Exhibit 10.1

CONFIDENTIAL TREATMENT - Asterisked material has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

SUPPLY AGREEMENT

THIS STRATEGIC SUPPLY AGREEMENT (the “Agreement”) is effective as of March 28,
2006 (the “Effective Date”) by and between Delta Electronics, Inc., an R.O.C.
corporation having its principal place of business at 186 Ruey Kuang Road, Neihu
Taipei 11491 Taiwan, R.O.C. (hereafter referred to as “DEI”), PECO II, Inc., an
Ohio corporation having its principal place of business at 1376 State Highway
598, Galion, Ohio 44833 (hereafter referred to as “PECO”) and DEI Logistics
(USA) Corporation, a California corporation having its principal place of
business at 4405 Cushing Parkway, Fremont, California 94538 (hereinafter
referred to as “DEI Logistics”), with respect to Section 19.14 hereof only, for
the purpose of defining the rights and duties of the parties in connection with
the distribution by PECO of certain DEI products.

WHEREAS, DEI and PECO entered into an OEM/ODM Partnership Agreement dated
April 8, 2004 and DEI Logistics and PECO entered into a Consignment Agreement
dated April 7, 2004 (the “Prior Agreements”);

WHEREAS, DEI Logistics is an indirect subsidiary of DEI; and

WHEREAS, each of DEI, PECO and DEI Logistics desire to terminate and supersede
the Prior Agreement(s) to which it is a party, except as reflected in
Section 19.14 hereof.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:

1. EXHIBITS AND DEFINITIONS.

1.1 Exhibits. The following Exhibits are incorporated into and made a part of
this Agreement. These Exhibits may be modified or adjusted as provided for in
this Agreement.

1.1.1 Exhibit A – Products

1.1.2 Exhibit B – Pricing

1.1.3 Exhibit C – DEI Branding Guidelines

1.1.4 Exhibit D – Reserved Entities

1.1.5 Exhibit E – Minimum Order Requirements

1.1.6 Exhibit F – Supply Records

1.2 Definitions. As used in this Agreement, the terms defined below shall have
the following meanings:

1.2.1 “Affiliate” means any entity which directly or indirectly controls, or is
under common control with, or is controlled by, such party. As used in this
definition, “control” (and its correlative meanings, “controlled by” and “under
common control with”) shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
beneficial ownership of securities or other ownership interests, by contract or
otherwise).

1.2.2 “Business Day” means a day that is not Saturday, Sunday or a statutory or
civic holiday in the State of Ohio or any other day on which banking
institutions are not required to be open in the State of Ohio.

1.2.3 “DEI Indemnitees” has the meaning set forth in Section 5.6.

 

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1.2.4 “DEI System” means a System principally designed and manufactured by DEI
as supplied to PECO pursuant to this Agreement.

1.2.5 “DEI Technology” means (i) any and all Technology with respect to, related
to and/or derived from the Products, and (ii) any and all Technology developed
solely by DEI. For clarification, a PECO System includes DEI Technology because
it necessarily incorporates a Module.

1.2.6 “Documentation” means the user manuals, reference manuals, guides or
portions thereof, supplied by DEI to PECO and which DEI may update from time to
time.

1.2.7 “Exclusivity Period” has the meaning set forth in Section 2.1.1.

1.2.8 “Intellectual Property Rights” means any or all of the following and all
rights in, arising out of, or associated therewith: (1) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including without limitation, invention
disclosures; (2) all trade secrets and other rights in know-how and confidential
or proprietary information; (3) all copyrights, copyrights registrations and
applications therefor and all other rights corresponding thereto throughout the
world; (4) all industrial designs and any registrations and applications
therefor throughout the world; (5) all rights in World Wide Web addresses and
domain names and applications and registrations therefor; (6) all rights in
trade names, trade dress, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world; and (7) any similar
corresponding or equivalent foreign rights to any of the foregoing anywhere in
the world, including moral rights.

1.2.9 “Logistics Inventory” means the units of Products delivered to and stored
at the Logistics Warehouse hereunder.

1.2.10 “Logistics Warehouse” means the warehouse operated by PECO to receive,
store and deliver Products.

1.2.11 “Modules” means DEI’s proprietary modules, including converters,
rectifiers and inverters, as set forth on Exhibit A.

1.2.12 “Order” means a written description of the name and quantity of Products
PECO desires to purchase that is sent to DEI pursuant to Section 3.2.1 hereof.

1.2.13 “PECO Customer” means any entity with a principal place of business in
the United States and/or Canada, but excluding Reserved Entities.

1.2.14 “PECO System” means a System offered by PECO to PECO Customers that
incorporates at least one (1) Module and may include the addition of other
components purchased from DEI, but exclusive of DEI System.

1.2.15 “Person” means any individual, corporation, partnership, firm,
association, joint venture, joint stock company, trust, unincorporated
organization or other entity, including any governmental entity.

1.2.16 “Prices” means the prices for Products as set forth in Exhibit B or any
amendment of Exhibit B as shall be agreed to, in writing, by DEI and PECO.

1.2.17 “Products” means the Modules and/or DEI Systems as listed in Exhibit A
including any improvements, updates, modifications, and derivatives thereof
furnished to PECO by DEI during the Term of this Agreement, and any such other
DEI products as DEI and PECO shall, from time

 

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to time, agree, in writing, to add to Exhibit A. It is understood that the
provision of any such improvements, updates, modifications, and derivatives
shall be at DEI’s sole discretion and may be subject to additional fees and/or
additional terms and conditions. Notwithstanding the foregoing, in no event
shall “Products” include any products, components, or other assets that are
acquired, received, attained, procured or otherwise obtained by DEI (or its
affiliates, related companies, divisions, subsidiaries, predecessor and
successor corporations, and assigns (hereafter, “DEI Entities”)) in connection
with a Transaction occurring during the term hereof. “Transaction,” as used in
this provision above, means any transaction entered into by DEI or a DEI Entity,
whereby DEI or such DEI Entity (i) acquires any person (or related group of
persons) whether by tender or exchange offer made directly to the stockholders,
open market purchases or any other transaction or series of transactions, of
fifty percent (50%) (or the such lesser percentage as is permitted in those
jurisdictions where the maximum percentage permitted by law is lower than 50%)
or more of the capital stock entitled to elect the members of the board of
directors or other analogous governing body of such entity, (ii) enters into a
merger, reverse merger or consolidation with any person (or related group of
persons); or (iii) otherwise acquires through asset sale or otherwise all or any
portion of the business or assets of any other person.

1.2.18 “Reserved Entities” means those entities (including affiliates,
successors and assigns thereof) listed on Exhibit D, as updated by DEI from time
to time with PECO’s consent which cannot be unreasonably withheld, delayed or
conditioned.

1.2.19 “System” means a complete self-contained unit (cabinet), capable of
providing a primary function and that incorporates one (1) or more subsystems or
products.

1.2.20 “Technology” means any or all of the following: (1) works of authorship
including, without limitation, computer programs, algorithms, routines, source
code and executable code, whether embodied in software or otherwise, and
documentation provided for use therewith; (2) inventions (whether or not
patentable) and improvements; (3) proprietary and confidential information,
including, without limitation, technical data and customer and supplier lists,
trade secrets, know how and techniques; (4) databases, data compilations and
collections; (5) processes, tools, devices, methods, prototypes, schematics,
bread boards, net lists, mask works, test methodologies and hardware development
tools; and (6) all instantiations of the foregoing in any form and embodied in
any media.

1.2.21 “Territory” means the United States and Canada.

