Document:

Exhibit 10.19

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Agreement”) is
entered into as of this fist day of December, 2006 (“Effective Date”), by
and between SEMI-PHOTONICS CO., LTD., a Taiwan company having offices at
7F, No.13, Ke Jung Rd., Chu-Nan Site, Hsinchu Science Park, Chu-Nan 350,
Miao-Li County, Taiwan, the Republic of China (“R.O.C.”) (the “Lessee”), and
LUXXON TECHNOLOGY CORPORATION, a Taiwan company having offices at 12-5,
Dungshr, 2 Lin, Dungming Tsuen, Shinwu Shiang, 327, Taoyuan County, Taiwan,
R.O.C. (the “ Lessor”).  The Lessee and
the Lessor are hereinafter referred to individually as a “Party” and
collectively as the “Parties.”

 

WHEREAS,
the Lessor and Maxedge Electronics Corp. (the “Landlord”) entered
into the lease agreement dated January 1, 2006 for the lease of the
Leased Premise as defined below;

 

WHEREAS,
the Lessor and the Lessee have entered into the assets purchase
agreement as of the date hereof (the “Assets Purchase Agreement”), under
which the Lessor agrees to sell certain assets to the Lessee, and the Lessee
agrees to purchase from the Lessor the said assets; and

 

WHEREAS,
the Parties desire to enter into this Agreement whereby the
Lessee agrees to lease from the Lessor certain Leased Premise and Leased
Facilities (as defined below).

 

NOW, THEREFORE,
in consideration of the premises and of the mutual covenants and
agreements set forth herein, the Parties hereby covenant and agree as follows:

 

ARTICLE 1   -   LEASED OBJECT

 

1.1           The Lessee agrees to lease
from the Lessor and the Lessor agrees to lease to the Lessee (“Lease”) the
premise outlined and described in Schedule A
(the “Leased Premise”) attached hereto and incorporated herein for the Lessee
to use as an office and factory (“Permitted Use”) and the facilities described in
Schedule B (the “Leased Facilities”)
attached hereto and incorporated herein. 
The Leased Premise shall be deemed to include eight (8) parking
places under the basement B1 of the building in which the Leased Premise is
located without subject to any charge or fee to the Lessee or its
Personnel (the “Parking Places”).

 

1.2           Upon request by the Lessee,
the Lessor shall deliver a written statement executed by the Landlord
expressing its understanding and consent to the Lease under this Agreement in
the form satisfactory to the Lessee (the “Statement”).

 

ARTICLE 2   -   TERM
OF LEASE

 

2.1           The Lease shall commence on
the Effective Date and will remain in full force and effect for a period of ten
(10) years, until November 30, 2016, when the Lease Agreement is expired
(the “Lease Term”).

 

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2.2           After the Lease Term,
provided that no Event of Default (as defined in Article 14.2)
has occurred and is then uncured accordingly, the Lessee shall have the
right to extend the Lease Term for up to three (3) additional two (2) year
periods (each, an “Option Term”) by delivering to the Lessor written notice not
less than ninety (90) days prior to the end of the Lease Term, expressing
its intent to renew the Lease. The Lease and the extended Lease shall be
hereinafter referred to collectively as the “Lease.”

 

2.3           After expiration of the
foregoing Option Term (the “Extended Lease Term”), the Lease shall be
automatically terminated without any notice or consent by either
Party or both Parties, and the Parties, if desired, shall enter into
a written agreement for the subsequent use or lease of the Leased Premise
and Leased Facilities.  Any utility,
possession, occupancy or management of the Leased Premise or Leased Facilities
after the Extended Lease Term shall be deemed as unauthorized use and
shall in no event apply to the Article 451 of the Civil Law of
Taiwan, R.O.C., whether the Lessor expresses its objection or not.

 

2.4           The Lease during the
Extended Lease Term shall be subject to all the terms and conditions of this
Agreement, except that the rental rate during the Extended Lease Term shall be
agreed upon by the Lessee and the Lessor; provided, however, that
the commencing Rental of the Extended Lease Term shall increase by fifteen
(15) percent, and thereafter the rental rate shall reflect the increase by
fifteen (15) percent every two years during the Extended Lease Term.

 

ARTICLE 3   -   OWNERSHIP.

 

The
Leased Facilities (including its Modifications, as defined below) and other
facilities, equipments, materials, movable fittings, assets and properties as
placed by the Lessor in or around the building where the Leased Premise locates
(“Building”) or otherwise designated as belong to the Lessor are, and shall at
all times remain, the property of the Lessor, notwithstanding that any part of
it may now be, or may become, in any manner attached to, or embedded in, or
permanently resting on, any real property, any Lessee Properties (as defined
below) or any Building on real property, or attached in any manner to what is
permanent as by means of cement, plaster, nails, bolts, screws, or otherwise
(the “Lessor Properties”).  The Lessee
shall keep the Leased Premise, Leased Facilities and Lessor Properties
(including their Modifications) free and clear of, and shall not make or
permit, any pledge, hypothecation, levy, lien(statutory or other) or
preference, mortgage, deed of trust, assignment, charge, claim, security
interest or other restriction or encumbrance of any kind or nature whatsoever
to attach or exist against either of them, and shall not commit any
waste.  Except for the rights expressly
provided herein, the Lessee shall in no event have or at any time acquire any
right, title or equity in the Leased Premise, Leased Facilities and Lessor
Properties. Except as otherwise agreed by the parties or according to the law,
Lessee shall not be liable whatsoever for any of the Lessor Properties located
within or about the Leased Premise that is not being leased by the Lessee.

 

ARTICLE 4   -   RENTAL AND TERMS OF PAYMENT.

 

4.1           During the Lease Term, the
total rental and charges (excluding the Operating Expenses as defined in the Article 7)
for the Leased Premise and Leased Facilities

 

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(“Rental”)
are as follows:

 

(i)  Dec 1st, 2006 –Nov 30th, 2008:
NT$1,000,000 per month;

(ii)  Dec 1st, 2008 –Nov 30th, 2010:
NT$1,200,000 per month;

(iii)  Dec 1st, 2010 –Nov 30th, 2012:
NT$1,440,000 per month; and

(iv)  Thereafter, the
rental rate will periodically increase by fifteen (15) percent every two
years until the expiration of the Lease Term.

 

4.2           The five percent (5%) or
such other rate of value-added tax (VAT) for the Rental will be borne by
the Lessee.  The Lessee shall pay to the
Lessor the Rental plus such VAT on the 10th day of each calendar month
during the Lease Term and/or the Extended Lease Term.  without demand and without abatement,
reduction, set-off or deduction of any tax.

 

4.3           A deposit equivalent to the
then current three (3)-month Rental (the “Deposit”) shall be given by the
Lessee to the Lessor as a security deposit immediately upon execution of
this Agreement.  On the 10th day of the
first month of each year when the Rental is adjusted pursuant to the Article 4.1
and Article 2.4, the Lessee shall make up and deliver to the Lessor
the deficiency for such Deposit in the light of the increase of the Rental
accordingly.

 

4.4           This Deposit after deducting
all the Rentals, Operating Expenses, charges, damages and other fees as
payable or due to the Lessor, arising from this Agreement or with respect to
the Leased Premise or Leased Facilities will be refunded within thirty (30)
days after the expiration or termination of the Agreement (except for event
provided in the Article 11 hereof).

 

4.5           All payments of Rental shall
be made in New Taiwan dollars by wire transfer to a bank account
designated by the Lessor or such other method as agreed by the
Parties.  The Lessee will bear the banking handling charges and
wire/mail fees arising from the manner it pays to the Lessor.  No payment by the Lessee or receipt
by the Lessor of Rental hereunder shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or
any letter accompanying any check or payment of Rental shall be deemed an
accord and satisfaction, and the Lessor may accept such check as payment
without prejudice to the Lessor’s right to recover the balance of such
payment or pursue any other remedies available to the Lessor.

 

4.6           The Lessee agrees and
acknowledges that, except as expressly provided in this Agreement, the Lessor
shall have no obligation to provide any allowances or grant any rental
abatement during either the Lease Term or the Extended Lease Term, and there
will be no period of rent-free occupancy at the commencement of any Lease Term
or Extended Lease Term. The Lessee specifically agrees that any damage, loss, or
disposition of or its idleness or purchase of the Leased Facilities in any
manner will not constitute nor construe an abatement, reduction, set-off
or deduction to the amount of Rental, Operating Expenses and other amounts
payable according to this Agreement, unless is otherwise agreed in writing by
the Lessor.

 

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ARTICLE 5   -   USE
OF LEASED PREMISE & LEASED FACILITIES.

 

5.1           The Lessee will be entitled
to the right of the use and occupancy of the Leased Premise during the
Lease Term; provided that the Lessee shall use its best degree of care to use
and possess the Leased Premise and Leased Facilities, but in no event
less than a reasonable degree of care.

 

5.2           The Leased Premise shall be
used by the Lessee for the Permitted Use only and for no other
purpose.  The Leased Premise and Leased
Facilities shall not be used for any illegal purposes.  The Lessee shall not move, use or relocate
the Leased Facilities, or any component thereof, from the Leased Premise
and shall use its best effort not to cause any out of the ordinary vibration, noise,
odor, light or other effect to occur within or around the Leased Premise
or Leased Facilities that could reasonably constitute a nuisance or
trespass for the Lessor, Landlord or any occupant of the Building or
an adjoining building, its customers, agents, or invitees.  Upon notice by the Lessor, the Lessee shall
promptly take best effort to remove or cure all such acts, provided that
they are caused, induced or committed by the  Lessee.

 

5.3           Any improvement, remodeling,
refurbishment, alteration, renovation, addition, change, decoration and/or
partition to or in the Leased Premise, Leased Facilities, Buildling or Common
Area, together with any and all fixtures, appurtenances, substitutions or
replacements therefore or thereof (collectively, “Modifications”) in
any manner, whether interior or exterior, and for any reason shall be upon
prior written consent by the Lessor, save to the extent of the minor
improvement, renovation, addition or modification to the Leased Premise
and/or the Leased Facilities provided that such modification shall be made
upon prior written notice received by the Lessor and shall, whether
individually or in the aggregate, be less than US$25,000. Any and all the
Modifications as from time to time added, constructed or made shall remain
the property of the Lessor or the Landlord, as the case may be, and each
Leased Premise and Leased Facilities referred herein shall also include
all the Modifications if any.  Lessee may
make any Lease Modification to the Leased Premise, at its own cost and
expense and risk, after obtaining written consent by the Lessor; provided, however, that in no event shall the safety of the structure or pathway
of the Building, Leased Premise or Common Area be affected.  If the approval of a competent authority
is required under the applicable laws, ordinance, regulation or otherwise, the
Lessee shall obtain such approval in advance and deliver to the Lessor any
official certificate or document evidencing such approval.  The
Lessor will provide all necessary assistance in filing such application in case
the Lessor agrees with such Modifications.

 

5.4           Other than the Leased
Premise, Leased Facilities and Modifications (if any), the facilities,
equipments, materials, merchandises, movable fittings and other personal
properties owned, placed and provided by the Lessee within the Leased Premise
(the “Lessee Properties”) shall remain the properties of Lessee and shall be
and remain at the Lessee’s sole risk.

