Exhibit 10.5

MANUFACTURING AND PURCHASE AGREEMENT

THIS MANUFACTURING AND PURCHASE AGREEMENT (“Agreement”) made and effective this
19th day of March, 2012 (“Effective Date”) by and between Oclaro Technology
Ltd., a company organized under the laws of the United Kingdom, having offices
at Caswell Office, Towcester, Northamptonshire, NN12 8EQ (on behalf of itself
and all of its Affiliates (collectively referred to as “Oclaro” or “Buyer”) and
Venture Corporation LTD, a company incorporated in Singapore, for itself with
its principal place of business at 5006 Ang Mo Kio Avenue 5, #05—1/12 TECHplace
ll, Singapore 569873 on behalf of itself and all of its Affiliates (collectively
referred to as “Venture” or “Supplier” and, together with “Buyer”, the
“Parties”).

 

1. Term.

The initial term of this Agreement commences on the Effective Date and, unless
earlier terminated pursuant to the terms of this Agreement, shall continue for a
period of five (5) years, expiring five (5) years from the Effective Date
(“Term”). The parties may extend the Term upon mutual written agreement.
Notwithstanding the expiration of the Term, any executed Statement of Work or
Purchase Order then valid shall continue under the terms and conditions of this
Agreement until completion unless earlier terminated pursuant to the terms of
this Agreement. BUYER shall provide written notice to SUPPLIER of its intent not
to renew this Agreement no later than six months prior to the end of the Term.

 

2. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

 

  2.1 “Acquired Equipment” means any and all hardware, testers, equipment,
tooling, molds, software (and related documentation), components, parts or other
materials purchased or developed by SUPPLIER and paid for or reimbursed by BUYER
and equipment which is within the scope of the Equipment and Inventory Purchase
Agreement of even date.

 

  2.2 “Additional Products” means any BUYER products included in a Statement of
Work that are not Transferred Products.

 

  2.3 “Affiliate” means any parent, subsidiary or other entity controlled by,
controlling or under common control with, a party to this Agreement. For
purposes of this definition, the term “control” shall mean the ownership of
voting stock or other equity interest entitling the owner to exercise at least
fifty percent (50%) of the voting rights of the entity.

 

  2.4 “Approved Manufacturing and Product Development Locations” means the
manufacturing locations approved by BUYER in writing, as set forth in Exhibit
A-1, as amended by BUYER in writing from time to time.

 

  2.5 “Build Plan” means the mutually agreed upon order schedule for Products in
the form attached at Exhibit B that BUYER shall agree upon with SUPPLIER on a
periodic basis.

 

  2.6 “Build Request” means the initial periodic forecasted quantities of
Products in the form attached at Exhibit B that BUYER shall provide to SUPPLIER
setting forth the number and type of Products BUYER requests SUPPLIER to
manufacture.

 

  2.7 “Business Day(s)” means, for purposes of timing and notification, each
weekday, Monday through Friday, excluding any holidays at either BUYER and/or
the Approved Manufacturing and Product Development Locations and the period of
any previously scheduled shut downs of either party, provided that the party
experiencing the shut down has notified the other party in writing at least
ninety (90) days prior to the shut down. Any shut downs for which the party
experiencing the shut down notifies the other party fewer that ninety (90) days
prior to the start of such shut down shall be deemed to be Business Days, unless
the other party provides written approval, which may be granted or withheld at
such other party’s discretion. For the removal of doubt, the definition of
Business Days does not relate to or in any way make any implication regarding
manufacturing work scheduling and labor rates.

 

  2.8 “Buyer Controlled Components” means the list of Components that BUYER has
responsibility for negotiating and providing the Component cost to SELLER. BUYER
and SUPPLER will review this list on a quarterly basis to identify any additions
or deletions. BUYER retains sole discretion as to the Components that are on the
said list. BUYER shall retain the right to negotiate costs with or independent
of SUPPLIER for any and all parts on BUYER’s approved vendor list.

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  2.9 “BUYER Designated Destinations” means a ‘ship to’ address as designated by
an authorized BUYER representative.

 

  2.10 “BUYER Properties” means the Acquired Equipment and Loaned Materials,
collectively.

 

  2.11 “BUYER Software” means BUYER’s proprietary software or the proprietary
software of BUYER’s licensors, to be embedded into or bundled with the Products.
The parties agree that all BUYER Software shall solely be embedded into or
bundled with the Products in object code format.

 

  2.12 “Buyer Supplied Components” means the list of Components that BUYER
either manufactures or acquires directly and then sells to SUPPLIER. BUYER and
SUPPLIER will review this list on a quarterly basis to identify any additions or
deletions and costs. BUYER retains sole discretion as to the Components that are
on the said list.

 

  2.13 “BUYER Technology” means the Technology and all Derivatives thereof
(a) provided by BUYER to SUPPLIER pursuant to this Agreement, or (b) developed
by BUYER or SUPPLIER pursuant to this Agreement including any work instructions
developed or modified by SUPPLIER but excluding SUPPLIER Technology and any
Technology which is demonstrably in the public domain.

 

  2.14 “Capital Efficiency” means the continual improvement in the production
output of a piece of capital equipment per unit of time, typically per day or
per week, including without limitation, increasing the speed of the equipment,
reducing test time, improving machine availability time, increasing the machine
utilization rate (measured on a 7X24 basis), reducing the machine load and
unload time, reducing the number of tasks performed by the equipment, reducing
change-over time, improving the process yield, and implementation and
utilization of all engineering efficiencies.

 

  2.15 “Components” means any parts, material, or other items that are used in
the manufacture and/or assembly of Products and any inventory purchased as set
forth in the Equipment and Inventory Purchase Agreement.

 

  2.16 “Derivative” means: (a) for copyrightable or copyrighted material, any
translation, abridgment, revision or other form in which an existing work may be
recast, transformed or adapted; (b) for patentable or patented material, any
improvement thereon; and (c) for material which is protected by trade secret,
any new material derived from such existing trade secret material, including new
material which may be protected under copyright, patent and/or trade secret
laws.

 

  2.17 “Documentation” means the electronic or printed user guides, manuals,
quick reference cards, getting started guides, literature, materials, flyers,
license agreements, registration cards and other end user literature for the
Products as provided to SUPPLIER hereunder. BUYER shall have the right, at no
additional charge, to use and/or reproduce the SUPPLIER’s applicable literature,
such as operating and maintenance manuals, technical publications, prints,
drawings, training manuals, and other similar supporting documentation and sales
literature. SUPPLIER shall advise BUYER of any updated information relative to
the foregoing literature and documentation with timely notifications in writing.

 

  2.18 “Installed Costs” means the freight and all normal direct and indirect
costs, such as installation and other assemblage costs, to make the Acquired
Equipment fully operational.

 

  2.19 “Intellectual Property Rights” means copyright rights (including, without
limitation, the exclusive right to use, reproduce, modify, distribute, publicly
display and publicly perform the copyrighted work), trademark rights (including,
without limitation, trade names, trademarks, service marks, and trade dress),
patent rights (including, without limitation, the exclusive right to make, use
and sell), trade secrets, moral rights, right of publicity, authors’ rights,
contract and licensing rights, and all other intellectual property rights as may
exist now and/or hereafter come into existence and all renewals and extensions
thereof, regardless of whether such rights arise under the law of the United
States or any other state, country or jurisdiction.

 

  2.20 “Joint Service Agreement” means a written statement describing the
responsibilities, expectations, and entitlements of each party; designed to
benefit both parties and improve the relationship for mutual advantage.

 

  2.21 “Leadtime” means (i) with respect to Components, the number of calendar
days between the date upon which a Purchase Order is received by SUPPLIER and
the date upon which the relevant Components will

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  be delivered; and (ii) with respect to Products, means the number of calendar
days between the date upon which a Purchase Order is received by SUPPLIER and
the date upon which the relevant Product is delivered to the shipping location
designated by BUYER.

 

  2.22 “Loaned Materials” means any and all test programs, testers, equipment,
tooling, fixtures, components, parts or other materials provided to SUPPLIER by
BUYER hereunder.

 

  2.23 “Materials Information” includes, but is not limited to, the following
information and data for Components: (a) BUYER part number; (b) SUPPLIER part
number; (c) manufacturer name; (d) manufacturer part number; (e) manufacturer
description; (f) Leadtime; (g) where used; (h) quantity per type of Product;
(i) purchase quantity authorized by BUYER; (j) purchase price authorized by
BUYER; and (k) extended price.

 

  2.24 “Necessary Equipment” means any and all test programs, software (and
related documentation), hardware, tooling, molds, fixtures or other equipment
purchased by SUPPLIER and not reimbursed by BUYER and used by SUPPLIER to
manufacture and/or assemble the Products.

 

  2.25 “Packed Out Product” means a Finished Product unit that is fully packaged
and ready for distribution directly to BUYER’s customers.

 

  2.26 “Finished Product” means a product unit that is not packaged for sale,
but is ready for shipping to packaging and a distribution location designated by
BUYER.

 

  2.27 “Product(s)” means the Transferred Products and Additional Products
identified in a Statement of Work.

 

  2.28 “Purchase Order” means a BUYER purchase order for the purchase of or
Products issued to SUPPLIER pursuant to the provisions of this Agreement.

 

  2.29 “Specifications” means the functional and performance specifications
(including, without limitation, bills of materials, schematic diagrams, parts
and assembly drawings) relating to the testing and manufacturing of each Product
as provided by BUYER, including, without limitation, the specifications set
forth on the applicable Statement of Work governing the development and/or
manufacture of a specific Product.

 

  2.30 “Statement of Work” means a written statement of work for the development
and/or manufacture of the Products which has been or will be signed by both
parties and attached hereto as Exhibit D.

 

  2.31 “Technology” means any and all technical information and/or materials,
including, without limitation, ideas, techniques, designs, sketches, drawings,
models, inventions, know-how, processes, apparatus, methods, equipment,
algorithms, software programs, data, software source documents, other works of
authorship, formulae and information concerning engineering, research,
experimental work, development, design details and specifications.

 

  2.32 “Transferred Products” means the versions of BUYER products and their
Derivative Products as identified in Exhibit A-2 and on a Statement of Work that
will be transferred from BUYER’s or BUYER’s contract manufacturer’s existing
site of manufacture to SUPPLIER’s Approved Manufacturing and Product Development
Location.

 

  2.33 “SUPPLIER Properties” means any test programs, software, tooling,
equipment or other materials provided to BUYER by SUPPLIER hereunder.

 

  2.34 “SUPPLIER Technology” means the Technology and all Derivatives
thereof provided by SUPPLIER to BUYER pursuant to this Agreement which are
(a) developed by SUPPLIER prior to, or independent of entering into this
Agreement but excluding BUYER Technology and any Technology which is
demonstrably in the public domain.

 

3. License and Ownership of the Product.

 

  3.1 License to Specifications and Loaned Materials. Subject to the terms and
conditions of this Agreement, BUYER hereby grants SUPPLIER a personal, limited,
non-exclusive, non-transferable, royalty-free license, without the right to
sublicense, under BUYER’s Intellectual Property Rights to use the Specifications
and the Loaned Materials provided by BUYER during the term of this Agreement,
solely internally, and solely for the purpose of manufacturing the Products for
BUYER.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  3.2 License to BUYER Technology. Subject to the terms and conditions of this
Agreement, BUYER hereby grants to SUPPLIER a personal, limited, non-exclusive,
non-transferable and royalty-free license, without the right to sublicense,
under BUYER’s Intellectual Property Rights to use the BUYER Technology (as
embodied in the Specifications or as otherwise provided to SUPPLIER) during the
term of this Agreement, solely internally, and solely for the purpose of
manufacturing under the terms of this Agreement; provided, however, that such
license granted to SUPPLIER will not be exercised to develop, manufacture or
distribute any products other than the Products.

 

  3.3 License to BUYER Software and Documentation. Subject to the terms and
conditions of this Agreement, BUYER hereby grants to SUPPLIER a personal,
limited, non-exclusive, non-transferable and royalty-free license, without the
right to sublicense, under BUYER’s Intellectual Property Rights and only during
the term of this Agreement to: (i) use and reproduce the BUYER Software and
Documentation for the limited purpose of manufacturing the Products; and
(ii) distribute the BUYER Software and Documentation solely as incorporated into
the Products as set forth in the applicable Statement of Work only to BUYER and
the BUYER Designated Destinations.

 

  3.4 License to SUPPLIER Technology and SUPPLIER Properties. Neither SUPPLIER
nor its licensors, suppliers or any other third party will retain any rights in
any materials incorporated into the Products. To the extent that SUPPLIER
provides any SUPPLIER Technology and/or SUPPLIER Properties to BUYER as set
forth in a Statement of Work or otherwise, SUPPLIER hereby grants to BUYER a
limited, perpetual, irrevocable, non-exclusive, non-transferable and
royalty-free license under SUPPLIER’s Intellectual Property rights, to use the
SUPPLIER Technology and/or SUPPLIER Properties provided to BUYER hereunder, if
any, solely in connection with the marketing, sale and distribution of the
Products. During the Term of this Agreement, unless otherwise agreed, If any
SUPPLIER Technology is incorporated in the Products which are developed or
manufactured by Seller under this Agreement, there shall not be any royalty or
license fees payable by Buyer to the Seller.

 

  3.5 License to BUYER Trademarks. BUYER requests and SUPPLIER agrees to place
certain markings and identification, which includes the trademark(s) and/or
trade name of BUYER, on the Products ordered and delivered to BUYER, the
Documentation and the Product packaging, as specified by BUYER. In addition,
upon written approval of BUYER, SUPPLIER may use such trademarks and trade name
in materials used in presentations made to suppliers of Components. The use of
such markings and identification shall be strictly in accordance with the
requirements of BUYER as set forth in BUYER’s Trademark Guidelines, as provided
to SUPPLIER and as may be updated from time to time by BUYER. SUPPLIER is not
authorized to use the trademark(s) and trade names of BUYER on any products,
other than Products ordered by and delivered to BUYER, or for any other purpose
not expressly set forth in this. BUYER hereby grants to SUPPLIER a limited,
non-exclusive, non-transferable trademark license, without the right to
sublicense, to use the BUYER trademarks set forth on Exhibit E and/or the
Statement of Work solely (i) internally to mark the Products, Product packaging
and Documentation as requested by BUYER, and (ii) in presentation materials upon
BUYER’s prior written approval. All other use is prohibited. This license shall
terminate on the earlier of termination of this Agreement or failure of SUPPLIER
to maintain the quality requirements set out in this Agreement and/or BUYER’s
Trademark Guidelines. SUPPLIER shall obtain no rights to or interest of any kind
in any BUYER trademarks or trade names other than the limited right to use set
out above.

 

  3.6 Restrictions. Except for the licenses as expressly set forth in this
Agreement, each party retains all of its Intellectual Property Rights. There are
no implied rights. No license is granted by BUYER to make, use or sell any other
products under the BUYER Intellectual Property Rights or to make, use or sell
any products for any other purpose. SUPPLIER will not disclose BUYER’s
Intellectual Property Rights to any third party. SUPPLIER will not modify,
decompile or reverse engineer the BUYER Software or any BUYER Technology. Any
other provisions of this Agreement notwithstanding, SUPPLIER will have no right
to use the trademarks, trade names or Product(s) names of BUYER directly or
indirectly in connection with any product(s), promotion or publication without
the prior written approval of BUYER.

 

  3.7 Ownership by BUYER. As between BUYER and SUPPLIER, BUYER will own all
right, title, and interest in the Specifications, BUYER Software, Products,
BUYER Properties and the BUYER Technology and all Intellectual Property Rights
therein, and SUPPLIER hereby irrevocably transfers, conveys and

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  assigns to BUYER all of its right, title, and interest therein. SUPPLIER will
execute such documents, render such assistance, and take such other action as
BUYER may reasonably request, at BUYER’s expense, to apply for, register,
perfect, confirm and protect BUYER’s rights to the BUYER Technology and all
Intellectual Property Rights therein.

 

  3.8 Ownership by SUPPLIER. As between SUPPLIER and BUYER, SUPPLIER will own
all right, title and interest in the SUPPLIER Technology and Supplier
Properties, and all Intellectual Property Rights therein.

 

  3.9 Design Work. If the parties agree to have SUPPLIER perform design work for
the Products, including without limitation, process design work, such work shall
be subject to the terms and conditions of this Section 3.9. performed under a
Design Statement of Work. Subject to the terms and conditions of this Agreement,
if the BUYER agrees to SUPPLIER performing design work for the Products, BUYER
shall grant to SUPPLIER a personal, limited, non-exclusive, non-transferable and
royalty-free license, without the right to sublicense, under BUYER’s
Intellectual Property Rights to use the BUYER Technology (as embodied in the
Specifications or as otherwise provided to SUPPLIER), solely internally, and
solely for the purpose of performing the design work and only for the minimum
period of time and to the minimum extent necessary to perform such design work.
BUYER shall own all Technology and Intellectual Property Rights developed or
created by SUPPLIER in the performance of such Design Statement of Work (“Work
Product”), unless otherwise agreed. SUPPLIER hereby irrevocably transfers,
conveys and assigns to BUYER all of its right, title, and interest in and to the
Work Product. SUPPLIER will execute such documents, render such assistance, and
take such other action as BUYER may reasonably request, at BUYER’s expense, to
apply for, register, perfect, confirm and protect BUYER’s rights to the Work
Product and all Intellectual Property Rights therein.

