**Exhibit10.26**

 

**Documentof Understanding Between Advanced Energy Industriesand**

**Advanced Power Technologies**

**Contract Number: 1010**

 

**1.             PREAMBLE**

 

This agreement is made onthis 15th day of Jan 2001 by and between Advanced Energy Industries, Inc. &Affiliates (hereinafter referred to as “Buyer”) and Advanced PowerTechnologies, (hereinafter referred to as “Seller”), under which services shallbe performed. This contract is in effect through the 15th day of Jan 2002.

 

**2.             TERMS AND CONDITIONS**

 

No terms and conditionsother than the terms and conditions set forth in this document and such termsand conditions as are set forth in any document attached to or incorporated byreference in this contract shall be binding unless specifically accepted byboth the Buyer’s authorized Purchasing Agent or Commodity Manager and theSeller’s authorized agent. This contract will be reviewed on an annual basisand unless terminated by either party, as provided for in Section 19, shallcontinue to be in force. This contract is intended as the complete and finalagreement of both parties and exclusive statement of its terms and may not bechanged, altered or modified, except in writing by agreement of both parties.

 

**3.             WARRANTY**

 

[ * ]. The Seller shallcomply with all applicable Colorado State, Federal and local laws, rules andregulations. The exclusive venue for any litigation concerning this mattershall be in the Larimer County District Court in Fort Collins, Colorado.

 

**4.             LIABILITY**

 

The Seller agrees that therelationship established by this order constitutes him as an independentcontractor and that, no tax assessment or legal liability of the Seller or ofhis agents or employees becomes, by reason of this order, an obligation of theBuyer.

 

**5.             REMEDY**

 

Seller will not be responsiblefor incidental or consequential damages. Seller’s entire remedy will be thevalue of the product sold to Buyer.

 

**6.             BUYER CHANGES**

 

Buyer shall have the rightto make changes to existing orders. Purchase order changes will be allowed onlyif authorized by Buyer. If such change affects delivery, quality or amount tobe paid by Buyer, Seller shall notify Buyer of such changes in writing.

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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**7.             ENGINEERING CHANGE ORDERS AND BUYER CHANGES**

 

Allengineering change orders will be communicated to Seller via an EngineeringChange Order (ECO). If such change affects delivery, quality or the amount tobe paid by Buyer, Seller shall notify Buyer immediately. The charges for scrapand/or rework resulting from any change submitted via Buyer’s ECO process, shall be limited to the materials in process at thetime of the change and within Seller’s manufacturing cycle, as defined in therelated addendum. These charges will be communicated in their entirety inwriting, to Buyer, within fifteen (15) working days of receipt of ECO. Buyerwill not be responsible for any costs associated with the change order whichare not identified within the fifteen (15) working day window.

 

**8.             DELIVERY**

 

The goods described hereinshall be delivered FOB point of origin. Buyer’s Purchasing Agent or CommodityManager shall authorize means of shipment. Preferred means of shipment is UPSGround. If seller chooses alternative method of shipment without Buyer’sauthorization, Seller is responsible for any incremental shipping charges.

 

[ * ].

 

Identification of the goodsshall occur when they are placed in the hands of the Carrier. Title shall passto Buyer upon delivery to Carrier. The goods shall be placed in suitablyprotected containers, the nature of which may be determined by the Buyer.

 

**9.             KANBAN PULL PROCESS**

 

Seller will participate in aKanban pull process for specifically agreed upon part numbers, as listed inaddendum. This list will be updated as parts are added on to or deleted off ofthe Kanban program, with agreement between Buyer and Seller.

 

Buyer’s authorizedPurchasing Agent or Commodity Manager and Seller shall agree on the Kanbanquantity and replenishment strategy for each part number. Kanban quantities forall part numbers will be reviewed by Buyer on an as required basis and adjustedaccordingly. Buyer’s quantity of Finished Goods Bins is subject to changedependent upon Seller’s ability to reduce manufacturing lead-time. Changing the

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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** **

quantity of Finished Goods Bins at the buyer’sfacility does not necessitate re­-negotiation of this contact. Seller agreesthat no shipments will be made to Buyer unless authorized by Buyer.

