Document:

exv10w2

Exhibit 10.2

McAFEE, INC.

AMENDED AND RESTATED 1993 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS

(as amended October 23, 2007)

ARTICLE I

INTRODUCTION

     1.1 Establishment. On January 19, 1993, McAfee, Inc., a Delaware corporation, the
predecessor to McAfee, Inc., a Delaware corporation (together with any successor corporation
thereto, the “Company”), established the McAfee, Inc. Stock Option Plan for Outside Directors (the
“Initial Plan”) for certain members of its Board (as defined in Section 2.1(d)) who are not
employees of the Company or any Affiliated Corporation (as defined in Section 2.1(b)) and who are
eligible to participate in the Plan based upon the definition of an Outside Director set forth in
Section 2.1(i). The Initial Plan was amended and restated in its entirety in April 1995 by the
Board of Directors of the Company and ratified by the Company’s stockholders in June 1995 as the
Amended and Restated McAfee, Inc. Stock Option Plan for Outside Directors (the “Plan”).

     1.2 Purposes. The purpose of the Plan is to provide certain directors of the Company
who are not also employees of the Company or an Affiliated Corporation (as defined in
Section 2.1(b)) added incentive to continue in the service of the Company and a more direct
interest in the future success of the operations of the Company.

     1.3 Effective Date. The effective date of the Plan shall be January 1, 1993 (the
“Effective Date”), subject to approval by the affirmative votes of the holders of a majority of the
shares of the Company present or represented and entitled to vote at a meeting duly held (in person
or through written consent) in accordance with governing law within one year following the
Effective Date. If the stockholders of the Company do not approve the Plan as specified above,
Options granted under the Plan shall be deemed to be rescinded without any further action by the
Board or the Company, and the Plan shall automatically terminate, notwithstanding any other
provision in the Plan to the contrary.

ARTICLE II

DEFINITIONS

     2.1 Definitions. For purposes of the Plan:

          (a) “Affiliate” and “Associate” shall have the meanings specified in
Rule 12b-2 or any successor regulation under the Exchange Act.

          (b) “Affiliated Corporation” means any corporation or other entity (including but not
limited to a partnership) that is affiliated with the Company through stock ownership or otherwise
and is treated as a common employer under the provisions of Sections 414(b) and (c) of the Code.

 

 

          (c) “Annual Meeting” means the annual meeting of the Company’s stockholders.

          (d) “Board” means the Board of Directors of the Company. If a committee of the Board
has been appointed to administer the Plan, “Board” also means such committee.

          (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          (f) “Disabled” or “Disability” shall have the meaning given to such terms in
Section 22(e)(3) of the Code.

          (g) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time.

          (h) “Fair Market Value” of a share of Stock shall be the last reported sale price of
the Stock on the NASDAQ National Market System on the day the determination is to be made, or if no
sale took place on such day, the average of the closing bid and asked prices of the Stock on the
NASDAQ National Market System on such day, or if the market is closed on such day, on the last day
prior to the date of determination on which the market was open for the transaction of business, as
reported by NASDAQ. If, however, the Stock should be listed or admitted for trading on a national
securities exchange, the Fair Market Value of a share of the Stock shall be the last reported sale
price on such securities exchange on the date the determination is to be made, or if no sale took
place on such day, the average of the closing bid and asked prices on such day, or if the market is
closed on such day, on the last day prior to the date of determination on which the market was open
for the transaction of business, as reported in the principal consolidated transaction reporting
system for the principal national securities exchange on which the Stock is listed or admitted for
trading. If the Stock is not listed or traded on the NASDAQ National Market System or on any
national securities exchange, the Fair Market Value of the Stock for purposes of the grant of
Options under the Plan shall be determined by the Board in good faith.

          (i) “Outside Director” is an individual who is (i) a member of the Board and (ii) not
an employee of the Company or an Affiliated Corporation. For purposes of the Plan, an employee is
an individual whose wages are subject to the withholding of federal income tax under Section 3401
of the Code. Furthermore, any individual who performs services, whether as an employee, partner,
sole proprietor, director, trustee, independent contractor, or consultant, for any entity or group
of affiliated entities which own at least ten percent (10%) of the total combined voting power of
all classes of stock of the Company shall not be considered to be a “Outside Director” for purposes
of the Plan.

          (j) “Holder” means an Outside Director who has received one or more Options under the
terms of the Plan.

          (k) “Option” means a right granted under the Plan to purchase Stock at a stated price
for a specified period of time. The Options granted under the Plan shall be nonstatutory stock
options, that is options that do not satisfy the requirements of Section 422 of the Code.

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          (l) “Option Agreement” means a written agreement between the Company and the Holder of
an Option as described in Section 3.2(c) hereof.

          (m) “Option Price” means the price at which shares of Stock subject to an Option may
be purchased, determined in accordance with Section 3.3(b).

          (n) “Share” means a share of Stock.

          (o) “Stock” means the common stock of the Company.

ARTICLE III

OPTIONS

     3.1 Participation. Each Outside Director who is elected or re-elected at an Annual
Meeting or at any other time (such as an individual who becomes an Outside Director by filling a
vacancy on the Board or a newly created directorship) shall receive an Option as of the date of
such election. Each Outside Director who is elected or re-elected for a term longer than one year,
including Outside Directors elected or re-elected prior to the Effective Date, shall receive
Options as of the date of his or her election and as of each anniversary date during his or her
term. Options shall be granted in accordance with Section 3.2 on the terms and conditions herein
described.

     3.2 Grant.

          (a) Annual Grants. Each Outside Director of the Company shall automatically receive,
on the date of that Outside Director’s initial election to the Board, an Option to purchase 30,000
Shares (the “Initial Grant”). Each Outside Director of the Company who has already received an
Initial Grant shall automatically receive, on each anniversary date of the Initial Grant, an Option
to purchase 15,000 Shares.

          (b) Date of Grant. The date on which an Outside Director receives an Option hereunder
is referred to as the date of grant of such Option.

          (c) Option Agreement. Each Option granted under the Plan shall be evidenced by an
Option Agreement which shall incorporate and conform to the terms and conditions set forth in
Section 3.3 of the Plan.

     3.3 Terms and Conditions. Options issued pursuant to the Plan shall have the
following terms and conditions:

          (a) Number and Timing. Each Outside Director shall receive under the Plan Options to
purchase the number of Shares determined as specified in Section 3.2, subject to adjustment as
provided in Section 4.2. Such grants shall be made at the times specified in Section 3.2.

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     (b) Price. The price at which each Share covered by the Option may be purchased by
each Outside Director shall be the Fair Market Value of a share of the Stock on the date of grant,
subject to adjustment as provided in Section 4.2.

     (c) Duration of Options. Each Option shall expire ten years from the date the Option
is granted (the “Option Period”), unless terminated sooner pursuant to Section 3.3(d) below or
fully exercised prior to the end of such period.

     (d) Termination of Service, Death, Etc. An Option shall terminate in the following
circumstances if the Holder ceases to be a director of the Company:

          (i) Removal for Cause. If the Holder is removed as a director of the Company during
the Option Period for cause, the Option shall be void thereafter for all purposes, including as to
Shares for which the Option was otherwise exercisable according to Section 3.3(g) prior to the
Holder’s removal as a director of the Company.

          (ii) Disability. If the Holder ceases to be a director of the Company on account of
Disability, the Option may be exercised by the Holder (or, in case of death thereafter, by the
persons specified in Section 3.3(d)(iii)) within one year following the date on which the Holder
ceased to be a director (if otherwise within the Option Period), but not thereafter. In any such
case, the Option may be exercised only as to Shares for which the Option had become exercisable on
or before the date the Holder ceased to be a director on account of Disability.

          (iii) Death. If the Holder dies during the Option Period while still serving as a
director or within the three-month period referred to in Section 3.3(d)(iv) below, the Option may
be exercised by those entitled to do so under the Holder’s will or by the laws of descent and
distribution within one year following the Holder’s death (if otherwise within the Option Period),
but not thereafter. In any such case, the Option may be exercised only as to the Shares for which
the Option had become exercisable on or before the date of the Holder’s death.

          (iv) Other Termination. If the Holder ceases to be a director within the Option
Period for any reason other than removal for cause, Disability or death, the Option may be
exercised by the Holder within three months following the date of such termination (if otherwise
within the Option Period), but not thereafter. In any such case, the Option may be exercised only
as to the Shares for which the Option had become exercisable on or before the date the Holder
ceased to be a director.

          (v) Extension if Holder Subject to Section 16(b). Notwithstanding the foregoing, if a
sale within the applicable time periods set forth in Sections 3.3(d)(i), (ii), (iii), or (iv) of
Shares acquired upon the exercise of the Option would subject the Holder to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur
of (i) the tenth (10th) day following the date on which a sale of such Shares by the
Holder would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Holder’s termination of service as a director, or (iii) the
expiration of the Option Period.

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          (vi) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the
exercise of the Option within the applicable time periods set forth in Section 3.3(d)(i), (ii),
(iii) or (iv) is prevented by the provisions of Section 3.3(e)(iv), the Option shall remain
exercisable until three (3) months after the date the Holder is notified by the Company that the
Option is exercisable, but in any event no later than the expiration of the Option Period.

     (e) Transferability, Exercisability.

          (i) Each Option granted under the Plan shall not be transferable by a Holder other than by
will or the laws of descent and distribution.

          (ii) Each Option granted under the Plan shall be exercisable during the Holder’s lifetime only
by the Holder or, in the event of disability or incapacity, by the Holder’s guardian or legal
representative.