 

4. Manufacture of Products.

 

  4.1 Manufacturing. Pursuant to the terms of this Agreement, SUPPLIER agrees to
manufacture each of the Products in accordance with this Agreement, the
applicable Specifications, Statement of Work, and any other instructions
provided in writing by BUYER and agrees not to stop or restrict the supply of
the Products during the term. SUPPLIER acknowledges and agrees that time is of
the essence for the provision of manufacturing services and the supply of
Products to BUYER hereunder and that the full and timely provision of all
manufacturing services and supply of Products to BUYER hereunder is a material
condition of this Agreement. SUPPLIER shall manufacture the Products only
according to the written instructions provided by BUYER. SUPPLIER shall only
manufacture each Product at the applicable Approved Manufacturing and Product
Development Location(s) for that Product. SUPPLIER will not change location of
the facilities, building location or line location for the manufacture and
assembly of the Products without BUYER’s prior written consent, which will not
be unreasonably withheld. [***]. The cost of any move initiated by SUPPLIER
shall be the sole responsibility of SUPPLIER. These costs may include, but are
not limited to, additional buffer inventory, expedite fees, overtime, equipment
rental costs, etc. Additionally, any move shall not be considered complete until
BUYER has qualified the new location. SUPPLIER agrees to aggressively work with
BUYER to develop strategies which will lead to ongoing reductions in costs,
Leadtimes and cycle times, yields and improvements in Capital Efficiency.

 

  4.2 New Product Introduction. BUYER may from time to time issue Purchase
Orders for advance, low-volume units of Products for testing of the Products
and/or the manufacturing process (“NPI Units”). All NPI Units will be
manufactured in the Approved Manufacturing and Product Development Location. Any
additional terms regarding the manufacture and delivery of NPI Units shall be
mutually agreed upon by the parties in a Statement of Work, which shall include,
without limitation, pricing, manufacturing milestones and milestone schedule,
testing procedures and quality assurance provisions. Such Statement of Work will
be attached hereto as a sequentially numbered attachment (“Attachment”) to
Exhibit D, and shall be deemed incorporated herein.

 

  4.3 Manufacturing Reporting. SUPPLIER shall perform the reporting obligations,
to be established between BUYER and SUPPLIER. SUPPLIER agrees to maintain, and
update on no less frequent than a weekly basis, the Materials Information, the
Capacity Information and the Leadtime Information, as well as information
regarding works in progress, works in stock, problems in the manufacturing
process and all returns, and all such data shall be accessible to BUYER online,
provided to BUYER via a direct data feed to BUYER’s internal information systems
as reasonably specified by BUYER, or manually until such online or direct data
feed can be established. To the extent that SUPPLIER is permitted access to
BUYER’s internal information systems, SUPPLIER shall not disclose any BUYER data
to any third party, or use such data for any purpose except as necessary to
fulfill its obligations hereunder.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  4.4 No Subcontracting. SUPPLIER agrees that no portion of the assembly of the
Products will be subcontracted to third parties without BUYER’s prior written
consent. Any permitted subcontractor approved in writing by BUYER
(“Subcontractor”) that SUPPLIER may use to assist SUPPLIER shall be obligated to
comply with the terms of this Agreement and SUPPLIER shall remain responsible
for such Subcontractor’s performance. BUYER’s consent to SUPPLIER’s use of any
Subcontractor shall not be deemed a waiver of any BUYER rights hereunder nor
relieve SUPPLIER of any of its obligations pursuant to this Agreement. SUPPLIER
shall enter into a written agreement with each approved Subcontractor which
includes terms and conditions no less protective of BUYER’s proprietary and
intellectual property rights than those set forth in this Agreement prior to
SUPPLIER permitting any such Subcontractor to perform any obligation hereunder.
SUPPLIER shall be solely responsible for the payment of all amounts payable to,
and the performance of all of SUPPLIER’s obligations for, all such
Subcontractors. Immediately upon request of BUYER, SUPPLIER shall commence such
proceedings as necessary (i.e., termination notice, request to cure default) to
terminate any Subcontractor that, in BUYER’s sole opinion, does not perform to
the standards set forth by BUYER in this Agreement.

 

  4.5 Testing. Upon the completion of the manufacture of each Product, SUPPLIER
will submit such Product to the testing procedures set forth on the applicable
Statement of Work, in this Agreement or specified by BUYER from time to time.
SUPPLIER, unless otherwise specified in writing, will only ship Products which
have been tested successfully according to such procedures. At BUYER’s
discretion, BUYER will provide training in the testing procedures set forth
herein to certain personnel designated in writing by SUPPLIER. SUPPLIER will
perform all required testing, as specified by BUYER, unless otherwise agreed by
BUYER and SUPPLIER in writing, of all Products at a SUPPLIER manufacturing
facility mutually agreed upon by the parties in writing.

 

  4.6 Storage of Property. SUPPLIER shall store all BUYER Properties required
for the manufacturing of Products under this Agreement free of charge in a place
of storage that is safe and suitable for the specific nature of the BUYER
Properties in accordance with industry standard practice for the type of
property stored and at a minimum meets any specified storage conditions for the
property, and undertakes never to hide, damage or remove the identification
plates on the BUYER Properties. SUPPLIER shall ensure that all of Loaned
Materials and property (which shall include but not be limited to all Products)
shall be kept distinct and separate from SUPPLIER’s or other third parties’
property and Loaned Materials shall be clearly identified as BUYER’s property.
SUPPLIER shall ensure that none of BUYER’s property is seized by any third
party, whether pursuant to an order of court or otherwise, while in SUPPLIER’s
possession. SUPPLIER shall not allow any lien or encumbrance to be created over
or otherwise encumber BUYER’s property. SUPPLIER will not at any time use the
Loaned Materials for any other purposes or for any third parties or in any
manner other than in performing SUPPLIER’s obligations under this Agreement.

 

  4.7 BUYER Properties.

 

  4.7.1 Loaned Materials. Subject to the license grant set forth above, BUYER
agrees to loan free of charge to SUPPLIER, and SUPPLIER accepts on loan, certain
items of Loaned Materials, as provided from time to time. All such Loaned
Materials shall be sent to SUPPLIER at BUYER’s expense. All such Loaned
Materials shall be provided to SUPPLIER on an “AS IS” and “AS AVAILABLE” basis
and without warranty of any type or kind. BUYER HEREBY DISCLAIMS AND EXCLUDES
ALL WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO THE IMPLIED WARRANTIES OF TITLE, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT AND MERCHANTABILITY. The Loaned Materials are to be used for
the express purpose of Products and cannot be used to support the production,
test, or service of any of SUPPLIER’s other customers. The Loaned Materials
shall be loaned for an indefinite period during the term of this Agreement, but
SUPPLIER’s right to use such Loaned Materials shall terminate automatically upon
request by BUYER or termination of this Agreement, whichever is sooner. If BUYER
requests that the Loaned Properties be returned to BUYER, the loan of Loaned
Properties shall terminate when the applicable Loaned Materials are received by
BUYER. BUYER agrees to reimburse any costs incurred by SUPPLIER for calibration
and maintenance SUPPLIER has performed by third party vendors on Loaned
Materials.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  4.7.2 Use of Loaned Materials. SUPPLIER shall use the Loaned Materials solely
for the benefit of BUYER and solely at the Approved Manufacturing and Product
Development Locations, which address shall not change without the express prior
written agreement of BUYER.

 

  4.7.3 Acquired Equipment. If SUPPLIER desires to purchase items to be included
as Acquired Equipment, SUPPLIER shall provide a written request to BUYER at
least five (5) Business Days prior to the purchase of such items. Such request
shall include a quote setting forth the cost of each item. If BUYER agrees in
writing to purchase some or all of the items, the approved items shall be deemed
to be Acquired Equipment. The purchase price plus the Installed Costs will be
amortized over a period of sixty (60) months, payable in monthly installments
based upon an interest rate equal to the then-current one (1) year LIBOR rate
(U.S. currency) plus one percent (1%) (“Supplier Net Book Value”). SUPPLIER
shall provide to BUYER all relevant invoices corresponding to the Acquired
Equipment purchased for reimbursing purposes. BUYER shall reimburse SUPPLIER for
the cost of the Acquired Equipment according to the invoicing and payment terms
in Exhibit C. At termination of work requiring this equipment, the BUYER will
reimburse the SUPPLIER for the SUPPLIER Net Book Value not already reimbursed.
BUYER shall have the option to purchase such Acquired Equipment from SUPPLIER,
such request shall not be unreasonably refused: (a) on an exception basis; or,
(b) upon termination of this Agreement, to the extent that SUPPLIER has not
recovered payment for Acquired Equipment through amortization of the Supplier
Net Book Value, BUYER will either (i) pay SUPPLIER for any such unrecovered
amortization and SUPPLIER shall retain ownership or (ii) purchase the Acquired
Equipment for a purchase price equal to the SUPPLIER’s Net Book Value.
Notwithstanding the above, if SUPPLIER fails to meet BUYER’s cost, quality and
delivery objectives, BUYER shall have no obligation to pay for such unrecovered
amortization in subsection (i) but may purchase the Acquired Equipment as
otherwise described herein in subsection (ii). Upon mutual agreement the Parties
may decide to designate an item proposed to be treated as Acquired Equipment as
Necessary Equipment, in which case such item will deemed to be Necessary
Equipment subject to the below.

 

  4.7.4 Necessary Equipment. SUPPLIER may purchase Necessary Equipment to
manufacture and/or assemble the Products. Within ten (10) days after
acquisition, SUPPLIER shall provide written notice to BUYER of acquisition of
the Necessary Equipment. Upon mutual agreement BUYER shall have the option to
purchase such Necessary Equipment upon termination of this Agreement.

 

  4.7.5 Return of BUYER Properties. Within two (2) Business Days of BUYER’s
request, SUPPLIER shall send BUYER Properties that are in electronic and paper
form to any location requested by BUYER, at SUPPLIER’s expense. SUPPLIER shall
use best efforts to send all other Loaned Materials to any location requested by
BUYER within five (5) business Days of BUYER’s request. SUPPLIER agrees to
provide all reasonable assistance for this purpose and to adequately ship and
insure the applicable BUYER Properties.

 

  4.7.6 Insurance. In addition to any other insurance requirements set forth
herein SUPPLIER shall take out insurance to adequately cover all Loaned
Materials, and add BUYER as a loss payee with respect to the Loaned Materials,
at its own cost, and give proof of such insurance to BUYER on request, and be
responsible for any damage occurring to the Loaned Materials while in SUPPLIER’s
possession that is not due to normal wear.

 

  4.7.7 Expenses. SUPPLIER shall assume all expenses due to the operation, and
use of all BUYER Properties. In any case, SUPPLIER will be responsible for any
loss or damage caused to any BUYER Properties while in SUPPLIER’s possession.
BUYER shall at all times retain title and ownership of allLoaned Materials. In
the event major repairs or replacement of BUYER Properties is necessary,
SUPPLIER shall notify BUYER in writing for instructions on how to proceed but in
no case will such major repair or replacement be at SUPPLIER expense. BUYER
agrees to reimburse any costs incurred by SUPPLIER for calibration and
maintenance which SUPPLIER has had performed by third party vendors on BUYER
Properties.

 

  4.8 Transferred Products. During the Term, BUYER will continue to have
SUPPLIER produce the Transferred Products including any updates or upgrades or
enhancements in functionality of those Products (“Derivative Products”) subject
to SUPPLIER’S meeting cost, quality and delivery objectives. In the event

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  of performance issues SUPPLIER shall have thirty (30) days to cure. In the
event the issue remains unresolved the Parties shall escalate to their executive
management for resolution. If after ten (10) days there remains no resolution
the Products in question shall lose their respective exclusivity terms. During
the first 30 days of this Agreement, Parties will finalise the Flight Plans. The
preliminary Flight Plans are set out in Exhibit A-3 of this Agreement, the
Parties will amend the Flight Plans as needed during the transition period. The
Transferred Products shall be transferred from BUYER’s facilities to Supplier’s
facilities according to the Flight Plans as mutually agreed.

 

  4.9 Non-Exclusivity. Except for Transferred Products as may be otherwise
expressly specified in a specific Statement of Work, this Agreement is
non-exclusive. Additional Products may be added to future Statements of Work, at
BUYER’s sole discretion, based on a competitive quote process, SUPPLIER’s
performance under this Agreement, and then current overall SUPPLIER/BUYER
business level and partnership. SUPPLIER will be provided notification of
potential significant opportunities that would reasonably be considered
consistent with the intent and capabilities of SUPPLIER associated with the
Transferred Products. BUYER shall have the right to use other contract
manufacturers to manufacture the Additional Products. Nothing in this Agreement
will be construed or deemed to prevent or otherwise inhibit BUYER’s ability or
right to manufacture the Products, whether at BUYER’s facility or at an
alternate or additional third-party facility(ies) of BUYER’s choice. Further,
nothing in this Agreement will be construed or deemed to (a) require BUYER to
order any minimum number of units of the Products to be manufactured by
SUPPLIER, or (b) prevent or otherwise inhibit BUYER’s ability or right to
design, develop, manufacture, have manufactured, market, use, sell, and or
distribute any follow-on products or Derivatives of the Products.

 

  4.10 PCBA’s. SUPPLIER shall be allowed to manufacture the PCBA’s for the
Transferred Products so long as SUPPLIER maintains cost, quality and delivery
competiveness.

 

5. Build Request and Build Plan. BUYER shall provide SUPPLIER with a good faith
twelve (12) month, non-binding, forward-looking, rolling forecast in the form of
a Build Request and shall update such forecast on periodic basis. The Build
Requests are not binding on BUYER and do not represent any commitment by BUYER
to purchase a minimum number of Products. Build Requests will be in weekly or
monthly buckets for the first six (6) months and monthly buckets for the
subsequent six (6) months. SUPPLIER shall promptly and in no case longer than
five (5) Business Days respond to any Build Request issued by BUYER with a
committed Build Plan. The Build Request and Build Plan shall set forth, as
applicable, the following information: Product name, BUYER Product numbers,
Product quantities, and requested delivery dates. BUYER and SUPPLIER shall
jointly review and agree on a committed Build Plan. The Build Request shall be
updated at least monthly and shall be used by SUPPLIER to plan for production
capacity, resources, and materials planning to support BUYER’s anticipated
orders. SUPPLIER shall only purchase Components in accordance with the mutually
agreed upon purchasing parameters, and the Buyer shall be responsible for the
costs of Components purchased within such purchasing parameters.

 

6. Procurement, Inventory Management and Purchase Orders.

 

  6.1 Procurement and Management of Materials and Components.

Procurement of BUYER Approved Materials and Components. SUPPLIER will maintain
the Lead-time for each Product that is specified in the applicable Statement of
Work. SUPPLIER is authorized to purchase Components for the Products in a manner
so as to meet the mutually agreed Build Plans, Purchase Orders and any long
Lead-time requirements specified by BUYER in the applicable Statements of Work.
All such procurement by SUPPLIER shall be done based on industry competitive
Lead-times. SUPPLIER’s material liability shall be consistent with the terms of
this Agreement. On a quarterly basis, the Parties will jointly review the BOM’s,
on a product by product basis, and mutually agree to a list of standard parts,
non-standard parts, non-cancellable, non-returnable parts, Lead-times, long
Lead-time Components, and MOQ. On a quarterly basis, BUYER shall identify any
SUPPLIER Controlled Components. Such lists are to be agreed to, signed by the
Parties and included in the quarterly RFP. SUPPLIER shall purchase all
Components for Products solely from suppliers listed on BUYER’s most current
approved vendor list (the “AVL”) as provided by BUYER to SUPPLIER as updated by
BUYER from time to time. Any purchases made from suppliers not listed on the AVL
or contrary to BUYER’s written instructions must be approved by BUYER in advance
in writing. BUYER agrees to use commercially reasonable efforts to have BUYER’s
approved vendors on the AVL extend to SUPPLIER the same pricing such vendor
extends to BUYER, but solely for purchases of Components to be used in the
manufacture of Products made under this Agreement. BUYER may assist SUPPLIER in
securing certain

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

long Lead-time Components for a Product. Such assistance may include placing
orders for long Lead-time Components directly with the manufacturer, providing
written authorizations for the purchase of certain Components in short supply or
issuing advance Purchase Orders. SUPPLIER shall purchase BUYER produced
Components pursuant to this Agreement. SUPPLIER shall collect all invoices
issued by BUYER for BUYER produced Components under the Agreement during each
month (“Accumulation Period’) and initiate payment for the invoices on the first
business day of the month forty five (45) days following the end of the
Accumulation Period. Notwithstanding the foregoing, if SUPPLIER rejects BUYER
Supplied Components under the Agreement, SUPPLIER may delay payment of the
applicable invoice until the BUYER Supplied Components are repaired or replaced.
Delivery shall be EXWORKS (INCOTERMS 2010) unless otherwise agreed in writing.

