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EXHIBIT 10-d(3)
CONFIDENTIAL TREATMENT REQUESTED
THIRD AMENDMENT TO
PHC TECHNICAL AGREEMENT
This Third Amendment to Technical Agreement - Silicon Wafer Manufacturing
(the "Third Amendment") is made and entered into as of the date affixed by the
signatures below, and is effective as of October 1, 1998, by and between MEMC
ELECTRONIC MATERIALS, INC., a Delaware corporation ("MEMC"), and POSCO XXXX
COMPANY LIMITED, a Korea corporation ("PHC"). All terms used herein, unless
otherwise defined, shall have the same meanings ascribed to them in the
Agreement (as defined below).
Recitals
A. MEMC and PHC made and entered into that certain Technical Agreement-Silicon
Wafer Manufacturing as of December 19, 1990, that certain Amendment to
Technical Agreement effective as of January 1, 1995, and that certain
Second Amendment to Technical Agreement effective as of September 30, 1998
(as so amended, the "Agreement").
B. MEMC and PHC wish to further amend the Agreement as set forth below.
NOW, THEREFORE, pursuant to Section 17.03 of the Agreement, the parties
agree as follows:
1. Limitation of Scope. The following sentence shall be added at the end of
the definition of Silicon Wafers in Section 1.02:
"As used herein, Silicon Wafers shall mean [CONFIDENTIAL MATERIAL HAS BEEN
DELETED AND FILED SEPARATELY WITH THE SEC]."
2. Research and Development Projects. Add the following paragraphs at the end
of Section 3.01 as follows:
"During the Term of the Agreement, the parties shall meet no less
frequently than annually at a mutually agreeable time and place at which
MEMC shall advise PHC of the nature of any major research or pilot plant
projects within the Field of this Agreement which MEMC is undertaking. In
addition, during the Term of the Agreement, MEMC shall periodically advise
PHC of the status and progress of projects in the Field of the Agreement
which MEMC has undertaken via its "Product and Process Pipeline" program
(the program under which MEMC currently directs its research and
development activities) or any similar successor program.
During the Term of this Agreement, if PHC requests information regarding a
technical improvement or development of MEMC (either product or
process-related) within the Field of the Agreement and PHC and MEMC agree
that PHC has a commercial requirement for such information, then MEMC will
make available to PHC the necessary technical information if MEMC has
incorporated the improvement or development into any of its Plants. If MEMC
has not incorporated the improvement or development into any of its Plants,
the parties will either agree for MEMC to transfer the information to PHC
at a later stage of development or for PHC to participate in the
development. PHC may undertake its own research or pilot plant projects
provided such projects (i) are not duplicative of any MEMC projects, (ii)
are mutually beneficial, and (iii) are agreed upon by both parties."
3. Licenses to MEMC.
(a) Sections 4.03 and 4.04 are deleted in their entirety and the following
sections are added to the Agreement:
"4.03 - PHC agrees to grant and hereby grants to MEMC a worldwide,
royalty-free, nonexclusive right and license, with the right to
sublicense, to use all Technical Information which PHC supplies to
MEMC pursuant to this Agreement.
4.04 - PHC agrees to grant and hereby grants to MEMC a royalty-free,
nonexclusive right and license, with the right to sublicense, under
and for the full terms of all PHC Korean Patents. PHC agrees to grant
and hereby grants to MEMC a royalty-free, exclusive right and license,
with the right to sublicense, under and for the full terms of all PHC
Ex-Korean Patents; provided, that the parties agree that PHC shall
retain the right to use (but not license) the PHC Ex-Korean Patents.
4.05 - Notwithstanding the foregoing, MEMC shall be permitted to
sublicense PHC Technical Information or patents to its Affiliates or
MEMC Joint Ventures only if the Affiliate or MEMC Joint Venture grants
to PHC a royalty-free license to its Technical Information and patents
in the Field of the Agreement which such Affiliate or MEMC Joint
Venture has the legal right to grant. Any license from an MEMC
Affiliate or MEMC Joint Venture shall be on the same terms as the MEMC
licenses granted in Sections 4.01 and 4.02 hereof."
(b) New Sections 1.18, 1.19 and 1.20 are added as follows:
"1.18 - "MEMC Joint Ventures" means joint venture companies in which
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MEMC participates as a shareholder, partner or member and which is
engaged in the manufacture and/or sale of silicon wafers.
1.19 - "PHC Korean Patents" shall have the meaning set forth in
Section 18.01 hereof.
1.20 - "PHC Ex-Korean Patents" shall have the meaning set forth in
Section 18.02 hereof."
