<PAGE>
EXHIBIT 10.27
***PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
WAFER FOUNDRY AGREEMENT
-----------------------
This Agreement is made on this 29th day of June, 2000 ("Effective Date") by
and between POWER INTEGRATIONS, INC., a corporation duly organized and existing
under the laws of the State of Delaware, U.S.A., having its principal place of
business at 477 North Mathilda Avenue, Sunnyvale, California 94086 ("PI"), and
MATSUSHITA ELECTRONICS CORPORATION, a corporation duly organized under the laws
of Japan, having its principal place of business at 1-1 Saiwai-cho, Takatsuki-
shi, Osaka-fu, 569 Japan ("MEC"), and
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., a corporation duly organized under the
laws of Japan, acting through Semiconductor Marketing & Sales Office for
Overseas having its principal place of business at Twin 21 National Tower, 1-61
Shiromi 2 Chome, Chuo-ku, Osaka 540-0001 Japan ("MEI"), (MEC and MEI shall be
hereby regarded as single party when indicated as "MEC/MEI").
RECITALS
--------
A. PI is the owner and developer of certain integrated circuit process
technologies required to manufacture high voltage integrated circuits.
B. PI has no wafer fabrication facility and desires to obtain a cost
competitive foundry to manufacture wafers for PI, in order to provide a source
for the wafers PI requires, and to assure a long term supply of wafers.
C. MEC/MEI has wafer fabrication facilities in Japan and desires full
utilization and efficient operation of its wafer fabrication facilities.
D. MEC/MEI and PI have established a fruitful business relationship.
E. MEC and PI intend to enter into a Technology License Agreement (the
"License Agreement") at the same time that they enter into this Agreement.
AGREEMENT
PI and MEC/MEI, intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
For the purpose of this Agreement, all capitalized terms not otherwise
defined in this Agreement, including its exhibits, shall have the meanings set
forth in the License Agreement, and the following terms have the following
meanings:
1.1 "Fab" means any of the existing or future wafer fabrication facilities
in Japan or the United States of any company in the Matsushita Group.
1.2 "Wafer(s)" means wafer(s) for Products which MEC fabricates under this
Agreement for sale to PI through MEI.
1.3 "Prior Wafer Foundry Agreement" means the Wafer Foundry Agreement
entered into among MEC, MEI and PI as of June 29, 1990, as amended June 29,
1995.
ARTICLE II
----------
MEC DEVELOPMENT ASSISTANCE AND WAFER FOUNDRY SERVICE
----------------------------------------------------
2.1 Information Transfer. Information relating to the Baseline Process,
--------------------
Products and Updates, if any, shall continue to be transferred, pursuant to the
provisions of Article II of the License Agreement, from PI to MEC/MEI and from
MEC/MEI to PI for purposes of prototype development fabrication and production
fabrication by MEC/MEI at the Fab pursuant to the terms of this Article II.
2.2 5-Inch Wafer Manufacturing.
--------------------------
For PI Products that will be second sourced by MEC, the mask set and
sample wafer costs will be shared equally between MEC and PI.
2.3 Updates of Baseline Process.
---------------------------
(a) MEC/MEI shall use its best efforts to bring-up Updates of Baseline
Process, if any, at the Fab at which PI Products then are made in order to
supply PI with prototype Wafers and production Wafers as contemplated by this
Agreement.
(b) The parties agree that each party shall pay all of its own
expenses incurred in order to perform its obligations under Section 2.3(a).
(c) During the term of this Agreement, the allocation of the costs and
expenses incurred by MEC, after consultation with PI and if requested by PI, for
(i) improvement of the existing manufacturing processes for PI Products; or (ii)
establishment of a new manufacturing process, and/or (iii) transfer of
manufacturing process from one Fab to another Fab, whichever is necessary to
diligently comply with this Agreement shall be negotiated in good faith between
the parties hereto.
