AMENDMENTNO. 2 TO FUMEDSILICA SUPPLY AGREEMENT

 

                                               

            *** 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

This Amendment No. 2 to Fumed Silica Supply Agreement (this “Amendment” or “Amendment No. 2”) is executed by the parties and effective as of April 22, 2008  (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”), as amended by Amendment No. 1 dated September 29, 2006 (as amended, the “Agreement”), between Cabot and CMC.  Capitalized terms used herein without definition and defined in the Agreement shall have the same meanings as defined in the Agreement.  Cabot and CMC are each referred to from time to time in the Agreement and herein as a “party” and, together, the “parties.”

WHEREAS, CMC and Cabot wish to amend the Agreement to, among other things, extend the duration of the First Term of the Agreement, revise forecasting methods, volumes and prices for Fumed Silica and amend certain Exclusivity, Resale and Non-compete provisions applicable to both parties.

NOW THEREFORE, the parties do hereby agree as follows:

 

1.	Subsection (a) of Section 1 of the Agreement is hereby deleted in its entirety and replaced to read in its entirety as follows:

 

 

 

2.	A new Subsection (b) shall be added to Section 1 of the Agreement, and shall read in its entirety as follows:

 

 

 

 

 

3.	As of the Effective Date, Section 2.2 of the Agreement is hereby deleted in its entirety and replaced to read in its entirety as follows:

 

 

(a)

On or before the last day of each calendar month during the Term, CMC shall provide Cabot with a forecast (each, a “Forecast”) of the quantities of Fumed Silica that CMC expects to purchase from Cabot during the six-month period (each rolling six-month period, a “Six-Month Forecast Period”) commencing the following calendar month (the “Forecasted Quantities”).  The Forecasts shall identify by grade the Forecasted Quantities and the Cabot facility or facilities that will produce and deliver to CMC such Forecasted Quantities (including the volume to be made at each plant).  In addition, the Forecasts shall be divided by calendar month within each Six-Month Forecast Period.  The calendar months within each Six-Month Forecast Period shall be defined as follows:

 

 

 

 

 

 

 

 

(b)

Certain monthly volume figures in a newly delivered Forecast may be changed from previously delivered Forecasts, as follows:  Month Five and Month Four in the newly delivered Forecast may not be [*** ] of the monthly forecasted volume in the Forecasts in which such calendar months first appeared as Month Six.  Note that although volumes for some months may be adjusted twice, the [***] permissible volume variation applies only to the originally forecasted volume for the then-current Month Five and Month Four.

 

(c)	Once the adjustments permitted in subsection (b) above are made, if any, then Forecasts shall be binding on CMC and the liquidated damages provision of Section 2.4 shall apply.  Cabot shall accept Forecasts submitted in compliance with this Section 2.2 and Section 2.3 below.

 

(d)	With respect to planned shutdowns of Cabot’s manufacturing facilities, the parties shall work together and cooperate with each other regarding necessary adjustments to Forecasts and delivery schedules hereunder.”

 

 

 

4.	As of the Effective Date, Section 2.3(b) of the Agreement shall be deleted in its entirety and replaced to read in its entirety as follows below, and a new Subsection (d) shall be added to Section 2.3 of the Agreement and shall read in its entirety as follows below:

 

“(b) Subject in all cases to the maximum volume limitations for the Tuscola Plant and the Barry Plant set forth in 2.3(a) above, in the event that CMC orders volumes of Fumed Silica from Cabot in excess of Forecasted Quantities for any Six-Month Forecast Period (after giving effect to adjustments permitted under Section 2.2(b)), Cabot shall not be obligated to supply to CMC Fumed Silica [***] of the aggregate volumes for any Six-Month Forecast Period (after giving effect to adjustments permitted under Section 2.2(b) contained in any  Forecast.”

