Exhibit 10.58
MANUFACTURING AGREEMENT
This manufacturing agreement (the “Agreement”) is made and entered into on
August 3, 2006 (‘Effective Date”) by and between Photon Dynamics, Inc. (“PDF), a
California corporation, having its principal office at 5970 Optical Drive, San
Jose, California 95138, and Ultra Clean Technology Systems and Service, Inc. a
corporation organized and existing under the laws of the State of California
having its principal office at 150 Independence Drive, Menlo Park, CA 94025 and
its affiliates (Collectively “the “Manufacturer”). PDI and Manufacturer are each
individually referred to herein as the “Party” and collectively as the
“Parties.”
RECITALS
WHEREAS, PDI designs and manufactures yield-enhancing test equipment for
flat-panel display manufacturers;
WHEREAS, PDI desires to engage Manufacturer to develop, manufacture, and sell,
according to PDI’s Specifications (defined below), the Product(s) (defined
below) to PDI exclusively;
WHEREAS, Manufacturer desires to obtain from PDI a non-exclusive right and
license to manufacture and sell to exclusively to PDI the Product(s); and
WHEREAS, PDI wishes to grant the aforementioned non-exclusive right and license
to Manufacturer and to purchase the Product(s) from Manufacturer.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
Parties hereby agree as follows:
SECTION 1
DEFINITIONS

1.1   “Affiliate” shall mean with respect to either Party, any other party
directly or indirectly controlling, controlled by, or under common control with
such Party. For purposes of this definition, “control” when used with respect to
either Party, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Party,
whether through the ownership of voting securities, by contract or otherwise.
The terms “controlling” and “controlled” as used herein have meanings
correlative to the foregoing.   1.2   “Authorized Third Party” shall mean any of
PDI’s Affiliates, or any PDI-approved third party that desires to purchase
Product(s) or Materials and whose credit-worthiness is reasonably acceptable to
Manufacturer.

 

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1.3   “Consigned Materials” shall mean any materials, components, and other
supplies necessary for the manufacture of the Product(s) by Manufacturer
pursuant to this Agreement which are supplied by PDI. Examples of such Consigned
Materials are the stage and camera assemblies.   1.4   “Epidemic Failure” shall
mean those substantial deviations from the Specifications within the warranty
period which seriously impair the use of the Product(s) existing at the time of
delivery but which are not reasonably discernible at that time and which are
evidenced by an identical, repetitive defect due to the same cause and occurring
in the same series of the Product(s).   1.5   “Hazardous Substances” shall
include, but not be limited to, any substances, materials or wastes that are
regulated by any local governmental authority of each State of the United States
or any other country, including China where the Product(s) is manufactured by
Manufacturer and Korea where the product is mainly sold by PDI because of toxic,
flammable, explosive, corrosive, reactive, radioactive or other properties that
may be hazardous to human health or the environment, including, without
limitation, above or underground storage tanks, flammables, explosives,
radioactive materials, radon, petroleum and petroleum Product(s), asbestos, urea
formaldehyde, foam insulation, methane, lead-based paint, polychlorinated
biphenyl compounds, hydrocarbons or like substances and their additives or
constituents, pesticides and toxic or hazardous substances or materials of any
kind, including, without limitation, substances now or hereafter defined as
“hazardous substances,” “hazardous materials,” “toxic substances” or “hazardous
wastes” in rules and regulations promulgated pursuant to any applicable federal,
state or local law, common law, code, rule, regulation, order, policy or
ordinance, presently in effect or hereafter enacted, promulgated or implemented,
or any other applicable governmental regulation imposing liability or standards
of conduct concerning any hazardous, toxic or dangerous substances, waste or
material, now or hereafter in effect.   1.6   “Intellectual Property” shall mean
any idea, concept, know-how, technique, invention, discovery, improvement,
document, product, system, practice, procedure, means, method, design, device,
program, software, drawings and sketches, and trade secrets relating to the
design, development, implementation, use, maintenance and upgrading of the
Product(s). Intellectual Property includes, but is not limited to, subject
matter that falls within the definition of patentable subject matter under the
laws of the United States or any other country, including Korea, or within the
definition of copyrightable materials under the laws of the United States or any
other country, including Korea.   1.7   “Manufacturer’s Intellectual Property”
shall mean all of Manufacturer’s designs, logos, technical descriptions,
specifications, trade secrets, and product descriptions, regardless of
registration, which are protected by patents, copyrights, trademarks or other
proprietary rights as provided in Exhibit A.

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1.8   “Materials” shall mean raw materials, components (except Consigned
Materials), and other supplies necessary for the manufacture of the Product(s)
by Manufacturer pursuant to this Agreement.   1.9   “Non-Binding Forecasts”
means the minimum shipment numbers listed in Exhibit B and used in conjunction
with procedures outlined in Sections 4.3.   1.10   “NRE” means non-recurring
engineering funded by PDI.   1.11   “PDI Trademarks” shall mean the trademarks
specified by PDI or its Affiliate, as applicable, that are to be used in
connection with the manufacturing and packaging of the Product(s).   1.12  
“Product” shall mean the product to be manufactured by Manufacturer under this
Agreement in accordance with the Specifications, as amended from time to time by
written agreement or as otherwise agreed upon in writing by the Parties incuding
all updates and enhancements.   1.13   “Project Plan” means the plan identified
in Exhibit F, or as agreed to by the Parties from time to time.   1.14  
“Purchase Order” or “Purchase Orders” shall have the meaning provided in
Section 4.2.   1.15   “Specifications” shall mean the design and manufacturing
specifications of the Product which are set forth in Exhibit A.   1.16  
“Technical Evaluation” shall mean the testing and evaluation of Manufacturer’s
test product for compliance with specification, quality, and suitability in
accordance with the process and dates outlined in the Specifications or Project
Plan.

SECTION 2
DEVELOPMENT OF THE PRODUCTS

2.1   Develop Products to Specifications. The Products shall be designed and
developed by Manufacturer in accordance with the agreed-upon Specifications and
Technical Evaluation listed in Exhibit A and the Project Plan described in
Exhibit F.   2.2   Exclusive Rights to NRE and the Products. Manufacturer
acknowledges and hereby agrees that PDI shall solely and exclusively have the
rights to the NRE, the Products and the Intellectual Property in and to the
Products. Manufacturer shall not, without PDI’s prior written consent, sell or
otherwise use the NRE and the Intellectual Property in and to the Products for
any other products without the prior written consent of PDI. Manufacturer hereby
agrees to assign and does hereby

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    expressly assign to PDI all Intellectual Property in and to the NRE and the
Products created after the date hereof unless the Parties agree otherwise in
writing prior to the commencement of the design of such Products. Manufacturer
shall assist PDI in every reasonable way, at PDI’s expense, to secure, perfect,
register, maintain, and defend PDI’s ownership and benefit in and to the NRE and
the Products. Manufacturer hereby irrevocably agrees not to assert against PDI,
its Affiliates, direct or indirect customers, assignees or sublicensees, any
claim of Manufacturer’s Intellectual Property affecting the NRE or the Products.
This Section 2.2 shall survive the termination of the Agreement. Except as
permitted herein, Manufacturer shall not reverse engineer any products
containing PDI’s Intellecutal Property.

