Document:

Foundry Agreement between the Registrant and Advanced Semiconductor

  
 Exhibit 10.5

  
 MONOLITHIC POWER SYSTEMS, INC HAS REQUESTED THAT PORTIONS OF THIS DOCUMENT
BE ACCORDED CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 OF REGULATION C PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ACCORDINGLY, CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. OMITTED
INFORMATION HAS BEEN REPLACED BY [*]. 
  
 Dated this 14th day of August 2001 
  
 Between 
  
 MONOLITHIC POWER SYSTEMS, INC. 
  
 and 
  
 ADVANCED SEMICONDUCTOR
MANUFACTURING CORP. 
 OF SHANGHAI 
  

  
 FOUNDRY AGREEMENT

  

  

 CONTENTS 
  

					
	Clause

	  	Page

	1.	  	DEFINITIONS	  	1
	2.	  	MANUFACTURE OF WAFERS	  	2
	3.	  	QUALIFICATION AND MODIFICATION	  	2
	4.	  	PRODUCTION PLANNING	  	3
	5.	  	PURCHASE ORDERS	  	4
	6.	  	PRICING AND PAYMENT TERMS	  	4
	7.	  	QUALITY CONTROL AND INSPECTION	  	5
	8.	  	PROCEDURE FOR CUSTOMER RETURNS	  	5
	9.	  	PRODUCTION HALTS	  	6
	10.	  	DELIVERY	  	6
	11.	  	TERM AND TERMINATION	  	7
	12.	  	FORCE MAJEURE	  	8
	13.	  	USE RESTRICTION AND LIMITATION OF LIABILITY	  	8
	14.	  	CONFIDENTIALITY	  	9
	15.	  	NOTICES	  	10
	16.	  	WAIVER AND REMEDIES	  	10
	17.	  	SEVERANCE	  	11
	18.	  	ENTIRE AGREEMENT	  	11
	19.	  	NO ASSIGNMENT OR SUB-CONTRACTING	  	11
	20.	  	GOVERNING LAW	  	11
	21.	  	ARBITRATION	  	11

  

			
	Agreed Price Quotations for Wafers	  	Appendix A
	 Qualification of process and product and
 Electrical Test
and Electrical Parameters
	  	Appendix B
	Acceptance Criteria	  	Appendix C
	Change Request Procedure	  	Appendix D
	Process Change Requests	  	Appendix E
	Procedure for Customer Returns	  	Appendix F
	Cancellation Fee	  	Appendix G

  

 THIS FOUNDRY AGREEMENT is made this 14th day of August 2001 (the “Effective Date”) by and between: 
  

(1) Monolithic Power Systems, Inc., with its principal place of business at 3777 Stevens Creek Blvd., Suit 400, Santa Clara, CA 95051-7364,
U.S.A. (hereinafter referred to as ‘MPS’); and 
  
 (2) ADVANCED SEMICONDUCTOR MANUFACTURING CORP. OF SHANGHAI (ASMC), with a principal place of business at 385 Hong Cao Road, Shanghai 200233, China. 
  
 WHEREAS 
  
 (A) MPS has designed and developed certain integrated circuit products and desires to have wafers manufactured to its specifications for the purposes of
manufacturing such products; 
  
 (B) ASMC is in the business of
manufacturing and selling semiconductor wafers; and 
  
 (C) MPS
and ASMC desire to enter into an agreement for the purpose of having ASMC manufacture wafers for MPS. 
  
 NOW IT IS HEREBY AGREED as follows: 
  
 1. DEFINITIONS 
  
 1.1 In this Agreement, unless otherwise defined or the context otherwise requires, the following words and expressions shall bear the
following meanings: 
  
 ‘Acceptance
Criteria’ shall mean the visual inspection criteria, electrical test and electrical parameters and other criteria for each Product to be met by ASMC prior to delivery of Wafers and mutually agreed upon by the Parties. The Acceptance
Criteria is set out in Appendix C; 
  
 ‘Masks’ means the masks and reticle sets used by ASMC in the production of Wafers for MPS; 
  
 ‘Products’ means MPS’s integrated circuit products identified by MPS’s product part numbers listed in
MPS’s purchase orders; 
  
 ‘Scheduled Delivery Date’ has the meaning set out in Clause 5.1; 
  
 ‘Wafers’ means silicon wafers containing finished die for the Products manufactured by ASMC in accordance with the terms
of this Agreement. 
  
 ‘Process
Technology’ means the process flow or the combination of manufacturing process modules for making each individual semiconductor device. 
  

 1.2 References to recitals, clauses and appendices are references to recitals, clauses
and appendices of this Agreement. 
  
 1.3 The
headings in this Agreement are inserted for convenience only and shall be ignored in the interpretation of this Agreement. 
  
 1.4 Unless the context otherwise requires, words denoting the singular number shall include the plural and vice versa, words importing the
masculine gender shall include the feminine gender and words importing a person shall include a company or corporation and vice versa. 
  
 2. MANUFACTURE OF WAFERS 
  
 2.1 ASMC shall manufacture Wafers for MPS in accordance with the terms of this Agreement. 
  
 2.2 MPS shall furnish ASMC with all requisite technical
support and assistance in starting up the manufacture of Wafers at ASMC’s wafer manufacturing facilities (‘the facilities’) on terms and conditions to be mutually agreed. MPS shall also assist, if it requires wafer sort and test
services from ASMC, in starting up sort and test capabilities for the Wafers at the facilities. MPS shall bear mutually agreed upon non-recurring engineering costs incurred in the start-up of the manufacture of the Wafers at the facilities.

  
 2.3 MPS shall provide at its own expense all
requisite Masks which meet ASMC’s tooling specifications to ASMC within reasonable time for the manufacture of Wafers. The Parties agree that lot starts shall be initiated only after Masks meet ASMC’s tooling and other specifications. MPS
shall bear the costs of any Wafer lots put on hold by reason of the non-availability of the Masks. Alternatively, MPS may authorise ASMC to procure at MPS’s expense and on terms mutually agreed beforehand, the Masks from a designated
third-party contractor. Such Masks will be subject to ASMC’s in-coming reticle inspection criteria and qualification process. 
  
 2.4 Ownership of the MPS products and MPS proprietary Process technologies: MPS will retain and own exclusively throughout the world all
right, title, and interest in the Products and designs, patents, copyrights, mask work rights and proprietary process technologies. ASMC shall not disclose any information related to MPS’s products and proprietary Process technologies to third
parties without written permission from MPS. ASMC will not use MPS’s proprietary process technologies for any other customers. 
  
 2.5 ASMC will not disclose to the third parties the cooperation relationship between MPS and ASMC without written permission from MPS.

  
 3. QUALIFICATION AND MODIFICATION 
  
 3.1 The Parties shall, where required by MPS, proceed in
accordance with mutually agreed terms, with the qualification of the relevant ASMC process to be used in the manufacture of Wafers for MPS. ASMC shall provide to MPS the applicable electrical test and electrical parameters for each qualified
process. 
  

 3.2 Upon successful qualification of the manufacturing process, ASMC shall manufacture
the Wafers to conform with the Acceptance Criteria set out in Appendix C. 
  
 3.3 If the changes to the Acceptance Criteria are made otherwise than to correct any defects in the manufacture of Wafers hereunder, the Parties shall in good faith re-negotiate any existing terms and conditions of
purchase (including pricing and delivery commitments) which require amendment as a result of such changes. Changes required shall be submitted to the MPS per procedures defined by Appendix D. 
  
 3.4 Any MPS requests for changes to the process flow for a
Product and/or lot of Wafers shall be evaluated by ASMC in accordance with the ASMC’s Process Request Form (PRF) Procedure referenced in Appendix E, where applicable. Other requested process changes not governed by the Process Request
Procedure, including a request for a non-standard process flow, shall be evaluated by ASMC in accordance with ASMC’s ROI Investigation Procedure for Non-standard Products. 
  
 4. PRODUCTION PLANNING 
  
 4.1 With effect from a date to be agreed by the Parties, MPS shall provide to ASMC no later than the 5th day of each month, its rolling
6-monthly forecast of its monthly volume requirements for Wafers for each relevant Product to be manufactured hereunder. The first 3 months of each 6-monthly forecast shall be backed by purchase orders for such first 3 months. By way of example, by
5th January, MPS shall provide to ASMC purchase orders for February, March and April, and a forecast of MPS’s monthly volume requirements for May, June and July; and by 5th February, MPS shall provide to ASMC purchase orders for May, and a
forecast of MPS’s monthly volume requirements for June, July and August; and by 5th March, MPS shall provide to ASMC purchase orders for June, and a forecast of MPS’s monthly volume requirements for July, August and September; and so on.

