Document:

Agreement, dated March 17, 2003

 Exhibit 10.22 
  
 [*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  
 AGREEMENT 
  
 This AGREEMENT is effective this 17th day of March, 2003, by and between Hoku Scientific, Inc. (“HOKU”), whose address is 2153 North King
Street, Suite 306, Honolulu, Hawaii 96819, United States of America, and Sanyo Electric Company, Ltd. (“SANYO”), whose address is 1-18-13, Hashiridani Hirakata-City, Osaka 573-8534, Japan. HOKU and SANYO are sometimes referred to herein
individually as a “Party” and collectively as “the Parties”. 
  
 WHEREAS, HOKU and SANYO have engaged in discussions regarding a relationship between the Parties and an investment by SANYO in HOKU; and 
  
 WHEREAS, HOKU and SANYO desire to enter into an agreement based on previous discussions between the Parties. 
  
 NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter contained, the parties hereto agree as follows: 
  

	1.	Definitions. 

  

	 	a.	Catalyst: Catalyst is a component of the Fuel Cell that helps to initiate and maintain the electrochemical reaction needed to generate electricity. Catalyst is typically
precious metals-based but may consist of other low cost materials. 

  

	 	b.	Catalyst Binding: Catalyst Binding means the process used to attach the Catalyst to the Catalyst Support. 

  

	 	c.	Catalyst Support: Catalyst Support is the backing used to support the Catalyst in the context of a Fuel Cell. The Catalyst Support and Catalyst together make up an Electrode.

  

	 	d.	Electrode: Electrodes consist of a Catalyst and a Catalyst Support. In Fuel Cells, Electrodes are located on either side of a Membrane. 

  

	 	e.	Formulation: Formulation is a prescription of ingredients in fixed proportion; a recipe. 

  

	 	f.	Fuel Cell: A Fuel Cell is an electrochemical device that combines a fuel such as hydrogen, methanol, or others with an oxidant such as oxygen. The result is electricity,
heat, and water. 

  

	 	g.	Hoku MembraneTM: Hoku MembraneTM is defined as all Formulations of the Membranes developed by HOKU for use in an electrochemical device such as a Fuel Cell. The Hoku MembraneTM is typically used as a Proton Exchange Membrane in Fuel Cells. 

  

	 	h.	Joint Laboratory: The Joint Laboratory is the laboratory facility that will house the single cell and limited short stack testing associated with Phase I of this Agreement,
as indicated in Exhibit A. The Joint Laboratory will be located at the HOKU facilities in Honolulu, Hawaii. Only Research and Development Equipment associated with Phase I of this Agreement will be housed in the Joint Laboratory. This includes, but
is not limited, to Single Cell and Stack testing equipment. 

  

	 	i.	Liquid Hoku MembraneTM: Liquid Hoku MembraneTM is defined as all Formulations of the Liquid Membranes developed by HOKU for use in an electrochemical device such as a Fuel Cell. It is a type of Liquid Membrane or Membrane Paint. 

 

	 	j.	Liquid Membrane: Liquid Membrane (sometimes called Membrane Paint) is used to combine the Catalyst on the Electrode with the Membrane for use in Fuel Cells. This can be
painted onto the surface of the Catalyst or the other components of a Fuel Cell as part of the MEA, and can serve to increase Fuel Cell performance. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	
 1
                

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	 	k.	MEA: MEA stands for Membrane Electrode Assembly and represents a finished product that typically contains Electrodes adhered to both sides of a Membrane. An MEA may also
incorporate Liquid Membrane or Membrane Paint. 

  

	 	l.	MEA Assembly Process: MEA Assembly Process pertains to the procedures, the Research and Development Equipment, and the methods entailed in the use of this equipment, that are
required to build an MEA. 

  

	 	m.	Membrane: Membranes in the context of Fuel Cells separate the system into two halves and help to initiate and maintain the electrochemical reaction which generates
electricity. 

  

	 	n.	Membrane Paint: Membrane Paint has the same meaning as Liquid Membrane (see Liquid Membrane definition). 

  

	 	o.	Production Equipment: Production Equipment includes all equipment required for the fabrication of the Hoku MembraneTM in accordance with this Agreement, including but not limited to hot presses, injection
molders, and mixers. 

  

	 	p.	Proton Exchange Membrane: A Proton Exchange Membrane is a Membrane utilized in a Proton Exchange Membrane Fuel Cell. 

  

	 	q.	Research and Development Supplies: Research and Development Supplies includes all materials and reagents required to support joint testing in accordance with this Agreement,
including but not limited to electrode material, gases, and synthesis chemicals. 

  

	 	r.	Research and Development Equipment: Research and Development Equipment includes all equipment required to support joint testing in accordance with this Agreement including
but not limited test stations, MEA assembly equipment, spectrometers, and other testing equipment. 

  

	 	s.	Single Cell: Single Cell is a Fuel Cell that utilizes a single MEA to generate power. 

  

	 	t.	Stack: A Stack is a Fuel Cell that contains two or more Single Cells connected in series. Fuel Cell Stacks are utilized to generate more power than a Single Cell can
generate. 

  

	2.	Relationship. 

  

	 	a.	The Parties agree to work together to achieve the objectives stated below: 

  

	 	i.	Develop and optimize an MEA Assembly Process incorporating the Hoku MembraneTM and the Liquid Hoku MembraneTM. 

  

	 	b.	To do so, the Parties shall follow the work plan attached as Exhibit A. 

  

	 	c.	Joint development will commence at the Joint Laboratory located at the HOKU facilities in Honolulu, Hawaii. All work pertaining to Phase I of this Agreement shall be conducted in
the Joint Laboratory at the HOKU facilities. No HOKU development activities other than the joint development efforts described in this Agreement shall be held in the Joint Laboratory. SANYO personnel will need to be accompanied by HOKU personnel to
enter into any of the HOKU research and development facilities other than the Joint Laboratory. Joint development Phases II and III will be completed at the SANYO facilities in Gunma, Japan. The timing and location of all joint development efforts
are described in Exhibit A. 

  

	3.	Responsibilities of the Parties. 

  

	 	a.	The Parties shall divide responsibility for all Agreement costs as defined by Exhibit B. Exhibit B describes any and all assignable costs associated with this Agreement. Costs not
covered in Exhibit B cannot be charged to the other Party. 

  

	 	b.	Responsibility for the filing of technology patents shall be as follows: 

  

	 	i.	HOKU shall be responsible for filing any and all patents for technology owned exclusively by HOKU as defined in Exhibit C. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 2 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	 	ii.	[ * ] shall be responsible for filing any and all patents for technology owned exclusively by [ * ] as defined in Exhibit C, and for the specific MEA Assembly Process
jointly owned by the Parties in accordance with this Agreement, as defined in Exhibit C. 

  

	 	iii.	Any patents filed by [ * ] for the specific MEA Assembly Process jointly owned by the Parties that refers to the Hoku MembraneTM and/or the Liquid Hoku MembraneTM, shall be specific to a particular Formulation of the Hoku MembraneTM and/or a particular Formulation of the Liquid Hoku
MembraneTM. 

  

	 	iv.	[ * ] shall file patent applications for the specific MEA Assembly Process owned jointly by the Parties within three months of its discovery or implementation. [ * ]
shall file, prosecute, and maintain these patent applications at its sole discretion and at its expense, and at a minimum, in any country where the MEA will be sold. [ * ] will provide [ * ] the documents submitted to or received from
the Patent Office for filing, prosecuting, or maintaining such patent applications. After the three months from discovery or implementation, if [ * ] at its sole discretion chooses not to file a patent on a particular technology, [ * ]
may file a patent at its sole expense and claim full ownership to that particular technology. 

  

	 	v.	All patents for the specific MEA Assembly Process owned jointly by the Parties, regardless of filing date or country, shall name both HOKU and SANYO as joint developers on the
patents, except as described above in 3.b.iv. 

  

	 	vi.	SANYO shall use its best efforts to promote and sell the MEA produced in accordance with the specific MEA Assembly Process jointly owned by the Parties. 

  

	 	c.	Responsibility for defending technology patents shall be as follows: 

  

	 	i.	HOKU shall be responsible for the legal fees and any other costs associated with maintaining and defending all patents associated with technology owned exclusively by HOKU.

  

	 	ii.	SANYO shall be responsible for the legal fees and any other costs associated with maintaining and defending all patents associated with technology owned exclusively by SANYO, and
for the specific MEA Assembly Process jointly owned by the Parties. 

  

	 	d.	The Parties agree to notify each other immediately if they identify any potential or actual patent infringements. 

  

	4.	Rights.  

  

	 	a.	The Parties’ intellectual property rights associated with this Agreement are described in full at Exhibit C. 

  

	 	b.	SANYO shall have the exclusive worldwide right and license to manufacture, market, and sell the MEA produced in accordance with the specific MEA Assembly Process jointly owned by
the Parties in accordance with this Agreement. SANYO shall not have the right to develop, reverse engineer, manufacture, market, or sell the Hoku MembraneTM, Liquid Hoku MembraneTM, or any other technology owned exclusively by HOKU, without written consent by HOKU. 

  

	 	c.	SANYO shall have the right to grant sublicenses with respect to MEA production in accordance with the specific MEA Assembly Process jointly owned by the Parties, including

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 3 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 MEA manufacturing. SANYO shall disclose all sublicenses to HOKU and work with HOKU to maintain the
confidentiality of all Confidential Information. Sanyo shall be liable for any unauthorized disclosure of any HOKU confidential information to or by a company that SANYO sublicenses production to. 
  

	 	d.	HOKU maintains the exclusive right to develop, manufacture, market, distribute, and sell the Hoku MembraneTM and any and all technologies developed solely by HOKU, which may or may not be included in the MEA produced in
accordance with the specific MEA Assembly Process jointly owned by the Parties in accordance with this Agreement. 

  

	 	e.	This Agreement does not preclude SANYO from working alone or with a third party to develop a different MEA Assembly Process from the specific MEA Assembly Process jointly owned by
the Parties in accordance with this Agreement (“SANYO MEA Assembly Process”), or from manufacturing, marketing, and selling MEAs that are produced in accordance with this SANYO MEA Assembly Process. The SANYO MEA Assembly Process must be
based on technology owned exclusively by SANYO. The SANYO MEA Assembly Process may not be based on technology owned exclusively by HOKU. 

  

	 	f.	This Agreement does not preclude HOKU from working alone or with a third party to develop a different MEA Assembly Process from the specific MEA Assembly Process jointly owned by
the Parties in accordance with this Agreement (“HOKU MEA Assembly Process”), or from manufacturing, marketing, and selling MEAs that are produced in accordance with this HOKU MEA Assembly Process. The HOKU MEA Assembly Process must be
based on technology owned exclusively by HOKU. The HOKU MEA Assembly Process may not be based on technology owned exclusively by SANYO. 

