EXHIBIT 10.9
Service Agreement
THIS AGREEMENT entered into this 5th day of August, 1999 by and between Hyundai
Electronics Industries Co. Ltd. ("HEI") having its principal office at San 136-
1, Ami-ri Bubal-cup, Ichon-si, Kyungki-do and ChipPAC Limited (""ChipPAC BVI")
having its principal office at the same address of HEI;
WHEREAS, HEI desires to appoint ChipPAC BVI as its provider of assembly services
for uBGA packages for RDRAM and [redacted*] which HEI will ramp up production
from 1999;
WHEREAS, ChipPAC BVI desires to provide HEI with uBGA packaging services for
RDRAM and [redacted*];
The parties hereto, having consulted, agree to the following.
Article 1 Purposes
The purpose of the Agreement is to provide for the details necessary for
HEI to provide the Chips and for ChipPAC BVI to provide HEI with its uBGA
packaging service to the Chips provided.
Article 2 Packaging Service Equipment
ChipPAC BVI will invest the capital expenditures to meet HEI's ramp up
schedule, up to a maximum capacity of [redacted*] RDRAM equivalent units
per month, subject to HEI's approval. The equipment acquired to provide HEI
with [redacted*] RDRAM equivalent units ("the Equipment") will be dedicated
to HEI use.
Article 3 Products
The semiconductor products ("Products") needed to ChipPAC BVI's packaging
service under this Agreement shall be listed in Appendix I and the list is
subject to addition or deletion in accordance with mutual agreement.
Article 4 Order and Purchase of the Products by HEI
4.1 HEI will ramp up production in 1999 and provide a ramp up schedule
for 2999 to ChipPAC BVI, which is estimated to be about [redacted*],
of which [redacted*] units are expected to be [redacted*] and
[redacted*] in units are to be [redacted*].
*Confidential treatment requested.
4.2 HEI commits to purchase [redacted*] RDRAM equivalent uBGA packages
per month from [redacted*].
4.3 If HEI does not purchase the number of RDRAM equivalent uBGA packages
for which ChipPAC BVI has made a capacity commitment to provide
exclusively to HEI in any one month period between [redacted*], HEI
shall reimburse ChipPAC BVI for the depreciation for unused capacity
which had been committed by ChipPAC BVI. The depreciation period for
the Equipment will be [redacted*] and the calculation of depreciation
or the Equipment will be made using straight line depreciation with
no residual value. Any charge for unabsorbed depreciation will be
reduced by capacity used for other ChipPAC BVI customers. ChipPAC BVI
will use its best efforts to find customers to utilize such unused
capacity.
4.4 The production schedule and purchasing volume commitment time
prescribed in Article 4.1, 4.2 and 4.3 may be changed depending upon
the introduction schedule of Intel's RDRAM and, in such event, the
term and other timing parameters of this agreement shall be revised
accordingly.
4.5 HEI will send ChipPAC BVI a written notice containing HEI's planed
packaging contract amount for the next three months by 15 days prior
to the end of each month.
4.6 ChipPAC BVI shall notify HEI of acceptance of a order within seven
(7) days from the date of HEI's written order. No response from
ChipPAC BVI with respect to such order without any special reasons
hall be regarded as acceptance of an order.
4.7 HEI shall provide ChipPAC BVI with a rolling 6 month unit forecast.
These forecasts will be subject to the following limits of accuracy:
Forecast within one month: +/- 10%
Forecast within two months: +/- 25%
Forecast within three months: +/- 50%
HEI will be financially responsible for inventory and purchase
commitments for unique
*Confidential treatment requested.
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material made by ChipPAC BVI ordered on the basis of these forecasts,
provided that such financial compensation will be limited to the
amount of the Products which were produced for recent 45 days out of
the amount of the Product committed to be purchased by HEI under this
Agreement.
Article 5 Purchase Price
5.1 The committed prices at which HEI will purchase under this Agreement
are as follows:
a. 1999: [redacted*]
b. 2000: [redacted*]
c. 2001: [redacted*]
d. 2002: [redacted*]
The unit prices of all RDRAM will be set on the basis of [redacted*]
balls per unit.
5.2 The purchase price shall be determined by the mutual agreement
between HEI and ChipPAC BVI considering the market circumstances by
fifteen (15) days prior to the date when the relevant year commences
and the determined purchase price will be applied through the year
concerned.