SECTION 3
MANUFACTURE OF PRODUCTS

3.1   Manufacture and Purchase. Subject to Manufacturer meeting and passing the
Technical Evaluation (Exhibit A) as shown in the Project Plan (Exhibit F),
Manufacturer hereby agrees to manufacture and sell to PDI such quantities of the
Product(s) for which PDI issues Purchase Orders (defined herein) pursuant to
this Agreement. Manufacturer shall manufacture the Product(s) in accordance with
the Specifications. Manufacturer further agrees that it shall not, without PDI’s
prior written consent, sell or otherwise use the PDI Intellectual Property for
any other Product(s).   3.2   Support and Training. Manufacturer shall provide
PDI employees, consultants or agents with such training related to the
manufacturing, operation and any other technical information relating to the
Product(s) as PDI may reasonably deem necessary to assist PDI in the integration
and assembly of the Product(s) with other components. Without limiting the
foregoing, Manufacturer can provide for each Product a detailed manufacturing
process or instructions at a predetermined cost agreed to by both Parties.   3.3
  Compliance with Laws. Manufacturer’s performance under this Agreement shall
comply with all applicable standards, provisions and stipulations of China and
the United States (including federal, state and local) laws, rules, regulations
and ordinances applicable to performance under this Agreement. Manufacturer
shall submit to PDI on a timely basis all information concerning the existence,
if any, of Hazardous Substances contained within the Product(s) in a form and
content as required by PDI.   3.4   Changes to Specifications. PDI may from time
to time request that modifications, alterations or changes be made to the design
of the Product(s) as reflected in the Specifications. Such modifications,
alterations or changes may originate with PDI or may be recommended by
Manufacturer. Within thirty (30) days following Manufacturer’s receipt of a
written request for modifications, alterations or changes from PDI, Manufacturer
shall provide PDI a binding estimate of the cost of such modifications,
alterations or changes and a total increase or decrease in the

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    price of the Product(s). If PDI approves the binding estimate, Manufacturer
shall make such modifications, alterations or changes as soon as practicable
upon receipt of such written consent from PDI. Manufacturer shall not make any
modifications, alterations or changes to the Specifications without the prior
written consent of PDI.   3.5   Other Changes. Manufacturer shall advise PDI in
writing of any material changes to manufacturing processes, Materials, sources
of supply, process chemistries, test procedures, quality reporting or other
major processes, and ensure that any such changes do not compromise the
Specifications, quality, or reliability of Product(s) ordered pursuant to this
Agreement. In the case of changes to Materials or sources of supply,
Manufacturer shall make best efforts to notify PDI at least sixty (60) days
prior to the effectiveness of such change; provided, however, that in any event,
the notice shall not occur later than twenty-four (24) hours following
Manufacturer’s determination of the same. If such change concerns any major
components or involves a substantial change, Manufacturer shall notify PDI while
the change is under consideration by Manufacturer. Manufacturer may not make any
such changes without prior written consent from PDI. To the extent the
Specifications need to be changed to comply with a license or to avoid a valid
utility patent, design patent, copyright or other intellectual property right,
Manufacturer shall advise PDI in writing of such “Necessary Patent-Related
Changes” including the circumstances giving rise to such changes, and await
PDI’s written consent before proceeding further.   3.6   Subcontracting.
Manufacturer may engage subcontractors or vendors to provide components or
subassemblies for the Product(s), provided that Manufacturer provides PDI with
written notice of such subcontractors or vendors at least twenty-four (24) hours
prior to such engagement. Manufacturer shall not engage any subcontractor to
manufacture the Product(s).   3.7   Tooling and Non-Recurring Expenses. PDI
shall provide non-Product and Product-specific tooling at its own expense. All
Product-specific tooling and molds shall be the exclusive personal property of
PDI, and Manufacturer hereby assigns all right, title and interest in same to
PDI. In the event of termination, in accordance with Section 15.2, all tools and
molds which are the property of PDI shall be delivered to PDI at Manufacturer’s
sole cost and expense.

SECTION 4
SUPPLY AND ORDER FOR PRODUCTS

4.1   Forecasts. PDI shall use reasonable efforts to provide Manufacturer with
reasonable estimates of its forecast of anticipated orders for the Product(s) on
a monthly basis showing monthly quantities for a maximum of 12 months. Forecast
information shall be non-binding, for planning purposes only, and shall not
represent PDI’s commitment to purchase any or all units, except as otherwise
specifically agreed in writing by PDI. PDI will also provide Manufacturer with a
master schedule showing (a) type information for Materials and Consigned

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    Materials (i.e. stage, chuck and camera assemblies), (b) arrival dates for
Consigned Materials (i.e. stage and camera assemblies), (c) customer acceptance
test procedure dates, and (d) shipment dates for the Product(s).   4.2  
Purchase Orders. PDI shall submit purchase orders (“Purchase Orders”) to
Manufacturer for the Product(s) at least 16 weeks prior to required shipment and
will include, at a minimum, the following information: (a) identification of the
Product(s) ordered; (b) quantity; (c) delivery date; and (d) shipping
instructions and shipping address. PDI does not guarantee any particular sales
volume with respect to the Product(s). In the event of any conflict between the
terms and conditions of this Agreement and any Purchase Order, the terms and
conditions of this Agreement shall control.   4.3   Product and Materials Lead
Times; Inventory Report.

  4.3.1   Lead times for Purchase Orders shall be agreed to by the Parties.
Manufacturer shall provide timely written notice to PDI in the event that a
change is necessary to lead time requirements.     4.3.2   Manufacturer shall
give PDI written notice, from time to time, of any desired change in the order
quantities, order lead time, cancellation lead time or cancellation terms.
Manufacturer shall continue to manufacture under the new order lead time,
cancellation lead time or terms, if and only if, a written agreement is provided
to Manufacturer by PDI. Such written agreement shall also obligate PDI to the
revised cancellation lead time or cancellation terms.     4.3.3   If requested
by PDI, Manufacturer shall provide PDI with a bi-weekly inventory report for all
finished goods, work in progress, Materials and other component parts (e.g.,
Consigned Materials) in its possession. Failure to provide such report shall
relieve PDI from any liability it would otherwise have hereunder for canceling
Purchase Order commitments, failing to issue Purchase Orders consistent with
agreed Non-Binding Forecasts, or otherwise upon termination of this Agreement
for any reason.