2. RIGHTS.

2.1 Rights.

2.1.1 Subject to the terms of this Agreement, DEI grants PECO, and PECO accepts,
a nontransferable right to purchase and incorporate Modules into PECO Systems
and to market, promote, sell and distribute the Modules, PECO Systems and/or the
DEI Systems solely to PECO Customers only within the Territory. Modules may only
be distributed in their unmodified form, as originally received from DEI, or as
modified by DEI (except that Modules may be incorporated into PECO Systems as
set forth herein). PECO may modify the DEI Systems (exclusive of Modules)
purchased hereunder to conform with the specifications of PECO Customers. The
rights granted in this Section 2.1.1 shall be exclusive to PECO for a period of
twenty-four (24) months from the Effective Date (“Exclusivity Period”). In the
event that DEI (i) acquires (or is acquired by) a Restricted Third Party
(defined below), (ii) is merged with a Restricted Third Party, or (iii) is a
party to an asset transaction whereby DEI sells substantially all its assets
relating to this Agreement, including the assignment of this Agreement, to a
Restricted Third Party, or, purchases assets from a Restricted Third Party that
results in such assets being subject to this Agreement, such exclusivity shall
continue to apply to the Products but

 

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shall not apply to products or technology sold, owned or controlled by such
Restricted Third Party (before or after the transactions described in (i),
(ii) and (iii) above), even if after such transactions, such products or
technology is ultimately sold, owned or controlled by DEI or a third party. A
“Restricted Third Party” is any party that is subject to contractual
restrictions precluding purchase of Products from PECO, or a party that is being
requested by a customer not to purchase Products from PECO.

2.1.2 During the Exclusivity Period, PECO shall refer to DEI any inquiry for the
purchase of Products or any other DEI products that PECO receives from any of
the Reserved Entities. Nothing herein shall prohibit or restrict PECO from
soliciting or selling to a Reserved Entity any other services provided by PECO
in the general conduct of its business; provided that, during the Exclusivity
Period, PECO shall notify DEI in writing no later than two (2) Business Days
before it initiates contact with, or within two (2) Business Days after it has
been contacted by, a Reserved Entity with respect to such services.

2.1.3 PECO shall use its best efforts to diligently market, promote, sell and
distribute the Products to PECO Customers in the Territory in accordance with
this Agreement. PECO shall be solely responsible for all costs and expenses
related to the advertising, marketing, promotion, sale and distribution of the
Products.

2.1.4 PECO shall ensure that the Products are accurately represented to PECO
Customers as to quality, function, purpose and compatibility.

2.2 Proprietary Rights; No Modification. PECO shall not remove, alter, cover or
obfuscate any copyright notices or other proprietary rights notices placed on or
embedded in the Products by DEI and all Products distributed by PECO shall
contain the copyright and other proprietary notices in the same manner in which
DEI incorporates such notices on or in the Products. PECO agrees to take all
reasonable steps to protect the Products and Documentation from unauthorized
copy or use. Any source code in the Products represents and embodies trade
secrets of DEI. Such source code and embodied trade secrets are not licensed to
PECO and any modification, addition, or deletion is strictly prohibited. PECO
shall not, and shall not allow any Person to, modify, alter, reverse engineer,
disassemble or decompile the Products or any portion thereof, and PECO shall use
commercially reasonable efforts to enforce such restrictions.

3. FORECASTS, ORDERING, DELIVERY, AND ACCEPTANCE.

3.1 Forecasts. On or before the first day of each month (“Forecast Date”) during
the Term, PECO shall provide DEI with a non-binding six (6) month rolling
Product specific purchase forecast for Orders for the Products.

3.2 Orders.

3.2.1 Any Order by PECO shall be deemed a firm commitment to take the goods
specified and shall be binding upon PECO. Orders must be received by DEI not
less than sixty (60) days prior to the requested shipping date (“Leadtime”).
Orders shall be sent in writing by letter, email or fax, shall specify requested
shipping dates and shall be subject to written acceptance by DEI. PECO may use
its standard purchase order form or other document to order Products; however,
the terms and conditions of this Agreement shall supersede any different,
conflicting, or additional terms on PECO’s order forms and all such terms are
hereby specifically objected to and will be of no force or effect. All Orders
must, at a minimum, include the Product name/description, quantity (by Product),
and the applicable price, as well as such other information as DEI may
reasonably request from time to time. Further, PECO agrees that it shall not
submit an Order for less than the number of units of Product specified in
Exhibit E without DEI’s prior written approval. DEI reserves the right to accept
or reject Orders from PECO. Orders or changes to Orders will not be accepted
over the telephone.

 

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3.2.2 DEI will use reasonable efforts to process and ship all Orders in
accordance with requested delivery dates. DEI reserves the right to add, delete
from, or modify, upon at least thirty (30) days advance notice to PECO, the
design, model or specifications of the Products. DEI further shall notify PECO
one hundred eighty (180) days prior to a discontinuance of manufacture, sales or
license of any product covered by this Agreement. DEI or its Affiliate shall be
committed to, at PECO’s expense, supporting parts and technical assistance of
discontinued Products ten (10) years from the date any Product is discontinued,
provided that the parts for such Products are available in the market.

3.3 Product Delivery and Title. All Products delivered pursuant to this
Agreement will be packed for shipment to the Logistics Warehouse in DEI’s
standard shipping cartons, marked for shipment, and delivered to PECO or its
carrier agent F.C.A. (Incoterms 2000) DEI’s designated facility, at which time
and risk of loss shall pass to PECO, but not title, which shall pass to DEI
Logistics. Title to the Products shall be deemed to remain with DEI Logistics
unless and until (i) a “sale” takes place or (ii) the Products become “mature”
(title shall pass to PECO upon a Product’s “sale” or “maturity”). A “sale” will
be deemed to take place when a unit of Product is removed from the Logistics
Inventory. A Product unit becomes “mature” when such Product unit has remained
in the Logistics Inventory for sixty (60) days from date of its receipt into the
Logistics Warehouse, or ninety (90) days from date of the unit of Product being
shipped from a DEI facility, whichever is sooner. Unless otherwise instructed in
writing by PECO, DEI shall select the carrier. All freight, insurance and other
shipping expenses, as well as any special packing expense, shall be paid by
PECO. PECO shall also bear all applicable taxes, duties and similar charges that
may be assessed against the Products after delivery to the carrier at DEI’s
facilities. Notwithstanding the passage of title under this Section 3.3, DEI
Logistics retains and PECO grants a purchase-money first-position security
interest in each of the Products for the amount of the purchase price of the
Products, and in any proceeds from PECO’s resale of the Products, until the full
invoice amount for such Product has been paid in full to DEI Logistics. Upon DEI
Logistics’s request, PECO will sign any documentation reasonably required by DEI
Logistics to perfect such security interest. In the event PECO fails to promptly
execute such documentation, PECO hereby appoints DEI Logistics its
attorney-in-fact for the purpose of executing such documentation, coupled with
an irrevocable interest.

3.4 Logistics Warehouse; Records and Insurance. PECO will be responsible for all
operations of the Logistics Warehouse, including contracting for the Logistics
Warehouse and associated services, all receipts and deliveries, keeping accurate
records of all Logistics Inventory and the safety of the Products in the
Logistics Warehouse. PECO will pay all expenses relating to the Logistics
Warehouse. PECO will keep written records identifying Logistics Inventory as
property of DEI Logistics unless and until a “sale” or “maturity” occurs. PECO
will hold the Logistics Inventory at PECO’s own risk and will replace such
inventory if it becomes lost, damaged or destroyed. PECO will insure such
Logistics Inventory against loss, theft, and damage under a policy naming DEI
Logistics as an additional insured.

3.5 Inspection. PECO will perform inspection of Products purchased from DEI,
depending on, but not limited to, Product complexity, Product performance
history, risk of nonconforming material, direct ship to stock status of DEI,
each according to PECO quality procedures. DEI will be notified as soon as
reasonably practicable, normally within three (3) Business Days of receipt (but
in any event no more than fifteen (15) Business Days (provided that, with
respect to Logistics Inventory, such period shall commence on removal from
inventory rather than upon receipt) of any nonconforming material found in any
Products, whether in receiving inspection or any point within the manufacturing
process. If nonconforming material is identified in a Product, PECO will notify
DEI in

 

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writing regarding any Products that materially fail to meet DEI’s published
Product specifications. Depending on various factors, including but not limited
to PECO Customer demand or complexity of repairs, PECO and DEI will jointly
decide the best method to resolve the nonconformance which may include a return
of the Products to DEI, repairs by PECO, or some form of both. If PECO desires
to return Products to DEI, PECO shall request from DEI a return material
authorization (a “RMA”), either by e-mail, mail or telefax following a proper
explanation of the rejection. Returns shall be performed in accordance with
DEI’s RMA procedure. Rejected goods should be returned freight prepaid to DEI
within ten business days of rejection and receipt from DEI of a return
authorization. As promptly as possible, but not later than sixty (60) days after
receipt by DEI of properly rejected Products, DEI shall, at its option and
expense, either repair or replace such Products. The party shipping Products
pursuant to this Section 3.5 shall bear the entire risk of loss for Products
during shipment. Any insurance proceeds payable in respect to any loss for any
Products to the extent of any loss incurred during shipment shall be paid to the
party bearing the risk of loss for such Products to the extent of the loss
incurred. DEI will prepay transportation charges back to PECO and shall
reimburse PECO for any costs of transportation incurred by PECO in connection
with the return to DEI of properly rejected Products. In the case of improperly
rejected or returned Products, PECO shall pay transportation charges in both
directions.