 

5.5           No sign, advertisement or
notice shall be inscribed, painted, affixed, or displayed
on the windows or exterior walls of the Leased Premise, Building or
on any Common Area, except in such places, numbers, sizes, colors and
styles as are approved in advance in writing by the Lessor, which approval
will not be unreasonably withheld, and which conform to all applicable
laws, ordinances or covenants affecting the Leased Premise, Building or on any
Common Area.  Any

 

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and
all signs installed or constructed by or on behalf of the Lessee pursuant
hereto shall be installed, maintained and removed by the Lessee at the Lessee’s
sole cost and expense.  The Lessee
shall, if possible, to label the Leased Facilities with the “Luxxon’s Property”
or the similarity and maintain such label during and after the Lease Term, upon
request by the Lessor.  The Lessee shall
be entitled to install one monument sign located at or near the gate entrance
of the Building or the exterior walls of the Lease Premise at the Lessee’s sole
cost and expense.  In addition to its
corporate name, the Lessee shall have the right to use its font and logo on any
such sign.

 

5.6           The Lessee shall promptly
comply, at the Lessee’s sole cost and expense, and shall not in any way
violate, any present and future law, ordinance, order, rule, regulation or
requirement or other restrictive covenant affecting the Leased Premise or
Leased Facilities, and shall not in any manner use either of all or any part of
the Leased Premise or Leased Facilities so as to cause cancellation of, prevent
the use of, or increase the rate of, the fire and extended coverage insurance
policy required hereunder, throughout the Lease Term and the Extended Lease
Term.  The Lessor makes no (and does
hereby expressly disclaim any) covenant, representation or warranty as to the
Permitted Use being allowed by or being in compliance with any applicable laws,
rules, ordinances or restrictive covenants now or hereafter affecting the
Leased Premise or Leased Facilities.  The
Lessee hereby expressly acknowledges and agrees that the Lessee shall conduct
and rely solely on its own due diligence and investigation with respect to the
compliance of the Permitted Use on the Leased Premise or Leased Facilities with
all such applicable laws, rules, ordinances and restrictive covenants.

 

ARTICLE 6   -   MAINTENANCE; OBLIGATIONS

 

6.1           Unless is due to or as a
result of any willful conduct or negligence by the Lessee or any of its
officer, employee, consultant, worker, agent, contractor, guest or invitee
(collectively, the “Personnel”), the Lessor, at its sole cost and expense, will
be responsible for the following:

 

6.1.1.  Structural maintenance of the Building,
Building foundations and exterior walls; and

 

6.1.2.  Outside area maintenance, including outside
landscaping, parking places, drive aisles to such parking places, roof
maintenance and repair; and all other structural aspects of the Leased Premise.

 

6.2           If applicable, the Lessee
shall give the Lessor written notice of the need for any maintenance or repair
for which the Lessor is responsible according to this Article 6.1, after
which the Lessor shall have a reasonable opportunity to perform the maintenance
or make the repair but in no event more than thirty (30) business
days.  In the event of emergency,
and upon notice, written or otherwise, the Lessor shall perform the repair
within twenty-four (24) hours after the Lessor’s receipt of such notice.  If, within such time periods, the Lessor
fails to perform any maintenance or make any repairs for which the Lessor is
responsible under this Article 6.1, the Lessee shall have the right to
perform such maintenance or make such repairs, at the Lessor’s expense on a
reasonable and necessary basis.  The
Lessor shall reimburse the Lessee within thirty (30) days after receipt of an
invoice from the Lessee for such actual and

 

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reasonable
expenses incurred by the Lessee in performing such necessary maintenance or
making such repair, plus interest thereon at the rate of five percent (5%) per
annum (the “Interest Rate”) thirty(30) days after the delivery of invoices to
Lessee to the date paid, and if the Lessor fails to do so, the Lessee shall
have the right to deduct such expenses from the next installment(s) of
the Rental coming due hereunder.

 

6.3           Intentionally deleted.

 

6.4           Unless is due to or as a
result of any willful conduct or negligence by the Lessor or
its Personnel, the Lessee shall, at its sole cost and expense, be
responsible for the following:

 

6.4.1.  Maintenance of the Leased Premise and Leased
Facilities in good condition, repair and working order, including normal
maintenance;

 

6.4.2.  All water, gas, heat, light, power,
telephone, refuse disposal and other utilities and services supplied to the
Leased Premise or Leased Facilities;

 

6.4.3.  Repair, recovery, reparation and indemnity of
any damage or loss to the Leased Premise caused by the Lessee or any of
its Personnel, other than ordinary wear and tear;

 

6.4.4.  Repair, recovery, reparation and indemnity of
any damage or loss to the Leased Facilities or their components, in whole
or in part caused by the Lessee or any of its Personnel, at least on a
basis consistent with the operation and maintenance of properties or equipment
comparable in type and function to such Leased Facilities with due care and
in compliance with standard industry practice; and

 

6.4.5.  Repair, recovery, reparation and indemnity to
the structural maintenance or outside area maintenance set forth in the Article 6.1.1
and 6.1.2., in whole or in part, ordinary or extraordinary, in the event
that the cause of destruction, damage, loss, or wear and tear (except for
normal wear and tear) is caused by the willful conduct or negligence of
the Lessee or any of its Personnel.

 

6.5           If the Lessee desires to
make any Modification to the Leased Facilities or to other facilities in the
Leased Premised, the Lessee shall make such request to the Lessor by submitting
written plan(s) for approval, which shall not be unreasonably
withheld.  Only after the Lessor releases
written approval, can construction work by the Lessee begin in accordance with
the foregoing approval and the Lessee shall in no event damage, impair or
affect the main structure and the facilities of the Leased Premise.  The Lessee shall bear all the costs and fees
and take all the risks and full liabilities arising from or in connection with
any of such Modification or change.

 

6.6           The Lessee agrees and
acknowledges that the Lessor shall have no obligation to construct or install
any improvements, and under no circumstances shall the Lessor be required to
build any improvements on any Leased Facilities, make any repairs,
replacements, alterations or renewals of any nature or description to such
Leased Facilities, make any expenditure whatsoever in connection with the
Leased Facilities or maintain any Leased Facilities in any way.  The Lessor shall not be required to maintain,
repair or rebuild all or any part of any Leased Facilities, and the Lessee
waives the right to (i) require the Lessor to maintain, repair, or rebuild
all or any part

 

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of
any Leased Facilities (unless such repairs are needed to cure damage to a
Leased Facilities caused by the gross negligence or willful misconduct of the
Lessor), or (ii) make repairs at the expense of the Lessor pursuant to any
legal requirement, insurance requirement, contract, agreement, covenants,
condition or restriction at any time in effect.

 

6.7           If any component of the
Leased Facilities becomes worn out, lost, destroyed, damaged beyond repair or
otherwise permanently rendered unfit for use, and unless such is due to or
as a result of any willful conduct or negligence by the Lessor or its
personnel, the Lessee, at its own expense, will within a reasonable time
replace such component with a replacement component which is free and clear of
all liens, pledge, mortgage, encumbrance and other restrictions and has a
value, utility and useful life at least equal to the component replaced.
All components which are added to the Leased Facilities shall immediately become
the property of, and title thereto shall vest in, the Lessor, and shall be
deemed incorporated in such Leased Facilities and subject to the terms of this
Lease as if originally leased hereunder.

 

6.8           In the event that the Lessee
fails to perform any of the duties and liabilities provided in this Article 6
within twenty-four (24) hours in the event of an emergency that substantially
affects the normal operation by the entities or persons or the safety of the
structure or pathway around the Building, Leased Premise or Common Area, or
thirty (30) days in all other cases, the Lessor shall have the right to perform
such works, at the Lesseer’s sole expense. 
The Lessee shall reimburse the Lessor within thirty (30) days after
receipt of an invoice from the Lessor for all such expenses incurred or payable
by the Lessor, plus Interest Rate thirty days after the delivery of invoices to
Lessee to the date paid, and if the Lessee fails to do so, the Lessor shall
have the right to deduct and obtain such expenses directly from the
Deposit, without any notice to or consent by the Lessee.

 

6.9           Moreover, upon reasonable
advance notice, the Lessor shall have the right to inspect the Leased Premise
or Leased Facilities and all maintenance records with respect thereto at any
reasonable time during normal business hours with the accompany of Lessee’s
designated Personnel but shall not materially disrupt the business of the
Lessee.

 

6.10         Unless otherwise expressly
provided under this Agreement, any damage, loss, or destruction to the Leased
Facilities, in whole or in part caused by the Lessee or any its Personnel shall
not constitute, or grant the Lessee any right to, terminate or cancel
the Agreement in any manner, or abate, reduce or impact the Rental,
Operating Expenses or other fees payable by the Lessee, by contract, operation
of law, in equity or otherwise.

 

6.11         Any and all the costs,
expenses or charges assessed against or attributed to the Lessee Properties or
articles entered, placed, occupied or operated by the Lessee or any of its
Personnel in or around the Leased Premise, the Leased Facilities, Building or
Common Area, for repair or maintenance or otherwise, shall be solely borne by
the Lessee.

 

ARTICLE 7   -   DISTRIBUTION OF EXPENSES

 

7.1           Except for the house tax and
land value of the Leased Premise to be borne by the

 

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Landlord,
the Lessee shall pay and be liable for any and all the taxes (e.g. VAT, rental,
use, inventory and sales tax or other similar taxes), duties, levies, tariffs,
and assessments, if any, arising from or incurred by amounts payable by the
Lessee hereunder, or the operation or business in the Leased Premise and/or the
Leased Facilities, whether levied or imposed by any city, state, county or other
governmental authority, including without limitation to the VAT imposed on
the Rental, Operating Expenses and other amount payable herein(“Tax”). Payments
of the Tax shall be in addition to all other payments required to be paid
to the Lessor by the Lessee under the terms of this Lease, and shall be
made by the Lessee directly to such governmental body if billed to the
Lessee, or if billed to the Lessor, such payment shall be paid concurrently
with the payment of the Rental, Operating Expenses, or such other amount upon
which the Tax is based, all as set forth herein.

 

7.2           In addition to the Rental
and Tax, the Lessee agrees to pay the following operating expenses (the “Operating
Expenses”):

 

7.2.1.  The electricity and water consumption and the
private air-conditioning consumption by the Lessee shall be paid by the Lessee
according to the readings on the respective electricity and water meter set up
by the Landlord or the Lessor.

 

7.2.2.  Forty Thousand NTs (NT$ 40,000) per month
during the initial two (2) years, with five percent (5%) increase every
two-year period, to cover all of the expenses, charges and fees involved in the
operation, cleanness, repair and maintenance as necessary to keep the Common
Areas (other than the Leased Premise, Leased Facilities and Lessee Properties)
used by the Lessee in good order, condition and repair, including but not
limited to: (i) the two elevators used by the Lessee close to the Leased
Premise; (ii) security services, expenses associated with the driveways
and parking areas, security systems; (iii) restrooms; and (iv) the
water supply, electricity, garbage and public air-conditioning for the public
facilities. Other than the monthly rental amount, VAT, and the amount set
forth above in this paragraph, neither Lessee nor its Personnel shall be
responsible for any other fees or charges to the Lessor relating to the
operation and use of the Common Areas and Parking Places unless is due to
or as a result of any willful conduct or negligence by the Lessee or its Personnel.
 Notwithstanding any provision to the
contrary, the Lessor or its Personnel shall not be responsible for any
fees or charges to the Lessee relating to the operation and use of the
Leased Premise, Leased Facilities or Lessee’s Properties.