4.4   Acceptance of Orders. All Purchase Orders issued in accordance with this
Agreement shall give rise to a binding contract between Manufacturer and PDI for
the sale of the Product(s) ordered subject to and governed by the terms of this
Agreement. Purchase Orders shall become binding on the Parties upon acceptance
thereof by Manufacturer. Manufacturer shall be deemed to have accepted a
Purchase Order if Manufacturer fails to reject the Purchase Order by notifying
PDI in writing within forty-eight (48) hours of its receipt thereof, not
including weekends and the nationally recognized holidays of the United States
or the country of manufacture. PDI may cancel a Purchase Order without penalty
or liability if PDI reasonably determines in its sole and absolute discretion
that

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    delivery to PDI shall be delayed beyond thirty days (30) from the date of
the acceptance of the Purchase Order or Manufacturer is otherwise unable to make
delivery in conformance with the Purchase Order, Specifications, or performance
or quality standards.   4.5   Rescheduling of Delivery Dates. PDI may reschedule
delivery of units of Product(s) up to one (1) month after the delivery date
specified on a Purchase Order, unless shipment has already occurred, by sending
Manufacturer a written change order or by canceling the old Purchase Order and
sending a new Purchase Order(s). Rescheduling of delivery of Product(s) beyond
this one (1) month limitation shall only be made with the written approval of
each of the Parties. Rescheduling of delivery of Product(s) earlier than the
delivery date specified on a Purchase Order shall only be made with the written
approval of each of the Parties.   4.6   Purchase Order Cancellations. If PDI
wishes to cancel (as opposed to reschedule a delivery) a certain quantity of
units of Product(s) ordered pursuant to a Purchase Order, Manufacturer, upon
receipt of such written notice of such cancellation, shall immediately stop work
on such units of Product(s) to the extent specified therein. PDI’s liability for
a cancellation shall be limited to the following:

  4.6.1   Manufacturer shall make its reasonable best effort to manage the
disposition and liability of all industry standard Materials to limit expense or
liability to PDI (i.e., all non-Unique Materials).     4.6.2   PDI shall be
liable to Manufacturer, if a Purchase Order is cancelled for the cost of unique
materials related to such a Purchase Order at Manufacturer’s cost and without
any overhead or profit markup.

4.7   Shipment. All Product(s) sold by Manufacturer to PDI shall be prepared for
shipment in accordance with PDI’s instructions as set forth in the Purchase
Orders.

  4.7.1   Time is of the Essence. TIME IS OF THE ESSENCE OF THIS AGREEMENT WITH
RESPECT TO THE SPECIFIED DELIVERY DATES.     4.7.2   Risk of Loss. PDI assumes
all risk of loss and damage upon Manufacturer’s shipment of the Product(s) to
PDI or its designated carrier or agent.     4.7.3   Packaging and Labeling.
Manufacturer shall package and label the Product(s) and prepare the Product(s)
for shipment in accordance with all applicable laws, regulations and industry
standards in the countries of manufacture and distribution. Such laws, rules and
industry standards include, but are not limited to, the laws, rules and industry
standards of country of origin designation and include the rules and regulations
promulgated by the government of Korea, the U.S. Customs and Border Protection,
the U.S. Department of Homeland Security, all requirements

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      under the U.S. Fair Packaging and Labeling Act, U.S. Federal Communication
Commission, U.S. Food and Drug Administration and other applicable government
agencies of the U.S., and other countries, including Korea, of intended
distribution.

4.8   Quality Acceptance.

  4.8.1   Inspections at Manufacturer’s Facility. PDI shall have the right to
perform vendor qualifications and/or on-site source inspections at
Manufacturer’s manufacturing facilities and Manufacturer shall reasonably
cooperate with PDI in such inspection. In the event that an inspection or test
is required to be made by PDI on Manufacturer’s manufacturing facilities,
Manufacturer shall provide PDI’s inspectors with reasonable facilities and
assistance at no additional charge.     4.8.2   Epidemic Failure. In the case of
an Epidemic Failure of Materials, Manufacturer shall, within five (5) business
days, propose an action plan to fix the failure of any affected Product(s) and
to implement this action plan immediately upon PDI’s acceptance thereof. If the
action plan is not acceptable to PDI, PDI can require Manufacturer to repair or
replace, at Manufacturer’s option, the affected Product(s). The repair or
replacement shall be done at mutually agreed-upon location(s); provided,
however, that costs of repair or replacement, together with the shipping,
transportation and other costs of gathering and redistributing the Product(s),
shall be borne by Manufacturer. In addition to bearing the costs associated
therewith, if requested by PDI, Manufacturer shall support and provide at
Manufacturer’s expense a sufficient number of Product(s) to permit the field
exchange or “hot swap” of Product(s) at customer sites. The Parties agree to
make all reasonable efforts to complete the repair or replacement of all of the
affected Product(s) within twenty (20) business days after written notice of
Epidemic Failure by PDI to Manufacturer. Manufacturer agrees that PDI shall be
supported with accelerated shipments of replacement Product(s) to fulfill PDI’s
supply requirements.

4.9   Inspection and Acceptance. PDI or a PDI representative shall conduct any
incoming inspection tests on the Product(s) prior to authorizing shipment from
Manufacturer’s facility. Such inspection shall occur no later than 48 hours from
the time Manufacturer declares the product complete and ready for inspection.
PDI shall have the right to reject any Product that does not meet the
Specifications (“Nonconforming Product”) and shall provide Manufacturer with
information as to the reason for the rejection of the Nonconforming Product. At
PDI’s option, Manufacturer shall either (a) promptly replace the Nonconforming
Product without additional cost to PDI, permit PDI to issue a debit memorandum
to Manufacturer for the purchase price of the Nonconforming Product, and shall
re-invoice PDI for

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    the Product shipped to replace the Nonconforming Product at the time of
shipment of the replacement product; or (b) credit PDI for the purchase price of
the Nonconforming Product and related shipping charges after receipt of PDI’s
debit memorandum related to such Nonconforming Product. At Manufacturer’s
request and expense, PDI shall return all rejected Product(s) to Manufacturer.

  4.9.1   Upon inspection and acceptance by PDI, products shipped by Manufacture
from Manufacturer’s facility will become responsibility of PDI for loss, damage,
or any quality issues.

4.10   Purchase by PDI’s Authorized Third Parties or Affiliates. Manufacturer
hereby agrees that all of the PDI’s Authorized Third Parties or Affiliates,
wherever located, shall be entitled to make purchases under this Agreement (at
the same price and in accordance with same terms negotiated by PDI, as
applicable), and all such purchases shall apply to the purchase commitments
hereunder, if any. With respect to any purchases made by Authorized Third
Parties or Affiliates, the terms and conditions of this Agreement shall govern
provided that all references to “PDI” contained in this Agreement shall refer to
the Authorized Third Party or Affiliate, as applicable.   4.11   Programming,
Operating Systems, Software. If applicable, procurement of all computer
programming, operating systems, or other software shall be the responsibility of
Manufacturer, or PDI upon PDI’s written assent thereof. Any restrictions or
payment obligations imposed by the original source on Manufacturer’s or PDI’s
use or handling of such programming shall be approved in writing by PDI. There
shall be no payment or reimbursement obligation on PDI’s part for programming
obtained or provided by Manufacturer unless such payments or reimbursements are
approved in writing by PDI which indicates that PDI has accepted such
obligation.

SECTION 5
PRICES AND PAYMENTS

5.1   Prices. The pricing model for all Product(s) sold by Manufacturer to PDI
shall be as set forth in Exhibit B or as otherwise agreed in writing by the
Parties from time to time. Prices may be decreased at any time upon agreement by
the Parties. A price increase can only take effect if Manufacturer gives at
least ninety (90) days’ prior written notice of the effective date of such
increase. In no event, however, shall a price increase affect (a) a Purchase
Order accepted by Manufacturer prior to the effective date of such price
increase; or (b) a prior agreement between the Parties concerning Purchase
Orders to be placed by PDI during a period in which prices are to remain firm.
All transactions shall be valued in United States currency and shall be invoiced
and payment remitted in the United States currency.

