<PAGE>
or materials, or any combination thereof, before COMPANY takes over the Facility
for operation; (ii) by reason of any loss or damage that may be suffered by the
Facility for which CONTRACTOR assumes responsibility under other provisions of
the Contract; (iii) to make the Facility and all workmanship and materials
therein conform to CONTRACTOR'S warranties and guarantees; or (iv) to the extent
that any such defects are the result of CONTRACTOR'S negligence or willfulness
or disregard of specifications or drawings. Any defect in materials due to the
fault or default of any subcontractor or vendor shall be imputed to CONTRACTOR,
and CONTRACTOR shall be liable to COMPANY for such defect. CONTRACTOR shall
require that each subcontractor and vendor incorporate into their respective
sub-subcontracts and purchase orders with their respective sub-subcontractors
and vendors the same liability to CONTRACTOR that CONTRACTOR has to COMPANY
under this Section. If any materials furnished by COMPANY hereunder are found to
be improper, inferior, defective, unsuitable or damaged, COMPANY shall bear the
expenses for all necessary alterations, adjustments, repairs, or replacements to
said materials that are needed because of such deficiencies. All alterations,
adjustments, repairs, and replacements made under the provisions of the Contract
shall include the removal (if removal be necessary) of the improper, inferior,
defective, unsuitable, or damaged materials and the handling and installation of
the altered, repaired, or new materials; and any such work which is done after
the Facility has been put into operation shall be performed with as little
interruption of the operation of the Facility as feasible.
19.2 USING NEW MATERIALS FOR REPAIRS. Materials which are found to be
-------------------------------
improper, inferior, defective, unsuitable, or damaged, or otherwise not in
conformance with the Contract shall not be altered or repaired, but shall be
replaced with new materials, unless (i) CONTRACTOR gives COMPANY a written
statement to the effect that the proposed alteration or repair is practicable
and will entirely correct the unsatisfactory features of the materials under
consideration, and COMPANY agrees in writing to said alteration or repair; or
(ii) specifications issued or approved by COMPANY for the materials in question
permit alterations or repairs of the nature contemplated.
19.3 REPAIR BY COMPANY. In the event that any alteration, adjustment,
-----------------
repair, replacement or other correction becomes necessary as provided in this
Article 19 after the Facility has been put into operation and if it is mutually
- ----------
agreed that said alteration, adjustment, repair, replacement or other correction
can be made more rapidly and with less delay in the operation of the Facility by
COMPANY'S forces than by CONTRACTOR'S, or if CONTRACTOR fails or refuses to make
or unreasonably postpones said alteration, adjustment, repair, replacement or
other correction, COMPANY shall have the right to make said alteration,
adjustment, repair, replacement or other correction with its own forces at
CONTRACTOR'S expense. In such event, COMPANY shall use reasonable efforts to
avoid unnecessary expenditures and shall maintain reasonably detailed records of
the costs COMPANY incurs.
Article 20
Indemnity
20.1 CONTRACTOR'S INDEMNITY. CONTRACTOR shall defend, indemnify, and hold
----------------------
harmless COMPANY, COMPANY'S consultants and any lender for the Project and their
officers, agents and employees from and against all claims, demands, damages,
liabilities, losses, suits, actions, costs and expenses, including court costs
and attorneys' fees, arising out of, or resulting from any defective design or
defective materials or from the performance of defective or negligent (simple or
gross) acts, errors or omissions during Construction Work or of any work
pursuant to CONTRACTOR'S guarantee and warranty (including without limitation
any work pursuant to guarantees and warranties provided by subcontractors and
vendors), CONTRACTOR'S or its subcontractors', vendors' or agents' activities on
the Site, or CONTRACTOR'S breach of this Agreement.