 

7.3           Any amounts required to be
paid by the Lessee under Article 7.2 and any charges or expenses incurred
by the Lessor on behalf of the Lessee under the terms of this Lease shall
be payable in the same manner and upon the same terms and conditions
as provided for the Rental hereunder. 
Any failure on the part of the Lessee to pay shall become due and shall
entitle the Lessor to the remedies available to it for non-payment of Rental.

 

7.4           The Lessee may set up and
maintain, in its sole discretion and at its own cost and expense, all the
equipments and systems for communication, telephone, fax, internet, entrance
guard and any other utility or service used or consumed in or servicing the
Leased Premise or the Leased Facilities and in the care, management and use  thereof.

 

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ARTICLE 8   -   FORCE MAJEURE

 

The
Lessor and Lessee shall not be responsible for any failure to perform or delay
in performance of any of its obligations in whole or in part under this
Agreement due to causes beyond its reasonable control and that is unforeseen
or, if foreseen, unavoidable, and that arises after the effective date of this
Agreement.  Those causes shall include
without limitation storm, fire, flood, earthquake, lightning, typhoon and other
natural disasters, power failure, explosion, strike and other labor
disputes, acts of public enemy, war, rebellion, insurrection, riot, epidemic,
quarantine restrictions, transportation embargoes, acts of God, acts of any
government or agencies thereof, governmental requirements and regulations and
restrictions imposed by law, or judicial action.  If such cause applies, the Lessor or Lessee
shall inform the other Party immediately in writing giving full details and use
reasonable efforts to avoid or remove such cause of non-performance and to
minimize the losses arising from such Force Majeure.  Notwithstanding anything in the foregoing to
the contrary, in no event will the occurrence of an event of Force Majeure
excuse the Lessee from its obligations to pay to the Lessor any sums due
hereunder save to the extent of the event provided in the Article 10.4 of
this Agreement.

 

ARTICLE 9   -   DELIVERY AND ACCEPTANCE OF LEASED PREMISE

 

The
Leased Premise and Leased Facilities are delivered to the Lessee on the Effective Date,
and the Lease shall commence on the Effective Date, whether or not the Lessee
enters into or operates the Leased Premise or Leased Facilities.

 

ARTICLE 10   -   DAMAGE OR DESTRUCTION

 

10.1         During the Lease Term and
the Extended Lease Term, the Lessee shall take good care to use the Leased
Premise and Leased Facilities.  If the
Leased Premise or any Leased Facilities, or any part thereof, is lost,
stolen, damaged or destroyed due to the Lessee or any of its
Personnel’s conduct, the Lessee shall repair, restore and be liable for such
loss, damage, destruction and/or other liability.  This Lease shall remain in full force and
effect, and the Leasee’s obligation to pay to the Lessor any sums due
hereunder shall remain.

 

10.2         Intentionally deleted.

 

10.3         If the Leased Premise or
Leased Facilities, or any part thereof, is damaged by fire, casualty or
otherwise so long as not due to or arising from act of the Lessee or any
of its Personnel during the Lease Term, the Lessor shall repair or cause
other to repair such damage and restore the Leased Premises or Leased
Facilities to substantially the same condition in which the Leased Premise and
Leased Facilities existed before the occurrence of such fire or other
casualty and this Lease shall, subject to this Article 10, remain in
full force and effect except that the Lessee shall be entitled to a
reduction in Rental based upon the proportion of the unusable area (as
determined by the Lessee) that the area of the Leased
Premise or Leased Facilities rendered unusable by such damage bears
to the total area of the Leased Premise. The Lessee shall, at the Lessee’s
sole cost and expense, repair and replace all such movable furniture,
equipment, trade fixtures and personal property.

 

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10.4         If the Leased Premise or
Leased Facilities in whole or in part is damaged by fire or other casualty
not due to or arising from act of the Lessee or any of its Personnel, the
Lessor or any of its Personnel, or the Lessee is prevented from using the
Leased Premise due to Force Majeure, during the Lease Term and
(a) such damage causes the failure of essential use of the Leased
Premise by the Lessee, and (b) the repair and restoration work to be
performed by the Lessor or Lessee cannot, as reasonably estimated by the Lessor
or Lessee, be completed within two (2) months after the Lessor’s
knowledge of such fire or other casualty, or three(3) months
thereafter while due to Force Majeure, as the case may be, then
the injured and non-causing party (i.e., the party not causing the
destruction) shall have the right, by giving written notice to the other Party
within two (2) months after the occurrence of such fire or other
casualty, or three (3) months while due to Force Majeure, as the case may
be, to terminate this Lease as of the date of the end of such period.
If neither the Lessor nor the Lessee exercises the right to terminate this
Lease in accordance with this Article 10.4, the Lessor shall repair
such damage and restore the Leased Premises and this Lease shall, subject
to the Article 10 hereof, remain in full force and effect.  A total destruction of the Leased Premise not
due to or arising from act of the Lessee or any of its Personnel shall
terminate this Lease effective as of the date specified in the written notice
by either Party after such total destruction.

 

10.5         Either Party shall have the
right to terminate this Lease if any portion of the Leased Premise is
taken by exercise of the power of eminent domain of any governmental authority
in Taiwan, R.O.C. during the Lease Tenn (other than due to or arising
from act of the Lessee or any of its Personnel), such event interferes
the Lessee’s normal use of such portion of the Leased Premise that cannot
be cured for a period of more than three (3) months and the remaining
portion of the Leased Premise cannot reasonably accomplish the essential use by
the Lessee as determined by the Lessor and the Lessee in good faith for the
subject purpose of Lease. In each such case, either Party shall exercise such
termination right by giving three-month’s prior written notice to the
other Party.  If the Lessee does
not exercise such right to terminate this Lease in accordance with this Article 10.5,
this Lease shall terminate as to the portion of the Leased Premise upon written
notice after being taken as of the date of such taking and shall remain in
full force and effect as to the portion of the Leased Premise not so
taken, and the Rental shall be reduced upon written notice after the date
of such taking in the proportion that the area of the Leased Premise so taken
bears to the total area of the Leased Premise. If all of the Leased
Premise is taken by exercise of the power of eminent domain by any
governmental authorities in Taiwan, R.O.C. during the Lease Term
(other than due to or arising from act of the Lessee or any of its
Personnel) and such event interferes the Lessee’s normal use of the Leased
Premise that cannot be cured for a period of more than three (3) months,
this Lease shall terminate as of the date of such taking.

 

ARTICLE 11   -   RETURN OF LEASED PREMISE & LEASED
FACILITIES

 

11.1         Upon expiration or
termination of the Lease, the Lessee shall, at its sole cost and expense,
immediately on the same date return the Leased Facilities to the Lessor
and vacate the Leased Premise in the manner and status as delivered by
Lessor on

 

10

 

the Effective Date (save to
the extent of normal wears and tears), clean and neat, and any remodeling,
refurbishment, decoration, partition, or article left inside or around the
Leased Premise or Building after the Lessee vacates the Leased Premise shall be
deemed to be abandoned by the Lessee at the disposal of the Lessor, to
which the Lessee shall have no objection. 
The Lessor may conduct the cleanness, recovery or other disposition of
all such remodeling, refurbishment, decoration, partition, and left articles at
the Lessee’s own cost and expense, and may withhold the Deposit for
deduction of all such costs and expenses until all the cleanness,
recovery or dispositions being consummated.

 

11.2         The Lessee must, upon the
termination or expiration of the Lease, return to the Lessor all keys and
security cards of stores, offices, and rooms, either furnished to,
or otherwise procured by, such Lessee, and in the event of the loss of any
keys and security cards so furnished, such Lessee shall pay to the Lessor the
cost of replacing the same or of changing the security, lock or locks
opened by such lost key or security card if Lessor shall deem it
necessary to make such change.

 

11.3         If the Lessee shall for any
reason remain in possession of the Leased Premise or Leased Facilities after
the date of expiration of the Lease Term or the Extended Lease Term or
three (3) months the earlier termination of this Agreement (unless the
Leased Premise and Leased Facilities are sold and transferred to the Lessee in
accordance with the Article 21), such possession shall be as a
lease-at-sufferance during which time the Lessee shall continue to pay the
rental that would be payable by the Lessee hereunder were the Lease then in
full force and effect with respect to the Leased Premise or Leased Facilities
and the Lessee shall continue to pay 200% of the Rental (according to the
most recent rental rate) that would otherwise be due and payable at such time
in addition to the Operating Expenses or other fees payable herein and all the
damages incurred by the Lessor as a result of such holdover. During such
three (3) months for earlier termination due to or as a result of the
Lessee or any of its Personnel, as a lease-at-sufferance, the Lessee shall
continue to pay the rental that would be payable by the Lessee hereunder were
the Lease then in full force and effect with respect to the Leased Premise or
Leased Facilities in addition to the Operating Expenses or other fees payable
herein.  During any period of lease
at sufferance, the Lessee shall be obligated to perform and observe all of the
terms, covenants and conditions of this Agreement, but shall have no rights
hereunder other than the right, to the extent given by law to tenant at
sufferance, to continue their occupancy and use of the Leased Premise or Leased
Facilities.  Nothing contained in
this Article11.3 shall constitute the consent, express or implied, of the
Lessor to the holding over of the Lessee after the expiration of the Lease or
earlier termination of this Lease, nor shall it be read or construed as renewal
of this Lease by operation of law, or applying to the Article 451 of the
Civil Law of Taiwan, R.O.C., or preventing the Lessor from maintaining a
suit for possession of the Leased Premise and/or Leased Facilities or
exercising any other remedy available to the Lessor at law or in equity.

 

ARTICLE 12   -   GENERAL INDEMNITY

 

12.1         The Lessee hereby agrees to
indemnify, defend, protect and hold the Lessor, its affiliates, directors,
officers, employees, consultants, contractors and agents harmless from and
against any and all claims, actions, proceedings, damages, fines,

 

11

 

encumbrances, liens, losses,
liabilities, costs and expenses, including reasonable attorneys’ fees and
disbursements, and costs and expenses of investigation incurred (collectively, “Claims”),
to the extent such Claims (i) caused, arising from or as a result of
any breach of this Agreement by the Lessee or any of its Personnel or (ii) arising
from or related to the existence of the Hazardous Material caused,
permitted or committed by Lessee or any of its Personnel, or violation
of Environmental Requirements with respect to the Leased Premise, or
brought in, on the Leased Premise, or the actual or threatened migration
of Hazardous Material into or from the Leased Premise on and after
the Effective Date and such actual or threatened migration is caused, committed
or permitted by Lessee or its Personnel. The Lessor and any Assignee may,
at its option and at its sole expense, participate in any such action with
counsel of its own choice.  To the extent
that the Lessee has an indemnification obligation under this Article 12.1,
the Lessee shall, in its reasonable discretion, perform all remedial actions
necessary to remove any such Hazardous Material, or to remedy actual or
threatened migration into or from the Leased Premise of any Hazardous Material
caused by Lessee or its Personnel.

 

As
used in this Agreement, “Hazardous Materials” means any hazardous or toxic
substance, material or waste, or any pollutant or contaminant, or words of
similar import which is or becomes regulated by any governmental authority in
which the Leased Facilities, Leased Premise, Common Area or Building is
located, or the government of Taiwan.

 

As
used herein, the term “Environmental Requirements” means all laws,
ordinances, rules, regulations, orders and other requirements of the
government in Taiwan now in force or which may hereafter be in force relating
to protection of human health or the environment from Hazardous Material,
including all requirements pertaining to reporting, licensing, permitting,
investigation and remediation of emissions, discharges, storage, disposal or
releases of Hazardous Materials and all requirements pertaining to the
protection of the health and safety of employees or the public with
respect to Hazardous Material.