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5.2   Most Favored Nation Requirement. Manufacturer warrants that the prices for
the Product(s) do not, and at all times shall not, exceed Manufacturer’s price
to any other customer for a substantially similar product in substantially
similar volumes, and under commercial terms and conditions similar to those of
this Agreement.   5.3   Additional Payments. If additional payments shall be or
have been made to Manufacturer by PDI in connection with this Agreement for
items such as assists (e.g., tooling, molds, dies, Materials, or components
provided for incorporation in or manufacture of the Product(s)), royalties,
packing, selling commissions, or other incidental charges, such additional
value(s) shall be separately itemized and identified on Manufacturer’s
commercial invoice. Manufacturer’s invoices shall not indicate a nominal value
for Product(s), but shall indicate the invoice price charged to PDI, or if
shipment is one of multiple shipments required under a single Purchase Order,
the value shall be stated as the actual value of the Product(s) with respect to
each shipment. If Manufacturer ships sample goods to PDI, a fair market value
shall be stated on the commercial invoice for customs purposes.   5.4   Payment
Terms. Manufacturer shall invoice PDI for the Purchase Order upon PDI acceptance
of Product(s). PDI shall pay amounts due in each such invoice within thirty
(30) days.   5.5   Taxes. Manufacturer’s prices do not include any goods and
services taxes or any sales, use, excise, or similar taxes unless expressly
indicated in writing.   5.6   Right to Make Offset. If Manufacturer’s fails to
resolve any invoice or payment related issues with PDI after 30 days from
receipt of a written claim by PDI, PDI may offset from Manufacturer’s invoice
any current or future indebtedness of Manufacturer to PDI. Manufacturer agrees
to not contest PDI’s deduction if Manufacturer fails to send a written denial
thereof, including all supporting documentation, to PDI within sixty (60) days
of the date of deduction (PDI’s check date). Such written denial shall be made
by Manufacturer by submitting notice to PDI under the notice provisions of this
Agreement.   5.7   Statement of Account. From time to time upon request by PDI,
Manufacturer shall provide a complete statement of account that shall include,
but not be limited to, unpaid invoices and disputed deductions. Such statement
of account shall also disclose all credit memos issued and outstanding. The
statement of account shall be forwarded by electronic mail in spreadsheet format
or by regular mail per PDI’s instructions. Statements for
merchandising/inventory accounts shall be separate from any statement of account
for parts purchased by PDI for Product service and out-of-warranty repairs.  
5.8   Debit Balances. If Manufacturer is indebted to PDI but there is no
outstanding balance due to Manufacturer, Manufacturer shall pay the amount due
to PDI via check or wire transfer in full within thirty (30) days of receipt of
notification thereof from PDI. If the amount in question is disputed, the
Parties agree to work in

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    good faith to reconcile the matter so that payment to PDI of any undisputed
amount shall be made within sixty (60) days of PDI’s original notice to
Manufacturer. In no event shall PDI be obligated to take a credit against future
purchases.   5.9   Cost Reduction Plans. Manufacturer shall develop a cost
reduction plan for all products based on material and labor cost reductions.
Such plans shall be reviewed by both Parties and mutually agreed upon twice a
year, The goal for cost reduction is 5% (five percent) annually, but
Manufacturer does not guarantee that such 5% cost reductions can be achieved
annually.

SECTION 6
WARRANTIES

6.1   Representations and Warranties of Manufacturer. Manufacturer represents
and warrants to PDI as follows:

  6.1.1   Manufacturer has the authority to enter into this Agreement and to
manufacture and sell the Product(s) to PDI and that the persons signing this
Agreement on behalf of Manufacturer are authorized to sign;     6.1.2  
Manufacturer possesses all necessary permits, licenses, or clearances required
to perform its obligations hereunder, including China and other governmental
approvals required to perform its obligations under this Agreement;     6.1.3  
the Product(s) shall be free and clear of all liens, charges, encumbrances, or
other restrictions;     6.1.4   the Product(s) shall be free from defects in
design, manufacture, materials and workmanship for a period equal to the greater
of (i) the warranty period provided to end-users by PDI, plus one (1) month; or
(ii) twelve (12) months from PDI’s resale to an end-user;     6.1.5   the
Product(s) shall be fit and safe for the use(s) normally and reasonably
intended;     6.1.6   the Product(s) are of merchantable quality and shall
perform in conformance with Specifications (including any identified “Useful
Life”) and Manufacturer samples;     6.1.7   Manufacturer shall comply with all
applicable laws and regulations in performing its obligations under this
Agreement, including but not limited to laws and regulations pertaining to
product design, manufacture, packaging and labeling and, if applicable,
importation and the Foreign Corrupt Practices Act;

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  6.1.8   the Product(s) and all Materials provided to PDI under this Agreement
are new Product(s) and do not contain anything used, refurbished or
reconditioned;     6.1.9   all Product(s), unless specifically exempted under
the applicable customs laws and regulations, shall be marked in a conspicuous
place as legibly, indelibly, and permanently as the nature of the article (or
container) shall permit, with the country of origin;     6.1.10   the Product(s)
are not supplied by the use of forced labor, convict labor or forced or illegal
child labor and mat the Product(s) were not trans-shipped for the purpose of
mislabeling, evading quota or country of origin restrictions or for the purpose
of avoiding compliance with forced labor, convict labor or child labor laws;

6.2   Representations and Warranties of PDI. PDI represents and warrants to
Manufacturer as follows:

  6.2.1   the Specifications and other Intellectual Property provided by PDI to
Manufacturer do not infringe the intellectual property rights of any third
party, including without limitation, any utility patent, design patent, trade
secret or other intellectual or proprietary rights; and     6.2.2   that the
persons signing this Agreement on behalf of PDI are authorized to sign on its
behalf.

6.3   Warranty Exclusions:

  6.3.1   MANUFACTURER MAKES NO WARRANTIES, GUARANTEES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCT(S) SOLD TO PDI EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT. ALL OTHER WARRANTIES ARE EXPRESSLY WAIVED
AND EXCLUDED, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.     6.3.2   MANUFACTURER
SHALL HAVE NO WARRANTY RESPONSIBILITY FOR CONSIGNED MATERIALS, BUT MANUFACTURER
AGREES TO COOPERATE IN PROCESSING APPLICABLE THIRD-PARTY WARRANTY CLAIMS AND IN
TAKING ADVANTAGE OF REMEDIES, IF ANY, AVAILABLE FROM THE ORIGINAL SOURCES OF
SUCH CONSIGNED MATERIALS.     6.3.3   PDI MAKES NO WARRANTIES, GUARANTEES, OR
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO

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      THE SPECIFICATIONS, AND EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES
RELATING TO THE SPECIFICATIONS OR THE PRODUCT(S) INCLUDING ANY WARRANTY AGAINST
INFRINGEMENT.     6.3.4   IN NO EVENT SHALL THE PARTIES BE LIABLE FOR ANY
INDIRECT, SPECIAL, CONSEQUENTIAL (INCLUDING, WITHOUT LIMITATION, LOST REVENUES
OR PROFITS), PUNITIVE, OR EXEMPLARY DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.     6.3.5   EXCEPT FOR ITS OBLIGATIONS UNDER THIS SECTION, AND
EXCLUDING ANY THIRD-PARTY CLAIM OF ANY KIND RELATED TO THIS AGREEMENT, THE
PARTIES’ LIABILITY TO EACH OTHER, WHETHER FOR BREACH OF CONTRACT OR WARRANTY,
STRICT LIABILITY, NEGLIGENCE OR OTHERWISE SHALL NOT EXCEED FIFTY PERCENT (50%)
OF THE AGGREGATE OF INVOICED COSTS PAID BY PDI TO MANUFACTURER FOR ALL PRODUCTS
FOR THE IMMEDIATE TWELVE (12) MONTH PERIOD.

