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MICRON TECHNOLOGY INC 8-K Report, Material Agreement (Aug 6, 2013)

Filed August 6, 2013For Securities:MU

Summary

Micron Technology, Inc. filed an 8-K on August 5, 2013, detailing significant amendments and agreements related to its acquisition of Elpida Memory, Inc. The company entered into a Second Amendment to its Sponsor Agreement with the trustees of Elpida and Akita Elpida Memory, Inc. This amendment introduces new termination rights for the trustees linked to non-payment events and allows for Micron-designated deputy trustees to assist in managing Elpida's operations during its reorganization. Additionally, Micron, through its subsidiary Micron Semiconductor Asia Pte. Ltd. (MSA), finalized Cost Plus Agreements with Elpida, including a Front-End Manufacturing Supply Agreement, a General Services Agreement, and a Research and Development Engineering Services Agreement. These agreements aim to transition Elpida's business to a cost-plus model to generate stable operating cash flows and are structured to commence upon the integration of Elpida's systems with Micron's and obtaining necessary court approvals.

Key Highlights

  • 1Micron amended its Sponsor Agreement with Elpida's trustees, adding new termination rights for trustees related to payment defaults and enabling Micron's involvement in Elpida's operational management during reorganization.
  • 2New 'Cost Plus Agreements' were executed between Micron's subsidiary MSA and Elpida, including a Supply Agreement, General Services Agreement, and R&D Engineering Services Agreement.
  • 3The Cost Plus Agreements are designed to transition Elpida's business towards a cost-plus revenue model, intended to create more stable operating cash flows.
  • 4Elpida's reorganization plans were approved by creditors on February 26, 2013, and by the Tokyo District Court on February 28, 2013.
  • 5Micron will place monthly orders for products and services from Elpida under these new agreements, which will also govern intellectual property ownership for R&D services.
  • 6The supply and services obligations under the Cost Plus Agreements are contingent on the successful integration of Elpida's IT systems with Micron's and obtaining relevant court approvals.
  • 7The agreements aim to ensure Elpida can meet its obligations to creditors under its approved reorganization plan.

Frequently Asked Questions

The Cost Plus Agreements (Supply Agreement, General Services Agreement, and R&D Engineering Services Agreement) are designed to transition Elpida's business operations to a cost-plus model. This model aims to generate more stable operating cash flows for Elpida, which will help meet the financial requirements of its reorganization plan, including payments to creditors.

The obligations under the Supply Agreement and General Services Agreement will commence on the first date that both Elpida's manufacturing, sales, and operational computing systems are successfully converted to Micron's enterprise resource planning system and all necessary court approvals for the cost-plus model are obtained. The R&D Agreement obligations will begin when Micron acquires all of Elpida's intellectual property, which is expected shortly after the acquisition closes and the cost-plus model is implemented.

The Second Amendment to the Sponsor Agreement introduces a new termination right for Elpida's trustees in cases of significant material non-payment events under the Cost Plus Agreements. It also allows for the appointment of deputy business trustees designated by Micron to assist the primary trustee, also a Micron designee, in managing Elpida's businesses during the corporate reorganization.

Elpida's reorganization plans were approved by its creditors on February 26, 2013, and by the Tokyo District Court on February 28, 2013. The company is undergoing corporate reorganization proceedings in Japan. Secured creditors, whose claims were approximately 113 billion yen as of the plan submission, will continue to have their claims secured by assets like Elpida's Hiroshima fab property and equipment.