MANUFACTURING SERVICES AGREEMENT
THIS MANUFACTURING SERVICES (the "Agreement") is entered into as of the
2nd day of February, 1998, by and between LG SEMICON AMERICA, INC., with
offices at 3003 North First Street, San Jose, California 95134, ("LGSA"), and
TANISYS TECHNOLOGY, INC., with offices at 12201 Technology Blvd., Suite 130,
Austin, Texas 78727-6101, ("Tanisys").
RECITALS
LGSA and its affiliates are suppliers of semiconductor memory products
worldwide to, among other customers, Compaq Computer Corporation ("Compaq").
Recently, Compaq and other customers have instituted new purchasing
procedures referred to as Configure to Order (CTO) and Build to Order (BTO)
programs which require LGSA and its affiliates to provide memory modules to
various customer locations throughout the world within forty-eight hours of
an order for such products. Tanisys has been qualified by Compaq to
manufacture memory modules for Compaq using LGSA component products.
Tanisys is establishing a manufacturing center in Scotland in the United
Kingdom to provide further manufacturing of memory modules. LGSA and its
affiliates wish to engage Tanisys through its new Scotland facilities and its
other facilities to provide manufacturing services for LGSA and its
affiliates for distribution to Compaq, as well as such other customers of
LGSA and its affiliates as may be requested from time to time, and Tanisys
wishes to be engaged by LGSA and its affiliates to provide such manufacturing
services, all in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of these premises, and the mutual
promises, covenants, agreements, and terms and conditions set forth in the
Agreement, the parties hereto agree as follows:
1. PURPOSE OF THIS AGREEMENT; MANUFACTURING
1.1 The purpose of this Agreement is to set forth those terms and
conditions which shall be applicable to the manufacture by Tanisys in any of
its manufacturing facilities throughout the world of certain Memory Modules,
as defined herein, for LGSA and its affiliates, and to such other services to
be provided by Tanisys pursuant to this Agreement. Any terms and conditions
of any purchase order, acknowledgment, or other similar document of either
party related to such manufacture and/or other services which are not
consistent with the terms and conditions of this Agreement shall be void and
of no effect. Hereinafter all references to LGSA may also refer to those LGSA
affiliates listed on Exhibit F hereto, and each such affiliate shall have all
of the rights of LGSA hereunder. LGSA may add other affiliates to this
Agreement
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from time to time with prior notice to Tanisys.
1.2 Tanisys shall perform manufacturing and other services and
manufacture Memory Modules pursuant to this Agreement, and maintain on a
rolling basis a sufficient inventory of finished Memory Modules equivalent to
one (1) months forecasted quantity to fill any purchase orders issued to
Tanisys by LGSA and/or its customers. Such Memory Modules shall conform to
the specifications therefor set forth in Exhibit B of this Agreement, and
completed Memory Modules will be shipped by Tanisys to the locations
designated by LGSA from time to time.
1.3 This Agreement creates no obligation, express or implied, for LGSA
to order or purchase any specific manufacturing services or quantity of
manufacturing services from Tanisys, nor does it limit in any way LGSA's
right to perform the manufacturing services itself or to have others to
perform the same or similar manufacturing services for any reason.
Notwithstanding this Section 1.3, it is anticipated that LGSA will require
manufacturing services for at least fifty thousand (50,000) Memory Modules
per month.
1.4 Tanisys shall at all times be and be deemed to be an independent
contractor with LGSA, and Tanisys shall have no right or authority to act
for, represent or to bind LGSA in any way, or to sign or take any action in
the name or on behalf of LGSA. Tanisys shall not be deemed an employee or
agent of LGSA for any purpose whatsoever. LGSA shall not be responsible for
the acts or omissions of Tanisys. Tanisys has no authority to create any
contract or obligation, express or implied, on behalf of, in the name of, or
binding upon LGSA, or to pledge LGSA's credit or to extend credit in LGSA's
name, and Tanisys shall not hold itself out to any party as having such right
or any other right with respect to LGSA or LGSA's business except as
expressly authorized by this Agreement. Tanisys agrees that in the context of
the service it is rendering to LGSA that it will not claim or represent that
it is operating or doing business as an LGSA sales office. Tanisys is and
shall be the sole employer and/or principal of any and all persons performing
services under this Agreement. Under no circumstances shall Tanisys or its
employees or agents be entitled to participate in the profit sharing,
pension, or other plans established for the benefit of LGSA's employees.
1.5 As this Agreement is intended for purposes of meeting the
requirements of LGSA's customers, Tanisys shall use its best efforts to
provide services hereunder consistent with each of LGSA's customer's CTO and
BTO programs, and any other or further requirements as any of LGSA's
customers may require, now or in the future.
1.6 In consideration for the execution of this Agreement by LGSA, and
for no other or further consideration, Tanisys hereby grants to LGSA and to
each of LGSA's affiliates on a non-exclusive basis the right to use and
modify any and all of the Memory Module specifications (the "Gerber Files").