  

	 	g.	The Parties agree to allow each other to use the others’ name for purposes of furthering their business and developing business partnerships with other companies or
corporations. This includes, but is not limited to, press releases, media quotes and paid advertising. Each Party agrees to seek and receive from the other Party prior approval for any use of the other Party’s name. 

  

	5.	Compensation. 

  

	 	a.	In exchange for the rights acquired by SANYO and described in Section 4 above, SANYO agrees to the following: 

  

	 	i.	Cash payment of two million five hundred thousand US dollars ($2,500,000) to HOKU as detailed in Exhibit D. Cash Payment is defined as a development fee being paid to HOKU by SANYO.

  

	 	ii.	The Parties agree to discuss an equity investment in HOKU by SANYO in the amount of at least one million US dollars ($1,000,000). The Parties Agree to put forth its best efforts to
execute this equity investment by April 15, 2003. Both Parties agree that not doing so would negatively affect the chances of a successful business outcome with respect to this Agreement. 

  

	 	iii.	The dates listed in Exhibit D are dates agreed upon by the Parties. Cash payments associated with a milestone are indicated as such in Exhibit D. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 4 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	 	b.	[*] 

  

	6.	Equipment and Resources. 

  

	 	a.	[ * ] shall identify and purchase all reasonable Research and Development Equipment, except for the equipment identified in Section 6.b. below, to complete Phase I of this
Agreement. Equipment described in this section will be housed at the Joint Laboratory in Honolulu, Hawaii. 

  

	 	b.	[ * ] shall provide all essential equipment pertaining to MEA assembly and test cells for use in Phase I of this Agreement, and pay any shipping costs required to relocate
this equipment from the [ * ] facilities to the Joint Laboratory in Honolulu, Hawaii. 

  

	 	c.	[ * ] shall identify and make available, or purchase, all reasonable Research and Development Equipment required to complete Phases II and III of this Agreement. This
equipment will be housed at the SANYO facilities in Gunma, Japan. 

  

	 	d.	All equipment purchased by [ * ] in accordance with this Agreement and described above at 6.b. and 6.c. shall belong to [ * ] regardless of the outcome of this
Agreement. 

  

	 	e.	All equipment purchased by [ * ] in accordance with this Agreement and described above at 6.a. shall belong to [ * ] regardless of the outcome of this Agreement.

  

	7.	Confidential Information. 

  

	 	a.	The term “Confidential Information” shall include all confidential or proprietary information and data furnished by either Party to the other, whether in oral, written,
graphic or machine-readable form, including but not limited to, product or sample product, designs, procedures, formulas, discoveries, inventions, improvements, concepts, and ideas, except such information and data as the parties agree in writing is
not proprietary or confidential. Confidential Information should be marked as “Confidential” or “Proprietary” or such similar wording at the time of disclosure by the disclosing party (the “Disclosing Party”) or orally
identified as such at the time of disclosure by the Disclosing Party to the other party (the “Receiving Party”). 

  

	 	b.	“Confidential Information” shall not include any information or data furnished by the Disclosing Party that (a) was in the public domain at the time it was communicated to
the Receiving Party; (b) entered the public domain subsequent to the time it was communicated to the Receiving Party through no fault of the Receiving Party; (c) was in the Receiving Party’s possession free of any obligation of confidence at
the time it was communicated to the Receiving Party; (d) was rightfully communicated to the Receiving Party free of any obligation of confidence subsequent to the time it was communicated by the Disclosing Party to the Receiving Party.

  

	8.	Confidential Information Covenants. 

  

	 	a.	The Parties acknowledge and agree that from time to time in connection with their discussions, it will be given or have access to certain Confidential Information. All Confidential
Information is and shall remain the exclusive property of the respective Party. The respective Party shall retain all rights, title and interest therein. The Parties shall hold in confidence and vigorously safeguard all such Confidential
Information, using no less care than that employed to protect their own proprietary information and to prevent the unauthorized use or disclosure thereof. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 5 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	 	b.	The Parties agree to take all action(s) necessary or appropriate to maintain the confidentiality of the Confidential Information. Each Party expressly agrees that such information
shall not be disclosed to any of its officers, directors, partners, employees, consultants, or agents (“Personnel”), or any other third party or individuals, except on a need-to-know basis, without the prior written consent of a corporate
officer of the Party that owns said Confidential Information. Each Party shall promptly advise the other in writing if it learns of any unauthorized use or disclosure of Confidential Information by their organization, any of their Personnel, or
former Personnel. 

  

	 	c.	No other rights or obligations other than those expressly recited herein are to be implied by this Agreement with respect to Confidential Information, trademarks, service marks,
patents, inventions, copyrights, trade secrets, and other information. 

  

	 	d.	The Parties acknowledge and agree that no license to any Confidential Information, or any patents, licenses, service marks or trademarks of the other Party is granted by this
Agreement or by any disclosure of Confidential Information hereunder other than expressly stated in this Agreement. 

  

	 	e.	If at any time SANYO comes in contact with Confidential Information through its relationship with HOKU that may create a conflict of interest for SANYO, including, but not limited
to, SANYO’s own Fuel Cell or related research or another relationship with an entity that may benefit from the Confidential Information from HOKU, then SANYO shall notify HOKU of the conflict at its earliest possible convenience, but no later
than seven (7) days after first becoming aware of such a conflict. 

  

	 	f.	Each of the Parties agrees that it shall not copy or reproduce, distribute or disseminate in whole or in part, or reverse engineer or attempt to reverse engineer, any Confidential
Information. 

  

	 	g.	In the event that a Party is required by lawful service of subpoena or court order to disclose Confidential Information, the Party shall notify the other as soon as practicable and
in any event prior to any actual disclosure so that the respective Party may seek an appropriate protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, the disclosing Party may only
furnish that portion (and only that portion) of the Confidential Information, which, in the opinion of their counsel, the Party is legally compelled to disclose. 

  

	 	h.	The Parties covenant and agree that upon written request from a corporate officer of the other Party, it shall deliver, within a reasonable period of time not to exceed seven (7)
days, to the custody of the person designated by the Party all originals and copies of Confidential Information and not retain any copies, summaries or other descriptions of such information. 

  

	9.	Employees. Due to the disparity in the relative sizes of the Parties, HOKU and SANYO agree not to hire as an employee or contractor, during the term of this agreement and for
a three (3) year period after the expiration or termination of this Agreement, any individual that is employed by the other Party at any point during the term of this Agreement. Violation of this covenant without the written approval of the other
Party shall result in the requisite and immediate payment of [ * ] paid by the hiring Party to the other Party. Payment is due within 30 days of the date of employee hire. Beyond 30 days, the hiring Party shall pay an additional interest
amount calculated at an annual interest rate of [ * ]% of the total amount owed. This sum is agreed upon as liquidated damages and not as a penalty. The Parties hereto have computed, estimated, and agreed upon the sum as an attempt to make a
reasonable forecast of probable actual loss because of the difficulty of estimating with exactness the damages which will result. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 6 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	10.	Term. The term of this Agreement shall commence on the date referenced above (the “Effective Date”) and shall continue for five (5) consecutive years unless
terminated by one of the Parties as provided in Section 11 below, or unless both parties mutually agree in writing to termination. This agreement shall automatically renew itself in one (1) year increments unless both Parties mutually agree in
writing to termination at least 30 days of expiration of the term. 

  

	11.	Termination and Breach. 

  

	 	a.	SANYO may terminate this Agreement under the following circumstances: 

  

	 	i.	Failure by HOKU to achieve one or more of the technical milestones as defined in Exhibit D of this Agreement within three (3) months after the intended date, as indicated by Exhibit
D. 

  

	 	ii.	Any material violation by HOKU of the other covenants of this Agreement, and failure by HOKU to cure such violation within thirty (30) days after written notice from SANYO.

  

	 	b.	HOKU may terminate this Agreement under the following circumstances: 

  

	 	i.	Any failure by SANYO to fulfill its payment obligation according to the dates and amounts prescribed in Exhibit D. 

  

	 	ii.	Any material violation by SANYO of the other covenants of this Agreement, and failure by SANYO to cure such violation within thirty (30) days after written notice from HOKU.

  

	12.	Termination Rights. 

  

	 	a.	If either Party terminates this Agreement for any of the reasons described above in 11.a. and 11.b, then the terminating Party will assume sole ownership of the specific MEA
Assembly Processes jointly owned by the Parties. 

  

	 	b.	If either Party terminates this Agreement, regardless of cause or reason, SANYO shall retain ownership of all equipment, materials, supplies and reagents purchased by SANYO in
accordance with this Agreement. 

  

	 	c.	If either Party terminates this Agreement, regardless of cause or reason, HOKU shall retain ownership of all equipment, materials, supplies and reagents purchased by HOKU in
accordance with this Agreement. 

  

	 	d.	If HOKU terminates this Agreement for any of the reasons described above in 11.b, SANYO will pay HOKU a pro rata share of the reasonable cash payment (not to exceed the amount of
the development fee payable for the next milestone) associated with work that has already been performed in pursuit of the next milestone listed in Exhibit D. 

  

	 	e.	Termination of this Agreement shall not affect any Party’s obligations and rights hereunder with respect to Confidential Information disclosed prior to termination. The
obligation and responsibility to maintain the confidentiality and covenants with respect to Confidential Information disclosed during the term of this Agreement shall continue indefinitely beyond the end of the Agreement unless agreed upon in
writing by both Parties. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 7 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	 	f.	Neither party shall be liable in damages or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by
conditions beyond its control including, but not limited to Acts of God, Government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable
control of the party whose performance is affected. 

  

	13.	Injunctive Relief. 

  
 The Parties agree that the restrictions set forth herein are necessary and reasonable in order to protect the interests of each of the Parties and that
any violations of the terms set forth herein shall cause irreparable injury to the non-breaching Party. The Parties further agree that money damages would not be a sufficient remedy for any breach of this Agreement. As a result, each Party hereby
agrees that upon any breach of the covenants and agreements set forth herein, the non-breaching Party shall be entitled to specific performance and injunctive relief as remedies for any such breach without the necessity of posting a bond, given the
disparate sizes of the Parties. Such remedies shall not be deemed to be the exclusive remedies for any breach of the Agreement but shall be in addition to all other remedies available at law or in equity to the non-breaching Party. 
  

	14.	Relationship of the Parties. Nothing contained in this Agreement shall be construed as constituting the relationship of the Parties to be one of agent/principal,
employer/employee, or cause any Party to be liable for any of the debts or obligations of the other, nor shall any Party have the right or authority to act for, incur any liability or obligation of any kind, express, or implied, in the name of or on
behalf of any other Party hereto. Either Party remains free to negotiate or enter into similar relationships with others. Each Party shall be responsible for its own expenses and costs related to this effort other than specified in Section 3 and
neither Party is authorized to make any commitments or statements on behalf of the other. 

  

	15.	Severability. If any provision of this Agreement shall be held invalid by any court of competent jurisdiction, such provision shall be modified to the extent necessary to
make it enforceable or, if necessary, shall be inoperative, and the remainder of this Agreement shall remain binding upon the Parties hereto. 