 

“(d) Cabot’s Maximum Volumes supply obligations set forth in Sections 2.3(b) and 2.3(c) above shall not apply if CMC fails to purchase [***] of Fumed Silica, in the aggregate, during any two consecutive six-month periods (commencing on January 1 and July 1, respectively); provided, however, that Cabot shall remain obligated to supply Fumed Silica pursuant to  Forecasts submitted in compliance with Section 2.2 and this Section 2.3, but for the remaining duration of this Agreement, Month Six in newly delivered Forecasts may not be [***] of the average purchased monthly volume for the immediately prior six-month period.”

5.	As of the Effective Date, Section 2.4 of the Original Agreement shall be deleted in its entirety and replaced to read in its entirety as follows:

(a)

Provided that CMC has purchased at least [***] of Fumed Silica in the aggregate during two consecutive six month periods (commencing on January 1 and July 1, respectively, and calculated as of June 30 and December 31 of each Term Year for the six-month periods ending on such dates) (each such six-month period, a “Six-Month Compliance Period”), then CMC shall be obligated to purchase from Cabot during each applicable Six-Month Compliance Period, a “Minimum Volume,” meaning at least 90% of the Forecasted Quantities during the Six-Month Forecast Period consisting of such Six-Month Compliance Period (after adjustment, if any, as permitted by Section 2.2 and 2.3).  Cabot and CMC recognize that damages for CMC’s failure to purchase Minimum Volumes would be difficult to ascertain and prove.  Cabot and CMC agree that if, during any Six-Month Compliance Period, CMC fails to purchase from Cabot the Minimum Volume of Fumed Silica for such Six-Month Compliance Period, CMC shall pay to Cabot liquidated damages in an amount equal to the product obtained by multiplying:

(i)	the difference (in pounds) between (x) 90% of the aggregate forecasted volume for the applicable Six-Month Forecast Period, and (y) the aggregate amount of Fumed Silica (in pounds) actually purchased by CMC during such Six-Month Compliance Period, times

(ii)

$1.35/lb.

(b)

Where CMC has purchased less than [***] pounds of Fumed Silica in the aggregate during two consecutive six month periods (commencing on January 1 and July 1, respectively, and calculated as of June 30 and December 31 of each Term Year for the six-month period ending on such dates) (each such six-month period, a “Six-Month Noncompliance Period”), then CMC shall be obligated to purchase from Cabot during each applicable Six-Month Noncompliance Period, a “Minimum Volume,” meaning at least 90% of the aggregate volumes of Fumed Silica forecasted to be purchased by CMC during Month Three, Month Two and Month One of each Six-Month Forecast Period consisting of such Six-Month Compliance Period (after adjustment, if any, as permitted by Section 2.2 and 2.3).  Cabot and CMC recognize that damages for CMC’s failure to purchase Minimum Volumes would be difficult to ascertain and prove.  Cabot and CMC agree that if, during any Six-Month Noncompliance Period, CMC fails to purchase from Cabot the Minimum Volume of Fumed Silica for such Six-Month Noncompliance Period, if required by this Section 2.4(b), CMC shall pay to Cabot liquidated damages in an amount equal to the product obtained by multiplying:

 

 

 

(i)

the difference (in pounds) between (x) 90% of the aggregate forecasted volume for Month Three, Month Two and Month One of the applicable Six-Month Forecast Period, and (y) the aggregate amount of Fumed Silica (in pounds) actually purchased by CMC during Month Three, Month Two and Month One of the applicable Six-Month Forecast Period, times

(ii)

$1.35/lb.

(c)

Cabot and CMC agree that the liquidated damages set forth in Sections 2.4(a) and (b) above are Cabot’s sole and exclusive remedy for CMC’s failure to purchase the applicable Minimum Volumes required by such Sections.  Cabot and CMC further agree that such liquidated damages represent a reasonable estimate of Cabot’s damages and do not constitute a penalty.

 

(d)

Within thirty (30) days of the end of each Term Year in which a Minimum Volume applied and was not met pursuant to Section 2.4(a) or 2.4(b) above, Cabot shall invoice CMC for any compensation payable by CMC under Section 2.4(a) or 2.4(b), if any, for such period, and CMC shall pay such invoiced amounts to Cabot within thirty (30) days following its receipt of Cabot’s invoice.

