AMENDMENT NO. 1 TO FUMED SILICA SUPPLY AGREEMENT
Exhibit 10.49
***
Text Omitted and Filed Separately with
the Securities and Exchange Commission.
Confidential
Treatment Requested Under 17C.F.R.
Sections 200.80(b)(4) and 240.24b-2
AMENDMENT
NO. 1 TO
This
Amendment No. 1 to Fumed Silica Supply Agreement (this “Amendment”) is made and
executed as of September 29, 2006 (the “Effective Date”) by and between Cabot
Corporation, a Delaware corporation (“Cabot”), and Cabot Microelectronics
Corporation, a Delaware corporation (“CMC”), and supplements and amends the
FUMED SILICA SUPPLY AGREEMENT executed on January 16, 2004 (the “Original
Agreement” and, as amended hereby, the “Agreement”) between Cabot and CMC.
Capitalized terms used herein without definition and defined in the Original
Agreement shall have the same meanings as defined in the Original Agreement.
Cabot and CMC are each referred to from time to time in the Original Agreement
and herein as a “Party” and, together, the “Parties.”
RECITALS
WHEREAS,
CMC and Cabot agree that [***] is beneficial to the [***] of Fumed Silica
purchased by CMC from Cabot pursuant to the Original Agreement.
WHEREAS,
CMC and Cabot agree that the capability for [***] should be installed on
Cabot’s
Tuscola A unit, Tuscola B unit and ▇▇▇▇▇ B unit
where Fumed Silica supplied to CMC
is manufactured.
WHEREAS,
CMC and Cabot entered into a Letter of Agreement dated as of February 15,
2006
(the “Letter of Agreement”) regarding the Parties’ intent with respect to
[***].
WHEREAS,
CMC and Cabot wish to amend the Original Agreement to, among other things,
include the Parties’ agreement as to the [***] and the payment for such
[***].
NOW
THEREFORE, the Parties do hereby agree as follows:
| 1. |
Cabot
has installed on Tuscola A unit a [***] (“TU-A Temporary System”). The
TU-A Temporary System has been in operation since late April 2006
for
[***] production. However, the TU-A Temporary System has been used
in a
mode in which [***]. The result is that the [***] and the full anticipated
benefit of the system has not been realized. When the [***], the
system is
said to be operated in [***] mode. Once a permanent system has been
installed and put into operation at the Tuscola A Unit in accordance
with
the terms of this Amendment, the TU-A Temporary System will be
decommissioned and the associated rented equipment
returned.
|
| 2. |
(a)
At CMC’s request, Cabot is in the process of evaluating the feasibility
of
a [***] for use at the Tuscola A Unit and the ▇▇▇▇▇ B Unit. If Cabot
reasonably and in good faith determines that such a [***] is not
feasible,
then a [***] shall be selected by the Parties for use at Tuscola
A Unit
and ▇▇▇▇▇ B Unit. On or before December 15, 2006, Cabot will give
written
notice to CMC whether it will be feasible to install and operate
a [***]
and if not, Cabot will provide a written description of the reasons
and
basis therefor. The system selected to [***] at the Tuscola A Unit
and
▇▇▇▇▇ B Unit, either the [***] shall be referred to herein as the
“TU-A
Permanent System”, and the “BA-B Permanent System”, respectively. Cabot
shall not initiate final design and construction of the TU-A Permanent
System or BA-B Permanent System until each of the following conditions
(the “Permanent Process Conditions”) have been met: (i) Cabot has received
CMC’s written approval to proceed with the detailed design and
installation of the TU-A Permanent System and the BA-B Permanent
System
(which approval shall not be unreasonably withheld or delayed); (ii)
at
least [***] of CMC’s orders for a period of at least one month for [***]
to be produced at Tuscola A unit are for [***] and (iii) either (x)
CMC
shall approve in writing a Supplier Process Change Notification for
production of [***] using the TU-A Permanent System and the BA-B
Permanent
System, respectively (which Permanent Systems shall, at the election
of
CMC, be run [***] or, (y) the Parties reach a mutually satisfactory
alternative agreement with respect to the production of [***] on
the
Tuscola A Unit and ▇▇▇▇▇ B unit. Upon satisfaction of each of the
Permanent Process Conditions, Cabot will promptly thereafter proceed
with
the final design, construction, installation and operation of the
TU-A
Permanent System and the BA-B Permanent System. All design, engineering,
capital, installation and operation costs relating to the operation
of
TU-A Permanent System (“TU-A Permanent Expenses”) and the BA-B Permanent
System (“BA-B Permanent Expenses”) shall be at Cabot's expense.
|
(b)
If
any Permanent Process Condition is not satisfied prior to December 31, 2006,
then from and after January 1, 2007 Cabot will continue to operate the TU-A
Temporary System until the Permanent Process Conditions have been satisfied,
or
CMC directs Cabot, on thirty (30) days notice, to decommission the TU-A
Temporary System and return the rented equipment.