  

	16.	Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, and all of which together shall constitute but one and the same
instrument. 

  

	17.	No Third Party Beneficiaries. This Agreement confers no rights whatsoever upon any persons, other than the Parties hereto. 

  

	18.	Waiver. No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as waiver thereof, nor shall any single or partial
exercise of any right hereunder by any Party preclude any other or further exercise of any other right and no waiver shall be valid unless in a signed writing, and then only to the extent specifically set forth in such writing. No waiver of any
right hereunder shall operate as a waiver of any other or of the same or similar right on another occasion. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 8 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

	19.	Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Hawaii applicable to agreements made and to be
performed in the State of Hawaii, without giving effect to conflicts of law principles. The Parties also consent to personal jurisdiction over them in the courts of the State of Hawaii. Service of process upon any Party shall be sufficient if made
in accordance with the laws of the State of Hawaii or in accordance with the notice provision in this Agreement. 

  

	20.	Arbitration. The Parties agree that any dispute or claim arising out of this Agreement shall be subject to final and binding arbitration, pursuant to Chapter 658A, Hawaii
Revised Statutes. The arbitration shall be conducted by one arbitrator who is a member of Dispute Prevention & Resolution “DPR”). The arbitration shall be held in Honolulu, Hawaii. The arbitrator shall have authority to determine the
arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. The arbitrator shall apply Hawaii substantive law in all respects. 

  

	21.	Notices. Notices required or appropriate to be given under the Agreement shall be given by hand delivery or facsimile or electronic mail transmission and by certified mail
return receipt requested, to the address for each Party set forth below, or in such other manner as shall be agreed to in writing by the Parties. 

  

			
	For HOKU:	  	Dustin M. Shindo
	 	  	Hoku Scientific, Inc.
	 	  	2153 North King Street, Suite 306
	 	  	Honolulu, Hawaii 96819-4559
	 	  	United States of America
	 	  	Phone: (808) 845-7800
	 	  	Fax: (808) 845-7807
		
	For SANYO:	  	Yasuhiko Itoh
	 	  	Sanyo Electric Co., Ltd.
	 	  	1-1-1, Sakata Oizumi-Machi
	 	  	Ora-Gun, Gunma
	 	  	370-0596 Japan
	 	  	Phone: [ * ]
	 	  	Fax: [ * ]

  

	22.	Headings. The Section headings contained in this Agreement are not part of this Agreement, are for the convenience of reference only and shall not affect the meaning,
construction or interpretation of this Agreement. 

  

	23.	Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Parties hereto and their respective successors and assigns.

  

	24.	Assignment. Neither Party may assign or transfer, whether voluntarily, by operation of law, or otherwise, any rights or delegate any duties under this Agreement without the
prior written consent of the other Party. Any purported transfer, assignment or delegation without such prior written consent will be null and void and of no force or effect. Notwithstanding the foregoing, 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 9 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 both Parties shall have the right to assign this Agreement to any successor to substantially all of
its business or assets to which this Agreement relates, whether by merger, sale of assets, sale of stock, reorganization or otherwise. Subject to the foregoing, this Agreement will bind and inure to the benefit of the Parties and their respective
successors and permitted assigns. 
  

	25.	Amendment. This Agreement sets forth the entire understanding of the Parties regarding the agreed upon relationship. Any amendment to this Agreement must be in writing and
signed by the Parties. 

  
 IN WITNESS WHEREOF, this Agreement has
been duly executed on the 17th day of March 2003. 
  

							
	SANYO ELECTRIC COMPANY, LTD.	 	HOKU SCIENTIFIC, INC.
				
	By:	 	 /s/ Fusao Terada

	 	By:	 	 /s/ Dustin M. Shindo

	Name:	 	Fusao Terada	 	Name:	 	Dustin M. Shindo
	Title:	 	Officer, General Manager
    Technology R&D Headquarters	 	Title:	 	Chairman & CEO
		
	Authorized Signatory	 	Authorized Signatory
		
	Sanyo Electric Company, Ltd.	 	Hoku Scientific, Inc.
	1-18-13, Hashiridani	 	2153 North King Street
	Hirakata-City, Osaka	 	Suite 306
	573-8534 Japan	 	Honolulu, Hawaii 96819-4559 U.S.A.

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 10 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 Exhibit A: Agreement Work Plan 
  

																	
	 Development Items

	  	 Location

	  	Phase I

	 	Phase II

	 	Phase III

	  	  	Q2-2003

	 	Q3 2003

	 	Q4 2003

	 	Q1 2004

	 	Q2 2004

	 	Q3 2004

	 	Q4 2004

	[ * ]	  	Honolulu, Hawaii	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Honolulu, Hawaii	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Honolulu, Hawaii	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Honolulu, Hawaii	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Honolulu, Hawaii	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Gunma, Japan	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Gunma, Japan	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]
	[ * ]	  	Gunma, Japan	  	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]	 	[ * ]

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 11 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 Exhibit B: Responsibility for Agreement Costs 
  

									
	 Cost Description

	  	Payment Responsibility

	I.	  	Direct Costs	  	 
	 	  	a.	  	Salaries & Benefits	  	 
	 	  	 	  	-	  	SANYO personnel in Honolulu & in Gunma, Japan	  	[ * ]
	 	  	 	  	-	  	HOKU personnel in Honolulu & in Gunma, Japan	  	[ * ]
	 	  	b.	  	Research and Development Supplies	  	 
	 	  	 	  	-	  	Hoku MembraneTM	  	[ * ]
	 	  	 	  	-	  	Liquid Hoku MembraneTM	  	[ * ]
	 	  	 	  	-	  	All gases used in testing at HOKU facilities	  	[ * ]
	 	  	 	  	-	  	All gases used in testing at SANYO facilities	  	[ * ]
	 	  	 	  	-	  	All electrode components, including catalyst, gas diffusion layer, and other MEA electrode materials except for those listed above for HOKU	  	[ * ]
	 	  	c.	  	Patent Application Costs (including patent preparation, any and all legal fees, patent application filing
fees, and all other patent-related costs)	  	 
	 	  	 	  	-	  	Technology owned exclusively by HOKU	  	[ * ]
	 	  	 	  	-	  	Technology owned exclusively by SANYO	  	[ * ]
	 	  	 	  	-	  	MEA Assembly Process owned jointly by the Parties	  	[ * ]
	 	  	d.	  	Patent Defense Legal and Other Costs	  	 
	 	  	 	  	-	  	Technology owned exclusively by HOKU	  	[ * ]
	 	  	 	  	-	  	Technology owned exclusively by SANYO	  	[ * ]
	 	  	 	  	-	  	MEA Assembly Process owned jointly by the Parties	  	[ * ]
			
	II.	  	Direct Overhead	  	 
	 	  	a.	  	Facilities Overhead in Honolulu, Hawaii including:	  	 
	 	  	 	  	-	  	Rent	  	[ * ]
	 	  	 	  	-	  	Utilities	  	[ * ]
	 	  	 	  	-	  	Insurance	  	[ * ]
	 	  	 	  	-	  	License, Permits, & Fees	  	[ * ]
	 	  	 	  	-	  	Telephone	  	[ * ]
	 	  	 	  	-	  	Office Supplies	  	[ * ]
	 	  	 	  	-	  	Equipment Repairs & Maintenance	  	[ * ]
	 	  	 	  	-	  	Other Overhead	  	[ * ]
	 	  	b.	  	Facilities Overhead in Gunma, Japan, including:	  	 
	 	  	 	  	-	  	Rent	  	[ * ]
	 	  	 	  	-	  	Utilities	  	[ * ]
	 	  	 	  	-	  	Insurance	  	[ * ]
	 	  	 	  	-	  	License, Permits, & Fees	  	[ * ]
	 	  	 	  	-	  	Telephone	  	[ * ]
	 	  	 	  	-	  	Office Supplies	  	[ * ]
	 	  	 	  	-	  	Equipment Repairs & Maintenance	  	[ * ]
	 	  	 	  	-	  	Other Overhead	  	[ * ]
	 	  	c.	  	Travel, Lodging, Meals & Entertainment	  	 
	 	  	 	  	-	  	SANYO employees in Honolulu, Hawaii	  	[ * ]
	 	  	 	  	-	  	HOKU employees in Gunma, Japan	  	[ * ]

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 12 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 Exhibit B Continued: Responsibility for Agreement Costs 
  

									
	 Cost Description

	  	Payment Responsibility

	III.	  	Capital Expenditures	  	 
	 	  	a.	  	Research and Development and Production Equipment	  	 
	 	  	 	  	-	  	For all work associated with Agreement at HOKU facilities, not including MEA assembly equipment and tools.	  	[ * ]
	 	  	 	  	-	  	For work associated with Agreement at HOKU facilities, including only MEA assembly equipment and tools (including any all shipping costs from SANYO to HOKU).	  	[ * ]
	 	  	 	  	-	  	For all work associated with Agreement at SANYO facilities	  	[ * ]
	 	  	b.	  	Facility Build out Costs (build out or renovations specifically related to this Agreement), if any	  	 
	 	  	 	  	-	  	HOKU facility in Honolulu, Hawaii	  	[ * ]
	 	  	 	  	-	  	SANYO facility in Gunma, Japan	  	[ * ]
	 	  	c.	  	Computer Equipment for Employees	  	 
	 	  	 	  	-	  	HOKU employees	  	[ * ]
	 	  	 	  	-	  	SANYO employees	  	[ * ]
	 	  	d.	  	Furniture and Fixtures	  	 
	 	  	 	  	-	  	HOKU facility in Honolulu, Hawaii	  	[ * ]
	 	  	 	  	-	  	SANYO facility in Gunma, Japan	  	[ * ]

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 13 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 Exhibit C: Intellectual Property & Ownership Rights for Agreement 
  

	1.	HOKU has the exclusive ownership and rights to: 

  

	 	a.	The Hoku MembraneTM, including but not limited to any and all Formulations of the Hoku MembraneTM, improvements and/or new permutations, manufacturing, manufacturing processes, marketing, promotion, and general use, regardless of the date of
development or the source of development. 

  

	 	b.	The Liquid Hoku MembraneTM, including but not limited to any and all Formulations of the Liquid Hoku MembraneTM, improvements and/or new permutations, manufacturing, manufacturing processes, marketing, promotion, and general use, regardless of the date of
development or the source of development. 

  

	 	c.	Any and all procedures used to apply the Liquid Hoku MembraneTM or any other Membrane Paint to the Hoku MembraneTM or any other Membrane, Electrodes, or any other MEA-related component or combination of components, solely developed by HOKU or a HOKU business partner
other than SANYO, except for the procedures covered in 3b below. 

  

	2.	SANYO has the exclusive ownership and rights to: 

  

	 	a.	Any and all existing MEA Assembly Processes developed by SANYO prior to this Agreement, that do not incorporate the technologies or processes owned exclusively by HOKU that are
listed above at 1.  

