Purchase Agreement - Micron Technology Inc. and KTI Semiconductor Ltd.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made this 30th day of
September, 1998, by and between Micron Technology, Inc., a Delaware, U.S.A.
corporation, with its principal place of business at 8000 South Federal Way,
Boise, Idaho 83716-9632, U.S.A. ("Micron"), and KTI Semiconductor Limited, a
Japanese corporation, with its headquarters located at 302-2, Hirano-cho,
Nishiwaki, Hyogo Prefecture, 677-0063, Japan ("KTI"). Micron and KTI are
hereinafter sometimes individually referred to as a "Party" and collectively as
the "Parties".
In consideration of the mutual promises and covenants contained herein, the
Parties, intending to be legally bound, agree as follows:
1. PURPOSE
1.1 This Agreement implements certain provisions of the Shareholders'
Agreement dated March 19, 1990, among KTI's shareholders and
ratified, joined in and accepted by KTI on May 22, 1990, and amended
September 28, 1990 by Amendment #1, amended November 5, 1992 by
Amendment #2, amended effective as of June 7, 1993 by Amendment #3,
amended July 14, 1993 by Amendment #4, amended December 15, 1993 by
Amendment #5, amended March 24, 1994 by Amendment #6, amended June 27,
1994 by Amendment #7, amended effective as of November 1, 1995 by
Amendment #8, amended effective as of November 1, 1996 by Amendment
#9, amended effective as of January 1, 1998 by Amendment #10, amended
March 26, 1998 by Amendment #11, amended June 23, 1998 by Amendment
#12, and amended [September 30, 1998] by Amendment #13 to
Shareholders' Agreement (as so amended, and as hereafter amended or
otherwise modified from time to time, the "Shareholders' Agreement")
for the purchase by Micron, and the sale by KTI to Micron, of those
Products (as defined in the Shareholders' Agreement) which are more
specifically set forth in Attachment 1 which is incorporated herein by
this reference (hereinafter "Products").
2. PURCHASE ORDERS
2.1 Purchase orders issued by Micron and/or its affiliates (hereinafter
individually or collectively ("Micron")) under this Agreement are for
administrative, payment and accounting purposes. The terms and
conditions of any purchase order so issued which purports to alter,
amend or extend provisions or terms of manufacture, sale and delivery
of Products as agreed to by Micron, KOBE and KTI in the Shareholders'
Agreement and Annexes thereto shall have no force or effect.
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3. PRODUCTS
3.1 KTI agrees to sell to Micron or its designated Affiliate (as that term
is defined in the Shareholders Agreement) and Micron or its designated
Affiliate agrees to purchase, KTI's entire output (i.e., one hundred
percent (100%), of the finished Products subject to the terms,
conditions and obligations set forth in the Shareholders' Agreement
and the Annexes thereto, including this Agreement. Such terms,
conditions and obligations include without limitation SECTIONS 8 (WORK
SPECIFICATIONS), 9 (QUALITY INSPECTION, TESTING AND CUSTOMER SERVICE),
and 10 (MANUFACTURING CHANGES) of the Technical Assistance Agreement
dated as of September 30, 1998 between Micron, Kobe Steel Ltd., a
Japanese corporation, with its headquarters located at 3-18,
Wakinohama 1-Chrome, Chuyou-Ku, Kobe, Japan, and KTI (as hereafter
amended or otherwise modified from time to time, the "Technical
Assistance Agreement"). Nothing in this Agreement shall be construed
to limit Micron's right or the right of Micron's affiliates to
purchase any semiconductor devices similar to the Products from any
source other than KTI
4. TERM
4.1 This Agreement shall be effective as of the Acquisition Closing Date
(as defined in Amendment #13 to the Shareholders' Agreement) and shall
continue in effect throughout the Term of the Shareholders' Agreement
(as defined therein), unless earlier terminated or modified by mutual
agreement in writing by Micron and KTI.