For purchases of Components, BUYER shall receive all rebates, discounts and
other price reductions, monetary and non-monetary, and in any way relating to
such Components purchases in proportion to such purchases. Should an audit
determine non-compliance with the obligations in this Section 6.1.1, the parties
agree that BUYER will be entitled to a refund of the amount of the determined
non-compliance and costs of audit, any exceptions shall be mutually agreed by
the Parties. [***].

 

  6.1.1 Procurement Policy: SUPPLIER will purchase all Components to meet the
latest approved Build Plan. BUYER shall not be liable for any purchased
Components unless pre-approved by BUYER in writing other than the Build Plan. As
a guideline, SUPPLIER will not transform Components into a non-returnable
condition (e.g., programming of flash memory, tape and reeling Components
supplied in trays) at any Approved Manufacturing Location in excess of the
quantity necessary to meet the Product cycle times according to Exhibit D
attached hereto. Exceptions will be granted for items that are packaged in large
quantities and are considered non-cancellable, nonreturnable by the SUPPLIER
once the packaging is opened or a piece is consumed. [***]. BUYER agrees that
within the Products being manufactured, there are standard parts, non-standard
parts and non-cancellable, non-returnable parts. BUYER’s maximum liability for
standard parts will be to the Build Plan or the Components Lead-time whichever
is less, and which cannot be returned for credit or consumed on any other of the
SUPPLIER’s manufactured products, with the exception of items that are packaged
in large quantities and such large package quantities must be approved by BUYER
in writing. BUYER’s maximum liability for non-standard parts will be to the
Build Plan or the Components Lead-time whichever is less plus any Components
held in VMI which cannot be returned for credit or consumed on any other of the
SUPPLIER’s manufactured products, plus Components on-order within the Component
Lead-time cancellation window (SUPPLIER will use best efforts to cancel or
mitigate BUYER’s exposure). BUYER’s maximum liability for non-cancellable,
non-returnable parts will be to the inventory on-hand plus the total quantity
on-order. Each Product-specific Statement of Work will identify any requirements
that deviate from these guidelines. [***].

 

  6.1.2 Material Management. SUPPLIER will, at a minimum, at no additional cost
to Buyer, comply with the following obligations to ensure good Component
material management for the Products: (a) ensure Component level failure
analysis is performed by the vendor; (b) expedite Component returns, failure
analysis and corrective actions regarding defective Components with the vendors
and promptly communicate this information to BUYER; (c) actively work with
vendors to reduce Component Leadtime and costs; (d) address poor Component
yields with vendors and promptly provide analysis and corrective plans regarding
same to BUYER; and (e) provide regular performance feedback to vendors, with a
copy to BUYER. SUPPLIER will not use components procured for BUYER in any other
customer products without advance written approval from BUYER.

 

  6.1.3 Allocation of Resources. SUPPLIER will notify BUYER promptly whenever
SUPPLIER identifies a reasonable likelihood that there is or will be a capacity
constraint that adversely affects SUPPLIER’s ability to meet the Build Plan
(“Capacity Constraint”). During any period of Capacity Constraint, SUPPLIER
agrees, at a minimum, to allocate capacity to BUYER under whichever of the
following formulas would give BUYER the greatest quantity of Products: (i) in
proportion to BUYER’s percentage of capacity used of all of SUPPLIER’s customer
manufacturing capacity for the previous two (2) calendar months; (ii) in
proportion to BUYER’s percentage of capacity, as set forth in applicable Build
Requests, of all of SUPPLIER’s customers forecasts for manufacturing capacity;
or (iii) any other more favorable allocation

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  formula which SUPPLIER utilizes with any other customer. SUPPLIER will notify
BUYER, in advance if possible, of any change the program management resources.
In the event that a change to any program management resource is required, BUYER
will have the ability to approve any new members before they are assigned to the
account.

 

  6.1.4 Vendor Managed Inventory. SUPPLIER shall establish and properly manage a
Vendor Managed Inventory (VMI) program whereby suppliers will deliver Components
to a VMI location for SUPPLIER’s withdrawal as needed. SUPPLIER shall execute
agreements with suppliers to ensure the proper delivery to and handling of
Components at the VMI location. [***]. Such VMI programs may be set forth in
separate VMI agreements, as applicable, if desired by the parties.

 

  6.2 Build Plans

 

  6.2.1 Build Plan. SUPPLIER shall reserve for BUYER capacity to manufacture the
quantity and type Products specified in each Build Plan and shall have available
the extra capacity for increases within the flexibility matrix as described
below.

 

  6.2.2 Terms. All Build Plans and Purchase Orders for Products placed by BUYER
hereunder and Build Plans agreed upon by the parties shall be governed by the
terms and conditions of this Agreement. In the event of a conflict between the
provisions of this Agreement and the terms and conditions of BUYER’s Purchase
Order, a Build Plan, SUPPLIER’s acknowledgment or other written communications,
the provisions of this Agreement shall prevail. In the event of a conflict
between the terms in a Purchase Order and those in a Build Plan, the terms of
the Purchase Order shall prevail.

 

  6.2.3 Flexibility. Changes in the quantity of units of a particular Product
ordered by BUYER shall be provided by written or electronically dispatched
notice from BUYER. SUPPLIER shall notify BUYER of acceptance of change in
[***].[***]. SUPPLIER will accept all increases or decreases in Purchase Order
quantities, without additional charges subject to installed capacity restraints
according to the Product Capacity schedule to be defined as part of a Statement
of Work, within the flexibility matrix set forth below (unless otherwise set
forth in Exhibit C). Multiple upside requests within the materials replenishment
windows will be at SUPPLIER’s reasonable efforts;

 

Number of Weeks Until Delivery Date

  

Percent Increase or Decrease from Purchase Order Quantity

[***]

   [***]

[***]

   [***]

[***]

   [***]

If there are extra costs to SUPPLIER to fulfill orders for quantities in excess
of the above flexibility matrix, SUPPLIER will promptly determine the extra
costs in good faith, inform BUYER in writing of such extra costs and how they
were calculated, and obtain BUYER’s prior written approval before fulfilling
such orders. If a BUYER order cancellation causes inventory to exceed the excess
inventory criteria set forth herein the inventory policy applies to those items.

 

  6.3 Reschedule or Cancellation of Delivery. BUYER shall be permitted to cancel
or reschedule delivery of Products as within the parameters of the flexibility
terms in Section 6.3 above and otherwise as set forth below subject to the terms
specified herein. BUYER shall be entitled to request a reschedule of delivery of
Products that are in a Build Plan or WIP at any time. SUPPLIER shall accommodate
a request to expedite the ship date. [***].

 

  6.3.1 Effect of Cancellation/Reduction of Products under a Purchase Order. If
BUYER should cancel, reschedule or reduce the quantity of Products ordered in a
Purchase Order (whether in whole or in part) for any reason, and such
cancellation is a net reduction to the total open order position, and such
deemed cancellation [***], then BUYER’s maximum liability to SUPPLIER for such
cancelled Purchase Order (or portion thereof) shall be no more than: (i) a
combination of partially assembled units of the Product, within published
Product Cycle Times and whose

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

10

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MANUFACTURING AND PURCHASE AGREEMENT

 

  manufacture or assembly is irreversible, such as completed surface-mount
manufacture, for which BUYER shall pay reasonable and actually incurred costs,
not to exceed the Purchase Order price for the Product based on level of
completion. (i.e., cost to manufacture); and (ii) all custom or non-cancellable,
nonreturnable, MOQ and approved long Lead-time Components that are not consumed
[***]; provided, that the applicable Components were approved for purchase by
BUYER based on Lead-times in conjunction with the Build Plan and agreed to in
writing as part of an special inventory buy relating to MOQ, buffer stock or
other exceptions. The calculation described in the immediately prior sentence
shall be made as of the date of BUYER’s notice of cancellation or reduction.
SUPPLIER acknowledges responsibility to minimize BUYER’s liability by [***] stop
the manufacture of outstanding cancelled orders and to cancel the orders
SUPPLIER has with vendors for related Components immediately upon receipt of
BUYER’s notice. Provided SUPPLIER has taken the foregoing measures, BUYER agrees
to pay the applicable cancellation fees described herein in full satisfaction of
its liability for such cancellation. Upon BUYER’s request, SUPPLIER shall make
available to BUYER for inspection and audit any and all relevant information in
support of SUPPLIER’s claim for reimbursement.

 

  6.3.1.1 Excess Inventory Owing to BUYER Cancellations.

 

  6.3.1.1.1 Obsolete Inventory. BUYER and SUPPLIER will conduct a formal
assessment of SUPPLIER’s inventory as defined in the Joint Services Agreement.
If BUYER has cancelled an order for a particular Product under a Purchase Order
because it will discontinue to utilize SUPPLIER as a manufacturer of that
Product or because of an engineering change initiated by BUYER, then SUPPLIER
must make any claims for reimbursement to BUYER within thirty (30) days,
otherwise such claims will be deemed waived by SUPPLIER. BUYER shall have thirty
(30) days to evaluate SUPPLIER’s claim made pursuant to this Section and to
request any adjustments. The parties shall negotiate in good faith the amount of
the reimbursement. Once the parties have agreed upon the reimbursement amount,
BUYER shall issue a Purchase Order for the sum of the agreed upon reimbursement
amount for such obsolete inventory within ten (10) Business Days from the date
of the agreement on the reimbursement amount. The parties agree to meet monthly
to review any open claims regarding Obsolete Inventory.

 

  6.3.1.1.2 Other Inventory. When BUYER cancels or reduces an order for a
particular Product under a Purchase Order for reasons other than the
discontinuance of SUPPLIER as a manufacturer of the Product or because of an
engineering change initiated by BUYER, BUYER will purchase approved custom,
non-cancellable, nonreturnable, MOQ, or long Leadtime Components purchased in
accordance with the agreed upon Build Plan and the terms of this Agreement for
the Products (“Excess Materials”) which remain in SUPPLIER’s inventory [***],
upon the execution of this Agreement, for a particular Product under a Purchase
Order. BUYER may elect to store them at SUPPLIER and pay SUPPLIER a storage fee
based on actual space required at the current quarters quoted warehouse space
cost.

Once the Excess Materials have been stored at SUPPLIER [***], BUYER will use
reasonable efforts to disposition the Excess Materials [***].

 

  6.4 Transfer of Inventory to Other Manufacturers. SUPPLIER understands that
BUYER may use other manufacturers which use the same Components as SUPPLIER.
SUPPLIER will promptly transfer its inventory of Components for unfilled
Purchase Orders to such other manufacturers as required by BUYER without service
charges for such transfer. SUPPLIER also agrees to sell the Components
then-currently in SUPPLIER’s inventory to BUYER’s designated manufacturer at a
cost not to exceed the actual purchase price plus a two percent (2%) mark-up.
BUYER also agrees to pay for transportation of equipment and/or materials to the
new manufacturing facility at cost.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

11

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

7. Pricing.

 

  7.1 Prices. The prices for the Products and shipping terms shall be set forth
on Exhibit C. The shipping terms shall be Ex Works, Supplier’s site.

 

  7.2 Periodic Price Reviews. SUPPLIER and BUYER shall meet at least once during
each BUYER fiscal quarter (BUYER’s fiscal year is July through June), unless
BUYER requests that such price reviews be conducted monthly, in which case the
parties shall meet at least once each calendar month, to review prices of each
Product and determine if any price adjustment is required. The prices in the
initial SOW will be the maximum prices for the Products unless mutually agreed
by the Parties. Prices will be adjusted to reflect (i) changes to the costs of
the Products (other than Component costs), which will be calculated in
accordance with the cost model in Exhibit C and then passed through to BUYER,
and (ii) changes in the costs of Components, which will be passed through to
BUYER on a dollar-for-dollar basis (iii) changes in the USD exchange rate
against the Supplier’s domestic currency of greater than plus/minus five percent
(+/- 5%).

 

  7.3 Implementation of Cost Reductions. Each party shall be responsible for
actively taking steps to reduce the cost of the Products, as agreed upon by the
parties during the periodic price reviews. With regard to Components, BUYER
shall notify SUPPLIER of price changes for Components that BUYER has negotiated
with its Component supplier(s), and may revise its instructions to SUPPLIER
regarding quantities and sources of supply from time to time as permitted
herein. SUPPLIER agrees to implement such price changes within one (1) week of
receiving notice from BUYER and adjust its outstanding Purchase Orders and Build
Plans and sources of supply as soon as possible and BUYER agrees to buy down the
inventory where Components prices have decreased, as defined in the PPV process
in Section 7.5 below. SUPPLIER must obtain BUYER’s prior written approval before
purchasing Components contrary to BUYER’s instructions. The split for sharing of
cost reductions is shown in the following table:

 

Originator of Change

  

Benefits from Cost Reduction

(after exhausting on-hand inventory, any
non-recurring costs associated with cost
reduction activity and non-changeable POs):
First 3 Months

  

Benefits from Cost Reduction:

After 3 Months

[***]

   [***]    [***]

[***]

   [***]    [***]

[***]

   [***]    [***]

In the event that SUPPLIER expends extraordinary effort, BUYER may extend the
cost sharing period for SUPPLIER from three (3) to six (6) months. BUYER shall
have the option at any time to work with SUPPLIER to revise costs to reflect
supplier cost reductions for Components or increase coverage on a
forward-looking basis. Components that have already been received by SUPPLIER
that are affected by SUPPLIER cost reductions or increase coverage shall be
addressed via the cost adjustment process set forth herein.

 

  7.4 Committed Cost Reductions. BUYER will own the BOM and provide SUPPLIER
with pricing, approved suppliers, and split percentages (for multi-sourced
Components) for BUYER Controlled components on the BOM. For non-controlled
components, BUYER will provide SUPPLIER with approved suppliers but will
leverage SUPPLIER’s negotiated pricing for those parts on BUYER’s approved
supplier list. SUPPLIER will use best efforts to a minimum percentage cost
takedown each quarter for all non-controlled components as specified in the
Statement of Work. BUYER will work in good faith to support SUPPLIER in
evaluating and qualifying SUPPLIER-suggested alternate sources of supply. BUYER
will drive cost reductions for BUYER-controlled components. For new products,
BUYER and SUPPLIER may agree to greater quarterly cost takedowns and this will
be specified in each Statement of Work.

 

  7.5 Purchase Price Variance Reports. BUYER shall not be responsible for
increases in materials and Component prices of [***], except for BUYER
Controlled Components. Unless SUPPLIER receives prior written approval, Buyer
will not be liable for increases in materials and Component prices of [***].
thus generating a Purchase Price Variance (“PPV”). For materials or Component
price increases [***], SUPPLIER must notify BUYER and submit a PPV Variance
Form, in the form set forth on Exhibit G, within three (3) Business Days after
SUPPLIER discovers a potential Component price increase. BUYER

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

12

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MANUFACTURING AND PURCHASE AGREEMENT

 

  may either accept or reject the price increase within five (5) Business Days
BUYER will pay amounts to SUPPLIER for pre-approved items listed in the PPV
Form, based on when the materials or Components were received and the charges
incurred. Such payments shall only be made for materials or Components purchased
by SUPPLIER within the parameters set forth in the Build Plan and only from
vendors on the AVL.

 

  7.6 SUPPLIER’s Bill of Materials. Upon BUYER’s request, and no less than
quarterly, SUPPLIER shall furnish BUYER with SUPPLIER’s updated costed BOM for
the Products in accordance with BUYER’s requirements and within the time period
specified by BUYER. SUPPLIER and BUYER agree to work together actively to reduce
the cost of Components, processes associated with the manufacture of Products,
and the Products.

 

  7.7 Taxes and Duties.

 

  7.7.1 Taxes. The parties’ obligations with respect to the taxes and duties on
the Products shall be set forth on Exhibit C or the applicable Statement of
Work. Taxes, when applicable, will appear as a separate item on SUPPLIER’s
invoice. If applicable law requires BUYER to withhold any taxes levied by any
governmental authority on payments to be made pursuant to this Agreement
(“Withholding Tax”), BUYER shall be entitled to deduct such Withholding Tax from
the payments due SUPPLIER hereunder. If SUPPLIER is eligible to take advantage
of the reduced Withholding Tax provided for by an applicable taxing agency,
SUPPLIER shall furnish BUYER with all appropriate forms, documents and paperwork
required to obtain such reduced Withholding Tax.

 

  7.7.2 Exemption. Where the law permits, SUPPLIER will treat BUYER as exempt
from applicable state and/or local sales tax for Product(s) purchased pursuant
to this Agreement. Where required by state or local law, BUYER will provide
SUPPLIER with a valid reseller’s exemption certificate for each taxing
jurisdiction to which SUPPLIER ships Product(s) and SUPPLIER shall promptly
execute and furnish such certificate to BUYER.