  
 4.2 MPS shall use commercially reasonable
efforts to make orders for a minimum of 24 Wafers per lot for 6” wafers, or 49 wafers per lot for 5” wafers. ASMC reserves the right to levy additional charges if Wafer lot sizes ordered are less than 24 Wafers per lot for 6” wafers,
or 49 wafers per lot for 5” wafers. 
  
 4.3
If requested by MPS, ASMC shall establish an in-line production inventory of Wafers for MPS upon mutually agreed terms. ASMC reserves the right to levy additional charges in the event that the ageing of such inventory exceeds 1 month at mutually
agreed terms. 
  
 4.4 In the event that the
actual quantity of Wafers ordered by MPS for the period commencing January 1st of a calendar year, and ending on 31 December of the same year (‘MPS Fiscal Year’) for all Products combined is less than the MPS Purchase Plan for that MPS
Fiscal Year, then the ASMC Capacity Plan to the MPS for the following MPS Fiscal Year shall be re-negotiated and mutually agreed upon, and either Party shall have no other obligation to the other Party with respect to that renegotiated portion of
the MPS Purchase Plan or ASMC Capacity Plan. 
  

 5. PURCHASE ORDERS 
  
 5.1 The purchase and supply of Wafers under this Agreement shall commence only when: 
  
 (a) MPS has issued a purchase order to ASMC; and 

 
 (b) ASMC has returned to MPS such purchase order with
ASMC’s written acknowledgement thereon; 
  
 (c) ASMC has issued to MPS, within 5 business days, a written confirmation of the scheduled delivery date and scheduled starting week (the “Scheduled Delivery Date”) of the Wafers ordered; and 
  
 (d) Subject to Appendix G, MPS may at any time cancel any
purchase order prior to the commencement of manufacturing. 
  
 5.2 All purchase orders issued by MPS shall reference this Agreement. The terms and conditions of this Agreement shall exclusively govern the purchase and supply of Wafers hereunder and shall override any conflicting,
amending and/or additional terms contained in any pricing agreement, MPS’s purchase order, MPS’s acceptance documents or ASMC’s acknowledgement documents. No variation or addition to the terms and conditions contained in this
Agreement shall be binding unless agreed in writing between the authorised representatives of the Parties. 
  
 5.3 The MPS’s purchase order shall contain the Product code, ASMC product code, quantity of Wafers required, requested delivery dates
for such Wafers, Wafer unit costs, a statement as to whether unprobed or probed Wafers are required and other purchase requirements. MPS shall request delivery dates consistent with ASMC’s then prevailing production cycle-times for the relevant
Product specified in MPS’s purchase order. 
  
 6. PRICING
AND PAYMENT TERMS 
  
 6.1 The purchase price
of Wafers charged to MPS shall be in accordance with the terms of the relevant ASMC price quotation agreed to by the Parties for the relevant lots of Wafers purchased. Each Agreed Price Quotation, which shall reference this Agreement, shall be
attached to this Agreement and shall be successively numbered as Appendix A-1, A-2, A-3 etc. 
  
 6.2 Payment term is determined according to credit check. MPS will use L/C as the payment term in first three month of production. After
three months of production, ASMC will review MPS’s credit and determine if give MPS T/T 30 days credit payment term in next phase. ASMC has the right to change the payment term in case MPS has not made the payment according to the agreed upon
time. Any late payment for Wafers shall be subject to interest charges of 1.5% per month. All bank charges outside of Mainland China shall be paid by MPS. 
  

 6.3 All invoices issued by ASMC shall identify the Wafers and the relevant MPS purchase
order number, Product part number, purchase order line and release number, description of items and quantity of items shipped. Unless otherwise agreed by MPS and ASMC in writing, invoices may be mailed no earlier than the relevant date of shipment.

  
 6.4 In the event of any dispute over the
amount invoiced, MPS shall first make payment of the undisputed portion in accordance with Clause 6.2 pending resolution of the dispute between the Parties. 
  
 6.5 MPS shall pay, in addition to the Ex-Works (ASMC Factory) prices of Wafers stipulated herein, the amount of any freight, insurance,
handling and other duties levied on the shipment of Wafers to MPS. MPS shall also pay for all sales, use, excise or other similar taxes levied on the purchase of Wafers by MPS herein. 
  
 7. QUALITY CONTROL AND INSPECTION 
  
 7.1 ASMC will use commercially reasonable efforts to manufacture Wafers to conform with the Acceptance
Criteria set out in Appendix C. Prior to delivery, ASMC shall perform on each lot of Wafers manufactured, the tests specified in the Acceptance Criteria. ASMC will deliver only Wafers which meet the Acceptance Criteria, unless MPS waives such
obligation in accordance with the applicable Waiver Procedures specified in Appendix C, or as mutually agreed between the Parties. 
  
 7.2 If ASMC discovers that the Wafers do not meet any one of the Acceptance Criteria, ASMC shall as soon as reasonably possible effect the
rectification or replacement of the Wafers. 
  
 8. PROCEDURE
FOR CUSTOMER RETURNS 
  
 8.1 The Procedure
for Customer Returns as set out in Appendix F shall apply to Wafers manufactured under this Agreement. The time limit for the return of Wafers due to low sort yield is 60 days from the delivery date of such Wafers, and the time limit for the return
of Wafers due to reliability failures is 1 year from the delivery date of such Wafers. 
  
 8.2 ASMC shall have no liability and shall not be obliged to accept the return of Wafers after the relevant period of 60 days or 1 year,
as the case may be. In addition, ASMC shall be under no liability for defects in the Wafers caused by persons other than ASMC, including, static discharge, abnormal working conditions, fair wear and tear, accident, wilful damage, abuse, misuse,
neglect, improper installation, repair or alteration by persons other than ASMC, improper testing and/or improper storage and/or improper handling or use contrary to any instructions issued by ASMC which are in keeping with generally accepted
industry practices. Further, ASMC shall be under no liability for any parts or materials it has not manufactured. 
  
 8.3 ASMC shall have the discretion to decide whether or not to conduct failure analysis on the Wafers returned by MPS, and if such failure
analysis is conducted, ASMC will, at 

  

 
MPS’s request, provide MPS with copies of the results of such analysis. If ASMC’s failure analysis determines that the defects are due to causes
other than the causes specified in Clause 8.2, then MPS may at its option elect for either a full credit for the purchase price paid for such Wafers, or ASMC’s replacement of the defective Wafers returned to ASMC. If MPS elects for the
replacement of defective Wafers, the manufacture of such Wafers shall have high priority on ASMC’s production schedule. 
  
 8.4 THE FOREGOING STATES ASMC’S ENTIRE LIABILITY, WHETHER IN CONTRACT OR IN TORT FOR DEFECTS IN WAFERS. THE EXPRESS TERMS OF THIS
AGREEMENT ARE IN LIEU OF ALL WARRANTIES, CONDITIONS, TERMS, UNDERTAKINGS, AND OBLIGATIONS IMPLIED BY STATUTE, COMMON LAW, CUSTOM, TRADE USAGE, COURSE OF DEALING OR OTHERWISE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED TO THE FULLEST EXTENT PERMITTED
BY LAW AND ASMC SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 
  
 9. PRODUCTION HALTS 
  
 9.1 MPS may at any time request ASMC to halt the manufacture of Wafers still in-process and ASMC shall effect production stoppage if
commercially feasible. The manufacture of Wafers shall remain on hold pending written directions from MPS. 
  
 9.2 If MPS decides to cancel its order for Wafers, MPS shall pay to ASMC a Cancellation Fee based on the formula set out in Appendix G.

  
 9.3 ASMC shall, if commercially feasible,
re-start the manufacture of Wafers within a reasonable time after receipt of MPS’s written request, subject to MPS’ s agreement to bear all expenses incurred by ASMC in production stoppage and re-start. ASMC will make no commitments of
yield, reliability and conformance with the Acceptance Criteria in respect of Wafers stopped in process (a) more than one time regardless of the number of days of stoppage, or (b) if the stoppage lasts for more than 30 days. 
  
 10. DELIVERY 
  
 10.1 ASMC shall use its commercially reasonable efforts to
deliver the exact quantity of Wafers stipulated in the relevant MPS purchase order and confirmed by ASMC. However if for each purchase order the aggregate quantity of Wafers delivered by ASMC is either within plus or minus 10% of the quantity
ordered, such quantity shall constitute compliance with MPS purchase order for the purposes of meeting delivery requirements. 
  