Such grant is made without reservation and without limitations as to the uses
of the Gerber Files, and any modifications, improvements, or alterations
thereto made by or for LGSA shall be sole and exclusive property of LGSA,
unless Tanisys shall have made such
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modifications, improvements, or alterations, in which case Tanisys shall have
exclusive ownership of the same and LGSA shall have the unrestricted right to
use and modify such modifications, improvements, or alterations.
2. TERM AND TERMINATION
2.1 This Agreement shall be effective from the date first above
written, and it shall continue in full force and effect for an initial term
of three (3) years. It shall be automatically renewed for successive periods
of one (1) year each unless either party provides the other with written
notice of its intent not to renew at least ninety (90) days prior to the
initial or applicable successive expiration dates.
2.2 Either party may terminate this Agreement at any time for any
reason or for no reason by providing written notice of termination to the
other party at least ninety (90) days prior to the effective date of
termination.
2.3 Either party may immediately terminate this Agreement at any
time for cause in the event of any incurable material breach of this
Agreement by the other party or in the event the other party files or has
filed against it any bankruptcy, insolvency, or receivership proceeding. If
a material breach of this Agreement can be cured, then the non-breaching
party shall provide the breaching party with written notice of the material
breach specifying the conditions constituting the breach and the corrective
action which must be undertaken to cure such breach. If the material breach
is not cured within thirty (30) days of the written notice thereof, then this
Agreement shall terminate as set forth in the written notice of material
breach.
2.4 The provisions of Sections 1.6, 2, 3, 10, 11, 12, 13, 14, 16,
17 and 18 shall survive any termination of this Agreement.
2.5 After notice of termination is tendered, the parties shall
cooperate with each other and prepare for an orderly termination of this
Agreement, and for the return of any Consigned Components, as defined herein,
other property, records, specifications, and Confidential Information, as
defined herein, provided by one party to the other pursuant to this Agreement.
2.6 Upon termination of this Agreement for any reason other than
cause, LGSA shall purchase from Tanisys all of Tanisys' actual work-in-process
for LGSA, and/or all raw materials or piece parts required for such work, but
only for the quantities of Memory Modules, as defined herein, forecasted by
LGSA for the ninety (90) day forecast period referenced in Section 8.1, and
only if the purchase of such raw materials or piece parts could not be
canceled by Tanisys. At LGSA's sole option, LGSA may purchase any
work-in-process, raw materials and/or piece parts in excess of forecasted
quantities, to the extent that Tanisys has such items. At LGSA's further
option, LGSA may require Tanisys to cancel or return any raw materials and/or
piece parts, provided, however, that LGSA shall pay for any cancellation
charges. Notwithstanding anything in this Agreement to the contrary, if
termination of this Agreement by LGSA is for cause, then LGSA may, but shall
not be obligated to, purchase any such work-in-process, raw materials, or
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piece parts, and Tanisys shall sell to LGSA such items as LGSA may request.
3. CONSIGNMENT OF COMPONENTS TO TANISYS
3.1 As used in this Agreement, the term "Consigned Components"
shall mean those products listed on Exhibit A to this Agreement which will be
supplied by LGSA to Tanisys for the performance of the manufacturing services
pursuant to this Agreement. Title to the Consigned Components shall at all
times remain in LGSA, but risk of loss and damage to any item of the
Consigned Components shall pass to Tanisys during all such times as the items
are in the possession of Tanisys, or any employee, subcontractor, or agent of
Tanisys.
3.2 LGSA shall provide to Tanisys on a consignment basis such
quantities of Consigned Components as shall be sufficient for Tanisys to
manufacture the quantity of Memory Modules forecasted by LGSA pursuant to
Section 8 of this Agreement. Tanisys agrees to develop, implement, and
utilize procedures to fully account for any Consigned Component as it is
transferred from LGSA to Tanisys, and to comply with all of LGSA's reasonable
written instructions regarding inventory accounting procedures.
3.3 Tanisys shall immediately inspect any transferred Consigned
Components and promptly notify LGSA in writing no later than three (3)
business days after receipt of such Consigned Components of any inventory
issues related to or defects in the packaging of Consigned Components. With
such notice, and when appropriate, Tanisys shall request a Return Merchandise
Authorization ("RMA") for the return of such defective Consigned Component.
3.4 LGSA and Tanisys shall conduct monthly reviews of the
inventory of Consigned Components held by Tanisys to determine if any of such
inventory is obsolete or whether there is an excess of such inventory beyond
current or next quarter's forecasted requirements. Upon notice, LGSA shall
have the right to enter Tanisys' premises at any time during regular business
hours to inspect and remove any Consigned Components.
3.5 Tanisys shall store the Consigned Components in a safe and
secure location and use reasonable security measures to prevent any theft or
damage of such Consigned Components. Tanisys shall keep the Consigned
Components separate from any other components or materials received from any
other source. Tanisys acknowledges and agrees that Consigned Components may
be received from LGSA or any of its affiliates, and Tanisys shall treat all
such Consigned Components in the manner set forth herein.