SECTION 7
INDEMNIFICATION

7.1   Indemnification by Manufacturer. Manufacturer shall indemnify, defend and
hold harmless PDI, its parent and each of its Affiliates, subsidiaries,
officers, directors, employees, consultants, agents and shareholders from and
against and in respect of any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, interest and penalties, costs
and expenses (including, without limitation, reasonable legal fees and
disbursements incurred in connection therewith and in seeking indemnification
therefore, and any amounts or expenses required to be paid or incurred in
connection with any action, suit, proceeding, claim, appeal, demand, assessment
or judgment) (“Indemnifiable Losses”), resulting from, arising out of, or
imposed upon or incurred by any person to be indemnified under this Section 7.1
by reason of (a) any breach of representation, warranty, covenant or agreement
on the part of Manufacturer under this Agreement; (b) acts or omissions of
Manufacturer relating to the Product(s) which includes, but is not limited to,
claims that the Product(s), or use thereof, caused personal injury, death, or
real or personal property damage to the extent not attributable to Consigned
Materials or PDI Proprietary Specifications; (c) a Product recall, whether or
not initiated by Manufacturer to the extent not attributable to Consigned
Materials or PDI Proprietary Specifications; (d) an allegation that any Product
constitutes an infringement of any patent or any other intellectual property
right protected under the laws of the United States, any State of the United
States, or any other country, including China, to the extent not attributable to
PDI Proprietary Specifications; (e) the negligence or willful misconduct of
Manufacturer; (f) any

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    retroactive antidumping duties payable by PDI; and (g) acts or omissions
that cause difficulty, delay or inability of PDI to import the Product(s) into
the United States or other country of importation and/or to comply with
applicable import regulations; provided that in no event shall Manufacturer be
liable for PDI’s lost profits, consequential, punitive or exemplary damages.  
7.2   Indemnification by PDI. PDI shall indemnify, defend and hold harmless
Manufacturer and each of its Affiliates, subsidiaries, officers, directors,
employees, consultants, agents and shareholders from and against and in respect
of any and all Indemnifiable Losses resulting from, arising out of, or imposed
upon or incurred by any person to be indemnified under this Section 7.2 by
reason of (a) any breach of representation, warranty, covenant or agreement on
the part of PDI under this Agreement; or (b) the gross negligence or willful
misconduct of PDI; provided that in no event shall PDI be liable for
Manufacturer’s lost profits, consequential, punitive or exemplary damages.   7.3
  Third Party Claims. If a claim by a third party is made against an indemnified
Party and if the indemnified Party intends to seek indemnity with respect
thereto under this Section 7, such indemnified Party shall promptly notify the
indemnifying Party of such claim; provided, however, that failure to give timely
notice shall not affect the rights of the indemnified Party so long as the
failure to give timely notice does not adversely affect the indemnifying Party’s
ability to defend such claim against a third party. The indemnifying Party shall
be entitled to assume the defense thereof, with counsel selected by the
indemnifying Party and reasonably satisfactory to the indemnified Party. The
indemnifying Party shall have control of the defense of any such action,
including any appeals and negotiations for the settlement or compromise thereof
and shall have full authority to enter into a binding settlement or compromise;
provided that, the indemnifying Party shall not enter into any settlement or
compromise which may adversely affect the indemnified Party without the
indemnified Party’s consent, which consent shall not be unreasonably withheld.
If the indemnifying Party assumes the defense of such claim, the indemnifying
Party shall not be responsible for any legal or other expenses subsequently
incurred by such indemnified Party in connection with the defense thereof. The
indemnified Party may participate, at its own cost and expense, in the defense
of any such claim; provided that such defense shall be controlled by the
indemnifying Party.   7.4   Cooperation as to Indemnified Liability. Each Party
hereto shall cooperate fully with the other Party with respect to access to
books, records, or other documentation within such Party’s control, if deemed
reasonably necessary or appropriate by any Party in the defense of any claim
which may give rise to indemnification hereunder.   7.5   Insurance
Requirements.

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  7.5.1   Manufacturer shall procure and maintain throughout the term of this
Agreement an insurance policy that meets the following requirements:     7.5.2  
Type of Policy:

  7.5.2.1   Comprehensive general liability, commercial general liability or
product liability.     7.5.2.2   Must be a per-occurrence policy.     7.5.2.3  
Claims-made policy is not acceptable.     7.5.2.4   If Manufacturer shall be
entering PDI’s premises, Manufacturer shall procure and maintain Workers’
Compensation insurance in an amount not less than the statutory requirements.

  7.5.3   Named Insured:

  7.5.3.1   Manufacturer shall be identified as the named insured.

  7.5.4   Policy of Insurance:

  7.5.4.1   A copy of an insurance policy shall be submitted to PDI before
shipment which is in compliance with these requirements.     7.5.4.2   The
policy shall provide that the insurance shall not be cancelled or changed unless
at least thirty (30) days’ prior written notice has been given to PDI.    
7.5.4.3   Prior to expiration of the insurance policy, an original certificate
of insurance shall be submitted to PDI evidencing the renewal of coverage in
compliance with these requirements.

  7.5.5   Additional Insureds:

  7.5.5.1   PDI and its Affiliates shall be added as additional insureds.

  7.5.6   Limit of Liability:

  7.5.6.1   U.S. $5,000,000 per occurrence for electronics Product(s)
manufacturing (primary insurance of U.S. $1,000,000 per occurrence plus U.S.
$4,000,000 in excess liability or umbrella coverage is acceptable).

  7.5.7   Policy Territory and Jurisdiction:

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  7.5.7.1   Worldwide.