  

	 	b.	Any and all existing Catalyst, Catalyst Binding, and Catalyst Support materials and processes solely developed by SANYO. 

  

	 	c.	Any and all existing Single Cell or Stack technology solely developed by SANYO. This includes all Fuel Cell and Stack parts and assembly procedures. 

  

	3.	HOKU and SANYO shall joint ownership and rights to: 

  

	 	a.	Any MEA Assembly Process jointly developed by the Parties in accordance with this Agreement, including any improvements and/or new permutations to the MEA Assembly Process developed
by the Parties in accordance with this Agreement or after the termination of this Agreement.  

  

	 	b.	The jointly developed procedures used to apply the Liquid Hoku MembraneTM or any other Membrane Paint to the Hoku MembraneTM or any other Membrane, Electrodes, or any other MEA-related component or combination of components. 

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 14 of 15

 [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 
  

 Exhibit D: Payment Timing and Milestones for Agreement 
  

									
	 Agreement Phases

	 	 Date

	 	 Cash Payment

	 	 Equity Investment

	 	 Milestone/Note

	 Phase 0
	 	 April 1, 2003
 April 1, 2003
	 	US $1,000,000	 	US $1,000,000	 	 —  
 —  

					
	 Phase 1
	 	 Dec 31, 2003
 April 1, 2004
	 	 —  
 US $   500,000
	 	 	 	 [ * ]
 Payment tied to Dec 31, 2003 milestone

					
	 Phase 2
	 	 June 30, 2004
 July 1, 2004
	 	 —  
 US $   500,000
	 	 	 	 [ * ]
 Payment tied to June 30, 2004 milestone

					
	 Phase 3
	 	 Dec 31, 2004
 April 1, 2005
	 	 —  
 US $   500,000
	 	 	 	 [ * ]
 Payment tied to Dec 31, 2004 milestone

  

					
	SANYO’s Initials & Date /s/ FT 17 Mar. ‘03	  	HOKU’s Initials & Date /s/ DS 20 Mar. ‘03	  	Page 15 of 15Wafer Supply Agreement

 Exhibit 10.21 
  
 WAFER SUPPLY AGREEMENT 
  
 This Agreement (“Agreement”) is made and entered into as of this 29th day of June, 2005 (the “Effective Date”), by and between:

  

	(1)	POWER INTEGRATIONS INTERNATIONAL LTD., a Cayman Islands corporation having its principal place of business at P.O. Box 219, Strathvale House, North Church Street, George Town, Grand
Cayman, Cayman Islands (“POWER INTEGRATIONS”);  

  
 and 
  

	(2)	MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., a corporation duly organized under the laws of Japan, acting through its Semiconductor Company having its principal place of business at 1
Kotari-yakemachi, Nagaokakyo City, Kyoto 617-8520, Japan (“COMPANY”). 

  
 WITNESSETH: 
  
 WHEREAS, COMPANY
is engaged in providing wafer foundry services for semiconductor companies; and 
  
 WHEREAS, POWER INTEGRATIONS is engaged in the design, development, marketing and sale of various integrated circuit products for use in power conversion applications; and 
  
 WHEREAS, POWER INTEGRATIONS desires to acquire from COMPANY the fabrication
and supply of wafers of certain integrated circuit products, and COMPANY is willing to supply such wafers to POWER INTEGRATIONS within the agreed upon production capacity of COMPANY. 
  

 Page 1 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 NOW, THEREFORE, in consideration of the mutual covenants of the parties contained herein, POWER
INTEGRATIONS and COMPANY hereby agree as follows: 
  
 Article 1: (Definitions) 
  
 When used throughout
this Agreement, each of the following terms shall have the meaning indicated below: 
  
 1.1 COMMON SPECIFICATION(S): The specifications for the production, delivery and acceptance of the WAFERS which will be provided by PI. 
  
 1.2 CONFIDENTIAL INFORMATION: Technical information, or other non-public information relating to PI or SUPPLIER,
whether in a human readable or machine-readable form and whether recorded on paper, tape, diskette or any other media, which is disclosed by the disclosing party to the receiving party and, subject to Section 1.3 (“CONFIDENTIAL MANUFACTURING
INFORMATION”), (i) which is designated in writing, by appropriate legend, as confidential or, (ii) if disclosed orally is identified as confidential information at the time of disclosure and a summary of which is confirmed in writing within
thirty (30) days after oral disclosure designated, by appropriate legend, as confidential. Notwithstanding the foregoing, all information generated by the activities and actions of SUPPLIER under this Agreement on PI’s behalf (other than
SUPPLIER IMPROVEMENTS and SUPPLIER’S CONFIDENTIAL INFORMATION made solely and independently by SUPPLIER without use of any of PI’s CONFIDENTIAL INFORMATION) and any information, including all PI INTELLECTUAL PROPERTY, received by SUPPLIER
shall also be considered PI’s CONFIDENTIAL INFORMATION. 
  
 1.3 CONFIDENTIAL MANUFACTURING INFORMATION: All of PI’s CONFIDENTIAL INFORMATION, whether in written, electronic, oral or other form, relating to the PI PROCESS and conveyed by any means including, without limitation, during a
meeting between the parties, by phone, letter, email or facsimile, whether or not declared or marked confidential and whether or not it is subsequently described in writing. 
  

 Page 2 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 1.4 ENGINEERING PRODUCTION: The production by SUPPLIER of WAFERS for engineering development.

  
 1.5 INDIVIDUAL SALES CONTRACTS: Individual contracts of
sale and purchase of the WAFERS that will be concluded between SUPPLIER and PI pursuant to this Agreement. 
  
 1.6 INTELLECTUAL PROPERTY RIGHTS: Copyrights, patent rights, trade secret rights, moral rights, mask work rights and all other intellectual or
proprietary rights of any kind. 
  
 1.7 MASK
SPECIFICATIONS: The specifications for the production, delivery and acceptance of the MASK TOOLING SETS. 
  
 1.8 MASK TOOLING SETS: Those mask tooling sets made by or for SUPPLIER for use in making WAFERS pursuant to this Agreement. 
  
 1.9 PI: POWER INTEGRATIONS and any of its SUBSIDIARIES. 
  
 1.10 PI IMPROVEMENTS: Any modification or change, made during the term
of this Agreement, to the PI INTELLECTUAL PROPERTY, unless such modification or change is a SUPPLIER IMPROVEMENT. 
  
 1.11 PI INTELLECTUAL PROPERTY: The PI PROCESS, the COMMON SPECIFICATIONS, the MASK TOOLING SETS and the mask databases therefor, the PI
IMPROVEMENTS, and all know-how related to the foregoing. PI INTELLECTUAL PROPERTY is PI’s CONFIDENTIAL INFORMATION. 
  
 1.12 PI PROCESS: PI’s process technologies, which are implemented in the SUPPLIER wafer fabrication facility to produce the WAFERS, and of
which the detailed specification is specified in the COMMON SPECIFICATIONS, plus all PI IMPROVEMENTS. 
  

 Page 3 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 1.13 PILOT PRODUCTION: The production by SUPPLIER of WAFERS for the purpose of evaluation by PI.

  
 1.14 PRODUCTS: Any and all integrated circuit products
of PI manufactured in accordance with the PI PROCESS. 
  
 1.15
SUBSIDIARY: Any corporation, company or other entity in which SUPPLIER or PI, as the case may be, owns and/or controls, directly or indirectly, now or hereafter, more than fifty percent (50%) of the outstanding shares of stock entitled to
vote for the election of directors or their equivalents regardless of the form thereof (other than any shares of stock whose voting rights are subject to restriction); provided, however, that any entity which would be a SUBSIDIARY by reason of the
foregoing shall be considered a SUBSIDIARY only so long as such ownership or control exists. SUPPLIER shall each enter into separate written agreements (each a “SUBSIDIARY Agreement”) with each of their respective SUBSIDIARIES who wish to
exercise any rights under this Agreement, binding the SUBSIDIARY to the terms and conditions of this Agreement. A SUBSIDIARY shall maintain its status as a SUBSIDIARY under this Agreement only for so long as such SUBSIDIARY has a SUBSIDIARY
Agreement in force and effect. SUPPLIER guarantees the performance of its respective SUBSIDIARIES under this Agreement, and will indemnify and hold PI harmless from any costs, damages, or liabilities incurred by PI arising out of a breach by a
SUBSIDIARY of any of the terms and conditions of this Agreement and/or SUBSIDIARY Agreements. 
  
 1.16 SUPPLIER: COMPANY and any of its SUBSIDIARIES. 
  
 1.17 SUPPLIER IMPROVEMENTS: Any modification or change, made during the term of this Agreement, to the PI INTELLECTUAL PROPERTY that (i) are made solely by SUPPLIER without use of any of PI’s CONFIDENTIAL

  

 Page 4 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 INFORMATION, and (ii) SUPPLIER has a substantial use for other than manufacturing or incorporation into PRODUCTS, and
(iii) are based solely on the SUPPLIER PROCESS. 
  
 1.18
SUPPLIER PROCESS: SUPPLIER’S standard process technology steps, from SUPPLIER owned technologies, developed exclusively by SUPPLIER and implemented in the SUPPLIER wafer fabrication facility to produce the WAFERS. 
  
 1.19 VOLUME PRODUCTION: The production by SUPPLIER of WAFERS for the
volume production of PRODUCTS. 
  
 1.20 WAFER(S):
Non-probed silicon wafers manufactured by SUPPLIER for PI in accordance with the COMMON SPECIFICATION. 
  
 1.21 WAFER TYPE. The different types of WAFERS (e.g., size, processing, location of manufacture) as defined by the COMMON SPECIFICATION.

  
 Article 2: (Foundry Commitment and
Forecasts) 
  
 2.1 SUPPLIER agrees to commit to PI the foundry
capacity (“FOUNDRY CAPACITY”) as set forth in Exhibit A (SUPPLIER FOUNDRY CAPACITY and PRICING). Annually, PI will provide SUPPLIER with a non-binding [* * * *] forecast of WAFER orders by WAFER TYPE (“PI ANNUAL FORECAST”).
Annually during the Term of this Agreement and in advance of the beginning of SUPPLIER’S fiscal year, SUPPLIER and PI will jointly review the PI ANNUAL FORECAST and SUPPLIER’S FOUNDRY CAPACITY for the upcoming SUPPLIER fiscal year.
Annually, at the beginning of SUPPLIER’S fiscal year during the Term of this Agreement, SUPPLIER will commit a FOUNDRY CAPACITY for the current SUPPLIER fiscal year, at each of the SUPPLIER’S plants making WAFERS for PI, in an amount no
less than [* * * *] Percent ([* * * *]%) of PI’s total WAFER purchases by WAFER TYPE during the previous SUPPLIER fiscal year; provided, however, that the committed FOUNDRY CAPACITY for the first fiscal year shall 
  

 Page 5 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 not exceed the Minimum Capacity for the fiscal year 2005 provided in Exhibit A. During the SUPPLIER fiscal year, SUPPLIER
shall accept up to a [* * * *] percent ([* * * *]%) upside request over the current FOUNDRY CAPACITY, by WAFER TYPE, upon a [* * * *] month written advance notice from PI, unless the current FOUNDRY CAPACITY represents [* * * *] percent ([* * * *]%)
of SUPPLIER’S total capacity in which case such advance notice shall be a [* * * *] month written notice. SUPPLIER can request PI to negotiate to reduce the committed FOUNDRY CAPACITY, by WAFER TYPE, for the then current SUPPLIER fiscal year,
if SUPPLIER and PI determine that PI will not order at least [* * * *] percent ([* * * *] %) of the PI ANNUAL FORECAST by WAFER TYPE. Any negotiated reduction in FOUNDRY CAPACITY must be agreed to by PI in writing. Notwithstanding the foregoing,
SUPPLIER’s maximum committed FOUNDRY CAPACITY is [* * * *] WAFERS per month. 
  