          (iii) Notwithstanding any other provision of the Plan, no Option may be unconditionally
granted unless and until the Plan is approved by the stockholders of the Company in accordance with
Section 1.3, and for any Option granted prior to the time of such stockholder approval which is
subject to such approval, the date of grant of the Option shall be the date on which the
stockholders of the Company approve the Plan.

          (iv) The grant of an Option and the issuance of Shares upon exercise of an Option shall be
subject to compliance with all applicable requirements of federal and state law with respect to
such securities. An Option may not be exercised if the issuance of Shares upon exercise would
constitute a violation of any applicable federal or state securities laws or other law or
regulations or the requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, no Option may not be exercised unless (i) a registration statement
under the Securities Act of 1933, as amended (the “Securities Act”), shall at the time of exercise
of the Option be in effect with respect to the shares issuable upon exercise of the Option or
(ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the
Option may be issued in accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares subject to an Option shall relieve the
Company of any liability in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. As a condition to the exercise of an Option, the
Company may require the Holder to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

     (f) Exercise, Payments, Etc.

          (i) Method of Exercise. The method for exercising each Option granted shall be by
delivery to the Company of written notice specifying the number of shares with respect to which the
Option is exercised. The purchase of Stock pursuant to the Option shall take place at the
principal office of the Company within thirty days following delivery of such notice, at which

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 time the purchase price of the Stock shall be paid in full by any of the methods set forth in
Section 3.3(f)(ii) or a combination thereof. A properly executed certificate or certificates
representing the Stock shall be delivered to the Holder upon payment
o herefore.

                (ii) Payment of Option Price. The Option Price shall be paid by any of the following
methods or any combination of such methods, at the option of the Holder: (A) cash; (B) certified,
cashier’s or other check acceptable to the Company, payable to the order of the Company;
(C) delivery to the Company of certificates representing a number of shares of Stock then owned by
the Holder, the Fair Market Value of which (determined as of the date the notice of exercise is
delivered to the Company) equals the price of the Stock to be purchased pursuant to the Option,
properly endorsed for transfer to the Company; or (D) by the assignment of the proceeds of a sale
of some or all of the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (“Immediate Sales Proceeds”).
No Option may be exercised by delivery to the Company of certificates representing Stock that has
been held by the Option Holder for less than six months or such other period as shall be sufficient
for the Company to avoid, if possible, the recognition of expense with respect to the Option for
accounting purposes. The payment of the exercise price with Immediate Sales Proceeds shall comply
with procedures established by the Company, which procedures may be changed from time to time in
the Company’s sole discretion. The Company retains the right to discontinue the availability of
payment with Immediate Sales Proceeds at any time.

          (g) Service Required for Exercise. Except as set forth in Section 1.3 and 3.3(d), the
Initial Grant made to an Outside Director under the Plan shall become exercisable (i) for one-third
(1/3) of the total number of shares subject to such Option after one year of continuous service by
the Holder as a director of the Company after the date of grant and (ii) for an additional
one-third (1/3) of the total number of shares subject to the Option at the end of each full year of
continuous service as a director of the Company thereafter, in each case rounded to the nearest
whole number of shares. Except as set forth in Sections 1.3 and 3.3(d), each subsequent Option
granted to an Outside Director under the Plan shall be exercisable in its entirety after three (3)
years of continuous service by the Holder as a director of the Company after the date of grant.
Except as set forth in Section 5.2, the Option shall not be exercisable as to any Shares as to
which the applicable continuous service requirements has not been satisfied, regardless of the
circumstances under which the Holder ceased to be a director.

ARTICLE IV

AUTHORIZED STOCK

     4.1 The Stock. Subject to adjustment pursuant to Section 4.2, the maximum aggregate
number of shares of Stock that may be issued under the Plan shall be 1,932,813 and shall consist of
authorized but unissued shares or treasury shares of Stock or any combination thereof. Shares of
Stock underlying expired or canceled and unexercised Options shall again be available for issuance
under the Plan. However, shares surrendered to the Company in payment of the Option Price of an
Option and shares purchased by the Company in the open market with the proceeds from the sale of
Stock pursuant to the exercise of Options shall not be available for issuance under the Plan.

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     4.2 Adjustments.

          (a) Stock Splits, Stock Dividends, Etc. If the Company at any time increases or
decreases the number of its outstanding shares of Stock, or changes in any way the rights and
privileges of such shares, by means of the payment of a stock dividend or the making of any other
distribution upon such shares payable in Stock, or through a stock split or subdivision of shares,
or a consolidation or combination of shares, or through a reclassification or recapitalization
involving the Stock, then the class, numbers, rights and privileges of the following shall be
increased, decreased or changed in like manner as if the Stock issuable upon exercise of the Option
had been validly issued and outstanding, fully paid and nonassessable at the time of such
occurrence: (i) the number and class of shares issuable pursuant to the Plan as provided in
Section 4.1, (ii) the number and class of shares for which Options may be granted under the Plan
pursuant to Section 3.2, (iii) the number and class of shares then subject to each outstanding
Option granted under the Plan, and (iv) the Option Price for each outstanding Option.

          If a majority of the shares which are of the same class as the shares that are subject to
outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant
to a Transfer of Control (as defined in Section 5.1) shares of another corporation (the “New
Shares”), the Board may unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of shares subject to,
and the Option Price of, the outstanding Options shall be adjusted in a fair and equitable manner
as determined by the Board, in its sole discretion.

          (b) Adjustments for Certain Distributions of Property. If the Company shall at any
time distribute with respect to its outstanding Stock, assets or securities of other persons
(excluding cash dividends, distributions payable out of capital surplus, and dividends or other
distributions referred to in Sections 4.2(a) and (c)), then the Option Price of outstanding Options
shall be adjusted to reflect the fair market value of the assets or securities distributed, the
Company shall provide for the delivery upon exercise of such Options of cash in an amount equal to
the appropriate portion of the fair market value of the assets or securities distributed, or a
combination of such actions shall be taken, all as determined by the Company in its discretion.
Fair market value of the assets or securities distributed for this purpose shall be as determined
by the Company.

          (c) Distributions of Capital Stock and Indebtedness. If the Company at any time
distributes to all holders of Stock shares of its capital stock (other than Stock), or evidences of
its indebtedness, then a proportionate part of such capital stock and evidences of indebtedness
shall be set aside for each outstanding Option and, upon exercise of the Option, delivered to the
Holder of such Option.

     4.3 No Rights as Stockholder. A Holder shall have none of the rights of a stockholder
with respect to the shares subject to an Option until such shares are transferred to the Holder
upon exercise of such Option. Except as provided in Section 4.2, no adjustments shall be made for
dividends, rights or other property distributed to stockholders (whether ordinary or extraordinary)
for which the record date is prior to the date such shares are so transferred.

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     4.4 Fractional Shares. No adjustments or substitution provided for in this Article IV
shall require the Company to sell a fractional share. The total substitution or adjustment with
respect to each Option shall be limited by deleting any fractional share. In no event may the
Option Price of any Option be decreased to an amount less than the par value, if any, of the stock
subject to the Option.

ARTICLE V

TRANSFER OF CONTROL

     5.1 Definition. A “Transfer of Control” shall be deemed to have occurred in the event
any of the following occurs with respect to the Company.

          (a) the direct or indirect sale or exchange by the stockholders of the Company of all or
substantially all of the voting stock of the Company wherein the stockholders of the Company
immediately before such sale or exchange do not retain in substantially the same proportions as
their ownership of shares of the Company’s voting stock immediately before such event, directly or
indirectly (including without limitation, through their ownership of shares of the voting stock of
a corporation which, as a result of such sale or exchange, owns the Company either directly or
through one or more subsidiaries), at least a majority of the beneficial interest in the voting
stock of the Company’s immediately after such sale or exchange;

          (b) a merger or consolidation wherein the stockholders of the Company immediately before such
merger or consolidation do not retain in substantially the same proportions as their ownership of
shares of the Company’s voting stock immediately before such event, directly or indirectly
(including, without limitation, through their ownership of shares of the voting stock of a
corporation which, as a result of such merger or consolidation, owns the Company either directly or
through one or more subsidiaries), at least a majority of the beneficial interest in the voting
stock of the Company immediately after such merger or consolidation;

          (c) the sale, exchange, or transfer of all or substantially all of the assets of the Company
(other than a sale, exchange, or transfer to one or more corporations (the “Transferee
Corporation(s)”) wherein the stockholders of the Company immediately before such sale, exchange, or
transfer retain in substantially the same proportions as their ownership of shares of the Company’s
voting stock immediately before such event, directly or indirectly (including, without limitation,
through their ownership of shares of the voting stock of a corporation which owns the Transferee
Corporation(s) either directly or through one or more subsidiaries, at least a majority of the
beneficial interest in the voting stock of the Transferee Corporation(s) immediately after such
event); or

          (d) a liquidation or dissolution of the Company.

     5.2 Effect on Options. In the event of a Transfer of Control, any unexercisable or
unvested portion of the outstanding Options shall be immediately exercisable and vested in full as
of the date ten (10) days prior to the date of the Transfer of Control, and the Company shall
provide each Holder of an outstanding Option with at least ten (10) days advance written notice of
the

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pending Transfer of Control prior to the consummation thereof. The exercise or vesting of any
Option that was permissible solely by reason of this Section 5.2 shall be conditioned upon the
consummation of the Transfer of Control. In addition, the Board, in its sole discretion, may
arrange with the surviving, continuing, successor, or purchasing corporation or parent corporation
thereof, as the case may be (the “Acquiring Corporation”), for the Acquiring Corporation to either
assume the Company’s rights and obligations under outstanding Options or substitute substantially
equivalent options for the Acquiring Corporation’s stock for such outstanding Options. Any Options
which are neither assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer of Control shall terminate and
cease to be outstanding effective as of the date of the Transfer of Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement evidencing such Option
except as otherwise provided in such Option Agreement. If the corporation the stock of which is
subject to the outstanding Options immediately prior to a Transfer of Control described in
Section 8.1(a) is the surviving or continuing corporation, the outstanding Options shall be deemed
to have been assumed by the Acquiring Corporation for purposes of this Section 5.2.