 

12.2         The Lessor shall indemnify,
defend, protect and hold the Lessee, its affiliates, directors, officers,
employees, consultants, contractors and agents harmless from and against
any and all Claims, to the extent such Claims (i) caused, arising from
or as a result of any breach of this Agreement by the Lessor in or on
the Leased Premise or Leased Facilities, or (ii) arising from or related
to the existence of Hazardous Material prior to the Effective Date caused,
committed or permitted by Lessor , or the actual or threatened migration of
Hazardous Material from or into the Leased Premises prior to the Effective
Date and such actual or threatened migration is caused, committed or permitted,
or the existence prior to the Effective Date of a violation of Environmental
Requirements. with respect to the Leased Premises caused by the Lessor,.  To the extent the Lessor has an
indemnification obligation under this Article 12.2, Lessor shall, in its
reasonable discretion, perform all remedial actions necessary to remove
any Hazardous Material in or on the Leased Premise, or to remedy actual or
threatened migration from the Leased Premise of any Hazardous Material, or to
remedy any actual or threatened violation of Environmental Requirements.

 

12.3         This Article 12 shall
survive any expiration or termination of this Agreement.

 

12

 

 

12.4                      Each of the
Lessor’s and Lessee’s remedies provided herein or by law, shall be cumulative
to and not exclusive of every other remedy, and remedies may be exercised
simultaneously or cumulatively.  No
failure or delay by the Lessor or Lessee to exercise any right or remedy shall
be a waiver thereof, nor shall any written waiver or consent extend to any
instance other than the one for which it is given.

 

12.5                      None of the
Lessor’s officer, director, shareholder, partner or principal of the
Lessor, whether disclosed or undisclosed, shall be under any personal
liability with respect to any of the provisions of this Lease.

 

ARTICLE 13   -   REPRESENTATIONS AND WARRANTIES

 

13.1                      The Lessor
represents and warrants as follows:

 

13.1.1.  The
Lessor is duly organized, validly existing, and has all requisite authority to
lease the Leased Premise and the Leased Facilities, and each individual of the
Lessor represents and warrants that it is duly authorized to execute and
deliver this Agreement on behalf of the Lessor; and

 

13.1.2.  This Agreement is binding on the Lessor in
accordance with its terms;

 

13.1.3. 
Except for the representations and warranties set forth in this Article
13.1, the Leased Premise and Leased Facilities are provided on a “AS-IS, WHERE
IS” basis, without representation, warranty or covenant of any kind, and the
Lessor hereby expressly disclaims any and all other representations, warranties
and conditions, express, implied, statutory or otherwise, including without
limitation, any warranty of its fitness or suitability for a particular
purpose, use, condition, design, operation, merchantability, value or the
ability of the Lessee to utilize either or all of them (or any part thereof) to
meet any proper functioning of the products. Neither the Lessor nor the
Landlord shall be liable for any latent, hidden, or patent defect on the Leased
Facilities or its failure, or any part thereof, to comply with any legal
requirement.  The foregoing is in lieu of all warranties of Leased
Premise and Leased Facilities, express or implied, whether arising by law,
custom or conduct.  The Lessee and its
affiliates have been afforded full opportunity to inspect each Leased Premise
and Leased Facilities and the improvements thereon (if any), are satisfied
with the results of its inspections and is entering into this Lease solely
on the basis of the results of its own inspections, and all risks incident to
the matters described in the preceding sentence are to be borne by the Lessee.

 

13.2                      The Lessee
represents and warrants as follows:

 

13.2.1.  The Lessee is duly organized, validly
existing, in good standing in the jurisdiction of its incorporation, and has
all requisite power and authority to enter into this Agreement and to conduct
business in the jurisdiction where it is currently or will be located, and each
individual executing this Agreement on behalf of the Lessee represents and
warrants that he or she is duly authorized to execute and deliver this
Agreement on behalf of the Lessee; and

 

13.2.2.  The Agreement is binding on the Lessee in
accordance with its terms.

 

13

 

13.2.3.  The Lessee shall not cause or permit any
Hazardous Material to be brought upon, kept or used in or about the Leased
Premise, Leased Facilities or Building, or the Common Area that results in
a risk of harm to person or property or otherwise negatively affect either of
their value or marketability, or is or become subject to any violation of
any applicable law or regulations, including without limitation the
Environmental Requirements and their amendments in effect during the Term or
the Extended Lease Term.

 

ARTICLE 14   -   EARLY TERMINATION

 

14.1                      Notwithstanding
the term of this Agreement, this Agreement may be terminated as a whole, with a
ninety (90) day written notice upon occurrence of any of the
following events, in which event this Lease shall expire and terminate on
the date specified in such notice:

 

(i)             By either Party, where the
other Party (the “Incurred Party” ) has elected to wind up and dissolved,
becomes insolvent, makes an assignment for the benefit of creditors, files a
voluntary petition in bankruptcy or for reorganization, insolvency or is
adjudicated as bankrupt or insolvent, or has a liquidator or trustee appointed
over its affairs and such event or appointment affects the due performance of
this Agreement by such Incurred Party (i.e. the Lessee’s obligation for
on-time payment while the Incurred Party is the Lessee , or the Lessee’s normal
use in accordance herewith while the Incurred Party is the Lessor), and
shall not have been terminated or discharged within thirty (30) days thereof;
or

 

(ii)          By either Party, if the
material performance of the other Party under this Agreement is delayed
for a period of two (2) months due to Force Majeure as described above, then
such Party (whose performance is not required due to Force Majeure) shall
be entitled to terminate this Agreement with immediate effect.

 

14.2                      Intentionally
Deleted.

 

14.3                      If an Event of
Default occurs, in addition to the right provided in the Article 14.2,
the Lessor may, request to sequestrate the Deposit (besides the Rental,
Operating Expenses and other amounts then due and payable), proceed by court
action to enforce performance by the Lessee and/or to recover all damages and
expenses incurred by the Lessor by reason of any Event of Default, and exercise
any other right or remedy available to the Lessor at law or in
equity.  Also, the Lessee shall
pay the Lessor all costs and expenses (including reasonable attorneys’
fees, court costs, legal fees and costs and fees of collection agencies)
incurred by the Lessor in enforcing any of the terms, conditions or provisions
of this Agreement.  The amount as
calculated above shall be deemed immediately due and payable, and the Lessor
may take the Deposit to compensate such damages, costs and expenses.  The rights, powers and remedies of the
Lessor provided herein are cumulative and are in addition to, and not exclusive
of, any other right or remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced
concurrently therewith or from time to time.

 

14

 

14.4                      The Lessee or
the Lessor may, in consideration of business operation or for convenience,
terminate this Agreement with a six (6)-month prior written notice to
the other Party.

 

14.5                      Except for the
provisions set forth in this Article 14, neither Party may terminate
this Agreement without prior written consent by the other Party, whether
in whole or in part.

 

14.6                      Termination of
this Agreement shall be without prejudice to the accrued rights and liabilities
of the Parties on or prior to the date of termination, unless expressly
waived in writing by the Parties. 
The Lessee shall remain liable for all obligations under this Lease
arising up to the date of such termination, and the Lessor’s acceptance of
Rental, Operating Expenses or other amounts in full or in part
following an Event of Default hereunder shall not be construed as a waiver
of such Event of Default.

 

ARTICLE 15   -   NOTICES

 

Any
and all notices, requests, waivers and other communications made pursuant to
this Agreement shall be made in writing in the English language, and delivered
by hand, mail, facsimile, overnight delivery service, or any other mode of
communication routinely used by the Parties in their course of dealing to the
address and number set forth below in this Article 15, or to such other address
and/or number as the recipient may indicate in writing.  Any such notice or communication shall
be deemed received when so deemed under Article 95 of the R.O.C. CivilCode
..

 

If to the Lessee:

Semi-Photonics
Co., Ltd.

7F,
No.13, Ke Jung Rd.

Chu-Nan
Site, Hsinchu Science Park

Chu-Nan
350, Taiwan

Attn:  Legal Counsel

Fax:   +1-208-728-3700

 

If to the Lessor:

Luxxon
Technology Corporation

 

Attn:

Fax:

 

ARTICLE 16   -   AMENDMENT AND MODIFICATION

 

The
Agreement shall not be amended, modified or altered in any manner except in
writing signed by the Parties.

 

ARTICLE 17   -   ENTIRE AGREEMENT

 

The
Agreement and the attached Schedules, which are incorporated by reference
and made an integral part of the Agreement, constitute the entire
agreement between the

 

15

 

Parties.  No agreements, representations, or warranties
other than those specifically set forth herein or in the attached Schedules
shall be binding on the Parties unless set forth in writing and signed by the
Parties.  The captions set forth herein
and in each Schedule are for convenience only and shall not define or limit any
of the terms herein or therein.

 

ARTICLE 18   -   SEVERABILITY

 

If,
in light of a particular set of facts and circumstances, any provision or
provisions of this Agreement will be held to be invalid or unenforceable by any
court or arbitrator of competent jurisdiction, then: (i) the validity and
enforceability of such provision or provisions as applied to any other
particular facts or circumstances and the validity of other provisions of this
Agreement will not in any way be affected or impaired thereby; and (ii) such
provision or provisions will be reformed without further action by the Parties
hereto, but only to the extent necessary to make such provision or provisions
valid and enforceable when applied to such particular facts and circumstances.

 

ARTICLE 19   -   GOVERNING LAW; DISPUTE RESOLUTION

 

This
Agreement shall be governed in all respects by the laws of the R.O.C. without
regard to provisions regarding choice of laws, and the Taoyuan District Court
shall have exclusive jurisdiction over any dispute arising under this
Agreement.  This Agreement is in both
English and Chinese languages, and if any dispute, inconsistency, or conflict,
the English text of this Agreement and its interpretation shall control and
prevail over the other language in all respects.

 

ARTICLE 20   -   NON-ASSIGNABILITY; BINDING EFFECT

 

20.1                      Neither this
Agreement, nor any of the rights or obligations of the Parties hereunder, shall
be assignable by any Party without the prior written consent of the other
Parties, provided, however, that the Party may, without requirement of any
consent of the other Party, assign its rights and/or obligations hereunder
or this Agreement to its subsidiary or affiliates, upon thirty (30) days’
prior written notice to the other Party. 
This Agreement and the Lease may not be subleased or assigned by the
Lessee, in whole or in part, to its affiliates or any third party (except by
law) without on each occasion first obtaining the prior express written consent
of the Lessor, and in the case of a sublease, the Lessee shall remain
fully liable for any obligations under this Agreement, and in the case of
assignment, the Lessee shall remain fully liable for any obligations under this
Agreement until such assignee execute a separate lease agreement with the
Lessor        and the assignee shall assume all
of the obligations of the Lessee with respect to the Lessor hereunder. To
obtain the Lessor’s consent, which shall not be unreasonably withheld, the
Lessee shall give the Lessor written notice specifying the name and business of
the assignee or sublessee, its intended use (including any hazardous materials
to be used in any manner at the Leased Premise), the amount of rental or other
consideration, the proposed effective date and duration and other details of
the assignment or subletting.  The Lessee shall be liable for any and
all acts or obligations of, or disputes with, the sublessees, whether or
not with the Lessor’s consent, without, however, relieving the Lessee of any of
its obligation or liability for the entire Lease.

