Component Recovery Agreement - Micron Technology Inc. and Micron Electronics Inc.
COMPONENT RECOVERY AGREEMENT
This Component Recovery Agreement (the "Agreement") is entered into
effective as of August 14, 1996 (the "Effective Date"), by and between Micron
Technology, Inc., a Delaware corporation located at 8000 South Federal Way,
Boise, Idaho 83707 ("MTI"), and Micron Electronics, Inc., a Minnesota
corporation located at 900 E. Karcher Road, Nampa, Idaho 83687 ("MEI").
WHEREAS, MTI is engaged in the business of developing and manufacturing
semiconductor memory devices and MEI is engaged in the business of recovering
semiconductor memory devices for sale to third parties; and
WHEREAS, MTI wishes to sell and MEI wishes to purchase semiconductor memory
devices manufactured by MTI which do not meet MTI's design and electrical
specifications and utilize them in less critical applications;
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
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following meanings:
(a) "Affiliated company" means any entity which is at least fifty percent
(50%) owned or controlled by MEI or by MTI and any entity which is at least
fifty percent (50%) owned or controlled by any such entity.
(b) "Components" means MTI semiconductor memory devices, in die or packaged
form, limited to DRAMs, SRAMs, VRAMs and/or derivatives which have failed MTI's
design and electrical specifications.
(c) "MEI Volume" means, at any given time and for each separate part type,
the quantity of full specification semiconductor memory devices purchased by MEI
during the previous fiscal work week.
(d) "MTI's Average Sales Price" means, for each separate part type, the
average of the prices associated with the lowest priced full specification
semiconductor memory devices sold by MTI during the previous fiscal work week in
the amount equal to the MEI Volume. For example, if the MEI Volume for 1 meg x
4 devices were 100 and if, during the same fiscal work week, MTI sold 50 1 meg x
4 devices for $4.00 per device, 100 1 meg x 4 devices for $5.25 per device and
50 1 meg x 4 devices for $6.00 per device, MTI's Average Sales Price for 1 meg x
4 devices would be $4.63 [(50 x 4) + (50 x 5.25) divided by 100].
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2. Sales of Components. MTI hereby grants to MEI the right to purchase all
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of MTI's Components and to resale the Components upon the terms and conditions
set forth herein. Accordingly, MTI shall not sell Components to any third party
whether in the form of components, modules or board level products without first
offering such Components for sale to MEI in accordance with this Agreement.
Nothing contained herein shall obligate MEI to purchase Components made
available for sale by MTI.
3. Component Recovery. MTI hereby grants to MEI the right to enter onto MTI's
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premises at all reasonable hours to recover Components from MTI. This right
shall include the right by MEI personnel directly or indirectly, with or without
MTI's assistance, (i) to retrieve Components from MTI's Probe area; (ii) to
select and assemble Components retrieved from MTI's Probe area for submission to
MTI's Assembly area for packaging (encapsulation) by MTI or in MTI's discretion
to an assembly site of MTI's choice (MTI is under no obligation to assemble
these Components for MEI); (iii) to retrieve Components from MTI's Assembly area
and from MTI's Test area. For the purpose of allowing MEI personnel to select
and assemble Components for packaging by MTI in MTI's Assembly area, MTI agrees
to make available to MEI at no cost a reasonable and adequate amount of Assembly
cleanroom floor space, but in no event less than 300 square feet of such floor
space, for use by MEI personnel and equipment; provided, however, that MTI may
for reasonable business purposes deny MEI access to MTI's manufacturing site,
recover Components and provide such Components to MEI off-site at MTI's cost.
MTI shall bear all costs associated with MTI's fabrication, probe, assembly and
testing of Components that failed (as defined in Section 1(b) above) in the Test
area. MTI shall also bear all fabrication and probe costs relating to
Components MEI recovers from MTI's Assembly and Probe areas. All manufacturing
costs associated with the assembly of Components recovered by MEI from MTI's
Probe and Assembly areas shall be borne by MEI. Except as otherwise provided
above, the point of delivery shall be deemed to be the point of shipment by MTI
at MTI's manufacturing site or the point of direct retrieval by MEI personnel of
packaged Components at MTI's manufacturing site. Components shall be shipped
FOB the point of delivery. Title and risk of loss of Components shall pass from
MTI to MEI at the FOB point.
4. Profit Sharing. In consideration for the recovery and purchase by MEI
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of the Components from MTI, MEI hereby agrees to pay to MTI an amount equal to
fifty percent (50%) of the pre-tax net income realized by MEI's Component
Recovery Division from sales of the Components to third parties and affiliated
companies and from intracompany sales or transfers to MEI's other divisions or
operations. For the purpose of determining profits of sales from MEI's
Component Recovery Division to MEI's affiliated companies and intracompany sales
or transfers to MEI's other divisions or operations, prices for such Components
shall be based on MTI's Average Sales Price and established in accordance with
the transfer price schedule set forth in Schedule A attached hereto.