(e)

From and after the Effective Date, the May 1, 2007 Letter of Acknowledgment between the parties shall no longer be effective.”

6.	As of the Effective Date, Subsection 3.1(a) of the Agreement shall be deleted in its entirety and replaced to read in its entirety as follows:

7.	As of the Effective Date, Subsection  3.1(c) of the Agreement shall be deleted in its entirety and replaced to read in its entirety as follows:

 

 

 

8.	As of the Effective Date, Subsection  3.1(d) of the Agreement shall be deleted in its entirety and replaced to read in its entirety as follows:

9.	A new Subsection 3.1(e) shall be added to the Agreement, reading in its entirety as follows:

10.	As of the Effective Date, Section 3.2 of the Agreement shall be deleted in its entirety and a new Section 3.2 shall be added to the Agreement, reading in its entirety as follows:

“3.2  Resale Prohibition.  The parties intend and agree that the Fumed Silica being sold hereunder to CMC is being sold solely for the use by CMC and its subsidiaries in manufacturing their products.  Accordingly, CMC and its subsidiaries are prohibited from reselling any Fumed Silica purchased hereunder.  However, in the event CMC determines, in good faith, that the Fumed Silica supplied hereunder, which otherwise meet the Specifications, is not fit for CMC’s use in the manufacture of CMP slurries, CMC shall have the right to resell such Fumed Silica, provided, CMC first offers Cabot the option to purchase such Fumed Silica back from CMC at a price which is the lower of (i) the price paid by CMC to Cabot for such material, or (ii) the price at which CMC will resell such material.”

11.	As of the Effective Date, Section 5.1 of the Agreement, relating to pricing, shall be deleted in its entirety and a new Section 5.1 shall be added to the Agreement, reading in its entirety as follows:

“5.1  Prices.  Cabot shall sell the Fumed Silica to CMC in accordance with the following prices (the "Prices"):

 

 

 

[***]

For the year 2010, the inflation adjustment will be triggered if the annual percentage increase (the “Inflation Factor”) in the PPI for the previous year, relative to the prior year, is greater than[***]  The inflation adjustment of the Base Price1 will then be calculated by the following formula:

 = Base Price for 2010 *[***]

Adjusted Price for 2011 ($/kg)

= Adjusted Price for 2010 *[***]* (Inflation Factor –[***]

where Inflation Factor (%) = [***]*[***]

 

 

 

 = Adjusted Price for 2011 *[***]* (Inflation Factor –[***]

[***]

12.	As of the Effective Date, Section 8.3 of the Agreement shall be deleted in its entirety and a new Section 8.3 shall be added to the Agreement, reading in its entirety as follows:

8.3	“Continuous Improvement Plan. [***] Cabot will devote the appropriate level of resources and make good faith efforts required[***].

13.	As of the Effective Date, the following sentence shall be appended to the end of

Subsection 8.7(b) of the Agreement:

14.	This Amendment constitutes the complete agreement between the parties regarding the subject matter being amended hereby and supersedes all prior or contemporaneous agreements or representations, written or oral, concerning the subject matter of this Amendment.

 

 

 

15.	Except as amended hereby, the Agreement is ratified and confirmed in all respects.  This Amendment shall take effect as of the Effective Date and as of the Effective Date, all references to the Agreement shall refer to the Agreement as amended by this Amendment No. 2.

16.

The parties acknowledge that this Amendment No. 2 contains Cabot and CMC Confidential Information subject to the provisions of Section 12.11 of the Agreement. In addition to the exclusions set forth in Section 12.11 (a) through (f) of the Agreement, each party may disclose Confidential Information of the other contained herein as required by law or regulation or pursuant to the rule of law or contractual undertakings with a stock exchange (collectively, the “Requirements”), provided however, that each party disclosing the Confidential Information of the other pursuant to any Requirement will use reasonable efforts to provide notification to the other party prior to any such public disclosure of the other party’s Confidential Information pursuant to the Requirements.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 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 Signatory   Name: Title:

CABOT MICROELECTRONICS CORPORATION     By_/s/________________________ Duly Authorized Signatory   Name: Title:

 

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