 10.2 Unless otherwise agreed by the Parties, Wafers shall be delivered Ex-Works (ASMC’s factory in Shanghai, China). ASMC shall use
its commercially reasonable efforts to deliver within the Scheduled Delivery Date. However if for each purchase order, Wafers are delivered within plus or minus 7 days of the Scheduled Delivery Date, such delivery shall constitute 

  

 
compliance with MPS purchase order. ASMC shall promptly give MPS written notice of any prospective failure to deliver within the Scheduled Delivery Date.

  
 10.3 All quantities of Wafers shall be
delivered in ASMC standard containers with proper labels identifying the specific Product and lot number and shall be accompanied by a packing list specifying the relevant purchase order number, Wafer lot number, Wafer quantity and number of good
un-inked die (if Wafers have been sorted) and agreed upon processing documentation. 
  
 10.4 If MPS fails to take delivery of any quantity of Wafers or fails to give adequate delivery instructions (otherwise than by reason of
any cause beyond MPS’s reasonable control or by reason of ASMC’s fault), then without prejudice to any other right or remedy available to ASMC, ASMC may at its option, store such Wafers until actual delivery and charge MPS for reasonable
costs (including insurance) of storage. 
  
 11. TERM AND
TERMINATION 
  
 11.1 This Agreement shall
commence on the Effective Date and shall continue for a period of 4 years therefrom, unless otherwise extended by the mutual agreement of the Parties or earlier terminated in the following events : 
  
 (a) by agreement of the Parties; 
  
 (b) forthwith by ASMC if MPS fails to pay any sum due to
ASMC hereunder which has been outstanding for a period of 60 days; 
  
 (c) forthwith by either Party if the other commits any material breach of any term of this Agreement and which in the case of a breach capable of being remedied shall not have been remedied within 60 days of a written
request to remedy the same. 
  
 (d) at the option
of either Party, in any of the following events: 
  
 (i) the inability of the other Party to pay its debts in the normal course of business; or 
  
 (ii) the other Party ceasing or threatening to cease wholly or substantially to carry on its business, otherwise than for the purpose of
a reconstruction or amalgamation without insolvency; or 
  
 (iii) any encumbrancer taking possession of or a receiver, trustee or judicial manager being appointed over the whole or any substantial part of the undertaking, property or assets of the other Party; or 

 
 (iv) the making of an order by a court of competent
jurisdiction or the passing of a resolution for the winding-up of the other Party or any company controlling the other Party, otherwise than for the purpose of a reconstruction or amalgamation without insolvency. 
  

 11.2 Termination of this Agreement pursuant to Clause 11.1 shall take effect immediately
upon the issue of a written notice to that effect by the Party terminating the Agreement to the other. The termination of this Agreement however caused shall be without prejudice to any obligations or rights of either Party which have accrued prior
to such termination and shall not affect any provision of this Agreement which is expressly or by implication provided to come into effect on or to continue in effect after such termination. This indemnity shall survive the expiration or termination
of this Agreement 
  
 11.3 MPS shall be
financially responsible for any unused materials if purchased for the exclusive use by MPS if such material was originally purchased in support of MPS’s demand forecast. 
  
 12. FORCE MAJEURE 
  
 12.1 Each Party’s obligations under this Agreement shall be suspended upon the occurrence of a force majeure event such as act of
God, flood, earthquake, fire, explosion, act of government, war, civil commotion, insurrection, embargo, riots, lockouts, labour disputes affecting such Party, for such period as such force majeure event may subsist. Upon the occurrence of a force
majeure event, the affected Party shall notify the other Party in writing of the same and shall by subsequent written notice after the cessation of such force majeure event inform the other Party of the date on which that Party’s obligation
under this Agreement shall be reinstated. 
  
 12.2 Notwithstanding anything in this Clause 12, upon the occurrence of a force majeure event affecting either Party, and such force majeure event continues for a period exceeding 6 consecutive months without a prospect of a cure of such
event, the other Party shall have the option, in its sole discretion, to terminate this Agreement. Such termination shall take effect immediately upon the written notice to that effect from the other Party to the Party affected by the force majeure
event. 
  
 13. USE RESTRICTION AND LIMITATION OF LIABILITY

  
 13.1 MPS accepts all responsibility for
any use or action taken by MPS with respect to Wafers manufactured by ASMC, once ASMC has satisfactorily delivered the said Wafers to MPS or MPS’s agent(s) in accordance with the terms of this Agreement. 
  
 13.2 MPS hereby agrees that the Wafers and Products are not
authorized for use as critical or important components in (a) any medical, life saving or life support devices or systems; or (b) any safety devices or systems in any automotive applications and mechanisms (including but not limited to automotive
brake systems or airbag systems). ASMC shall not be responsible or liable to MPS or any third party for any unauthorized use of the Wafers or Products. As used herein: 
  
 (i) Medical, life saving or life support devices or systems are devices or systems which are intended (aa)
for surgical implant into the human body, or (bb) to support or sustain life, and whose malfunction or failure to perform may result in significant injury or death to the user. 
  

 (ii) A critical or important component is any component of a medical, life saving, life
support or safety device or system whose malfunction or failure to perform may cause the failure of such device or system, or to affect its effectiveness. 
  
 13.3 MPS shall indemnify, hold harmless and defend ASMC, its officers, directors, employees and subcontractors from and against any claim,
suit, demand or action which arise in any way out of, involve or relate to an unauthorized use of any Wafers or Products and MPS shall indemnify and hold harmless ASMC, its officers, directors, employees and subcontractors against any and all direct
losses, liabilities, damages, awards of settlement (including court costs) and expenses (including all reasonable attorney’s fees, whether or not legal proceedings are commenced) arising from any such claim, suit, demand or action. ASMC shall
notify MPS of any such claim or allegation promptly after receiving notice thereof. 
  
 13.4 THE TOTAL LIABILITY OF ASMC ON ALL CLAIMS OF ANY KIND, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR
OTHERWISE ARISING OUT OF THE PERFORMANCE OR BREACH OF THIS AGREEMENT OR USE OF THE WAFERS SHALL NOT EXCEED THE TOTAL AMOUNT RECEIVED BY ASMC FROM MPS IN RESPECT OF THE SALE OF THE WAFERS WHICH GIVES RISE TO THE CLAIM. 
  
 13.5 In no event shall either Party be liable to the other
for any damages with respect to any subject matter of this Agreement under any contract, tort (including negligence), strict liability or other legal or equitable theory for any incidental, consequential, special or indirect damages of any sort even
if such Party has been informed of the possibility of such damages. 
  
 14. CONFIDENTIALITY 
  
 14.1 All
Confidential Information shall be kept confidential by the recipient unless or until the recipient Party can reasonably demonstrate that any such Confidential Information is, or part of it is, in the public domain through no fault of its own,
whereupon to the extent that it is in the public domain or is required to be disclosed by law this obligation shall cease. For the purposes of this Agreement, “Confidential Information” shall mean all communications between the Parties,
and all information and other materials supplied to or received by either of them from the other (a) prior to or on the date or after the date of this Agreement whether or not marked confidential; (b) all information concerning the business
transactions and the financial arrangements of the Parties with any person with whom any of them is in a confidential relationship with regard to the matter in question coming to the knowledge of the recipient. 
  
 14.2 The Parties shall take all reasonable steps to minimise
the risk of disclosure of Confidential Information, by ensuring that only they themselves and such of their employees and directors whose duties will require them to possess any of such information shall have access thereto, and will be instructed
to treat the same as confidential. 
  
 14.3 The
obligation contained in this Clause 14 shall endure, even after the termination of this Agreement, for a period of 5 years from the date of receipt of the Confidential 

  

 
Information except and until such Confidential Information enters the public domain as set out above. 
  
 15. NOTICES 
  
 15.1 Addresses. All notices, demands or other
communications required or permitted to be given or made under or in connection with this Agreement shall be in writing and shall be sufficiently given or made (a) if delivered by hand or commercial courier or (b) sent by pre-paid registered post or
(c) sent by legible facsimile transmission (provided that the receipt of such facsimile transmission is confirmed and a copy thereof is sent immediately thereafter by pre-paid registered post or commercial courier) addressed to the intended
recipient at its address or facsimile number set out below. A Party may from time to time notify the others of its change of address or facsimile number in accordance with this Clause 15. 
  
 Advanced Semiconductor Manufacturing Corp. of Shanghai 

385 Hong Cao Road 
 Shanghai,
200233, China 
 Facsimile #: +86-21-64853925 
  
 Monolithic Power Systems, Inc. 
 3777 Stevens Creek Blvd., Suite 400 
 Santa Clara, CA 95051-7364 
 U.S.A. 
 Facsimile #: +1 408
2430099 
  
 15.2 Deemed Delivery. Any
such notice, demand or communication shall be deemed to have been duly served (a) if delivered by hand or commercial courier, or sent by pre-paid registered post, at the time of delivery; or (b) if made by successfully transmitted facsimile
transmission, at the time of dispatch (provided that the receipt of such facsimile transmission is confirmed and that immediately after such dispatch, a copy thereof is sent by pre-paid registered post or commercial courier). 
  