4. SPECIFICATIONS
4.1 Tanisys shall use the Consigned Components to manufacture the
Memory Modules according to the specifications set forth in Exhibit B
attached hereto, which exhibit is by this
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reference incorporated into and made a part of this Agreement. All such
Memory Modules and the manufacturing and other services provided by Tanisys
pursuant to this Agreement shall fully conform to the technical
specifications and requirements of LGSA's customers, as well as LGSA's
visual/mechanical, marking, electrical and packaging specifications, all as
may be reasonably requested by LGSA from time to time. During the term
hereof, Tanisys shall be and remain qualified as a components or module
manufacturer for each of LGSA's customers for which manufacturing services
hereunder are requested, and if Tanisys shall ever cease to be so qualified
for any one or all of LGSA's customers, then LGSA may immediately terminate
this Agreement, for cause pursuant to Section 2.3 hereof.
4.2 LGSA may change any specifications by providing written notice to
Tanisys. If any such change is incompatible with Tanisys' existing equipment
or would adversely affect Tanisys existing productivity rates, Tanisys shall
promptly notify LGSA, and the parties shall in good faith negotiate a
reasonable, mutually acceptable solution. LGSA may request technical changes
of the Memory Modules to be manufactured and Tanisys must comply with such
change request. Tanisys will inform LGSA within ten (10) working-days after
receiving such requests of the result of its evaluation of the change in
writing. The parties shall mutually agree upon prices and implementation
schedules for such changes.
4.3 If Tanisys is required to apply LGSA's or its customers' name,
trademark, logo, or similar information ("Marks") on any units or packaging
of the Memory Modules manufactured under this Agreement, Tanisys agrees that
it will not acquire or claim any right, title, or interest thereto nor will
it use any of the Marks in any other manner except as has been specifically
authorized in writing by LGSA or its customer, as the case may be. All Marks
shall be the property of LGSA or its customer, as the case may be.
5. PROCESS CHANGES
5.1 Should any changes regarding processes or materials become
necessary in order to maintain qualification with Compaq or with any of
LGSA's other customers, or to improve quality or yield, but without affecting
qualification, either party may initiate such changes of processes or
materials by sending a notice of such changes to the other party. Tanisys
hereby covenants and agrees that it shall do everything possible and make its
best efforts to maintain the qualification of the Memory Module design and
specifications with Compaq, or with any other of LGSA's customers, and it
shall do nothing that may cause the disqualification of Tanisys or its Memory
Module design and specifications by any of LGSA's customers. The party
initiating such change will document and transmit the proposed changes to the
other party, who shall acknowledge receipt of such notice. Notice of any
changes shall be provided at least ninety (90) days before the implementation
of any such process change. The parties shall mutually discuss in good faith
any proposed changes and any associated pricing impact, and MUTUALLY AGREE TO
ANY change before it may be implemented.
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5.2 After any changes in any processes or materials under Section 5.1
of this Agreement, Tanisys shall use its best efforts to obtain or to
maintain its qualification with Compaq or any other affected customer of
LGSA. As stated elsewhere in this Agreement, failure to obtain or maintain
such qualification shall be sufficient grounds to immediately terminate this
Agreement for cause pursuant to Section 2.3 of this Agreement.
6. YIELD AND SCRAP
6.1 Tanisys' yield for manufacture of Tanisys shall dispose of any
scrap (non LGSA component related) generated while performing the
manufacturing service in accordance with applicable law. Tanisys will
indemnify and hold LGSA harmless from any and all claims, liability or damage
of any kind or nature arising from Tanisys' disposal of any scrap hereunder.
6.2 Tanisys shall account for every Consigned Component on the monthly
inventory reports and indicate the number of such Consigned Component that
becomes scrap during the manufacturing process. Tanisys shall use its best
efforts to meet a goal of scrap equal to 0.00% of the total monthly Consigned
Component usage. If scrap is equal to or greater than 0.02% of the total
monthly Consigned Component usage, but less than 0.05%, Tanisys shall conduct
a failure analysis and develop a corrective action plan, but Tanisys shall
not be required to send any such scrap to LGSA. If scrap is equal to or
greater than 0.05% of the total monthly Consigned Component usage, Tanisys
shall obtain RMA numbers for all such scrap and ship the scrap to LGSA.
Thereafter, LGSA, with Tanisys' cooperation and assistance, will conduct a
failure analysis of such returned scrap. If the defects or problems resulting
in the scrap arose from a defect in the Consigned Components, then Tanisys
shall have no liability for such defective Consigned Component. However, if
any such scrap did not result from a defect in the Consigned Component, then
Tanisys shall be liable for the nondefective Consigned Component at the then
current price for such Consigned Components, as well as any and all shipping
charges related to the nondefective Consigned Component returned to LGSA
hereunder.
6.3 Tanisys shall provide a report of all scrap returns per Section
6.2, which shall be reviewed monthly by the parties.