2.4 Bring-Up of New Products, etc.
------------------------------
<PAGE>
(a) Throughout the term of this Agreement, MEC/MEI shall make its best
effort to commit human, capital and financial resources necessary and reasonably
calculated to permit it to timely fulfill all of its obligations under this
Agreement, including, but not limited to, appropriate capital expenditures and
allocation of capacity, facilities and experienced personnel for an
engineering/manufacturing team to ensure an expeditious Product technology
transfer; an expeditious bring-up of new Products including Updates of Products
at the Fab; and a smooth production build-up beyond the period of prototype
development of such Products.
(b) During the period of prototype production development and sample
Wafer production development for new Products including Updates of Products, PI
shall bear the cost of mask making for all PI Products and pay for all Wafers
requested by and delivered to PI.
(c) During the period of prototype production development and sample
Wafer production development for new Products including Updates of Products,
MEC/MEI shall bear any and all the costs of Wafers used or disposed of by
MEC/MEI for the production or development.
2.5 Qualification of a New Fab. A Fab not qualified previously shall be
--------------------------
qualified by PI for the purpose of this Agreement in the event three runs of
wafers for the qualifying Product at that Fab have passed the evaluation test of
PI then in effect. MEC/MEI shall bear all costs of qualifying any new Fab,
including the cost of all Wafers used or disposed of by MEC/MEI or PI during
such qualification.
ARTICLE III
-----------
WAFER SUPPLY
------------
3.1 Wafer Quantities.
----------------
(a) During the term of this Agreement, MEC/MEI shall make available
for delivery to PI, from the production capacity of the Fab, not less than the
quantities of tested wafers as are set forth in Exhibit A ("Wafer Pricing and
Capacity"). The terms "Standard Process" and "DC Process" shall mean the
definitions given for those terms in Appendix A ("Baseline Process") of the
License Agreement.
(b) At either party's request, the parties shall negotiate in good
faith the terms and conditions for MEC/MEI to supply to PI, and for PI to
purchase from MEC/MEI, more than the minimum quantities of wafers agreed between
the parties.
(c) PI shall order Products in lots, each of which contains the number
of Wafers as set forth in Exhibit A to this Agreement ("Wafer Pricing and
Capacity").
3.2 Prices.
(a) The purchase price payable by PI to MEC/MEI for the quantities of
wafers set forth in Exhibit A will be as set forth in that Exhibit A.
(b) Wafers shall be tested in accordance with test procedures as
agreed by MEC and PI. All Wafers shall be FOB point of shipment by MEC/MEI.
(c) Any gain or loss due to the exchange rate between Japanese Yen and
United States Dollars will be shared equally by PI and MEC per Exhibit B
("Exchange Rate") at the time the Wafer
<PAGE>
order is placed.
3.3 Most Favored Customer. The prices of Wafers purchased by PI under
---------------------
this Agreement shall be the lowest price charged by MEC/MEI to any foundry
customers for similar products being purchased in similar volumes under similar
terms and conditions as this Agreement and during the term hereof. Should
MEC/MEI sell or agree to sell the same or similar products at lower price under
more favorable terms and conditions or at the same price under more favorable
terms and conditions, MEC/MEI will notify PI in writing within thirty (30) days
of the effective date of such sale or agreement and shall automatically extend
to PI as of such effective date the benefit of such more favorable prices or
terms and conditions.
3.4 Leadtimes. After the bring-up of the baseline process:
---------
(a) MEC/MEI will complete mask sets for any PI Product within seven
(7) working days after the receipt by MEC/MEI of a final database tape for such
PI Product. PI will bear all the costs of mask tooling.
(b) MEC/MEI will ship to PI prototype Wafers of any PI Products within
forty (40) working days after availability of mask sets for such PI Product.
MEC/MEI and PI will negotiate in good faith the possibility of making available
to PI fast-turn lots for certain prototype Wafers. PI will pay for those
prototype wafers.