 16. WAIVER AND REMEDIES 
  
 16.1 No delay or neglect on the part of either Party in
enforcing against the other Party any term or condition of this Agreement or in exercising any right or remedy under this Agreement shall either be or be deemed to be a waiver or in any way prejudice any right or remedy of that Party under this
Agreement. 
  
 16.2 No remedy conferred by any of
the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise and each and every other remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. The election of any one or more of such remedies by either of the Parties shall not constitute a waiver by such Party of the right to pursue any other
available remedy. 
  

 17. SEVERANCE. If any provision or part of this Agreement is rendered void, illegal or
unenforceable in any respect under any enactment or rule of law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  
 18. ENTIRE AGREEMENT 
  
 18.1 This Agreement and the Appendices constitutes the
entire agreement between ASMC and MPS and shall supersede all previous agreements and undertakings between Parties with respect to the subject matter hereof. 
  

18.2 The following Appendices are hereby deemed a part of this Agreement and incorporated herein by reference. The term
“Agreement” includes the following Appendices: 
  

			
	Appendix A	  	Agreed Price Quotations for Wafers
	Appendix B	  	Qualification of process and product and Electrical Test and Electrical Parameters
	Appendix C	  	Acceptance Criteria
	Appendix D	  	Change Request Procedure
	Appendix E	  	Process Change Requests
	Appendix F	  	Procedure for Customer Returns
	Appendix G	  	Cancellation Fee

  
 18.3
The terms and conditions of the Agreed Price Quotations and this Agreement shall exclusively govern the purchase and supply of Wafers and shall override any conflicting, amending and/or additional terms contained on MPS’s purchase order and/or
acceptance documents which have been or may hereafter be issued by MPS or any acknowledgement or similar documents by ASMC. In the event of any conflict or inconsistency between the terms of this Agreement and the relevant Agreed Price Quotation,
the terms of the Agreed Price Quotation shall prevail. 
  
 19.
NO ASSIGNMENT OR SUB-CONTRACTING. Unless otherwise agreed in writing by the Parties, this Agreement may not be assigned or sub-contracted by either Party to any third party without the prior written consent of the other Party. 
  
 20. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the People’s Republic of China. 
  
 21. ARBITRATION. Any dispute arising from or relating to or in connection with this Agreement shall be submitted to China International Economic and Trade Arbitration Commission, Beijing, China for arbitration
which shall be conducted in accordance with the commission’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties. 
  

 IN WITNESS WHEREOF the Parties have hereunto entered into this Agreement as at the date first
above written. 
  

									
			
	       /s/ Deming Xiao
	 	 	 	 
	 Name:
	 	 Deming Xiao
	 	 	 	 
	 Title:
	 	 Foundry Manager
	 	 	 	 8/15/01

			
	 for and on behalf of
 Monolithic Power
Systems, Inc.
	 	 	 	 
			
	       /s/ Sun Zhen
	 	 	 	 
	 Name:
	 	 Sun Zhen
	 	 	 	 
	 Title:
	 	 Sales and Marketing Dept. Manager
	 	 	 	 
			
	 for and on behalf of
 Advanced Semiconductor
Manufacturing Corp. of Shanghai
	 	 	 	 

  

 APPENDIX A 
 (Ref : Clause 6.1) 
  
 AGREED
PRICE QUOTATIONS FOR WAFERS 
  
 Each agreed price
quotation shall reference this Foundry Agreement and shall be attached to this Agreement and successively numbered as Appendix A-1, A-2, A-3, etc. of Foundry Agreement dated August 14, 2001. 
  

 Appendix A 
  

PRICE QUOTATIONS 
  
 1. ASMC – MPS Term Sheet 
  
 1.1 This document summarizes the mutual agreement between ASMC and MPS concerning the manufacture being manufactured by ASMC. 

 
 1.2 The current term of this agreement is in essence from
Aug. 14, 2001 to Aug. 13, 2005, and may be by mutual consent, be extended beyond this term. 
  
 2. Process Technologies 
  
 2.1 The pricing covers the MPS proprietary Process technologies: [*] and its derivatives. 
  
 3. Pricing 
  
 3.1 Pricing for standard production wafers: 
  
 3.1.1 Production Pricing is based on the following assumptions: 
  
 3.1.1.1 Un-probed, PCM wafers 
  
 3.1.1.2 Price validity: Aug. 14, 2001 through Aug. 13, 2005. 
  
 3.1.1.3 Minimum Acceptable Yield: Refer to Appendix C of
Foundry Agreement. 
  
 3.1.2 Price: 

 
 3.1.2.1 : [*] per mask layer and Epi layer for volume
>= 1000 wafers on the quarterly average basis. 
  
 3.1.2.2 : [*] per mask layer and Epi layer for volume < 1000 wafers on the quarterly average basis. 
  
 3.1.3 Price during technology transfer and qualification: [*] per mask layer. The transfer and qualification period should be completed
before Aug. 5, 2002. 
  
 3.2 Pricing for
prototype wafers: 
  
 3.2.1 Pricing for prototype
wafers: [*] premium over the standard production wafer. 
  

 3.2.2 Prototype lot status: Unless MPS requests otherwise, the Prototype lot assumes the
hot lot status, defined as 1.8 days per mask layer. The exception is initial lots which used as setting up process in ASMC, which will take longer times. 
  
 3.2.3 Minimum wafer start for prototype lot: 12 wafers. One split in each lot. If customer ask for more split, the cost is [*] each more
split. 
  
 3.3 Pricing for engineering wafers:

  
 3.3.1 Engineering wafers defined as the
wafers processed with nonproduction process. 
  
 3.3.2 Pricing for engineering wafers: [*] premium over the standard production wafers. 
  
 3.3.3 Engineering lot status: Unless MPS requests otherwise, the Engineering lot assumes the hot lot status, defined as 1.8 days per mask
layer. 
  
 3.3.4 Minimum wafer start for engineer
lot: 12 wafers. One split in each lot. If customer ask for more split, the cost is [*] each more split. 
  
 3.4 Pricing of wafers shall be charged to MPS on wafers shipped, fully processed. Pricing does not include probe or backgrind costs.

  
 3.5 MPS will pay ASMC [*] to cover the cost
of the transfer of its proprietary Process technologies [*] and its derivatives to ASMC. The [*] shall be paid after the signing of the contract and rest of the NRE payment is due after the successful transfer of the MPS process technologies.

  
 The NRE will cover all the engineering cost before process
ready (PCM in spec, and 1st product has above 70% wafer test yield). MPS will pay for mask cost and the
qualification lot cost. 
  
 4. Capacity 
  
 4.1 ASMC Capacity Commitment 
  
 4.1.1 ASMC shall make available a loading commitment subject
to the terms expressed in Section 4.0 PRODUCTION PLANNING in the Foundry Agreement. 
  
 4.1.2 ASMC will advise MPS within 48 hours of request outside the normal monthly forecast whether ASMC can accept an upside to planned
capacity. 
  
 5. Forecasting: 
  
 See section 4.0 of the FOUNDRY AGREEMENT. 
  

 -2- 

 6. Obsolescence 
  
 6.1 MPS shall agree to give ASMC 3 months notification of intent to obsolete the manufacture of the products
to be manufactured in the agreed upon technologies, and will place orders for at least 3 months after notification. 
  
 6.2 ASMC shall agree to give MPS 3 months notification of any intent to obsolete the availability of the technologies, and will accept
orders for at least 3 months after notification. ASMC agrees to accept life time buy orders as by MPS to prevent MPS supply interruption while MPS obtains another supply source. 
  
 7. Terms & Conditions 
  

7.1 If the above assumption sets prove to be invalid, both parties reserve the right to change the terms of the contract as applicable.

  
 7.2 ASMC reserves the right to schedule the
delivery according to Clause 10.2 of the Foundry Agreement. 
  
 7.3 MPS to provide a full set of masks that meets ASMC’s tooling specification. ASMC shall provide all production mask replacements (reticles without product design revision) at no charge to MPS. 
  
 7.4 MPS assumes full responsibility against any claims on
design intellectual property rights. 
  
 8. Effectiveness

  
 This Price Quotations shall be interpreted and used in
conjunction with the prevailing version of the Foundry Agreement entered into both Parties. 
  
 9. Governing Law 
  
 This
Agreement shall be governed by the laws of The People’s Republic of China. 
  