 

16

 

No
transfer, assignment, subletting or occupancy, whether or not with the Lessor’s
consent, shall be deemed the acceptance of the sublessee, as the Lessee, or a
release of the Lessee from its full and complete performance of all the
obligations hereunder and the terms hereof, and the terms thereof shall in
no event surpass or supersede the rights of the Lessee provided herein.

 

20.2                      Notwithstanding
the foregoing, the Lessee acknowledges that the Lessor may transfer, sell,
pledge, assign and/or convey its interest in each Lease, the Rental due
thereunder or the Leased Premise or Facilities listed therein, in whole or in
part, to an assignee (the “Assignee”), which may be represented by a bank
or trust company acting as a trustee of such Assignee.  EACH OF THE LESSEE AND LESSOR ACKNOWLEDGES
THAT ANY ASSIGNMENT OR TRANSFER BY THE LESSOR, LANDLORD OR ANY ASSIGNEE SHALL NOT
MATERIALLY CHANGE THE LESSEE’S OBLIGATIONS UNDER THE ASSIGNED LEASE, AND THE
ASSIGNEE SHALL ASSUME ALL OF THE OBLIGATIONS OF THE LESSOR WITH RESPECT TO THE
LESSEE.  Any Assignee shall be entitled
to enforce all the rights so assigned, the Lessor shall be entirely free and
released from any obligations accruing thereafter under this Lease, and the
Lessee agrees to look solely to Lessor’s successor in interest for performance
of such obligations; provided, in each case, the Assignee shall assume all
of the obligations of the Lessor with respect to the Lease.  The Lessor and the Lessee acknowledge and
agree that all of the rights against the other under this Agreement shall be
unaffected except as provided herein. 
The Lessee agrees that upon notice of assignment of this Lease, it shall
pay directly to the Assignee, unconditionally, all amounts which become due
hereunder..

 

ARTICLE 21   -   FIRST REFUSAL RIGHT

 

21.1                      Subject to the
Lessee’s full compliance with all the terms provided herein and
without any occurrence of the Event of Default during the Lease Term
and/or Extended Lease Term (including their date of expiration), the Lessor
hereby grants to the Lessee a non-assignable and non-transferable right to
purchase all, but not less than all, of the Leased Facilities during the
Lease Term and/or Extended Lease Term (unless is earlier terminated) in the
event that the Lessor determines to sell the Leased Facilities.  The Lessor will provide the Lessee a written
notice (the “First Refusal Right Notice”) indicating the price and other terms
and conditions for such sale (the “Offered Purchase”), and the Lessee shall
irrevocably respond to the Lessor in writing within fifteen (15) business
days of the Lessor’s notice ensuring the Lessee’s decision to buy
accordingly.  Failure to respond the
Lessor in accordance with the aforesaid shall be deemed that the Lessee
has elected not to exercise such rights and Lessee’s first refusal rights
provided under this Article 21 shall be deemed waived and immediately
expire.  The Lessor shall have no
obligation to sell any Leased Facilities to the Lessee unless and until
all of the Leased Facilities shall be purchased and paid by the Lessee on
the equivalent terms and conditions offered by the Offered Purchase.  It is expressly understood by the parties
hereto that any purchase hereunder SHALL BE WITHOUT REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, on the part of the Lessor and that the
Lessor sells the Leased Facilities hereunder on a “AS IS,” “WHERE IS” basis.

 

17

 

21.2                      If the Lessee
elects not to purchase the Leased Facilities according to Article 21.1, then
Lessor shall have the right to sell to the Leased Facilities on the terms and
conditions specified in the First Refusal Right Notice.  Lessee’s right provided
in this Article shall not apply to any sublessee or assignee unless
agreed by the Lessor in writing.

 

The
Parties agree to have the Agreement to be notarized by the public notary
institutions chose by the Parties, cost of which shall be shared by the Parties
50-50.

 

IN
WITNESS WHEREOF, the Parties have duly executed the Agreement.

 

 

	
  Lessor:

  	
   

  	
  LUXXON
  TECHNOLOGY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lessee:

  	
   

  	
  SEMI-PHOTONICS
  CO., LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

18

 

Schedule A

 

The Leased Premise

 

(a)                                 Address of the Building:
12-5, Dungshr, 2 Lin, Dungming Tsuen, Shinwu Shiang, 327,

Taoyuan
County, Taiwan, R.O.C.

 

(b)                                 Location of the Leased
Premise:

The
Leased Premise is located on a parcel of the fourth floor of the Building as
outlined in the drawing attached:

The
Space of the Fourth Floor  [As attached]

 

The
Space of the Leased Premise: approximately 5,030.51 square meters (1,521.73)

 

(c)                                  The lease will contain a
non-exclusive right to use, in common with the Lessor and other lessees of the
Building (and their employees, guests and other invitees), the following Common
Area:

 

19

 

 

20

 

Schedule B

 

The Leased Facilities

 

	
  No.

  	
   

  	
  Code

  	
   

  	
  Item

  
	
  1

  	
   

  	
  16320004

  	
   

  	
  Cleanroom
  construction

  
	
  2

  	
   

  	
  16330008

  	
   

  	
  Gas
  Pipe (Not Include Hook-up )

  
	
  3

  	
   

  	
  16310005

  	
   

  	
  Factory
  Steel I-Beam-Build

  
	
  4

  	
   

  	
  16330011

  	
   

  	
  Process
  Pipe Hook-up (DI Exhaust)And Additional Cost

  
	
  5

  	
   

  	
  16330010

  	
   

  	
  Power
  Hook-UP And Additional Cost

  
	
  6

  	
   

  	
  16320001

  	
   

  	
  Epoxy
  floor works

  
	
  7

  	
   

  	
  15350024

  	
   

  	
  Oil
  Free Compressor(CDA)

  
	
  8

  	
   

  	
  16330007

  	
   

  	
  Main
  Fire System

  
	
  9

  	
   

  	
  16320005

  	
   

  	
  Cleanroom
  improvements

  
	
  10

  	
   

  	
  16330003

  	
   

  	
  Fireproof
  Infilling Engineering

  
	
  11

  	
   

  	
  16320002

  	
   

  	
  Cleanroom
  floor works

  
	
  12

  	
   

  	
  15350003

  	
   

  	
  Generator
  Exhaust Smoke Depurator

  
	
  13

  	
   

  	
  16330012

  	
   

  	
  Acid
  Exhaust Duct Modify

  
	
  14

  	
   

  	
  16330017

  	
   

  	
  NH3
  CQC And VMB Install

  
	
  15

  	
   

  	
  16330019

  	
   

  	
  Roof
  Exhaust SUS 316 Duct Material Chang To PP Pipe

  
	
  16

  	
   

  	
  16330016

  	
   

  	
  Acid
  Exhaust Duct 4F Walk-wayModify

  
	
  17

  	
   

  	
  16330020

  	
   

  	
  HIGH
  Voltage Wire And ACB2/ACB4 Panel Modify

  
	
  18

  	
   

  	
  16320003

  	
   

  	
  CLEAN
  ROOM Air Exhaust works

  
	
  19

  	
   

  	
  16380002

  	
   

  	
  Fab
  refurbishment

  
	
  20

  	
   

  	
  16310002

  	
   

  	
  Wall
  fixing and painting

  
	
  21

  	
   

  	
  16310003

  	
   

  	
  Firefighting
  items

  

 

21Exhibit
10.21

 

SEMI-PHOTONICS
CO., LTD.

 

INTERNATIONAL DISTRIBUTION AGREEMENT

 

This
International Distribution
Agreement (the “Agreement”) is made and entered into
effective December 20, 2006 (the “Effective Date”) between SEMI-PHOTONICS
CO., LTD., a company with offices at 7F, No.13 Ke Jung Rd., Chu-Nan Site,
Hsinchu Science Park, Chu- Nan 350, Taiwan (“Company”), and NANOTECO
CORP., a Japanese company with offices at 408 Mitaka Sangyo Plaza, 3-38-4
Shimorenjaku, Mitaka, Tokyo, 181-8525 Japan (“Distributor”).

 

WHEREAS
Company is engaged in the business
of LED, general illumination, lighting, projector, projection display and related products; and

 

WHEREAS
Distributor wishes to act as an independent
distributor of Products in the Territory to Customers.

 

NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth below, the parties agree as follows:

 

1.             Definitions.

 

1.1           “Assigned Accounts” means the companies having
their manufacturing facilities/subsidiaries inside or outside the Territory but
having their purchasing decision making authority in the Territory as listed in
Exhibit A attached
hereto. Any addition to the list of Assigned Accounts shall be agreed in
writing by the Company and Distributor.

 

1.2           “Customer” means an Assigned Account,
and its wholly-owned
subsidiaries and affiliates,
other than a House Account, that purchase the Products.

 

1.3           “Products” means
those Company LED chips and LED related products described in Exhibit B.

 

1.4           “House Account” means an account which
is the sole responsibility of Company and which is listed in Exhibit C
of this Agreement.  Company has the absolute right to designate (or remove) certain additional Customer accounts which are not originally listed in Exhibit A
as House Accounts at any time
during the term of this Agreement upon thirty (30) days’ written notice to
Distributor.  Upon such notice, the
additional House Accounts so designated shall be deemed added to (or removed from) the list set forth in Exhibit C. Notwithstanding the
foregoing, the Company shall not designate Assigned Accounts to
House Account by way of direct or indirect manner whatsoever, including
but not limited to, sell Products through buying agent(s) of Customer
or any other distributor with offices inside or outside of the Territory
to the same Customer.

 

1.5           “Territory” means that geographic area identified
in Exhibit D attached
hereto.

 

2.             Appointment of Distributor or Sales Representative.

 

2.1           Appointment as Distributor.  Company hereby
appoints Distributor as a

 

1

 

distributor
in the Territory as well as Company’s exclusive Distributor of the Products to
the Assigned Accounts within the Territory. Notwithstanding the foregoing,
Distributor may not solicit or take orders for the sale of Products to a House
Account. Distributor shall have the right during the term of this Agreement to
represent to the public that it is a sole authorized independent distributor of
the Products to the Assigned Accounts. Distributor shall have the right to
obtain confidential technical information on Products from Company that is necessary for sales by distributor.

 

2.2           Independent Contractor. 
Distributor is and at all times
shall be an independent contractor in
all matters relating to this Agreement. Distributor and its employees
are not agents of Company for any
purposes and have no power or authority
to bind or commit Company in any way.

 

3.             Distributor’s General Duties.  The Distributor shall use its best efforts to introduce, promote the sale of, solicit and obtain orders for the Products from the Assigned Accounts in
accordance with the terms of this Agreement. 
The Distributor shall bear the entire cost and expense of
conducting any and all of its
activities under this Agreement.

 

4.             The Distributor’s Specific Duties and Prohibitions.  Without in any way limiting the generality of
the preceding paragraph, the Distributor agrees as follows:

 

4.1           Facilities. 
The Distributor shall maintain its own office space and facilities, with the entire cost of these items and activities to be borne solely by the Distributor.

 

4.2           Personnel. 
The Distributor shall provide and maintain, at
its own expense, a competent and adequately
trained, skilled and motivated
sales organization for the sale of Products to Customers.  The Distributor shall employ sufficient
technical resources to support Company’s
product line.

 

4.3           Records.  The
Distributor shall maintain complete and accurate
books and records.  Company and its agents shall have the right at any time during the terms of this
Agreement and for a period of six months after its termination or expiration to examine and copy such books, records, correspondence, quotations, orders and other documents which pertain to Company’s business and the fulfillment of the Distributor’s obligations hereunder, as it may
deem necessary or appropriate upon reasonable advance notice to Distributor.