(c) MEC/MEI will ship the first (1st) shipment of the Wafers ordered
by PI for that month no later than forty (40) working days after the start of
the production as per PI's purchase order for such PI Products, unless PI's
purchase order specifies a later delivery date. The rest of the 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 forty (40) working
days after the first (1st) shipment. MEC/MEI shall use its reasonable and best
efforts to improve actual leadtime for the production of Wafers.
(d) In the event the production of new Products (including Updates of
the Products) requires more complicated manufacturing process to MEC, including
the case, but not limited to, where the increase of the number of masks used for
such production, or the manufacturing processes of the Products are transferred
from the present Fab to another qualified Fab, the leadtime stated in Section
3.4(c) may be changed according to such different conditions if both parties
agree to such change.
3.5 Order Forecasts. Once PI Product enters volume production, MEC/MEI
---------------
shall provide PI sufficient information concerning wafer lot sizes and cycle
times to enable PI to plan its purchase orders. PI agrees to place monthly
orders/releases for tested Wafers with MEC/MEI. PI shall issue purchase orders
and rolling six (6) month forecasts on a monthly basis as follows:
(a) PI shall deliver an initial binding purchase order covering four
(4) months of deliveries of tested Wafers and a nonbinding forecast[s] for same
for the following two (2) months.
(b) In order to allow MEC the smooth production of the Wafers, by the
twenty-fifth (25th) day of each month during the term of this Agreement, PI
shall deliver a purchase order and updated forecast, specifying (i) its firm,
noncancellable order for Wafer starts for the next four (4) months ahead; the
first month of which is specified by product, and the next three months of which
are forecast by product, against which the numbers of Wafers (but not
necessarily the product mix) stated in PI's actual
<PAGE>
orders shall be the same, and (ii) the quantities of Wafers to be ordered by PI
for the months five (5) and six (6) months ahead, against which PI's actual
orders will be within the range of plus or minus thirty percent (30%).
3.6 Acceptance. All Wafers delivered to PI by MEC/MEI hereunder shall be
----------
subject to the inspection and acceptance criteria being used at the time of this
Agreement or the ones to be mutually agreed upon by the parties hereto during
the term of this Agreement, which basically consists of PCM test and visual
inspection criteria. In the event any lot or Wafers is found to fail such
applicable inspection and acceptance criteria, PI shall have the right to reject
such lot or Wafers by giving notice of such effect within sixty (60) days after
PI receives them and return them at MEC/MEI's cost and risk after obtaining a
return authorization number from MEC/MEI in writing. PI shall provide MEC/MEI
with a report specifying the reason for such rejection. MEC/MEI shall provide
either a refund, or a replacement lot of the Wafers within forty-five (45) days
after the receipt thereof pursuant to the mutual consent of the parties. All
rejected products may be subject to inspection by MEC/MEI to confirm that they
are defective. Any product not rejected by PI within sixty (60) days after
receipt by PI shall be deemed accepted.
3.7 Warranty. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.7 HEREOF,
--------
MEC/MEI MAKES AND PI RECEIVES NO WARRANTIES OR CONDITIONS ON THE WAFERS, EXPRESS
OR IMPLIED, STATUTORY OR OTHERWISE, AND MEC/MEI SPECIFICALLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. MEC/MEI
AGREES TO KEEP RECORDS FOR THREE (3) YEARS OF EACH PROCESSED LOT MANUFACTURED
AND SUMMARIES OF PROCESS MONITORS FOR ONE (1) YEAR FOR WARRANTY TRACEABILITY.
THE FOREGOING IS PI'S SOLE REMEDY FOR BREACH OF WARRANTY BY MEC/MEI WITH RESPECT
TO ANY WAFERS SUPPLIED BY MEC/MEI. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IN THE EVENT ANY CUSTOMER OF PI CLAIMS ANY INCONVENIENCE IN
ANY PRODUCTS RESULTING FROM MEC'S DIFFUSION OF WAFERS AND PI DECIDES TO DEAL
WITH SUCH INCONVENIENCE, MEC SHALL GIVE NECESSARY SUPPORT TO PI UPON REQUEST.