5. PRICING AND PAYMENT TERMS
5.1 KTI shall sell the Products to Micron in accordance with the pricing
formula provided in Annex A to the Shareholders' Agreement. KTI
shall invoice Micron for Products sold to Micron on a monthly basis in
accordance with Section 18.6 of the Shareholders' Agreement and such
Annex.
5.2 Place of shipment and payment terms are as specified in Sections 18.5,
18.6 and 18.7 of the Shareholders' Agreement.
6. DELIVERY
6.1 The delivery dates indicated by Micron on its purchase orders for the
Products are important elements of shipment and receiving of Products.
KTI agrees to take all reasonable efforts so that the Products shall
be delivered to Micron's designated delivery point on the dates set
forth in the applicable purchase order(s) accepted by KTI, unless the
Parties agree otherwise in writing. In the event that any Products are
not shipped in accordance with such delivery dates, KTI agrees to ship
via air freight (or as directed by Micron) and to pay for all extra
costs.
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6.2 Failure of KTI to meet agreed upon delivery shall be considered a
breach of contract. Furthermore, KTI agrees to pay to Micron any
penalty and damages imposed upon or incurred by Micron for failure of
KTI to deliver any of the Products on such delivery dates.
6.3 In addition to the packing and shipping instructions in Paragraph 11
below, the Products shall be packaged in accordance with commercially
accepted standards, or to applicable Micron specifications, to ensure
safe arrival at Micron's designated delivery point.
7. KTI'S WARRANTIES AND REPRESENTATIONS
7.1 KTI warrants and represents to Micron that the Products will conform
to the Specifications and shall be fit for their intended purpose and
use and shall be free from any defects in material and workmanship for
a period of two (2) years from the date of each shipment from KTI of
the Products, provided that said period may be renegotiated for a
longer period of time to conform to the industry standard current at
the time of renegotiation. KTI's failure to take corrective actions
for the next production lots after written notification of the
problem(s) is provided to KTI may be considered by Micron to be a
material breach of this Agreement.
7.2 In the event Micron determines that the Products are defective in
workmanship or otherwise in breach of the warranty set forth in
Paragraph 7.1, Micron shall notify KTI immediately in writing of the
defect, and KTI shall promptly, at Micron's option, either repair or
replace any defective Products at no cost to Micron, or credit to
Micron's account Micron's purchase price and all reasonable out of
pocket shipping costs incurred with respect to the return of the
defective Products; provided, however, in the event such defect is
directly attributable to a material error in the Technical Information
transmitted by Micron to KTI under the Technical Assistance Agreement,
then Micron agrees that during the two (2) year warranty period Micron
will indemnify KTI for all direct manufacturing and material costs
associated with the repair or replacement of the defective Products
manufactured for Micron. MICRON SHALL NOT BE LIABLE FOR ANY
CONSEQUENTIAL DAMAGES, COSTS OR LOSSES WITH RESPECT TO BUSINESS
INTERRUPTION. A Return Material Authorization ("RMA") form previously
issued by KTI must accompany any such returned Products.
7.3 Following receipt of each shipment, Micron shall perform an incoming
test on each shipment of the Products shipped hereunder. In the event
that such Products fail to conform to the Specifications as evidenced
by the Micron incoming inspection, Micron shall have the right to
return, after confirmation of failures, such Products to KTI for
rework or replacement at no cost to Micron. Micron has the right to
recommend corrective action to address any such variances from
Specifications. Such return shipment shall be made by Micron F.O.B.
the destination from which they were originally shipped by KTI.
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7.4 If the Products fail Micron's incoming inspection tests at the
shipping destination as designated on the Micron purchase order,
Micron may so advise KTI in writing and receive, at Micron's option,
prompt replacement of the Products or credit in that amount against
pending or future Micron orders for the Products.
7.5 Except as provided in Section 20.5 of the Shareholders' Agreement, KTI
will hold Micron harmless from and indemnify Micron against all claims
made by third parties arising out of the operations of KTI or the
Products manufactured by KTI, including all acts or omissions by KTI's
personnel (whether or not such personnel are direct employees of KTI
or have been obtained from one of the parties to the Shareholders'
Agreement on a seconding or contractual basis).