ARTICLE VI

GENERAL PROVISIONS

     6.1 Administration. The Plan shall be administered by the Board and/or any duly
appointed committee of the Board having such powers as shall be specified by the Board. Unless the
powers of the committee have been specifically limited, the committee shall have all of the powers
of the Board granted herein, including, without limitation, the power to terminate or amend the
Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.
The Board shall have no authority, discretion, or power to select the Outside Directors who will
receive Options under the Plan, to set the Option Price of the Options, to determine the number of
Shares to be granted under option or the time at which such Options are to be granted, to establish
the duration of Options, or alter any other terms or conditions specified in the Plan, except in
the sense of administering the Plan subject to the provisions of the Plan. All questions of
interpretation of the Plan or of any Options granted under the Plan shall be determined by the
Board, and such determinations shall be final and binding upon all persons having an interest in
the Plan and/or any Option. Any officer of the Company shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.

     6.2 Expiration. The Plan shall terminate whenever the Board adopts a resolution to
that effect. After termination, no additional Options shall be granted under the Plan, but the
Company shall continue to recognize Options previously granted.

     6.3 Amendments, Etc. The Board may from time to time amend, modify, suspend or
terminate the Plan. Nevertheless, no such amendment, modification, suspension or termination shall
impair any Option theretofore granted under the Plan or deprive any Holder of any Shares that he

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may have acquired through or as a result of the Plan without the consent of the Holder. The
Plan may not be amended more than once every six months with respect to the persons entitled to be
granted Options hereunder, the timing of grants to Outside Directors, the number of Shares subject
to an Option or the Option Price thereof, other than amendments necessary to comport with changes
in the Code, ERISA or the rules and regulations thereunder. The Company shall obtain the approval
of stockholders to any amendment or modification of the Plan to the extent required by Rule 16b-3
under the Exchange Act or by the listing requirements of the National Association of Securities
Dealers, Inc. or any stock exchange on which the Company’s securities are quoted or listed for
trading.

     6.4 Treatment of Proceeds. Proceeds from the sale of Stock pursuant to Options
granted under the Plan shall constitute general funds of the Company.

     6.5 Paragraph Headings. The paragraph headings are included herein only for
convenience, and they shall have no effect on the interpretation of the Plan.

     6.6 Severability. If any article, section, subsection or specific provision is found
to be illegal or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal
and invalid provision had never been set forth in the Plan.

     6.7 Rule 16b-3. This Plan is intended to comply with the requirements of Rule 16b.3
under the Exchange Act. To the extent the Plan does not conform to such requirements, it shall be
deemed amended to so conform without any further action on the part of the Board of Directors or
stockholders.

     6.8 Continuation of Initial Plan as to Outstanding Options. Notwithstanding any other
provision of the Plan to the contrary, the terms of the Initial Plan shall remain in effect and
apply to all Options granted pursuant to the Initial Plan.

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Exhibit 10.1

Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

WAFER SUPPLY AGREEMENT

     This Agreement (“Agreement”) is made and entered into as of this 1st day of April, 2005 (the
“Effective Date”), by and between:

	 	(1)	 	POWER INTEGRATIONS INTERNATIONAL LTD., a Cayman Islands corporation having a
place of business at P.O. Box 219, Strathvale House, North Church Street, George Town,
Grand Cayman, Cayman Islands (“POWER INTEGRATIONS”);

     and

	 	(2)	 	SEIKO EPSON CORPORATION, a Japanese corporation with a place of business at
281 Fujimi, Fujimi-machi, Suwa-gun, Nagano-ken, 399-0293 Japan (“SEIKO EPSON”)

WITNESSETH:

     WHEREAS, SEIKO EPSON is engaged in providing wafer foundry services for semiconductor
companies; and

     WHEREAS, POWER INTEGRATIONS is engaged in the design, development, marketing and sale of
various integrated circuit products for use in power conversion applications; and

     WHEREAS, POWER INTEGRATIONS desires SEIKO EPSON to fabricate and supply wafers of certain
integrated circuit products, and SEIKO EPSON is willing to fabricate and supply such wafers to
POWER INTEGRATIONS in accordance with the terms and conditions of this Agreement.

Confidential

Page 1 of 33 

 

     NOW, THEREFORE, in consideration of the mutual covenants of the parties contained herein,
POWER INTEGRATIONS and SEIKO EPSON hereby agree as follows:

Article 1: (Definitions)

     When used throughout this Agreement, each of the following terms shall have the meaning
indicated below:

     1.1 COMMON SPECIFICATION(S): The specifications for the production, delivery and
acceptance of the WAFERS which will be provided by PI.

     1.2 CONFIDENTIAL INFORMATION: Technical information, or other non-public information
relating to PI or SUPPLIER, including software in a human-readable or machine-readable form and
regardless of whether recorded on paper, tape, diskette or any other media, which is disclosed by
the disclosing party to the receiving party and, subject to Section 1.3 (“CONFIDENTIAL
MANUFACTURING INFORMATION”), which (i) if first disclosed in writing or other tangible form, is
identified by appropriate legend, as confidential or, (ii) if first disclosed orally or in other
intangible form, is identified as confidential information at the time of disclosure, and confirmed
by a written summary thereof designated, by appropriate legend, as confidential, and delivered to
the receiving party within thirty (30) days after such oral or other intangible disclosure.
Notwithstanding the foregoing, all information generated by the activities and actions of SUPPLIER
under this Agreement on PI’s behalf (other than SUPPLIER IMPROVEMENTS) and any information,
including all PI INTELLECTUAL PROPERTY received by SUPPLIER, shall also be considered PI’s
CONFIDENTIAL INFORMATION.

     1.3 CONFIDENTIAL MANUFACTURING INFORMATION: All CONFIDENTIAL INFORMATION of PI or
SUPPLIER, as applicable, whether in written, electronic, oral or other form, relating to the PI
PROCESS or the

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 2 of 33 

 

SUPPLIER PROCESS, as applicable, and conveyed by the disclosing party to the
receiving party by any means including, without limitation, during a meeting between the
parties, by phone, letter, email or facsimile, whether or not declared or marked confidential and
whether or not it is subsequently described in writing.

     1.4 ENGINEERING PRODUCTION: The production by SUPPLIER of WAFERS for engineering
development.

     1.5 FOUNDRY CAPACITY: The capacity or output as set forth in Exhibit A (FOUNDRY
CAPACITY and PI ANNUAL FORECAST).

     1.6 INDIVIDUAL SALES CONTRACTS: Individual contracts of sale and purchase of the
WAFERS that will be concluded between SUPPLIER and PI pursuant to this Agreement.

     1.7 INTELLECTUAL PROPERTY RIGHTS: Copyrights, patent rights, trade secret rights,
moral rights, mask work rights and all other intellectual or proprietary rights of any kind.

     1.8 MASK SPECIFICATIONS: The specifications for the production, delivery and
acceptance of the MASK TOOLING SETS.

     1.9 MAXIMUM FOUNDRY CAPACITY ALLOCATION: The combined number of WAFERS (including UPSIDE
WAFERS) for all WAFER TYPES per month, or per year, that SUPPLIER is obligated to supply to PI as
set forth in Exhibit A (FOUNDRY CAPACITY and PI ANNUAL FORECAST).

     1.10 MASK TOOLING SETS: Those mask tooling sets for use in making WAFERS.

     1.11 PI: POWER INTEGRATIONS and any of its SUBSIDIARIES.

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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     1.12 PI IMPROVEMENTS:  Any modification or change, made during the term of this
Agreement, to the PI INTELLECTUAL PROPERTY that has been made solely by PI or made jointly by PI
and SUPPLIER. 

     1.13 PI INTELLECTUAL PROPERTY: The PI PROCESS, the COMMON SPECIFICATIONS, the GDSII,
the MASK TOOLING SETS insofar as they are protected by copyright of PI, the PI IMPROVEMENTS, and
all know-how related to the foregoing.

     1.14 PI PROCESS: PI’s process technologies, which are implemented in the SUPPLIER
wafer fabrication facility to produce the WAFERS, and of which the detailed specification is
specified in the COMMON SPECIFICATIONS, plus all PI IMPROVEMENTS.

     1.15 PILOT PRODUCTION: The production by SUPPLIER of WAFERS for the purpose of
evaluation by PI.

     1.16 PRODUCTS: Any and all integrated circuit products of PI manufactured in
accordance with the PI PROCESS.

     1.17 REVIEW PERIOD: The period of time as set forth in Exhibit A (FOUNDRY CAPACITY and PI
ANNUAL FORECAST) for the parties to jointly review the PI ANNUAL FORECAST and the FOUNDRY CAPACITY.

     1.18 SUBSIDIARY: Any corporation, company or other entity in which SUPPLIER or PI, as
the case may be, owns and/or controls, directly or indirectly, now or hereafter, more than fifty
percent (50%) of the outstanding shares of stock entitled to vote for the election of directors or
their equivalents regardless of the form thereof (other than any shares of stock whose voting
rights are subject to restriction); provided, however, that any entity which would be a SUBSIDIARY by

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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reason of the foregoing shall be considered a SUBSIDIARY only so long as such ownership or
control exists.