5. Payment of Profit Sharing Amount. Unless otherwise provided herein,
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MTI's share of pre-tax net income realized from sales to third parties and
intracompany
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sales or transfers of Components shall be paid by MEI to MTI net forty-five (45)
days after the end of each MEI fiscal month.
6. Inspection of Records. MEI shall keep full, clear and accurate records
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with respect to third party and intracompany sales of Components. MTI shall
keep full, clear and accurate records with respect to the Average Sales Price
used for the purpose of calculating the price of Components and with respect to
MTI's assembly costs. Each party's records shall be kept at the party's
principal place of business and shall be open at all reasonable times during the
term of this Agreement to the inspection of a mutually agreeable third party.
Neither party hereto shall unreasonably withhold from the other information
necessary to confirm compliance with the terms of this Agreement, including but
not limited to information pertaining to intellectual property rights and
agreements pertaining to the Components. In the event a party requests an
inspection as provided herein, such party shall bear all costs and expenses
associated with such inspection, unless such inspection reveals noncompliance
with the terms of this Agreement by the other party, in which case the
noncomplying party shall bear all such costs and expenses.
7. Intellectual Property Rights. Each party hereby grants to the other party
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the right to use and make available as reasonably requested the intellectual
property of the other, including but not limited to patents, patent
applications, software programs, and copyrighted materials, as necessary to
identify, recover and sell the Components. In addition to bearing all costs of
development and manufacture of Components, MTI shall bear sole responsibility
for, and shall promptly pay when due, all royalty obligations arising from
patent license agreements entered into by MTI, and associated with sales of the
Components to and by MEI. MTI hereby agrees to indemnify MEI for any damages
incurred in the event of nonpayment by MTI of any such royalty obligations,
provided that such indemnification shall not extend to damages incurred as the
result of nonpayment of royalties arising from a bona fide dispute by MTI
regarding the terms or extent of such obligations. Royalty obligations paid by
MTI associated with sales of the Components shall be treated as costs for the
purpose of the computation of pre-tax net income referred to in Section 4 above.
8. Confidentiality. Each party acknowledges that it will have access to
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certain information and materials concerning the business, plans, customers,
technology, and products of the other pertaining to the subject matter of this
Agreement that are confidential and of substantial value to the other party.
Each party agrees that it will not at any time disclose such confidential
information to any third party.
9. No Warranty. MTI MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, REGARDING THE
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COMPONENTS, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY, OR OTHERWISE.
MTI DOES NOT MAKE TO MEI OR ANY CUSTOMER OF MEI, AND HEREBY EXPRESSLY DISCLAIMS,
ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND
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WITH RESPECT TO THE COMPONENTS. ALL COMPONENTS ARE SOLD "AS IS" AND "WITH ALL
FAULTS".
10. Limitation of Liability. Except as otherwise provided herein, in the event
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of termination by either party in accordance with any of the provisions of this
Agreement, neither party shall be liable to the other because of such
termination, for compensation, reimbursement or damages on account of the loss
of prospective profits or anticipated sales, or on account of any expenditures
or commitments in connection with the business or goodwill of either party.
11. Patent Indemnity. MTI represents and warrants that the delivery and sale
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of Components hereunder will not infringe any patent, trademark or other
intellectual property rights of third parties. MTI shall indemnify and hold MEI
harmless of and from any and all losses, including loss of costs, claims
liabilities and expenses, including attorneys' fees, incurred by MEI with
respect to any such infringement of any patent, trademark or other intellectual
property rights, provided that such indemnification shall not exceed that amount
equal to MTI's share of the net profits derived from the sale by MEI of the
infringing products. MEI shall have the right to offset against payments due to
MTI hereunder the amount of any indemnification owed by MTI to MEI under this
Section.
12. Term and Termination.
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12.1 Term. The term of this Agreement shall commence on the Effective
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Date and shall continue thereafter for a period of three (3) full fiscal years
from the fiscal year-end next following the Effective Date, subject to earlier
termination in accordance with the provisions of this Section and shall continue
on a year-to-year basis thereafter unless canceled by the other party within
thirty (30) days prior to the end of the initial term or any extension thereof.
12.2 Termination by Mutual Agreement. This Agreement may be terminated at
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any time upon the mutual written agreement of the parties.
12.3 Termination by MTI. MTI shall have the option to terminate this
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Agreement upon MTI's Loss of Control of MEI (as defined below), by providing
written notice to MEI within ninety (90) days of such Loss of Control.