 2.2 PI shall provide SUPPLIER, on or before a mutually agreed day of each calendar month, a written [* * * *] month forecast (“PI MONTHLY FORECAST”) of the quantity of the WAFERS of each PRODUCT to be
manufactured and delivered during the Term of this Agreement. Such forecast shall be in conformity with the FOUNDRY CAPACITY. 
  
 2.3 PI must order the exact quantity of WAFERS per each PRODUCT forecasted in the first month, and at least the quantity of WAFERS by WAFER TYPE
forecasted in the second month, of the PI MONTHLY FORECAST unless SUPPLIER agrees to any change. PI may revise the quantity for each of the last [* * * *] months of each PI MONTHLY FORECAST without penalty or charge. 
  
 Article 3: (Sale and Purchase of WAFERS; MASK TOOLING
SETS) 
  
 3.1 PI shall purchase WAFERS from SUPPLIER and SUPPLIER
shall sell such WAFERS to PI. 
  

 Page 6 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 3.2 PI shall submit to SUPPLIER a purchase order (the “PO”) for the WAFERS in accordance with
the terms and conditions of this Agreement. All such PO’s shall be accepted by SUPPLIER unless the PO cannot be met for reasons beyond SUPPLIER’s control. SUPPLIER shall issue a written confirmation within [* * * *] business days of
receipt of the PO. Upon SUPPLIER’S confirmation, the PO terms of total quantity, delivery date, delivery location and pricing shall constitute an INDIVIDUAL SALES CONTRACT which will be deemed to incorporate all of the terms and conditions of
this Agreement. Subject to the restrictions of Section 2.3, for any INDIVIDUAL SALES CONTRACT, the quantity of WAFERS ordered for each PRODUCT, within a WAFER TYPE, can be modified by PI by written notice received by SUPPLIER at least [* * * *]
weeks before the starting date of fabrication of such WAFERS, so long as the total quantity of WAFERS is not less than the original quantity ordered for that WAFER TYPE. 
  
 3.3 The mask databases for creating MASK TOOLING SETS for WAFERS of any PRODUCT shall be supplied by PI to SUPPLIER in a
timely manner. SUPPLIER shall immediately notify PI in detail of any defects or non-conformity in the MASK TOOLING SETS caused by the mask databases. Upon such notice, PI shall either provide corrected mask databases and pay for corrected MASK
TOOLING SETS or, notwithstanding any other provision of this Agreement, PI can cancel the INDIVIDUAL SALES CONTRACT for the affected WAFERS, upon written notice to SUPPLIER, without any liability except for affected WAFER work in progress
(“WIP”) and inventory. 
  
 3.4 SUPPLIER will produce or
procure the MASK TOOLING SETS for the WAFERS in accordance with the MASK SPECIFICATIONS. SUPPLIER shall submit the MASK SPECIFICATIONS to PI for prior approval. The cost of production or procurement of the MASK TOOLING SETS shall be paid by PI and
the MASK TOOLING SETS shall be owned by PI. The price to PI for the MASK TOOLING SETS shall be SUPPLIER’S cost to produce or procure them, and shall 
  

 Page 7 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 be commercially reasonable. If PI determines that the price or quality of the MASK TOOLING SETS is not acceptable then,
at PI’s option, the SUPPLIER will procure the MASK TOOLING SETS from a vendor specified by PI. SUPPLIER will produce or procure the MASK TOOLING SETS within [* * * *] working days after the receipt of the mask database from PI. Upon request
from PI, SUPPLIER will produce or procure the MASK TOOLING SETS on an expedited basis. 
  
 Article 4: (INTELLECTUAL PROPERTY RIGHTS) 
  
 4.1 PI is and shall remain the sole and exclusive owner of all rights (including INTELLECTUAL PROPERTY RIGHTS), title and
interest in and to the PI INTELLECTUAL PROPERTY. PI grants SUPPLIER a limited, non-transferable, non-exclusive, royalty free license, without the right to sublicense, in the PI INTELLECTUAL PROPERTY for the sole purpose of using it internally to
manufacture WAFERS. Notwithstanding any other statement in this Agreement, the foregoing license shall not survive expiration or termination of this Agreement. SUPPLIER may not (i) use the PI INTELLECTUAL PROPERTY for any purpose other than to
manufacture WAFERS, or (ii) license it to any third party. 
  
 4.2
PI shall be the sole and exclusive owner of all right, title and interest in the PI IMPROVEMENTS. SUPPLIER hereby irrevocably and unconditionally transfers and assigns to PI all of SUPPLIER’S right, title and interest worldwide in the PI
IMPROVEMENTS. SUPPLIER will promptly disclose to PI in writing all PI IMPROVEMENTS upon their creation. SUPPLIER shall take all reasonable actions in a timely manner, at PI’s expense, to assist PI in perfecting and enforcing its rights in the
PI IMPROVEMENTS. Such actions shall include but not be limited to execution of assignments, patent applications and other documents. Subject to all of the terms and conditions of this Agreement, PI hereby grants to SUPPLIER a non-exclusive,
irrevocable, perpetual, royalty-free, non-transferable, worldwide, right and license to use, modify, reproduce, (but sub-license only to a SUPPLIER SUBSIDIARY) the PI IMPROVEMENTS only for SUPPLIER’S 
  

 Page 8 of 32 
  
 CONFIDENTIAL TREATMENT REQUESTED 

 development and manufacture of SUPPLIER’s products. Notwithstanding the foregoing, no license is granted to the PI
IMPROVEMENTS for the purpose of SUPPLIER providing foundry service or other benefit to a third party. 
  
 4.3 In the event that any portion of Section 4.2 is declared invalid or illegal according to any applicable law, (a) SUPPLIER hereby waives and agrees
never to assert such right, title and interest, including any moral rights or similar rights, against PI or PI’s licensees and (b) the parties hereby modify such portion, effective upon such declaration, in such manner as shall secure for PI an
exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license under all INTELLECTUAL PROPERTY RIGHTS, with rights to sublicense through one or more level(s) of sublicensee(s), to use, modify, reproduce, create derivative works
of, distribute, publicly perform and publicly display by all means now known or later developed, and otherwise exploit in any manner, such rights in the PI IMPROVEMENTS, to the maximum extent permitted by applicable law. 
  
 4.4 SUPPLIER shall be the sole and exclusive owner of all right, title and
interest in the SUPPLIER IMPROVEMENTS. SUPPLIER hereby grants to PI a non-exclusive, irrevocable, perpetual, royalty-free, non-transferable, worldwide, right and license to use, modify, reproduce, create derivative works of, distribute, publicly
perform and publicly display by all means now known or later developed, and otherwise exploit in any manner all SUPPLIER IMPROVEMENTS as part of the PI PROCESS and any modifications thereto. Without any consent of SUPPLIER, PI may sublicense the
foregoing license for the SUPPLIER IMPROVEMENTS to PI’s SUBSIDIARY so long as the sublicense provides for the protection of SUPPLIER’S CONFIDENTIAL INFORMATION on terms not less protective than those set forth in this Agreement. SUPPLIER
will promptly disclose to PI in writing all SUPPLIER IMPROVEMENTS upon their creation. 
  
 4.5 SUPPLIER agrees not to use the PI INTELLECTUAL PROPERTY or any license under this Agreement, in whole or in part, or any knowledge gained by SUPPLIER through producing WAFERS, to develop an equivalent or competing
process to the PI PROCESS, or other product or service that would compete with PI. 
  

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 CONFIDENTIAL TREATMENT REQUESTED 

 Article 5: (WAFER Production) 
  
 5.1 ENGINEERING PRODUCTION 
  
 5.1.1 For ENGINEERING PRODUCTION, PI may place an order with SUPPLIER for
WAFERS up to a maximum of [* * * *] WAFERS for each WAFER TYPE, or any other quantity agreed to in writing by the parties. SUPPLIER will use its [* * * *] to ship WAFERS in ENGINEERING PRODUCTION to PI as quickly as possible but no more than [* * *
*] working days after availability of the MASK TOOLING SETS. 
  
 5.1.2 Any output of the ENGINEERING PRODUCTION will be shipped to PI immediately upon completion. If the WAFERS output is less than [* * * *] percent ([* * * *] %) of the ordered quantity, SUPPLIER will inform PI of the output quantity of
the WAFERS and if PI requires to have the shortage covered, SUPPLIER will re-input the WAFERS to cover the shortage of quantity at no additional cost to PI. 
  
 5.2 PILOT PRODUCTION 
  
 5.2.1 For the PILOT PRODUCTION, PI may place an order with SUPPLIER for a minimum of [* * * *] WAFERS per each PRODUCT, or any other quantity agreed to in
writing by the parties. 
  
 5.2.2 SUPPLIER will ship to PI WAFERS
in PILOT PRODUCTION of each PRODUCT within [* * * *] working days after availability of MASK TOOLING SETS for such PRODUCT. 
  
 5.2.3 The output of the PILOT PRODUCTION will be shipped to PI if such WAFERS output is at least [* * * *] percent ([* * * *]%) of the ordered quantity.

  

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 If the WAFERS output is less than [* * * *] percent ([* * * *]%) of the ordered quantity, SUPPLIER will inform PI of the
output quantity of the WAFERS and if PI requires to have the shortage covered, SUPPLIER will re-input the WAFERS to cover the shortage of quantity at no additional cost to PI. 
  
 5.3 VOLUME PRODUCTION 
  
 5.3.1 For VOLUME PRODUCTION, PI shall place a PO with SUPPLIER for a minimum of [* * * *] WAFERS per each PRODUCT, or any other quantity agreed to in
writing by the parties. The delivery date of the PO shall be in accordance with the VOLUME PRODUCTION cycle time for WAFERS as specified by the SUPPLIER but such cycle time shall not exceed [* * * *] days. 
  
 5.3.2 For VOLUME PRODUCTION, SUPPLIER will ship the WAFERS ordered by PI by
the delivery date in the INDIVIDUAL SALES CONTRACT. SUPPLIER shall use reasonable efforts to deliver the WAFERS earlier than such delivery date. 
  