 

4.4           Sales and Distribution
of Products.  The
Distributor shall purchase Products from Company at the price
to be determined by the Company from time to
time.  Company reserves the
right to change the Products prices by
consulting with Distributor in good faith.

 

4.5           Reports.  The Distributor shall prepare and submit to Company periodic reports relating to its activities as Distributor by
the 5th working day of the following quarter as follows:

 

(a)           Forecasts. 
On the fifth (5th) day after the
end of each quarter, Distributor
will provide Company with a
12-month rolling forecast, setting forth its estimated requirements for
shipment by month for each Product.  Such
forecasts are for planning purposes
only, and will not be binding on either party.

 

(b)           Quarterly Reports.  Distributor will submit to Company quarterly

 

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sales information. 
Such sales information will include, at a minimum, date shipped,
quantity of Product sold and quantity used
internally, the Customers’ names, addresses, contact information, and quantities sold to each such Customer, and remaining
inventory.

 

(c)           Feedback Reports.  Distributor will submit to Company, upon receipt of such information and upon request
by Company, any competitive
information, problems, complaints or suspected defects with respect to the
Product, and any feedback from any
Customer.

 

4.6           Non-Competition. 
Distributor may distribute with prior written approval from Company products that compete with the Products, provided that Distributor
maintains separate sales and support personnel for the Products and competing
product(s).

 

4.7           Assignment.  The Distributor shall not transfer, pledge, or assign this Agreement or enter into any form of
sub-sales distributor agreement concerning any of its obligations hereunder
without the prior written consent of Company.

 

4.8           Secrecy.  The
Distributor shall not during the term of this Agreement or thereafter for three
(3) years, disclose to any third party any invoice value or Products sold
by Company to the Distributor, sales
policies for any other business information of Company acquired from
or as a consequence of
transactions under this Agreement, without the prior written consent of Company.

 

4.9           Matters Not Provided For.  With respect to any matters for which this
Agreement does not provide, or if any questions arise with respect
to the interpretation of the matters provided in this Agreement, Company and the Distributor shall
exercise their best efforts to resolve
such questions by consulting with each other in good faith.

 

5.             Company’s General Duties.  The Company shall use its
best efforts to supply the Products in
good quality with competitive price in accordance with the terms of this
Agreement.

 

6.             Product Manufacture and Order Placement.

 

6.1           Additions to and Deletions
from Products.  Company may, in its sole discretion, discontinue the manufacture of any or all Products or make whatever changes to those Products it deems necessary, desirable or
appropriate.  Company may, in its sole discretion, delete Products from the list of
Products described in Exhibit B
upon thirty (30) days’ written notice to the Distributor.

 

6.2           Purchase Orders and Acknowledgements.

 

(a)           Purchase Orders. 
Purchase orders shall be in writing or a mode agreeable to both parties, subject to the terms of this Agreement, and must contain the following: (a) description of the Product to be
purchased, (b) quantity to be purchased, (c) delivery schedule, (d) bill-to
and ship-to destinations, (e) price,
(f) payment terms, and (g) routing
instructions.  All Products must be
ordered in the minimum multiples quantities as specified per Product in Exhibit B only.  All Purchase orders submitted by Distributor
shall be governed exclusively by the terms and conditions of
this Agreement. Any preprinted terms and conditions in
Distributor’s purchase order in addition to or inconsistent with those
contained in this Agreement shall be of no force and effect unless
Company specifically and expressly

 

3

 

agrees
in writing to such terms.  Distributor
shall submit all Purchase Orders to Company, 7F, No.13,
Ke Jung Road, Chu-Nan Site, Hsinchu Science Park, Chu-Nan 350, Miao-Li County,
Taiwan, fax +886-37-586788 or such
other address as is designated by Company.

 

(b)           Order Acknowledgments.  Company will notify
Distributor if an order is not
accepted.  No purchase order shall be
binding on Company unless and until so accepted in writing by Company.  Company will use
commercially reasonable efforts to fill all orders submitted by Distributor
during the term of this Agreement.

 

(c)           Refusal of Orders. 
Company may withhold shipments
because of the Distributor’s general financial condition and/or conditions of
the Distributor’s account with Company.  Such withholding shall not be construed as a
breach of this Agreement.  Company reserves the right at all times either generally or with respect to
any specific order to vary, change or limit the
amount or duration of credit to be allowed to the Distributor.

 

(d)           Shipping. 
Products shipped pursuant to the terms of this Agreement will be
suitably packed for shipment in Company’s standard packaging,
marked for shipment to Distributor’s address as designated by Distributor.  Risk of loss and title shall
pass to Distributor upon delivery of the Products to the freight forwarder at
Company’s facility, as specified in Company’s shipping and freight guidelines. 
Distributor will be responsible for payment (or reimbursement of Company) of all freight, insurance, taxes, customs duties and other shipping expenses after such point.

 

(e)           Product Acceptance. 
Distributor will inspect all Products for obvious physical damage
promptly upon receipt thereof and may reject
any Product that fails in a material way to meet Company’s specifications for
such Product.  Any Product not properly
rejected within 30 days of receipt of that Product by Distributor will be
deemed accepted.  Distributor will return
any rejected Products pursuant to Company’s Return Merchandise Authorization
Procedures, a copy of which is attached hereto as Exhibit E
(“RMA Procedure”).  As promptly as
practicable after receipt by Company of properly
rejected Products, Company will, at its
option and expense, replace the
Products and return such replaced
Product to Distributor or credit Distributor’s account at the current price for
the rejected Product.  Improperly rejected
Products will be returned to Distributor at Distributor’s expense and will be subject to a service and handling fee.  Company reserves the right to discontinue the manufacture of any
Product.

 

(f)            Company’s Modifications to Exhibits.  Company may, from time
to time, revise or amend Exhibits B,
C  and E, or any of the foregoing, and will provide Distributor with no less than 30 days prior written
notice of such changes.  The revised Exhibits shall be deemed
incorporated herein and made a part of this Agreement.

 

6.3           Title and Delivery of
Product.

 

(a)           Delivery of the Products to the Distributor shall be
completed upon delivery of the Products to the Distributor’s freight forwarder
at a location specified by Company.  All shipments shall be EXFACTORY from such
location.  In all cases, Company’s title and the risk of loss or damage to any Product, shall pass to the
Distributor upon delivery of the Products to the Distributor’s freight
forwarder.

 

Shipping
dates are approximate and are based
upon prompt receipt of all necessary information from the Distributor.  In no event shall Company be liable for any reprocurement costs for

 

4

 

delay
in delivery or non-delivery, due to causes beyond Company’s control.  In the event of any such delay, the date of
delivery shall automatically be extended for a period equal to the time lost by
reason of the delay.  In any event, Company shall not be in default for failure to deliver unless Company does not respond to the Distributor with a revised delivery
commitment within fifteen (15) days after receipt of written notice of failure
to deliver from the Distributor.  The
Distributor’s sole remedy for such default shall be cancellation of the
order.  Company further
reserves the right to allocate production deliveries among its customers in a
fair and reasonable manner.

 

(b)           Company may make partial shipments against the Distributor’s purchase orders upon mutual
agreement of the parties.

 

(c)           Company shall have
the right to make substitutions and modifications
in the specifications of Products sold by Company upon not less
than ninety (90) days notice in writing to Distributor, provided that such
substitutions or modifications will not materially affect overall
Product form, fit, or function.

 

7.             Cancellation/Reschedules.

 

(a)           Company will work
with the Distributor on a case by case basis to resolve issues related to
market changes and potential impact on orders placed with Company.

 

(b)           No cancellations shall be allowed within forty-five (45)
days of scheduled ship date unless prior approval is obtained in writing from
Company.

 

(c)           If the Distributor cancels a portion of an order, the balance of that
order, shipped and unshipped,
will be repriced to reflect the appropriate volume price.  Company will invoice
the Distributor for any price increase on Products previously shipped against
the order.

 

(d)           In the event that the Distributor wishes to terminate all
or a portion of an order made in accordance herewith or to make any change in the scope of the order, such termination or change will be accepted only with the specific approval of Company in writing.

 

8.             Payment Terms.

 

8.1           Company will supply
the Distributor with price quotations, at Distributor’s request, for
Products.  Unless otherwise specified on
the price quotation, quoted prices shall remain in effect for ninety (90) days.

 

8.2           Payment for all orders shipped by Company during a
calendar month will be due on or before the 15th day of the
following month.  All payment shall be made
in United States dollars in immediately available funds by wire transfer to
Seller’s bank account at                                       ,
ABA#                               in
favor of Semi-Photonics Co., Ltd., Account
#                        .

 

8.3           Company will invoice
the Distributor for Products when Company ships such
Products.

 

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9.             Compensation. 
The difference between Distributor’s purchase price for the Products and Distributor’s price to its customers will be Distributor’s sole
remuneration for the purchase and sale of the
Products hereunder.  Distributor shall
have no right to receive any other payment or compensation from Company for the purchase and sale of the
Products or to receive reimbursement of any expenses or other costs incurred by
Distributor in connection therewith, unless specifically and expressly provided
for hereunder.

 

10.           Limited Warranties; Disclaimer; Limited Liability.

 

10.1         Except for the warranty of title, Company warrants only that
each Product to be delivered hereunder shall, under normal use and conditions, at the time of delivery and for one
hundred twenty (120) days thereafter conform substantially to Company’s
specifications therefore.  However, the
Company will have no
responsibility for any such defect arising from, relating to, or in combination
with, components, parts, or materials
not produced or not provided by the Company, including
without limitation Distributor’s products, and this limited
warranty is void if the defect resulted from accident, abuse, or misapplication
of the Products.

 

10.2         As the Company’s sole liability and Distributor’s
exclusive remedy for breach of the limited warranty in Section 10.1, Company shall, at its option, (a) repair or replace at its expense
(including return shipment) any Product found by Company to be non-conforming to warranty, or (b) reimburse Distributor
for the purchase price allocable to such products less reasonable deductions
for usage and general market
depreciation; provided that Distributor first notifies Company in writing of the alleged defective Products and then, at Distributor’s expense, returns such Products to Company’s
designated return facility within the applicable warranty period along with a
brief statement explaining the alleged defect and a reference
to the return material authorization number (“RMA #”) issued by Company.  Returned Proucts that are
found by Company to conform to
such warranty or are returned out-of-warranty will be repaired or replaced at Company’s
standard charges and shipped back to Distributor at Distributor’s expense.  The warranty under this Section 10 shall
not be valid if Company determines
that the Product has been abused, modified, altered, subjected to damage from
accident or acts of nature or otherwise used in breach of this Agreement or in
a manner not in accordance with the Company’s specifications or
description.  THE FOREGOING STATES
DISTRIBUTOR’S AND CUSTOMER’S SOLE REMEDY AND THE COMPANY’S SOLE LIABILITY FOR
BREACH OF THE WARRANTY SET FORTH IN THIS SECTION 10.  In no event shall Company be liable for any consequential or incidental damages.  The Distributor shall have no right or
authority, express or implied, directly or indirectly, to alter, enlarge or
limit the representations or guarantees expressly contained in Company’s most
current written Product warranty as distributed by
Company for the applicable
Product.

 

10.3         EXCEPT FOR THE LIMITED WARRANTY PURSUANT TO SECTION 10.1
ABOVE, THE COMPANY DOES NOT MAKE ANY WARRANTIES WITH RESPECT TO THE PRODUCTS OR
OTHERWISE UNDER THIS AGREEMENT.  THE
COMPANY PROVIDES THE PRODUCTS TO DISTRIBUTOR “AS IS,” WITHOUT WARRANTY OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND AGAINST
INFRINGEMENT.