					
	 Authorizing Signature
	 	 	 	 Authorizing Signature

			
	 Advanced Semiconductor
 Manufacturing Corp of Shanghai
	 	 	 	 Monothic Power Systems, Inc.

			
	 /s/ Sun Zhen
	 	 	 	 /s/ Deming Xiao

	 Name: Sun Zhen
	 	 	 	 Name: Deming Xiao

	 Designation:
	 	 	 	 Designation:

	 Dated: 8/15/01
	 	 	 	 Dated: 8/15/01

  

 -3- 

 APPENDIX B 
 (Ref : Clause 3.1, 3.2) 
  
 QUALIFICATION OF PROCESS AND PRODUCT AND ELECTRICAL TEST 
 AND ELECTRICAL PARAMETERS 
  
 The agreed Electrical Test and Electrical Parameters for each Product shall
be based on the relevant ASMC process which has been qualified, as evidenced by a Release to Production document issued by ASMC. 
  

 APPENDIX C 
 (Ref : Clauses 3.2, 3.3, 7.1) 
  
 ACCEPTANCE CRITERIA 
  
 The Acceptance Criteria for each
Product shall comprise the following: 
  

	A.	Electrical Test and Electrical based on the relevant ASMC process which has been qualified, as evidenced by a Release to Production document issued by ASMC; and

  

	B.	The Wafer Quality and Reliability Criteria set out in this Appendix C. 

  

	C.	Yield criteria: 

  

	 	C.1:	Average yield: The average yield of a specific type is defined as the average yield achieved on the first 10 lots of wafers after this product is released to production.

  

	 	C.2:	Yield criteria: The lot will be returned to ASMC for fully refund if the yield is less than 50% of the average yield, unless MPS requests otherwise. 

  
 The following ASMC procedures shall apply. All procedures shall be subject to change by ASMC
in accordance with the Change Request Procedure specified in Appendix D. 
  
 WAFER QUALITY AND RELIABILITY CRITERIA 
  

			
	WATER SORT
		
	Document No.	  	Document Title
		
	NA	  	Setting of ASMC wafer yield limits in all ASMC wafer sort subcontractors (includes amendments thereto)

  

			
	OUTGOING QUALITY ASSURANCE
		
	Document No.	  	Document Title
		
	 WOQ900104
 Visual Inspection Photo Book
	  	QA Outgoing Wafer Inspection Procedure (includes amendments thereto)
		
	 OQ002Q
 Procedure Outgoing Inspection
	  	QA Outgoing Wafer Packing Procedure (includes amendments thereto)
		
	 MM008Q
 Procedure for Packing Diffused
Wafer
	  	Secondary Wafer Packing Procedure (includes amendments thereto)

  

			
	RELIABILITY QUALIFICATION AND MONITORING
		
	Document No.	  	Document Title
		
	 OQ015Q
 ASMC Wafer Level Reliability Monitoring
Procedure
	  	Process Reliability Qualification Requirements (includes amendments thereto)
		
	 OQ015Q
 ASMC Wafer Level Reliability Monitoring
Procedure
	  	Process Reliability Monitoring Requirement (includes amendments thereto)

  
 WAIVER
PROCEDURES 
  

			
	Document No.	  	Document Title
		
	 OQ011 Q
 Material Review Board Procedure
	  	Material Review Board Procedure (includes amendments thereto)
		
	 OQ005Q
 Procedure for Concession Request
	  	Waiver Request Procedure (includes amendments thereto)

  

 -2- 

 APPENDIX D 
 (Ref : Clause 3.3) 
  
 CHANGE
REQUEST PROCEDURE 
  
 The following ASMC procedures shall
apply. All procedures shall be subject to change by ASMC in accordance with the Change Request Procedure set out in this Appendix D. 
  

			
	Document No.	  	Document Title
		
	 DCOIOQ
 Process Change Customer Approval
Requirement
	  	Major and Minor Change Definition (includes amendments thereto)
		
	 D0007Q
 TPD Change Procedure
	  	Change Request Execution (includes amendments thereto)

  

 APPENDIX E 
 (Ref: Clause 3.4) 
  
 PROCESS
CHANGE REQUESTS 
  
 The ASMC specifications set out in the
following documents are deemed a part of and are incorporated into this Agreement by reference: 
  

			
	Document No.	  	Document Title
		
	 D0007Q
 TPD Change Procedure
	  	Process Request Form (PRF) Procedure (includes amendments thereto)

  

 APPENDIX F 
 (Ref : Clause 8.1) 
  
 PROCEDURE FOR CUSTOMER RETURNS 
  
 The
following ASMC procedures shall apply. All procedures shall be subject to change by ASMC in accordance with the Change Request Procedure set out in Appendix D. 
  

			
	Document No.	  	Document Title
		
	 OQ016Q
 Procedure for Customer Return
  
 OQ012Q
 Procedure for Customer Complaints (Technical)
	  	Procedure for Customer Returns (includes amendments thereto)

  

 APPENDIX G 
 (Ref : Clause 9.2) 
  
 CANCELLATION FEE 
  
 The Cancellation Fee payable by MPS
upon cancellation of delivery of each Wafer in a purchase order will be calculated as follows: 
  
 CF = [(CS divided by TS) x (P - R)] + R + T 
  

			
	where	  	 
		
	‘CF’	  	means the cancellation fee payable by MPS.
		
	‘CS’	  	means the number of completed manufacturing steps as at the date of cancellation.
		
	‘TS’	  	means the total number of manufacturing steps required to produce the Wafers had there not been any cancellation.
		
	‘P’	  	refers to the purchase price of the Wafer as set out in the applicable Agreed Price Quotation.
		
	‘R’	  	refers to the raw wafer cost incurred by ASMC.
		
	‘T’	  	refers to any applicable sales, use, excise or other similar taxes levied on or otherwise payable in connection with the Cancellation Fee.

  
 ASMC shall not charge MPS for the
cancellation of orders if the wafers of the orders have not been started.Investment and Cooperation Contract, dated August 19, 2004

 Exhibit 10.13 
  
 MONOLITHIC POWER SYSTEMS, INC. HAS REQUESTED THAT PORTIONS OF THIS DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 OF
REGULATION C PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ACCORDINGLY, CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. OMITTED INFORMATION HAS BEEN REPLACED BY “[*]”. 

 
 Investment and Cooperation Contract 
  
 This Investment and Cooperation Contract (hereinafter “Contract”) is entered into
by and between the following two parties: 
  

	(1)	The Management Committee of Chengdu Hi-Tech Industrial Development Zone (hereinafter “Committee”); and 

  

	(2)	Monolithic Power Systems Inc. (hereinafter “MPS”), a company duly established and existing under the laws of the State of California, United States of America.

  
 WHEREAS, MPS intends to establish a wholly foreign owned
enterprise (hereinafter “Company”) in the State-Council approved Export Processing Zone of Chengdu Hi-Tech Industrial Development Zone (hereinafter “Hi-tech Zone”), to engage in IC design, R&D, manufacturing and sale;

  
 WHEREAS, the Committee fully supports MPS’ investment plans, and
the Committee and MPS signed on July 9, 2004 a Preliminary Agreement for Investment and Cooperation (hereinafter “Preliminary Agreement”) to set forth the major terms and conditions to the MPS’ investment; 
  
 WHEREAS, based on the friendly negotiations and discussions, the parties agreed to set
forth in this Contract the detailed terms and conditions to MPS’ investment and the parties’ rights and obligations. 
  
 NOW, THEREFORE, the parties agree as follows: 
  

	1.	ESTABLISHMENT OF THE COMPANY 

  

	1.1	The Company will be established as an independent legal entity in the form of limited liability company under the laws of the PRC. The Company shall be liable to any third party
(including government authorities) only to the extent of the Company’s own assets. MPS shall have no liability for any losses, debts, liabilities or other obligations of the Company beyond its contribution to the Company’s Registered
Capital (as defined below). 

  

	1.2	The Company will have a total investment of approximately twelve million US dollars (USD12,000,000) (hereinafter “Total Investment”), of which five million US dollars
(USD5,000,000) will be the registered capital to be contributed by MPS (hereinafter “Registered Capital”). The specific amount of the Company’s Total Investment and Registered Capital will be stipulated in the articles of association
of the Company (hereinafter “AA”). 

	1.3	Notwithstanding any other provisions herein, the difference between the Registered Capital and the Total investment may, at the sole discretion of the Company, be financed by the
Company through bank or shareholder’s loans or other debt financing. In any event, neither the Company nor MPS shall have any obligation whatsoever to make up such difference with further capital contribution or by any other means.

  

	1.4	The Registered Capital shall be contributed by MPS in the form of cash, equipment and/or intellectual property rights, as specified in the AA. 