3.8 Terms and Conditions. To the extent not inconsistent with the
--------------------
provisions of this Agreement, the terms and conditions of PI's standard purchase
order shall apply to MEC/MEI's provision of goods and services to PI under this
Agreement.
3.9 Payment Terms. Payment for the Wafers shall be by telephonic transfer
-------------
within thirty (30) days after bill of lading date and secured by a standby
letter of credit to be opened at a first class bank selected by PI and
reasonably acceptable to MEC/MEI. MEC/MEI agrees to negotiate terms or
alternate forms of payment as proposed by PI.
3.10 Title and Transportation. All shipments to PI will be made F.O.B.
------------------------
point of shipment. Title and risk of loss and damage will pass to PI upon
delivery of Products to the carrier at the shipping point in good conditions.
Unless written instructions from PI specify the method of shipment, MEC/MEI will
use the least expensive means of shipment which will permit on time delivery of
the products to PI.
<PAGE>
ARTICLE IV
----------
EXPORT CONTROL
--------------
4.1 Technical Data. Each party hereby assures the others that it will
--------------
not, without prior authorization, if required, of the Office of Export
Administration, U.S. Department of Commerce, 14th and Constitution Ave., N.W.,
Washington, D.C. 20230, export or re-export (as defined in Section 779.1(b)-(c)
of the Export Administration Regulations - "Regulations" - and any amendments
thereto) the technical data covered thereby. PI shall inform MEC in writing of
the technical data restricted under such Regulations as well as its restricted
country group upon PI's disclosure or provision of technical information.
4.2 Other Restrictions. In exercising its rights under this Agreement,
------------------
each party agrees to comply strictly and fully with all export controls imposed
on Wafers, by any country or organization or nations within whose jurisdiction
each party operates or does business. Each party agrees not to export or permit
export of Wafers or any related technical data or complying with the export
control laws in the relevant jurisdiction.
4.3 Each party shall not export the Product to any country designated as
"Countries against which the sanctions should be taken" by certain resolutions
of the Security Council of the United Nations regarding the sanctions against
certain countries, as long as such resolutions remain valid and effective. For
purposes of this Agreement, any re-export in violation of such resolutions by a
customer of either MEC or PI will not be considered to be an export in violation
of such resolutions by MEC or PI, as the case may be, so long as MEC or PI, as
the case may be, did not knowingly participate in such re-export.
4.4 During and after the term of this Agreement, to the extent the same
practically is within its control, each party shall not sell, lease or otherwise
dispose of, directly or indirectly, any Product to customers whom such party
knows intend to make use of the Product for Military Purposes (defined
hereinbelow). For the purpose of this Agreement, "Military Purposes" means the
design, development, manufacture or use of any weapons, including without
limitation nuclear weapons, biological weapons, chemical weapons and missiles.
4.5 In the event either party violates the provisions of this Article IV,
the non-violating party shall have the right to require reasonable written
assurances from the violating party that such violation, whether or not past
incidents of violation can be cured, will not continue in the future, and if the
violating party does not deliver such assurances to the non-violating party
promptly after its request, the non-violating party may suspend the performance
of its obligations under this Agreement until such time as it receives such
assurances, without any prejudice to the rights and remedies which the non-
violating party may have under this Agreement. In the event that such assurance
is not delivered to the non-violating party within three (3) months after
request, the non-violating party shall the right to terminate forthwith, without
any prejudice to the rights and remedies which it may have hereunder, this
Agreement, by giving a written notice to the violating party.
<PAGE>
ARTICLE V
---------
EXPIRATION AND TERMINATION
--------------------------
5.1 Term of Agreement. This Agreement shall become effective as of the
-----------------
Effective Date and shall continue in full force and effect, unless sooner
terminated as elsewhere provided in this Agreement, until the fifth (5th)
anniversary of the Effective Date, at which time it shall expire.