4. PRICES AND PAYMENT TERMS.

4.1 Prices. Prices for the Products are as stated in Exhibit B. Subject to the
provisions of this Section 4, prices shall be firm for a period of [*] following
the Effective Date. Thereafter, DEI may change the prices, upon thirty (30) day
written notification to PECO. Notwithstanding the foregoing, if DEI and PECO
mutually agree on specially modified pricing for the Products with respect to a
PECO Customer and a specific project, such specially modified pricing shall
supersede and replace the pricing for such Products and project as stated in
Exhibit B with respect solely to such PECO Customer and project and such
specially modified pricing shall remain in effect for the full term of any
agreement entered into by PECO and such PECO Customer with respect to such
Products and project.

4.2 [*]

4.3 Payment Terms. PECO will, at the beginning of each week, submit to DEI
Logistics a request for invoice detailing the quantities and Orders to bill
against with respect to the units of Products removed from the Logistics
Inventory in the previous week. DEI Logistics will reconcile the request for
invoice with DEI Logistics’ own inventory record, and then submit an invoice
matching the request for invoice and DEI Logistics’ own inventory record amounts
for payments. In case of discrepancy between PECO’s request for invoice and DEI
Logistics’ own inventory record, DEI Logistics and PECO shall work diligently to
resolve such discrepancy within three (3) Business Days. DEI Logistics may
inspect the Logistics Inventory at any time upon three (3) Business Days advance
written notice to PECO. Subject to DEI’s continuing approval of PECO’s credit
status and financial condition, all payments by PECO shall be made to DEI
Logistics in U.S. dollars and will be due five (5) Business Days from receipt of
invoice. DEI, in its sole discretion, reserves the right to specify, and to
change from time to time, PECO’s credit line and payment terms. Payment for
Products purchased by PECO shall, at DEI’s sole discretion, either be made:

4.3.1 by prepayment in the form of a wire transfer;

4.3.2 on credit terms DEI has approved in writing; or

4.3.3 such other terms as DEI shall designate in writing from time to time.

 

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* Portions have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

 

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4.4 Credit Limits or Credit Term. Nothing herein shall obligate DEI to extend to
PECO any credit limits or credit term, and credit limit or credit term once
authorized may be modified or canceled at any time solely at DEI’s option.

4.4.1 DEI may increase PECO’s credit limit or credit term based on PECO’s
history of timely payments of amounts due, general financial strength and on
PECO’s successfully meeting or exceeding its sales obligations.

4.4.2 DEI may declare all sums immediately due and payable in the event of a
breach by PECO of any of its material obligations to DEI under this Agreement,
including the failure of PECO to comply with credit terms.

4.4.3 Interest shall accrue upon any delinquent payments owed by PECO as to
which DEI has made a final written demand for payment, at the maximum rate
allowed by London Interbank Offered Rate (LIBOR). In the event that it becomes
necessary for DEI to institute litigation to collect sums owed by PECO, PECO
shall be responsible for reasonable attorney’s fees and other costs incurred by
DEI in connection with such litigation, if DEI prevails therein.

4.5 Taxes. Prices do not include and are net of any foreign or domestic
governmental taxes or charges of any kind that may be applicable to the sale,
licensing, marketing, or distribution of the Products, including without
limitation excise, sales, use, property, license, value-added taxes, franchise,
income, withholding or similar taxes, customs or other import duties or other
taxes, tariffs or duties other than taxes which are imposed by the United States
based on the net income of DEI Logistics. Any such taxes which are otherwise
imposed on payments to DEI Logistics shall be the sole responsibility of PECO.
PECO shall provide DEI Logistics with official receipts issued by the
appropriate taxing authority or such other evidence as is reasonably requested
by DEI Logistics to establish that such taxes have been paid.

5. OTHER OBLIGATIONS OF PECO. PECO’s obligations under this Agreement shall,
without limitation, include the following:

5.1 Services. PECO shall be solely responsible for order processing, customer
service to PECO Customers and inventory maintenance.

5.2 Marketing Reports. During the Exclusivity Period, PECO shall provide to DEI
an ongoing report based upon DEI’s calendar year summarizing their marketing
activities. This information will include activity such as PECO Customers’
feedback on Product, PECO Customer/distributors suggestions for new products,
support and operational issues between DEI and PECO, competitive marketing
intelligence, market share data, material changes at PECO’s company, analysis of
sales to forecast, promotional activities completed and planned etc.

5.3 Training. DEI may from time to time conduct training programs. The
reasonable costs for attending such training sessions provided by DEI, such as
travel and lodging, shall be PECO’s sole responsibility.

5.4 Compliance. PECO acknowledges that it is familiar with and will comply with
and be solely responsible for its obligations under all laws, rules and
regulations related to distribution and/or sale of the Modules, DEI Systems
and/or PECO Systems, as applicable. PECO shall keep a record of all written and
oral complaints concerning the Products. PECO shall promptly inform DEI of all
suspected Product defects, safety problems or any information associated with
the safety of the Product and shall promptly notify DEI in writing of any third
party dispute involving a Product.

 

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5.5 Product Returns. PECO shall promptly notify DEI of any Products returned to
PECO by PECO Customers. All Products returned by PECO Customers to PECO (whether
for warranty or non-warranty action), if any, must be either repaired, returned
to DEI (subject to DEI’s prior written approval and in accordance with DEI’s RMA
procedures) or destroyed, and PECO shall maintain adequate written procedures to
ensure such repair, return or destruction.

5.6 Advertising and Promotion. During the Exclusivity Period, PECO shall
advertise and promote the Products at PECO’s expense by appropriate means,
including but not limited to, participating in relevant trade fairs, seminars,
public demonstrations of Products, prompt and effective responses to trade and
customer inquiries, regular and continuing advertising programs, and regular
visits to customers. PECO shall not make any express warranty on behalf of DEI
with regard to the Products other than as may be provided by DEI from time to
time and as set forth in DEI’s product literature. Any other warranty made by
PECO to its customers with respect to the Products shall not obligate DEI in any
way and PECO shall indemnify, defend and hold harmless DEI and any of its
officers, directors, employees, agents, investors, shareholders, administrators,
affiliates, related companies, divisions, subsidiaries, predecessor and
successor corporations, and assigns (“DEI Indemnitees”) from third party claims
in accordance with Section 5.7 below.

5.7 Indemnity. At DEI’s option and election, PECO shall indemnify, defend and
hold the DEI Indemnitees harmless from and against any claims, suits, losses,
damages, liabilities, costs and expenses (including reasonable attorney’s fees)
incurred by DEI arising from or relating to personal injury, death or property
damage, arising out of or related to PECO’s modifications of DEI Systems;
provided that DEI promptly notifies PECO in writing of any such claim and
promptly tenders the control of the defense and settlement of any such claim to
PECO at PECO’s expense and with PECO’s choice of counsel. DEI shall cooperate
with PECO, at PECO’s expense, in defending or settling such claim and DEI may
join in defense with counsel of its choice at its own expense.

5.8 Records and Reports. PECO shall maintain adequate written procedures for
control, sale and distribution of Products. Adequately detailed records of
shipments to PECO Customers shall be maintained for at least two (2) years, or
until the end of the useful life of the Products, whichever is longer and shall
be made available to DEI or its representative, upon reasonable request.
Further, PECO will provide DEI with access to: (a) Product warranty or other
claims related to defective Products; and (b) during the Exclusivity Period,
sales by Product, customer and geographic location.