     1.19 SUPPLIER: SEIKO EPSON and any of its SUBSIDIARIES.

     1.20 SUPPLIER IMPROVEMENTS: Any modification or change, made during the term of this
Agreement, to the PI INTELLECTUAL PROPERTY that (i) are made solely by SUPPLIER without use of
CONFIDENTIAL INFORMATION of PI, and (ii) SUPPLIER has a substantial use for other than
manufacturing or incorporation into PRODUCTS, and (iii) are based solely on the SUPPLIER PROCESS.

     1.21 SUPPLIER INTELLECTUAL PROPERTY: (i) The SUPPLIER PROCESS, and (ii) the SUPPLIER
IMPROVEMENTS.

     1.22 SUPPLIER PROCESS: SUPPLIER’s standard process technology steps, from SUPPLIER
owned technologies, developed exclusively by SUPPLIER and implemented in the SUPPLIER wafer
fabrication facility to produce the WAFERS.

     1.23 VOLUME PRODUCTION: The production by SUPPLIER of WAFERS for the volume
production of PRODUCTS.

     1.24 WAFER(S): Non-probed silicon wafers manufactured by SUPPLIER for PI in accordance
with the COMMON SPECIFICATION.

     1.25 WAFER TYPE. The different types of WAFERS (e.g., size, processing, location of
manufacture) as defined by the COMMON SPECIFICATION.

Article 2: (Foundry Commitment and Forecasts)

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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     2.1 SUPPLIER agrees to commit the FOUNDRY CAPACITY to PI up to the MAXIMUM FOUNDRY CAPACITY
ALLOCATION.

     2.2 Annually, during the term of this Agreement, PI will provide SUPPLIER with a non-binding
twelve (12) month forecast of WAFER orders by WAFER TYPE (“PI ANNUAL FORECAST”).

     2.3 Annually, during the term of this Agreement, and during the REVIEW PERIOD prior to the
beginning of the next calendar year, SUPPLIER and PI will jointly review the PI ANNUAL FORECAST and
SUPPLIER’s FOUNDRY CAPACITY for such next calendar year.

     2.4 Annually, during the term of this Agreement, no later than the last business day of the
REVIEW PERIOD, SUPPLIER will commit to a FOUNDRY CAPACITY for the next calendar year, at each of
the SUPPLIER’s plants making WAFERS for PI, in an amount no less than [*] of PI’s total WAFER
purchases by WAFER TYPE during the previous calendar year, which in no event shall exceed the
MAXIMUM FOUNDRY CAPACITY ALLOCATION.

     2.5 During each calendar year during the Term of this Agreement, SUPPLIER shall exert best
commercially reasonable efforts to accommodate up to a [*] upside request over the current FOUNDRY
CAPACITY, by WAFER TYPE (“UPSIDE WAFERS”), upon a [*] month written advance notice from PI, unless
the current FOUNDRY CAPACITY represents [*] of SUPPLIER’s total capacity in which case such advance
notice shall be a [*] month written notice. Notwithstanding anything to the contrary herein, any
INDIVIDUAL SALES CONTRACT for UPSIDE WAFERS shall not be subject to rescheduling or cancellation,
and PI shall pay SUPPLIER the full price stated in such INDIVIDUAL SALES CONTRACT.

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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     2.6 SUPPLIER can request PI to negotiate to reduce the committed FOUNDRY CAPACITY, by WAFER
TYPE, for the then current calendar year, if SUPPLIER and PI determine that PI will not order at
least [*] of the PI ANNUAL FORECAST by WAFER TYPE. Any negotiated reduction in FOUNDRY CAPACITY
must be agreed to by PI in writing. The FOUNDRY CAPACITY shall be allocated equally on a
monthly basis over SUPPLIER’s fiscal year.

     2.7 During the Term of this Agreement, PI shall provide SUPPLIER, on or before a mutually
agreed day of each calendar month, a written six (6) month rolling forecast (“PI MONTHLY FORECAST”)
of the quantity of the WAFERS of each PRODUCT within a WAFER TYPE to be manufactured and delivered
to PI during the six (6) month period corresponding thereto. Such forecast shall be in conformity
with the FOUNDRY CAPACITY.

     2.8 PI must order at least the quantity of WAFERS by WAFER TYPE forecasted in the first [*]
months of the PI MONTHLY FORECAST unless SUPPLIER agrees in writing to any change thereto. PI may
revise the quantity for each of the last [*] months of each PI MONTHLY FORECAST without penalty or
charge.

Article 3: (Sale and Purchase of WAFERS; MASK TOOLING SETS)

     3.1 PI shall purchase WAFERS from SUPPLIER and SUPPLIER shall sell such WAFERS to PI, in
accordance with the terms and conditions of this Agreement.

     3.2 PI shall submit to SUPPLIER a purchase order (“PO”) for the WAFERS in accordance with the
terms and conditions of this Agreement. Each PO shall be subject to acceptance by SUPPLIER through
issuance of a written confirmation within five (5) business days of receipt of the PO. Upon
SUPPLIER’s

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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confirmation, the PO terms of total quantity, delivery date, delivery location and
pricing shall constitute an INDIVIDUAL SALES CONTRACT which will be deemed to incorporate all of
the terms and conditions of this Agreement.

     3.3 Each confirmed PO shall be irrevocable except as set forth in Section 2.8. For any
INDIVIDUAL SALES CONTRACT, the quantity of WAFERS,
ordered for each PRODUCT, within a WAFER TYPE can be modified by PI at any time prior to the
week the WAFERS are started so long as the total quantity of WAFERS is not less than the original
quantity ordered for that WAFER TYPE.

     3.4 All PO’s shall be sent to Epson Electronics America, Inc., 150 River Oaks Parkway, San
Jose, CA 95134 (EEA), who shall confirm such PO’s and invoice PI.

     3.5 The GDSII for creating MASK TOOLING SETS for WAFERS of any PRODUCT shall be supplied by PI
to a vendor specified by SUPPLIER in a timely manner. SUPPLIER shall immediately notify PI in
detail of any defect or non-conformity in the MASK TOOLING SETS caused by SUPPLIER or the mask
vendor. If any non-conformity in the MASK TOOLING SETS is caused by the GDSII, upon such notice,
PI shall either provide corrected GDSII and pay for corrected MASK TOOLING SETS or, notwithstanding
any other provision of this Agreement, PI can cancel the INDIVIDUAL SALES CONTRACT for the affected
WAFERS, upon written notice to SUPPLIER, without any liability except for affected WAFER work in
progress (“WIP”) and WAFER inventory that was manufactured in accordance with the PO schedule.

     3.6 PI will procure the MASK TOOLING SETS, in accordance with the MASK SPECIFICATIONS, from a
vendor specified by SUPPLIER. SUPPLIER shall submit the MASK SPECIFICATIONS to PI for prior
approval. The cost of production or procurement of the MASK TOOLING SETS shall be paid by PI and

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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the MASK TOOLING SETS shall be owned by PI. The price and terms to PI for the MASK TOOLING SETS
shall be negotiated by SUPPLIER with such vendor to be better than or equal to SUPPLIER’s price and
terms for other similar mask tooling sets from such vendor.

     3.7 The MASK TOOLING SETS shall not be removed from the SUPPLIER facility where the WAFERS are
produced, except with the prior written consent of SUPPLIER.

Article 4: (Intellectual Property Rights)

     4.1 Subject to the licenses granted to the other party in this Agreement, all INTELLECTUAL
PROPERTY RIGHTS owned or controlled by a party as of the Effective Date shall continue to be owned
or controlled by such party.

     4.2 Subject to the licenses granted to SUPPLIER in this Agreement, PI is and shall remain the
sole and exclusive owner of all rights (including INTELLECTUAL PROPERTY RIGHTS), title and interest
in and to the PI INTELLECTUAL PROPERTY. PI grants SUPPLIER a limited, non-transferable,
non-exclusive royalty-free and fully paid-up license, without the right to sublicense, under the PI
INTELLECTUAL PROPERTY for the sole purpose of using it internally to manufacture, test, and
evaluate WAFERS for PI, and to, sell and offer to sell, WAFERS to PI. Notwithstanding any other
statement in this Agreement, the foregoing license shall not survive expiration or termination of
this Agreement. SUPPLIER may not (i) use the PI INTELLECTUAL PROPERTY for any purpose other than
to manufacture WAFERS, or (ii) license it to any third party.

     4.3 Subject to the licenses granted to SUPPLER in this Agreement, PI shall be the sole and
exclusive owner of all right, title and interest in the PI IMPROVEMENTS. SUPPLIER hereby
irrevocably and unconditionally
transfers

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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and assigns to PI all of SUPPLIER’s right, title and
interest worldwide in the PI IMPROVEMENTS.

     4.4 SUPPLIER will promptly disclose to PI in writing all PI IMPROVEMENTS upon their creation.

     4.5 SUPPLIER shall, in a timely manner and at PI’s expense, take all reasonable actions
reasonably requested by PI, to assist PI in perfecting and enforcing its rights in the PI
IMPROVEMENTS. Such actions shall include but not be limited to execution of assignments, patent
applications and other documents.

     4.6 Subject to all of the terms and conditions of this Agreement, PI hereby grants to SUPPLIER
a non-exclusive, irrevocable, perpetual, royalty-free and fully-paid-up, non-transferable,
worldwide, right and license to use, modify, reproduce, (but sub-license only to a SUPPLIER
SUBSIDIARY) the PI IMPROVEMENTS for SUPPLIER’s internal use only. Notwithstanding the foregoing,
no license is granted to the PI IMPROVEMENTS for the purpose of SUPPLIER providing foundry service
or other benefit to a third party.