5.2 Renewal. If this Agreement has not earlier terminated, the parties
-------
agree to negotiate in good faith, beginning on the fourth (4th) anniversary of
the date of this Agreement, for the continuation on mutually agreeable terms and
conditions of this Agreement.
5.3 Termination.
-----------
(a) Except as otherwise set forth in this section, if either party
shall at any time default, without any material causative fault on the part of
the other party, by failing to substantially perform any material provision of
this Agreement, and such default shall not be cured within sixty (60) days after
written notice to it from the other party specifying the nature of the default,
the non-defaulting party shall have the right to terminate this Agreement at any
time thereafter by giving written notice of termination to the other party, and
upon the giving of such notice of termination, this Agreement shall terminate
immediately. The party receiving notice shall have the right to cure any such
default up to the date of termination.
(b) Each party shall have the right to terminate this Agreement by
giving written notice of termination to the other at any time upon or after, (i)
the filing by the other party of a petition in bankruptcy or insolvency, or (ii)
upon or after the filing of any voluntary or involuntary petition or answer
seeking reorganization, readjustment or arrangement of the other party's
business under any law relating to bankruptcy or insolvency, or (iii) upon or
after the appointment of a receiver for all or substantially all of its
property, or (iv) upon or after the making by the other party of any assignment
or attempted assignment for the benefit of creditors, or (v) upon or after the
institution of any proceedings for the liquidation or winding up of the other
party's business or for the termination of its corporate charter; and this
Agreement shall terminate automatically on the thirtieth (30th) day after such
notice of termination is given, without further notice, demand or opportunity to
cure.
5.4 Consequences of Expiration. Upon expiration of this Agreement, all
--------------------------
rights and obligations of the parties hereunder shall cease and determine,
except for rights and obligations which, by the terms of this Agreement,
continue after the expiration or earlier termination of this Agreement and
except that the expiration of this Agreement shall not release either party from
any of its obligations accrued hereunder prior to the time expiration becomes
effective.
5.5 Consequences of Termination. Upon termination of this Agreement, all
---------------------------
rights and obligations of the parties hereunder shall cease and determine,
except for rights and obligations which, by the terms of this Agreement,
continue after the expiration or earlier termination of this Agreement and
except that no termination of this Agreement shall release either party from any
of its obligations accrued hereunder prior to the time such termination becomes
effective.
<PAGE>
ARTICLE VI
----------
MISCELLANEOUS AND GENERAL PROVISIONS
------------------------------------
6.1 Publicity. Neither party shall except as, to the extent, and in the
---------
manner, required by law or regulation, disclose to any third party any of the
specific terms or conditions of this Agreement, without prior written approval
by the other party.
6.2 Successors and Assigns; No Assignment.
-------------------------------------
(a) This Agreement, and rights and obligations herein, shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that except as set forth below neither party
shall assign this Agreement or any of its rights hereunder without the prior
written consent of the other party.
(b) Notwithstanding any other provision of Agreement, PI may without
the prior consent of MEC/MEI assign all of its rights under this Agreement to a
purchaser of all or substantially all of PI's stock or assets or to a third
party participating in a merger or other corporate reorganization in which PI is
a constituent corporation. Within 180 days after such assignment, if the
assignee is (i) a competitor of MEC, and (ii) of comparable size to MEC or
larger, then either party may elect to have this Agreement be deemed to have
expired and to have the provisions of Section 5.4 take effect 180 days after
written notice to the other party of such election. Any terminations by MEC/MEI
in this situation will become effective after a reasonable but significant
transition period for PI to bring up another supplier of wafers.
(c) As a condition of any assignment of this Agreement or any of the
rights granted hereunder, any successor shall expressly assume in writing the
performance of all terms and conditions of this Agreement to be performed by the
assigning party including such party's obligations hereunder with respect to the
protection of Confidential Information.