 

  7.8 Most Favored Customer Prices. SUPPLIER shall treat BUYER as a most favored
customer. SUPPLIER represents and warrants that all of the prices, warranties,
benefits and other terms set forth hereunder are equivalent to or no less
favorable than the terms being offered by SUPPLIER to its other customers and
distributors of similar product(s). If, during the term of this Agreement,
SUPPLIER enters into an agreement with any other customer that contains more
favorable terms than are provided hereunder, then this Agreement shall be deemed
automatically amended to provide such terms to BUYER, which shall be effective
as of the effective date of such agreement. BUYER may, at its option, either
elect to receive from SUPPLIER a credit against future invoices for the
retroactive amounts due to BUYER by reason of such favored customer status or a
cash refund. SUPPLIER agrees to fulfill its most favored customer obligations to
BUYER in good faith and will not create any terms, conditions, purchasing
program, pricing formulas or other conditions that serve to deny BUYER the
benefits of its most favored customer status.

 

  7.9 Reports and Meeting. SUPPLIER shall promptly submit the reports described
in the Joint Services Agreement in accordance with the times contained therein
and all other elements that make up the cost of the Products. The parties will
also meet with the frequency described in the Joint Service Agreement, on the
specific dates as agreed to by the parties.

 

8. Delivery Terms.

 

  8.1 Delivery Point. The shipping terms shall be [***]. Title to and risk of
loss of the Products shall pass to BUYER upon SUPPLIER’s tender of delivery to
the common carrier or BUYER’s designee.

 

  8.2 Shipping. SUPPLIER may ship partial orders provided SUPPLIER notifies
BUYER and BUYER agrees in writing prior to shipment. BUYER’s Purchase Order
and/or Build Plan shall specify the carrier or means of transportation or
routing, and SUPPLIER will comply with BUYER’s instructions, including, without
limitation, drop shipping directly to a BUYER designated destination. If BUYER
fails to provide shipping instructions, SUPPLIER shall, in its reasonable
discretion, select the best available carrier, on a commercially reasonable
basis. At the time of each shipment, SUPPLIER shall notify BUYER (and/or its
designated recipient) in writing as to the quantity shipped and the anticipated
arrival date of the shipment. If SUPPLIER utilizes SUPPLIER’s carrier based on
the exception above, BUYER will be invoiced for the shipping cost with no
supplier markup.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

  8.3 Packing Instructions. All Products shall be packaged and prepared for
shipment in a manner which (i) follows the requirements set forth in the
applicable Statement of Work, (ii) follows good commercial practice, (iii) is
acceptable to common carriers for shipment, and (iv) is adequate to ensure safe
arrival. SUPPLIER shall mark the outside of each shrink wrapped pallet with the
applicable BUYER part numbers and any necessary lifting and handling
information. Each shipment shall be accompanied by a packing slip which will
include BUYER’s part numbers, Purchase Order or Build Plan number, the quantity
shipped and country of origin. Shipping marks and labels shall not contain any
identifying references such as Product names and model numbers, to minimize the
risk of theft and shrinkage.

 

  8.4 Responsibility for Export Licensing. SUPPLIER agrees, upon BUYER’s
request, to deliver Products to BUYER’s freight forwarder for export from the
country of origin. BUYER will be responsible for obtaining the appropriate
licenses or permits necessary to export Products from the country of origin with
assistance from SUPPLIER as provided for in this Section. SUPPLIER shall furnish
BUYER or BUYER’s designee with the information necessary for BUYER to timely
obtain all required export and import documentation.

 

  8.5 Delivery Schedule. Delivery shall be pursuant to the schedule set forth in
BUYER’s Purchase Order and/or Build Plan. Upon learning of any potential
delivery delays, SUPPLIER shall immediately notify BUYER in writing of any
anticipated delay in meeting the delivery schedule, stating the extent and
reasons for the delay. If SUPPLIER fails to meet the committed delivery
schedule, then SUPPLIER, upon BUYER’s request, shall expedite the delivery at
SUPPLIER’s expense by employing accelerated measures such as paying for material
expediting fees, premium transportation costs, or overtime labor required to
minimize the lateness of the Delivery; provided, however, if SUPPLIER fails to
meet the delivery schedule [***], then BUYER, at its sole option and without
liability or any additional expense, may (i) require SUPPLIER to expedite the
delivery by the fastest available commercial carrier; (ii) reschedule the
delivery; or (iii) cancel the delivery in whole or in part.

 

  8.6 Incomplete Shipments. No delivery of Products shall be deemed complete
unless such delivery: (i) complies with the terms of the Purchase Order for the
Products ordered; (ii) is accompanied by a certificate of conformity, required
test sheets and all other required documents corresponding to the relevant
Specifications; and (iii) is accompanied by the relevant pro-forma invoice and
any other documents required for transportation. BUYER will not have any
obligation to accept any such incomplete shipments, except as BUYER may
otherwise agree in advance and in writing, and BUYER may return incomplete
shipments to SUPPLIER at SUPPLIER’s sole risk and expense.

 

  8.7 Timing. SUPPLIER shall not deliver any Products earlier than three
(3) Business Days prior to the scheduled delivery date or later than the
acknowledged delivery date, without BUYER’s written consent, and BUYER may
return early, excess or late shipments to SUPPLIER at SUPPLIER’s sole risk and
expense.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

9. Invoicing and Payment.

 

  9.1 SUPPLIER will submit invoice(s) to BUYER upon shipment of Product(s). The
invoices must include the BUYER Purchase Order number, Product number, and price
(unit, extended). All such invoices shall indicate any discounts which are
applicable to such purchase. Subject to acceptance of the Products all invoices
shall be due and payable in accordance with Exhibit C. Payment shall not
constitute acceptance of the Products by BUYER. SUPPLIER shall furnish bills of
lading, express receipts, or other proof of delivery upon BUYER’s request.

 

  9.2 Supplier shall submit invoices (an original and two copies) to Buyer at
the address on the Statement of Work or Purchase Order containing at least the
following information: (i) the name of the Supplier, address to which invoice
payments should be made, and all bank details required for invoice payments
(unless cheque payment applies and bank details had been exchanged before) ;
(ii) invoice date; (iii) Supplier’s order number; (iv) description, quantity,
unit of measure, unit price and extended price of the goods delivered;
(v) transportation charges, including domestic and foreign inland freight and
insurance, and any applicable taxes or duties, if applicable and specifically
allowed under this Agreement; (vi) reference this Agreement and to the
applicable Statement of Work or Purchase Order purchase is authorized under; and
(vii) any other information specified in the applicable order.

 

10. Quality and Acceptance.

 

  10.1 At BUYER’s Designated Facility. All Products are subject to BUYER’s
inspection and testing at any BUYER-designated facility before final acceptance,
as set forth in Exhibit I.

 

  10.2 At SUPPLIER’s Facility. BUYER shall be entitled to conduct inspections
and qualifications at SUPPLIER’s facility, as set forth in Exhibit I.

 

  10.3 Failure to Inspect. Notwithstanding anything to the contrary contained in
this Agreement, inspection or failure to inspect the Products upon delivery will
not affect BUYER’s rights under the warranty provisions of this Agreement.

 

  10.4 ISO 9001 and ISO 14001 Certified Supplier. SUPPLIER represents that
SUPPLIER has, and will at all times during the term of this Agreement have, ISO
9001 and ISO 14001 certifications. SUPPLIER represents that any Subcontractors
used by SUPPLIER in the manufacture of Products have, at a minimum, ISO 9001
certification, unless specifically agreed to, on a case-by-case basis, in
writing by BUYER. Further terms and conditions concerning SUPPLIER’s
qualifications as an ISO 9001 and ISO 14001 are set forth in Exhibit I.

 

  10.5 Epidemic Failure. “Epidemic Failure” for any particular Product shall
mean a failure resulting from defects in material, workmanship, and
manufacturing process, including but not limited to the use of Components with
known defects. The Epidemic Failure clause shall be invoked [***]. The failure
rate may be calculated [***], as determined by BUYER. Epidemic failures do not
supersede the requirements of any expressed or implied warranty defined herein.
In the case of an epidemic failure, SUPPLIER’s obligation is to propose an
action plan to fix the failure of any affected Product within seventy-two
(72) hours of discovery. SUPPLIER shall implement this action plan upon BUYER’s
acceptance thereof. If the action plan is not acceptable to BUYER, BUYER can
require SUPPLIER to repair or replace, at BUYER’s option, the affected Product.
In addition to bearing the costs associated therewith, if requested by BUYER,
SUPPLIER shall support and provide at SUPPLIER’s expense a sufficient number of
units of the Product to permit the field exchange or “hot swap” of Products at
customer sites. The parties agree to make all reasonable efforts to complete the
repair or replacement of all affected Products within eight (8) Business Days
after written notice of epidemic failure by BUYER to SUPPLIER. SUPPLIER also
agrees that BUYER will be supported with accelerated shipments of replacement
Product to cover BUYER’s supply requirements. If an Epidemic Failure is caused
by (i) a design, including a BUYER-provided test process, as required by the
Specifications or (ii) a failure by a Component required by the Specifications,
(iii) misuse or damage during transit or damage by a third party at no fault of
SUPPLIER, SUPPLIER shall perform the obligations in this Section 10.5 and BUYER
shall pay to SUPPLIER the fees mutually agreed upon by the parties in writing.
If an Epidemic Failure is caused by any other reason other than as set forth in
the immediately preceding sentence, SUPPLIER shall perform the obligations set
forth in this Section free of charge.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

11. Compliance with Specifications. All Products delivered hereunder shall fully
comply with: (i) the Specifications; (ii) any end user documentation that may be
included with each Statement of Work for a Product; and (iii) all applicable
laws, rules and regulations.

 

12. Regulatory Agency Compliance. All Products delivered hereunder, shall fully
comply with known regulatory agency requirements (e.g., Product Safety).
SUPPLIER will support BUYER in obtaining all required agency certifications and
approvals for the Products in BUYER’s name. SUPPLIER will be open to inspections
by all compliance agencies as it relates to BUYER Products. All compliance
agency inspection reports will be provided by SUPPLIER to BUYER within
twenty-four (24) hours of receipt.

 

13. Representations and Warranties.

 

  13.1 Hardware Products.

 

  13.1.1 Hardware Warranty. SUPPLIER warrants that all hardware portions of the
Products (including associated firmware media) sold by SUPPLIER to BUYER under
the terms of this Agreement will (i) be free from defects in workmanship and
Component (save and except for latent Component defects which could not be
detected through the tests processes which are mutually agreed), and
(ii) conform to the Specifications for a [***]. If BUYER, in its reasonable
opinion, believes that any Product or part thereof contains a defect in
materials or workmanship, or otherwise fails to conform to the Specifications,
during the warranty period, SUPPLIER shall at its expense correct any such
defect by repairing such defective Product or part or, at BUYER’s option, by
delivering to BUYER an equivalent Product or part replacing such defective
Product or part. Except as set forth in the immediately following sentence,
nonconforming and/or defective Products shall be managed in accordance with
Exhibit H. In the event a Product completely fails to function within the first
seventy-two (72) hours of installation (dead-on-arrival or DOA), SUPPLIER agrees
to replace the failed Product with a new Product and will ship replacement
within four (4) hours of notification using same day, if possible, or at the
latest next day delivery. SUPPLIER shall waive any expedite charges to BUYER in
order to affect earliest reasonable replacement of such defective Product(s).
Notwithstanding the foregoing, if a unit of the Product under warranty should
fail owing to a defective Component part, SUPPLIER shall manage the warranty
process and provide assistance and information to BUYER required to enforce, or
pass on SUPPLIER’s rights or otherwise support BUYER in order to enforce the
original manufacturers’ warranty terms, this includes BUYER providing evidence,
testimony engagement of, and working with expert witnesses in any claim for
damages against the Component manufacturer.

 

  13.1.2 Return of Products. BUYER will notify SUPPLIER of nonconforming
Product. Such notification shall include serial numbers and reason for
nonconformance. Nonconforming Products will be repaired as specified in Exhibit
H.

 

  13.1.3 Failure Trend. For any Product family set forth on Exhibit C which has
a failure rate resulting from defects in material, workmanship, manufacturing
process and/or design deficiencies, including but not limited to the use of
Components with inherent or latent defects, that exceeds one percent (1%) from
the same root cause during any two (2) consecutive calendar months, a “Failure
Trend” shall be deemed to have occurred for the applicable Product family. Such
failure rate shall be calculated as the greater of: (i) the total number of
units of the applicable Product family that contain such defects divided by the
total number of units of that Product family shipped by BUYER to date, or
(ii) the total number of units in the applicable Product family that have been
registered with BUYER that contain such defects divided by the total number of
units of that Product family that have been registered with BUYER to date, as
determined by BUYER in its sole discretion. SUPPLIER shall immediately take
corrective action with respect to the Failure Trend to reduce the failure rate
of the applicable Product family to one percent (1%) or less by the last day of
the calendar month following the occurrence of the Failure Trend. If SUPPLIER is
unable to reduce such failure rate to one percent (1%) or less by the last day
of such following calendar month, BUYER, at its sole discretion, may return any
defective Product to SUPPLIER for evaluation and repair in accordance with
Exhibit H. In addition, nothing in this Section shall have any effect on, and
BUYER shall retain all of its rights and remedies herein. This Section shall not
apply if the Failure Trend is caused by (i) a design required by the
Specifications or (ii) a failure by a Component required by the Specifications.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  13.2 Title; No Conflict. Each Party represents and warrants that it has
sufficient right, title and interest to enter into this Agreement and to perform
its obligations hereunder. Further, each Party represents and warrants that it
has not granted to any third party any rights which conflict or interfere with
or supersede the rights granted to the other Party hereunder.

 

14. Inventory Control and Security Measures.

 

  14.1 Inventory Control. At all times during the term of this Agreement,
SUPPLIER shall (i) physically segregate the Products in a SUPPLIER inventory
location so as not to mix BUYER inventory with other customer inventory;
(ii) physically segregate agency approved (e.g., RoHS) components from
non-agency approved (e.g., non-RoHS) components; and (iii) maintain clear and
accurate records of all inventory transactions, including, without limitation,
receipts, usage and scrap. At predetermined times, SUPPLIER and BUYER shall
conduct a physical inventory of the Products.

 

  14.2 Security Measures. At all times during the term of this Agreement,
SUPPLIER shall take security measures reasonably necessary (as determined by
BUYER) as may be more fully described in a Statement of Work and, including but
not limited to the minimum security provisions set forth in Exhibit J.

 

15. Engineering Change Procedures

Buyer may at any time during the term of this Agreement request in writing
changes to the Products or services provided under a Statement of Work. Within a
reasonable time after receiving such a request but in any event within five
(5) Business Days, the SUPPLIER will inform BUYER in writing whether the
requested change(s) is technically feasible and advise as to its impact on cost,
resource requirements, schedule and any other consequent changes to the Products
or services. For any such changes, the SUPPLIER will give BUYER a written fixed
price quotation or its firm estimate. If the Parties agree to proceed with the
as changed, then the details of such changes will be recorded in writing on a
engineering change document similar to the template included as an exhibit to
this Agreement and executed by both parties. No changed order shall be binding
on Buyer without a valid executed Change Order document.

 

16. Confidentiality.

The parties agree that the terms of the non-disclosure agreement executed
between the parties on the 1st of April, 2011 shall govern the exchange of
confidential information between the parties (“NDA”). The terms of the NDA shall
continue to apply to this Agreement until the Agreement terminates or expires
regardless of the termination or expiration of the NDA.

 

17. Relationship of the Parties.

 

  17.1 The relationship of the parties hereto is that of independent
contractors. Under no circumstances shall any employees of one party be deemed
to be the employees of the other for any purpose. Each party shall pay all
wages, salaries, and other amounts due its respective employees relative to this
Agreement and shall be responsible for all obligations respecting them relating
to applicable payroll taxes, income tax withholdings, disability, workers’
compensation and unemployment insurance premiums, health care and pension plan
contributions and other similar responsibilities. Neither party has the right
nor authority to assume or to create any obligation or responsibility on behalf
of the other party, except as may, from time to time, be provided by written
instrument signed by both parties. Nothing contained herein shall be construed
as creating an agency or joint venture, consortium or partnership between the
parties. Supplier and its employees shall not acquire any of the rights or
privileges of any Buyer employee.

 

  17.2 SUPPLIER agrees to indemnify BUYER from any claims, losses, costs, fees,
liabilities, damages, attorney’s fees and expenses suffered by BUYER arising
directly or indirectly from any allegation or determination that SUPPLIER or its
employees or subcontractors are employees of BUYER.

 

  17.3 If any employee or subcontractor of SUPPLIER makes a claim that an
employee or independent contractor of BUYER may be treating them in an improper
manner, including subjecting them to discrimination or harassment, SUPPLIER
shall report this immediately to BUYER. BUYER shall be relieved of liability to
the extent that SUPPLIER fails to inform BUYER of any such instance of improper
behavior.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

18. Termination

 

  18.1 Termination for Cause. In the event that SUPPLIER materially breaches or
defaults any of its obligations, duties or responsibilities under this Agreement
or any Statement of Work or Purchase Order, which breach or default has not been
remedied within thirty (30) days after written notice is given to SUPPLIER
specifying the breach or default, BUYER may, at no liability to BUYER, provide
written notice terminating this Agreement or any Statement of Work or Purchase
Order as of the date specified in such termination notice. Before BUYER
exercises BUYER’s right to terminate under this Section 18.1, BUYER will use the
dispute resolution procedure set forth in Section 22.