7. PACKAGING
7.1 All packaging of the Memory Modules manufactured by Tanisys shall
be of antistatic materials, and shall conform to LGSA's and/or its customer's
specifications as described in Exhibit B to this Agreement, or as may be
reasonably requested from time to time by LGSA. Unless more stringent
standards are required in Exhibit B or requested from time to time by LGSA,
such packaging shall at least be resistant to any damage which may result
from the normal handling of similar products by common carriers. LGSA must be
notified of changes in existing packaging, even if still within LGSA's
specifications.
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7.2 Except and only to the extent otherwise specified in writing by
LGSA, Tanisys shall make no reference or identification in its packaging of
any goods, boxes, or containers, which would indicate that Tanisys is the
manufacturer of the goods.
8. SCHEDULING AND DELIVERY
8.1 LGSA shall supply Tanisys on a monthly basis with rolling forecasts
of its anticipated requirements for Memory Modules for the subsequent ninety
(90) day period. Such forecasts are for Tanisys' convenience only and they
shall not be binding on LGSA. LGSA shall have no obligation for any products
manufactured by Tanisys, whether or not forecasted, unless the manufacture of
such products was expressly requested by LGSA through a purchase order, or
other means permitted hereunder, properly delivered or transmitted to Tanisys
pursuant to this Agreement. Such forecasts shall show the anticipated
requirements of Memory Modules by customer and location.
8.2 LGSA shall also provide Tanisys with blanket purchase orders
covering at least a ninety (90) day period, however, no portion of such
blanket purchase order shall be binding on LGSA unless and until LGSA has
issued a written request for the manufacture and/or release of all or any
portion of the Memory Modules listed on such blanket purchase order. LGSA's
written request for the manufacture and/or release of Memory Modules shall,
when appropriate or necessary, provide Tanisys with purchase order numbers
and instructions to cover all deliveries of products manufactured by Tanisys
pursuant to LGSA's express request, including detailed delivery information
such as delivery addresses of LGSA's customers or their other delivery sites.
Tanisys shall promptly and timely manufacture the products so requested by
LGSA and timely deliver such products to the places and pursuant to the
delivery terms requested in LGSA's purchase order or through any other means
as permitted herein. LGSA may, by written notification, make changes to
shipping instructions, quantities, or delivery schedules specified in any
blanket purchase order, estimate or forecast.
8.3 Tanisys acknowledges and agrees that its stated manufacturing
philosophy is to utilize just sixty percent (60%) of manufacturing line
capacity, withholding the remaining forty percent (40%) of capacity to
address upside requests. Tanisys hereby grants to LGSA a right of first
refusal to at least fifty percent (50%) of the upside capacity (or twenty
percent (20%) of total capacity) for the initial production line installed in
Tanisys' Scotland facility. This upside capacity is intended to respond to
LGSA's requirements for Memory Modules to meet its customers' upside
requirements, not forecasted production, within forty-eight (48) hours of
receiving a purchase order for such upside requirements. Tanisys will make
every commercially reasonable effort to achieve LGSA's goal of fulfilling
upside orders for Memory Modules within forty-eight (48) hours after receipt
of a purchase order.
8.4 In addition to the manufacturing services described herein, Tanisys
shall also provide warehousing, inventory control, assembly and test services
for finished Memory Modules, and ship completed Memory Modules to LGSA or any
designated customer or location on a same day basis, and in no event later
than twenty-four (24) hours of Tanisys' receipt of a
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purchase order therefor from LGSA or any of its designated customers. Tanisys
acknowledges and agrees that its timely performance is essential to LGSA's
meeting its obligations to its customers, and Tanisys shall use its best
efforts to timely perform all of Tanisys' obligations hereunder, including
but not limited to the manufacture and delivery of the Memory Modules under
this Agreement.
8.5 Tanisys shall include with every shipment of the Memory Modules a
packing slip stating the quantity of each type of Memory Modules being
shipped and the shipment date, and describing the Memory Modules by Tanisys',
LGSA's, and/or LGSA's customer's Memory Module part numbers, as may be
required.
8.6 Tanisys shall deliver the finished Memory Modules F.O.B. Tanisys'
facilities wherever such facilities may be located. Shipments of such Memory
Modules shall be delivered to such address(es) as may be designated by LGSA.
8.7 LGSA may request manufacturing services via electronic means. The
parties hereto agree to discuss in good faith appropriate procedures for such
electronic communication consistent with the requirements of LGSA's customers
and in order to maximize the efficiency and speed of the order and delivery
process for finished Memory Modules. Tanisys agrees to adopt any EDI or
similar program which may be requested by LGSA or any of its customers.
9. PRICE AND PAYMENT
9.1 Prices for the manufacturing services will be fixed for a calendar
quarter and shall initially be as specified in Exhibit D (Tanisys Technology:
Quotation for Contract Manufacturing Services). All prices shall be exclusive
of freight, insurance, and the costs of any Consigned Components or other
components supplied by LGSA, unless the same is purchased by Tanisys and
titled thereto passes to Tanisys. Such prices shall also not include taxes of
any kind, and Tanisys shall be responsible for all taxes unless LGSA fails to
obtain the proper resale permits. Risk of loss for any and all Consigned
Components and completed or partially completed Memory Modules shall be and
remain with Tanisys unless and until delivered by Tanisys to a freight
carrier designated by LGSA at Tanisys' facilities.