6.3 No Rights to Marks, Etc. Nothing contained in this Agreement shall
-----------------------
confer any rights to use in advertising, publicity, or otherwise, any
trademarks, trade names, or any contraction, abbreviation or simulation thereof,
of either party, provided such restriction shall not apply to identification
numbers and descriptions of devices and software which are the subject matter of
this Agreement.
6.4 No Joint Venture. Nothing contained in this Agreement shall be
----------------
construed as:
(a) creating any partnership, joint venture or other similar
relationship between PI and MEC/MEI; or
(b) obligating either party to commercially produce or to continue to
commercially produce, any solid state device of any type whatsoever, or any
parts or components thereof except otherwise explicitly provided in this
Agreement.
6.5 Force Majeure. Anything contained in this Agreement to the contrary
-------------
notwithstanding, the obligations of the parties hereto shall be subject to all
laws, both present and future, of any government having jurisdiction over the
parties hereto, and to orders, regulations, directions or requests of any such
government, or any department, agency or corporation thereof, and to war, acts
of public enemies, strikes
<PAGE>
or other labor disturbances, fires, floods, earthquakes, acts of God, or causes
of like or different kind beyond the control of the parties and the parties
hereto shall be excused from any failure to perform any obligation hereunder to
the extent such failure is caused by any such law, order, regulation, direction,
request or contingency, for the period such cause endures. Notwithstanding the
foregoing, in the event any such cause delays either party's performance of any
of its material obligations under this Agreement, the other party may suspend
its performance hereunder for the period such delay continues and if any such
cause renders impossible or delays for a period of more than six months either
party's performance of any of its material obligations under this Agreement, the
other party may terminate this Agreement pursuant to Section 5.3, as if a
material default had occurred hereunder and shall have the rights and remedies
specified in Article V. The party whose performance is delayed on account of any
such cause shall promptly notify the other party, and shall exert its best
efforts to recommence performance as soon as possible.
6.6 Entire Agreement. This Agreement and the License Agreement set forth
----------------
the entire agreement and understanding between the parties as to the subject
matter hereof and thereof and supersede all prior discussions, negotiations and
agreements, written, oral or implied, between them in respect of the subject
matter of this Agreement. None of the parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or therein or as duly set
forth on or subsequent to the date hereof or thereof in writing and signed by a
proper and duly authorized officer or representative of the party to be bound
thereby.
6.7 Remedies. Upon the breach by any party to this Agreement of any
--------
provision of this Agreement, the non-breaching party shall have the right to
pursue all available remedies at law or in equity it may elect, in order to
obtain the benefits to have been provided pursuant to this Agreement, or to
obtain adequate recourse or compensation in the event the same are not so
provided.
6.8 Absence of Waivers. Failure or delay on the part of a party hereto to
------------------
enforce any of the provisions of this Agreement or any rights with respect
thereto, or to exercise any election provided for herein shall in no way be
considered to be a waiver of such provisions, rights or elections or in any way
affect the validity of this Agreement. Failure or delay on the part of a party
to exercise any of the said provisions, rights or elections shall not preclude
or prejudice such party from later enforcing or exercising the same or any other
provisions, rights or elections which it may have under this Agreement.
6.9 Notices. All notices shall be given in writing either by personal
delivery to the party to whom notice is given, or by a commercial overnight
courier service, or by registered or certified mail, return receipt requested.
The date upon which any such notice is so personally delivered, the date of
confirmation of courier delivery, or if the notice is given by registered or
certified mail the date of the return receipt, shall be deemed to be the date of
such notice, irrespective of the date appearing therein.
If to PI: POWER INTEGRATIONS, INC.