4. Running Royalty
(a) Section 5.03 is deleted in its entirety and replaced with the
following:
"5.03 - In addition to the payments specified in Sections 5.01 and
5.02 and elsewhere in this Agreement, during the Term of this
Agreement, PHC shall pay MEMC a running royalty consisting of (i)
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH THE
SEC] of Net Sales Proceeds (the "Net Sales Royalty"), and (ii)
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH THE
SEC] of Net Income After Taxes (the "NIAT Royalty")."
(b) The first sentence of Section 5.06 is deleted in its entirety and
replaced with the following:
"5.06 - The Net Sales Royalty due MEMC pursuant to this Agreement
shall be computed quarterly and shall be paid to MEMC within sixty
(60) days of the last day of March, June, September, and December of
each calendar year; each such payment shall be accompanied by a
written report setting forth the quantities and descriptions of all
Silicon Wafers sold by PHC during the period for which payment is
made; the NIAT Royalty shall be computed annually and shall be paid to
MEMC within sixty (60) days of the last day of each calendar year;
each such payment shall be accompanied by an earnings statement of PHC
detailing the calculation of Net Income After Taxes."
(c) In the last sentence of Section 5.06, the phrase "or annual, as the
case may be" is inserted after the word "quarterly".
(d) In the second sentence of Section 5.07, the phrase "or year, as the
case may be" shall be added after the phrase "calendar quarter".
(e) A new Section 1.21 is added as follows:
"1.21 - "Net Income After Taxes" shall mean PHC's net income after
taxes but before deduction of the NIAT Royalty and shall be computed
in accordance with U.S. generally accepted accounting principles.
5. Sharing of Certain MEMC Royalties.
(a) A new Section 5.08 is added as follows:
"5.08 - In the event that MEMC sublicenses any patent jointly owned by
the parties or owned or controlled solely by PHC to a third party
other than (i) an MEMC Affiliate, or (ii) an MEMC Joint Venture, in
consideration for cash royalties, PHC shall be entitled during the
Term of this Agreement to a share of the royalties as agreed between
the parties. In determining PHC's share of the royalties, the parties
shall take into consideration each party's relative contribution to
the sublicensed technology, and MEMC's contribution to the core
technology on which the sublicensed technology is based or to which it
is related. If the parties are unable to agree on PHC's share of the
royalties, the matter shall be submitted to arbitration as set forth
in Section 13.04 below."
6. Running Royalty Upon Termination
(a) A new Section 5.09 is added as follows:
"5.09 - Following termination or expiration of this Agreement, PHC
shall pay MEMC, in accordance with the procedures set forth in this
Article V, a running royalty as follows:
a. For the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SEC] following termination or expiration, a
percentage Net Sales Royalty and NIAT Royalty equal to [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH THE SEC] of the
percentage Net Sales Royalty and NIAT Royalty, respectively, in effect
at the date of termination or expiration;
b. For the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SEC] following termination or expiration, a
percentage Net Sales Royalty and NIAT Royalty shall be equal to
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH THE
SEC] of the percentage Net Sales Royalty and NIAT Royalty,
respectively, in effect at the date of termination or expiration; and
c. For the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH THE SEC] following termination or expiration, a
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percentage Net Sales Royalty and a NIAT Royalty equal to [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH THE SEC] of the
percentage Net Sales Royalty and NIAT Royalty, respectively, in effect
at the date of termination or expiration.
d. Thereafter, PHC shall have no obligation to pay any royalty
whatsoever to MEMC."
(b) The following phrase is added at the end of the first sentence of
Section 14.05:
"and the obligation of PHC to pay MEMC a running royalty upon
termination or expiration of this Agreement as set forth in Section
5.09"
7. Notice
In Sections 12.01 and 12.02, "telex or facsimile" shall be replaced with
"telex, facsimile, or electronic mail."
8. Arbitration of Certain Matters
(a) The following phrase shall be added at the beginning of the first
sentence of Section 13.01:
"Except for those matters which are to be settled by arbitration in
accordance with Section 13.04 below,"
(b) A new Section 13.04 is added as follows:
"13.04 - Arbitration to determine PHC's share of royalties received by
MEMC pursuant to Section 5.08 shall be by a single arbitrator pursuant
to the Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "Rules") then in force. The single arbitrator
shall be selected by the parties and shall be a person familiar with
the silicon wafer business. If the parties are unable to agree upon an
arbitrator within thirty (30) days after arbitration is invoked,
either party may ask the ICC to appoint an arbitrator subject to the
following stipulation: if PHC so requests, the arbitrator shall not be
a U.S. national and, if MEMC so requests, the arbitrator shall not be
a Korean national. The arbitration shall be conducted in Singapore.
