Exhibit 10.42
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 0000 Xxxxx Xxxxxxx Xxx, Xxxxx, Xxxxx
00000 ("MTI"), and Micron Electronics, Inc., a Minnesota
corporation located at 000 X. Xxxxxxx Xxxx, Xxxxx, Xxxxx
00000 ("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 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].
2. Sales of Components. MTI hereby grants to MEI
the right to purchase all 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 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 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, MTI's share of pre-tax net income
realized from sales to third parties and intracompany 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 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 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 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 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 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 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 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.
12.1 Term. The term of this Agreement shall
commence on the Effective 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 any time upon the mutual written
agreement of the parties.
12.3 Termination by MTI. MTI shall have the option
to terminate this 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 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 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 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.
14.1 Governing Law. This Agreement shall be governed by
and construed under 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 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 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 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 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 XXX xxxxx or transfers its component
recovery assets and business to a subsidiary or affiliated
company, 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 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 Xxxxxx X. Xxxxxxxx By Xxxxxx Xxxxxxx
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Title President Title President
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Schedule A
Transfer Price
MTI's Transfer Price Transfer Price Transfer Price Transfer Parts
Average for Full for Systems for Printer Buffer for Audio
Sales Price Specification Parts Grade Parts Grade Parts Grade Devices
----------- ------------------- -------------- ------------------ --------------
X .975(X) .8288(X) .70(X) .25(X)
Amendment Number 1 to Component Recovery Agreement
THIS AMENDMENT NUMBER 1 (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 (the "Agreement");
WHEREAS, MTI and MEI desire to amend the Agreement to
change the effective date to August 30, 1996;
NOW THEREFORE, MTI and MEI agree that in the first
sentence of the Agreement the date "August 14, 1996" is
deleted and is replaced with the date "August 30, 1996." In
all other respects, the parties hereby ratify and reaffirm
all other provisions of the Agreement.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be effective as of August 30, 1996.
MICRON TECHNOLOGY, INC. MICRON ELECTRONICS, INC.
By:/s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxxxxxxx
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President, Chairman and Executive Vice President,
Title: Chief Executive Officer Title: Operations
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Date: January 6, 1997 Date: January 7, 1997
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