477 N. Mathilda Ave.
Sunnyvale, California 94086
Attn: President
If to MEC: MATSUSHITA ELECTRONICS CORPORATION
1 Kotariyakemachi, Nagaokakyo, Kyoto
617 JAPAN
Attn: Director, Sales & Marketing Division
<PAGE>
If to MEI: MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
Semiconductor Marketing & Sales Office for Overseas
Twin 21 National Tower
1-61 Shiromi 2-chome, Chuo-ku
Osaka 540-0111 JAPAN
6.10 Headings. All paragraph captions are for reference only and shall
not be considered in construing this Agreement.
6.11 Severability. Any provision or provisions of this Agreement which in
any way contravenes a law of any state or country in which the Agreement is in
effect shall, in such state or country and to the extent of such contravention
of local law, be deemed separable and shall not affect any other provision or
provisions of this Agreement.
6.12 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
laws of the United States and the State of California as applied to agreements
entered into and to be performed entirely within California between California
residents without regard to conflict of laws principles.
6.13 Arbitration. Disputes arising out of or in connection with the
validity, interpretation, application, or enforcement of this Agreement or the
performance of either party will be discussed and settled amicably by good faith
negotiations between PI and MEC/MEI. Any such disputes which cannot be settled
amicably and by such good faith negotiations within sixty (60) days after
written notice by one party to the other of such inability to amicably settle
shall thereafter be settled by binding arbitration. The arbitration shall be
conducted in English pursuant to the Rules of Arbitration of the International
Chamber of Commerce, which shall be held in San Francisco, California. Any
judgement or award rendered in these arbitrations may be entered and enforced by
any court of competent jurisdiction and may include, when appropriate, equitable
relief.
6.14 Time of Essence. Time is of the essence in the performance of each
and every obligation of the parties under this Agreement.
6.15 Originals. This Agreement shall be executed in triplicate, each of
which shall be an original, and shall be kept by PI, MEC and MEI, respectively.
6.16 Prior Wafer Foundry Agreement. Purchases undertaken under the Prior
Wafer Foundry Agreement shall be governed by the Prior Wafer Foundry Agreement
even though those purchases are to be fulfilled after the expiration or
termination of that agreement and during the term of this Agreement.
<PAGE>
IN WITNESS WHEREOF, PI, MEC and MEI have caused this Agreement to be
executed in their names by the duly authorized officers or representatives as of
the date first above written.
POWER INTEGRATIONS, INC. MATSUSHITA ELECTRONICS
CORPORATION
By: /s/ By: /s/
Name:______________________ Name:__________________________________
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
By: /s/
Name:__________________________________
<PAGE>
EXHIBIT A
WAFER PRICING AND CAPACITY
5" WAFERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Agreement Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
July 1-June 30
--------------------------------------------------------------------------------------
*** *** *** *** *** ***
--------------------------------------------------------------------------------------
*** *** *** *** *** ***
--------------------------------------------------------------------------------------
*** *** *** *** *** ***
--------------------------------------------------------------------------------------
</TABLE>
Lot Size shall be *** Wafers.
* The parties agree that for the term ***to ***, more than *** capacity will
be negotiated in good faith.
MEC agrees to provide at least the minimum capacity of *** of the previous
year's wafer purchases to provide for PI's future growth.
*** IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
EXHIBIT B
EXCHANGE RATE
Base exchange rate ("F/X_BASE") will be set at ***
A new effective F/X_RATE is only established at the time of placing a purchase
order for WAFERSs if the Previous Month's Average daily exchange rate is equal
to or greater than *** from the current F/X_RATE. The new F/X_RATE will be set
to the Previous Month's Average exchange rate and will remain in effect for at
least the month it was established.
The actual WAFERS PURCHASE_PRICE used at the time of order will be calculated by
the following formula:
Calculation Example
-------------------
Production WAFERS BASE_PRICE = ***
F/X_BASE = ***
Initial F/X_RATE = ***
PURCHASE_PRICE =
***
Examples:
1) Nominal F/X Rate Example: F/X_RATE = ***:
PURCHASE_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 = ***
*** IDENTIFIES REDACTED MATERIAL WHICH HAS BEEN DELETED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