 5.3.3 SUPPLIER will ship orders in quantities not less than [* * * *] percent ([* * * *] %) of the quantities ordered of each PRODUCT. 
  
 Article 6: (Delivery) 
  
 6.1 The terms of delivery of the WAFERS shall be FOB Japan (as such term is
defined in Incoterms 2000). 
  
 6.2 The title and risk of loss
relating to the WAFERS delivered by SUPPLIER to PI shall transfer from SUPPLIER to PI at such time and point as provided in Incoterms 2000 relating to such FOB terms. PI shall have the right to designate a freight forwarder, subject to
SUPPLIER’S reasonable approval. 
  
 6.3 SUPPLIER will deliver
the WAFERS within the number of calendar days specified in the INDIVIDUAL SALES CONTRACT. In the event that 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 SUPPLIER foresees a delay in the delivery schedule of the WAFERS, SUPPLIER shall make a best effort to correct any delay
and SUPPLIER shall promptly notify PI of such delay and submit to PI the new delivery schedule. PI will have the right to cancel, without liability, the INDIVIDUAL SALES CONTRACT for the delayed WAFERS if the delay is greater than [* * * *] days and
the delay is not due to PI’s instruction. 
  
 6.4 SUPPLIER
shall pack the WAFERS in accordance with the packing standards defined in the COMMON SPECIFICATIONS. 
  
 6.5 SUPPLIER shall collect PCM data (“PCM DATA”), as defined in the COMMON SPECIFICATIONS, on the manufactured WAFERS. SUPPLIER will send the
PCM DATA electronically to PI before the WAFERS are received by PI. The PCM DATA will be accurate and complete for all WAFERS and sent in a mutually agreed upon format. 
  
 6.6 If PI determines, in consultation with SUPPLIER, that the WAFERS currently being manufactured will not meet the PRODUCTS
requirements, PI can, notwithstanding any other provision of this Agreement, cancel the INDIVIDUAL SALES CONTRACT for the affected WAFERS without any liability except for the affected WAFER WIP and inventory, upon written notice to SUPPLIER.

  
 Article 7: (Test and Inspection)

  
 7.1 PI shall conduct incoming inspection of the WAFERS, by
WAFER TYPE, to determine the WAFERS’ conformance to the COMMON SPECIFICATIONS. The PCM DATA is required for the incoming inspection of the WAFERS and the omission, inaccuracy or other defect in the PCM DATA will in itself be sufficient cause to
reject the WAFERS. This inspection shall be regarded as final in terms of quality, quantity and other conditions of the WAFERS supplied to PI, which are subject to SUPPLIER’S warranty as defined in Section 11.1. All WAFERS passing the incoming
inspection will be accepted by PI. 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 7.2 PI shall notify SUPPLIER which of the WAFERS have been accepted by PI within [* * * *] days after
receipt of the WAFERS by PI. Should PI fail to notify SUPPLIER within the said [* * * *] days, the WAFERS shall be deemed to have been accepted by PI. PI will owe SUPPLIER payment only for the quantity of WAFERS that have been accepted by PI. PI may
return non-accepted WAFERS at Supplier’s cost and risk after obtaining a return authorization number from SUPPLIER in writing. PI shall provide SUPPLIER with a report specifying the reason for such rejection. SUPPLIER shall provide either a
refund, or a replacement lot of the Wafers within [* * * *] days after the receipt thereof pursuant to the mutual consent of the parties. 
  
 7.3 SUPPLIER shall not be held responsible for the defects and failures of the WAFERS which are attributable to the design, test and assembly by PI of the
PRODUCTS. 
  
 7.4 SUPPLIER shall not be held responsible for the
defects, failures and yield problems of the WAFERS if the WAFERS meet the specifications set forth in the COMMON SPECIFICATIONS. 
  
 7.5 SUPPLIER may make a written special waiver request to PI to ship WAFERS that do not comply with the COMMON SPECIFICATIONS. If PI approves such special
waiver request in writing, which approval may include special terms and conditions, SUPPLIER may ship such non-complying WAFERS under such terms and conditions. 
  

Article 8: (Process and Specification Changes) 
  
 8.1 SUPPLIER shall notify PI in writing as soon as possible, in advance of any process change which requires PI’s
change in any database or which would affect the quality, reliability, manufacturability, form, fit or function of the PRODUCTS. Each such process change shall be subject to PI’s prior written approval. Notwithstanding any other provision of
this Agreement, if PI does not 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 approve and the process change is implemented, PI will have the right to cancel, without liability, any INDIVIDUAL SALES
CONTRACT affected by the process change. 
  
 8.2 PI shall have
sole responsibility for the control, maintenance, distribution and modification of the COMMON SPECIFICATIONS including but not limited to the addition and maintenance of applicable process, inspection, quality and procurement specifications. PI will
notify SUPPLIER of any changes to the COMMON SPECIFICATIONS by providing a copy of the amended COMMON SPECIFICATIONS to SUPPLIER. SUPPLIER will acknowledge acceptance of the amended COMMON SPECIFICATIONS in writing and SUPPLIER’S acceptance
will not be unreasonably withheld, conditioned or delayed. In the case of any issue with the COMMON SPECIFICATIONS, SUPPLIER agrees that PI is the ultimate authority on the COMMON SPECIFICATIONS. 
  
 Article 9: (Price) 
  
 9.1 The prices of the WAFERS, which are produced in the ENGINEERING
PRODUCTION, the PILOT PRODUCTION and the VOLUME PRODUCTION are set forth in Exhibit A (SUPPLIER FOUNDRY CAPACITY and PRICING). Any modifications thereto must be agreed upon by SUPPLIER and PI in writing, either as an amendment to Exhibit A (SUPPLIER
FOUNDRY CAPACITY and PRICING) or as part of an INDIVIDUAL SALES CONTRACT. SUPPLIER and PI may jointly review and revise the WAFERS price, by WAFER TYPE, within [* * * *] days of the close of each half of SUPPLIER’S fiscal year or upon a
material change to the COMMON SPECIFICATIONS. 
  
 9.2 Any gain or
loss due to the exchange rate between Japanese Yen and United States Dollars will be [* * * *] by PI and MEI per Exhibit B (EXCHANGE RATE) at the time the WAFER order is placed. 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 Article 10: (Payments) 
  
 10.1 Payment for the WAFERS shall be by wire transfer [* * * *] days after
receipt of invoice. SUPPLIER agrees to negotiate terms or alternate forms of payment as proposed by PI. 
  
 Article 11: (Warranty, Indemnification) 
  

11.1 SUPPLIER warrants that the WAFERS sold to PI will conform to the COMMON SPECIFICATIONS. PI shall notify SUPPLIER in writing of any defect or
non-conformity of said WAFERS within [* * * *] months after notification of acceptance per Section 7.2 above. SUPPLIER’S sole obligations under this warranty are limited to, at PI’s option, (i) [* * * *] or [* * * *] any said WAFERS which
shall be returned to SUPPLIER’S manufacturing facility with [* * * *], or (ii) SUPPLIER [* * * *] PI an [* * * *] to the purchase price of said WAFERS. 
  
 11.2 SUPPLIER shall defend, indemnify and hold harmless PI, its officers, directors, employees and representatives from and against any claim, demand,
cause of action, debt, or liability, including reasonable attorneys’ fees, relating to or arising from allegations that the SUPPLIER PROCESS, SUPPLIER IMPROVEMENTS and any SUPPLIER contributions to the PI INTELLECTUAL PROPERTY used to produce
WAFERS or the resulting WAFERS infringes any of the INTELLECTUAL PROPERTY RIGHTS of a third party; provided that SUPPLIER is promptly notified in writing of the action and is allowed to assume and control the defense thereof. SUPPLIER shall pay [* *
* *] and [ * * * *] awarded therein, but shall not be responsible for any compromise or settlement made without SUPPLIER’S written consent. 
  
 11.3 EXCEPT AS EXPRESSLY STATED HEREIN, NO EXPRESS OR IMPLIED WARRANTIES ARE MADE BY SUPPLIER RELATING TO THE WAFERS, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PI MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH REGARD TO ANY OF THE PI INTELLECTUAL PROPERTY. 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 11.4 PI shall defend, indemnify and hold harmless SUPPLIER, its officers, directors, employees and
representatives from and against any claim, demand, cause of action, debt, or liability, including reasonable attorneys’ fees, relating to or arising from allegations that the PI PROCESS and any PI contributions to the PI IMPROVEMENTS used to
produce WAFERS infringes any of the INTELLECTUAL PROPERTY RIGHTS of a third party; provided that PI is promptly notified in writing of the action and is allowed to assume and control the defense thereof. PI shall pay [* * * *] and [* * * *] awarded
therein, but shall not be responsible for any compromise or settlement made without PI’s written consent. 
  
 11.5 Notwithstanding Section 13.7, SUPPLIER shall keep records for three (3) years, notwithstanding the termination of this Agreement, of the WAFERS
manufactured and summaries of their process monitors. SUPPLIER agrees to permit such records to be examined and copied by PI or PI’s authorized representative, upon reasonable prior written notice to SUPPLIER, during normal business hours at
SUPPLIER’S offices. Such records shall be deemed to be PI’s CONFIDENTIAL INFORMATION. 
  
 Article 12: (Confidentiality) 
  
 12.1 The receiving party shall use any CONFIDENTIAL INFORMATION acquired from the disclosing party in connection with this Agreement solely for the
purposes of this Agreement. 
  
 12.2 Subject to Sections 12.7 and
12.8, for a period of [* * * *] years after the receipt or creation of the CONFIDENTIAL INFORMATION, or during the Term of this Agreement, whichever is longer, the receiving party shall use a reasonable standard of care not to publish or disseminate
the CONFIDENTIAL INFORMATION to any third party, except as otherwise provided herein, and use 
  

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 such CONFIDENTIAL INFORMATION only for the purpose of this Agreement. The receiving party shall have no obligation with
respect to any CONFIDENTIAL INFORMATION received by it which the receiving party shall prove is: 
  
 (a) Published or otherwise available to the public other than by a breach of this Agreement or any other agreement by the receiving party; 
  
 (b) Rightfully received by the receiving party hereunder from a third party
not obligated under this Agreement or any other agreement, and without confidential limitation; 
  
 (c) Known to the receiving party prior to its first receipt of the same from the disclosing party; 
  
 (d) Independently developed by the receiving party without access to the
CONFIDENTIAL INFORMATION of the disclosing party; 
  
 (e)
Furnished to a third party by the disclosing party without restrictions on the third party’s right of disclosure similar to those of this Agreement; or 
  
 (f) Stated in writing by the disclosing party no longer to be CONFIDENTIAL INFORMATION. 
  
 In the case that receiving party intends to disclose publicly or to a third party any CONFIDENTIAL INFORMATION under any of
the exceptions above, the receiving party must first give the disclosing party written notice [* * * *] days prior to any such disclosure. 
  