 

10.4         COMPANY SHALL IN NO EVENT BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT

 

6

 

OF
OR RELATING TO THE SALE OR USE OF ITS PRODUCTS, WHETHER OR NOT COMPANY HAS
ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.  IF COMPANY BREACHES ANY PROVISION OF THIS
AGREEMENT, COMPANY’S SOLE AND EXCLUSIVE MAXIMUM LIABILITY, WHETHER BASED IN
CONTRACT, TORT, OR OTHERWISE, AND TOGETHER WITH ANY OTHER LIABILITIES RELATING
TO THE PRODUCTS, SHALL NOT IN ANY EVENT EXCEED THE CONTRACT PRICE FOR THE
PARTICULAR PRODUCTS DURING THE TWELVE MONTH PERIOD PRIOR TO THE FINAL
AJUDICATION SETTING FORTH THE LIABILITY AMOUNT.

 

11.           Proprietary Right. 
Ownership and all right,
title and interest in and to any trademarks, trade names or service marks which
are valid and enforceable, used with any
Product are and shall remain
vested solely in Company.  Company grants to the
Distributor a limited license to use the trade name of Company and Company logo solely to identify the Distributor as an independent distributor of Company.  The Distributor shall provide to Company, at no cost to Company, examples of
all its uses of Company’s trade name and logo and shall modify such use if requested by Company.  The Distributor shall not adopt any
trademark, trade name or service mark which
is confusingly similar to the trademark, trade name or service mark used by Company to sell or
assist in the sale of its Products.  Upon
termination of this Agreement, the Distributor will immediately cease all
further use of Company’s trademarks, trade names or service marks except as may be required in the sale of Products in
inventory.  The Distributor’s rights and license under this Section 11 shall not survive the termination of this Agreement. 
All products authorized by Company which are
sold by the Distributor directly or through its sales distribution channel must
bear an authorized Company name, trademark or logo, and no other
except those authorized by Company in
writing.  The Distributor may not put any
Company trademark, trade name,
logo etc. on any product other than as authorized by Company in writing.

 

12.           Confidential Information.

 

12.1         During the term of this Agreement, each party (the “Receiving
Party”) may be provided with or
otherwise learn confidential and/or proprietary information of the other party
(the “Disclosing Party”) (including,
without limitation, certain information
and materials concerning the
Disclosing Party’s business, plans, technology, and products) that is of substantial value to the Disclosing Party, which is identified as confidential
at the time of disclosure or which ought in good faith to be considered
confidential (“Confidential Information”). All Confidential Information remains
the property of the Disclosing Party.  The Receiving Party may disclose
the Confidential Information of the Disclosing Party only to its
employees and contractors who need to
know the Confidential Information for purposes permitted under this Agreement and who are bound by written confidentiality agreements with terms at
least as restrictive as those provided in this Agreement.  The Receiving Party will not use
the Confidential Information without the Disclosing Party’s prior written
consent except in performance under this
Agreement.  The Receiving Party will take measures to maintain the confidentiality of the
Confidential Information similar to those measures the Receiving Party uses to maintain the confidentiality of its own confidential
information of like importance but in no
event less than reasonable measures. 
Distributor will not disclose or publish any technical description of
the Product or technology beyond the description published by the Company for general dissemination.  The
Receiving Party will give
immediate notice to the Disclosing Party of any
unauthorized use or disclosure of the Confidential Information and agrees to assist the Disclosing Party in remedying
such unauthorized use or disclosure.

 

12.2         The confidentiality obligations do not extend to
Confidential

 

7

 

Information
which (i) becomes publicly available without the fault of the Receiving Party; (ii) is independently developed by the Receiving Party without reference to or use of the Disclosing Party’s Confidential
Information; or (iii) was lawfully in the possession of the Receiving Party at the time of disclosure, without restriction on disclosure.  The Receiving Party will have the
burden of proving the existence of any condition in this Section 12.2.

 

12.3         The Distributor and Company have previously or are concurrently executing a separate
confidentiality agreement and
non-disclosure agreement (the “Non- Disclosure Agreement”) which shall be unaffected
by the execution of this Agreement.

 

The
obligations set forth in this Section 12 will be effective from the
Effective Date until three (3) years from the termination or
expiration of this Agreement.

 

13.           Indemnification.

 

13.1         Company agrees to defend
and hold Distributor harmless
against any loss, liability or expense (including reasonable attorneys’ fees)
paid to third parties arising from any action or claim brought or threatened
against Distributor alleging that the Products under normal use infringe any
third party’s United States patent, Japanese patent, copyright, trademark,
trade secret or other intellectual property right; provided that Distributor
provides Company with (a) prompt
written notice of such claim or action, (b) sole control and authority over the defense or settlement of such claim or action and (c) proper and full
information and reasonable assistance to defend
and/or settle any such claim or action. If the Product becomes or in Company’s
opinion is likely to become, the subject of an infringement
claim, Company may, at its option, (a) procure
for Distributor the right to continue using the Product as provided in this
Agreement; (b) modify or replace the Product so that there is no
infringement; or (c) if neither of the foregoing options are reasonably
available to Company, accept the
return of the Products and refund to
Distributor the amounts paid for such Products depreciated over a three year
period on straight line basis. Notwithstanding the provisions set for the
above, Company assumes no liability for
infringement claims to the extent such claims arise from (x) combination
of Products with other products not provided by Company, (y) the
modification of such Products unless such modification was made or authorized
by Company, where such infringement
would not have occurred but for such modifications, or (z) Company’s
compliance with specifications provided by Distributor (the “Excluded Claims”).

 

13.2         THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATIONS OF
COMPANY AND THE EXCLUSIVE REMEDY OF DISTRIBUTOR WITH RESPECT TO ANY ALLEGED OR
ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS. 
COMPANY’S MAXIMUM LIABILITY UNDER THIS SECTION 13 AND WITH ANY OTHER
SECTIONS UNDER THIS AGREEMENT TOGETHER SHALL NOT EXCEED THE AMOUNT OF THE
PURCHASE PAID BY DISTRIBUTOR FOR THE PRODUCTS THAT GIVES RISE TO THE CLAIM
DURING THE TWELVE- MONTH PERIOD PRIOR TO THE CLAIM.

 

13.3         Other than as to claims for which Company is obligated to indemnify Distributor under Section 13.1 above,
Distributor agrees to defend and hold Company harmless against any damages, loss, liability or expense (including
reasonable attorneys’ fees and costs)
arising from claims brought or threatened against Company by any other party
arising out of or related to (a) the Excluded Claims or otherwise
Distributor’s misuse, modification, alteration, adaptation, promotion,
marketing, sublicensing or distribution of the Product; or (b)

 

8

 

Distributor’s
acts or omissions in breach of this Agreement, including but not limited to
Distributor’s representations and claims
regarding the Products that are contrary to or inconsistent with Company’s
Product descriptions and warranties.

 

14.           Term and Termination.

 

14.1         Term.  The
initial term of this Agreement shall commence on the Effective Date and end two (2) years thereafter, unless earlier terminated as
provided in this Section 14. 
Thereafter, this Agreement shall be extended automatically every year
for an additional period of one (1) year,
unless terminated earlier pursuant to the terms of this Section 14 or
unless either party gives written notice to the other party of its intention
not to renew this Agreement at least thirty (30) days prior to the end of then
current term.

 

14.2         Termination for Convenience.   Either party may terminate this Agreement
for its convenience by giving the other party sixty (60) days prior written
notice of the termination.

 

14.3         Termination for Cause.  Either party may terminate this Agreement
immediately, upon written notice, (a) if the other party materially
breaches any term of this Agreement and fails to cure
such breach within thirty (30) days after receipt by the breaching party of
written notice from the non-breaching party describing such breach, (b) upon
the institution by or against the other party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of the other
party’s debts not dismissed within 60 days, (c) upon the other party’s
making an assignment for the benefit
of creditors, or (d) upon the other party’s dissolution or ceasing to
conduct business in the normal course, or the other party’s failure to pay its
debts as they mature in the ordinary course of business.

 

14.4         Effect of Termination.  Upon termination or expiration of this
Agreement, (a) all rights and licenses
granted to Distributor hereunder will immediately cease; (b) Distributor
shall immediately deliver the Quarterly Report as to the
period as yet unreported; (c) Distributor will immediately cease all use,
marketing, promotion and distribution of the Product and return to the
Company all copies of Company’s
Confidential Information in Distributor’s possession, custody or control.  Upon termination or expiration of this
Agreement, each party will promptly return the other party’s Confidential
Information.  The following Sections will
survive expiration or
termination of this Agreement for any reason: Sections 4, 6, 10-12, 14, and 15.

 

14.5         Disclaimer. 
Except as specifically provided herein, if either party is entitled
under local law or otherwise for any special payment or termination indemnity
as a consequence of termination or expiration of this Agreement, such party
hereby waives and disclaims to
the fullest extent permitted by law, any right to such payment or indemnity.

 

15.           General Provisions.

 

15.1         No Waiver.  The
failure of either party to enforce at any time or for any period any of the
provisions of this Agreement shall not be construed to be waiver of those
provisions or of the right of that party thereafter to enforce each and every provision hereof.

 

15.2         Return of Company Property.  Promptly upon the termination of this
Agreement, the Distributor shall turn over to Company all
Confidential Information and all other
Company information and material, including, without limitation, all samples, pamphlets,

 

9

 

catalogs,
booklets and other technical
advertising data and literature
concerning Company
and/or its Products and all copies
thereof, in the possession, custody or control of the Distributor.

 

15.3         Notices.  Any
notice hereunder shall be deemed duly given if delivered personally, facsimiled
with receipt acknowledged, mailed to the other by prepaid registered mail, or
certified mail, return receipt requested, or delivered by a recognized
commercial carrier addressed to the address designated below or last
designated.

 

If
to Company:

 

Semi-Photonics
Co., Ltd.

7F,
No.13, Ke Jung Rd.

Chu-Nan
Site, Hsinchu Science Park

Chu-Nan
350, Miao-Li County

Taiwan (R.O.C.)

Attn:       Legal Counsel

Fax:         +1-408-716-2452

 

If
to Distributor:

 

Nanoteco
Corp.

408
Mitaka Sangyo Plaza

3-38-4
Shimorenjaku

Mitaka,
Tokyo, 181-8525

Japan

Attn:       CTO

Fax:         +81-42-486-5661

 

15.4         Governing Law. 
This Agreement (and any other
documents referred to herein) shall in all respects be interpreted, enforced and governed by and under the
laws of the United States and the State of California applicable to instruments,
persons and transactions which have legal contacts and relationships
solely within the State of California.

 

15.5         United Nations Convention.  The parties hereto
agree that the rights and obligations
of each party under this Agreement shall not be governed by any of the
provisions of the United Nations Convention on Contracts for the International Sale of Goods.

 

15.6         Force Majeure. 
The parties shall not
be liable for any delay or failure of the obligation hereunder (other than
payment of amounts due), in whole or in part, for any
causes beyond the reasonable control of the parties including,
but not limited to, Acts of God, war, riot, civil disturbance, strikes,
lockouts or other labor disputes, accident of transportation or other force majeure.