| 3. |
Cabot
will pay for the TU-A Temporary System [***] costs. Cabot will pay
for the
TU-A Temporary System [***] costs, including but not limited to [***]
(collectively, the TU-A [***] Costs”). Notwithstanding the foregoing, if
the Permanent Process Conditions have not been satisfied by December
31,
2006, CMC will pay documented, actual TU-A [***] Costs reasonably
incurred
for the period of time beginning January 1, 2007 until the earlier
of the
date the Permanent Process Conditions have been satisfied, or the
date the
TU-A Temporary System is decommissioned and the rented equipment
returned.
|
4. Cabot
will install and operate [***] (“TU-B Temporary System”). At CMC’s election, the
TU-B Temporary Expenses (as hereinafter defined) may be included in the Cabot
CI
Cap in Term Year 3 and Term Year 4, and expenses incurred in Term Year 3
in
excess of the Cabot CI Cap for such Term Year may be carried forward into
the
Cabot CI Cap for Term Year 4. To the extent such expenses are not included
in
the Cabot CI Cap in such Term Years, CMC will reimburse Cabot for such expenses
in accordance with the provisions of the Agreement. “TU-B Temporary Expenses”
shall mean all [***] in connection with the TU-Temporary System, including
but
not limited to, [***]. If CMC desires [***] of the TU-B Temporary System,
all
costs associated with such [***] shall be at CMC’s expense. The TU-B Temporary
System shall remain operational until CMC has given Cabot at least thirty
(30)
days written notice that CMC will no longer require the product from that
line.
5. Effective
as of the first day of Term Year 4, Section 2.3(a)(ii) of the Original Agreement
shall be amended and restated in its entirety as follows:
“(ii)
the
maximum annual volume of Fumed Silica from ▇▇▇▇▇’▇ ▇▇▇▇▇, Wales facility (the
“▇▇▇▇▇ Plant”) shall be [***] pounds per Term Year. In addition to the
foregoing, the maximum monthly volume of Fumed Silica from the ▇▇▇▇▇ Plant
shall
be [***] pounds per month provided that the total of such monthly volumes
does
not exceed [***] pounds per Term Year from the ▇▇▇▇▇ Plant.”
6. Effective
as of the first day of Term Year 4, Section 2.4 of the Original Agreement
shall
be amended and restated in
its
entirety as follows:
“2.4
Minimum
Volumes.
(a) CMC
shall
be obligated to purchase from Cabot, during each six month period covered
by a
Six Month Forecast (each, a “Six Month Forecast Period”), a “Minimum Volume,”
meaning at least 90% of the aggregate volumes of Fumed Silica forecasted
to be
purchased by CMC as set forth in such Six Month Forecast; provided however,
that
if CMC fails to meet the ▇▇▇▇▇ Minimum Volume (as defined in Section 2.4(b)
below) during any Six Month Forecast Period and CMC is required to pay
compensation under Section 2.4(b) below in connection with such ▇▇▇▇▇ Shortfall
(as defined in Section 2.4(b) below), then the ▇▇▇▇▇ Shortfall shall be
subtracted from the applicable Minimum Volume for the purposes of the liquidated
damages calculation set forth below in this Section 2.4(a)(i)(x) for such
Six
Month Forecast Period. Cabot and CMC recognize that damages for CMC’s failure to
purchase the Minimum Volumes
would be difficult to ascertain and prove. Cabot and CMC agree that if, during
any Six Month Forecast Period, CMC fails to purchase from Cabot the Minimum
Volume of Fumed Silica for such Six Month Forecast Period, CMC shall pay
to
Cabot liquidated damages in an amount equal to the product obtained by
multiplying:
(i) the
difference (in pounds) between the (x) the applicable Minimum Volume and
(y) the
amount of Fumed Silica actually purchased by CMC during the relevant Six
Month
Forecast Period; times
(ii) $1.35.
(b)
CMC
will order from Cabot a minimum of [***]
pounds
(“▇▇▇▇▇ Minimum Volume”) of Fumed Silica from ▇▇▇▇▇ B unit (“▇▇▇▇▇ B Fumed
Silica”) during each Six Month Forecast Period during Term Year 4, Term Year 5
and Term Year 6. For the purposes of this Section 2.4, all Fumed Silica ordered
by CMC shall be counted in the Six Month Forecast Period ordered, and actual
order quantities shall be calculated from quantities invoiced to CMC, even
if
such Fumed Silica is not shipped, delivered or invoiced to CMC until the
following Six Month Forecast Period. In the event that in any Six Month Forecast
Period during Term Year 4, Term Year 5 or Term Year 6 CMC does not order
the
▇▇▇▇▇ Minimum Volume (the difference, in pounds, between such ▇▇▇▇▇ Minimum
Volume, and the aggregate volume of ▇▇▇▇▇ B Fumed Silica ordered by CMC in
any
such Six Month Forecast Period (to the extent less than the ▇▇▇▇▇ Minimum
Volume) is referred to herein as the “▇▇▇▇▇ Shortfall”), then subject to the
provisions of Section 2.4(c) below, CMC will pay Cabot the following amounts
for
any such Six Month Forecast Period in which the ▇▇▇▇▇ Minimum Volume is not
met:
(i)
In
any Six Month Forecast Period during Term Year 4, Term Year 5, or Term Year
6
where CMC orders ▇▇▇▇▇ B Fumed Silica in an aggregate volume greater than
or
equal to [***] pounds, but less than or equal to the ▇▇▇▇▇ Minimum Volume,
CMC
will pay Cabot the amount equal to [***], multiplied by the ▇▇▇▇▇ Shortfall
during the applicable Six Month Forecast Period, divided by [***], or [***]
x
((▇▇▇▇▇ Shortfall)/[***].