 

  18.2 Obligations in the Event of Termination

 

  18.2.1 In the event of Termination, BUYER may require SUPPLIER to promptly
transfer and assign title and immediately deliver to BUYER any completed
Products, WIP, Components, BUYER Tools, BUYER’s Intellectual Property, BUYER’s
confidential information and other items that SUPPLIER has produced or acquired
for the performance of the canceled portions of the order and for which BUYER
has paid.

 

  18.2.2 Supplier will return all BUYER Confidential Information, BUYER Data and
other information received from BUYER that pertains to the Products or services
described herein upon BUYER’s request. Any Confidential Information, BUYER Data
or which cannot be returned must be destroyed and so certified by SUPPLIER.

 

  18.2.3 Unless otherwise agreed to in advance and in writing SUPPLIER hereby
grants and agrees to grant BUYER a worldwide, non-exclusive, irrevocable,
perpetual license to use any SUPPLIER Technology necessary for the, manufacture,
production, marketing and sales of any of the BUYER designed Products; provided,
however, BUYER covenants not to exercise such license until the effective date
of termination of this Agreement or upon delivery to BUYER of the BUYER
Properties, whichever is earlier. BUYER agrees to pay a reasonable royalty or
license fees for the license of the applicable SUPPLIER Technology. The parties
will only negotiate the amount of the royalty or license fees for such license.
The parties shall negotiate such royalties or fees in good faith promptly upon
termination of this Agreement; provided that SUPPLIER will offer to BUYER a fee
for such license that is no higher than that offered to any other customer of
SUPPLIER for comparable technology and in no case will this fee exceed one
percent (1%) of the total cost of producing the Products that use SUPPLIER
Technology based upon the pricing model in Exhibit C.

 

  18.2.4 SUPPLIER will immediately cease the use of all of the BUYER Technology
and BUYER Properties, except that upon the termination of this Agreement for any
reason, SUPPLIER will complete the production of any Products of which SUPPLIER
has accepted a Build Plan as of the effective date of such termination and
deliver such completed Products to BUYER within twenty (20) days of the
effective date of such termination;

 

  18.2.5 SUPPLIER shall promptly provide all Loaned Materials to BUYER. To the
extent that BUYER has exercised its option to purchase Necessary Equipment upon
termination of this Agreement, BUYER agrees to pay a reasonable one-time fee to
SUPPLIER to be negotiated in good faith by the parties at the time of
termination, taking into consideration the condition and fair market value of
the items. In addition, SUPPLIER shall promptly transfer to BUYER any title
and/or license with respect to the Necessary Equipment held in its name.

 

  18.3 Payments following Termination. In the event of termination of this
Agreement; or a Statement of Work or Purchase Order for convenience, BUYER shall
pay SUPPLIER for all Products and/or services provided up to the effective date
of termination as specified in the Agreement and/or the applicable Statement of
Work or Purchase Order.

 

  18.3.1 Completed Products or services: BUYER shall pay SUPPLIER for the
purchase price of any completed Products or services required for a Purchase
Order prior to the date of Supplier’s receipt of BUYER’s Termination or
Suspension Notice (“Notice Date”). BUYER shall not be required to pay for any
Products or services completed after the receipt of the Buyer’s Termination or
Suspension Notice.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

18

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MANUFACTURING AND PURCHASE AGREEMENT

 

  18.3.2 Product WIP and Components: BUYER shall pay SUPPLIER the reasonable and
actual costs incurred by Supplier, prior to the Notice Date, for Components and
WIP for the canceled or changed portion of the order. In all cases, however, the
SUPPLIER’s recovery will be limited as follows: (a) SUPPLIER will only be
reimbursed for Components and WIP which are not cancelable, saleable, or
otherwise usable by SUPPLIER; (b) The reasonable manufacturing cycle time period
for the Products in question will be the maximum period for which SUPPLIER may
claim WIP costs prior to the notice date; and (c) The reasonable lead time
necessary to order Components for the Products in question will be the maximum
period for which SUPPLIER may claim Components’ costs prior to the Cancel Date.

 

  18.4 Transition Services. Upon expiration or termination of this Agreement,
BUYER may request that SUPPLIER provide transition services to BUYER to ensure
an orderly transfer of services to BUYER or any other third party BUYER may
designate as a successor to SUPPLIER. Transition services, if any, will be
undertaken at agreed upon rates in accordance with the terms of a Statement or
Work or change request, signed by both parties. During any such transition
period Supplier agrees to maintain the same level of performance of services and
use its best efforts to cooperate with BUYER and the successor to effect an
orderly and efficient transition.

 

19. Force Majeure/Business Continuity Plan

 

  19.1 Business Continuity Plan. Beginning 30 days following the Effective Date
of this Agreement and continuing through the termination or expiration of this
Agreement, SUPPLIER shall maintain a mutually agreeable Business Continuity Plan
to ensure the uninterrupted flow of Product to BUYER in the case of the
diminution or cessation of operations of SUPPLIER for any reason that may affect
BUYER’s relationships with BUYER’s customers including Force Majeure. SUPPLIER
shall provide such Business Continuity Plan to BUYER for BUYER’s review no later
than thirty (30) days from the date of this Agreement. If a catastrophic event
occurs including Force Majeure, SUPPLIER shall notify BUYER immediately of the
situation and shall implement, within three (3) days, the Business Continuity
Plan to resolve the problem. Only if BUYER complies with the obligations set
forth in this Section 19.1 will SUPPLIER be temporarily relieved of its
obligations under this Agreement. Notwithstanding the foregoing, BUYER reserves
the right to terminate the Agreement or Statement of Work or Purchase Order if
BUYER reasonably determines such delay is or will detrimentally affect the value
and usefulness of the Products or services or SUPPLIER failed to promptly
implement its Business Continuity Plan.

 

  19.2 Force Majeure. Subject to Section 19.1 above, neither party shall be
liable for any delay in performance or non-performance (including payment
obligations), directly or indirectly caused by Act of God, fire, explosion,
flood, war, act of terrorism, act of, or authorized by any government, accident
or any other circumstances beyond the control of the Party. Any Party so delayed
in its performance will immediately notify the other by email or telephone or by
the most timely means otherwise available.

 

20. Insolvency

In the event that a party:

 

  (a) Becomes insolvent or unable to pay its debts or perform its obligations as
they mature;

 

  (b) Becomes the subject of any voluntary or involuntary proceeding in
liquidation, dissolution, receivership, attachment, composition or general
assignment for the benefit of creditors; or

 

  (c) Pursues any other remedies under any other law relating to relief for
debtors,

Then such party will provide prompt notice to the other and reasonable
assurances therefore, as may be requested from the other party from time to
time, that it can and will perform its obligations under this Agreement. If such
notices or assurances are not received in a timely manner or are not reasonably
satisfactory to the party receiving the assurances, then such party may
terminate any Statement of Work or Purchase Order or this Agreement in whole or
in part without any cost or liability.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

19

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MANUFACTURING AND PURCHASE AGREEMENT

 

21. Governing Law

This Agreement shall be construed, governed and interpreted in accordance with
the laws of the United States of America and the State of California, without
regard to choice of law principles. The U.N. Convention on Contracts for the
International Sale of Goods does not apply to this Agreement.

 

22. Disputes

The Parties shall attempt, in good faith, to resolve any dispute promptly by
discussion and negotiation which shall be conducted as follows:

 

  (a) the dispute shall be referred, by either Party, first to the senior
managers of each of the Parties for resolution;

 

  (b) if the dispute cannot be resolved by the senior managers of the Parties
within 14 days after the dispute has been referred to them, either Party may
give notice to the other Party in writing (“Dispute Notice”) that a dispute has
arisen; and

 

  (c) within seven days of the date of the Dispute Notice, each Party shall
refer the dispute to the most senior representative of each of the Parties for
resolution.

If the most senior representative of each of the Parties are unable, or fail, to
resolve the dispute within 21 days of the date of the Dispute Notice, the
Parties may attempt to resolve the dispute by mediation in accordance with this
clause.

If, within 30 days of the Dispute Notice, the Parties have failed to agree on a
resolution, either Party may refer any dispute for mediation, but neither shall
be a condition precedent to the commencement of any arbitration proceedings as
set forth in this Section 22, and either Party may issue and commence
arbitration proceedings prior to or contemporaneously with the commencement of
mediation. All disputes arising out of or relating to this Agreement that are
referred to arbitration as set forth above will be resolved by binding
arbitration to take place in County of Santa Clara, State of California, United
States of America, under the Rules of Arbitration of the International Chamber
of Commerce (the “RAICC”). The arbitration administration and appointing
authority will be the International Chamber of Commerce (the “ICC”), and the
arbitrator(s) shall apply the governing law as set forth in Section 21, to
decide the dispute. The arbitration will be conducted by a panel of three
arbitrators, one chosen by each party to this Agreement and the third by
agreement of the parties; failing agreement within 30 days of commencement of
the arbitration proceeding, the ICC will appoint the third arbitrator in
accordance with the RAICC. The proceedings will be confidential and conducted in
English. The arbitral tribunal will have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
to resolve a disputed matter. The arbitration award will be final and binding on
the parties and the award may be entered by any court of competent jurisdiction,
and each of the parties irrevocably submits to the jurisdiction of such court
for confirmation and/or recognition and/or enforcement of any award rendered by
the arbitral tribunal in accordance with, inter alia, the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The
arbitral tribunal will determine how the parties will bear the costs of the
arbitration. Notwithstanding the foregoing, with respect to claims relating to
intellectual property, each party will have the right at any time to immediately
seek injunctive relief, an award of specific performance or any other equitable
relief against the other party in any court or other tribunal of competent
jurisdiction. During the pendency of any arbitration or other proceeding
relating to a dispute between the parties, SUPPLIER will continue to exercise
its remaining respective rights and fulfill its remaining respective obligations
under this Agreement. SUPPLIER hereby consents to being served outside the State
of California, United States of America with any documents relating to any
dispute, or proceedings in any court, permitted under this Agreement. The rights
and remedies provided by BUYER in this Agreement shall be cumulative and in
addition to any other rights and remedies provided by law or equity or those
provided under the Uniform Commercial Code.

 

23. Assignment

No part of this Agreement may be assigned or subcontracted by SUPPLIER without
the prior written approval of BUYER.

 

24. Change of Control

This Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective successors and assigns. SUPPLIER may request that
any acquirer of all or substantially all of the assets of BUYER provide written
confirmation of its obligations under this Agreement within thirty (30) days of
the closing of such acquisition.

 

25. Compliance with Laws

 

  25.1 SUPPLIER shall comply with all applicable laws and regulations and shall
monitor any modifications to them. This includes, but is not limited to, the
laws and regulations governing the following: environmental,

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  health, safety, labor, employment, child labor, intellectual property,
discrimination and human rights. SUPPLIER shall comply with the standards of the
industry. SUPPLIER must not use forced labor. SUPPLIER shall ensure the
compliance of its Products with specific legal requirements applicable to the
countries into which Products are being sold to BUYER.

 

  25.2 Export Compliance

 

  25.2.1 SUPPLIER shall promptly notify, and provide Buyer with, necessary or
applicable supporting documents, permits, approvals or information required to
comply with export or import regulations and/or BUYER policy, including
manufacturer’s affidavit, certificate of origin, manufacturer’s safety data
sheet and other items.

 

  25.2.2 Transfer, export, re-export or import of Product, software or
technology may require an approved government license, permit, or other
authorization from the applicable government(s). Each party shall comply, at its
own expense, with all applicable import and export laws, restrictions, and
regulations of the United States and all other applicable foreign governments
relevant to such party.

 

  25.2.3 Each party hereby acknowledges that it will not export any Product,
related documentation or technical data without first obtaining the required
export licenses. SUPPLIER hereby agrees to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (“Act”) and shall refrain from making any
payments to third parties that would cause SUPPLIER or BUYER to violate the Act.

 

  25.2.4 The Parties agree to comply with all laws, ordinances, rules,
regulations, and other requirements of all governmental units or agencies,
including obtaining all import/export and other permits, certificates, and
licenses required by foreign jurisdictions.

 

26. Indemnification

 

  26.1 General Indemnification: SUPPLIER is solely responsible for and shall
indemnify, defend and hold BUYER and its respective directors, officers, agents,
employees and customers (each an “BUYER Indemnitee”) harmless from and against
all claims, demands, threats, damages, losses, liabilities, costs, expenses and
reasonable attorney’s fees (collectively “Damages”) arising out of a claim by a
third party against an BUYER Indemnitee resulting from or alleged to have
resulted from any act or omission of SUPPLIER, its employees or agents under or
related to this Agreement which has not been rectified in accordance with the
terms herein including. BUYER will provide SUPPLIER with prompt written notice
of the claim and permit SUPPLIER, at SUPPLIER’s expense, to control the defense,
settlement, adjustment or compromise of any such claim. BUYER may employ counsel
at its own expense to assist it with respect to any such claim. SUPPLIER shall
have no authority to settle any claim on behalf of BUYER if any such settlement
imposes any obligation on BUYER.

 

  26.2 Infringement Indemnification: SUPPLIER shall indemnify and hold harmless
BUYER, and, at BUYER’s request, defend BUYER and the BUYER Indemnitees from and
against any Damages arising from or relating to any claim that BUYER infringes
any proprietary rights of any third party as a result of the manufacturing
services provided under this Agreement including, but not limited to: the actual
or alleged infringement of any patent, copyright, trade secret, trademark, mask
work or other third party right worldwide arising from or related to the
manufacturing of any Products or services furnished under this Agreement and
alleged defect in the Components or services, whether latent or patent,
including any failure of the Components, Products or services to comply with
their specifications. BUYER will provide SUPPLIER with prompt written notice of
the claim and permit SUPPLIER, at SUPPLIER’s expense, to control the defense,
settlement, adjustment or compromise of any such claim. BUYER may employ counsel
at its own expense to assist it with respect to any such claim. SUPPLIER shall
have no authority to settle any claim on behalf of BUYER.

 

  26.2.1 If the exercise by BUYER or any BUYER Indemnitee of any rights granted
herein is enjoined, or in BUYER’s reasonable opinion is likely to be enjoined,
at BUYER’s request and option, and without prejudice to any other rights and
remedies Buyer otherwise may have at law, in equity, or under this Agreement,
SUPPLIER shall, at its expense, use its best efforts to:

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

  (a) Procure from the person(s) claiming infringement a license for BUYER to
continue to exercise all rights granted under this Agreement; or,

 

  (b) Modify, without diminishing existing functionality, the allegedly
infringing item to avoid infringement.

 

  26.2.2 If options (a) and (b) cannot be accomplished despite such attempts,
then, in addition to any other rights at law or in equity or otherwise provided
for in this Agreement, SUPPLIER shall refund to BUYER all amounts previously
paid to SUPPLIER under this Agreement related to such infringing item.

 

  26.3 BUYER infringement Indemnification: BUYER shall indemnify and hold
harmless SUPPLIER, and, at SUPPLIER’s request, defend SUPPLIER and its
respective directors, officers, agents, and employees (“SUPPLIER Indemnitees”)
from and against any Damages arising from or relating to any claim that SUPPLIER
infringes any proprietary rights of any third party as a result of the use and
sale of the Products under this Agreement including, but not limited to: the
actual or alleged infringement of any patent, copyright, trade secret,
trademark, mask work or other third party right worldwide arising from or
related to the use and sale of any Products under this Agreement and alleged
defect in the Products, whether latent or patent, including any failure of the
Products to comply with their Specifications not subject to the indemnification
provided in Section 26.2. SUPPLIER will provide BUYER with prompt written notice
of the claim and permit BUYER, at BUYER’s expense, to control the defense,
settlement, adjustment or compromise of any such claim. SUPPLIER may employ
counsel at its own expense to assist it with respect to any such claim.

 

27. LIMITATION OF LIABILITY

 

  27.1 EXCEPT FOR LIABILITY RESULTING FROM SUPPLIER’S INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT OR A PARTY’S BREACH OF ANY OBLIGATION OF
CONFIDENTIALITY, IN NO EVENT SHALL EITHER PARTY OR THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS BE LIABLE FOR ANY INDIRECT, SPECIAL, PUNITIVE,
EXEMPLARY, OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO
LOST PROFITS, WITH RESPECT TO THIS AGREEMENT, EVEN IF THE PARTIES HAVE BEEN
ADVISED OF THE POSSIBILITY OF THE SAME OR EVEN IF SAME WERE REASONABLY
FORESEEABLE.

 

  27.2 The entire and aggregate liability of BUYER and SUPPLIER’s exclusive
remedy for all claims of any nature against BUYER shall not exceed [***].

 

  27.3 Nothing in any of SUPPLIER’s documentation, any Statement of Work or any
Purchase Order shall have the effect of extending or changing the liabilities of
the parties, their directors, officers, employees and agents as provided for in
this Section.

 

  27.4 The provisions of this Section apply whether the claim for damages arises
a result of contract, tort (including negligence), or any other statutory, legal
or equitable grounds.