9.2 Price negotiations shall be conducted during the second month of
any ninety (90) forecast period, unless both parties mutually agree not to
change the price from the last agreed price, for manufacturing services to be
provided in the following ninety (90) day forecast period.
9.3 If the parties fail to agree in writing on actual prices for any
Memory Module within thirty (30) days after commencing pricing negotiations,
then the prices for the Memory Modules shall be the last agreed price.
Tanisys hereby agrees to make every effort on an ongoing basis to reduce the
costs of manufacturing the Memory Modules and the price for the services to
be provided hereunder. Any and all efforts at cost and price reduction shall
be subject to periodic review by LGSA.
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9.4 Tanisys shall invoice LGSA for the manufacture of Memory Modules
upon completion of the manufacturing and delivery of the finished Memory
Modules to Tanisys' finished Memory Module inventory location within its
facilities. All invoicing will be in United States dollars. Such invoices
shall be sent to the Accounts Payable Departments of LGSA or its affiliates,
as the case may be, at the addresses set forth on Exhibit F. Such invoices
shall be paid within thirty (30) days after receipt of such invoice. Any
payment due under any invoice may be off-set by any amounts due from Tanisys
to LGSA or its affiliates, respectively, for returns, refunds or any other
payments.
9.5 Notwithstanding the above, if an opportunity shall arise for an
order of Memory Modules significantly in excess of the quantities forecasted,
Tanisys agrees to negotiate the pricing for the manufacturing services for
such order in good faith with a view toward providing LGSA with a pricing
advantage to assist LGSA in winning such order.
10. WARRANTIES
10.1 Tanisys warrants that, for a period of three (3) years following
acceptance of any unit of the Memory Modules by LGSA or any of its customers,
each such unit shall conform to the specifications set forth in Exhibit B and
shall be free from any defects in materials or workmanship, unless such
defects are caused by a Consigned Component.
10.2 Tanisys farther represents and warrants that all services to be
provided under this Agreement, and the performance of all of Tanisys'
obligations hereunder, shall be performed in a careful and efficient manner
by fully qualified workers in a workmanlike manner, and all such services
shall fully conform to the Class II Standards of the Institute for
Interconnecting and Packaging of Electronic Circuits (IPC Class II).
10.3 For any breach of the warranties set forth in this Section 10,
Tanisys shall either re-manufacture the unit if returned, replace the unit,
pay LGSA for the cost of the unit, or accept an off-set against Tanisys'
invoices, as determined by LGSA in its sole discretion. All costs associated
with returns, replacements, rework, and corrections shall be at Tanisys' sole
expense, including all labor, materials, installation, repair, service,
transportation, and other charges. Tanisys expressly assumes all the risk of
loss or damage to units returned while the same are in transit or in Tanisys'
possession.
10.4 The above warranties shall not apply to Memory Modules which are
altered or repaired, or which have been subjected to misuse, negligence, or
over-stress due to circuit or system design. The above warranties shall also
not apply to defective Memory Modules if the defect is solely attributable to
a defect in the Consigned Component incorporated into the Memory Module.
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10.5 All warranties shall survive the acceptance of and the payment for
the Memory Module by LGSA.
11. INSURANCE
11.1 Tanisys shall have and shall maintain, in fall force and effect,
and at its sole expense, the following forms of insurance:
(A) All risks insurance to cover any and all toss and/or damage to the
Consigned Components, Memory Modules, and works-in-process, however
such loss and/or damage may be caused, including, but not limited to,
by fire or theft, in the amount of the full replacement cost thereof
with coverage limits equal to the higher of $2,000,000 or the total
aggregate value of the entire inventory of Consigned Components in
Tanisys' possession based on its full replacement value
(B) Adequate worker's compensation and occupational disease insurance as
may be required by law and within statutory limits; and
(C) Public liability, products liability and property damage liability
insurance, under the comprehensive general liability form, with
limits of liability of no less than $2,000,000 including contractual
liability coverage for the indemnity obligations specified in the
Agreement, and a Products/Completed Operations Endorsement.
LGSA shall be made a loss payee and co-insured on any and all such or
similar insurance policies as may be appropriate.
11.2 Tanisys shall not accept a purchase order or perform any of the
manufacturing services until such time as it may have in force insurance in
the forms and of the types specified in the preceding paragraph.
11.3 LGSA reserves the right to require other reasonable forms of
insurance and/or faithful performance guarantee bonds by giving Tanisys
written notice of said additional requirements.
11.4 The procurement and maintenance of insurance specified in this
section shall not limit or affect any liability which Tanisys might have by
virtue of this Agreement or otherwise.
12. RECORDS AND AUDITS
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12.1 Tanisys shall implement and utilize such records, procedures, and
systems as may be specified by LGSA in writing from time to time to document,
record, and account for Tanisys' performance under this Agreement, compliance
with the specifications attached as Exhibit B, the location and use of the
Consigned Components, the location and quantity of finished Memory Modules,
quality control and reliability processes, shipment and delivery history,
invoicing and payment history, cost and price reductions and similar matters.