5.9 Sales Activities. During the Exclusivity Period, PECO agrees to provide to
DEI opportunities to participate in PECO’s national or regional sales meetings,
and shall permit DEI to participate in joint visits to PECO Customers.

6. OTHER OBLIGATIONS OF DEI. DEI shall have the following obligations under this
Agreement:

6.1 Marketing and Promotion. DEI shall provide PECO with electronic copies of
sales aids, data sheets, product profiles, brochures, and other materials to
assist PECO in the promotion and sales of Products. Additional marketing
materials will be made available to PECO in accordance with DEI’s then current
policy regarding same. PECO may copy and/or translate some or all of such
literature and advertising copy and incorporate such in its own product
literature. In the event that PECO elects to copy and/or translate materials
provided by DEI, all materials provided by Distribution shall include all
copyright, trademark and other proprietary legends included in the original
material furnished by DEI and DEI shall own all rights in such translations.

 

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6.2 Warranty and Technical Support. PECO will provide cleaning, refurbishing,
reselling and repair services for the Products in accordance with a Repair
Services Agreement; the parties shall use commercially reasonable efforts to
negotiate and enter into such Repair Services Agreement prior to the Closing of
the transaction contemplated in that certain Asset Purchase Agreement between
the parties dated October 13, 2005. Subject to DEI or its Affiliate’s
obligations pursuant to Section 3.2.2, DEI or its Affiliate will provide
reasonable technical assistance and back-up support to PECO in connection
therewith as mutually agreed at DEI or its Affiliate’s standard rates.

6.3 Indemnity. At PECO’s option and election, DEI shall indemnify, defend and
hold the PECO Indemnitees harmless from and against any claims, suits, losses,
damages, liabilities, costs and expenses (including reasonable attorney’s fees)
incurred by PECO arising from or relating to personal injury, death or property
damage, arising out of or related to unmodified Modules and DEI Systems, as
delivered by DEI; provided that PECO promptly notifies DEI in writing of any
such claim and promptly tenders the control of the defense and settlement of any
such claim to DEI at DEI’s expense and with DEI’s choice of counsel. PECO shall
cooperate with DEI, at DEI’s expense, in defending or settling such claim and
PECO may join in defense with counsel of its choice at its own expense.

6.4 Product Development. DEI will use reasonable commercial efforts to develop
Products in accordance with its Product roadmap and will consult in good faith
with PECO regarding the Product roadmap.

6.5 Referrals to PECO. During the Exclusivity Period, DEI shall promptly refer
to PECO any inquiry DEI receives from any Person, other than a Reserved Entity,
for the purchase of Products

6.6 Delegation of Obligations to Affiliates. Notwithstanding anything in this
Agreement to the contrary, in the case of any delegation or assignment of an
obligation under this Agreement by DEI to an Affiliate, DEI will be liable for
the non-performance of any such obligation by any such Affiliate.

7. TRADEMARKS.

7.1 Trademarks. During the term of this Agreement, PECO shall have the right to
indicate to the public that it is authorized to sell DEI’s products and to
advertise the Products under the trademarks, marks, and trade names that DEI may
adopt from time to time (“DEI’s Trademarks”). All representations of DEI’s
Trademarks that PECO intends to use shall be exact copies of those used by DEI
or shall first be submitted to DEI for approval (which shall not be unreasonably
withheld) of design, color and other details. In addition, PECO shall fully
comply with all reasonable guidelines, if any, communicated by DEI concerning
the use of DEI’s Trademarks. All DEI Systems sold to PECO under this Agreement
shall be resold only in the original packages, and shall not be relabeled or
otherwise marked, except as otherwise agreed by the parties, or to indicate PECO
as the territorial source of the Product or as otherwise required by
governmental regulations in force. All Products shall be labeled according to
the guidelines set forth in Exhibit C. PECO shall promptly report to DEI any
unauthorized use, duplication, copying or reproduction whatsoever of DEI’s name,
trade name, trademark, logo, patents, copyrights or any other identifying
material by any other person or entity whatsoever.

7.2 Trademark Restrictions. In no event may PECO use or authorize any use of any
of DEI’s Trademarks in any domain name whether registered, owned, or operated by
or on behalf of DEI. Any violation of the foregoing shall be deemed a material
breach of this Agreement that is incapable of cure, entitling DEI to terminate
this Agreement immediately upon notice to PECO. PECO shall not alter or remove
any of DEI’s Trademarks affixed to the Products by DEI. Except as set forth in
this Section 7,

 

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nothing contained in this Agreement shall grant or shall be deemed to grant to
PECO any right, title or interest in or to DEI’s Trademarks. PECO will not
challenge or assist others to challenge DEI’s Trademarks (except to the extent
such restriction is expressly prohibited by applicable law) or the registration
thereof or attempt to register any trademarks, marks or trade names confusingly
similar to those of DEI. Upon termination of this Agreement, PECO shall
immediately cease to use any and all of DEI’s Trademarks except to continue to
sell the Product in its inventory if authorized hereunder.

7.3 Registered User Agreements. DEI and PECO shall enter into registered user
agreements with respect to DEI’s Trademarks pursuant to applicable trademark law
requirements in the Territory. PECO shall be responsible for proper filing of
the registered user agreement with government authorities within the Territory
and shall pay all costs or fees associated with such filing.

8. JOINT ACTIVITIES.

8.1 Relationship Managers. Each party shall appoint a representative as a
relationship manager who shall be the primary contact for implementing and
administering the terms and conditions of this Agreement (“Relationship
Managers”). During the Exclusivity Period, the Relationship Managers shall meet
at mutually agreeable times to review and coordinate efforts under this
Agreement and address other topics related to the successful distribution of the
Products as set forth herein.

8.2 Joint Cooperation. During the Exclusivity Period, the parties expect to
engage in joint exploration and discussions (“Joint Cooperation”) with respect
to System-level design and component-level design. Any such joint development
projects shall be subject to a separately negotiated written joint development
agreement (“Joint Development Agreement”).

8.3 DEI Personnel. DEI shall secund two (2) DEI employees (“Secunded Employees”)
to PECO to aid in the Joint Cooperation during the Exclusivity Period (the
“Joint Cooperation Services”). Said Secunded Employees’ job duties shall consist
of performing services for PECO as directed by PECO and PECO shall provide
day-to-day direction to said Secunded Employees with respect to the Joint
Cooperation Services. PECO shall, to the fullest extent permitted by applicable
law, indemnify and hold harmless the DEI Indemnitees from and against all taxes,
losses, damages, liabilities, costs and expenses, including attorneys’ fees and
other legal expenses (collectively “Losses”) claimed by said Secunded Employees
or by a third-party governmental entity as a result of any claims arising from
or relating to, in any way, PECO’s work environment and/or its day-to-day
direction of said Secunded Employees (including, but not limited to, compliance
with any and all health, safety and employment laws related thereto) during the
Exclusivity Period. DEI shall, to the fullest extent permitted by applicable
law, indemnify and hold harmless PECO and any of its officers, directors,
employees, agents, investors, shareholders, administrators, affiliates,
divisions, related companies, subsidiaries, predecessor and successor
corporations, and assigns (the “PECO Indemnitees”) from and against all Losses
claimed by said Secunded Employees or by a third-party governmental entity as a
result of any claims arising from or relating to, in any way, the overall
control and management of said Secunded Employees, including the compensation,
evaluation, discipline and/or termination of said Secunded Employees (including,
but not limited to, compliance with any and all wage and hour laws related
thereto) during the Exclusivity Period.

8.4 Adherence to Rules. Each party will ensure that all of its personnel and
subcontractors working on the other party’s premises follow the host party’s
guidelines, policies and instructions while on the host party’s premises,
including confidentiality and security procedures.

 

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9. IP OWNERSHIP.

9.1 Pre-Existing Technology. Each party shall retain sole ownership of its
Technology independently developed prior to the Effective Date.