  

	1.5	Of the initial installment of the Registered Capital (USD750,000) three hundred thousand US dollars (USD300,000) shall be contributed by MPS within three (3) months after the
Establishment Date (as defined below). The contribution schedule of the remaining four hundred fifty thousand US dollars (USD450,000) may be extended for another nine (9) months upon MPS’ application, and the Committee shall ensure to secure,
on behalf of MPS, the necessary government approvals required for such extension. The balance of the Registered Capital of USD4,250,000, will be contributed within three (3) years after the Establishment Date. 

  

	1.6	MPS shall have no obligation to contribute the Registered Capital unless and until: 

  

	 	(1)	the execution of this Contract, the Land Use Rights Purchase Contract, the Factory Lease and Purchase Agreement, the Utilities Service Contracts, all as defined below, in a form and
substance satisfactory to MPS and/or the Company; 

  

	 	(2)	the legal establishment of the Company and the issuance of its Business License; 

  

	 	(3)	the Company is certified as “Encouraged Foreign Investment Project”; and 

  

	 	(4)	the satisfaction of other conditions as may be specified in the AA. 

  

	1.7	The Company name shall be determined by MPS in accordance with relevant PRC laws and regulations and be specified in the AA. 

  

	1.8	The Company shall be established for a term of fifty (50) years, subject to extension at the sole discretion of the Company’s Board of Directors. The extension shall be
approved by the Approval Authority upon the application of the Company six (6) months prior to the expiration of operation period. 

  

	1.9	The Company may, depending on its business requirements, establish branches or business offices inside and/or outside of the PRC in accordance with relevant PRC law.

  

	1.10	The Company shall, in accordance with the relevant PRC laws and regulations, enter into labor contracts with both Chinese and expatriate employees. The Committee shall assist the
Company in recruiting and training employees as required by the Company. 

  

	1.11	The Committee shall support the Company to secure all legally required approvals, licenses, permits and certifications for the establishment and operation of the Company.

  

	1.12	The date on which all of the following conditions have been satisfied shall be deemed the date of establishment of the Company (hereinafter “Establishment Date”):

  

	 	(1)	The Ministry of Commerce or its authorized local agent (hereinafter “Approval Authority”) issues an Approval Letter and Approval Certificate approving the Company’s
AA and the establishment of the Company; and 

  

 -2- 

	 	(2)	The relevant bureau of the Administration of Industry and Commerce issues a Business License for the Company reflecting the major terms and conditions contained in the AA.

  

	2.	LAND USE RIGHTS 

  

	2.1	The Committee shall arrange to have the local land authority in the Hi-tech Zone (hereinafter “Land Authority”) sign a state-owned land use rights purchase contract
(hereinafter “Land Use Rights Purchase Contract”) with the Company pursuant to which: 

  

	 	(1)	A plot of land with an area of [*] (hereinafter “Land”) in the Hi-tech Zone, and at proximity to Intel’s project (the map of the Land attached hereto as Exhibit
A) shall be provided for the Company’s use; 

  

	 	(2)	The Company will acquire the granted land use rights to the Land and will use [*] of the Land for its initial operation. If the Company decides not to use the remaining [*] of the
Land within two (2) years after the commencement of the Company’s operation, the Company shall return the [*] of the Land to the Committee. The Committee shall fully refund or otherwise reimburse the Company the land use rights purchase fees
paid by the Company for such [*] of the Land; 

  

	 	(3)	The term of the land use rights for the Land shall be fifty (50) years, from the execution date of the Land Use Rights Purchase Contract, subject to extension;

  

	 	(4)	The land use rights granted to the Company shall have the legal status of “granted land use rights” under relevant PRC laws and regulations, and may be legally
transferred, mortgaged, leased or otherwise disposed of by the Company, subject to any applicable legal requirements or restrictions; 

  

	 	(5)	The designated use for the Land shall be: industrial use land; 

  

	 	(6)	The land use rights purchase fee for the net area of the Land shall be [*] per mu, which includes the land grant fee but excludes the deed tax (hereinafter “Land Use Rights
Purchase Fee”). The difference between this purchase fee and the standard land purchase fee will be compensation by the committee. 

  

	 	(7)	The Land Use Rights Purchase Contract shall become legally effective on the date on which all the following conditions are satisfied (hereinafter “Land Contract Effective
Date”): 

  

	 	(i)	The Land Use Rights Purchase Contract has been pre-signed, signed and endorsed in accordance with the terms therein; 

  

	 	(ii)	This Contract has become legally effective in accordance with the relevant terms therein; 

  

 -3- 

	 	(iii)	The Land Use Rights Purchase Contract has been approved by MPS’ Board of Directors; 

  

	 	(iv)	The final area for the Land has been determined in accordance with the terms of the Land Use Rights Purchase Contract; 

  

	 	(v)	All of the conditions for the Establishment Date set out in Article 1.12 of this Contract have been fully satisfied. 

  

	 	(8)	The Land Use Rights Purchase Fee shall be paid in full within ninety (90) days of the Land Contract Effective Date; 

  

	 	(9)	The Company shall not be required to pay any land use fees, taxes or other charges in connection with the Land except for the Land Use Rights Purchase Fee and the deed tax of 3% of
the Land Use Rights Purchase Fee; 

  

	 	(10)	The Land Authority shall make representations and warranties in respect of the Land as set out in Exhibit B; 

  

	 	(11)	The Land Authority shall indemnify and hold harmless the Company and MPS against any losses, damages, liabilities or expenses sustained, assumed or incurred by the Company and/or
MPS as a result of any breach by the Land Authority of the Land Use Rights Purchase Contract, and Pre-Handover Liabilities (as such term is defined in the Land Use Rights Purchase Contract), or any third party claims (including government actions or
claims for taxes, fees or charges in respect of the Land in excess of the Land Use Rights Purchase Fee) against the Company and/or MPS with regard to the Company’s possession, control or use of the Land; 

  

	 	(12)	The Land Use Rights Purchase Contract shall be governed by the laws of the PRC, with disputes between MPS/the Company and the Land Authority to be submitted to the China
International Economic and Trade Arbitration Commission (“CIETAC”) in Beijing for arbitration in accordance with CIETAC’s rules. 

  

	2.2	If the total investment from MPS and/or the Company in the Hi-tech Zone reaches fifty million US dollars (USD50,000,000) within five (5) years after the Establishment Date, the
Committee agrees to fully refund or otherwise reimburse the Company the total Land Use Rights Purchase Fee paid by the Company for the Land. 

  

	2.3	The Committee shall secure the relevant granted land use certificate accurately reflecting the relevant terms of the Land Use Rights Purchase Contract within ninety (90) days of the
Land Contract Effective Date. 

  

	3.	FACTORY FACILITIES 

  

	3.1	The Committee shall construct, according to MPS’ standards, technical requirements and national and local laws and regulations, a factory facility and ancillary facilities
(hereinafter “Factory Facility”) of approximately [*] on [*] of the Land, of which [*] shall be testing workshop, warehouse and laboratory, and [*] shall be office space. 

  

 -4- 

	3.2	The parties agree to use their best efforts to keep the construction cost of the Factory Facility under [*] per square meter, such construction cost shall be approved by both
parties, before commencement of construction, based on estimates made by an evaluation agent jointly retained by the parties. Upon completion of the construction, the actual construction cost shall be verified and determined by an evaluation agent
jointly retained by the parties or retained independently by MPS/Company at their sole discretion, subject to the parties’ confirmation. The cost for retaining the service of such evaluation agent(s) shall be borne by the Committee, unless the
agent(s) is retained by MPS or the Company independently, in which case, MPS or the Company will pay for the services. 