Tanisys shall provide to LGSA reports of such records, procedures, and
systems, and any other information or reports reasonably requested by LGSA,
through the methods, at the times, and in the formats described in Exhibit G
attached hereto, which exhibit may be changed from time to time upon the
mutual consent of the parties. Tanisys agrees to permit representatives of
LGSA to inspect, audit, and copy such books, records, and documentation in
Tanisys' possession or control.
12.2 Tanisys shall also send to LGSA, via personal computer interface or
other acceptable means on a daily basis, updated inventory reports for
Consigned Components, finished Memory Modules, and Memory Modules in process,
which shall include at least the following:
(1) the month ending inventory of Consigned Components, by device
type:
(2) the total number of defective Consigned Components shipped by
LGSA to Tanisys and the total number of defective Memory Modules
during the fiscal month, by device type.
Tanisys shall account for every unit of Consigned Components and
finished Memory Modules on the daily inventory reports.
13. CONFIDENTIALITY/NON-DISCLOSURE AGREEMENT
13.1 In the course of doing business under this Agreement, one party may
furnish to the other party software, data, designs, drawing, tracings, plans,
layouts, specifications, samples, equipment, and other written information
which may be confidential and proprietary to the furnishing party, and which
is clearly and conspicuously marked as "Confidential" or "Proprietary"
(hereinafter called "Confidential Information"). Tanisys hereby acknowledges
and agrees that any and all information related to the price of the Consigned
Components and of the Memory Modules are trade secrets of LGSA, and all such
information shall be included in the definition of Confidential Information,
regardless of whether clearly marked as such. Any Confidential Information
which is furnished orally shall be confirmed in writing within thirty (30)
days of the disclosure. It is agreed that during the term of this Agreement
and for a period of two (2) years after termination of this Agreement, the
receiving party shall: (1) restrict dissemination of Confidential Information
to only those employees who must be directly involved in using the
Confidential Information in the performance of the services described
hereunder; and (2) use the same degree of care as it uses for its own
information of like importance, but at least reasonable care, in safeguarding
against the unauthorized disclosure of
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Confidential Information.
13.2 Notwithstanding any provision to the contrary, during the term of
this Agreement nothing received by the receiving party shall be construed as
Confidential Information which is now available or which becomes available to
the public through no breach of this Agreement by the receiving party, is
released in writing by the furnishing party, is lawfully obtained from a
third party or parties, or is known to the receiving party prior to such
disclosure by the furnishing party, or is at any time developed by the
receiving party prior to such disclosure, or is at any time developed by the
receiving party independently of such disclosure or disclosures by the
furnishing party.
13.3 The parties shall not disclose the terms of this Agreement to
others, except by mutual agreement and as required by law and various
regulatory agencies or as may be necessary to enforce the terms of this
Agreement.
13.4 Each party agrees not to disclose to the other party the
confidential or proprietary information of any third parties.
13.5 Tanisys shall within thirty (30) days after the termination or
expiration of the Agreement, forward to LGSA, or to its designee, all
Confidential Information of LGSA which may be in its possession, and Tanisys
shall thereafter make no farther use, either directly or indirectly, of such
Confidential Information.
13.6 The only rights or licenses which either party may claim as being
granted hereunder are those which are expressly granted hereunder, and no
rights or licenses are conveyed to either party or to any third party by
implication, waiver, or estoppel.
13.7 Any breach of the provisions in this Section 13 shall be deemed a
material breach of the Agreement.
14. SECURITY
14.1 Tanisys agrees to take all necessary precautions to secure the
areas in its facility related to the performance of the manufacturing
services and storage of Consigned Components. LGSA shall have the right to
audit Tanisys' security practices, policies, procedures, and measures as they
relate to the performance of the Work, and to specify such changes as may be
reasonably required to protect the manufacturing services or the Consigned
Components.
14.2 Tanisys shall immediately report to LGSA any breaches or suspected
breaches of its security, but such reporting shall not relieve Tanisys of its
responsibilities hereunder.
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15. NOTICES
15.1 In any case where a notice or other communications is to be given
or made pursuant to any provision of this Agreement, such notice or
communication will be deemed to be given when made or as follows: if by hand
delivery, on the day delivered; if by telex, cable, fax, or telegraph, upon
confirmation of receipt, the next business day following the date sent, or if
by mail, on the third calendar day following posting by certified or
registered mail, return receipt requested.
15.2 All such notices mailed to LGSA will be sent postage prepaid and
addressed as follows:
LG SEMICON AMERICA, INC
3003 North First Street
San Jose, CA 95134
Attn: President
with a copy to:
LG SEMICON AMERICA, INC.
20405 State Highway 249, Suite 350
Houston, Texas 77070
Attn: Compaq Global Account Manager
Notices to any of LGSA's affiliates shall be sent postage prepaid to the
addresses for each such affiliate set forth in Exhibit F hereto, with a copy
to LGSA's Compaq Global Account Manager at the address set forth immediately
above.