7.6 The warranties in the Shareholders' Agreement and its Annexes,
including this agreement, are stated in lieu of all other warranties,
express, statutory, or implied, and neither assume nor authorize any
other person to assume for the parties any other liabilities in
connection with the manufacture or sale of said Products. The
warranties shall not apply to any of such Products which have been
repaired or altered, except as authorized by KTI, or which shall be
subjected to misuse, negligence, accident, or abuse.
7.7 The terms "Specifications," "Technical Information," and "Products" as
used herein shall have the same definitions as in the Technical
Assistance Agreement.
8. FORCE MAJEURE
8.1 Should any Party be prevented from performing its contractual
obligations under this Agreement due to the cause or causes of force
majeure such as acts of God, acts of war (declared or undeclared),
fire, storm, floods, typhoon or other severe weather conditions,
serious earthquake, strikes, boycotts, legal restraints, government or
like interference, accidental damage to equipment, as well as any
other cause outside the control of that Party, that Party shall not be
liable to the other for any delay or failure of performance caused by
any of the above events.
8.2 The Party prevented from performing by the causes identified in
Paragraph 8.1 shall notify the other Party of the occurrence of any of
the above events in writing by cable or telex within the shortest
possible time.
8.3 Should the delay caused by any of the above events continue for more
than ninety (90) days, the Parties shall settle the problem of further
performance of this Agreement through friendly negotiations as soon as
possible. In the event that the Parties cannot meet to negotiate or
cannot reach agreement, the Agreement may be terminated by prior
written notice of one Party to the other Party.
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9. RETURN MATERIAL AUTHORIZATION
9.1 Defective material shall be returned freight collect to KTI.
Replacement material shall be sent freight prepaid from KTI, which
shall absorb the burden of premium transportation when defect or
replacement material places critical time or delivery schedule
constraints on Micron.
9.2 KTI agrees to provide as soon as reasonably possible, but not
exceeding five (5) work days, RMAs as contemplated by Paragraph 7.2
herein.
10. OVERSHIPMENTS
10.1 KTI shall ship only the quantity(ies) specified in purchase orders
placed under this Agreement. However, any deviation caused by
conditions of loading, shipping, packing or allowances in
manufacturing processes may be accepted by Micron according to the
overshipment allowance indicated on the face of Micron purchase
orders. If no allowance is shown, no percentage overshipment is
allowed. Micron reserves the right to return any overshipment in
excess of the allowance at KTI's expense.
11. PACKING AND SHIPPING INSTRUCTIONS
11.1 KTI will properly pack and describe shipments in accordance with
Micron specifications and applicable carrier regulations. Shipment
will be made at the lowest possible freight charges. Micron may
assist KTI by providing freight classifications or classifying
material. KTI will insure or declare value on shipments except on
parcel post, unless Micron specifies otherwise. On shipments where
value is declared, KTI will ship prepaid insured for fifty U.S.
dollars (US $50.00) to facilitate tracing. If shipping by air
carrier, KTI will ship freight prepaid. KTI shall consolidate the air
and surface shipments on single bills of lading insofar as possible so
as to avoid premium freight costs unless instructed otherwise by
Micron.
11.2 In case any shipment does not correspond to normal practice in the
industry (e.g., require special handling shipment or air ride
suspension, or air shipment over five hundred (500) pounds, or over
one hundred twenty (120) inches long or wide or over fifty-six (56)
cubic feet, etc.), KTI agrees to notify Micron's appropriate traffic
department seventy-two (72) hours prior to shipment for special
shipping instructions.
11.3 Each box, crate or carton will show Micron's full street address and
purchase order number regardless of how shipped. On air carrier
shipments, a packing list shall accompany each container and shall
describe the contents of such container. On all other shipments, KTI
will provide a packing list to accompany each shipment, referencing
the appropriate purchase order number. The bill of lading also will
reference the purchase order number.
