MANUFACTURING AND PURCHASE AGREEMENT

28

MAXTOR CONFIDENTIAL 4/27/95
DISCLOSE AND DISTRIBUTE SOLELYHyundai-Maxtor Mfg. Agmt.
TO MAXTOR EMPLOYEES HAVING A
NEED TO KNOW


MANUFACTURING AND PURCHASE AGREEMENT


BY AND BETWEEN


MAXTOR CORPORATION


AND


HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.


DATED APRIL 27, 1995


TABLE OF CONTENTS


RECITALS 1 1.0 DEFINITIONS 1 2.0 SCOPE; ROLE OF THE PARTIES 2 3.0 OBLIGATIONS OF THE PARTIES DURING TRANSITION PERIOD; 3
PAYMENT OF EXPENSES; ON-GOING SUPPORT 4.0 GRANT OF LICENSE; TRANSFER OF TECHNOLOGY 4 5.0 OBLIGATIONS DURING PRE-PRODUCTION PERIOD 6 6.0 OBLIGATIONS DURING PRODUCTION PERIOD 7 7.0 FORECAST 8 8.0 PURCHASE ORDERS 8 9.0 PURCHASE ORDER CANCELLATIONS AND 9
RESCHEDULING AND CHANGES 10.0 PURCHASE PRICE 9 11.0 TERMS OF PAYMENT AND TAXES 10 12.0 PACKAGING AND SHIPMENT 10 13.0 ENGINEERING CHANGES 11 14.0 INSPECTION AND ACCEPTANCE 11 15.0 WARRANTY 12 16.0 EPIDEMIC FAILURE 13 17.0 ON-SITE INSPECTION/VISITATION, VENDOR INFORMATION 13
AND AUDITS 18.0 INDEMNIFICATION 14 19.0 INVENTIONS 15 20.0 CONFIDENTIAL INFORMATION 16 21.0 ADMINISTRATIVE AND TECHNICAL COORDINATORS 16 22.0 TERM AND TERMINATION 17 23.0 LIMITATION OF LIABILITY 18 24.0 DISPUTE RESOLUTIONS 18 25.0 GENERAL 18


MANUFACTURING AND PURCHASE AGREEMENT


This Manufacturing and Purchase Agreement (the "Agreement") dated this 27th day of April, 1995 (the "Effective Date") is entered into by Maxtor Corporation ("Maxtor"), a Delaware corporation having its principal place of business at 211 River Oaks Parkway, San Jose, California 95134, U.S.A., and Hyundai Electronics Industries Co., Ltd. ("Hyundai"), a Korean corporation having its principal place of business at San 136-1, Ami-ri, Bubal-eub, Ichon-kun, Kyoungki-do, 467- 860 Korea.


RECITALS


A. Maxtor is in the business of designing, manufacturing and selling hard disk drives and other storage products.


B. Hyundai is in the business of designing, manufacturing and selling, among other items, certain high technology computer products.


C. Maxtor wishes to contract with Hyundai to manufacture and sell to Maxtor the Products (as hereinafter defined), and Hyundai wishes to manufacture and sell to Maxtor the Products.


D. Hyundai and Maxtor are entering into this Agreement for the purpose of establishing a long-term mutually beneficial business relationship, and understand that the full cooperation of both parties is necessary to fully develop this business and maximize the potential opportunities. If problems should be encountered with respect to any aspect of this Agreement or if the parties should encounter any problems not covered by this Agreement, Maxtor and Hyundai shall discuss them in a cooperative and sincere spirit and attempt to arrive at a mutually acceptable solution.


NOW, THEREFORE, in consideration of these premises and of the mutual covenants herein contained, the parties agree as follows:


1.0 DEFINITIONS.


1.1 Day shall mean calendar day unless otherwise specified.


1.2 Hyundai Technology shall mean all information, in whatever form or medium, whether communicated orally or in tangible form, including, but not limited to, trade secrets, inventions, patent rights, designs, drawings, specifications, test information, methods, procedures, engineering and associated design data and manufacturing information, relating to the use, manufacture, service and/or sale of the Products and components thereof to which Hyundai now or hereafter owns or is authorized to sublicense without payment to third parties.