 

**10.          PURCHASE ORDER**

 

Buyer will also be entitledto issue purchase orders for individual items separate from the Kanban Pullprocess and the Schedule Agreement Process, as quoted by Seller and agreed toin writing by Buyer.

 

**11.          SCHEDULE AGREEMENT**

 

Schedule Agreements will beissued with agreement by Buyer and Seller for a specific time frame, by partnumber, negotiated price and estimate annual usage. Buyer shall provide Sellerwith demand information as part of the planning and forecasting process, to beupdated periodically as agreed upon by Buyer and Seller. This report is for useas a planning tool only. Seller is responsible for any and all materialpurchased beyond the agreed upon liabilities, as stated in addendum.

 

**12.          LIMITATION OF MATERIAL LIABILITY**

 

The extent and limitation ofBuyer’s liability for materials purchased by Seller are as defined in theaddendum.

 

**13.          PRICING**

 

Buyer and Seller agree tothe price(s) set forth in the appropriate addendum. Any change in thecontracted price must have written approval by Buyer’s Commodity Manager orPurchasing Agent, prior to implementation. Seller will establish a costreduction program, which will be reviewed on an annual basis. Cost changes willbe reflected in price adjustments and a revised addendum to this document.

 

**14.          PAYMENT TERMS**

 

Terms of payment are net [ * ] days for each shipment invoiced, unless otherwiseexpressly provided for and confirmed in writing by the Seller. Method ofpayment for goods receipt is electronic receipt settlement (ERS). Seller shalluse standard invoicing for charges on any items that do not require a goodsreceipt.

 

**15.          PROPRIETARY INFORMATION**

 

It is understood that theBuyer may provide proprietary information to the Seller,likewise, Seller may provide proprietary information to Buyer in theperformance of this contract. “Proprietary Information” shall be deemed toinclude all information conveyed by one party to the other party orally, inwriting, by demonstration or by magnetic or other media. If the disclosure isin other than written form, the information shall not be

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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deemed Proprietary Information after thirty (30)days unless within that period the disclosing party has identified it as suchin written summary communicated to the receiving party. Proprietary Informationmay also include, by way of example but without limitations, data, know-how,formulas, algorithms, processes, design, sketches, photographs, plans,drawings, specifications, samples, reports, customer and distributor names,pricing information, product demand information, market definitions, inventionsand ideas.

 

ProprietaryInformation shall not include information, which can be clearly demonstrated tobe:

 

a)generally known or available to the public, through noact of omission on the part of the receiving party; or

b)known to the receiving party prior to disclosure underthis agreement; or

c)provided to the receiving party by a third party without any restriction ondisclosure and without breach of any obligation of confidentiality to a party.

 

Both parties to this agreement, agree to return to the forwarding party alldocuments containing propriety information and to retain no copies thereof. Inaddition, ownership and possession of all product assembly and test fixtures,tooling, test programs, Non-­Recurring Engineering (NRE) tooling, testequipment and consigned equipment, shall revert to Buyer. Both parties to theagreement agree that the obligation to protect proprietary information shall beongoing and shall not cease upon completion or termination of this contract.

 

**16.          REVIEWS**

 

Buyer and Seller agree toconduct Annual Business Reviews, at an agreed venue. Such reviews shall beconducted by the Buyer’s Commodity Manager or authorized Purchasing Agent.Pricing will be reviewed annually, by the Seller and the Buyer’s CommodityManager or authorized Purchasing Agent. Supplier will establish and maintain aformal cost reduction program. Material or labor cost savings identified by theBuyer in conjunction with and verified by the Seller shall be implementedimmediately and shared equally between the Buyer and the Seller.

 

**17.          DEFECTIVE MATERIAL RETURN POLICY**

 

The Buyer will issue a DMRto the Seller prior to returning failed product to the Seller. Seller shallacknowledge Buyer DMR with an RMA number within twenty-four (24) hours. Sellershall repair or replace failed products under warranty in a timely manner, atSeller’s discretion, at Seller’s expense. The Seller will pay freight on goodsreturned to the Buyer which are covered by warranty..