 12.3 If any CONFIDENTIAL INFORMATION is disclosed pursuant to the requirement or request of a governmental or judicial agency or disclosure is required by
operation of law, such disclosure will not constitute a breach of this Agreement, provided that the receiving party shall give prompt prior written notice 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 to the disclosing party to allow the disclosing party to seek a protective order with respect thereto reasonably
satisfactory to the disclosing party to the extent available under applicable law. 
  
 12.4 The receiving party shall limit access to the CONFIDENTIAL INFORMATION only to such officers and employees of the receiving party who are reasonably necessary to implement this Agreement and only to such extent
as may be necessary for such officers and employees to perform their duties under this Agreement. The receiving party shall be liable to cause all of such officers and employees to sign a secrecy agreement to abide by the secrecy obligations
provided in this Agreement. The receiving party shall maintain records of such officers and employees. 
  
 12.5 CONFIDENTIAL INFORMATION and all materials including, without limitation, documents, drawings, masks, specifications, models, apparatus, sketches,
designs and lists furnished to the receiving party by, and which are themselves identified to be or designated in writing to be the property of, the disclosing party are and shall remain the property of the disclosing party and shall be returned to
the disclosing party promptly at its request, including any copies. 
  
 12.6 PI may disclose information with respect to any SUPPLIER IMPROVEMENTS to the PI PROCESS to one or more third parties as PI’s CONFIDENTIAL INFORMATION and covered by a non-disclosure agreement with protection equivalent to this
Agreement for the sole purpose of having such third parties provide PI with design, layout, foundry, assembly and testing services. 
  
 12.7 CONFIDENTIAL MANUFACTURING INFORMATION will be confidential for a period of [* * * *] years after the Term of this Agreement and SUPPLIER agrees to
use its best efforts to never make public the CONFIDENTIAL MANUFACTURING INFORMATION. Notwithstanding any other provision of this Agreement, SUPPLIER shall treat the CONFIDENTIAL MANUFACTURING INFORMATION in accordance with the confidentiality
obligations and use restrictions of this Agreement during that [****] year period. 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 12.8 SUPPLIER’S obligations with respect to any portion of PI’s CONFIDENTIAL MANUFACTURING
INFORMATION shall terminate when SUPPLIER can document and with PI’s written concurrence that such CONFIDENTIAL MANUFACTURING INFORMATION: 
  
 (a) Was rightfully in the public domain at the time it was communicated to SUPPLIER by PI; or 
  
 (b) Rightfully entered the public domain through no fault of SUPPLIER
subsequent to the time it was communicated to SUPPLIER by PI; or 
  
 (c) Was rightfully in SUPPLIER’S possession free of any obligation of confidence at the time it was communicated to SUPPLIER by PI; or 
  
 (d) Was rightfully communicated to SUPPLIER by a third party free of any obligation of confidence subsequent to the time it was communicated to SUPPLIER
by PI; or 
  
 (e) Was independently developed by SUPPLIER and the
SUPPLIER gave PI notice thereof, within thirty (30) days of the disclosure of the PI CONFIDENTIAL MANUFACTURING INFORMATION to the SUPPLIER, documenting the information independently developed by the SUPPLIER. 
  
 For any CONFIDENTIAL MANUFACTURING INFORMATION to be subject to an exception
above, any document containing such CONFIDENTIAL MANUFACTURING INFORMATION, and the information related thereto, must in their entirety qualify for the exception. This explicitly excludes any right to apply the exception by redacting CONFIDENTIAL
MANUFACTURING INFORMATION or any part thereof from a document. 
  

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CONFIDENTIAL TREATMENT REQUESTED 

 In the case that SUPPLIER intends to disclose to an unauthorized party PI’s CONFIDENTIAL
MANUFACTURING INFORMATION under the exceptions above, the SUPPLIER must first receive PI’s prior written approval and such approval will be in PI’s sole discretion. 
  
 12.9 PI may request the confidential release of SUPPLIER’S CONFIDENTIAL INFORMATION to a customer of the PRODUCTS for
purposes of such customer’s evaluation or audit. SUPPLIER shall not unreasonably withhold approval of the release. 
  
 12.10 Obligation to Notify and Remedy. SUPPLIER will immediately give written notice to PI of any suspected unauthorized use or disclosure of
PI’s CONFIDENTIAL MANUFACTURING INFORMATION and SUPPLIER will be responsible for remedying such unauthorized use or disclosure. In the event that SUPPLIER or (to the knowledge of SUPPLIER) any of its representatives is requested or required (by
oral questions, interrogatories, requests for information or documents in legal proceedings, subpoenas, civil investigative demands or other similar processes) to disclose any of PI’s CONFIDENTIAL MANUFACTURING INFORMATION, SUPPLIER shall
provide PI with prompt written notice of any such request or requirement sufficiently timely to allow PI adequate time to seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. 

 
 Article 13: (Term and Termination) 
  
 13.1 This Agreement shall continue in full force and effect from the
Effective Date until the fifth anniversary of the Effective Date, unless earlier terminated as provided herein (“Term”). If this Agreement has not been earlier terminated, the parties agree to negotiate in good faith, beginning one year
prior to end of the Term, for this Agreement’s continuation for another five (5) year period, on mutually agreeable terms and conditions. 
  

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 13.2 Notwithstanding anything to the contrary in Section 17.11 (“Force Majeure”), if any
governmental agency, entity or authority requires (including through administrative guidance) any changes to this Agreement, PI may terminate this Agreement immediately if the changes are, in PI’s sole discretion, detrimental to PI’s
interests or otherwise not reasonably acceptable to PI, without liability of any kind. 
  
 13.3 In the event that either party has committed a material breach of this Agreement, the other party shall promptly give written notice thereof to the breaching party, specifying any alleged material breach or
breaches. The breaching party shall have [* * * *] days after the effective date of such written notice to have all material breaches specified either remedied or waived (“cured”). If such breaches are not so cured, the other party shall
have the right to terminate this Agreement effective upon written notice. 
  
 13.4 Either party shall also have the right to terminate this Agreement with immediate effect by giving written notice of termination to the other party at any time upon or after the occurrence of any of the following
events with respect to such other party: 
  
 (a) Insolvency,
bankruptcy, reorganization or liquidation or filing of any application therefor, or other commitment of an affirmative act of insolvency, which is not promptly removed or stayed, if (1) the first party does not receive prompt, satisfactory, written
assurance from the other party that it can meet its obligations under this Agreement, or (2) after such assurance such other party does not continue to meet such obligations; 
  
 (b) Attachment, execution or seizure of substantially all of the assets or filing of any application therefor which is not
promptly released or stayed; 
  
 (c) Assignment or transfer of
that portion of the business to which this Agreement pertains to a trustee for the benefit of creditors; or 
  
 (d) Termination of its business or dissolution. 
  

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 13.5 In the event SUPPLIER shall be acquired or controlled, directly or indirectly, by, or shall be
consolidated or merged into, any other company or corporation and reasonable written assurance satisfactory to PI shall not be forthcoming in connection therewith as to the continued performance by SUPPLIER’S successor of SUPPLIER’S
obligations under this Agreement within [* * * *] days thereafter, or in the event of such other company or corporation being a [* * * *] of PI, then PI shall notify SUPPLIER’S successor immediately of such a determination in writing and will
have the right for a period of [* * * *] days to request negotiations to cure any concerns. If no cure is obtained, the parties will negotiate in good faith the orderly termination of this Agreement upon written notice by PI to SUPPLIER’S
successor. 
  
 13.6 No failure or delay on the part of either
party in exercising its right of termination hereunder for any one or more causes shall be construed to prejudice its rights of termination for such cause or any other or subsequent cause. 
  
 13.7 In the event of expiration or termination of this Agreement, within
[****] days after expiration or termination of this Agreement, the receiving party shall return to the disclosing party all media and documentation containing the CONFIDENTIAL INFORMATION and render unusable all said CONFIDENTIAL INFORMATION placed
in any storage apparatus under the receiving party’s control. SUPPLIER will promptly produce for PI all documents in any form containing CONFIDENTIAL MANUFACTURING INFORMATION, whether made by PI or by SUPPLIER (including notes made by
SUPPLIER), and whether such documents be in hard copy, electronic (including email), optical or other form. 
  

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 13.8 The termination or expiration of this Agreement shall not release either party from any liability
which at said date of termination or expiration has already accrued to the other party. 
  
 13.9 Notwithstanding any termination or expiration of this Agreement, the provisions of Articles 1 (“Definitions”), 4 (“INTELLECTUAL PROPERTY RIGHTS”), 11 (“Warranty, Indemnification and
Improvements”), and 12 (“Confidentiality”), Sections 13.7, 13.8, 13.9, and Articles 14 (“Government Regulations”), 15 (“Nondisclosure”), and 17 (“Miscellaneous Provisions”) shall survive this Agreement.

  
 Article 14: (Government Regulations)

  
 14.1 Both parties hereto acknowledge that the CONFIDENTIAL
INFORMATION disclosed by the disclosing party to the receiving party hereunder may be subject to the export control laws, rules or regulations of the relevant countries. The disclosing party shall be responsible for obtaining any export license
required under such laws or regulations with respect to the export of any CONFIDENTIAL INFORMATION by the disclosing party, and the receiving party agrees that it will not export or re-export the CONFIDENTIAL INFORMATION communicated pursuant to
this Agreement, except in compliance with applicable law, rule or regulation, including without limitation, the U.S. Export Administration Regulations. To the extent the same practically is within its control, the receiving party agrees that no
CONFIDENTIAL INFORMATION received from the disclosing party will be knowingly used by the receiving party, directly or indirectly, to make products for customers whom such party knows intend to make use of such products for “[* * * *]
Purposes” (defined herein below). For the purpose of this Agreement, “[* * * *] Purposes” means the design, development, or manufacture of any [* * * *], including without limitation [* * * *], [* * * *], [* * * *] and [* * * *].

  

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 14.2 SUPPLIER is responsible for all taxes in respect of this Agreement except for taxes on PI’s
income. 
  
 Article 15: (Non-Disclosure)

  
 SUPPLIER shall keep this Agreement and its terms, conditions and existence
confidential and shall not make disclosure thereof to any third party without the prior written consent of PI, which will be at PI’s sole discretion and, if given, shall be conditioned upon all CONFIDENTIAL MANUFACTURING INFORMATION being
redacted from such disclosure. Notwithstanding any other statement in this Agreement, PI may disclose this Agreement and/or its terms and conditions to the extent that such disclosure is necessary to comply with federal and state securities and
other applicable laws. 
  