SECTION 8
RETURNS & DEFECTIVE MATERIALS

8.1   General. PDI shall have the right to return at Manufacturer’s expense, and
for full credit or refund of PDI’s cost, any non-consigned Products that (a) are
not developed, manufactured, supplied, packaged, or labeled in accordance with
the Specifications and all applicable laws, rules, regulations and industry
standards; (b) are shipped in error or in non-conformance with PDI’s Purchase
Order; (c) have caused injury to person or property; (d) are damaged; (e) are
supplied in breach of Manufacturer’s warranty as provided herein; or (g) are
returnable as a defective Product, subject to the terms of Section 8.2 below.  
8.2   Return Procedures. If a Manufacturer Return Authorization (“MRA”) is first
required by either Party prior to PDI’s return of Product(s) to Manufacturer,
Manufacturer agrees to provide a unique MRA number to PDI within forty-eight
(48) hours of PDI’s request. Manufacturer shall allow delivery of the return
Product(s) as of the day the MRA is issued to PDI. If Manufacturer requires that
PDI make an appointment to deliver returned Product(s), such appointment shall
be provided by Manufacturer within three (3) days of the carrier’s expected
arrival time. See Exhibit G for MRA procedures.   8.3   Returns; Defective
Products. The Parties agree that returns shall be governed by a “Return” and
“Defective Allowance” procedures with respect to the handling and responsibility
of end-user returns and defective Product(s) as specified in Exhibit G. Unless
otherwise agreed to in writing, for a period not to exceed the warranty period
specified in Section 8.2 hereof, PDI may return to Manufacturer-any Product(s)
either determined by PDI to be defective or claimed by an end-user to be
defective (returns to Manufacturer may therefore include Product(s) that are
not, in fact, defective). PDI may seek credit or exchange for such returned
Product(s) upon mutual agreement that Manufacturer is at fault.   8.4  
Replacement Inventory. At the request of PDI or its designated agent,
Manufacturer shall ship parts and assemblies for the Product(s) that are the
equivalent in specifications and quality to the original parts supplied with the
Product(s). At the request of PDI, Manufacturer shall maintain an inventory of
general replacement parts or special parts as forecasted by PDI. During such
time, Manufacturer shall supply parts to PDI or its designated agent at
reasonable, competitive rates as may be necessary to perform out-of-warranty
repairs. As required, the Parties will enter into separate agreement(s) covering
spare parts and refurbished assemblies.

SECTION 9
CONSULTING DESIGN AND ENGINEERING SERVICES

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PDI may engage Manufacturer to render consulting, design or engineering services
in connection with Product(s) to be manufactured hereunder. In the event that
PDI desires to engage Manufacturer to render such services, the Parties shall
execute a Project Plan which shall include a description of the services to be
rendered, any milestones or delivery dates, payment terms or other terms
relevant to such engagement. To the extent the results of Manufacturer’s
performance of such services may constitute “work made for hire” for PDI under
the USA Copyright Revision Act of 1976, as amended from time to time, then such
work shall be considered “work made for hire” by the Parties.
SECTION 10
INTELLECTUAL PROPERTY; TRADEMARKS

10.1   Intellectual Property. PDI hereby grants to Manufacturer and Manufacturer
hereby accepts, a non-exclusive, non-transferable and royalty free right and
license under all of PDI’s Intellectual Property to make, use and distribute the
Products exclusively on behalf of PDI. It is acknowledged and hereby agreed by
the Parties that all rights to sell, price, market, license, distribute, or
manufacture the Products or any Intellectual Property related thereto (except
for manufacturing processes and build procedures developed by Manufacturer) as
between Manufacturer and PDI, is wholly and exclusively owned by PDI.
Notwithstanding the foregoing, PDI acknowledges that the Products are assembled
using common industry modular assembly methods and that PDI has no proprietary
rights in such methods and that Manufacturer may continue to use such methods in
constructing other products.   10.2   Use of Trademarks. PDI hereby grants to
Manufacturer, and Manufacturer hereby accepts, a nonexclusive, nontransferable
and royalty-free right and license to use PDI’s trademarks in connection with
the manufacturing and packaging of the Products for so long as the PDI’s
trademarks are used by Manufacturer in accordance with PDI’s standards,
specifications and instructions, but in no event beyond the term of this
Agreement. Manufacturer shall acquire no right, title or interest in PDI’s
trademarks other than the foregoing limited license, and Manufacturer shall not
use any PDI Trademarks as part of Manufacturer’s corporate or trade name or on
products not specifically authorized by PDI in writing or permit any third party
to do so.   10.3   Termination of Use. Manufacturer acknowledges PDI’s
proprietary rights in and to PDI’s trademarks and Manufacturer hereby waives in
favor of PDI all rights to any trademarks, trade names and logotypes now or
hereafter originated by PDI. Manufacturer shall not adopt, use or register any
words, phrases or symbols that are identical to or confusingly similar to any of
PDI’s trademarks or trade names in the United States and internationally. Upon
termination of this Agreement, Manufacturer shall cease and desist from use of
PDI’s trademarks and trade names in any manner.   10.4   Change in
Specifications. To the extent the Specifications need to be changed, altered or
modified, as provided in Section 3.5 above, to comply with a license or to

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    avoid a valid utility patent, design patent, copyright or other Intellectual
Property right, Manufacturer shall advise PDI in writing of such “Necessary
Patent-Related Changes” including the circumstances giving rise to such changes.
  10.5   Programming, Operating Systems, Software. If applicable, procurement of
all computer programming, operating systems, or other software shall be the
responsibility of Manufacturer, or PDI upon PDI’s written consent thereof.
Restrictions or payment obligations may be imposed by the original source on
Manufacturer’s or PDI’s use or handling of such programming. There shall be no
payment or reimbursement obligation on PDI’s part for programming obtained or
provided by Manufacturer unless such payments or reimbursements are approved in
writing by PDI which indicates that PDI has accepted such obligation.

SECTION 11
ADDENDA: SUPPLY CHAIN SECURITY REQUIREMENTS

11.1   Addenda. PDI and Manufacturer may agree upon certain business terms from
time to time concerning matters such as Product(s), pricing, market, invoice
credit terms, and the like. Such terms shall be contained in one or more written
addenda to this Agreement, each of which shall be considered an addendum hereto
and may be identified as Exhibits to this Agreement. In the event of conflict
between business terms of any addendum and this Agreement, the business terms
contained in such addendum shall control.   11.2   Supply Chain Security. PDI
supports the U.S. Customs and Border Protection (“CBP”) Customs-Trade
Partnership Against Terrorism, commonly referred to as “C-TPAT” and similar
programs in Korea promulgated by the Korean government. PDI requires foreign
suppliers of imported goods to scrutinize, and, where necessary, develop
sufficient security measures within, their own supply chain. More information
about C-TPAT can be found at www.cpb.gov. In particular, Manufacturer agrees to
implement Customs’ Security Recommendations for manufacturers as set forth as
part of the Supplier Compliance Standards attached hereto as Exhibit H.