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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**18.          QUALITY ASSURANCE**

 

APT’s Quality must meet allapplicable Seller’s specifications. The Buyer shallinspect the goods not later than the time permitted by the carrier forinspection and assertion of claims, which may be related to shipping andhandling. The failure of the Buyer to report any damage or claims within two(2) weeks of the Buyer’s receipt shall constitute the Buyer’s admission ofreceipt of the goods in an undamaged condition and that such goods are in fullconformity with the contract. The Seller will utilize the Supplier Call Backprocess to document all issues and concerns. Seller agrees to

 

participate in continuous improvement plans and programsas defined by Buyer and Seller. .

 

**19.          COMPLETE AGREEMENT**

 

This contract is intended asthe complete and final agreement of the parties and exclusive statement of itsterms. This contract may not be changed, altered or modified, except in writingby the party against whom enforcement is sought. Either party with thirty (30)days written notice may terminate this agreement. This clause is subject toreview after one year.

 

**20.          MATERIAL PIPELINE REQUIREMENTS**

 

The seller is responsiblesetting up and maintaining a pipeline of finished goods for the items listed inthe addendum that will meet the following demands:

 

a. Be able to provide product to the customerin the specified quantities and delivery times set forth in the Kanbanagreements

 

b. Be able to meet and sustain the demands ofa 50% ramp immediately

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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**21.          SIGNATURE PAGE:**

 

Signature attests that theparties have reviewed this agreement and concur with the parameters:

 
| Advanced Energy  Industries, Inc. | Advanced Power  Technologies |
|-----------------------------------|------------------------------|
|                              |                         |
|                              |                         |   |   |
| Name/Date                         | Name/Date                    |
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| Name/Date                         | Name/Date                    |
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| Title                             | Title                        |
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| Name/Date                         | Name/Date                    |
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| Title                             | Title                        |
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| Name/Date                         | Name/Date                    |
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| Title                             | Title                        |
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| Name/Date                         | Name/Date                    |
|                              |                         |
|                              |                         |   |   |
| Title                             | Title                        |

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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APTAddendum

PartNumber Pricing and Liability Information

 
| **Plant** | ** ** | **AE P/N** | ** ** | **Class** | ** ** | **EAU 00** | ** ** | **EAU 01** | ** ** | **Unit Price** | ** ** | **01 Price** | ** ** | **Est. Annual S ‘00** | ** ** | **Est. Annual $‘01** | ** ** |
|-----------|------------|------------|------------|-----------|------------|------------|------------|------------|------------|----------------|------------|--------------|------------|----------------------------|------------|---------------------------|------------|
| UCM1      |       | 1501258    |       | A         |       | 1200       |       | 1800       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 1541036    |       | A         |       | 1300       |       | 900        |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 1541097    |       | A         |       | 2200       |       | 2400       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 1541107    |       | A         |       | 250        |       | 400        |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 1541108    |       | A         |       | 1000       |       | 1800       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 8100014    |       | A         |       | 179        |       | 1000       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 8100021    |       | A         |       | 6231       |       | 500.       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UCM1      |       | 8705113    |       | A         |       | 1300       |       | 3800       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UGS1      |       | 8705109    |       | A         |       | 1200       |       | 1400       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501227    |       | A         |       | 3797       |       | 6000       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501232    |       | A         |       | 8915       |       | 13500      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501257    |       | .A        |       | 1379       |       | 1400       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501258    |       | A         |       | 239        |       | 1800       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501260    |       | A         |       | 682        |       | 4500       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1501291    |       | A         |       | 4500       |       | 7200       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541031    |       | A         |       | 3600       |       | 3600       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541052    |       | A         |       | 43587      |       | 39000      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541064    |       | A         |       | 977        |       | 600        |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541083    |       | A         |       | 2691       |       | 3600       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541088    |       | A         |       | 4601       |       | 22000      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541095    |       | A         |       | 789        |       | 1800       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541098    |       | A         |       | 14078      |       | 27600      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 1541118    |       | A         |       | 1300       |       | 7200       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 8705109    |       | A         |       | 9665       |       | 14400      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP01      |       | 8705111    |       | A         |       | 6100       |       | 22000      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP03      |       | 1541031    |       | A         |       | 10000      |       | 10200      |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
| UP03      |       | 1541134    |       | B         |       | —     |       | 7300       |       | $              | [ * ]      |         | $          | [ * ]                      |       | [ * ]                     |       | $ | [ * ] |   |
| UP04      |       | 1541088    |       | A         |       | 4801       |       | 1000       |       | $              | [ * ]      |         | $          | [ * ]                      |       | $                         | [ * ]      |   | $ | [ * ] |   |
|      |       |       |       |      |       | 136361     |       | 208700     |       |           |       |         |       | $                          | [ * ]      |                      | $          | [ * ] |   |