52
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Additionally, CONTRACTOR agrees to defend, indemnify and hold COMPANY, COMPANY'S
other consultants and any lender for the Project and their officers, agents and
employees harmless from and against any and all claims, demands, damages,
liabilities, losses, suits, actions, costs and expenses (including court
expenses and attorneys' fees) for (i) injuries to or death of any person or
persons, including the employees of each party hereto and the employees of their
subcontractors or vendors or of any lender for the Project, and (ii) loss of or
damage to real property (including environmental contamination resulting from
the activities of CONTRACTOR or its subcontractors, vendors or agents), or the
property of any person or persons (including existing property of COMPANY and
the Facility) caused by or arising out of any occurrence in any manner connected
with the defective or negligent (simple or gross) acts, errors or omissions
during performance of the Contract, regardless of whether or not it is caused in
part by a party or other person indemnified hereunder, except that CONTRACTOR
assumes no liability whatsoever for the sole negligent acts of COMPANY or of
COMPANY'S officers, agents or employees. CONTRACTOR shall be fully responsible
for any defective or negligent (simple or gross) acts, errors or omissions of
any of CONTRACTOR'S subcontractors or vendors (including without limitation sub-
subcontractors, manufacturers, suppliers and other persons hired by any
subcontractor or vendor in performing its obligations under the Contract).
20.2 INDEMNIFICATION BY SUBCONTRACTORS AND VENDORS. CONTRACTOR shall use
---------------------------------------------
its best efforts to require each subcontractor and vendor in each subcontract
and purchase order to defend, indemnify and hold harmless COMPANY, COMPANY'S
consultants and any lender for the Project and their officers, agents and
employees from and against all claims, demands, damages, liabilities, losses,
suits, actions, costs and expenses, including court costs and attorneys' fees,
arising out of, or resulting from the performance of the Construction Work by
such subcontractor or vendor or of any work pursuant to any guarantee and
warranty given by such subcontractor or vendor, such subcontractor's or vendor's
activities on the Site, or such subcontractor's or vendor's breach of its
subcontract or purchase order, and each subcontract and purchase order shall
require each subcontractor and vendor to defend, indemnify and hold COMPANY,
COMPANY'S consultants and any lender for the Project and their officers, agents
and employees harmless from and against any and all claims, demands, damages
(including consequential damages), liabilities, losses, suits, actions, costs
and expenses (including court expenses and attorneys' fees) for (i) injuries to
or death of any person or persons, including the employees of each party hereto
and the employees of their sub-subcontractors or vendors or of any lender for
the Project, and (ii) loss of or damage to real property (including
environmental contamination resulting from the activities of such subcontractor
or vendor), or the property of any person or persons (including existing
property of COMPANY and the Facility) caused by or arising out of any occurrence
in any manner connected with the performance of such subcontract or purchase
order, regardless of whether or not it is caused in part by a party or other
person indemnified hereunder, except that no subcontractor or vendor shall have
any liability whatsoever for the sole negligent acts of COMPANY or of COMPANY'S
officers, agents or employees.
20.3 COMPANY'S INDEMNITY. COMPANY shall defend, indemnify, and hold
-------------------
harmless CONTRACTOR and CONTRACTOR'S officers, agents and employees from and
against all claims, demands, damages, liabilities, losses, suits, actions, costs
and expenses, including court costs and attorneys' fees, arising out of, or
resulting from the negligence or willful misconduct of COMPANY or COMPANY'S
officers, agents or employees, in the performance of COMPANY'S obligations
hereunder. Additionally, COMPANY agrees to defend, indemnify and hold
CONTRACTOR and CONTRACTOR'S officers, agents and employees harmless from and
against any and all claims, demands, damages, liabilities, losses, suits,
actions, costs and expenses (including court expenses and attorneys' fees) for
(i) injuries to or death of any person or persons, including the employees of
53
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each party hereto and the employees of their subcontractors or vendors
proximately and solely caused by the negligence or willful misconduct of COMPANY
or COMPANY'S officers, agents or employees, and (ii) loss of or damage to real
property (including pre-existing environmental contamination), or the property
of any person or persons, proximately and solely caused by the negligence or
willful misconduct of COMPANY or COMPANY'S officers, agents or employees.
20.4 CONSEQUENTIAL DAMAGES. Except as provided in this Section 20.4, neither
--------------------- ------------
COMPANY nor CONTRACTOR shall be liable for any consequential damages arising
from or in connection with this Contract or the Project.