For purposes of this Section 12.3, "Loss of Control" shall mean such time
as MTI shall become the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, as amended) of less than thirty
percent (30%) of the total voting power of all classes of Equity Interests of
MEI then outstanding and normally entitled to vote in the election of directors
or other governing body of MEI. For purposes of this Section 12.3, "Equity
Interests" shall mean any and all shares, interests, rights to purchase
warrants, options, participations or other equivalents of, or interests in
(however
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designated) corporate stock or other equity participations, including
partnership interests, whether general or limited, including any preferred
equity interests.
12.4 Survival of Certain Terms. The provisions of Sections 8, 9, 10, 11
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and 14 of this Agreement shall remain in full force and effect after any
termination of the Agreement. With respect to Components delivered by MTI to MEI
for which profits have not yet been realized by MEI or paid to MTI, all the
provisions of this Agreement shall remain in full force and effect after any
termination of this Agreement.
13. Application to Subsidiaries. The obligations of either party hereunder
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shall be applicable to subsidiaries of each such party. "Subsidiary" shall mean
any entity owned fifty percent (50%) or more by a party.
14. General Provisions.
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14.1 Governing Law. This Agreement shall be governed by and construed under
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the laws of the State of Idaho. The federal and state courts within the State
of Idaho shall have the sole and exclusive jurisdiction to adjudicate any
dispute arising out of this Agreement.
14.2 Entire Agreement. This Agreement sets forth the entire agreement and
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understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by authorized representatives of both parties.
14.3 Notices. Any notice required or permitted by this Agreement shall be
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in writing and shall be sent by prepaid registered or certified mail, return
receipt requested, addressed to the other party at the address shown at the
beginning of this Agreement or at such other address for which such party give
notice hereunder. Such notice shall be deemed to have been given three (3) days
after deposit in the mail.
14.4 Force Majeure. Nonperformance of either party shall be excused to the
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extent that performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, or any other reason where failure
to perform is beyond the control and not caused by the negligence of the
nonperforming party.
14.5 Assignability and Binding Effect. The rights and obligation of each
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party hereunder may not be assigned or transferred directly or indirectly
without the prior written consent of the other party, which consent shall not be
unreasonably withheld. Provided, however, that MEI may assign or transfer its
rights and obligations arising out of this Agreement to one or more of its
subsidiaries or affiliated companies. Change of ownership or control of MEI or
MTI or any assignee permitted under this Section 14.5 shall not constitute an
assignment or transfer under this Section 14.5. If MEI sells or transfers its
component recovery assets and business to a subsidiary or affiliated company,
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MEI shall be permitted to assign or transfer its rights and obligations arising
out of this Agreement to such subsidiary or affiliated company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
14.6 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
MICRON TECHNOLOGY, INC. MICRON ELECTRONICS, INC.
By /s/ Steven R. Appleton By /s/ Gregory D. Stevenson
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Title CEO and President Title Executive Vice President,
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Operations
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Schedule A
Transfer Price
Transfer Price Transfer Price Transfer Price Transfer Parts
for Full Specification for Systems Grade for Printer for Audio Grade
MTI's Average Sales Price Parts Parts Buffer Grade Parts Devices
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X .975(X) .8288(X) .70(X) .25(X)
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Amendment Number 2 to Component Recovery Agreement
THIS AMENDMENT NUMBER 2 (this "Amendment") is entered
into by and between Micron Technology, Inc., a Delaware
corporation ("MTI") and Micron Electronics, Inc., a
Minnesota corporation ("MEI").
WHEREAS, MTI and MEI entered into that certain
Component Recovery Agreement with an effective date of
August 14, 1996, as amended by that certain Amendment Number
1 to Component Recovery Agreement dated effective as of
August 30, 1996 (as amended, the "Agreement"); and
WHEREAS, MTI and MEI desire to amend the Agreement in
accordance with the terms set forth below:
NOW THEREFORE, MTI and MEI agree as follows:
1. Amendment. Section 12.1 of the Agreement is deleted
and replaced in its entirety to read as follows:
Section 12.1 Term. The term of this Agreement shall
commence on the Effective Date and shall continue
thereafter until September 2, 1999, subject to earlier
termination in accordance with the provisions of this
Section, and shall continue on a year-to-year basis
thereafter unless terminated by either party by written
notice not less than ninety (90) days prior to the end
of the initial term or any extension thereof.
2. No Further Modification. Except as set forth herein,
the provisions of the Agreement remain unmodified and in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be effective as of the date of the last
signature set forth below.
MICRON TECHNOLOGY, INC. MICRON ELECTRONICS, INC.
By:/s/Steven R. Appleton By:/s/T.Erik Oaas
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Name: Steven R. Appleton Name: T.Erik Oaas
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Title: Chairman, CEO & President Title: Executive V.P., Finance, & CFO
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Date: September 2, 1998 Date: August 26, 1998
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