     4.7 In the event that any portion of Section 4.2 is declared invalid or illegal according to
any applicable law, (a) SUPPLIER hereby waives and agrees never to assert such right, title and
interest, including any moral rights or similar rights, against PI or PI’s licensees and (b) the
parties hereby modify such portion, effective upon such declaration, in such manner as shall secure
for PI an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license under
all INTELLECTUAL PROPERTY RIGHTS, with rights to sublicense through one or more level(s) of
sublicensee(s), to use, modify, reproduce, create derivative works of, distribute, publicly perform
and publicly display by all means now known or later developed, and otherwise exploit in any
manner, such rights in the PI IMPROVEMENTS, to the maximum extent permitted by applicable law.

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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     4.8 SUPPLIER shall be the sole and exclusive owner of all right, title and interest in the
SUPPLIER IMPROVEMENTS. SUPPLIER hereby grants to PI a non-exclusive, irrevocable, perpetual,
royalty-free, non-transferable, worldwide, right and license to use, modify, reproduce, create
derivative works of, distribute, publicly perform and publicly display by all means now known or
later developed,
and otherwise exploit in any manner all SUPPLIER IMPROVEMENTS as part of the PI PROCESS and
any modifications thereto. Without any consent of SUPPLIER, PI may sublicense the foregoing
license for the SUPPLIER IMPROVEMENTS to PI’s SUBSIDIARY so long as the sublicense provides for the
protection of SUPPLIER’s CONFIDENTIAL INFORMATION on terms not less protective than those set forth
in this Agreement. SUPPLIER will promptly disclose to PI in writing all SUPPLIER IMPROVEMENTS upon
their creation.

     4.9 SUPPLIER agrees not to use the PI INTELLECTUAL PROPERTY or any license under this
Agreement, in whole or in part, or any knowledge gained by SUPPLIER through producing WAFERS, to
develop an equivalent or competing process to the PI PROCESS, or other product or service that
would compete with PI.

Article 5: (WAFER Production)

     5.1 ENGINEERING PRODUCTION

          5.1.1 For ENGINEERING PRODUCTION, PI may place an order with SUPPLIER for WAFERS up to a
maximum of [*] WAFERS for each WAFER TYPE, or any other quantity agreed to in writing by the
parties. SUPPLIER will use its best commercially reasonable efforts to ship WAFERS in ENGINEERING
PRODUCTION to PI on the average of [*] working days after, or as quickly as possible but no more
than [*] working days after, availability of the applicable MASK TOOLING SETS.

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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          5.1.2 Any output of the ENGINEERING PRODUCTION will be shipped to PI immediately upon
completion. If the WAFERS output is less than [*] of the ordered quantity, SUPPLIER will inform PI
of the output quantity of the WAFERS and if PI requires to have the shortage covered, SUPPLIER will
re-input
the WAFERS to cover the shortage of quantity at no additional cost to PI (RECOVERY WAFERS).

     5.2 PILOT PRODUCTION

          5.2.1 For the PILOT PRODUCTION, PI may place an order with SUPPLIER for a minimum of [*]
WAFERS, or multiples thereof, per each PRODUCT, or any other quantity agreed to in writing by the
parties.

          5.2.2 SUPPLIER will use best commercially reasonable efforts to ship to PI WAFERS in PILOT
PRODUCTION of each PRODUCT within [*] working days after availability of the MASK TOOLING SETS for
such PRODUCT.

          5.2.3 The output of the PILOT PRODUCTION will be shipped to PI if such WAFERS output is at
least [*] of the ordered quantity. If the WAFERS output is less than [*] of the ordered quantity,
SUPPLIER will inform PI of the output quantity of the WAFERS and if PI requires to have the
shortage covered, SUPPLIER will re-input the WAFERS to cover the shortage of quantity at no
additional cost to PI.

     5.3 VOLUME PRODUCTION

          5.3.1 For VOLUME PRODUCTION, PI shall place an order with SUPPLIER for a minimum of [*]
WAFERS, or multiples thereof, per each PRODUCT, or any other quantity agreed to in writing by the
parties.

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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          5.3.2 For VOLUME PRODUCTION, SUPPLIER will ship the first (1st) shipment of the WAFERS ordered
by PI for that month no later than [*] working days after the start of the production as per PI’s
PO for such PRODUCTS, unless PI’s PO specifies a later delivery date. The rest of such ordered
WAFERS for that month will be shipped so that PI receives all such WAFERS, in equal weekly
quantities to the extent practicably possible, within [*] working days after the first
(1st) shipment. SUPPLIER shall use its best commercially reasonable efforts to minimize such
number of working days.

          5.3.3 SUPPLIER will ship monthly orders in quantities not less than [*] of the quantities
ordered of each PRODUCT.

Article 6: (Delivery)

     6.1 The terms of delivery of the WAFERS shall be FCA Sakata, Japan,  (as such term is
defined in Incoterms 2000).

     6.2 The title and risk of loss in and to the WAFERS delivered by SUPPLIER to PI shall transfer
from SUPPLIER to PI at the FCA point. PI shall have the right to designate a freight forwarder,
subject to SUPPLIER’s reasonable approval.

     6.3 SUPPLIER will deliver the WAFERS within the number of calendar days specified in the
INDIVIDUAL SALES CONTRACT. In the event that SUPPLIER foresees a delay in the delivery schedule of
the WAFERS, SUPPLIER shall make a best commercially reasonable effort to correct any delay and
SUPPLIER shall promptly notify PI of such delay and submit to PI the new delivery schedule. PI
will have the right to cancel, without liability, the INDIVIDUAL SALES CONTRACT for the delayed
WAFERS, except for RECOVERY WAFERS, if

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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the delay is greater than thirty (30) days and if such delay
is not caused solely by PI.

     6.4 SUPPLIER shall pack the WAFERS in accordance with the packing standards defined in the
COMMON SPECIFICATIONS.

     6.5 SUPPLIER shall collect PCM data (“PCM DATA”), as defined in the COMMON SPECIFICATIONS, on
the manufactured WAFERS. SUPPLIER will send the PCM DATA electronically to PI before the WAFERS
are received by PI.
The PCM DATA will be accurate and complete for all WAFERS and sent in a mutually agreed upon
format.

     6.6 If PI determines, in consultation with SUPPLIER, that the WAFERS currently being
manufactured will not meet the PRODUCTS requirements, PI can, notwithstanding any other provision
of this Agreement, cancel the INDIVIDUAL SALES CONTRACT for the affected WAFERS by notice to
SUPPLIER without any liability except for the affected WAFER WIP and WAFER inventory that was
manufactured in accordance with the PO schedule, upon written notice to SUPPLIER.

Article 7: (Test and Inspection)

     7.1 PI shall conduct incoming inspection of the WAFERS, by WAFER TYPE, to determine the
WAFERS’ conformance to the COMMON SPECIFICATIONS. The PCM DATA and SUPPLIER’s test results will be
supplied in a timely manner by SUPPLIER for the incoming inspection of the WAFERS. Any omission,
inaccuracy or other defect in the PCM DATA will in itself be sufficient cause to reject the WAFERS.
This inspection shall be regarded as final in terms of

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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quality, quantity and other conditions of
the WAFERS supplied to PI, which are subject to SUPPLIER’s warranty as defined in Section 11.1.

     7.2 PI shall notify SUPPLIER which of the WAFERS have been accepted by PI per the INDIVIDUAL
SALES CONTRACT within [*] days after receipt of the WAFERS by PI. PI will owe SUPPLIER payment
only for the quantity of WAFERS that have been accepted by PI. Should PI fail to notify SUPPLIER
within the said [*] days, the WAFERS shall be deemed to have been accepted by PI.

     7.3 SUPPLIER shall not be liable for: (i) any non-conformity in the WAFERS that is not
attributable to SUPPLIER and was caused by abuse, misuse,
neglect, improper transportation, improper installation, improper operation, improper use,
improper testing, improper storage, improper maintenance, repair, alteration, modification,
tampering, accident or unusual deterioration and/or degradation of such WAFERS due to conditions of
the physical environment beyond the tolerance requirements set forth in the COMMON SPECIFICATIONS;
or (ii) any defects and/or failures of the WAFERS which are attributable to the design, testing
and/or assembly of the PRODUCTS or the back-end processing of the WAFERS (including, without
limitation, cutting and packaging thereof).SUPPLIER shall not be held responsible for the defects,
failures and yield problems of the WAFERS if the WAFERS meet the specifications set forth in the
COMMON SPECIFICATIONS.

     7.4 SUPPLIER may make a written special waiver request to PI to ship WAFERS that do not comply
with the COMMON SPECIFICATIONS. If PI approves such special waiver request in writing, which
approval may include special terms and conditions, SUPPLIER may ship such non-complying WAFERS
under such terms and conditions.

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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Article 8: (Process and Specification Changes)

     8.1 SUPPLIER shall notify PI in writing as soon as possible, in advance, of any process change
which requires PI’s change in any database or which would affect the quality, reliability,
manufacturability, form, fit or function of the PRODUCTS. Each such process change shall be
subject to PI’s prior written approval. Notwithstanding any other provision of this Agreement, if
PI does not approve the process change, and such process change is implemented, PI will have the
right to cancel, without liability, any INDIVIDUAL SALES CONTRACT affected by the process change.