(ii)
In
any Six Month Forecast Period during Term Year 4, Term Year 5, or Term Year
6
where CMC orders ▇▇▇▇▇ B Fumed Silica in an aggregate volume of less than
[***]
pounds, CMC will pay Cabot flat-rate compensation of [***] for such Six Month
Forecast Period.
Within
thirty (30) days of the end of each such Six Month Forecast Period, Cabot
shall
invoice CMC for any compensation payable by CMC under this Section 2.4(b)
for such
period, and CMC shall pay such invoiced amounts to Cabot within thirty (30)
days
following its receipt of Cabot’s invoice.
(c)
Cabot
agrees that it shall supply 100% of CMC’s actual orders (up to [***]) for each
month for ▇▇▇▇▇ B Unit Fumed Silica (collectively, “▇▇▇▇▇’▇ ▇▇▇▇▇ Supply
Obligation”). If, in any period, Cabot fails to produce or allocate to CMC Fumed
Silica volumes sufficient to meet ▇▇▇▇▇’▇ ▇▇▇▇▇ Supply Obligation for such
period for any reason (other than force majeure as set forth in Section 12.10
below, excluding volume shortfall due to Cabot’s suppliers), then, for the
purposes of calculating the compensation due Cabot pursuant to Section 2.4(b)
above, the ▇▇▇▇▇ Minimum Volume shall be reduced by the amount of such shortfall
on a cumulative pound for pound basis. If Cabot is unable and/or has otherwise
failed to supply 100% of CMC’s monthly orders (up to [***]) for ▇▇▇▇▇ B Fumed
Silica for each of three (3) consecutive calendar months, then CMC shall
not be
required to pay the compensation to Cabot specified in Section 2.4(b) for
the
then current Term Year at the conclusion of such three month period.
(d) Cabot
and
CMC agree that the liquidated damages set forth in Sections 2.4(a) and 2.4(b)
above is the sole and exclusive remedy for CMC’s failure to purchase the Minimum
Volumes and the ▇▇▇▇▇ Minimum Volumes. Cabot and CMC further agree that such
liquidated damages represent a reasonable estimate of the Cabot’s damages and do
not constitute a penalty.”
7. The
third
sentence of Section 6.1 of the Original Agreement is hereby amended and restated
in its entirety as follows:
“For
purposes of applying Sections 2.3 and 2.4(a) only, each volume of Fumed Silica
shall be deemed to be in the month specified for its shipment in CMC’s order;
and if no date is specified, then in the month following the month in which
the
order therefor is issued by CMC.”
8. Notwithstanding
anything in the Original Agreement to the contrary, by way of clarification
and
not limitation, the TU-A Permanent Expenses and BA-B Permanent Expenses shall
be
for the sole account of Cabot in all respects during all Term Years, and
shall
be separate from, and not be credited toward, the Cabot CI Cap in any Term
Year.
9. Except
as
amended hereby, the Original Agreement is ratified and confirmed in all
respects. This Amendment shall take effect as of the Effective Date, except
that
the amendments contained herein to Sections 2.3 and 2.4 of the Original
Agreement shall not take effect until the first day of Term Year 4. It is
the
express intent of the parties that the Original Agreement, as amended by
this
Amendment No. 1, expresses the Parties’ further agreement regarding the [***]
and supersedes the Letter of Agreement, and the Letter of Agreement shall
have
no further effect from and after the execution hereof. Cabot shall credit
CMC
for all amounts relating to the TU-A Temporary System invoiced by Cabot or
paid
by CMC in connection with the Letter of Agreement.
(Signature
Page Follows)
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
executed and delivered by their respective duly authorized representatives
as of
the date first set forth above.
CABOT
CORPORATION
By
/s/
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Duly
Authorized
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
VP and GM, FMO and Aerogel
CABOT
MICROELECTRONICS CORPORATION
By
/s/
▇▇▇▇
▇▇▇▇▇▇▇
Duly
Authorized
Name:
▇▇▇▇ ▇▇▇▇▇▇▇
Title:
VP Business Operations