 

28. Audits

 

  28.1 SUPPLIER shall keep and maintain accurate records relevant to this
Agreement and all Statements of Work and Purchase Order issued hereunder for a
period of five (5) years after final payment under this Agreement. In the event
that BUYER has specific records that require a longer retention period BUYER
shall make such written request and such request shall not be unreasonably
refuse.

 

  28.2 SUPPLIER warrants and represents that it has internal controls in place,
as well as auditing procedures (scheduled and random), consistent with industry
best practices and standards.

 

  28.3 BUYER, or its authorized agent subject to signed non-disclosure
agreement, as mutually agreed between the parties, shall have the full right to
audit and review any and all relevant BUYER-related SUPPLIER records and
facilities to ensure compliance with the terms of this Agreement. Such audit may
be conducted any time during the term of the Agreement, and for a period of up
to twelve (12) months following termination or expiration of the agreement,
after BUYER provides written notice at least five (5) Business

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

  Days in advance and shall take place during SUPPLIER’s normal business hours.
In the event an audit determines material non-compliance with the terms of the
Agreement, SUPPLIER shall bear the costs of the audit.

 

  28.4 Where applicable, BUYER may impose additional audit requirements where
deficiencies in compliance are determined as related to support of the terms of
this Agreement.

 

29. Acquisition.

 

  29.1 For any business where Oclaro acquires controlling interest:

 

  29.1.1 If that acquired business has an existing agreement with SUPPLIER, the
volume for that agreement will be included in the BUYER volume discount
calculations immediately for discount purposes (retroactive to the beginning of
the current measurement period for determining the discount); and,

 

  29.1.2 If that acquired business has more favorable terms for BUYER in its
existing agreement with SUPPLIER, the more favorable terms will immediately
apply to this Agreement.

 

  29.2 If SUPPLIER acquires or is acquired by a contract manufacturer that has
an agreement with BUYER with more favorable terms than in this Agreement, the
more favorable terms will immediately apply to this Agreement.

 

30. Insurance

 

  30.1 Minimum Insurance Required. During the term of this Agreement, SUPPLIER
will obtain and maintain at its sole expense, with financially reputable
insurers licensed to do business in all jurisdictions where Products are
manufactured and services are performed, liability insurance sufficient to
protect BUYER from any claims described herein, and in any event no less than
the policies and limits set forth below. SUPPLIER will pay the premiums
therefore, and deliver to BUYER, upon execution of this Agreement, proof of such
insurance.

 

Minimum Coverage    Limits 1) Worker’s Compensation    Statutory 2) Employer’s
Liability    $500,000 each accident 4) Automobile Liability Insurance   
$1,000,000 each occurrence 5) Commercial General Liability    $10,000,000

 

  30.2 Where applicable, BUYER may impose additional insurance requirements
based upon the nature of the specific Products and services to be purchased from
SUPPLIER such additional requirements shall be outlined in an “Additional
Insurance Requirements” Exhibit to this Agreement.

 

  30.3 Every insurance policy providing the coverage required in this Section
shall contain the following or equivalent clause: “No reduction, cancellation or
expiration of the policy shall be effective until thirty (30) days from the date
written notice thereof is actually received by SUPPLIER.” Upon receipt of any
notice of reduction, cancellation or expiration, SUPPLIER shall immediately
notify BUYER.

 

  30.4 BUYER and its affiliates shall be named as an additional insured under
the Commercial General Liability Insurance policies described in this Section.
SUPPLIER waives all rights of recovery against BUYER and its affiliates for any
loss or damage covered by the Commercial General Liability Insurance policies.

 

  30.5 SUPPLIER is solely responsible for the claims of its employees and shall
release, defend, and indemnify BUYER and its affiliates from and against such
claims.

 

  30.6 The complete or partial failure of SUPPLIER’s insurance carrier to fully
protect and indemnify BUYER and its affiliates or the inadequacy of the
insurance coverage shall not in any way lessen or affect the obligations of
SUPPLIER to indemnify BUYER or its affiliates.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

31. Notices

Any notice or other document or communication required or permitted hereunder to
the parties hereto will be deemed to have been duly given only if in writing and
delivered by any of the following methods: (i) certified U.S. mail, return
receipt requested, postage prepaid; or (ii) deposit with a recognized commercial
overnight courier service, fees prepaid, in each case delivered to the addresses
of the receiving parties set forth below or such other addresses as such parties
may subsequently dictate according to the notice provisions hereof. Notice is
deemed to have been given five (5) Business Days after deposit in the mail or
one day after deposit with overnight carrier or delivery service, except that
notice of change of address is effective only upon receipt. Notice is not deemed
to have been given to BUYER unless the notice to BUYER’s General Counsel has
been delivered.

If to SUPPLIER, all notices shall be addressed and delivered to:

 

Venture Corporation LTD,

5006 Ang Mo Kio Avenue 5, #05—1/12

TECHplace ll, Singapore 569873

Attention: President, Copy to: CFO

Telephone: (65) 6482 1755

Facsimile: (65) 6482 0122

If to BUYER, all notices shall be addressed and delivered to:

 

Oclaro Inc.

2560 Junction Ave.

San Jose, CA 94538

Attention: General Counsel

Telephone: 408-383-1400

Facsimile: 408-919-1501

 

32. Amendment

Any and all amendments, alterations, or additions to this Agreement must be in
writing and executed by SUPPLIER and an authorized representative of BUYER. No
modifications to this Agreement proposed by SUPPLIER, or “riders” whether
inserted in the page margins or attached on separate pages, shall be binding on
BUYER unless signed or initialed by a duly authorized representative of BUYER.

 

33. Waiver

The failure of either party at any time to require performance by the other
party of any provision hereof will not affect in any way the right to require
such performance at any time thereafter. The waiver by either party of a breach
of any provision hereof will not be taken or held by the other party to be a
waiver of the provision itself unless such a waiver is expressed in writing.

 

34. Severability

 

  34.1 Any provision in this Agreement which is held to be illegal or
unenforceable in any jurisdiction shall be ineffective to the extent of such
illegality or unenforceability without invalidating the remaining provisions and
any such illegal or unenforceable provision shall be deemed to be restated to
reflect as nearly as possible the original intentions of the parties in
accordance with applicable law.

 

  34.2 IT IS EXPRESSLY AGREED THAT EACH PROVISION OF THIS AGREEMENT (INCLUDING
THE STATEMENT(S) OF WORK and PURCHASE ORDERS) THAT PROVIDES FOR A LIMITATION OF
LIABILITY OR REMEDIES, DISCLAIMER OF WARRANTIES, INDEMNIFICATION OF A PARTY OR
EXCLUSION OF DAMAGES OR OTHER REMEDIES IS SEVERABLE AND INDEPENDENT OF ANY OTHER
PROVISION AND IS INTENDED TO BE ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY
AGREED THAT IN THE EVENT ANY REMEDY UNDER THIS AGREEMENT IS DETERMINED TO HAVE
FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY AND EXCLUSIONS OF
DAMAGES OR OTHER REMEDIES SET FORTH IN THIS AGREEMENT SHALL REMAIN IN EFFECT.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

 

35. Survival

The provisions of this Agreement that would naturally survive termination shall
so survive.

 

36. Agreement of Precedence

Each Statement of Work and Purchase Order shall be governed by the terms of this
Agreement and the terms set out in the Statement of Work or Purchase Order. In
the event of any conflict or inconsistency between the provisions of this
Agreement and any Joint Service Agreement, Statement of Work or Purchase Order,
the same shall be resolved by giving precedence to this Agreement (including any
exhibits or addenda).

 

37. Counterparts

This Agreement may be signed in counterparts, including but not limited to
facsimile or scanned versions of the full document, each of which shall be
deemed to be an original but all of which shall constitute an original and the
same instrument.

 

38. Entire Agreement

This Agreement, together with all valid attachments, exhibits, supplemental
sheets and riders, constitutes the entire understanding and agreement of the
Parties with respect to the subject matter hereof, and supersedes all prior or
contemporaneous communications, understandings, representations and agreement,
whether written or oral, with respect to such subject matter.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

IN WITNESS WHEREOF the parties have executed this Agreement on the day and year
first above written.

 

OCLARO Technology Ltd.    Venture Corporation Ltd

 

  

 

Date

   Date

 

  

 

Signature

   Signature

 

  

 

Printed Name

   Printed Name

 

  

 

Title

   Title

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit A-1

APPROVED MANUFACTURING AND PRODUCT DEVELOPMENT LOCATIONS

1.     Approved Manufacturing and Product Development Locations.

Venture Electronics Services (Malaysia) Sdn. Bhd.

Plot 44, Bayan Lepas Industrial Park IV 11900 Penang

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit A-2

TRANSFERRED PRODUCTS

[***18 pages redacted***]

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit A-3

Preliminary FLIGHT PLANS

[***one page redacted***]

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit B

BUILD REQUEST AND BUILD PLAN FORM

These forms are set forth for example only. The parties may mutually agree in
writing to any change in format.

Build Request

The Build Request is provided by BUYER to SUPPLIER at least monthly.

Build Request Form (BUYER Requested MPS)

 

Product

 

Units

 

Wk1

 

Wk2

 

...

  

Wk26

  

Mo7

  

Mo8

  

...

  

Mo12

Name, #

                    

Name, #

                    

Name, #

                    

Name, #

                    

Name, #

                    

Build Plan

The Build Plan is provided by SUPPLIER to BUYER, after receiving Build Request,
and then jointly reviewed. The proposed Build Plan is discussed, any adjustments
are made, and the Build Plan is agreed upon jointly. The updated and agreed upon
Build Plan is then published by SUPPLIER.

Build Plan Form (SUPPLIER Committed MPS)

 

Product

 

Units

 

Wk1

 

Wk2

 

...

  

Wk26

  

Mo7

  

Mo8

  

...

  

Mo12

Name, #

                    

Name, #

                    

Name, #

                    

Name, #

                    

Name, #

                    

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit C

PRICES AND SHIPPING TERMS

Description of Products

SUPPLIER and BUYER shall set forth the requirements for transferring the
Transferred Products from BUYER’s Shenzhen facility to the Approved
Manufacturing and Product Development Locations in sequentially numbered
Statements of Work (E.g., SOW #1, SOW#2, etc.). Additional Products to be
manufactured by SUPPLIER for BUYER will be specified in a sequentially numbered
Statement of Work.

Product Price

The unit prices charged by SUPPLIER for the Products shall be those set forth on
the applicable Statement of Work, less the applicable discount, if any, stated
therein. SUPPLIER shall be solely responsible for the purchase of all Components
and parts required for manufacture production of the Products within the
Leadtime. All prices are Ex Works. Prices are exclusive of costs of Product
delivery, insurance, taxes, customs, duties, landing, storage and handling fees
included in the original price quotation, and/or cost for documents or
certificates required for Product exportation or importation.

Out of Warranty Repair Charge

Out of warranty repair requirements will be defined and set forth on each
Statement of Work. If desired, BUYER may request SUPPLIER to repair out of
warranty products. For such Products, BUYER and SUPPLIER will agree on pricing
in the applicable Statement of Work.

Invoices

Unless otherwise set forth on the applicable Statement of Work, subject to
acceptance of Products as provided in Section 10 of the Agreement, BUYER shall
[***]. Notwithstanding the foregoing, if BUYER rejects Products under the
Agreement, BUYER may delay payment of the applicable invoice until the Products
are repaired or replaced in accordance with Section 13.

Product Pricing

Definitions:

CM G&A means the SUPPLIER’s general and administrative costs including the cost
of capital for the purposes of pricing

CM Profit means the amount of SUPPLIER’s profit for the purposes of pricing

CM Mark-Up means the CM G&A and CM Profit attributed to a Product by BUYER

Consumables means the agreed consumable consumption for the necessary materials
to manufacture the Products that are not included in the Bills of Materials.
Where allocation assumptions are required, allocation will be made on the basis
of Direct Labor hours. Examples are; cleanroom supplies, process gases, etc.

Depreciation and Equipment Support means the cost applied for a piece of
Equipment upon its transfer and qualification at SUPPLIER’s manufacturing
facility determined according to Table C-5 and as otherwise set forth below,
including SUPPLIER’s incurred cost for shipping, support and maintenance of such
equipment

Direct Labor means the agreed fully-loaded direct labor cost applied to agreed
touch time per unit, including standard rate, “yielded rate”, and rework labor

Direct Materials means the actual direct materials costs per unit, net of any
discounts or rebates (BOM cost)

Facilities Costs means the agreed costs for all facilities and infrastructure
support for Products, including without limitation building and facilities
staff; equipment; warehouse facilities and staff; security; maintenance; utility
cost. Where allocation assumptions are required, Facilities Costs will be
allocated to Product families based upon their facility requirements and to
Products within a Product family on the basis of Direct Labor hours

Freight means the variable freight charges associated with the purchase of
Components which shall be determined as a maximum of 0.5% of Direct Materials
cost

Indirect Labor means the agreed costs for all indirect support for Products
including without limitation engineering, purchasing, maintenance, quality,
planning, purchasing, etc. Where allocation assumptions are required, Indirect
Labor costs will be allocated to Product families based upon their actual
support and requirements and to Products within a Product family on the basis of
Direct Labor hours

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Overhead Cost means the Indirect Labor, Facilities and Depreciation Costs
attributed to a Product by BUYER

Scrap means the agreed scrap rate, net of salvage/rework value

Variable Cost means the Direct Materials, Direct Labor, Scrap and Consumables
attributed to a Product by BUYER

Pricing Model

Pricing shall be determined and adjusted as set forth herein. The parties agree
that the price shall consist of the sum of Variable Cost plus Overhead plus CM
Mark-Ups in total, as further illustrated in Table C-1.

Table C-1

Pricing Model Elements

 

Cost Element

  

Components

Variable Cost    Direct Materials    Direct Labor    Scrap    Freight   
Consumables Overhead Cost    Indirect Labor    Facilities Costs    Depreciation
and Equipment Support CM Mark-Ups    CM G&A, including cost of capital    CM
Profit

Variable costs and Overhead shall be agreed to based upon the actual costs and
the parties agree that BUYER shall have access to all documentation to determine
actual costs. Overhead costs shall be determined as described herein below. Upon
notice, BUYER may audit SUPPLIER records to determine actual costs.

Variable Cost

Direct materials pricing will reflect the actual BOM costs attributable to the
Product on a quarterly basis, subject to the provisions of sections 6 and 7 of
this agreement. Direct Labor, Scrap, Freight and Consumables shall be set with
agreed upon rates, established quarterly, which will be based upon the actual
SUPPLIER costs for the respective line items without additional charges or
mark-ups.

Scrap will be adjusted quarterly, with within-quarter adjustments if actual
scrap rates are outside +/- 10% from the current quarter’s agreed value.

Overhead Cost

Indirect Labor and Facilities rates shall be agreed on an annual basis, based
upon actual costs of operations without additional charges or mark-ups.

The Parties shall allocate Indirect Labor and Facilities by category of Product.
On an annual basis Each Product will be assigned an overhead pricing category as
described in Table C-2 and as illustrated in Table C-3, and all Products in that
category will have the same Overhead rate.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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Table C-2

Overhead Rate Methodology

 

Timing

  

Activity

Initial Cost
Program Setup   

•    Assign Product to an Overhead category containing like Products with
similar support requirements.

 

•    Establish actual costs for Indirect Labor and Facilities for each Product
family.

 

•    Define Overhead rates for each category as the median of per-unit costs for
all Products in that category.

 

•    Define boundaries of each category to be the midpoint between the Overhead
rate for that category and the next lower/higher category.

 

•    Compare actual costs per Product to the category boundaries. Re-assign
Products to lower/higher categories when actual costs for that Product are
outside the boundaries for the initially-assigned category.

Annually   

•    Reset Overhead rates for each category based on current actual support
costs, as mutually assessed and agreed.

 

•    Establish quarterly volume forecast by Product family and volume
variability limits which would shift the Product family to a higher/lower
category.

Quarterly   

•    Shift Products to different Overhead categories based on current actual
support requirements, and establish the appropriate volume adjustment to reflect
prior quarter actual family volumes.

Table C-3

Overhead Rate Illustrative Example

 

VALUES ARE FOR ILLUSTRATIVE EXAMPLE ONLY

Overhead Cost
Category

  

Overhead Rate

(per DL Hour)

    

Products

1    $ 1.50       Product A, Product C, Product F, Product N 2    $ 2.25      
Product B, Product E, Product R 3    $ 3.00       Product D, Product G, Product
L, Product M 4    $ 4.50       Product H, Product J, Product K …      …       …
N    $ 7.00       Product P

Overhead categories will be specified in the Statement of Work for a Product.

Overhead adjustments

On a quarterly basis, BUYER and SUPPLIER will adjust the Product family Overhead
rate based upon the prior quarter actual volume for the Product family. In the
case of volumes significantly above or below the volumes planned in the annual
rate setting process, an adjustment factor shall be applied to the actual
Overhead rate to compensate for Overhead over or under absorption as set forth
in Table C-4 (“Adjustment Factor”). The quarterly rate will be calculated as
follows: [Product family Overhead rate] x [Adjustment Factor].