     8.2 PI shall have sole responsibility for the control, maintenance, distribution and
modification of the COMMON SPECIFICATIONS including but not
limited to the addition and maintenance of applicable process, inspection, quality and
procurement specifications. PI will notify SUPPLIER of any changes to the COMMON SPECIFICATIONS by
providing a copy of the amended COMMON SPECIFICATIONS to SUPPLIER. SUPPLIER will acknowledge
acceptance of the amended COMMON SPECIFICATIONS in writing and SUPPLIER’s acceptance will not be
unreasonably withheld, conditioned or delayed. In the case of any issue with the COMMON
SPECIFICATIONS, SUPPLIER agrees that PI is the ultimate authority on the COMMON SPECIFICATIONS.

Article 9: (Price)

     9.1 The prices of the WAFERS, which are produced both in the PILOT PRODUCTION and the VOLUME
PRODUCTION are set forth in Exhibit B (PRICES) attached hereto. Any modifications thereto
must be agreed upon by SUPPLIER and PI in writing, either as an amendment to Exhibit B
(PRICES) or as part of an INDIVIDUAL SALES CONTRACT. SUPPLIER and PI may jointly review and revise
the WAFERS price, by WAFER TYPE, within [*] days of the close

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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of each half of SUPPLIER’s fiscal
year or upon a material change to the COMMON SPECIFICATIONS.

Article 10: (Payments)

     10.1 Payment for the WAFERS shall be net and by wire transfer [*] days after receipt of
invoice.

Article 11: (Warranty, Indemnification)

     11.1 SUPPLIER warrants that the WAFERS sold to PI will conform to the COMMON SPECIFICATIONS.
PI shall notify SUPPLIER in writing of any defect or non-conformity of said WAFERS within [*] days
after notification of acceptance per Section 7.2 above. SUPPLIER’s sole obligations under this
warranty are limited to, at PI’s option, (i) replacing or reworking any said WAFERS which shall be
returned to SUPPLIER’s manufacturing facility with transportation charges prepaid, or
(ii) SUPPLIER crediting PI an amount equal to the purchase price of said WAFERS.

     11.2 Notwithstanding anything to the contrary in this Agreement, the warranty in Section 11.1
shall not apply, and SUPPLIER shall have no liability or obligation to PI under Section 11.1 with
respect to: (i) any non-conformity in the WAFERS that is not attributable to SUPPLIER and was
caused by abuse, misuse, neglect, improper transportation, improper installation, improper
operation, improper use, improper testing, improper storage, improper maintenance, repair,
alteration, modification, tampering, accident or unusual deterioration and/or degradation of such
WAFERS due to conditions of the physical environment beyond the tolerance requirements set forth in
the COMMON SPECIFICATIONS; or (ii) any defects and/or failures of the WAFERS attributable to the
design, testing and/or

Confidential

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omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

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assembly of the PRODUCTS or the back-end processing of the WAFERS
(including, without limitation, cutting and packaging thereof).

     11.3 SUPPLIER shall defend, indemnify and hold harmless PI, its officers, directors, employees
and representatives from and against any claim, demand, cause of action, debt, or liability,
including reasonable attorneys’ fees, relating to or arising from allegations that the SUPPLIER
PROCESS, SUPPLIER IMPROVEMENTS and any SUPPLIER contributions to the PI INTELLECTUAL PROPERTY used
to produce WAFERS or the resulting WAFERS infringes any INTELLECTUAL PROPERTY RIGHTS or other right
of any kind of a third party; provided that SUPPLIER is promptly notified in writing of the action
and is allowed to assume and control the defense thereof. SUPPLIER shall pay all damages and costs
awarded therein, but shall not be responsible for any compromise or settlement made without
SUPPLIER’s written consent.

     11.4 EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO EXPRESS OR IMPLIED WARRANTIES ARE MADE
BY SUPPLIER RELATING
TO THE WAFERS, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY OF ANY KIND WITH REGARD TO ANY OF THE PI INTELLECTUAL PROPERTY OR THE
SUPPLIER INTELLECTUAL PROPERTY, AS THE CASE MAY BE.

     11.5 PI shall defend, indemnify and hold harmless SUPPLIER, its officers, directors, employees
and representatives from and against any claim, demand, cause of action, debt, or liability,
including reasonable attorneys’ fees, relating to or arising from allegations that the PI PROCESS
and any PI contributions to the PI IMPROVEMENTS used to produce WAFERS infringes any INTELLECTUAL
PROPERTY RIGHTS or other right of any kind of a third party; provided that PI
is

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 18 of 33 

 

promptly notified
in writing of the action and is allowed to assume and control the defense thereof. PI shall pay
all damages and costs awarded therein, but shall not be responsible for any compromise or
settlement made without PI’s written consent.

     11.6 Notwithstanding Section 13.7, SUPPLIER shall keep records for [*] years, notwithstanding
the termination of this Agreement, of the WAFERS manufactured and summaries of their process
monitors. SUPPLIER agrees to permit such records to be examined and copied by PI or PI’s
authorized representative, upon reasonable prior written notice to SUPPLIER, during normal business
hours at SUPPLIER’s offices. Such records shall be deemed to be PI’s CONFIDENTIAL INFORMATION.

Article 12: (Confidentiality)

     12.1 The receiving party shall use any CONFIDENTIAL INFORMATION acquired from the disclosing
party in connection with this Agreement solely for the purposes of this Agreement.

     12.2 Subject to Sections 12.7 and 12.8, for a period of [*] years after the receipt or
creation of the CONFIDENTIAL INFORMATION, or during the Term of this Agreement, whichever is
longer, the receiving party shall use a reasonable standard of care not to publish or disseminate
the CONFIDENTIAL INFORMATION to any third party, except as otherwise provided herein, and use such
CONFIDENTIAL INFORMATION only for the purpose of this Agreement. The receiving party shall have no
obligation with respect to any CONFIDENTIAL INFORMATION received by it which the receiving party
shall prove is:

          (a) Published or otherwise available to the public other than by a breach of this Agreement or
any other agreement by the receiving party;

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 19 of 33 

 

          (b) Rightfully received by the receiving party hereunder from a third party not obligated
under this Agreement or any other agreement, and without confidential limitation;

          (c) Known to the receiving party prior to its first receipt of the same from the disclosing
party;

          (d) Independently developed by the receiving party without access to the CONFIDENTIAL
INFORMATION of the disclosing party;

          (e) Furnished to a third party by the disclosing party without restrictions on the third
party’s right of disclosure similar to those of this Agreement; or

          (f) Stated in writing by the disclosing party as no longer being CONFIDENTIAL INFORMATION.

     In the case that the receiving party intends to disclose publicly or to a third party any
CONFIDENTIAL INFORMATION under any of the exceptions above, the receiving party must first give the
disclosing party written notice [*] days prior to
any such disclosure.

     12.3 If any CONFIDENTIAL INFORMATION is disclosed pursuant to the requirement or request of a
governmental or judicial agency or disclosure is required by operation of law, such disclosure will
not constitute a breach of this Agreement, provided that the receiving party shall give prompt
prior written notice to the disclosing party to allow the disclosing party to seek a protective
order with respect thereto reasonably satisfactory to the disclosing party to the extent available
under applicable law.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 20 of 33 

 

     12.4 The receiving party shall limit access to the CONFIDENTIAL INFORMATION only to such
officers and employees of the receiving party who are reasonably necessary to implement this
Agreement and only to such extent as may be necessary for such officers and employees to perform
their duties under this Agreement. The receiving party shall be liable to cause all of such
officers and employees to sign a secrecy agreement to abide by the secrecy obligations provided in
this Agreement. The receiving party shall maintain records of such officers and employees.

     12.5 CONFIDENTIAL INFORMATION and all materials including, without limitation, documents,
drawings, masks, specifications, models, apparatus, sketches, designs and lists furnished to the
receiving party by, and which are themselves identified to be or designated in writing to be the
property of, the disclosing party are and shall remain the property of the disclosing party and
shall be returned to the disclosing party promptly at its request, including any copies.

     12.6 PI may disclose information with respect to any SUPPLIER IMPROVEMENTS to the PI PROCESS
to one or more third parties as CONFIDENTIAL INFORMATION of PI and covered by a non-disclosure
agreement with protection equivalent to this Agreement for the sole purpose of having such third
parties provide PI with design, layout, foundry, assembly and testing services.

     12.7 CONFIDENTIAL MANUFACTURING INFORMATION will be confidential for a period of [*] years
after the Term of this Agreement and SUPPLIER agrees to use its best commercially reasonable
efforts to never make public the CONFIDENTIAL MANUFACTURING INFORMATION. Notwithstanding any other
provision of this Agreement, the receiving party shall treat the CONFIDENTIAL MANUFACTURING
INFORMATION in accordance with the confidentiality obligations and use restrictions of this
Agreement during that [*] year period.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 21 of 33 

 

     12.8 The receiving party’s obligations with respect to any portion of the CONFIDENTIAL
MANUFACTURING INFORMATION shall terminate when the receiving party can document, and with the
disclosing party’s written concurrence, that such CONFIDENTIAL MANUFACTURING INFORMATION:

          (a) Was rightfully in the public domain at the time it was communicated to the receiving party
by the disclosing party; or

          (b) Rightfully entered the public domain through no fault of SUPPLIER subsequent to the time
it was communicated to the receiving party by the disclosing party; or

          (c) Was rightfully in the receiving party’s possession free of any obligation of confidence at
the time it was communicated to the receiving party by the disclosing party; or

          (d) Was rightfully communicated to the receiving party by a third party free of any obligation
of confidence subsequent to the time it was communicated to receiving party by the disclosing
party; or

          (e) Was independently developed by the receiving party and the receiving party gave the
disclosing party notice thereof, within [*] days of the disclosure of the CONFIDENTIAL
MANUFACTURING INFORMATION to the
receiving party, documenting the information independently developed by the receiving party.