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11.4 KTI is responsible for packing shipments correctly based on the
carrier/mode utilized. Charges for packing and crating shall be
deemed part of the purchase price and no additional charges will be
made therefor unless specifically requested by Micron on the purchase
order. KTI agrees to ship via the carrier specified by Micron.
12. NOTICE OF LABOR DISPUTE
12.1 Whenever any actual or potential labor dispute delays or threatens to
delay the timely performance of any purchase order issued hereunder,
KTI shall immediately give notice thereof to Micron.
13. APPLICABLE LAW
13.1 This Agreement and any purchase order issued hereunder shall not be
governed by the United Nations Convention on the International Sale of
Goods; rather this Agreement and any purchase order issued hereunder
shall be governed by, construed and enforced in accordance with the
laws of the State of New York, U.S.A. The Parties hereby submit to the
exclusive jurisdiction of the Federal Courts of the United States of
America and specifically the U.S. District Court for the Southern
District of New York.
13.2 For the purpose of any proceeding before the Federal Courts, the
Parties hereby appoint the respective persons set out below as their
agents for service of process in New York:
Micron: CT Corporation System KTI: c/o Kobe Steel USA Inc.
1633 Broadway 535 Madison Avenue
New York, NY 10019 New York, NY 10022
USA USA
14. MISCELLANEOUS
14.1 All notices and formal communications required or permitted to be
given hereunder shall be served on each Party in writing, via
facsimile transmission, registered letter, telex or prepaid cable
and shall be valid and sufficient when served on a Party at the
following address:
If to KTI: if to Micron:
President
KTI Semiconductor Limited General Counsel
302-2 Micron Technology, Inc.
Hirano-cho, Nishiwaki 8000 South Federal Way
Hyogo Prefecture, 677-0063, Japan Boise, Idaho 83716-9632
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14.2 Except as required by law, for governmental approval or as may be
reasonably required for the operation of KTI, the parties shall not,
without the prior written consent of the other, disclose to any third
party, other than the Parties to the Shareholders' Agreement either
the existence or contents of this Agreement, or any information of a
proprietary nature which it obtains or which becomes available to it
as the result of this Agreement or of the operations of KTI.
14.3 KTI agrees to comply with all applicable export control laws and to
obtain all export licenses required for performance of its
obligations hereunder.
14.4 Micron may assign this Agreement or any obligation hereunder to any
Affiliate (as that term is defined in the Shareholders' Agreement)
of Micron upon written notice to KTI. In such event, Micron shall
be the controlling Party of such assignee and shall guarantee the
obligations of such assignee under this Agreement. KTI shall not
assign or transfer this Agreement or any portion hereof, or
subcontract any obligation hereunder, without the prior written
consent of Micron. Any such attempted assignment, transfer or
subcontract by KTI shall be void.
14.5 The headings of the Paragraphs of this Agreement are for reference
purposes only and shall not be deemed to affect in any way the
meaning or interpretation of the Paragraphs to which they refer.
14.6 The failure on the part of any Party to exercise or enforce any
rights conferred on it hereunder shall not be deemed to constitute a
waiver of any rights or operate to bar the exercise or enforcement of
any such right at any time or times thereafter.
14.7 This Agreement may be executed in one or more counterparts, each of
which shall be enforceable against the Parties executing such
counterparts, and all of which together shall constitute one
instrument.
14.8 This Agreement may not be modified, except with the written consent
of the Parties.
14.9 If any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be
strictly construed and, subject to applicable law, shall not affect
the validity or effect of any other provisions hereof.
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IN WITNESS WHEREOF, the Parties have signed and dated this Purchase
Agreement in the space provided below.
KTI SEMICONDUCTOR LIMITED MICRON TECHNOLOGY, INC.
By: _________________________ By: _________________________
Name: _________________________ Name: _________________________
Title:_________________________ Title:_________________________
Date: _________________________ Date: _________________________
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