SECTION 12
CONFIDENTIALITY

12.1   Confidentiality. Each Party agrees, during the term of this Agreement and
for a period of three (3) years thereafter, it shall not use any Confidential
Information (as defined below) for any purpose other than as permitted or
required for performance by such Party under this Agreement, nor shall it
disclose or provide any Confidential Information to any third party. Each Party
shall take all necessary measures to prevent any such disclosure by its
employees, agents, contractors or

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  consultants. Upon request of the other Party or upon termination of this
Agreement, each Party shall return all such Confidential Information to the
other Party.   12.2   Confidential Information. This Agreement and any
information marked as confidential or, regardless of form
(written/electronic/oral) or marking, is of the nature that a reasonable person
would understand its owner would not want it disclosed to the public shall be
considered to be Confidential Information. Further, Confidential Information
shall also include (a) any document or data transaction between the Parties;
(b) matters of a technical nature such as trade secret processes or devices,
know-how, data, formulas, inventions (whether or not patentable or copyrighted),
specifications and characteristics of Product(s) or services planned or being
developed, and research subjects, methods and results; (c) matters of a business
nature such as information about costs, profits, pricing, policies, markets,
sales, PDI’s customers (e.g., names and addresses), Product plans, and marketing
concepts, plans or strategies; (d) matters relating to project initiatives and
designs; (e) matters of a human resources nature such as employment policies and
practices, personnel information, including individual names, addresses, and
telephone numbers, compensation, and employee benefits; and (f) other
information of a similar nature not generally disclosed to the public.
Confidential Information shall not include information that:

  12.2.1   was already in the possession of the Receiving Party prior to its
receipt from the Disclosing Party (provided that the Receiving Party is able to
provide the Disclosing Party with reasonable documentary proof thereof);    
12.2.2   is or becomes part of the public domain by reason of acts not
attributable to the Receiving Party;     12.2.3   is or becomes available to the
Receiving Party from a source other than the Disclosing Party which source, to
the best of the Receiving Party’s knowledge, has rightfully obtained such
information and has no obligation of non-disclosure or confidentiality to the
Disclosure Party with respect thereto;     12.2.4   is made available on an
unrestricted basis by the Disclosing Party to a third party unaffiliated with
the Disclosing Party; and     12.2.5   has been or shall be publicly disclosed
by reason of legal, accounting or regulatory requirements beyond the reasonable
control, and despite the reasonable efforts of the Receiving Party.

12.3   Manufacturer Information. Any unpatented knowledge or information
concerning Manufacturer’s manufacturing processes for the Product(s) that
Manufacturer may disclose to PDI or its employees shall, unless specifically
agreed in writing, be deemed to have been disclosed as a part of the
consideration for this Agreement. Manufacturer agrees not to assert any claim
against PDI by reason of

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    any use or alleged use to which any such information or knowledge may be put
by PDI. Manufacturer hereby assigns to PDI all of its right, title and interest
in and to any technology, concepts, data, information or knowledge relating to
modifications of, or enhancements to, the Product(s) or the process by which it
is manufactured and assembled developed by Manufacturer in response to a request
by PDI during the term of this Agreement.   12.4   Privacy. Manufacturer shall
respect and preserve the strict confidentiality and privacy of all
personally-identifiable information in respect of any customer, employee or
other identifiable individual related to PDI (“Personal Information”). Personal
Information shall be considered Confidential Information for purposes of this
Section 12. Manufacturer shall comply with, and shall co-operate with and assist
PDI to comply with, all provincial, state, federal and other laws applicable to
the Personal Information as amended from time to time and PDI’s privacy policy.
Manufacturer shall only use the Personal Information for lawful and legitimate
business purposes associated with the performance of Manufacturer’s obligations
under this Agreement or as otherwise consented to in writing and in advance by
PDI. Without limiting the generality of the foregoing, Manufacturer shall:

  12.4.1   not sell, trade, lend or otherwise voluntarily disclose any Personal
Information to any entity other than PDI; and     12.4.2   establish and
maintain adequate security safeguards to ensure that Personal Information is not
vulnerable to unauthorized access and use and is not disclosed or used in a
manner contrary to this Agreement or applicable law.

12.5   PDI may immediately terminate, cancel and revoke Manufacturer’s right to
use any or all of the Personal Information at any time and for any reason in
PDI’s sole discretion, with or without cause, and without any liability to
Manufacturer or any other person whatsoever, by giving notice of that
cancellation to Manufacturer. Upon receipt of such notice, Manufacturer shall
immediately cease use of the Personal Information, and shall comply with any
request by PDI to transfer the Personal Information to PDI or a third party
designated by PDI and thereafter permanently delete and destroy any or all of
the Personal Information and certify through a notary public that the Personal
Information has been permanently deleted and destroyed.

SECTION 13
AUDITS; INSPECTIONS

13.1   PDI, or its designated third-party agent, may audit the Manufacturer’s
production and quality records and inspect the Manufacturer’s facilities and
procedures. Any audit or inspection may be conducted at any time at
Manufacturer’s facilities, with at least four (4) week’s notice at PDI’s sole
cost. The audit shall not exceed twice per year. Manufacturer shall provide
PDI’s designated audit or inspection team

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    with access to the relevant Manufacturer’s production and quality records,
facilities and procedures.   13.2   In the event that the audit reveals that
Manufacturer is not performing in material compliance with the terms of this
Agreement, then, in addition to any other rights and remedies PDI shall have
under this Agreement and applicable laws, Manufacturer shall reimburse PDI for
the costs of the audit and cure any and all defects within five (5) days of
receipt of notice from PDI.

SECTION 14
ARBITRATION AND GOVERNING LAW

14.1   Disputes. Any controversy or claim arising out of or relating to this
Agreement shall be determined by arbitration administered by JAMS pursuant to
its Comprehensive Arbitration Rules and Procedures (“Rules”). Such arbitration
shall be conducted before an arbitral tribunal consisting of three
(3) arbitrators appointed in accordance with the Rules. The arbitration shall be
conducted in the English language. The place of arbitration shall be Santa Clara
County, California, United States of America. Any decision rendered by the
arbitration tribunal shall be final and binding on the Parties, and judgment
thereon may be entered by any court of competent jurisdiction. The Parties
expressly agree that the arbitration tribunal shall be empowered to award and
order equitable or injunctive relief with respect to matters brought before it.
  14.2   Governing Law. This Agreement shall be governed by, and interpreted and
construed in accordance with, the laws of the State of California, without
reference to principles of conflicts of laws or to the United Nations Convention
on Contracts for the International Sales of Goods.

SECTION 15
TERM AND TERMINATION

15.1   Term. This Agreement shall take effect as of the date first mentioned
above and shall continue in force for a period of three (3) years from that
date. Thereafter, the Agreement shall automatically renew on an annual basis
unless either Party provides written notice to the other of its intent not to
renew at least ninety (90) days prior to the end of the then current term.  
15.2   Termination. Notwithstanding the provisions of Section 15.1, this
Agreement may be terminated in accordance with the following provisions:

  15.2.1   Either Party may terminate this Agreement at any time by giving
notice in writing to the other Party, which notice shall be effective upon
dispatch, should the other Party cease operations, file a petition of any type
as to its bankruptcy, be declared bankrupt, become insolvent, make an assignment

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      for the benefit of creditors, go into liquidation or receivership, or
otherwise lose legal control of its business.     15.2.2   Either Party may
terminate this Agreement by giving notice in writing to the other Party in the
event the other Party is in material breach of this Agreement and fails to cure
such breach within fifteen (15) days of receipt of written notice thereof from
the non-breaching Party.     15.2.3   PDI may terminate this Agreement in its
sole discretion without cause upon giving sixty (60) days’ advance written
notice to Manufacturer.