     For any CONFIDENTIAL MANUFACTURING INFORMATION to be subject to an exception above, any
document containing such CONFIDENTIAL MANUFACTURING INFORMATION, and the information related
thereto, must in their entirety qualify for the exception. This explicitly excludes any right to
apply the exception by redacting CONFIDENTIAL MANUFACTURING INFORMATION

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 22 of 33 

 

or any part thereof from a
document.

     In the case that the receiving party intends to disclose to an unauthorized party CONFIDENTIAL
MANUFACTURING INFORMATION under the exceptions above, the receiving party must first receive the
disclosing party’s prior written approval and such approval will be in the disclosing party’s sole
discretion.

     12.9 PI may request the confidential release of SUPPLIER’s CONFIDENTIAL INFORMATION to a
customer of the PRODUCTS, covered by a non-disclosure agreement with confidentiality protections
equivalent to those of this Agreement, for purposes of such customer’s evaluation or audit, but
only with the prior written consent of SUPPLIER, which shall not be unreasonably withheld.

     12.10 Obligation to Notify and Remedy. The receiving party will immediately give
written notice to the disclosing party of any suspected unauthorized use or disclosure of the
disclosing party’s CONFIDENTIAL MANUFACTURING INFORMATION and the receiving party will be
responsible for remedying such unauthorized use or disclosure. In the event that the receiving
party or (to the knowledge of the receiving party) any of its representatives is requested or
required (by oral questions, interrogatories, requests for information or documents in legal
proceedings, subpoenas, civil investigative demands or other similar processes) to disclose any of
the disclosing party’s CONFIDENTIAL MANUFACTURING INFORMATION, the receiving party shall provide
the
disclosing party with prompt written notice of any such request or requirement sufficiently
timely to allow the disclosing party adequate time to seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement.

     12.11 Notwithstanding Section 18.1 (“Entire Agreement”), the parties agree that the
Confidential Manufacturing Information Agreement previously entered

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 23 of 33 

 

into between the parties, with
an effective date of October 31, 2002, (“CMI Agreement”) shall remain in full force and effect. In
case of any conflict between any of the provisions this Agreement and those of the CMI Agreement,
the provisions giving the greater confidentiality protection to the CONFIDENTIAL MANUFACTURING
INFORMATION shall govern, except that in any such conflict involving Section 12.4 of this
Agreement, such Section 12.4 shall govern.

Article 13: (Term and Termination)

     13.1 This Agreement shall continue in full force and effect from the Effective Date until the
end of the calendar year containing the fifth (5th) anniversary of the Effective Date, unless
earlier terminated as provided herein (“Term”). If this Agreement has not been earlier terminated,
the parties agree to negotiate in good faith, beginning one year prior to end of the Term, for this
Agreement’s continuation for another [*] year period, on mutually agreeable terms and conditions.

     13.2 Notwithstanding anything to the contrary in Section 18.11 (“Force Majeure”), if any
governmental agency, entity or authority requires (including through administrative guidance) any
changes to this Agreement, PI may terminate this Agreement immediately if the changes are, in PI’s
sole discretion,
detrimental to PI’s interests or otherwise not reasonably acceptable to PI, with liability
only as set forth in Section 6.6.

     13.3 In the event that either party has committed a material breach of this Agreement, the
other party shall promptly give written notice thereof to the breaching party, specifying any
alleged material breach or breaches. The breaching

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 24 of 33 

 

party shall have sixty (60) days after the
effective date of such written notice to have all material breaches specified either remedied or
waived (“cured”). If such breaches are not so cured, the other party shall have the right to
terminate this Agreement effective upon written notice.

     13.4 Either party shall also have the right to terminate this Agreement with immediate effect
by giving written notice of termination to the other party at any time upon or after the occurrence
of any of the following events with respect to such other party:

          (a) Insolvency, bankruptcy, reorganization or liquidation or filing of any application
therefor, or other commitment of an affirmative act of insolvency, which is not promptly removed or
stayed, if (1) such party does not receive prompt, satisfactory, written assurance from the other
party that it can meet its obligations under this Agreement, or (2) after such assurance such other
party does not continue to meet such obligations;

          (b) Attachment, execution or seizure of substantially all of the assets or filing of any
application therefor which is not promptly released or stayed;

          (c) Assignment or transfer of that portion of the business to which this Agreement pertains to
a trustee for the benefit of creditors; or

          (d) Termination of its business or dissolution.

     13.5 [*]

     13.6 No failure or delay on the part of either party in exercising its right of termination
hereunder for any one or more causes shall be construed to prejudice its rights of termination for
such cause or any other or subsequent cause.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 25 of 33 

 

     13.7 In the event of expiration or termination of this Agreement, within [*] days after
expiration or termination of this Agreement, the receiving party shall return to the disclosing
party all media and documentation containing the CONFIDENTIAL INFORMATION and render unusable all
said CONFIDENTIAL INFORMATION placed in any storage apparatus under the receiving party’s control.
Notwithstanding the foregoing sentence, (a) SUPPLIER shall render unusable each piece of said
CONFIDENTIAL INFORMATION set forth in Section 11.6 promptly when its [*] year retention period is
complete or as required under applicable Japanese laws, including its tax laws and regulations,
whichever is later; and (b) the receiving party will promptly produce for the disclosing party all
documents in any form containing CONFIDENTIAL MANUFACTURING INFORMATION, whether made by the
disclosing party or by the receiving party (including notes made by the receiving party), and
whether such documents be in hard copy, electronic (including email), optical or other form.

     13.8 The termination or expiration of this Agreement shall not release either party from any
liability which at said date of termination or expiration has already accrued to the other party.

     13.9 Notwithstanding any termination or expiration of this Agreement, the provisions of
Articles 1 (“Definitions”), 4 (“INTELLECTUAL PROPERTY RIGHTS”), 11 (“Warranty, Indemnification and
Improvements”), and 12 (“Confidentiality”), Sections 13.7, 13.8, 13.9, and Articles 14 (“Government
Regulations”), 15 (“Nondisclosure”), and 18 (“Miscellaneous Provisions”) shall survive this
Agreement.

Article 14: (Government Regulations)

     14.1 Unless prior approval is obtained from the competent governmental agency, each party
shall not knowingly export or re-export, directly or indirectly,

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 26 of 33 

 

any WAFERS to any country or
countries to which export or re-export will violate any laws or regulations of the United States of
America.

     14.2 SUPPLIER is responsible for all taxes in respect of this Agreement except for taxes on
PI’s income.

Article 15: (Non-Disclosure)

     Each party shall keep this Agreement and its terms, conditions and existence confidential and
shall not make disclosure thereof to any third party without the prior written consent of the other
party. Notwithstanding the previous sentence, either party may make such disclosure to the party’s
legal and financial advisors provided the disclosure is covered by a non-disclosure agreement with
confidentiality protections equivalent to those of this Agreement. Notwithstanding any other
statement in this Agreement, either party may disclose this Agreement and/or its terms and
conditions to the extent that such disclosure is necessary to comply with securities and other
applicable laws.

Article 16: (Third Party Service Providers)

     16.1 1.1 SUPPLIER shall each enter into separate written agreements (each a “SUBSIDIARY
Agreement”) with each of their respective SUBSIDIARIES who wish to exercise any rights under this
Agreement, binding the SUBSIDIARY to the terms and conditions of this Agreement. A SUBSIDIARY
shall maintain its status as a SUBSIDIARY under this Agreement only for so long as such SUBSIDIARY
has a SUBSIDIARY Agreement in force and effect. SUPPLIER guarantees the performance of its
respective SUBSIDIARIES under this Agreement, and will indemnify and hold PI harmless from any
costs, damages, or
liabilities incurred by PI arising out of a breach by a SUBSIDIARY of any of the terms and
conditions of this Agreement and/or SUBSIDIARY Agreements.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 27 of 33 

 

     16.2 SUPPLIER shall have no right to have WAFERS manufactured, in whole or in part, by a third
party unless PI gives its written approval therefor in advance, which approval shall be at PI’s
sole discretion. If PI does give such written approval, then SUPPLIER may disclose CONFIDENTIAL
INFORMATION of PI for the sole purpose of, and only to the extent reasonably necessary for, having
such third party provide such services solely for the benefit if PI and not for the benefit of any
other party. Such approval shall be conditioned upon:

          (a) PI’s prior review and written approval of the contract between SUPPLIER and such third
party performing such manufacture; and

          (b) the third party agreeing in writing to all applicable terms and conditions of this
Agreement, and;

          (c) SUPPLIER being the insurer and guarantor of such third party’s full observance of such
terms and conditions; and

          (d) SUPPLIER’s disclosure of CONFIDENTIAL MANUFACTURING INFORMATION to such third party being
subject to PI’s prior written approval, which shall be at PI’s sole discretion.

Article 17: (High Voltage Upgrade)

     17.1 SUPPLIER owns an electrical tester defined below (the “TOOLING”):

	 	 	 
	Name of TOOLING
	 	 
	 
	 	 
	Name of Manufacturer
	 	 
	 
	 	 
	Current Energy Rating
	 	 

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 28 of 33 

 

	 	 	 
	Quantity

	 	One (1) unit
	 
	 	 
	Serial Number
	 	 

     17.2 SUPPLIER will submit to PI in writing any necessary conversion plans for upgrading the
TOOLING for high voltage, and the cost of the upgrade. If PI agrees in writing to the conversion
plans PI will pay for upgrading the TOOLING pursuant to the conversion plans, provided that the
cumulative costs of all TOOLING upgrades shall not exceed [*].