1.3 Maxtor's Other Manufacturing Sources shall mean Maxtor's existing manufacturing Subsidiaries listed on Schedule A hereto and other Subsidiaries established or acquired by Maxtor from time to time for the purpose of manufacturing the Products or Other Products.


1.4 Maxtor Technology shall mean all information, in whatever form or medium, whether communicated orally or in tangible form, including, but not limited to, trade secrets, inventions, patent rights, designs, drawings, Specifications, Process, test information, methods, procedures, Quality and Reliability Systems, engineering and associated design data and manufacturing information, relating to the use, manufacture, service and/or sale of the Products and components thereof to which Maxtor now or hereafter owns or is authorized to sublicense without payment to third parties.


1.5 "Products" shall mean any and all data storage products (including, but not limited to, hard disk drives (rigid or removable) and flash memory products) which will be manufactured by Hyundai for Maxtor hereunder in accordance with the terms of this Agreement.


1.6 "Other Products" shall mean any and all data storage products (including, but not limited to, hard disk drives (rigid or removable) and flash memory products) manufactured by Maxtor, or jointly by Maxtor with a third person, or for Maxtor by a third person, that do not fall under the definition of Products.


1.7 "Process" shall mean assembly and test methods and procedures established by Maxtor relating to the manufacture of the Products.


1.8 "Specifications" shall mean the engineering specifications relating to the Products provided or developed by Maxtor from time to time.


1.9 "Quality and Reliability Systems" shall mean those methods and practices provided or developed by Maxtor which (i) prevent shipment of material which does not meet Specifications, (ii) provide corrective action to prevent manufacture of additional non- conforming material, (iii) provide notification and control of all changes to the Process or Products which may impact the end customers' use of the Product, (iv) provide resolution for customer perceived quality or reliability problems with the Products and (v) provide regular reports of manufacturing data to give assurance that the Process and Products are within acceptable statistical limits.


1.10 "Subsidiary" shall mean any other corporation, company or other entity more than fifty percent (50%) of whose outstanding shares of securities are now or hereafter owned or controlled directly or indirectly by either party, but only so long as such ownership or control exists.


2.0 SCOPE; ROLES OF THE PARTIES.


2.1 Maxtor shall have the principal responsibility for designing the Products and providing to Hyundai working prototypes ready for volume production. Maxtor shall purchase the Products from Hyundai in accordance with the terms and conditions of this Agreement and shall have the responsibility for the worldwide marketing and sale of the Products. Without making any , Maxtor acknowledges that it is Maxtor's to have Hyundai manufacture for Maxtor the defined in Schedule F hereto.


2.2 Hyundai shall have the principal responsibility for the manufacture of the Products and shall manufacture and assemble the Products for Maxtor solely in accordance with the Process and Specifications provided by Maxtor from time to time.


2.3 Maxtor and Hyundai understand that full cooperation is necessary to fully develop the business relationship contemplated herein and to achieve the potential opportunities thereof. The parties, therefore, intend to fully cooperate with each other to continue and maintain a long-term and mutually beneficial business relationship.


2.4 (a) Neither party shall be prevented from entering into similar agreements with third parties for products or services or for performing such manufacturing services, provided that the confidential information or Technology of the other party is not used without obtaining prior written consent from the other party. At the request of either party, .


(b) Notwithstanding anything to the contrary contained herein, it is understood that . In analyzing such overall costs and other terms, the shall be considered. In analyzing such overall costs and other terms, shall be considered. For this analysis, Maxtor will take into consideration .