20.4.1. CONTRACTOR shall only be liable to COMPANY for consequential damages
to the Facility, its contents and any persons present therein, and which occur
during the performance of work under this Contract and during the warranty
periods referenced herein. Under no circumstances shall CONTRACTOR be
liable to COMPANY for consequential damages in the nature of lost profits,
loss of revenue, loss of production or loss of operation.
20.4.2. The amount of consequential damages for which CONTRACTOR shall be
liable to COMPANY pursuant to the first sentence of Section 20.4.1 shall be:
--------------
20.4.2.1. to the extent such consequential damages arise from
intentional conduct of Contractor, in an unlimited amount;
20.4.2.2. to the extent such consequential damages in the form of
property damage or bodily injury arise from the gross negligence of CONTRACTOR,
in an amount limited to DM 20,000,000 (DM twenty million) for each individual
occurrence and DM 80,000,000 (DM eighty million) annual aggregate;
20.4.2.3. to the extent such consequential damages arise from the
negligence of CONTRACTOR, the gross negligence of CONTRACTOR not covered by
Section 20.4.2.2, or the negligence, gross negligence or intentional conduct of
- ----------------
CONTRACTOR'S subcontractors, vendors or agents, in an amount limited to the
greater of DM 10,000,000 (DM ten million) for each individual occurrence or the
applicable limits of coverage under CONTRACTOR'S and subcontractor's insurance
for each individual occurrence; and,
20.4.2.4. in the event that CONTRACTOR is able to recover any sums from
one or more subcontractors, vendors or agents (after reasonable attempts in
accordance with AMD's reasonable instructions to collect the same), the amount
of these additional sums actually collected in order to fully compensate COMPANY
for its total consequential damages. CONTRACTOR may keep any amounts collected
under this Section 20.4.2.4 which exceed the amount necessary to fully
--------
compensate COMPANY.
20.4.3. Except for consequential damages referenced in Section 20.4.2.1 and
----------------
Section 20.4.2.2, the aggregate amount of all out-of-pocket liability (for which
- -----------------
there is no recovery from CONTRACTOR'S insurance or from subcontractors, vendors
or agents or their insurers) incurred by CONTRACTOR for consequential damages,
including penalties which may be paid pursuant to Section 37.2, in connection
------------
with this Contract shall be limited to the sum of DM 35,000,000 (DM thirty-five
million).
Article 21
Insurance And Bank Guarantees
21.1 CONTRACTOR TO CARRY INSURANCE. CONTRACTOR shall not commence
-----------------------------
Construction Work under this Contract until CONTRACTOR has obtained all the
insurance required hereunder and the insurance certificates and/or certified
copies of the original policies evidencing the insurance have been reviewed by
COMPANY. COMPANY has the right to review the certificates or policies
54
<PAGE>
evidencing the subcontractor's insurance. Review of the insurance by COMPANY
shall not relieve or decrease the liability of CONTRACTOR hereunder. In the
event any Construction Work under the Contract is performed by a subcontractor,
CONTRACTOR shall be responsible for any liability directly or indirectly arising
out of the Construction Work performed under the Contract by a subcontractor, to
the extent not covered by the subcontractor's insurance but limited, however, as
provided in Section 20.1.
------------
21.2 CONTRACTOR'S LIABILITY INSURANCE.
--------------------------------
21.2.1 LIABILITY COVERAGE. CONTRACTOR shall obtain and maintain
------------------
insurance coverage for the following claims which may arise out of the
performance of this Contract, whether resulting from CONTRACTOR'S operations or
by the operations of any subcontractor, anyone in the employ of any of them, or
by an individual or entity for whose acts they may be liable:
1. under applicable employer's liability law, bodily injury,
occupational sickness, disease or death claims of CONTRACTOR'S
employees;
2. bodily injury, sickness, disease or death claims for damages
to persons not employed by CONTRACTOR;
3. personal injury liability claims for damages directly or
indirectly related to the person's employment by CONTRACTOR or
for damages to any other person;
4. damage to or destruction of tangible property, including
claims for property other than the Construction Work itself;
5. bodily injury, death or property damage claims resulting from
motor vehicle liability in the use, maintenance or ownership of
any motor vehicle;
6. claims for bodily injury (Personenschaden), property damages
(Sachschaden) and financial losses (Vermogensschaden) arising
from Contractor's defeictve design work; and