     17.3 SUPPLIER will own the upgraded TOOLING. The upgraded TOOLING will be used for
manufacturing WAFERS. Any other use is permitted as long as delivery and FOUNDRY CAPACITY
commitments by SUPPLIER to PI are met.

Article 18: (Miscellaneous Provisions)

     18.1 Entire Agreement. This Agreement embodies the entire understanding of the
parties as it relates to the subject matter hereof and this Agreement supersedes any prior
agreements or understandings between the parties with respect to such subject matter.

     18.2 Headings. The article and section headings herein are for convenience only and
shall not affect the construction hereof.

     18.3 Waiver. Should either PI or SUPPLIER fail to enforce any provision of this
Agreement or to exercise any right in respect thereto, such failure shall not be construed as
constituting a waiver or a continuing waiver of its rights to enforce such provision or right or
any other provision or right.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 29 of 33 

 

     18.4 No License. Nothing contained in this Agreement shall be construed as conferring
by implication, estoppel or otherwise upon either party hereunder any license or other right except
as expressly set forth in Article 4 (“INTELLECTUAL PROPERTY RIGHTS”).

     18.5 English Language. This Agreement is in the English language only, which language
shall be controlling in all respects, and all versions hereof in any other language shall be for
accommodation only and shall not be binding upon the parties. All communications between SUPPLIER
and PI to effect the terms of this Agreement shall be in the English language only.

     18.6 No Agency. The parties to this Agreement are independent contractors. There is
no relationship of agency, partnership, joint venture, employment or franchise between the parties.
Neither party has, nor will either party represent that it has, the authority to bind the other or
to incur any obligation on its behalf.

     18.7 Notices. Any notice required or permitted to be given by either party to the
other party under this Agreement shall be in writing and delivered by international or overnight
courier, signature of receipt required, and shall be deemed delivered upon written confirmation of
delivery by the courier, if sent to the following respective addresses or such new addresses as may
from time to time be supplied hereunder.

	 	 	 
	To:

	 	SUPPLIER
	 

	 	Seiko Epson Corporation
	 

	 	281 Fujimi
	 

	 	Fujimi-machi, Suwa-gun
	 

	 	Nagano-ken, 399-0293 Japan
	 

	 	Attention: General Manager of the IC Operations Division

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 30 of 33 

 

	 	 	 
	 

	With a courtesy copy to: EEA:
	 

	 	Epson Electronics America, Inc.
	 

	 	150 River Oaks Parkway
	 

	 	San Jose, CA 95134
	 

	 	Attn: General Manager, SMS Business Unit

Failure to provide such a courtesy copy shall not be a breach of this Agreement.

	 	 	 
	 

	To:	POWER INTEGRATIONS
	 

	 	Power Integrations International Ltd.
	 

	 	P.O. Box 219, Strathvale House, North Church Street
	 

	 	George Town, Grand Cayman, Cayman Islands
	 

	 	Attention: President

     18.8 Invalidity. If any provision of this Agreement, or the application thereof to
any situation or circumstance, shall be invalid or unenforceable, the remainder of this Agreement
or the application of such provision to situations or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected; and each remaining provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by applicable law. In the event of
such partial invalidity, the parties shall seek in good faith to agree on replacing any such
legally invalid provisions with provisions which, in effect, will most nearly and fairly approach
the effect of the invalid provision.

     18.9 Assignment. This Agreement and any rights or licenses granted herein shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns. Neither party shall assign any of its rights or

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 31 of 33 

 

privileges, or delegate any of its
obligations, hereunder without the prior written
consent of the other party except as set forth in Section 13.5. Such consent shall not be
unreasonably withheld.

     18.10 Amendment. This Agreement may not be extended, supplemented or amended in any
manner except by an instrument in writing expressly referring to this Agreement and duly executed
by an authorized representative of each party.

     18.11 Force Majeure. Either party shall be excused for failures or delays in
performance (other than a payment obligation) caused by war, declared or not, any laws,
proclamations, ordinances or regulations of the government of any country or of any political
subdivision of any country, or strikes, lockouts, floods, fires, explosions, acts of terrorism or
such other catastrophes as are beyond the control or without the material fault of such party
(“CAUSES”). Any party claiming any such excuse for failure or delay in performance due to such
CAUSES shall give prompt notice thereof to the other party, and neither party shall be required to
perform hereunder during the period of such excused failure or delay in performance except as
otherwise provided herein. This provision shall not, however, release such party from using its
best commercially reasonable efforts to avoid or remove all such CAUSES and such party shall
continue performance hereunder with the utmost dispatch whenever such CAUSES are removed. In the
event that the period of excused performance continues for ninety (90) days, this Agreement may be
terminated by the party not excused under this Section 18.11 (“Force Majeure”), by written notice
to the other party, subject to the provisions of Article 13 (“Term and Termination”) relating to
the effect of termination.

     18.12 Equitable Relief. Because the receiving party will have access to and become
acquainted with the CONFIDENTIAL INFORMATION of the disclosing party, the unauthorized use or
disclosure of which would cause irreparable harm and significant injury which would be difficult to
ascertain and which would not be

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 32 of 33 

 

compensable by damages alone, the parties agree that the
disclosing party will have
the right to seek and obtain an injunction, specific performance, or other equitable relief
without prejudice to any other rights and remedies that it may have for such breach of this
Agreement.

     18.13 [*]

     18.14 Governing Law. This Agreement and matters connected with the performance hereof
shall be construed, interpreted, applied and governed in all respects in accordance with the laws
of the State of California and the United States without regard to conflict of laws principles.
The parties hereby submit to the jurisdiction of, and waives any venue objection against, the
Superior Court of the State of California in Santa Clara County, or the Municipal Court of the
State of California, County of Santa Clara, or the United States District Court for the Northern
District of California, in any litigation arising out of this Agreement. Notwithstanding anything
to the contrary herein, either party may seek injunctive relief in any court of competent
jurisdiction in accordance with Section 18.12 (“Equitable Relief”). The United Nations Convention
on Contracts for the International Sale of Goods is specifically excluded from application to this
Agreement.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Page 33 of 33 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their respective corporate names by their duly authorized representatives on the
date written below.

	 	 	 
	Seiko Epson Corporation

	 	Power Integrations International Ltd.
	 
	 	 
	
Signature: /s/ Kazuhiro Takenaka

	 	Signature: /s/ John L. Tomlin
	Name: Kazuhiro Takenaka

	 	Name: John L. Tomlin
	Title: General Manager, IC 
Process and
Design Technology Department

	 	Title: President

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

  

 

Exhibit A

FOUNDRY CAPACITY and PI ANNUAL FORECAST

1. FOUNDRY CAPACITY – DS WAFERS

The following FOUNDRY CAPACITY will effective from [*] to [*]:

[*] WAFERS / month.

The following FOUNDRY CAPACITY will be effective from [*] for the [*] calendar year.

[*] WAFERS/month.

The FOUNDRY CAPACITY shall be allocated equally on a monthly basis over a given calendar year.

2. PI’s projected PI ANNUAL FORECAST of WAFER orders (non-binding) – DS WAFERS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Calendar Year	 	2006	 	2007	 	2008	 	2009	 	2010
	WAFERS
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 

3. The MAXIMUM FOUNDRY CAPACITY ALLOCATION shall be [*] WAFERS per month or [*] WAFERS per year.

4. The REVIEW PERIOD is the [*] day period prior to the commencement of the next calendar year.

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

 

Exhibit B

WAFER PRICES FOR VOLUME PRODUCTION OF SIX (6) INCH WAFERS BY MONTHLY ORDER VOLUME

For DS WAFERS in both PILOT PRODUCTION and VOLUME PRODUCTION:

	 	 	 	 	 	 	 	 	 	 	 
	Calendar Year	 	 	 	 	 	 	 	 	 	 
	Monthly WAFER

Volume	 	2005
PRICE	 	2006
PRICE	 	2007
PRICE	 	2008
PRICE	 	2009
PRICE
	Less than [*]

	 	[*]
	 	[*]
	 	[*]
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 	 	 
	[*]

	 	[*]
	 	[*]
	 	[*]
	 	[*]
	 	[*]
	 
	 	 	 	 	 	 	 	 	 	 
	[*] and above

	 	[*]
	 	[*]
	 	[*]
	 	[*]
	 	[*]

Pricing will be reviewed and mutually agreed to in writing on an annual basis.
For WAFERS in ENGINEERING PRODUCTION, the price for each entry of the above table will be
multiplied by [*].

The above prices are the WAFER’s BASE_PRICE and are based on an exchange rate of [*] ¥/$. The
fluctuation in foreign exchange rate, as supplied by the Wall Street Journal, will be shared
equally by each party as follows

F/X_BASE = [*]¥/$

Initial F/X_RATE = [*]¥/$

A new F/X_RATE is only established at the time of placing a PO for WAFERS if the [*] is equal

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

 

to or
greater than [*]¥ from the
F/X     BASE. The new F/X     RATE will be set to the [*] and will
remain in effect for at least the [*] it was established.

The actual PURCHASE_PRICE for WAFERS, by WAFER TYPE, used at the time of order will be calculated
by the following formula:

     PURCHASE_PRICE =

     [*]

Examples: For DS WAFERS with a BASE_PRICE of [*]

1) Nominal F/X Rate Example: F/X_RATE = in the range of [*]¥ to [*]¥:

     PURCHASE_PRICE = BASE_PRICE

2) Higher F/X Rate Example: New F/X_RATE = [*]¥:

     PURCHASE_PRICE = [*] = [*]

3) Lower F/X Rate Example: New F/X_RATE = [*]¥:

     PURCHASE_PRICE = [*]

Confidential

 Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00149-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00149-of-00352.parquet"}]]