 Article 16:
(Third Party Service Providers) 
  
 16.1 SUPPLIER shall have no
right to have WAFERS manufactured, in whole or in part, by a third party unless PI gives its written approval therefor in advance, which approval shall be at PI’s sole discretion. If PI does give such written approval, then SUPPLIER may
disclose PI’s CONFIDENTIAL INFORMATION for the sole purpose of, and only to the extent reasonably necessary for, having such third party provide such services solely for the benefit if PI and not for the benefit of any other party. Such
approval shall be conditioned upon: 
  
 (a) PI’s prior
review and written approval of the contract between SUPPLIER and such third party performing such manufacture; and 
  
 (b) the third party agreeing in writing to all applicable terms and conditions of this Agreement, and; 
  
 (c) SUPPLIER being the insurer and guarantor of such third party’s full
observance of such terms and conditions; and 
  

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 (d) SUPPLIER’S disclosure of CONFIDENTIAL MANUFACTURING INFORMATION to such third party being
subject to PI’s prior written approval, which shall be at PI’s sole discretion. 
  
 Article 17: (Miscellaneous Provisions) 
  

17.1 Entire Agreement. This Agreement embodies the entire understanding of the parties as it relates to the subject matter hereof and this
Agreement supersedes any prior agreements or understandings between the parties with respect to such subject matter. 
  
 17.2 Headings. The article and section headings herein are for convenience only and shall not affect the construction hereof. 
  
 17.3 Waiver. Should either PI or SUPPLIER fail to enforce any
provision of this Agreement or to exercise any right in respect thereto, such failure shall not be construed as constituting a waiver or a continuing waiver of its rights to enforce such provision or right or any other provision or right.

  
 17.4 No License. Nothing contained in this Agreement
shall be construed as conferring by implication, estoppel or otherwise upon either party hereunder any license or other right except as expressly set forth in Article 4 (“INTELLECTUAL PROPERTY RIGHTS”). 
  
 17.5 English Language. This Agreement is in the English language only,
which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the parties. All communications between SUPPLIER and PI to effect the terms of this
Agreement shall be in the English language only. 
  
 17.6 No
Agency. The parties to this Agreement are independent contractors. There is no relationship of agency, partnership, joint venture, employment or franchise between the parties. Neither party has, nor will either party represent that it has, the
authority to bind the other or to incur any obligation on its behalf. 
  

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 17.7 Notices. Any notice required or permitted to be given by either party to the other party
under this Agreement shall be in writing and delivered by overnight courier, signature of receipt required, and shall be deemed delivered upon written confirmation of delivery by the courier, if sent to the following respective addresses or such new
addresses as may from time to time be supplied hereunder. 
  

					
	To:	  	SUPPLIER
			
	 	  	 	  	 MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

	 	  	 	  	 Semiconductor Company

	 	  	 	  	 1 Kotari-yakemachi, Nagaokakyo City,

	 	  	 	  	 Kyoto 617-8520, Japan

			
	 	  	 	  	 Attention: Director, Discrete Semiconductor Business Unit

		
	To:	  	PI
			
	 	  	 	  	 Power Integrations International Ltd.

	 	  	 	  	 P.O. Box 219, Strathvale House, North Church Street

	 	  	 	  	 George Town, Grand Cayman, Cayman Islands

			
	 	  	 	  	 Attention: President

  
 17.8
Invalidity. If any provision of this Agreement, or the application thereof to any situation or circumstance, shall be invalid or unenforceable, the remainder of this Agreement or the application of such provision to situations or
circumstances other than those as to which it is invalid or unenforceable, shall not be affected; and each remaining provision of this Agreement shall be valid and enforceable to the fullest extent permitted by applicable law. In the event of such
partial invalidity, the parties shall seek in good faith to agree on replacing any such legally invalid provisions with provisions which, in effect, will most nearly and fairly approach the effect of the invalid provision. 
  

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 17.9 Successors and Assigns; No Assignment. 
  
 (a) This Agreement, and all rights, licenses and obligations herein, shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that except as set forth below neither party shall assign this Agreement or any of its rights or privileges, or delegate any of its
obligations, hereunder without the prior written consent of the other party. 
  
 (b) Notwithstanding any other provision of Agreement, either party may without the prior consent of the other party assign all of its rights and delegate all of its duties under this Agreement to a purchaser of all or
substantially all of such party’s stock or assets or to a third party participating in a merger or other corporate reorganization in which such party is a constituent corporation. Within 180 days after such assignment, if the assignee is (i) a
[****] of the other party, and (ii) of [****] to the other party or larger, then either party may elect to have this Agreement be deemed to have expired and to have the provisions of Sections 13.7 and 13.8 take effect [****] days after written
notice to the other party of such election. Any terminations by either party in this situation will become effective after a reasonable but significant transition period for PI to bring up another supplier of WAFERS. 
  
 17.10 Force Majeure. Either party shall be excused for failures and
delays in performance caused by war, declared or not, any laws, proclamations, ordinances or regulations of the government of any country or of any political subdivision of any country, or strikes, lockouts, floods, fires, explosions, acts of
terrorism or such other catastrophes as are beyond the control or without the material fault of such party (“CAUSES”). Any party claiming any such excuse for failure or delay in performance due to such CAUSES shall give prompt notice
thereof to the other party, and neither party shall be required to perform hereunder during the period of such excused failure or delay in performance except as otherwise provided herein. This provision shall not, however, release such party from
using its best efforts to 
  

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 avoid or remove all such CAUSES and such party shall continue performance hereunder with the utmost dispatch whenever
such CAUSES are removed. In the event that the period of excused performance continues for ninety (90) days, this Agreement may be terminated by the party not excused under this Section 17.10 (“Force Majeure”), by written notice to the
other party, subject to the provisions of Article 13 (“Term and Termination”) relating to the effect of termination. 
  
 17.11 Amendment. This Agreement may not be extended, supplemented or amended in any manner except by an instrument in writing expressly referring
to this Agreement and duly executed by authorized officers of both parties. 
  
 17.12 Equitable Relief. Each party will have access to and become acquainted with the CONFIDENTIAL INFORMATION of the other party, the unauthorized use or disclosure of which would cause irreparable harm and
significant injury which would be difficult to ascertain and which would not be compensable by damages alone. Therefore the parties agree that in such circumstances the party whose CONFIDENTIAL INFORMATION was used or disclosed without authorization
by the other party will have the right, in any court of competent jurisdiction, to obtain an injunction, specific performance, or other equitable relief without prejudice to any other rights and remedies that it may have for such breach of this
Agreement. 
  
 17.13 LIMITATION OF LIABILITY. EXCEPT AS TO
OBLIGATIONS ARISING UNDER SECTIONS 11.2 AND 11.4, AND ARTICLE 12 (“CONFIDENTIALITY”): (1) NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR [* * * *] IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT, REGARDLESS
OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT LIABILITY OR OTHERWISE, EVEN IF ANY REPRESENTATIVE OF SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND (2) DAMAGES FOR EACH CLAIM BY EITHER

  

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 PARTY UNDER THIS AGREEMENT SHALL NOT EXCEED [* * * *] AS MEASURED FROM THE DATE OF THE EVENT THAT CAUSED THE CLAIM FOR
SUCH DAMAGES. THE FOREGOING SENTENCE SHALL NOT APPLY TO SUPPLIER’s BREACH OF ANY PROVISION OF ARTICLE 2 (“FOUNDRY COMMITMENT AND FORECASTS”), IF SUCH BREACH BENEFITED SUPPLIER. 
  
 17.14 Governing Law. This Agreement and matters connected with the
performance hereof shall be construed, interpreted, applied and governed in all respects in accordance with the laws of the State of California and the United States without regard to conflict of laws principles. The parties agree that the United
Nations Convention on Contracts for the International Sale of Goods is specifically excluded from application to this Agreement. 
  
 17.15 Arbitration. Subject to Section 17.12 (“Equitable Relief”) and other than disputes relating to INTELLECTUAL PROPERTY RIGHTS,
disputes which cannot be settled amicably and by good faith negotiations within sixty (60) days after written notice by one party to the other party of such inability to amicably settle shall thereafter be settled by binding arbitration. Subject to
Section 17.14 (“Governing Law”), the arbitration shall be conducted in English pursuant to the Rules of Arbitration of the International Chamber of Commerce, and shall be held in San Francisco, California. Any judgment or award rendered in
these arbitrations may be entered and enforced by any court of competent jurisdiction and may include, when appropriate, equitable relief. 
  

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 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in their respective corporate names by their
duly authorized representatives on the date written below. 
  

							
	MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.	    	POWER INTEGRATIONS INTERNATIONAL LTD.
				
	Signature:	 	 /s/ Yuji Yamanishi

	    	Signature:	 	 /s/ John Tomlin

	Name:	 	 Yuji Yamanishi

	    	Name:	 	 John Tomlin

	Title:	 	 IPD Category Owner

	    	Title:	 	 President

  

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 EXHIBIT A 
  
 SUPPLIER FOUNDRY CAPACITY AND PRICING 
  
 [* * * *] WAFERS 
  

											
	 12 Month Period
 April 1-March
31

	  	2005-2006

	 	2006-2007

	  	2007-2008

	  	2008-2009

	  	2009-2010

	Minimum Capacity	  	[* * * *]
WAFERS/
Mo.	 	 	  	 	  	 	  	 
						
	Standard Process Price Per Wafer	  	[* * * *] ¥	 	 	  	 	  	 	  	 
						
	 DC Process
 Price per Wafer for orders between [* * * *]
and [* * * *] WAFERS per month
	  	[* * * *] ¥	 	 	  	 	  	 	  	 
						
	 DC Process
 Price per Wafer for orders between [* * * *]
and [* * * *] WAFERS per month
	  	[* * * *] ¥	 	 	  	 	  	 	  	 
						
	 DC Process
 Price per Wafer for orders of [* * * *]
WAFERS per month and above
	  	Price to be
negotiated	 	 	  	 	  	 	  	 

  
 The above prices apply to ENGINEERING
PRODUCTION, PILOT PRODUCTION and VOLUME PRODUCTION WAFERS. 
  

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 EXHIBIT B 
  

EXCHANGE RATE 
  
 Base exchange rate (“F/X_BASE”) will be set at [* * * *]¥. 
  
 A new effective F/X_RATE is only established at the time of placing a purchase order for WAFERS if the Previous Month’s Average daily exchange rate is equal to or greater than [* * * *]¥ from the current
F/X_RATE. The new F/X_RATE will be set to the Previous Month’s Average exchange rate and will remain in effect for at least the month it was established. 
  

The actual WAFERS PURCHASE_PRICE used at the time of order will be calculated by the following formula: 
  
 Calculation Example 
  
 Production WAFERS BASE_PRICE = [* * * *] ¥ 
  
 F/X_BASE = [* * * *] ¥/$ 
  
 Initial F/X_RATE = [* * * *] ¥/$ 
  
 PURCHASE_PRICE = [* * * *] 
  
 Examples: 
  

	 	1)	Nominal F/X Rate Example: F/X_RATE = [* * * *] ¥: 

  
 PURCHASE_PRICE = [* * * *] 
  

	 	2)	Higher F/X Rate Example: New F/X_RATE = [* * * *] ¥: 

  
 PURCHASE_PRICE = [* * * *] 
  

	 	3)	Lower F/X Rate Example: New F/X_RATE = [* * * *] ¥: 

  
 PURCHASE_PRICE = [* * * *] 
  

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