 

15.7         Dispute.

 

(a)           Dispute Resolution. 
Any and all disputes,
controversies or claims concerning or relating to this Agreement (a “Dispute”)
will be addressed in accordance with the procedures specified in this Section 15.7,
which will be the sole and exclusive
procedures for the resolution of such Disputes. 
All negotiations pursuant to this provision are confidential and shall be treated as compromise and settlement
negotiations for purpose of the

 

10

 

United
States Federal Rules of Evidence and state rules of
evidence.

 

(b)           Negotiation.  The parties will
attempt in good faith to resolve any Dispute promptly by negotiation.  If the Dispute has not been resolved within
sixty (60) days of a party’s request for negotiation, either party may
initiate mediation as provided in Section 15.7(c).

 

(c)           Nonbinding Mediation.  A party may initiate mediation by giving
notice to the other party.  Mediation
will be nonbinding and before the
Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the then effective JAMS Rules of
Practice and Procedure.  The mediation shall take place in Santa Clara County, California, regardless which party initiates the
mediation.  The parties shall attempt to reach agreement on the appointment of a
mediator.  If they cannot so agree, the
mediator shall be appointed by JAMS and pursuant to
JAMS Rules of Practice and
Procedure.  The mediator will be a former
judge of a federal or state court.  The mediation shall be completed within sixty
(60) days of its initiation, unless the parties otherwise
agree.  The parties will bear
their own costs and expenses for
participating in mediation under this Section 15.7(c), including, without
limitation, attorney’s fees, and shall shares
equally the mediator’s fees and expenses.

 

(d)           Binding Arbitration.  Any Dispute that has not been resolved by
mediation as provided in Section 15.7(c) may be submitted to binding
arbitration by the American Arbitration Association (“AAA”).  There will be one (1) neutral,
independent and impartial arbitrator selected in accordance with the AAA rules and procedures then in effect; provided, however, the arbitrator may not
vary, modify or disregard any of the provisions contained in this Section 15.7.  The parties shall
attempt to reach agreement on the appointment of an
arbitrator.  If they cannot so agree, the
arbitrator shall be appointed by the AAA. 
The arbitration shall take place in Santa Clara
County, California, regardless which party initiates the arbitration.  As part of any
arbitration conducted under this Section 15.7(d), each party may (i) request
from the other party documents and other
materials relevant to the
Dispute and likely to bear on the
issues in such Dispute, (ii) conduct no more than five (5) oral
depositions each of which will be limited to a maximum of seven hours in
testimony, (iii) propound to the other party no more than two sets of
interrogatories comprising a total of 35 questions, and (d) two
sets of requests for admissions comprising a total of 10 requested admissions
maximum. The decision and any award
resulting from such arbitration shall be final and binding.  Any final decision or award from arbitration
will be in writing and
reasoned.  The judgment upon the award
rendered by the arbitrator may be entered by any court having
jurisdiction thereof.  The arbitrator is
not empowered to award damages in excess of compensatory damages and each party hereby irrevocably waives any right to recover such
damages with respect to any Dispute resolved by arbitration.  Each party shall bear its own expenses
(including attorney’s fees) and an equal share of the expenses of the arbitrator and the AAA fees.

 

(e)           Confidentiality in Dispute
Resolution.  The parties, their representatives, other participants and the mediator and arbitrator shall hold the existence,  content and result of the
mediation and arbitration in
confidence.  All the dispute resolution
proceedings contemplated in this Section 15.7 will be as confidential and private as permitted by law. 
The parties will not
disclose the existence, content or results of any proceedings conducted in
accordance with this Section 15.7, and materials
submitted in connection with such proceedings will not be admissible in any
other proceeding, provided however, that this confidentiality provision will
not prevent a petition to vacate or enforce an arbitration
award,  and shall not bar
disclosures required by law.

 

11

 

(f)            Injunctions; Waiver.  Nothing in this Section 15.7 shall be
construed to preclude any party from seeking injunctive relief from a court without posting bond or other security, in order to protect its rights
pending mediation or arbitration.  If
either party chooses to seek such relief from a court, the parties
consent to the exclusive jurisdiction and venue of the
courts located in Santa Clara County, California.  A
request by a party to a court for such
injunctive relief shall not be deemed a waiver of the obligation to mediate or
arbitrate.  EACH PARTY ACKNOWLEDGES THAT
THIS AGREEMENT TO ARBITRATE DISPUTES WAIVES THE PARTY’S RIGHT TO TRIAL BY JURY
OR COURT OR TO HAVE DISCOVERY UNDER COURT RULES.

 

15.8         No Representations.  The Distributor represents and acknowledges that it is relying solely on its own judgment, including
its own estimate of the market for Products in Territory, in entering into this
Agreement, and that Company has made no written or verbal representations or warranties, either
express or implied, regarding the subject matter hereof, including, without
limitation, the duration of the distributorship arrangement and any selling representation created hereby, the circumstances under
which this Agreement shall or may be terminated, the size of the market for
Products in Territory or the amount of commissions or profits which the
Distributor will, could or might expect to receive hereunder.

 

15.9         Titles of Paragraphs.  The title of the various paragraphs of this
Agreement are used for convenience of reference only and are not intended to and shall not in
any way enlarge or diminish the rights or obligations of the parties or affect the meaning or construction of this document.

 

15.10       Integration/Modification/Entire
Agreement.  This
Agreement together with the attached Appendixes and the
Nondisclosure Agreement constitute the entire agreement and final understanding of the parties with
respect to the subject matter hereof and supersedes and terminates any and all prior
and/or contemporaneous negotiations, representations, understandings,
discussions, offers and/or agreements between the parties, whether
written or verbal, express or implied, relating in any way to the subject
matter hereof.  This Agreement is
intended by the parties to be a
complete and wholly integrated expression
of their understanding and agreement, and it may not be altered, amended, modified or otherwise changed in any
way except by a written instrument, which specifically identifies the intended
alteration, amendment, modification or other change and clearly expresses the intention to so change this
Agreement, signed by the parties.

 

[Signature Page Follows]

 

12

 

 

IN
WITNESS WHEREOF, the parties have
executed this Distribution Agreement effective as of the Effective Date.

 

 

	
  SEMI-PHOTONICS
  CO., LTD.

  	
   

  	
  NANOTECO
  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  

 

13

 

Exhibit A

 

ASSIGNED ACCOUNTS

 

	
   

  	
  English name

  	
   

  	
  Categor 1 die

  	
   

  
	
   

  	
  C
  . I. KASEI CO., LTD

  	
   

  	
   

  	
  1
  2Lamp

  	
   

  
	
   

  	
  SUN
  ELECTRONIC INDUSTRY CO LTD

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  KYOSEMI

  	
   

  	
   

  	
  1

  	
   

  
	
   

  	
  CCS
  Inc

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Sammy
  Co.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Union
  ELECTRONIC INDUSTRY CO LTD

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Prof
  Precision LTD

  	
   

  	
   

  	
  1

  	
   

  
	
   

  	
  LOOP
  CO. LTD

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  NIPPON
  LEIZ Corporation

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  INTERNIX
  Inc

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Shin-Etsu
  Handoutai Co. LTD

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  SEIKO
  EPSON CORPORATION

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Silicon
  technology Co. Ltd

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  NIHON
  COLMO CO , LTD

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Toshiba
  Matsusita Display Technology

  	
   

  	
  ( 1 and 2

  	
   

  	
   

  
	
   

  	
  HOYA
  CORPORATION

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  DENKA

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Japan
  Scantic Technology Management

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  NEC
  Lighting Ltd

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Jupa

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  MK
  Seiko Co.,Ltd

  	
   

  	
  2

  	
   

  	
   

  
	
   

  	
  Iwasaki
  Electric Co., Ltd

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Iwasaki
  Information Systems Co., Ltd

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Techtuit
  Co., Ltd.

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  lida
  Electronics (Tsusho) Co.,Ltd.

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  Jyoyo
  Denshikiki Co., Ltd.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Sankosha
  Corp.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Nippon
  Koki Kogyo Co., Ltd.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Nippon
  Sento Co., Ltd.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Japan
  Outdoor Lighting MFG Co., Ltd.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Contents

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  ICHIKOH
  INDUSTRIES, LTD

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Shibasaki
  Inc.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Kictec
  Corp.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  KIRIN
  TECHNO-SYSTEM Corp.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Schott
  Nippon K.K.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Koizumi
  Lighting Technology Corp.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  LTEL
  Corp.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  OSAKI
  ELECTRIC CO., LTD.

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Denso
  Co..Ltd

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Koito
  Industries.Ltd

  	
   

  	
  1 and 2

  	
   

  	
   

  
	
   

  	
  SAXA, Inc

  	
   

  	
   

  	
  2

  	
   

  
	
   

  	
  Endo
  Lighting Corp

  	
   

  	
   

  	
  2

  	
   

  

 

 

Exhibit B

 

PRODUCTS

 

Blue
LED Chips:

SL-B60

SL-B40

SL-B28

SL-B24

SL-B15

 

Green
LED Chips:

SL-G40

SL-G28

SL-G24

 

Near
UV:

SL-U40

 

 

Exhibit C

 

HOUSE ACCOUNTS

 

None

 

 

Exhibit D

 

TERRITORY

 

Japan

 

 

Exhibit E

 

RETURN MERCHANDISE AUTHORIZATION PROCEDURES

 

Distributor
must obtain a Return Merchandise Authorization (RMA) number from Company for all Products, prior to returning said Product to Company for repair or replacement, or any other reason.  Failure to obtain an RMA number and follow the procedures below by the Distributor before returning
Product to Company will result
in Company’s refusal of said Product. 
All Product returned for credit will be at Company’s current published
price.

 

(a)           Distributor must submit a request for an RMA number to Company
in writing, and should include the following information:

 

(1)           Distributor Name and Address 

(2)           Requester’s Name, Phone
Number and Fax Number 

(3)           Product Name and Description, Company Part Number or SKU, Quantity 

(4)           Product Current Unit Price and Date of Purchase (if possible) 

(5)           Reason for Product Return 

(6)           Purchase Order Number 

(7)           Debit Memo Number if
Distributor intends to debit Company

 

(b)           Company will issue an RMA number to Distributor when the information required is provided to
Company.  Authorized RMA numbers are
valid for only 30 days, upon which time the RMA will be closed.

 

(c)           The returning Product should be properly packaged for shipment of
electronic parts including anti-static packing for boards.

 

(d)           The RMA number issued by Company must be clearly
referenced on the outside of all ship containers and packing lists
packed and prepared by Distributor so that  identification
is possible when Product is received by Company.

 

(e)           The following are the freight terms & guidelines for all typical
authorized returns:

 

(1)           Distributor pays Freight

(i)            In
warranty - Distributor pays freight one way, inbound to Company.

(ii)           Out
of warranty — Distributor pays freight both ways, in bound &
outbound.

(iii)          DOA’s
(“dead on arrivals”)- Distributor pays freight one way, inbound to
Company for credit only or for credit & replacement.

 

(2)           Company pays Freight

(i)            In
warranty - Company pays freight one way, outbound back to the customer.

(ii)           DOA’s
- Company pays freight one way for REPLACEMENT DOA’s, outbound to the
customer.

(iii)          Company
shipment error - Company pays freight both ways, back from the customer
and replacement product to the customer. 
Company will select the carrier both ways.

 

 

 

(f)            Any Produce returned to Company that has failed as a
result of abuse, misuse, neglect, unauthorized repair or modification are not
covered under this warranty.  At its
option, Company may refuse said Product or charge Distributor for out of
warranty service.

 

(g)           Any Product returned to Company that is replaced
becomes the property of Company.

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