5.3 Should no agreement be reached on the purchase price an independent
accounting firm will be appointed by the consultation of HEI and
ChipPAC BVI to determine the purchase price and either party shall
not raise objection to the result thereof.
Article 6 Supply of Chip
6.1 In case of acceptance of order by ChipPAC BVI, HEI shall provide
ChipPAC BVI with Chips required for the packaging of relevant
Products according to the definite order amount.
6.2 Chips, provided by HEI under Article 6.1 shall be transported by HEI
or HEI's designated forwarding
* Confidential treatment requested.
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agent to ChipPAC BVI's plant on HEI's own responsibility and at its
own costs thereof.
6.3 ChipPAC BVI's inspection of Chips provided by HEI shall be pursuant
to Appendix II "Chip Inspection Specification" agreed to by HEI and
ChipPAC BVI in advance. ChipPAC BVI shall notify HEI of the
inspection result within five (5) days from the date of provision of
Chips by HEI. Failure to notify during the given period shall be
deemed as acceptance by ChipPAC BVI and ChipPAC BVI shall no longer
be entitled to claim for defectiveness of Chips.
6.4 ChipPAC BVI, in principle, shall procure on its own all raw and
subsidiary materials that are required for packaging, other than
Chips provided by HEI. Nonetheless, HEI may be entitled to
instruct ChipPAC BVI to use certain materials or to provide some
materials to ChipPAC BVI.
Article 7 Packaging Process
Process for packaging service which ChipPAC BVI shall provide to HEI under
the Agreement shall be pursuant to Appending III "Process Baseline
Specification and other related Specification," agreed to by HEI and
ChipPAC BVI in advance.
Article 8 Required Date and Delivery
8.1 ChipPAC BVI shall deliver finished Products to HEI within [redacted*]
in 1999 and within [redacted*] thereafter from the date of the
provision of Chips (and Schedule) by HEI provided that the said
period can be changed upon mutual consent of both parties.
8.2 Packaging methods for Products shall be pursuant to Appendix IV
"Packaging Specification."
8.3 Products, provided to HEI by ChipPAC BVI under Article 8.1, shall be
forwarded to HEI plants or warehouses which HEI designates by ChipPAC
BVI or ChipPAC BVI's designated forwarding agents on ChipPAC BVI's
own responsibility and at its own costs thereof.
*Confidential treatment requested.
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8.4 The waste materials produced during the packaging process shall be
provided to HEI.
8.5 the status of the production of the Products and the information on
the quality of the Products shall be provided to HEI from time to
time by ChipPAC BVI.
Article 9 Inspection
9.1 HEI' inspection of Products provided by ChipPAC BVI shall be
pursuant to Appendix V : Semiconductor Inspection Specification,"
agreed to by HEI and ChipPAC BVI in advance.
9.2 HEI shall send ChipPAC BVI a written notice stating the inspection
result conducted as prescribed in the Article 9.1 within five (5)
days from the date of delivery of Products. No notice within the
given period shall be deemed as acceptance by HEI of the provided
Products.
Article 10 Payment
10.1 ChipPAC BVI shall deliver to HEI invoices for the products supplied
during the relevant month after completing the provision of Product
to HEI in accordance with the Agreement within five (5) days from
the end of such month. In case that HEI does not raise any objection
to such invoice, HEI shall pay ChipPAC BVI the amount within five (5)
days from the receipt of such invoice.
10.2 In the event that HEI has opened a letter of credit in consideration
of selling to its customers the Products which has been provided by
ChipPAC BVI to HEI, HEI shall, open a domestic letter of credit in
favor of ChipPAC BVI by the payment date as set forth in Article
10.1. HEI shall pay cash in US dollar currency or issue a check to
ChipPAC BVI for the amount not paid by such domestic letter of
credit.
10.3 [redacted*]
*Confidential treatment requested.
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10.4 All payments to be made pursuant to this agreement shall be made in
US dollar currency.
Article 11 Compensation to HEI for damages
11.1 In the event the provision of the Products are not completed within
the time agreed between the Parties, which is attributable to ChipPAC
BVI's responsibility, ChipPAC BVI shall pay to HEI the liquidated
damage per one day of delay equal to [redacted*] of the die cost plus
assembly cost of the Products.