9.2 Joint Technology. Unless otherwise agreed pursuant to a separate Joint
Development Agreement entered into pursuant to Section 8.2, all Technology
(other than DEI Technology and Secunded Employee Technology) created jointly by
employees or agents of DEI and employees or agents of PECO (“Joint Technology”)
shall be owned jointly by DEI and PECO. Subject to the foregoing, joint
ownership will provide each party with an undivided interest in such Joint
Technology with the power to license, enforce and otherwise exploit it without
the consent of and without accounting to the other party, and each party hereby
waives any right it may have under the laws of any country to require such
consent or accounting. The parties shall mutually agree on the terms and
conditions related to the prosecution and maintenance of any patents, patent
applications, copyright registrations and other intellectual property
protections related to the Joint Technology.

9.3 Secunded Employee Technology. All Technology that is created solely by the
Secunded Employees during the performance of tasks assigned to the Secunded
Employees by PECO or that results from the Secunded Employees’ use of property,
equipment, or premises owned, leased or contracted for by PECO (“Secunded
Employee Technology”) is subject to the following ownership provisions:

9.3.1 All Secunded Employee Technology relating to the Modules or the
manufacture or use thereof (including all modifications, enhancements,
extensions, and upgrades of and/or to Modules), and all Intellectual Property
Rights therein (collectively, “Module Technology”), shall be owned by DEI.
Accordingly, PECO hereby agrees to assign (or cause to be assigned) and does
hereby irrevocably assign fully to DEI all Module Technology and any and all
Intellectual Property Rights throughout the world therein or pertaining to the
manufacture or use thereof.

9.3.2 PECO covenants to DEI that it will not initiate any litigation against
DEI, the DEI Indemnitees, or any of DEI’s or DEI Indemnitees’ customers or
entities in their distribution channels (any of the foregoing, a “DEI Party”),
asserting that a DEI Party is a direct or contributory infringer of any patents
or patent applications claiming inventions within the Secunded Employee
Technology or the manufacture or use thereof.

9.3.3 Except as set forth in Section 9.3.1, PECO shall retain all of its right,
title and interest in and to Secunded Employee Technology, including all
Intellectual Property Rights therein. Accordingly, DEI hereby agrees to assign
(or cause to be assigned) and does hereby irrevocably assign fully to PECO all
Secunded Employee Technology and any and all Intellectual Property Rights
throughout the world therein (subject to Section 9.3.1). Additionally, DEI shall
execute and deliver, from time to time, such documents and perform such acts as
may be necessary or convenient to effectuate and perfect the assignments
contemplated herein, and will cooperate with and assist PECO in every proper way
(at the expense of PECO) in obtaining and from time to time enforcing such
Intellectual Property Rights within the Secunded Employee Technology in any and
all countries.

9.3.4 PECO shall execute and deliver, from time to time, such documents and
perform such acts as may be necessary or convenient to effectuate and perfect
the assignments contemplated herein, and will cooperate with and assist DEI in
every proper way (at the expense of DEI) in obtaining and from time to time
enforcing Intellectual Property Rights within the Module Technology in any and
all countries. Notwithstanding anything to the contrary stated herein, during
and after the term of this Agreement, each party shall have the right to use
without liability or restriction the Residuals from the Secunded Employee
Technology. The term “Residuals” shall mean trade secret rights in information
disclosed in nontangible form (i.e., not in written or other documentary form,
including tape or disk) which is retained in memory by the Secunded Employees,
including ideas, concepts, know-how, or techniques contained therein.

 

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9.4 Reservation of Rights/Ownership. Except as expressly provided herein, all
present and future trademarks and trade names, logos, patents, copyrights, and
other identifying material or Intellectual Property Rights of either party shall
remain the exclusive property of such party and no rights to such trademarks,
trade names, logos, patents, copyrights and other identifying material or
Intellectual Property Rights shall vest in the other party because of this
Agreement. The Products are offered for sale and are sold by DEI subject in
every case to the condition that such sale does not convey any license,
expressly or by implication, to manufacture, duplicate or otherwise copy or
reproduce any of the Products. PECO shall take appropriate steps with its PECO
Customers, as DEI may request, to inform them of and assure compliance with the
restrictions contained in this Section.

9.5 Non-Exclusive License. DEI hereby grants to PECO a nonexclusive, fully paid
up, royalty-free license, under DEI’s (and its Affiliates’) rights in the Supply
Records (as defined in Exhibit F hereto), to use, reproduce, distribute,
digitally transmit and display tangible manifestations of the Supply Records,
and to confidentially disclose tangible manifestations of the Supply Records,
including the right to sub-license for use, solely in support of PECO’s
performance of its rights and obligations hereunder.

10. WARRANTIES AND DISCLAIMERS.

10.1 General Warranty. Each party hereby represents and warrants to the other
that (i) such party has the right, power and authority to enter into this
Agreement and to fully perform all of its obligations, including the granting of
licenses, hereunder; (ii) entering into this Agreement does not violate any
agreement or obligation existing between such party and any third party; and
(iii) such party has and will maintain with all of its employees written
agreements sufficient to enable such party to perform its obligations hereunder
with confidentiality terms at least as restrictive as those provided herein.

10.2 Product Warranty. DEI shall provide PECO with its standard one (1)-year
warranty for the Products. PECO may repair Products pursuant to the Repair
Services Agreement contemplated in Section 6.2. Upon PECO’s request, on a PECO
Customer-by-PECO Customer basis, DEI will negotiate in good faith with PECO to
provide PECO with a warranty that is coterminous with the warranty provided by
PECO to such PECO Customer.

10.3 Notification and Remedy. With respect to any warranty, PECO will
immediately notify DEI in writing if it becomes aware, during the warranty
period, that a Product fails to conform to the warranty. Upon its verification
of any claim of defect or nonconformity of a unit of the Products during the
Term, DEI will use commercially reasonable efforts to either, at its option,
(i) repair the Product or have PECO repair the Product, at a mutually agreed
cost, or (ii) provide a replacement thereof to the extent necessary to honor
DEI’s warranty. The foregoing states DEI’s sole liability for any failure of the
Products to conform to each warranty.

10.4 Recalls. If DEI decides to recall, replace or take other action with
respect to any Products, it will notify PECO by rapid means of communication and
PECO shall immediately cease sales of any units of Product in its possession or
control, which are subject to the action until the course of action to be taken
has been determined. The reasonable and justifiable costs of recovering Product
in the field and its replacement in any action affecting a Product will be borne
by DEI.

10.5 Disclaimer. DEI DOES NOT MAKE ANY WARRANTY TO PECO, WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO PRODUCTS, SPECIFICATIONS,
SUPPORT, SERVICE OR ANY OTHER MATERIALS

 

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CONTEMPLATED HEREUNDER, AND DEI SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, NON-INFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE.

11. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, TO
THE EXTENT ALLOWED BY LAW, THE LIABILITY OF DEI TO ANY PERSON WITH RESPECT TO
THE PRODUCTS AND/OR THE RELATIONSHIP DESCRIBED IN THIS AGREEMENT, WHETHER BASED
ON CONTRACT, INCLUDING BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER
TORT THEORY, SHALL IN NO EVENT EXCEED THE AMOUNT OF MONEY PAID TO DEI PURSUANT
TO THIS AGREEMENT PRIOR TO THE EVENT OR CIRCUMSTANCES GIVING RISE TO SUCH
LIABILITY, AND IN THE CASE OF LIABILITY RELATING TO ANY ALLEGEDLY DEFECTIVE OR
INFRINGING UNIT OF PRODUCTS, SHALL, UNDER ANY LEGAL OR EQUITABLE THEORY, BE
FURTHER LIMITED TO REPLACEMENT OF THE UNIT, OR IF IMPRACTICAL, RETURN OF THE
PURCHASE PRICE PAID BY PECO FOR SUCH UNIT. DEI SHALL IN NO EVENT BE LIABLE TO
ANY PERSON FOR ANY LOST PROFITS, LOST DATA, COST OF PROCUREMENT OF SUBSTITUTE
GOODS, OR FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL
DAMAGES, EVEN IF DEI HAS BEEN INFORMED OF THE POSSIBILITY THEREOF AND
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY STATED
HEREIN. THE PARTIES AGREE THAT THIS SECTION REPRESENTS A REASONABLE ALLOCATION
OF RISK.