15.3 All such notices mailed to Tanisys will be sent postage prepaid and
addressed to:
TANISYS TECHNOLOGY, INC.
Unit B, Hamilton International Technology Park
Hamilton, Scotland, U.K
Attn:__________________
or
24 Langlands Avenue
East Kilbride, Scotland
with a copy to:
TANISYS TECHNOLOGY, INC.
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Attn: Mr. Chris Efstathiou
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16. OTHER OBLIGATIONS OF TANISYS
16.1 Tanisys shall permit LGSA to communicate directly with its
manufacturing facilities wherever located for all matters and services
described herein. Tanisys shall at all times maintain contact persons at such
manufacturing facilities as well as its main facilities in Austin, Texas, for
purposes of coordinating manufacturing, deliveries, and all other matters
related to this Agreement.
16.2 In the performance of this Agreement, Tanisys shall comply with all
applicable federal, state, and local laws and ordinances, and rules,
regulations, and orders of any duly constituted authority including, but not
limited to, those relating to social security and income taxes, workers'
compensation insurance, unemployment compensation insurance, environmental
regulation, transportation, and occupational safety and health.
16.3 The parties shall not export, directly or indirectly, any technical
data acquired from the furnishing party under this Agreement, or any
products utilizing any such data, to any country for which the U.S.
Government or any agency thereof at the time of export requires an
export license or other government approval without first obtaining
such license or approval.
17. MISCELLANEOUS PROVISIONS
17.1 This Agreement contains the complete and exclusive statement of the
agreement and understanding of LGSA and Tanisys relating to the subject
matter of this Agreement, and it supersedes all other agreements,
understandings, communications, and proposals, oral or written, between the
parties. Any amendment of this Agreement must be in writing and signed by
authorized representatives of LGSA and Tanisys.
17.2 If any provision of this Agreement should become fully or partially
invalid or unenforceable for any reason whatsoever, or violate any applicable
law, this Agreement is to be considered divisible as to such provision and
such provision shall be deemed deleted from this Agreement, and the remainder
of this Agreement shall be valid and binding as if such provision were not
included herein. A new provision shall be substituted for any such deleted
provision which shall come as close as what the parties intended, as far as
legally possible, according to the sense and purpose of this Agreement.
17.3 No waiver of any right, or failure to exercise any remedy, with
respect to any matter or event which is subject to this Agreement, shall
serve or be deemed to be a waiver of such right or remedy with respect to any
other matter or event, or to constitute a precedent for purposes of the
interpretation of this Agreement.
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17.4 Neither party shall be liable for damages to the other for any
delay in performance or failure to perform, in whole or in part, when due to
labor dispute, strike, war or act of war (whether an actual declaration is
made or not), insurrection, riot, civil commotion, act of public enemy,
accident, fire, flood, or other act of God, act of any government authority,
judicial action, or similar causes beyond the reasonable control of such
party. If such an event of force majeure occurs, the other party shall be
immediately notified.
17.5 Neither this Agreement, LGSA's Purchase Orders, or any of the
manufacturing services shall be assigned or subcontracted by Tanisys without
the prior written approval of LGSA.
17.6 This Agreement may be executed by the parties in counterpart, and
each fully executed counterpart shall be deemed an original.
17.7 Headings appearing in this Agreement are used for convenience only
and shall not be used in any manner whatsoever for purposes of interpretation
of this Agreement.
17.8 This Agreement shall be interpreted in all respects in accordance
with the laws of the State of California, except for that body of law known
as conflicts of laws.
18. DISPUTE RESOLUTION
18. LGSA and Tanisys shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy. The executives shall
be of sufficiently high level and will not have had direct responsibility for
administration of this Agreement.
18.2 If a dispute should arise between the parties that cannot be
resolved in the ordinary course of business, then either party may give the
other written notice of such dispute. Within fifteen (15) days after delivery
of the notice, the party receiving the notice shall submit to the other a
written response. The notice and response shall include a statement of the
party's positions regarding the matter in dispute, a summary of arguments in
support, and the name and title of the executive who will represent that
party and any other person who will accompany that executive. Within thirty
(30) days after delivery of the initial notice, the designated executives
shall meet at a mutually acceptable time and place, and thereafter as often
as they reasonably deem necessary to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other shall be
honored in a timely fashion.
18.3 MI negotiations conducted pursuant to this Section 18 (and any of
the party's submissions in contemplation hereof) shall be kept confidential
by the parties and shall be treated by the parties and their respective
representatives as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and any similar state rules.
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18.4 If either party believes in good faith that the negotiations
between the two executives are not or will not be successful, the party may
request that the dispute be mediated before a mediator mutually agreeable to
the parties. If the parties fail to resolve the dispute through mediation,
then either party request binding arbitration of the dispute
18.5 In order to initiate binding arbitration, one party (the claimant)
may give written notice to the other (respondent) of its intention to
arbitrate, which notice shall contain a statement setting forth the nature of
the dispute, the amount involved, if any, and the remedy sought, and file
with the appropriate office of the American Arbitration Association three
copies of the notice and three copies of the arbitration provision of this
Agreement.