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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Table C-4

Adjustment Factors

 

Volume Deviation from Plan

  

Adjustment Factor

(Volumes above Plan)

  

Adjustment Factor

(Volumes below Plan)

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

Depreciation and Equipment charges will be allocated to product cost on a
proportionate basis based upon actual usage of the equipment, utilizing the
amortization schedule as indicated in Table C-5. The parties will agree on the
applied charges on a product basis as part of the quarterly pricing process. In
the event that there are insufficient units to apply the depreciation charges on
a quarterly basis the parties will mutually agree to an alternative billing
mechanism for SUPPLIER to recover depreciation cost.

Table C-5

Equipment Amortization Schedule

 

Age of Asset

(Years)

  

Depreciation Timeline

(Years)

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

In the event anticipated volumes during a quarter are insufficient to fully
absorb the depreciation the following quarter’s pricing will be adjusted to
ensure “true-up” of the full amount within the quarter.

SUPPLIER may use the Acquired Equipment for SUPPLIER’s other customers as long
as no BUYER intellectual property is used without BUYER’s prior written consent.
Depreciation will be calculated by excluding the proportionate share of the
Acquired Equipment used or made available for use by SUPPLIER’s other customers.

CM Mark-Ups

CM Mark-Ups shall be as follows, for the duration of this agreement, calculated
as a portion of total cost:

- [***]

- [***]

NPI Pricing

The Parties shall establish pricing for newly introduced Products (NPI) as
described herein.

(i) Variable Cost will be priced in the same manner as described above

(ii) Overhead will be priced as follows: Upon SUPPLIER’s award of a new Product,
SUPPLIER and BUYER shall determine: (a) the cost of Overhead, (b) the Overhead
category for the initial ramp period for NPI based upon additional support
requirements; (c) the Overhead category for volume production (based on the
anticipated support requirements for volume production), and (d) the timing
required to reach volume production as a result

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

of a ramp plan including the anticipated calendar quarter of migration from NPI
to volume production, The Product will shift Overhead categories as part of a
quarterly reassignment for all Products at which time any significant departures
from the ramp plan will be addressed.

(iii) CM Mark-up will be priced equal to the CM Mark-Up for volume production.

Volume Discounts

For each Product, BUYER shall establish volume discounts for Overhead and CM
Mark-Ups upon Product volume reaching established thresholds. For Overhead,
BUYER shall set a percentage change in the Overhead cost for all Overhead
categories based on a set deviation from the standard volume in such Overhead
categories. For CM Mark-Up, BUYER shall set a percentage reduction in the CM
Mark-Up cost for all Products upon reaching a series of volume thresholds using
the prior quarter’s actual total business volume with the SUPPLIER as set forth
in Table C-6.

Overhead and CM Mark-Up rates based upon volume shall be established/reset on an
annual basis, and applied each quarter using volumes from the prior quarter,
except as adjusted in Section 27 above.

Table C-6

Volume price adjustments will be calculated as follows:

 

Revenue

(Quarterly)

  

SG&A Adjustment

  

Profit Margin Adjustment

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

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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Exhibit D

EXAMPLE STATEMENT OF WORK

This Statement of Work is entered into as of <month>, <year>, (“SOW Effective
Date”) between BUYER and SUPPLIER

NOW, THEREFORE, in consideration of the promises and agreements of the parties
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

Equipment

Description of Equipment to be transferred;

Inventory

Description of Inventory to be transferred;

Transition Plan.

Pricing

All prices are based on the agreed upon Overhead pricing matrix for these
Products per Exhibit C of the Manufacturing and Purchase agreement.

Specifications

Engineering Specifications for each Product are attached to this Statement of
Work.

Approved Manufacturing and Product Development Locations

All Products under this Statement of Work will be manufactured at SUPPLIER’s
facility:

SUPPLIER

Address1

Address2

City, State Zip

Materials

Schedule

Append transfer / transition / ramp schedule here, including milestones, target
quantities, and target yields

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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Exhibit E

BUYER TRADEMARKS

Page intentionally left blank

 

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Exhibit F

Intentionally left blank

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit G

PURCHASE PRICE VARIANCE FORM

[EXAMPLE]

 

BUYER
Component
Part No

  

Descr

   SUPPLIER
Site    Mfg    MPN    SUPPLIER
Site
Buyer
Name    SUPPLIER
Commodity
Mgr    Current
QtrStd
W/
BUYER    Total
Lead
Time    Purchase
Price    Unit
PPV
$    Qty
Received
Last
Month    Extended
PPV
$    Explanation
For
PPV                                                                           
                                                                                
                                                                             

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit H

RETURN AND REPAIR SERVICES

Product Repairs. SUPPLIER will Repair a defective Product and forward the same
back to BUYER or BUYER’s customer as requested by BUYER. SUPPLIER will Repair
defective Product to BUYER Specifications. SUPPLIER will upgrade Repaired
Product to the most recent BUYER approved ECO level. SUPPLIER shall charge rates
as specified in a Statement of Work. Any Repair shall be warranted for the
remainder of the warranty period or six (6) months, whichever is longer. This
statement excludes Product which has been damaged by accident, abuse or misuse.
BUYER reserves the option to perform out-of-warranty Repairs at Repair
facilities designated by BUYER. In the event BUYER exercises the option to
perform Repairs at such designated facilities, SUPPLIER shall provide all
required product specifications, engineering documentation, and test and Repair
procedures.

 

2. Return Material Authorization (RMA). SUPPLIER shall provide BUYER with RMA
procedures. The following procedure shall apply to SUPPLIER’s Repair of
Products.

 

  (i) Turn-Around Time. SUPPLIER will use its best efforts to provide BUYER with
RMA number within one (1) Business Day after receipt of request. SUPPLIER will
Repair the defective Product and forward the same back to BUYER within five
(5) Business Days after receipt. SUPPLIER will provide expedited Repair service
to accommodate BUYER emergency requirements at a minimal expedite charge, not to
exceed five (5%) of Repair charge.

 

  (ii) Reporting. BUYER Repaired Products will be returned with a detailed
Repair report for each unit. SUPPLIER will provide a monthly report of: (i) RMAs
processed, including failure analysis and (ii) physical inventory of BUYER owned
material. Upon special request, SUPPLIER will provide inventory status within
two (2) Business Days.

 

  (iii) Shipping charges. SUPPLIER will pay all inbound and outbound shipping
charges on all in-warranty Products shipped to SUPPLIER for Repair. BUYER will
pay all inbound and outbound shipping charges on out-of-warranty Products
shipped to SUPPLIER for Repair.

 

  (iv) Marking requirements. On all Products returned to BUYER, SUPPLIER will
affix label that identifies Product, including model number, serial number,
current hardware and/or software revision level, and RMA number.

 

3. Problem with Specification or Component. If a defect in a Product is caused
by (i) a design required by the Specifications or (ii) a failure by a Component
required by the Specifications, SUPPLIER shall perform the obligations in this
Exhibit H and BUYER shall pay to SUPPLIER the costs mutually agreed upon by the
parties in advance in writing.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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Exhibit I

QUALITY REQUIREMENTS

This Exhibit sets forth SUPPLIER’s obligations with respect to the quality of
the Products. SUPPLIER agrees to conform to the minimum requirements established
by the BUYER Quality Systems Requirements. In addition, SUPPLIER shall conform
to SUPPLIER’s internal ISO 9001 compliant Quality Systems Requirements for the
term of this Agreement.

 

1. SUPPLIER Quality Control Plan and Process Capability

SUPPLIER will establish, maintain and manage a quality assurance plan and
program for the Products that is consistent with standard industry practices to
ensure that the overall reliability, quality and performance objectives stated
in the applicable Statement of Work are achieved and the Products comply with
the Specifications (the “Quality Control Plan”). The Quality Control Plan is
subject to BUYER’s prior written approval. BUYER will have the right during
normal business hours to audit SUPPLIER’s compliance with the Quality Control
Plan. Such audit will include, without limitation, BUYER’s access, on-line or
otherwise, to SUPPLIER’s: (i) Product test data and any statistical analysis of
such data, (ii) Product improvement issues and data, (iii) Product time studies,
test yields, repair and scrap reports, efficiency reports and incoming and
outgoing inspection details, (iv) in-process repair and service repair and
statistical data, and (v) corrective and preventive action systems. Such
documentation will be logged into a permanent file and will be available for
BUYER’s inspection at all times during the term of this Agreement.

As part of the Quality Control Plan, SUPPLIER is required to document and retain
objective evidence of the following: a detailed production process flow showing
how SUPPLIER will control the production system; receiving inspection and
material certification processes; outgoing inspection, in-process inspection,
calibration of all Inspection Measurement and Test Equipment (IMTE); Measurement
Systems Analyses for all IMTE used in the production of BUYER Products;
maintenance of all equipment defined in production process flow; an
organizational chart which identifies the members of SUPPLIER team who formulate
and execute SUPPLIER approach to quality; and title and number of all applicable
documents.

 

2. Inspection and Testing

Products purchased pursuant to this Agreement shall be subject to initial
inspection, testing, and acceptance or non-acceptance by BUYER, which shall
occur within thirty (30) days of final test. SUPPLIER shall perform First
Article Inspection (FAI). BUYER’s quality assurance personnel (“BUYER Quality
Assurance”) may approve the Product for production, disapprove the Product for
production or require immediate corrective action for all the non-conformances
found during the FAI. BUYER may have the SUPPLIER approve or disapprove the
Product for production with BUYER’s authorization. Any non-conformances shall be
corrected within the time periods determined by BUYER.

SUPPLIER will manufacture the Products in accordance with the quality
requirements, standards and expectations as set forth in the Specifications, and
as otherwise mutually agreed upon by the parties in writing. SUPPLIER will not
ship any Product to BUYER which is not in conformance with the Specifications,
and shall provide certification with such Product shipment of such shipment’s
conformity to the foregoing.

SUPPLIER agrees that it will perform testing and inspection of the Product as
mutually agreed upon by the parties in writing prior to the delivery, pack out
or distribution of the Products. The testing and inspection procedures shall be
documented in the Quality Control Plan. Containment of defective Product either
in work in progress (“WIP”) or packed and waiting for shipment shall begin
immediately after the discovery of a defective Product. Should Products or
SUPPLIER’s processes be found to be non-conforming, SUPPLIER shall notify BUYER
Quality Assurance and withhold shipping Product until such non-conformance is
resolved. SUPPLIER shall be wholly responsible for Products that fail to meet
the acceptance criteria and/or Specifications.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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In addition to the foregoing, all deliveries of Products are subject to, at
BUYER’s option, BUYER’s inspection and testing, before final acceptance by
BUYER. BUYER may inspect any Product within thirty (30) days after receipt of
such Products and may reject any Product that fails to meet the Specifications.
BUYER has the right to reject the order in whole or in part during such thirty
(30) day period. To reject a Product, BUYER will, within such thirty (30) day
period, notify SUPPLIER in writing of its rejection and request a Return
Material Authorization (“RMA”) number.

 

3. Specifications

SUPPLIER agrees that all Products will conform to the Specifications established
by BUYER for the part number stated on the Bill of Materials or the Purchase
Order. Additionally, all Products produced by SUPPLIER shall conform to the
workmanship specifications of IPC-610 Class II, latest revision, and to all
currently accepted commercial manufacturing practices.

 

4. Nonconforming Material

Any material identified as nonconforming material shall be isolated and
segregated in a secure location. Nonconforming material shall be clearly
identified with the SUPPLIER part number, the BUYER part number, reason for
rejection and date of rejection. SUPPLIER must dispose of all nonconforming
material within 96 hours of discovery of nonconformance. In the event that
SUPPLIER, BUYER or a Component supplier identifies discrepant material in WIP
Products, SUPPLIER shall immediately purge all discrepant material from WIP
Products, remove such material from inventory and store it in the secure
location. Upon completion of such purge procedure, SUPPLIER shall provide to
BUYER written verification that WIP Products and inventory have been purged of
the discrepant material.

 

5. Traceability

SUPPLIER shall provide electronic Product or Component serial number
traceability for all units produced at SUPPLIER’s facility. The traceability
process must have the capability to trace all in-coming material, WIP and all
Products shipped from the SUPPLIER’s facility. The traceability process shall
have the capability of detecting and rejecting any unit with a duplicate serial
number either in WIP or already in the installed base. The traceability process
shall meet BUYER’s requirements and be approved by BUYER.

 

6. Quality Performance

SUPPLIER shall comply with the quality performance metrics, including but not
limited to, the following: Cumulative Yield, Defects per Million Opportunities
(DPMO), defect and process paretos and corrective action for agreed upon process
control points in the manufacturing process, incoming inspection or outgoing
inspection.

 

7. Corrective Action

If upon inspection the Products do not comply with the Specifications, BUYER may
issue a Corrective Action Request (CAR). SUPPLIER will comply with BUYER’s
closed-loop quality and corrective action process associated with any CAR given
by BUYER. The parties shall engage in continuous improvement activities to reach
higher levels of Product quality and cost improvements, and SUPPLIER shall
participate in quality performance reviews through meetings set forth in
Section 14.2 below.

 

8. ISO Certification

SUPPLIER shall conform to the requirements of ISO 9001 and ISO 14001 at all
times in manufacturing the Products hereunder. SUPPLIER warrants and represents
that it currently is certified under ISO 9001 and ISO 14001, and during the term
of this Agreement will remain ISO 9001 and ISO 14001 certified. If at any time
hereafter certification under ISO 9001 or ISO 14001 is no longer generally
appropriate, SUPPLIER will ensure that it is certified under another comparable
or higher standard, which is acceptable to BUYER. Should SUPPLIER lose the ISO
9001 or ISO 14001 certification, SUPPLIER will immediately notify BUYER Quality
Assurance in writing. SUPPLIER shall inform BUYER of the specific reason(s) for
the loss of the certification. SUPPLIER shall inform BUYER of an Action Plan
that defines the specifics of regaining compliance to ISO 9001 and/or ISO 14001
and defines the short-term corrective actions that will insulate BUYER from
SUPPLIER noncompliance.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

9. Defective Product

If SUPPLIER identifies defective Product(s) during the manufacturing process,
pack out or distribution process, SUPPLIER shall notify BUYER Quality Assurance
immediately. SUPPLIER shall implement appropriate actions that minimize the
possibility that additional defective Products will be processed or delivered.
SUPPLIER shall implement appropriate corrective actions to prevent reoccurrence
of the defect. All corrective actions that affect Products are subject to
approval by BUYER Quality Assurance. SUPPLIER shall respond to any defective
Product as set forth in Section 14.3 below. Within 4 hours of discovery,
SUPPLIER shall use best efforts to implement appropriate containment activity
for: (1) all such Product, including WIP, finished goods and component level.
SUPPLIER’s containment action shall also include identification by serial
number, the manufacturing site for all defective Product and any other
appropriate action to minimize the possibility that additional defective
Products will be delivered to pack out, distribution or the customer; (2) shall
notify BUYER of all such Product already shipped, including serial number,
manufacture date and ship date; and (3) SUPPLIER shall submit the initial
written response for short-term corrective action plan. In no event shall the
implementation of the foregoing containment activities exceed twenty-four
(24) hours of discovery. SUPPLIER further agrees to conduct a detailed
root-cause failure analysis and to report the failure analysis data and
root-cause correction plan to BUYER within a minimum of five (5) working days of
notification of the defective Product. SUPPLIER agrees to preserve and maintain
all data associated with Product and process failure analysis, corrective
actions and to make that data available to BUYER upon request.

If the defective Product is not DOA and is situated outside of SUPPLIER’s
facilities, then SUPPLIER shall promptly commit the necessary resources to
repair the defective Product on-site at SUPPLIER’s facility and at SUPPLIER’s
sole expense, including, without limitation, the costs of shipping the Product
to and from SUPPLIER’s facility. In addition, SUPPLIER shall comply with BUYER’s
closed-loop corrective action process. If the Product is DOA, SUPPLIER shall
repair or replace the DOA Product in accordance with Section 15.1 of the
Agreement.

 

10. Epidemic Failure

The terms and conditions defining Epidemic Failure shall be as specified in
Section 10.5 of the Agreement.

 

11. RMA – Return Material Authorization

SUPPLIER shall provide a Return Materials Authorization (RMA) within 24 hours
after receipt of request for an RMA from BUYER for a nonconforming or defective
Product. After receipt of the written RMA number, BUYER or BUYER’s customer will
return to SUPPLIER the rejected or defective Product, freight collect and
properly insured, with the RMA number displayed on the outside of the carton.

 

12. Supplier Change Notification

Written approval from BUYER is required prior to the implementation of changes
and deviations by SUPPLIER. Approval may be withheld at BUYER’s sole discretion.
In the event an approved SUPPLIER-proposed change fails BUYER’s Product
qualification, SUPPLIER is obligated to provide the existing qualified Product
until the Product with the proposed change can be qualified. BUYER shall respond
to the change or deviation request within fifteen (15) Business Days of receipt
or the change or deviation will be deemed rejected. In the event SUPPLIER fails
to follow the requirements defined herein, SUPPLIER assumes all costs and
responsibilities for the Product affected by the change, including to, but not
limited to, Product in transit, Product in finished goods inventory, and any
Product located with a BUYER customer.