12. CONFIDENTIAL INFORMATION.

12.1 Confidential Information. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing, the parties agree that the receiving
party shall keep confidential and shall not publish or otherwise disclose or use
for any purpose other than as provided for in this Agreement any Confidential
Information of the other party. “Confidential Information” means (i) information
disclosed in tangible form that is marked “confidential” or with other similar
designation to indicate its confidential or proprietary nature, or
(ii) information disclosed orally, where such information is either (A) of the
type usually considered confidential or proprietary in the disclosing party’s
industry or (B) otherwise indicated to be confidential or proprietary by the
disclosing party at the time of the initial disclosure thereof and confirmed in
writing as confidential or proprietary by the disclosing party within thirty
(30) days after such disclosure. Subject to the provisions of Sections 8 and 9,
the parties agree that the following shall be considered the “Confidential
Information” of a disclosing party without the requirement that such information
be designated as in writing as “Confidential” or with some other similar
designation by the disclosing party: knowledge and information that may be
learned or obtained by a receiving party, its agents, servants or employees with
respect to the conduct and details of the disclosing party’s business, including
but not limited to, product sales or other financial information, all aspects of
the technology for manufacture of the Products, the processes, formulas,
machinery, equipment, utensils and arts of manufacture used by a party and its
designs or methods of manufacture, as well as its trade secrets and customer
lists. Notwithstanding the foregoing, Confidential Information shall not include
information that, in each case as demonstrated by written documentation: (i) was
already or becomes lawfully known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure; (ii) was generally
available to the public or otherwise part of the public domain at the time of
its disclosure to the receiving party or became generally available to the
public or otherwise part of the public domain after its disclosure and other
than through any act or omission of the receiving party in breach of this
Agreement; or (iii) was developed by the receiving party without reference to
any information or materials disclosed or provided by the disclosing party.

 

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12.2 Confidentiality of Agreement. PECO agrees that the terms and conditions of
this Agreement shall be treated as the Confidential Information of DEI; provided
that PECO may disclose the terms and conditions of this Agreement: (i) to legal
counsel; (ii) in confidence, and as necessary to its accountants, banks, and
financing sources and their advisors; (iii) in connection with evaluation of a
potential merger of PECO, except where the party that would be merging with or
acquiring PECO is a competitor of DEI; (iv) in confidence, and to legal counsel
in connection with the enforcement of this Agreement or rights under this
Agreement, or (v) as advisable or required in connection with any government or
regulatory filings, including without limitation filings with the Securities and
Exchange Commission and its counterparts in other jurisdictions.

12.3 Compelled Disclosure. Nothing in Section 12.1 or Section 12.2 will prevent
disclosure of either or both the terms and conditions of this Agreement or of
the receiving party’s Confidential Information generally if, in the opinion of
the receiving party’s legal counsel, such disclosure is required to be made in a
judicial, administrative or governmental proceeding pursuant to a subpoena,
deposition, interrogatory, civil investigative demand or similar process or
order. In that event, however, the receiving party shall provide notice to the
disclosing party (unless notice is prohibited by order, subpoena or law) before
disclosing any of the Confidential Information. In making such disclosure, the
receiving party may disclose only that portion of the Confidential Information
required to be disclosed and shall use reasonable efforts to obtain assurance
that confidential treatment will be accorded the information. The receiving
party is not, however, under any obligation to seek a protective order.

13. INSURANCE. To the extent that PECO is required to carry insurance with
respect to agreements with PECO Customers, then PECO shall provide comparable
insurance to DEI, including naming DEI as an additional insured.

14. PECO STATUS. For the purpose of carrying out this Agreement, PECO shall be
and act as independent contractor and not as an agent or employee of DEI and
shall not have the power to bind, and agrees not to attempt to bind, DEI to any
contract without prior written approval thereof from DEI.

15. ASSIGNMENT. PECO may not assign, transfer, subdivide or otherwise deal with
any obligations or benefit under this Agreement, through operation of law or
otherwise, without the prior written consent of DEI. Any attempted assignment in
violation of this Section shall be null and void.

16. TERM AND TERMINATION.

16.1 Term. The term of this Agreement shall commence on the Effective Date and
shall remain in effect for thirty (30) months thereafter, subject to early
termination pursuant to Sections 16.2 and 16.3 below (the “Term”). This
Agreement may be renewed for an agreed upon term by mutual written agreement of
the parties.

16.2 Termination for Change of Control. In the event that PECO undergoes a
Change of Control, DEI may thereafter in its sole discretion terminate this
Agreement immediately upon written notice to PECO. The term “Change of Control”
with respect to an entity means the occurrence of one or more of the following:
(i) the acquisition by any person (or related group of persons), whether by
tender or exchange offer made directly to the stockholders, open market
purchases or any other transaction or series of transactions, of more than fifty
percent (50%) of the capital stock entitled to elect the members of the board of
directors or other analogous governing body of such entity; (ii) a merger or
consolidation in which such entity is not the surviving entity, except for a
transaction in which the securities of such entity immediately prior to
consummation of such merger or consolidation are converted by means of such
merger or consolidation into securities representing more than fifty percent

 

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(50%) of the total combined voting power of the surviving entity; or (iii) any
reverse merger in which such entity is the surviving entity but in which the
securities of such entity immediately prior to consummation of such reverse
merger represent less than fifty percent (50%) of the total combined voting
power of such entity’s capital stock outstanding immediately after consummation
of such merger.

16.3 Termination by Either Party. Either party may terminate this Agreement
prior to its expiration and upon thirty (30) days’ written notice if: (a) a
party breaches any material term of this Agreement and the breaching party has
not cured the breach within such thirty (30) day period; (b) a party is the
subject of a liquidation or insolvency, or the filing of bankruptcy, or similar
proceeding(s) (provided that in the case of involuntary proceedings, such
proceedings are not dismissed within sixty (60) days of filing); or (c) the
other party ceases to actively engage in business.

16.4 Effect of Termination.

16.4.1 If proper notice of termination is given for any reason, DEI shall be
entitled to reject or cancel without liability all or part of any previously
accepted Orders received from PECO after such notice, but prior to the effective
date of termination. Notwithstanding any credit terms made available to PECO
prior to that time, any shipments during said period shall be paid for by wire
transfer prior to such shipment. Upon termination of this Agreement, the due
date of all invoices for Product shall automatically be accelerated so that they
shall become due and payable on the effective date of termination, even if
longer terms have been provided previously.

16.4.2 All rights and licenses of PECO hereunder shall automatically be
terminated except that PECO may continue only to sell, in accordance with normal
business practice and the terms of this Agreement, Products previously shipped
to it by DEI as set forth in Section 16.4.2 above.

16.4.3 Each party shall, within thirty (30) days of the effective date of
termination, return to the other party all of the other party’s Confidential
Information then in a party’s possession, custody or control.

16.4.4 Upon the termination of this Agreement in accordance with its terms,
except for obligations incurred prior to the effective date of termination,
neither party shall have any obligation to the other party, or to any employee,
agent or representative of a party, for compensation or for damages of any kind,
whether on account of loss by a party, or by such employee agent or
representative of present or prospective sales, investments, compensation or
goodwill; provided, however, that nothing in this section shall relieve PECO of
any liability for willful misconduct, gross negligence, or breach of contract.
Each party, for itself and on behalf of each of its employees, agents and
representatives, hereby waives any rights which may be granted to it or them
under the laws and regulations of the Territory or otherwise which are not
granted to it or them by this Agreement. Without limiting the generality of the
foregoing, PECO understands and acknowledges that any contract or other
arrangements it enters into with any third parties with respect to Product will
be subject and subordinate to the rights of termination set forth in this
Agreement; provided, however, DEI’s obligation pursuant to Section 3.2.2 shall
not be superseded or terminated by virtue of the termination of this Agreement
upon (i) this Agreement’s natural expiration or (ii) DEI’s material breach. PECO
will indemnify and hold the DEI Indemnitees harmless from any and all liability,
loss, damages, costs or expenses incurred by DEI in connection with claims by
any such third party made because of the termination of this Agreement.