  

	3.3	A factory construction, lease and purchase agreement (hereinafter “Factory Lease and Purchase Agreement”) shall be executed by the Company and the Committee, pursuant to
which: 

  

	 	(1)	The Committee shall complete the construction of the Factory Facility and deliver it for the Company’s use within six (6) months after the Company pays the Land Use Rights
Purchase Fee to the Committee and/or the Land Authority, in compliance with the designs and requirements provided by the Company/MPS and subject to the Company’s consent to the final design proposal and the Company’s final inspection and
acceptance of the Factory Facility; 

  

	 	(2)	For five (5) years after completion of the Factory Facility, the Company shall lease the Factory Facility from the Committee at [*] per square meter per month, with the rental to be
paid by the Company quarterly; 

  

	 	(3)	After the fifth year, the Company shall purchase the Factory Facility at its actual construction cost, as determined according to Article 3.2 of this Agreement. The Committee shall
use its best efforts to obtain all tax and non-tax benefits, subsidies and concessions that the Committee and/or the Company may be entitled to with respect to the construction of the Factory Facility; 

  

	 	(4)	The accumulated rental paid by the Company for the Factory Facility shall be deducted from the purchase price of the Factory Facility; 

  

	 	(5)	The Committee shall be responsible for obtaining on behalf of the Company the title certificate under the name of the Company for the Factory Facility duly issued by the relevant
real estate authority no later than ninety (90) days after the completion date of the Factory Facility. The Committee shall provide a copy of such title certificate to the Company within ten (10) days after obtaining such title certificate and
deliver the original copy of the title certificate to the Company once the Company exercises its right to purchase the Factory Facility; 

  

	 	(6)	The Committee shall ensure that the Company’s right to use the Factory Facility is not disturbed by any rights or claims of any third party during the entire term of the
Company; 

  

	 	(7)	Without prior written consent of the Company, the Committee is not allowed to create any mortgage, pledge, lien or other encumbrances on the Factory Facility or seek to sell the
Factory Facility to any third party. The Committee shall ensure that the Company will acquire clean titles to the Factory Facility free from any mortgage, 

  

 -5- 

 pledge, lien, encumbrances, environmental liabilities, historic liabilities at the time when the Company
exercises its right to purchase the Factory Facility, except for those liabilities caused by the Company’s sole action or negligence. 
  

	 	(8)	The title to the Factory Facility will be transferred to the Committee if the Company does not purchase the Factory Facility according to Article 3.3 (3) of this Contract, provided
that the Land Use Rights Purchase Fee for the Land is fully refunded or otherwise reimbursed to the Company by the Committee. The Company, however, should still have the right to lease the Factory Facility. 

  

	3.4	For the avoidance of doubt, the Land Use Rights Purchase Fee for the Land, the rental and the purchase price of the Factory Facility will be paid by the Company out of the
Company’s registered capital. 

  

	4.	TAX AND BENEFITS 

  

	4.1	The Committee will ensure that the Company enjoys the following tax benefits: 

  

	 	(1)	enterprise income tax will be imposed at a base rate of fifteen percent (15%), provided that the Company will enjoy an exemption from enterprise income tax for two years starting
from the Company’s first “profit-making year” and, for the following three years, the Company shall pay enterprise income tax at a reduced rate of [*]; 

  

	 	(2)	the Company will be exempt from local income tax and any administrative charges (excluding the enterprise income tax defined in Article 4.1(1) above) during the entire term of the
Company; 

  

	 	(3)	the Company shall pay enterprise income tax at a reduced rate of [*] for the [*] in which the export of the Company reaches [*] of its annual output; 

  

	 	(4)	the Company shall be entitled to import manufacturing equipment and materials, at values up to the Total Investment of the Company and/or as otherwise permitted by the applicable
laws and regulations, free of customs duties and import VAT; 

  

	 	(5)	the Company shall be entitled to enjoy the VAT, enterprise income tax and other tax reduction, exemption and refund granted specifically under the national and local laws and rules
to the IC manufacturing and R&D enterprises; 

  

	 	(6)	the Company shall be entitled to enjoy other reductions, exemptions and referential tax benefits granted under national and local laws and rules, and those otherwise enjoyed by any
other enterprises in the Hi-tech Zone. 

  

	4.2	Within five (5) years after the Establishment Date, the Committee agrees to reimburse the relevant individuals the portion of the individual income tax paid by the Company’s
expatriate experts and senior management personnel and retained by the Hi-tech Zone; provided that the number of such experts/personnel shall not exceed 10% of the total number of employees of the Company, and the annual salaries of each of such
experts/personnel shall be no less than RMB100,000. 

  

 -6- 

	4.3	Within ten (10) years after the Establishment Date, the Company shall not be required to pay the statutory social insurance for its employees exceeding those required in the
following chart (based on the base salary of the Company’s employees) and shall have the option to pay these social insurance at the rates which meet the minimum requirements of the applicable laws and regulations during the term of the
Company: 

  

					
	 	  	Rates Payable by the
Company

	 	Rates Payable by the
Company’s Employees

	 Pension Fund
	  	[*]	 	[*]
	 Medical Insurance
	  	[*]	 	[*]
	 Unemployment Insurance
	  	[*]	 	[*]
	 Occupational Injuries Insurance
	  	[*]	 	[*]
	 Maternity Insurance
	  	[*]	 	[*]
	 Housing Fund
	  	[*]	 	[*]
	 Total
	  	[*]	 	[*]

  

	4.4	The Committee shall use its best efforts to assist the Company/MPS to apply for and obtain the maximum benefit of all permitted reductions in, or exemptions from, PRC taxes,
including benefits accorded to certified “High and New Technology Enterprises”, exemptions from VAT and customs duties for imported equipment, materials and technology, and exemptions from withholding and business tax for royalty payments
on technology transferred and/or technical assistance provided to the Company. 

  

	4.5	The Committee shall ensure that neither MPS nor Company is penalized for relying on and implementing the terms of this Article 4. 

  

	4.6	The Committee represents and warrants that it has the legal authority to secure the above detailed preferential tax benefits. 

  

	4.7	The Committee acknowledges that in evaluating the feasibility of investing in the Hi-tech Zone, MPS has relied on the Committee’s assurances that the Company will enjoy the
benefits detailed in this Article 4. 

  

	5.	UTILITIES & SERVICES 

  

	5.1	To satisfy the Company’s needs for a reliable supply of and access to electricity, gas and water, etc., the Committee agrees to assist in signing the relevant utilities and
service contracts (“Utilities Service Contracts”) by the relevant utilities/services suppliers and the Company (or MPS, acting on the Company’s behalf) for the procurement and management of such utilities and services, pursuant to
which: 

  

	 	(1)	The Company shall notify the Committee in writing sixty (60) days in advance of the date(s) on which it requires the various services and utilities detailed in item (2) below to be
first available to the Land, setting out in such notice details regarding the Company’s anticipated usage requirements (the “Notice”); 

  

 -7- 

	 	(2)	The Committee shall ensure that the following utilities are available to meet the request of the Company: 

  

	 	(i)	water pipeline(s) sufficient to accept/supply the anticipated quantity of water produced/required by the Company; 

  

	 	(ii)	adequate phone lines, including IDD lines, to support the Company’s business operations and administration: 

  

	 	(iii)	electric power sufficient for the Company’s operations; 

  

	 	(iv)	gas supplies sufficient for the Company’s operations. 

  

	 	(3)	The Committee shall use its best efforts to ensure that the Company’s needs for utilities and services in addition to those detailed in item (2) above are satisfied:

  

	 	(4)	The Company shall enjoy uninterrupted access to the various utilities and services throughout the entire term of the Company; 

  

	 	(5)	The fees charged to the Company for the various utilities and services shall not be higher than fees for the same or comparable utilities and services charged to any other
enterprise in the Hi-tech Zone; 

  

	 	(6)	The supply of water, gas, electricity and other utilities shall be provided in accordance with the following terms: 

  

	 	(i)	Term: At least fifty (50) years. 

  

	 	(ii)	Connections & Maintenance: The Company shall not, unless otherwise stipulated in the Utilities Service Contracts, bear the cost of any utility connections or maintenance
of the pipelines and utilities infrastructure. Connections for the utilities shall be made at the boundary limits of the Land at specific locations designated in the Utilities Service Contracts or otherwise reasonably designated in writing by the
Company. 

  

	 	(iii)	No Minimum Fees or Increased Capacity Charges: Unless otherwise provided in the Utilities Service Contracts, the Company shall not be subject to any minimum purchase
requirements nor shall it be subject to any increased capacity fees or charges. 

  

	 	(iv)	Pricing: According to the price published by the relevant government authorities. 

  

	 	(v)	Billing & Payments: The suppliers shall issue monthly invoices based on the actual utilities/services provided to the Company in accordance with the terms of the
Utilities Service Contracts. Payment terms shall be detailed in the Utilities Service Contracts. 

  

	 	(vi)	Measuring Devices: The Company and the relevant utility suppliers shall, at their respective cost and pursuant to agreed-upon technical specifications

  

 -8- 

 and industry metering requirements, install metering equipment at locations specified in the Utilities
Service Contracts. Terms regarding calibration, precision levels and meter reading shall also be set out in the Utilities Service Contracts. 
  

	 	(vii)	Delivery & Risk of Loss: The utility suppliers shall provide utilities strictly in accordance with the specifications set out in the Utilities Service Contracts and shall
bear all losses, damages, etc, for any breach of such supply obligations. Delivery points shall be specified in the Utilities Service Contracts, with ownership and risk of loss passing to the Company at such specified points.