Each party shall submit its position to the arbitrator and the
arbitrator shall agree upon and approve one of the positions
submitted. Unless otherwise agreed by the parties, the arbitration
proceedings shall be conducted in English and any relevant documents
in other languages shall be translated into English at the expense of
the party producing them. In rendering its decision, the arbitrator
shall apply the terms and conditions of this Agreement. The arbitrator
shall determine how the expenses of the arbitration are to be borne by
the parties in dispute."
9. Term of Agreement
(a) Section 14.03 is deleted in its entirety and replaced with the
following:
"14.03 - No later than [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND
FILED SEPARATELY WITH THE SEC] after the effective date of this Third
Amendment, MEMC and PHC shall negotiate in good faith on another
technical agreement with the object of allowing PHC and MEMC to obtain
continuing technology from the other party on reasonable terms. In the
case of failure of such negotiations and unless terminated earlier as
herein provided, this Agreement shall expire [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH THE SEC] from the effective
date of this Third Amendment. Expiration or termination of this
Agreement shall not act to terminate any of the rights or licenses
granted by the parties hereunder, provided, however, that all rights
and licenses granted by MEMC to PHC shall be non-exclusive. The period
prior to the expiration or termination of this Agreement is herein
referred to as the "Term of the Agreement.""
(b) In Section 3.02, the phrase "during the five (5) year period beginning
with the Date of First Commercial Production" shall be replaced with
"during the Term of this Agreement."
(c) In Section 3.04, the phrase "During the five (5) year period following
the Date of First Commercial Production" shall be replaced with
"During the Term of this Agreement".
10. Management of PHC and Jointly-Owned Patents. A new Article XVIII-Management
of PHC and Jointly-Owned Patents is added with the following provisions:
"18.01 - In the Republic of Korea, PHC shall be responsible for preparing,
filing, prosecuting and maintaining patents and patent applications which
claim as an invention a PHC development ("PHC Korean Patents").
18.02 - In countries other than the Republic of Korea, MEMC shall be
responsible, upon the request of and at the expense of PHC, for preparing,
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filing, prosecuting and maintaining patents and patent applications which
claim as an invention a PHC development ("PHC Ex-Korean Patents"). The
decision of when and where to file PHC Ex-Korean Patents and what other
actions to take with respect thereto shall be agreed between the parties;
provided, that if PHC elects not to pay for any filing or action proposed
by MEMC with respect to a PHC Ex-Korean Patent and MEMC makes such filing
or takes such action at its expense, PHC agrees that it will assign its
entire right and interest in and to such patent or patent application to
MEMC. MEMC shall keep PHC advised as to all developments with respect to
PHC Ex-Korean Patents and shall endeavor to supply PHC copies of all papers
received and filed in connection with the prosecution thereof and give due
consideration to PHC's comments thereon. If PHC requests MEMC to prepare,
file, prosecute or maintain a PHC Ex-Korean Patent and MEMC elects not to
assume or continue responsibility for such actions, PHC may take such
actions at its own expense. In such event, the exclusive license granted to
MEMC with respect to such patent shall become nonexclusive.
18.03 - All patents and patent applications which claim as an invention a
joint development of PHC and MEMC shall be filed in the names of and be
jointly owned by PHC and MEMC. MEMC shall be solely responsible for
preparing, filing, prosecuting and maintaining such patents and patent
applications. The expenses of such actions shall be shared equally by PHC
and MEMC. MEMC shall have the right to freely sublicense any of such
jointly-held patents; provided, that in the Republic of Korea, PHC's
consent shall be required for any such sublicense. Elsewhere, if PHC's
consent is legally required prior to MEMC's grant of a sublicense, then PHC
agrees that it shall provide such consent. PHC shall have the right to
sublicense any of such jointly-held patents with the consent of MEMC. MEMC
shall notify PHC in writing prior to granting a sublicense of any
jointly-held patent."
11. Effect
This Third Amendment shall become effective on October 1, 1998 and shall
supercede any provisions of the Agreement which are in conflict with this
Amendment. All other provisions of the Agreement shall remain effective and
binding.
IN WITNESS WHEREOF, the parties have executed this Third Amendment as
follows:
MEMC ELECTRONIC MATERIALS, INC POSCO XXXX COMPANY, LIMITED
By: /s/ Xxxxx X. von Horde By: /s/ S. B. Hong
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Title: President, COO Title: President, PHC
Date: December 17, 1998 Date: December 17, 1998