18.6 The arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, as amended, and as
farther modified or revised by the provisions herein, shall govern these
proceedings. The arbitration shall be conducted by three arbitrators, one
selected by each party and the third selected by those two arbitrators. After
the arbitrators are selected, the parties agree to try in good faith to
settle the dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules.
18.7 The place of the arbitration proceedings shall in San Jose,
California. The decision of the arbitration panel shall be rendered in
writing.
18.8 The parties agree that procedural rules will be those of the State
in which the arbitration is to occur, as amended by this Agreement. In
addition, in an attempt to keep combined legal expenses to a minimum, the
parties agree that discovery will take place informally to the extent
possible through document production, interrogatories limited to
identification of witnesses and documents and no more than five (5)
depositions per side.
19. SUBSTANTIVE LAW
19.1 All disputes shall be settled in accordance with the provisions of
this Agreement and all other Agreements regarding its performance, in
accordance with the substantive law of the State of California (except for
its conflict of laws provision) without reference to other law. The United
Nations Convention on contracts for the International Sale of Goods of April
1, 1980 shall not apply.
20. LIMITATION OF LIABILITY
20.1 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES THAT RESULT FROM PERFORMANCE UNDER THIS
AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. WITHOUT LIMITING THE ABOVE, TANISYS RECOGNIZES THAT LGSA'S ABILITY
TO MEET ITS OBLIGATIONS
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TO ITS CUSTOMERS DEPENDS UPON THE TIMELY PERFORMANCE BY TANISYS OF ITS
MATERIAL OBLIGATIONS. SIMILARLY, LGSA RECOGNIZES THAT TANISYS DEPENDS ON
THIRD PARTIES TO PERFORM ITS OBLIGATIONS HEREUNDER. NOTWITHSTANDING THE
ABOVE, TANISYS AGREES TO INDEMNIFY LGSA FOR AND HOLD IT HARMLESS FROM ANY AND
ALL LIABILITIES, CLAIMS AND/OR DAMAGES ARISING FROM TANISYS'S INABILITY TO
TIMELY PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT. THIS LIMITED
INDEMNIFICATION SHALL IN NO EVENT COVER INCIDENTAL, SPECIAL, OR CONSEQUENTIAL
DAMAGES.
IN WITNESS THEREOF, the parties hereto have caused this Manufacturing
Services Agreement to be executed by their duly authorized representatives as
of the date first written above.
TANISYS TECHNOLOGY, INC LG SEMICON AMERICA, INC.
/s/ Chris Efstathiou /s/ Jae Hoon Bae
- -------------------------------- ------------------------------
Charles T Comiso, President Jae Hoon Bae, President
Chief Executive Officer
Chris Efstathiou
Vice President & General Manager
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EXHIBIT A
CONSIGNED COMPONENTS LIST
Manufacturing services shall be provided by Tanisys for the following
Consigned Components:
LGSA Part No. Description
- --------------------------------------------------------
1. GM 7IV 164O3 CJ- 6 4M x 4,3.3V, EDO
2. GM 72V 161621 CT - 10K 1M x 16, 66 Mhz, DSRAM
3. GM 72V 16821 BT - 10K 2M x 8, 66 Mhz, SDRAM
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EXHIBIT B
MEMORY MODULE SPECIFICATIONS AND PACKAGING SPECIFICATIONS
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EXHIBIT B
MEMORY MODULE SPECIFICATIONS AND PACKAGING SPECIFICATIONS
Description LG Semicon Compaq Specification
- ----------------------------------------------------------------------------
4Mx72 EDO Unbuff GMMT7734243C5G6 247288-002
4Mx72 EDO Buff GMMT7734240CSG6 228468-001
8Mx72 EDO Unbuff GMMT7738243CSG6 247289-002
8Mx72 EDO Buff GMMT7738240CSG6 228469-001
IMx64 SDRAM DJMM GMMT2641233CTG-1OK 278029-002
286546-001
2Mx64 SDRAM DIMM GMMT2642233CTG-1OK 278030-002
286547-001
4Mx64 SDRAM DJMM GMMT2644233CTG-1OK 278031-002
286548-001
8Mx72 SDRAM REG GMMT2739210CTG-7J 333143-001
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EXHIBIT C
[Intentionally Left Blank]
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EXHIBIT D
TANISYS TECHNOLOGY: QUOTATION FOR CONTRACT MANUFACTURING SERVICES
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EXHIBIT E
[Intentionally Left Blank]
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EXHIBIT F
LGSA'S AFFILIATES
LG Semicon Wales Ltd.
4th Floor, C.P. House, 97-107 Uxbridge Road
Ealing, London W5 5TL, U.K.
Attn: C. S. Chung
---------------------
LG Semicon Co., Ltd.
Taiwan Office
Rm. 1212, 12F., International Trade Bldg., No.333
Sec. 1, Keelung Road, Taipei, 10548
Attn:
---------------------
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EXHIBIT G
PROCEDURES AND FORMATS FOR REPORTS TO LGSA
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