11.3 In the event any Product provided to HEI by ChipPAC BVI shall not
satisfy the target yield rate for each period set forth below, which
is attributable to ChipPAC BVI's responsibility, ChipPAC BVI shall
pay to HEI the cost to manufacture the Chips used in the Products
which did not satisfy the yield rate below.
a. [redacted*] within the first quarter from the first ordered date;
b. [redacted*] within the second quarter from the end of first
quarter;
c. [redacted*] in the event that the number of the product ChipPAC
BVI provides is [redacted*] or more per month;
d. [redacted*] in the event that the number of the product ChipPAC
BVI provides is [redacted*] or more month;
Even in the first or second quarter from the first ordered date, if the
number of the product ChipPAC BVI provides is [redacted*] or more per month
or [redacted*] or more per month, the target yield rate of [redacted*] will
be applicable respectively.
Article 12. Term
This Agreement shall be effective upon execution and remain in effect until
June 30, 2002 and it can be renewed by mutual agreement of both parties.
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Article 13. Termination
13.1 This Agreement can be terminated with just causes by either party and
either Party who intends to terminate this Agreement shall give a
written notice to the other Party describing the details on the
breach of the Agreement which, for HEI, shall be limited to
deficiencies in quality, delivery, yield or competitive price.
13.2 Either Party in default will have 30 days (hereinafter the
"correction period") to put forth corrective action plan from the
date of receipt of above notice. Unless the breach of either Party in
default is corrected with the correction period or the extended
correction period set forth below, the other Party can cancel this
Agreement by providing 90 days written notice. Provided that ChipPAC
BVI may ask HEI additional period to correct its breach of contract
within above period and such correction period can be extended
("extended correction period") subject to HEI's consent not to be
unreasonably withheld.
13.3 If this Agreement is terminated in accordance with Article 13,
[redacted*].
13.4 After the transferor ownership of the Equipment to HEI in accordance
with Article 13.2 and 13.3, HEI will permit the ChipPAC BVI to use
the Equipment to provide the product with other customers until new
equipment necessary to provide the ordered products by its customers
are installed in ChipPAC BVI. In any case, the period for HEI to
permit ChipPAC BVI to use the Equipment will not exceed [redacted*].
Article 14 Audit on charges for unutilized capacity and materials
Charges from ChipPAC BVI for [redacted*] and for excess/obsolete material
purchased for HEI production will be subject to audit by a mutually agreed
external auditor.
*Confidential treatment requested.
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Article 15 Strategic Relations
Both parties agree to form strategic relationship to develop next
generation memory package in which ChipPAC BVI will support future volume.
Article 16 Confidentiality
16.1 Both parties agree that the contents of this Agreement and certain
information that each party may supply to the other in the course of
this Agreement are confidential. Except when it is required for a
financial audit, or for obtaining financing, or when its disclosure
is legally required, such as a United States SEC registration
statement, such confidential information shall not be disclosed to
third parties without the written consent of the other party. Both
parties will ensure that information obtained in the course of this
Agreement will be used only for fulfilling this Agreement, and that
any employees, consultants, advisors, and financial institutions
which receive such information are bound by this Article.
16.2 The obligation for Article 16.1 shall exist during one (1) year after
the expiation or termination of the Agreement.
Article 17 Force Majeure
Each party shall not be responsible for failure to perform hereunder due
to acts of God, national emergency situations, road or port blockades,
strikes, wars, internal tumult, or force majeure; provided, however, the
party shall immediately notify of such occurrence to the other party.
Article 18 Others
18.1 HEI and ChipPAC BVI shall make their best efforts to cooperate with
each other for the performance of this Agreement.
18.2 For the matters not provided in this Agreement or the parts where
there are different opinions for interpretation hereof, both parties
shall settle them by mutual consultation.
Article 19 Governing Law
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19.1 This Agreement shall be governed by the laws of Republic of Korea.
19.2 Any disputes arising in connection with and out of to the Agreement
shall be submitted to Seoul District Court.
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IN WITNESS WHEREOF, the parties have executed this Service Agreement on the day
and year first above written.
Hyundai Electronics Industries Co., Ltd.:
San 136-1,. Ami-ri, Bubal-cup, ichon-si, Kyungki-do
Hyundai Electronic Industrial Co., Ltd.
Representative: Young Hwan Kim
Position: Representative Director, President
/s/ Y.H. Kim
__________________________
ChipPAC Limited
Craigmuir Chambers
Road Town, Tortola
British Virgin Islands
Representative: Richard Parsons, for Westlaw Limited
Position: Director
/s/ R. Parsons
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Appendices do not exist.