16.5 Survival. Upon any termination or expiration of this Agreement the
provisions of Sections 1, 2.2, 3.2.2 (subject to Section 16.4.4 above), 3.3,
3.4, 5.4, 5.7, 7.2, 9, 10.1, 10.2 (only with respect to the first and third
sentences, and only for so long as a warranty period extends beyond the Term
(provided that the obligation to negotiate as set forth in the third sentence
shall not survive)), 10.3 (only for so long as a warranty period extends beyond
the Term), 10.4, 10.5, 11 – 14, 16.4, 16.5, 18 and 19, and all payment
obligations incurred prior to the effective date of such termination or
expiration (and all related payment provisions) shall survive. All other
provisions of this Agreement shall terminate.

 

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17. EVENTS BEYOND CONTROL. The obligations of either party to perform under this
Agreement shall be excused if such failure to perform or any delay is caused by
matters such as acts of God, strikes, civil commotion, riots, war, revolution,
acts of governments, lack of adequate production capacity, failure or delay in
plant start up, breakdown of machinery, shortage of raw materials, equipment,
fuel, transportation, or containers, or any other cause whether similar or
dissimilar to those enumerated that are reasonably beyond the control of the
party obligated to perform. Upon the occurrence of such an event, the duties and
obligations of the parties shall be suspended for the duration of the event
preventing proper performance under this Agreement; provided however that if
such suspension shall occur, the parties shall meet and attempt to arrive at a
mutually acceptable compromise within the spirit and intent of this Agreement,
and if such a reasonable compromise cannot be reached in good faith, then either
party may terminate this Agreement upon thirty (30) days written notice.

18. NOTICE. Notices shall be sent by certified or registered mail to the address
set forth in this Agreement, or to such other address as the receiving party
shall have designated by notice in writing. Notices shall be effective on
mailing.

 

Notice to be sent to:    Delta Electronics, Inc.   

186 Ruey Kuang Road, Neihu

  

Taipei 11491

  

Taiwan, R.O.C.

  

Attention: Michael Tan, Manager, Corporate Legal Affairs

  

Fax: 886-2-8797-3241

  

With a copy to:

  

Wilson Sonsini Goodrich & Rosati

  

Professional Corporation

  

650 Page Mill Road

  

Palo Alto, CA 94304-105

  

Attention: Aaron J. Alter, Esq.

  

Fax: 650-493-6811

   DEI Logistics (USA) Corporation   

4405 Cushing Parkway

  

Fremont, CA 94538

  

Attention: Yao C.H. Chou, President

  

Fax: 510-226-4101

 

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With a copy to:

  

Wilson Sonsini Goodrich & Rosati

  

Professional Corporation

  

650 Page Mill Road

  

Palo Alto, CA 94304-105

  

Attention: Aaron J. Alter, Esq.

  

Fax: 650-493-6811

   PECO II Inc.   

1376 State Route 598

  

Galion, Ohio 44833

  

Fax: 419-468-9164

  

Attention: President & CEO

  

With a copy to:

  

Porter Wright Morris & Arthur LLP

  

41 S. High Street

  

Columbus, Ohio 43215

  

Fax: 614-227-2100

  

Attention: Curtis A. Loveland

19. MISCELLANEOUS.

19.1 Discussions. In the eighteenth (18th) month of the Term of this Agreement,
the parties agree to negotiate in good faith, for a period not to exceed 30
days, a possible extension of the Term and/or the duration of the exclusivity of
the rights granted in Section 2.1.1, it being understood that neither party
shall be obligated to modify or amend this Agreement.

19.2 Necessary Actions. Each party agrees to perform any further acts and
execute and deliver any and all further documents and/or instruments which may
be reasonably necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby.

19.3 Waiver; Amendment. The failure of either party to enforce its rights under
this Agreement at any time for any period shall not be construed as a waiver of
such rights. Further, no changes or modifications or waivers can be made to this
Agreement unless evidenced in writing and signed for on behalf of both parties.

19.4 Severability. If any provision of this Agreement shall be determined to be
unenforceable, all other provisions shall remain in full force and effect and
the affected provision shall be construed so as to be enforceable to the maximum
extent possible.

19.5 Governing Law; Jurisdiction; Arbitration.

19.5.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONTROLLED BY, CONSTRUED AND
ENFORCED ACCORDING TO THE LAWS OF THE STATE OF DELAWARE, U.S.A., EXCLUDING ITS
CHOICE OF LAW PROVISIONS AND ALSO EXCLUDING THE UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

 

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19.5.2 Exclusive Jurisdiction. With respect to any matter based upon or arising
out of this Agreement or the transactions contemplated hereby that seeks
temporary or injunctive relief or specific performance, each of the parties
(a) irrevocably consents to the exclusive jurisdiction and venue of the state
courts of the State of Delaware located in New Castle County, (b) agrees that
process may be served upon them in any manner authorized by the laws of the
State of Delaware for such persons, (c) waives the defense of an inconvenient
forum and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process, and (d) agrees that
a final judgment in such legal proceeding shall be final, binding and
enforceable in any court of competent jurisdiction. Each party agrees not to
commence any legal proceedings subject to this Section 19.5.2 except in such
courts.

19.5.3 Binding Arbitration. Each party irrevocably agrees and acknowledges that,
subject only to Section 19.5.2 above, any claim, dispute, controversy or other
matter based upon, arising out of or relating to this Agreement or the
transactions contemplated hereby, including (i) as to the existence, validity,
enforceability or interpretation of any such claim, (ii) the performance,
breach, waiver or termination of any provision in dispute, (iii) any such claim
in tort, or (iv) any such claim raising questions of law, in each case, whether
arising before or after termination of this Agreement (each a “Disputed Claim”),
shall be resolved, as between the parties, exclusively and solely by binding
arbitration in accordance with Section 19.5.4.

19.5.4 Any Disputed Claim shall be resolved exclusively and solely by binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the “Rules”) and in accordance with the following:
(a) there shall be three (3) arbitrators, one of whom shall be a member of the
American College of Trial Lawyers (who shall chair the arbitration panel) and
one of whom shall be a certified public accountant; (b) the arbitration shall
take place in Wilmington, Delaware, and in no other place; (c) the arbitration
shall be conducted in accordance with the procedural laws of the U.S. Federal
Arbitration Act, to the extent not inconsistent with the Rules or this
Section 19.5.4; (d) subject to legal privileges, each party shall be entitled to
conduct discovery in accordance with the Federal Rules of Civil Procedure;
(e) at the arbitration hearing, each party shall be permitted to make written
and oral presentations to the arbitration panel, to present testimony and
written evidence and to examine witnesses; (f) the arbitration panel shall have
the power to grant temporary or permanent injunctive relief and to order
specific performance; (g) the arbitration panel shall have the power to order
either party to pay, or to allocate between the parties, the fees and expenses
of the arbitrators and of the American Arbitration Association and to order
either party to pay all or a portion of the other party’s attorneys’ fees and
expenses incurred in connection with a Disputed Claim and the arbitration; and
(h) the arbitration panel shall issue a written decision explaining the bases
for the final ruling, and such decision shall be final and binding on the
parties hereto, and not subject to appeal, and enforceable in any court of
competent jurisdiction.

19.5.5 Other Remedies; Specific Performance.

(a) Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.

 

18

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(b) It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which they are entitled at law or in equity.

19.6 Headings. Headings herein are for convenience of reference only and shall
in no way affect interpretation of this Agreement.

19.7 Conflicting Terms. Such terms and conditions of PECO’s Orders, invoices or
other sales documents, as may be in conflict in whole or in part with the
provisions of this Agreement shall be of no force or effect whatsoever and the
provisions of this Agreement shall be controlling in any such instance. It is
the intention of both parties that the acceptance, even in writing, of any such
purchase or sales document not constitute a modification or amendment of, or
addition to, the terms of this Agreement unless accompanied by a typed letter of
agreement conspicuously entitled “Amendment of Agreement” which begins with a
proposal to amend the Agreement and specifies exactly each change to be made and
which is signed by an authorized officer of both parties.

19.8 Subcontracting. DEI may subcontract any of its rights and/or obligations,
in part or in whole, pursuant to this Agreement at any time without restriction.

19.9 Registrations. If this Agreement is required to be registered with any
governmental authority in the United States, PECO shall cause such registration
to be made and shall bear any expense or tax payable in respect thereof.