2.5 It is the parties' intention to manufacturing levels at each of Hyundai and Maxtor's Other Manufacturing Sources' factories. Accordingly, the parties agree to meet and confer at least once quarterly to review and determine the most efficient and cost effective utilization of their . Notwithstanding anything to the contrary, it is agreed and understood that in order to achieve the intent of this Section,
.


2.6 It is also the parties' intention to conduct Hyundai's manufacturing operations in the and mutually beneficial manner, . Accordingly, the parties also agree to meet and confer at least once per quarter to assess whether the current Hyundai manufacturing operation is , and if it is agreed that it is not, to to make such manufacturing operations .


2.7 The parties understand that the assurance of continued production of quality and low-cost Products is critical to Maxtor's business and that Maxtor is relying on Hyundai as the sole source of certain Products. The parties recognize that the laws existing in certain countries may require the manufacture of products in the country in order for the products to be sold in such country and that unforeseen events, including political conditions within the United States, or other circumstances, may arise which would either limit or prevent Hyundai from manufacturing Products or Other Products in Korea or other countries, or from satisfying Maxtor's purchase requirements for Products necessary to meet the demands of the market. In addition, the economics associated with the manufacture of the Products, or some portion thereof, may be such that it is clearly appropriate to have such Product, or component or portion thereof, manufactured outside of Korea. In the event that legal, political or governmentally imposed economic restrictions or other conditions, or if any event described in Section 25.4, or if a material breach of this Agreement by Hyundai shall occur, or the parties are unable to resolve a material dispute in accordance with Section 24, which prevent or limit, or make more unfavorable, the delivery of Products from Hyundai to Maxtor or its customers, Maxtor and Hyundai will immediately cooperate in good faith and sincere spirit to find a mutually acceptable solution to allow Hyundai to continue supplying the Products to Maxtor. Nothing set forth in this Section shall affect the understandings and obligations set forth in Section 2.4(b), above.


3.0 OBLIGATIONS OF THE PARTIES DURING TRANSITION; PAYMENT OF EXPENSES; ON-GOING SUPPORT.


3.1 Hyundai's Obligations. Hyundai shall be responsible to purchase, own, lease or otherwise acquire and continually make available, the facilities and capital equipment needed to manufacture the Products and shall provide all parts, labor, materials and other items necessary to perform Hyundai's obligations hereunder.


3.2 Maxtor's Obligations.


(a) To enable Hyundai to manufacture the Products, Maxtor shall (i) provide Hyundai (through Maxtor or a Maxtor subcontractor) with the necessary in accordance with the Transition Plan described in Schedule B attached hereto, as will be modified from time to time by the parties, (ii) assist Hyundai in procuring the necessary to allow Hyundai to perform its obligations hereunder, and (iii) with respect to the Products, produce and compile for Hyundai and deliver to Hyundai, on a schedule mutually agreed to by the parties, the Product design, Process, technical specifications, and test information relating to the Products, and the Product manufacturability, fabrication, operation, performance, interfaces, and reliability of the Products in sufficient detail so as to enable Hyundai to thoroughly understand the Products to be manufactured by Hyundai.


(b) Subsequent to the initial transition period for each Product as described in the Transition Plan for each such Products, upon Hyundai's reasonable request, Maxtor shall promptly provide additional
to Hyundai at facilities designated by Hyundai relating to the services performed or Products delivered hereunder. The period of time is required shall be mutually agreed upon by the parties. The parties agree to periodically assess the continued provision of such Maxtor support in terms of reasonableness relating to, among other items, expense, time, manpower required, and .


3.3 Allocation of Expenses. All expenses incurred by the parties during the initial transition period shall be allocated as specified in the Transition Plan in accordance with the terms of this Agreement. It is anticipated that the parties will continue to incur expenses as part of the ongoing technology exchange under Section 4.3 and continual refinement of their business relationship. Unless otherwise agreed to by mutual agreement, the parties agree to
incurred pursuant to this Agreement in accordance with the following guidelines:


(a) Maxtor agrees to assume all expenditures associated with Product and Process design and development, including costs of component design and selection and prototype manufacture.