  

	 	(viii)	Interruptions & Maintenance: The utilities suppliers and the Company will consult with each other to plan maintenance stops and procedures, using all reasonable
endeavours to minimize disruptions and/or interruptions in the supply and off-take of utilities. Long and short-term maintenance plans and schedules of anticipated shut-downs and interruptions shall be prepared and discussed by the parties in
accordance with the Utilities Service Contracts. 

  

	 	(ix)	Governing Law & Dispute Resolution: The Utilities Service Contracts shall be governed by PRC law, with disputes between MPS/Company and the Committee with respect to the
provision of the utilities and services to be referred to CIETAC in Beijing for arbitration. 

  

	 	(7)	The discharge of waste and pollutants by the Company shall be in compliance with relevant provisions of PRC laws and regulations in connection with environmental protection:

  

	 	(8)	The Committee shall ensure that the Land is, for the duration of the term of the Company, accessible by road, and the roads around the Land have suitable load-bearing capacity for
the transportation of required equipment and materials to and from the Land; 

  

	 	(i)	The Committee shall be responsible for levelling the Land to meet the requirements of Factory Facilities construction without any charge or expense to the Company.

  

	6.	GOVERNING LAW AND DISPUTE RESOLUTION 

  

	6.1	This Contract shall be governed by and construed in accordance with the laws of the PRC. 

  

	6.2	The parties shall strive to settle any dispute or claim arising from the interpretation or performance of this Contract through friendly consultations. In case no settlement can be
reached through consultations within sixty (60) days of the submission of notice of such matter by a party to the other party, then such matter shall be submitted to the CIETAC in Beijing for arbitration in accordance with its then applicable rules.

  

	6.3	The parties confirm that this Contract is a commercial contract, negotiated and concluded on a voluntary and equal basis, creating civil obligations and liabilities on all parties
and authorities related to this Contract. The Committee also confirms that the execution and 

  

 -9- 

 performance of this Contract is a commercial, rather than a governmental or administrative, act. The
Committee and all authorities relevant to this Contract further confirm that they do not have any claim of immunity or similar claim whatsoever. 
  

	7.	EFFECTIVE DATE & TERMINATION 

  

	7.1	This Contract shall become legally effective once signed by the Committee and MPS, (such date shall be referred to herein as the “Effective Date”). This Contract is a
legally binding obligation of each party. 

  

	7.2	Within ninety (90) days after the execution of this Contract, the Committee shall make sure to: 

  

	 	(1)	assist the Company in applying for and obtaining the Approval Letter and Approval Certificate for the Company’s establishment and the Business License of the Company and all
other licenses, permits, approvals, certifications or endorsements necessary for the Company’s legal establishment and operation; 

  

	 	(2)	cause the relevant parties/authorities to sign with the Company the Land Use Rights Purchase Contract, Factory Lease and Purchase Agreement, Utilities Service Contracts and other
legal documents and agreements necessary for the Company’s operation, to the satisfaction of MPS/the Company; 

  

	 	(3)	cause the relevant authorities to certify and confirm the designs of the Factory Facility as supplied by MPS and/or the Company and accepted by the Committee.

  

	7.3	Within one (1) month after the Establishment Date, the Committee shall ensure to obtain from the relevant approval authority the certification confirming the Company as a
“Encouraged Foreign Investment Project”. The Committee ensures that the Company would be certified as a High and New Technology Enterprise after the Company commences its operation. 

  

	7.4	This Contract shall remain in effect, from the Effective Date, for the full term of the Company unless terminated earlier in accordance with this Article 7.4. This Contract may be
terminated by the Company or MPS if: 

  

	 	(1)	any matter set forth in Article 7.2 has not be fulfilled within the time period as specified in Article 7.2 or any extension thereof agreed to by the parties; or

  

	 	(2)	this Contract, the Facility Lease and Purchase Agreement, the Land Use Rights Purchase Contract or the Utilities Service Contracts is materially breached by the Committee, the Land
Authority or the relevant utilities and service suppliers, as the case may be, and such breach is not remedied within thirty (30) days after notification from MPS or the Company. 

  

	7.5	The Committee shall indemnify and hold the Company and MPS harmless against any losses, damages, liabilities or expenses sustained, assumed or incurred by the Company and/or MPS as
a result of any breach by the Committee of this Contract and the Facility Lease and Purchase Agreement. 

  

 -10- 

	7.6	If, during the performance of this Contract, any circumstance that is reasonably unpredictable and unavoidable by both parties when signing this Contract and that prevents the
performance of this Contract occurs, and neither party is liable for the occurrence of such events, then either Party may delay the performance of part or all of its obligations under this Contract, or terminate this Contract without liabilities on
the part of either Party. 

  

	8.	MISCELLANEOUS 

  

	8.1	Each party agrees to hold in confidence and not disclose or permit to be disclosed to any third party without the prior written consent of the other party (unless expressly
permitted herein or required to be filed or disclosed to the public by either the United States Securities and Exchange Commission or by the applicable law) the terms of this Contract, or any technical or other confidential information which one
party might disclose to the other party in the course of discussions regarding this Contract and the establishment of the Company. 

  

	8.2	The Committee shall ensure that the Company is entitled to enjoy any and all beneficial treatments granted to and enjoyed by any other entity in the Hi-tech Zone.

  

	8.3	MPS is entitled to transfer or assign its rights and obligations under this Contract to one of its wholly owned subsidiaries. The Committee hereby specifically agrees to such
transfer or assignment, and confirms that no further consent, in whatever form, from the Committee is required for such transfer or assignment by MPS. 

  

	8.4	The Exhibits attached hereto are an integral part of this Contract 

  

	8.5	This Contract and its Exhibits constitute the entire agreement between the parties relating to the subject matter hereof and supersede any previous written or oral agreements or
memoranda related hereto, including without limitation the Memorandum of Understanding and the Preliminary Agreement for Investment and Cooperation signed by the parties on April 13, 2004 and July 9, 2004 respectively. 

  

	8.6	All notices or other communications under this Contract shall be in writing (including telegram or facsimile) and shall be delivered or sent to the correspondence addresses or
facsimile numbers of the Parties as set forth below or to such other addresses and facsimile numbers as shall be notified to all Parties in writing by any Party. 

  
 MPS/Company: 
  
 Attn: Deming Xiao 
 Tel:
408-395-2802-45 
 Fax: 408-395-2812 
  

Committee: 
  
 Attn: Gang Li 
 Tel:
86-28-85178684 
 Fax: 86-28-85176329 
  

	8.7	This Contract shall be executed in both English and Chinese versions. Both versions shall have equal validity. 

  

 -11- 

	8.8	This Contract shall be executed in four (4) counterparts with each party retaining two (2) counterpart. 

  
 IN WITNESS THEREOF, this Investment and Cooperation Contract has been duly signed by the authorized representatives of each party on this
19th day of August, 2004. 
  
 The Management Committee of Chengdu Hi-Tech
Industrial Development Zone 
  

			
	 Signature:  /s/ Jing Gang

	
	 Printed Name:  Jing Gang

	
	 Position:  Director, The Management Committee of the Chengdu Hi-tech Zone

	
	 Official Seal:

  
 Monolithic Power Systems Inc.

  

			
	 Signature:
	 	 
		
	 Printed Name:  Deming Xiao
	 	/s/ Deming Xiao
		
	 Position:  Vice President of Operations, MPS
	 	 

  

 -12- 

 Exhibit A 
  
 Bluelined Land Map 
  
 [map] 

 Exhibit B 
  
 Representations and Warranties 
 to be Included in the Land Use Rights Purchase Contract 
  
 The Land Authority represents and warrants as of the date the Land Use Rights Purchase Contract is executed, and as of the Grant Date, as such term is defined in the Land Use Rights Purchase Contract, that:

  

	(1)	The granted land use rights in respect of the Land can be legally granted to the Company; 

  

	(2)	The execution and performance by the Land Authority of the Land Use Rights Purchase Contract: (i) is within its respective authority and power; and (ii) does not contravene any law
or contractual restriction binding on or affecting it; 

  

	(3)	As of the Grant Date, the Company shall enjoy granted land use rights of the Land, free and clear of any liens, mortgages, or other security interests or encumbrances, including,
without limitation, claims by any government agency; 

  

	(4)	The Land Use Rights Purchase Contract is a legal, valid and binding obligation of the Land Authority, fully enforceable in accordance with its terms; 

  

	(5)	The Land is free from environmental hazards and contamination of any nature, and is in full compliance with applicable PRC laws and regulations, including, without limitation,
relevant environmental laws and regulations related to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, toxic or hazardous substances or wastes; 

  

	(6)	There is no lawsuit, arbitration, or legal, administrative or other proceeding or governmental investigation pending or, to the best knowledge of the Land Authority, threatened in
respect of the Land.

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