15.3   Rights and Obligations on Termination. In the event of termination of
this Agreement for any reason, the Parties shall have the following rights and
obligations:

  15.3.1   Termination of this Agreement shall not release either Party from the
obligation to make payment of all amounts then or thereafter due and payable.  
  15.3.2   The terminating Party shall have the right, at its option, to cancel
any or all Purchase Orders, which provide for delivery after the effective date
of termination.     15.3.3   Notwithstanding anything to the contrary contained
herein, in no event shall either Party be obligated to issue or accept Purchase
Orders during the notice period(s) specified in this Section 15, except to the
extent that the Parties have agreed to binding forecasts or other written
agreement between the Parties.     15.3.4   Upon termination of the Agreement by
PDI, if Manufacturer has an inventory of the Product(s) in its possession or
control, Manufacturer shall timely inform PDI regarding the quantity of the
Product(s) in its inventory. PDI shall purchase these Product(s) under the terms
of this Agreement. Manufacturer shall not sell the Product(s) to a third party
unless PDI provides its express written consent authorizing such sale.    
15.3.5   The expiration or termination of this Agreement shall not terminate
vested rights of either Party from any liabilities or obligations incurred under
this Agreement prior to or which by their nature are intended to survive
expiration or termination, including but not limited to, provisions relating to
confidentiality, warranties, indemnification, returns, and proprietary rights.

15.4   No Renewal Extension or Waiver. Acceptance of the Product(s) by PDI after
the date of termination of this Agreement shall not be construed as a renewal or
extension hereof, or as a waiver of termination by PDI.

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SECTION 16
MISCELLANEOUS

16.1   Regulatory Approvals. The Parties shall cooperate with each other in
obtaining all regulatory approvals necessary for the importation of the
Product(s) in the country of destination.   16.2   Force Majeure. Neither Party
shall be liable for any direct, indirect, special, incidental or consequential
damages arising out of total or partial failure to perform hereunder, or delay
in such performance, by reason of acts of God, wars, acts of a public enemy,
acts of the governments of any state or political subdivision or any department
or regulatory agency thereof or entity created thereby (whether or not valid),
quotas, embargoes, acts of any person engaged in subversive activity or
sabotage, riots, fires, floods, explosions, or other catastrophes, epidemics or
quarantine restrictions, strikes, lockouts or other labor stoppages, slowdowns
or disputes. If a force majeure event shall prevent timely delivery of
Product(s), then PDI may, without liability to Manufacturer, by written notice
cancel its Purchase Order for the delayed Product(s).   16.3   Relationship.
This Agreement does not make either Party the employee, agent or legal
representative of the other for any purpose whatsoever. Neither Party is granted
any right or authority to assume or to create any obligation or responsibility,
express or implied, on behalf of or in the name of the other Party. In
fulfilling its obligations pursuant to this Agreement, each Party shall be
acting as an independent contractor.   16.4   Assignment.

  16.4.1   Assignment. Neither Party shall assign or otherwise transfer its
rights and obligations under this Agreement without the prior written consent of
the other Party, except as provided in this Section 16 or in the event that
either Party may assign any or all of its rights and obligations under this
Agreement to any successor in interest of all or substantially all of the
business of such Party by merger, operation of law, assignment, purchase or
otherwise or to any of its affiliates. Any prohibited assignment shall be null
and void. All terms and conditions of this Agreement shall be binding on and
inure to the benefit of the successors and permitted assigns of the Parties.    
16.4.2   Assignment of Accounts Receivable. If Manufacturer assigns payments to
an assignee/factor, Manufacturer understands and agrees that Manufacturer and
the assignee/factor shall be required to sign PDI’s standard acknowledgment form
to assure PDI that the assignee/factor understands the rights and obligations
being assigned, including the right of PDI to make offsets.

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  16.4.3   Assignment of Duty Drawback Rights. All drawback of duties and rights
thereto related to import duties paid by Manufacturer or PDI upon importation of
the Product(s) into the customs territory of the United States or other
countries of importation, as applicable, shall accrue to the exclusive benefit
of PDI. Manufacturer agrees to promptly provide PDI with all documents, records,
and other supporting information necessary to obtain any eligible duty drawback
for Product(s) purchased by PDI from Manufacturer under this Agreement.

16.5   Notices. All notices, requests, demands and other communications that are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if hand-delivered or mailed by either registered
or certified mail, return receipt requested, or by a nationally recognized
overnight courier service, receipt confirmed. In the case of notices via
first-class mail or courier service, notices shall be deemed effective upon the
date of receipt. Notices shall be addressed to the Parties as set forth below,
unless either Party notifies the other of a change of address, in which case the
latest noticed address shall be used.

     
Notices to Manufacturer:
  Notices to PDI:
 
   
Ultra Clean Technology
  Photon Dynamics, Inc.
150 Independence Drive
  5970 Optical Drive
Menlo Park, CA 94025
  San Jose, CA 95138
Attn: CFO
  Attn: Vice President Operations
 
   
 
  Copy to: CFO
 
  Copy to: General Counsel, Legal Dept.

16.6   Entire Agreement. This Agreement, including the exhibits incorporated as
an integral part of this Agreement, constitutes the entire agreement of the
Parties with respect to the subject matter hereof, and supersedes all previous
proposals, oral or written, and all negotiations, conversations or discussions
heretofore between the Parties related to this Agreement. The following exhibits
are hereby incorporated into this Agreement by reference:       Exhibit A:
Specifications and Technical Evaluation;       Exhibit B: Price List and
Non-Binding Forecasts;       Exhibit C: Not Applicable;       Exhibit D: Not
Applicable;       Exhibit E: Product Acceptance Criteria;

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    Exhibit F: Project Plan;       Exhibit G: Return Material Authorization
Procedures; and       Exhibit H: Supplier Compliance Standards.   16.7  
Amendment. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, other than by
written amendment signed by the Parties hereto, except as expressly provided in
this Agreement.   16.8   Severability. In the event that any of the terms of
this Agreement are in conflict with any rule of law or statutory provision or
otherwise unenforceable under the laws or regulations of any government or
subdivision thereof, such terms shall be deemed stricken from this Agreement,
but such invalidity or unenforceability shall not invalidate any of the other
terms of this Agreement and this Agreement shall continue in force, unless the
invalidity or unenforceability of any such provisions of this Agreement
substantially violates, comprises an integral part of, or is otherwise
inseparable from the remainder of this Agreement.   16.9   Counterparts. This
Agreement shall be executed in two or more counterparts, and each such
counterpart shall be deemed an original hereof.   16.10   Waiver. No failure by
either Party to take any action or assert any right hereunder shall be deemed to
be a waiver of such right in the event of the continuation or repetition of the
circumstances giving rise to such right.   16.11   Draftsmanship. Each of the
Parties hereto has been represented by its own counsel. In the event of a
dispute, no provision of this Agreement shall be construed in favor of one Party
and against the other by reason of the draftsmanship of this Agreement.   16.12
  Non-Exclusivity. Nothing in the Agreement shall be construed as creating an
exclusive purchase arrangement or requirements contract between PDI and
Manufacturer. PDI shall have the right to obtain similar Product(s) from any
other manufacturer.   16.13   Translation. This Agreement is drafted in the
English language.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first above written.

                              PDI:           MANUFACTURER:        
 
                            Signature:   /s/ Jeff Hawthorne       Signature:  
/s/ John K. Sexton                          
 
  Printed Name:   JEFF HAWTHORNE           Printed Name:   JOHN K. SEXTON    
 
  Title:   President & CEO           Title:   CHIEF FINANCIAL OFFICER    
 
                            Date: 2/1/08           Date: 1/29/08        

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