(b) During and subsequent to the initial transition period,
issued by Maxtor and shipping Products to Maxtor.


(c) Maxtor agrees to assume all costs incurred in the sale and marketing of the Products.


(d) agrees to assume associated with the
after the initial transition period.


(e) agrees to assume , including
or other technical information developed or provided by Maxtor, and assisting Hyundai in establishing and operating Hyundai's manufacturing facility.


(f) Except as otherwise provided, will be borne by the .


4.0 GRANT OF LICENSE; TRANSFER OF TECHNOLOGY.


To enable the parties to fulfill their respective obligations under this Agreement, Maxtor and Hyundai shall grant to the other a non- exclusive license pursuant to the terms described below.


4.1 Grant of License by Maxtor.


(a) Subject to the provisions of Section 22, Maxtor hereby grants to Hyundai:


(i) a non-exclusive, personal, nontransferable, royalty-free license, without the right to sublicense (except as provided below), to use the Maxtor Technology solely in connection with the development, assembly, manufacturing and/or testing of the Products solely for Maxtor in accordance with the terms of this Agreement; and


(ii) the right to sublicense to third party contractors, with no right to resublicense, in accordance with certain minimum terms and conditions established by Maxtor and subject to Maxtor's prior written approval, the right to use the Maxtor Technology solely for the purpose of having such third party subcontractors make the Products for Maxtor.


(b) Maxtor will deliver to Hyundai in a timely manner the Maxtor Technology as determined necessary by Maxtor in order to permit Hyundai to meet its obligations hereunder. The schedule and manner of delivery of information shall be mutually agreed to by Maxtor and Hyundai with respect to each Product.


(c) The rights granted to Hyundai pursuant to Section 4.1(a) (including all sublicenses granted by Hyundai under Section 4.1(a)(ii)) shall terminate upon termination or expiration of this Agreement, whenever and for whatever reasons, and Hyundai agrees to immediately cease using the Maxtor Technology or any other information supplied by Maxtor or obtained by Hyundai under this Agreement in any manner upon such termination or expiration.


4.2 Grant of License by Hyundai.


(a) Subject to the provisions of Section 22, Hyundai hereby grants to Maxtor and its Subsidiaries:


(i) a non-exclusive, personal, nontransferable, royalty-free license, without the right to sublicense (except as provided below), to use the Hyundai Technology solely in connection with the development, assembly, manufacturing, distribution, sales and/or testing of the Products and hard disk drive Other Products developed by or for Maxtor provided that the license to Hyundai technology as aforesaid for such hard disk drive Other Products is limited solely to Maxtor and Maxtor's Other Manufacturing Sources; and


(ii) the right to sublicense to third party subcontractors, with no right to resublicense, in accordance with certain minimum terms and conditions established by Hyundai and subject to Hyundai's prior written approval, the right to use the Hyundai Technology solely for the purpose of having such third party subcontractors make the Products.


(b) The rights granted to Maxtor pursuant to Section 4.2(a) (including all sublicenses granted by Maxtor under Section 4.2(a)(ii)) shall terminate upon termination or expiration of this Agreement, whenever and for whatever reasons, and Maxtor agrees to immediately cease using the Hyundai Technology or any other information supplied by Hyundai or obtained by Maxtor under this Agreement in any manner upon such termination or expiration.


4.3 Technology Transfer and Technical Information Exchange. It is agreed that technical information exchange will be an ongoing process during the term of the Agreement. Each party shall have
, subject to the provisions of Section 20, to the other's facilities and production processes for the Products and shall provide of technical information. To the extent feasible, the parties agree to each other information relating to a Product design or manufacturing, as it is developed or becomes available.