19.10 Compliance With Laws. The parties shall each comply with all applicable
federal, state, and local laws and regulations in performing its duties
hereunder.

19.11 Entire Agreement. This Agreement, and all exhibits attached hereto,
constitutes the entire understanding and contract between the parties pertaining
to the subject matter hereof and supersedes any and all prior and
contemporaneous, oral or written representations, communications,
understandings, and agreements between the parties with respect to the subject
matter hereof, including without limitation that certain OEM/ODM Partnership
Agreement between PECO II, Inc. and Delta Electronics, Inc., together with all
exhibits attached thereto, which is hereby terminated in its entirety by the
parties as of the Effective Date hereof. The parties acknowledge and agree that
neither of the parties is entering into this Agreement on the basis of any
representations or promises not expressly contained herein.

19.12 Construction of Agreement. Except where the context clearly requires to
the contrary: (i) each reference in this Agreement to a designated “Article,”
“Section,” “Schedule,” “Exhibit,” “Attachment” or “Appendix” is to the
corresponding Article, Section, Schedule, Exhibit, Attachment or Appendix of or
to this Agreement; (ii) “including” shall mean “including, without limitation”;
and (iii) the parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party will not be
applied in the construction or interpretation of this Agreement.

19.13 Counterparts. For convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
for all purposes.

19.14 Prior Agreements. As of the Effective Date, each of DEI, PECO and DEI
Logistics hereby agree that the Prior Agreement(s) to which it is a party is/are
terminated. Notwithstanding the termination of the Prior Agreements, all terms
and conditions, including all rights, obligations and liabilities associated
therewith, shall apply to all Products shipped under the terms of the Prior
Agreements as if such Prior Agreements remained in effect.

 

19

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[Signature Page Follows]

 

20

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AGREED TO AND ACCEPTED BY:

 

DELTA ELECTRONICS, INC. (“DEI”)     PECO II INC. (“PECO”) By:  

/s/ Albert Chang

    By:  

/s/ John G. Heindel

Name:   Albert Chang     Name:   John G. Heindel Title:   General Manager,    
Title:   President & Chief Executive Officer   Power System Business Group II  
    Place:   Taipei, Taiwan, R.O.C.     Place:   Galion, Ohio

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AGREED TO AND ACCEPTED ONLY WITH RESPECT TO SECTION 19.14 BY:

DEI Logistics (USA) Corporation (“DEI Logistics”)

 

By:  

/s/ Yao C.H. Chou

Name:   Yao C.H. Chou Title:   President Place:   Fremont, California

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EXHIBIT A

PRODUCTS

 

Category

   Series   

Delta P/N

Converter    DC-DC    DCS-24/20A A-S Converter    DC-DC    DCS-48/10A A-S
Inverter    Inverter    ESI125N102AB A Inverter    Inverter    ESI125N202AB A
Inverter    Inverter    ESI24N102AB A Inverter    Inverter    ESI24N102AB B
Inverter    Inverter    ESI48I202AB D Inverter    Inverter    ESI48N102AB A
Inverter    Inverter    ESI48N102AB B Inverter    Inverter    ESI48N202AB A
Rectifier    HDS-7200    ESR-48/120A A-S Rectifier    HDS-3000    ESR-24/100D
A-S Rectifier    HDS-3000    ESR-48/50D A-S Rectifier    MCS-3000    ESR-24/100A
A-S Rectifier    MCS-3000    ESR-24/100B A-S Rectifier    MCS-1800    ESR-48/30D
A-S Rectifier    MCS-1800    ESR-24/50D A-S Rectifier    MCS-600    ESR-48/10B
A-S Shelf    HDS-3000    SA-11F/EE C-S Shelf    DC-DC    SB-18K/HG H-S System   
HDS-3000    ES24/1200-NDA03 System    HDS-3000    ES24/1200-NDC01 System   
HDS-3000    ES48/200-NEA01 System    MCS-3000    ES24/1200-GDA09 System   
MCS-3000    ES24/1200-GDA11 System    MCS-3000    ES24/1200-GEA02 System   
MCS-3000    ES24/600-GEA01 System    MCS-3000    ES48/1200-GDA09 System   
MCS-3000    ES48/1200-GDA10 System    MCS-1800    ES24/200-JAA03 System    DC-DC
   ES24/80-KAA01 System    BDFB    ES48/3600-PEA01 System    BDFB   
ES48/3600-PFA01

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EXHIBIT B

PRICING

 

Category

   Series   

Delta P/N

  

Price to Peco II

Converter    DC-DC    DCS-24/20A A-S    [*] Converter    DC-DC    DCS-48/10A A-S
   [*] Inverter    Inverter    ESI125N102AB A    [*] Inverter    Inverter   
ESI125N202AB A    [*] Inverter    Inverter    ESI24N102AB A    [*] Inverter   
Inverter    ESI24N102AB B    [*] Inverter    Inverter    ESI48I202AB D    [*]
Inverter    Inverter    ESI48N102AB A    [*] Inverter    Inverter    ESI48N102AB
B    [*] Inverter    Inverter    ESI48N202AB A    [*] Rectifier    HDS-7200   
ESR-48/120A A-S    [*] Rectifier    HDS-3000    ESR-24/100D A-S    [*] Rectifier
   HDS-3000    ESR-48/50D A-S    [*] Rectifier    MCS-3000    ESR-24/100A A-S   
[*] Rectifier    MCS-3000    ESR-24/100B A-S    [*] Rectifier    MCS-1800   
ESR-48/30D A-S    [*] Rectifier    MCS-1800    ESR-24/50D A-S    [*] Rectifier
   MCS-600    ESR-48/10B A-S    [*] Shelf    HDS-3000    SA-11F/EE C-S    [*]
Shelf    DC-DC    SB-18K/HG H-S    [*] System    HDS-3000    ES24/1200-NDA03   
[*] System    HDS-3000    ES24/1200-NDC01    [*] System    HDS-3000   
ES48/200-NEA01    [*] System    MCS-3000    ES24/1200-GDA09    [*] System   
MCS-3000    ES24/1200-GDA11    [*] System    MCS-3000    ES24/1200-GEA02    [*]
System    MCS-3000    ES24/600-GEA01    [*] System    MCS-3000   
ES48/1200-GDA09    [*] System    MCS-3000    ES48/1200-GDA10    [*] System   
MCS-1800    ES24/200-JAA03    [*] System    DC-DC    ES24/80-KAA01    [*] System
   BDFB    ES48/3600-PEA01    [*] System    BDFB    ES48/3600-PFA01    [*]

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* Portions have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

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EXHIBIT C

DEI BRANDING GUIDELINES

PECO shall mark each DEI System and PECO System as follows and in a size and
location on the Product as mutually agreed, such agreement not to be
unreasonably withheld:

POWER BY DELTA

and shall include the above legend in all PECO System brochures, manuals,
descriptive literature, and, space permitting, advertising.

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EXHIBIT D

RESERVED ENTITIES

[*]

 

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* Portions have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

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EXHIBIT E

MINIMUM ORDER REQUIREMENTS

 

  •   Spare Parts:

 

  •   Boards: [*]

 

  •   Components: [*]

 

  •   Racks/Shelves: [*]

 

  •   DEI Systems: [*]

 

  •   Modules: [*]

 

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* Portions have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.

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EXHIBIT F

SUPPLY RECORDS

“Supply Records” shall mean the following data and documentation (excluding in
each case any documentation, data or other information related to Reserved
Entities and the Modules):

 

  •   product drawings, technical manuals, BOM (Bill of materials), training
materials, and part item master listings for Systems that Buyer is authorized to
sell pursuant to this Agreement;

 

  •   list of suppliers for materials, vendor purchase agreements, and purchase
order pricing list by item by vendor used in North American telecom operations
for Systems that Buyer is authorized to sell pursuant to this Agreement;

 

  •   product cut sheets, product catalogs, current customer price listings, and
product forecasts for Systems that Buyer is authorized to sell pursuant to this
Agreement; and

 

  •   a copy of the RMA database for Systems that Buyer is authorized to sell
pursuant to this Agreement.