 

Total Liability                       11%

 
| **Plant** | ** ** | **Bin Size** | ** ** | **NCNR** | ** ** | **Bins FGI  Liability** | ** ** | **Bins WIP  Liability** | ** ** | **Bins of Die  Buffer** | ** ** | **Total $  Liability *** | ** ** | **Cycle  Time** | ** ** | **Delta** | ** ** |
|-----------|------------|--------------|------------|----------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|--------------------------|------------|-----------------|------------|-----------|------------|
| UCM1      |       | 100          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UCM1      |       | 65           |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UCM1      |       | 100          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UCM1      |       | 26           |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UCM1      |       | 100          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UCM1      |       | 80           |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UCM1      |       | 50           |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UCM1      |       | 135          |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UGS1      |       | 40           |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 265          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 825          |       | N        |       | 2                       |       | 2                       |       | .2                      |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UP01      |       | 50           |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 100          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 180          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 15 wks     |      | $          | [ * ] |   |
| UP01      |       | 310          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 250          |       | Y        |       | ,2                      |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 2000         |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 72           |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 200          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UP01      |       | 885          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 100          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 1600         |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 315          |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14 wks     |      | $          | [ * ] |   |
| UP01      |       | 800          |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UP01      |       | 610          |       | Y        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UP03      |       | 500          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
| UP03      |       | 500          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | [ * ]      |   |
| UP04      |       | 125          |       | N        |       | 2                       |       | 2                       |       | 2                       |       | $                        | [ * ]      |            | 14wks      |      | $          | [ * ] |   |
|      | * *   | * *     | * *   | * * | * *   | * *                | * *   | * *                | * *   | * *                |       | $                        | [ * ]      |            |       |      | $          | [ * ] |   |

 

CostSavings        -4%

 

AE is ONLY liable for PowerMos IV parts and NCNR parts that APT has no other customers (FGI and WIP)

* Does not include DieBuffer Stock

 

NewParts to be Added

 
| **Plant** | ** ** | **APT P/N** | ** ** | **Class** | ** ** | **EAU 00** | ** ** | **EAU 01** | ** ** | **Unit  Price** | ** ** | **01 Price** | ** ** | **Est. Annual $  ‘00** | ** ** | **Est. Annual  $‘01** | ** ** |
|-----------|------------|-------------|------------|-----------|------------|------------|------------|------------|------------|-----------------|------------|--------------|------------|-----------------------------|------------|----------------------------|------------|
| UP01      |       | 50M65JVFR   |       |      |       | —     |       | —     |       |            |       | $            | [ * ]      |                        |       |                       |       |   |
|           |            |             |            |           |            |            |            |            |            |                 |            |              |            |                             |            |                            |            |  |

 
| **Plant** | ** ** | **Bin Size** | ** ** | **NCNR** | ** ** | **Bins FGI  Liability** | ** ** | **Bins WIP  Liability** | ** ** | **Bins of  Die Buffer** | ** ** | **Total $  Liability *** | ** ** | **Cycle  Time** | ** ** | **Delta** | ** ** |
|-----------|------------|--------------|------------|----------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|--------------------------|------------|-----------------|------------|-----------|------------|
| UP01      |       |         |       |     |       |                    |       |                    |       |                    |       |                     |       |            |       |      |       |

 

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[ * ] = CONFIDENTIAL TREATMENT REQUESTED  

 

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