5.0 OBLIGATIONS DURING PRE-PRODUCTION PERIOD.


5.1 Maxtor's Obligations.


(a) For each Product proposed by Maxtor, Maxtor shall be responsible for and shall bear all expenses related to the following:


(i) the development of the Product design (including Specifications thereof) and component design;


(ii) the selection and qualification of and ;


(iii) the development of the by Hyundai;


(iv) the performance of ;


(v) the of the Quality and Reliability Systems; and


(vi) the of technology, technical information and documentation relating to the foregoing to Hyundai in an manner.


(b) Maxtor shall Hyundai's manufacturing facilities and each of the Products to be manufactured by Hyundai hereunder.


(c) Maxtor shall assist and cooperate with Hyundai in resolving any pre-production issues.


5.2 Hyundai's Obligations.


(a) Hyundai agrees that it will complete, as provided in the Transition Plan, the establishment of a manufacturing facility fully equipped to manufacture the Products in volume for Maxtor pursuant to Section 8.


(b) Hyundai shall relating to
required to perform its obligations under this Agreement.


(c) Hyundai shall comply with the qualification plan developed by Maxtor for the qualification of Hyundai's manufacturing facility and the Products to be produced by Hyundai. It is understood that the qualification plan may be modified from time to time as new Products are being introduced.


(d) Hyundai shall perform all Quality and Reliability testing in accordance with the Quality and Reliability Systems that are developed and provided by Maxtor and attached hereto as Schedule D.


(e) Hyundai may not move any portion of the manufacturing process or Product to any new facility or move from the original manufacturing facility qualified by Maxtor, except with the prior written consent of Maxtor.


(f) At Maxtor's request, Hyundai will assist Maxtor in qualifying
used in the Products. It is understood, however, that Maxtor will select and qualify , including components manufactured by Hyundai. Hyundai agrees that it will purchase components and parts for the manufacture or assembly of the Products from provided to Hyundai from time to time by Maxtor. The parties, however, agree to cooperate and use reasonable efforts to in order to reduce material or manufacturing costs.


6.0 OBLIGATIONS DURING PRODUCTION PERIOD.


6.1 Maxtor's Obligations.


(a) Maxtor shall use its best efforts to use of Hyundai's factory as contemplated under Section 2.5.


(b) Maxtor shall promptly assist and cooperate with Hyundai in resolving any production problems to allow Hyundai to resume production .


(c) Maxtor shall work with Hyundai on an ongoing basis to address
issues and to improve yield.


(d) Maxtor shall keep in place, at , a mutually agreed upon dedicated to assist Hyundai with the ongoing technology exchange and shall promptly .


(e) Maxtor shall promptly qualify, at in order to reduce the materials and manufacturing cost of the Product.


(f) Maxtor will develop and to ensure effective and efficient continuity of supply for all components used in the Products. Hyundai shall assist Maxtor in the development and .


(g) Maxtor shall inspect Products within from the date of receipt and use the data obtained to independently determine whether the have been maintained. Maxtor shall promptly make such to assist Hyundai in meeting its reliability and quality goals.


(h) Maxtor shall promote the sale of the Products.


6.2 Hyundai's Obligations.


(a) Hyundai will be responsible for processing sufficient Product starts and procuring sufficient inventory to provide Maxtor with the required number of Products.


(b) Hyundai acknowledges that due to the of certain Products manufactured by Hyundai for Maxtor, it is critical that Hyundai maintain the its manufacturing capacity upon Maxtor's request. Hyundai and Maxtor therefore agree to develop
Hyundai's manufacturing capacity to meet customer demand.


(c) Hyundai shall assist Maxtor in the development of plans to ensure effective and efficient continuity of supply for all components used in the Products.


(d) Hyundai shall maintain and supply on Products pursuant to the Quality and Reliability Systems.


(e) Hyundai shall comply with the Change Control Policy set forth in Schedule C and the Quality and Reliability Systems Procedure set forth in Schedule D.


(f) Hyundai may not move to any new facility or move from the original manufacturing facility qualified by Maxtor, except with the prior written consent of Maxtor.


(g) Hyundai will comply with the ...