In the case of changes to materials or sources of supply, such notice shall be
provided to BUYER no less than the Components Lead-time plus thirty (30) days
prior to the proposed implementation of the change. Written approval from BUYER
is required prior to the implementation of the requested change. If BUYER does
not respond to the change request within fifteen (15) Business Days of receipt,
the changes will be deemed rejected.

 

13. Site Assessments and Inspections at SUPPLIER Site

Upon two (2) Business Days’ notice, BUYER shall have the right to perform vendor
qualifications and/or on-site inspections at SUPPLIER’s manufacturing facilities
during SUPPLIER’s normal business hours. If an inspection or test is made on
SUPPLIER’s premises, SUPPLIER shall provide BUYER’s inspectors with access to
facilities and reasonable assistance at no additional charge. SUPPLIER shall
also provide BUYER with final acceptance documentation/criteria. In the event
that any on-site inspection of the Products indicates that the Products do not

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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conform to the requirements of this Agreement, SUPPLIER shall not ship such
Products to BUYER until such nonconformity has been corrected and BUYER has
approved shipment of such Products in writing. This audit right does not limit
BUYER’s right to perform additional acceptance testing at BUYER’s facilities.

 

14. Quality Goals and Support

 

  14.1 Quality Performance and Goals

Depending on the exact processing and testing sequence used, quality performance
metrics may include but are not limited to, the following:

 

  •  

SMT Yield (% and raw data)

 

  •  

ICT Yield (% and raw data)

 

  •  

Functional Test Yield (% and raw data)

 

  •  

Cumulative Yield (% and raw data)

 

  •  

Trend charts documenting each metric

 

  •  

Pareto of actual defects found for each yield metric

 

  •  

Pareto of cost of actual defects for each yield metric

 

  •  

DPMO calculations

Performance goals for the metrics utilized shall be mutually agreed to by the
parties in writing prior to the first customer shipment of each Product.
Reporting shall be accomplished via BUYER-approved electronic medium according
to a schedule approved by BUYER Quality Assurance. SUPPLIER agrees to
continually improve their performance against the goals and targets for the
above categories and any other categories included by BUYER.

 

  14.2 Quality Reviews and Continuous Improvement Meetings

 

  •  

SUPPLIER shall submit periodic reports via BUYER-approved electronic medium and
on the BUYER-approved schedule. Each report concerning the Products which will,
at a minimum, provide information regarding the production yield and major
defect data for each Product in production during the applicable time period.

 

  •  

The parties shall participate in mutually agreed to cross-site, cross-supplier
improvement projects.

 

  •  

The parties shall conduct quarterly business reviews. Such reviews shall be at a
mutually agreed upon time and place.

 

  14.3 Corrective Action Timetable for Defective Product Detected Prior to
Shipment

 

Event

  

Maximum Response Time

Problem notification by SUPPLIER to BUYER    Within 4 hours—verbal; within 1
Business Day—written Containment plan communicated to BUYER    4 hours Initial
SUPPLIER problem verification and short-term
corrective action plan    Written—8 hours SUPPLIER failure or problem analysis
completed,
results communicated, and root-cause corrective
action plan communicated    7 Business Days SUPPLIER corrective action plan
approval/rejection by
BUYER    2 days after communication of plan SUPPLIER corrective and preventative
actions
implemented and verified    6 Business Days

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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15. Reliability Corrective Action Plan

If a Product does not meet the required SUPPLIER’s reliability specification,
SUPPLIER shall provide to the BUYER, within ten (10) days or as mutually agreed
a plan identifying steps the SUPPLIER will take, including milestones and dates,
to ensure that the Product meets the required reliability specification.

 

  15.1 Out-of-Box Failure Corrective Action Plan

SUPPLIER shall submit a non-recurring failure corrective action plan to prevent
such failures, to the BUYER’s quality supplier engineers within twenty four
(24) days of receipt of failed unit from BUYER.

 

  15.2 Corrective Action Request (CAR):

 

  15.2.1 Upon discovery of a problem, BUYER will submit a written request to
SUPPLIER for corrective action.

 

  15.2.2 Supplier shall submit a corrective action report to BUYER that includes
the details from the final root cause/failure analysis report, analysis of the
problem described by the BUYER (commensurate with the level of detail provided
by BUYER), details of containment activity (as required), a casual analysis, and
a corrective action plan that includes the steps already taken to prevent
recurrence of the same.

 

  15.3 Delivery of Reports:

 

  15.3.1 Upon request, a preliminary root cause/failure analysis report will be
provided by SUPPLIER to BUYER within five (5) working days after receipt of the
defective Product or mutually agreed upon time objective.

 

  15.3.2 The detailed root cause/ failure analysis corrective action report will
be due from SUPPLIER within twenty four (24) calendar days after receipt of the
defective Product by SUPPLIER, or as mutually agreed.

 

  15.3.3 SUPPLIER will achieve a fourteen (14) day failure analysis and
corrective action cycle time eighty (80) percent of the time. BUYER shall
provide at a minimum, complete problem description, product P/N, s/n, date of
failure, action taken to fix problem in order to receive a complete failure
analysis and corrective action plan.

 

  15.3.4 The BUYER may approve or disapprove the corrective action plan
submitted by SUPPLIER prior to implementation.

 

  15.3.4.1 In the event of disapproval, the Buyer will provide details regarding
the reason for disapproval and any additional requirements or issues that must
be addressed.

 

  15.3.4.2 The SUPPLIER will take action to conform to the requested action,
correct the actions as needed, and re-submit for approval so that BUYER and
SUPPLIER can mutually agree on a final plan. Upon receipt of approval the action
is to be implemented by SUPPLIER.

 

16 Field Failure Reports

 

  16.1 In the event the BUYER has a Product failure inside the warranty period
and requests a failure analysis be performed, the SUPPLIER will provide a
comprehensive failure analysis to the Buyer, at no charge, within twenty four
(24) calendar days or as mutually agreed. SUPPLIER will use all reasonable
efforts to provide expedited failure analysis reports on returned Products
designated by BUYER to be of high priority. All reports will contain the
following elements:

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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  16.1.1 Failure analysis for units outside the warranty period will carry a
charge to the BUYER.

 

  16.1.2 Date the returned Product was originally shipped to BUYER.

 

  16.1.3 Date the Product was received by the SUPPLIER for repair and revision
level of the specific Product returned to the SUPPLIER.

 

  16.1.4 Description of the testing prior to any repair activity with a detailed
description of the symptoms.

 

  16.1.5 Identification of the failure mode and action taken to repair the
specific Product returned for analysis including any component or assembly
replaced that corrected the cause of failure.

 

  16.1.6 Analysis of the cause of the failure to the component level including
photographs as required.

 

  16.1.7 Latest revision level of the components/assemblies used to repair the
failed Product and new revision level of the repaired Product if the repair
caused an advance in the revision level.

 

  16.2 BUYER shall provide the following information (at minimum) as contingency
to receive an failure analysis/corrective action from SUPPLIER:

 

  16.2.1 Product P/N

 

  16.2.2 Product S/N

 

  16.2.3 Problem Description

 

  16.2.4 Action taken to fix failure

 

  16.2.5 Date of Failure

 

  16.2.6 Troubleshooting used

 

  16.3 Component/Failure mode pareto information shall be provided monthly to
cover the preceding six months of Products purchased.

 

17 Compliance General. SUPPLIER warrants that the processes used in the
manufacturing of Products sold to BUYER are (i) Safe for normal use and
non-toxic, (ii) RoHS compliant and (iii) meets WEEE requirements at date of
shipment, as applicable. Any additional safety requirements or Product marking
will be defined in Statement of Work.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Exhibit J

SECURITY PROVISIONS

This exhibit outlines SUPPLIER’s minimum security requirements and obligations
for manufacturing and printing Products. This is a non-exclusive list.
Additional or different measures than those outlined below may be required for
SUPPLIER to comply with the terms and spirit of the Agreement.

To protect BUYER Intellectual Property Rights and based upon the type of Product
being manufactured by SUPPLIER, SUPPLIER shall provide three levels of
segregation (No Segregation, Partial Segregation and Full Segregation) as set
forth in Table J-1 below and as shall be further defined by BUYER.

Table J-1

 

Category of Protection

  

No Segregation

  

Partial Segregation

  

Full Segregation

Facility    Shared    Shared    Dedicated, restricted access to Oclaro support
only, frosted windows Equipment    Shared    Mixed—some dedicated    Dedicated
Direct Labor    Shared    Shared    Shared, but will work with CM to avoid
sharing DL with competitors Product Engineers    Shared    Shared with
non-competitors    Dedicated Process Engineers    Shared    Shared    Dedicated
Test Engineers    Shared    Shared with non-competitors    Dedicated Quality   
Shared    Shared    Dedicated Other IDL    Shared    Shared    Shared Tours
Allowed    Allowed    Only for customers in non-competitive industries
(automotive, healthcare, etc.) or for customers sharing manufacturing lines with
Oclaro    Not Allowed

General:

BUYER may, at its sole expense, perform a security assessment of SUPPLIER’s
operations and assist the SUPPLIER in the development and implementation of cost
effective security procedures for the protection of the BUYER’s Product.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

SUPPLIER agrees, at its sole expense, to develop and maintain its own security
procedures as they relate to the manufacture, handling, storage and transport of
BUYER Product.

Should, as a part of its business model, SUPPLIER subcontract any portion of
BUYER’s freight or warehousing business to a third party, SUPPLIER warrants that
appropriate security procedures consistent with those employed by SUPPLIER and
customarily used in the industry will be developed and maintained.

SUPPLIER agrees to designate a management-level employee to oversee the security
function of their facilities. This individual will act as the security interface
for all BUYER business, and will be available for reasonable periods of time to
coordinate the SUPPLIER’s security efforts with BUYER security management.

Handling Guidelines:

SUPPLIER shall provide a storage area for all units of the Product. This area
will be designed to prevent unauthorized access as well as protect the Product
from damage, loss and theft.

Product sealed in shipping boxes shall not be re-opened unless an inspection is
necessary to determine the adequacy of packing; or the existence and/or extent
of damage; or the accuracy of the description of contents; or the acceptability
of the shipment for transportation in accordance with SUPPLIER tariffs.

SUPPLIER shall avoid exposing BUYER product or materials to conditions that may
cause damage. SUPPLIER must implement procedures for communicating incidents of
damaged or loss of Product and/or materials to BUYER within 24 hours of each
occurrence and a plan of action for preventing re-occurrence in the future.

SUPPLIER shall not pre-load Product into trailers or vehicles intended for later
collection or shipment without the prior written authorization of BUYER.

If BUYER authorizes Product or materials to be stored in trailers parked within
a facility’s truck yard, trailers must be sufficiently and adequately secured.
Examples of security precautions to be taken for such freight include, without
limitation: Pin locks, Padlocks on container or trailer doors, Numbered, logged,
and inspected seals, containers or trailers backed up against each other or
against a structure so that the unit’s cargo doors cannot be opened.

SUPPLIER’s Premises Protection:

At locations where Product will be stored in excess of six (6) hours, SUPPLIER
will provide and maintain, at all times, adequate security and handling
practices to allow continuous security monitoring and protection of BUYER
product against fire, damage, and theft. The use of electronic security systems
including intrusion detection and security camera systems is encouraged.

Control of BUYER freight information:

SUPPLIER agrees to implement and maintain adequate procedures and precautions
for the protection of records involving BUYER and BUYER freight; such as load
contents, customers’ identity, the times and dates of shipments, destinations,
and shipping routes.

Hiring / Supervising / Training of Employees

SUPPLIER will ensure that all SUPPLIER’s employees and subcontracted personnel
involved with handling or transportation of BUYER Products are subjected to
vetting and background checks as permitted by local laws, regulations and
availability, to confirm that such employees are free from records of criminal
convictions involving drugs, theft, or dishonesty.

SUPPLIER agrees to provide security awareness orientation and training to each
employee handling or transporting BUYER Product within thirty (30) days of hire.

SUPPLIER shall not allow unauthorized employees, temporary employees,
contractors or visitors access to the BUYER inventory or controlled access
areas.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Audits:

BUYER Security personnel and representatives of BUYER’s insurance carriers
reserve the right to conduct security audits of the SUPPLIER’s premises and/or
transit locations containing Product, and will report audit results and proposed
corrections within thirty (30) days of the completed audit. Likewise, SUPPLIER
will make every effort to ensure that its third-party forwarders and/or
warehouses subcontracted to handle or store BUYER Product consent to these audit
terms.

General Security Responsibilities:

SUPPLIER will report to BUYER and the proper legal authorities loss, theft or
damage to the Products and/or Components used to make the Products and cooperate
at all times with the subsequent investigation and documentation of each such
incident. SUPPLIER will promptly complete loss / theft / damage investigations
as such incidents are reported or made known. Results and/or conclusions are to
be forwarded to the local BUYER security contact as this information is made
available. BUYER security management shall be invited to participate in any
investigation involving the loss of BUYER Product.

SUPPLIER will maintain written security operating procedures for BUYER Products
and will ensure that those procedures are (1) consistent with these guidelines,
(2) communicated clearly, prominently and frequently to SUPPLIER’s employees and
permitted third-party contractors, and (3) updated as needed.

As requested, SUPPLIER will provide BUYER with a full report on all known losses
and thefts at specific facilities for a stated period of time not to exceed two
(2) years, in accordance with Carrier Tariffs for loss and damage claims.

Labeling Requirements for Confidential Information.

SUPPLIER’s originators of Confidential Information documents are responsible for
prominently labeling every page as “Confidential” (or with a similar
designation); information in electronic form should be identified as
“Confidential” (or with a similar designation) at the beginning or header of
every data set or file. All magnetic media must have “confidential” marked (or a
similar designation) on the contents and the exterior of its container.
Prototypes shall be treated as confidential, and labeled (if possible).

Safekeeping.

Confidential information shall not be left exposed and shall be secured at the
end of the workday in a locked cabinet, desk or other locked container or in a
secured room with access limited to those with a need to access the information.

Confidential information stored on computing systems must be protected by the
use of strong passwords (e.g., passwords of an adequate length and alphanumeric
mix consistent with best industry practices). Confidential information stored on
PCs laptops or workstations should be encrypted.

SUPPLIER shall require all employees, temporary employees (directly or through
their temporary agencies), independent contractors and subcontractors either to
be bound by an employee handbook containing a confidential or non-disclosure
requirement and/or sign a separate non-disclosure agreement prior to access to
Confidential Information of BUYER.

SUPPLIER shall limit access to BUYER Confidential Information (logs of
accessibility shall be kept current and made available to BUYER on reasonable
request).

SUPPLIER shall maintain visitor logs for all controlled access areas containing
BUYER Confidential Information and/or other high risk assets materials such as,
but not limited to, Serial numbers and the like. Logs of accessibility shall be
kept current and made available to BUYER on reasonable request.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

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MANUFACTURING AND PURCHASE AGREEMENT

 

Mail Requirements.

When it is necessary for SUPPLIER to send media containing confidential
information between the parties or elsewhere, it shall be sent by courier,
registered mail or an internationally recognized overnight delivery service
(i.e. Federal Express, Emery, etc.) Items sent by SUPPLIER shall require
recipients to sign for deliveries and the information to be entered into a log
by the courier, postal or delivery service.

Electronic.

Confidential information must be encrypted when sent over the Internet.

Faxes containing confidential information must include an ownership statement
and the recipient should be notified prior to transmission in order to receive
the fax.

Media containing confidential information must be disposed of in a manner that
destroys it beyond recognition and reconstruction.

Inventory.

Inventory shall be kept in controlled dedicated work areas with no commingling
of BUYER’s Inventory with that of other entities.

Regular cycle counts, consistent with the sensitivity of the inventory, shall be
made with all results forwarded to BUYER.

Any incidents of burglary, theft, unaccounted Inventory, shrinkage of Products,
or Components theft shall be reported immediately to BUYER. In the event of any
of the foregoing, SUPPLIER shall investigate the reasons therefore, and promptly
take the necessary steps to prevent such situation from arising again.

SUPPLIER shall maintain 100% accountability of Components and scrap.

SUPPLIER shall keep sensitive materials such as, but not limited to, Serial
number labels and the like, stored in a secure area with limited employee
access.

Scrap and Sensitive Material

All inventory, Confidential Information, and Products (includes any Components
thereof) shall be disposed of by SUPPLIER, as authorized by BUYER. SUPPLIER
shall keep accurate records of the disposition of the said material. The logs of
accessibility shall be kept current and made available to BUYER on reasonable
request.

Under no circumstances shall SUPPLIER allow BUYER Product, Components, serial
numbers, Confidential Information or other BUYER property to be disposed of in
SUPPLIER’s dumpster. SUPPLIER shall not transfer scrap produced as a result of
this Agreement in a black or gray market transaction of any sort.

 

Confidential treatment is being requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidentiality request. Omissions are designated by the symbol
[***]. A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

50