Document:

Letter employment agreement with Mr. John D. Williams

 Exhibit 10.1 
  

					
		 		 	 Domtar Corporation

		 		 	 Head Office

		 		 	 395 de Maisonneuve Blvd. West

		 		 	 Montreal, QC H3A 1L6

			
		 		 	 Operations Center

		 		 	 100 Kingsley Park Dr.

		 		 	 Fort Mill, SC 29715-6476

 

 
  

			
	September 15, 2008	  	STRICTLY CONFIDENTIAL

 Mr. John D. Williams 
 Charters Towers 
 Brodick 
 Isle
of Arran 
 Scotland 
 KA27 8AF 
 Dear John, 
 We are pleased to confirm the terms of your
employment with Domtar Corporation, a Delaware corporation (the “Company”). As of January 1, 2009 (your “Start Date”), your employment with the Company will commence on the terms set forth herein. 

1. Duties. You will serve as President and Chief Executive Officer of the Company, with such duties and responsibilities as are customarily
assigned to individuals holding such positions and such other duties and responsibilities consistent with the positions of President and Chief Executive Officer as may be specified by the Board of Directors of the Company (the
“Board”). You will report directly to the Board and will devote all of your skill, knowledge and full working time solely and exclusively to the conscientious performance of your duties hereunder, other than authorized vacation time
and absence for sickness or disability. You will be appointed as a director of the Company contemporaneously with commencement of your employment with the Company pursuant to the terms of this letter agreement. You agree to devote your full business
time to the business and affairs of the Company Group (as hereinafter defined) except for (i) time spent serving on corporate, civic or charitable boards or committees provided that such service (individually or in the aggregate) does not
materially interfere with the performance of your duties and responsibilities, that service on any corporate 

  

					
		  		  	www.domtar.com

 
board is subject to the prior approval of the Board and that no such activities involve being involved with a competitive organization, and (ii) periods
of vacation and sick leave to which you are entitled. 
 2. Location. You shall perform your duties at the Company’s head office
in Montreal, Quebec, Canada (although from time to time you may be required to travel to other locations to properly fulfill your responsibilities). 
 3. Term. This letter shall be construed as a contract for employment for an indefinite period, subject to termination in accordance with the provisions of Section 14. 
 4. Base Salary. Your base salary while you are employed will be at an annualized rate of CDN$900,000 (the “Base Salary”), which
amount may be increased from time to time by the Board in its sole discretion and shall be reviewed annually by the Board. Your Base Salary shall be payable at the same time as the Company pays salary to the members of the management committee of
the Company (the “Management Committee”). 
 5. Annual Incentive Bonus. While you are employed, you will be eligible
to participate in the Domtar Corporation Annual Incentive Plan (including any successor to such plan, the “Annual Incentive Plan”). Your target annual bonus under the Annual Incentive Plan will be not less than 75% of Base Salary,
and your maximum annual bonus will be 150% of Base Salary. In respect of fiscal year 2009, 50% of your actual bonus payments will be determined based on performance results versus the applicable financial and operating targets established by the
Board (or the Human Resources Committee of the Board) for the members of the Management Committee, and the remaining 50% of your actual bonus payments will be determined based on performance results versus individual objectives to be discussed and
agreed with the Board (or the Human Resources Committee of the Board). Bonuses will be subject to and paid in accordance with the Annual Incentive Plan, a copy of which has previously been provided to you. In respect of fiscal year 2009, and
notwithstanding the foregoing, you shall be entitled to a bonus payment of not less than 50% of your target bonus opportunity of 75% of Base Salary. 
 Any annual bonus with respect to a particular year will be payable promptly following the receipt of the Company’s audited financial statements for such year and in any event within two and a half months of the
end of such year. 
 6. Long Term Incentive Awards. You will be eligible to participate in the Domtar Corporation 2007 Omnibus
Incentive Plan (the “Stock Incentive Plan”) as determined by the Board (or the Human Resources Committee of the Board) consistent with its determinations with respect to members of the Management Committee. With respect to fiscal
year 2009, you shall be granted awards under the Stock Incentive Plan having an aggregate grant date fair value of CDN$1,575,000, with the same relative weighting 

  

					
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between types of awards as applies to other members of the Management Committee (expected to be 25% options to purchase shares of the Company’s common
stock (“Options”) having an exercise price equal to the Fair Market Value (as defined under the Stock Incentive Plan) on the grant date, 50% performance-conditioned restricted stock units (“PCRSUs”) and 25%
time-vested restricted stock units (“RSUs”)), subject to your continuous employment through the grant date for such awards. Options will be valued on a Black-Scholes basis using the same assumptions that apply for purposes of the
Company’s audited financial statements and PCRSUs and RSUs will be valued based on the Fair Market Value of the Company’s common stock, in each case as of the grant date. The grant date (currently anticipated to occur in February 2009) and
specific terms of your awards (including vesting and exercisability) shall be the same as shall apply to awards granted to other members of the Management Committee in respect of fiscal year 2009 and may, as in the case of the May 2008 Option and
PCRSU grants, be subject to performance conditions. You hereby confirm receipt of a copy of the Stock Incentive Plan. For illustrative purposes only, a summary of the terms of Options, PCRSUs and RSUs granted thereunder to members of the Management
Committee in respect of fiscal year 2008 has been provided to you. 
 7. Additional Awards. To compensate you for annual incentive
payments for 2008 from your current employer and other compensation from your current employer which you will forfeit by reason of accepting employment with the Company and to induce you to accept employment under the terms and conditions of this
letter agreement: 
 (a) within 30 days after commencement of your employment with the Company, you shall receive a cash payment of
CDN$520,000 (the “Make-Whole Payment”), subject to your continuous employment through the date of such payment. 
 (b)
within 70 days after commencement of your employment with the Company, you shall receive an award under the Stock Incentive Plan of DSUs with an aggregate grant date fair value of CDN$415,000 (the “Replacement DSUs”) (as determined
in accordance with the principles set forth in Section 6 with respect to your long-term incentive awards), subject to your continuous employment through the date of such grant. The Replacement DSUs will vest in three substantially equal
installments on March 15 of each of 2009, 2010, and 2011, subject only to your continuous employment through the applicable vesting date, and will be payable in the form of cash or shares of the Company’s common stock (as elected by you)
in January of the year following the year of your Separation from Service (as defined in Section 24). 
 8. SERP. You shall be
eligible to participate in the DB SERP for Management Committee Members of Domtar (the “DB SERP”) (a copy of which will be provided to you) as of your Start Date. You will earn an additional two months of credited service under the
DB SERP for each 12 months of actual service (pro rated for any period of service of less than 12 months), up to a maximum of 12 months of additional credited service. 
  

					
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 9. Housing. While you are employed, to facilitate the fulfillment of your duties and
responsibilities with respect to the Company’s Operations Center in Fort Mill, South Carolina (the “Fort Mill Operations Center”), in lieu of hotel accommodations, the Company will make available for your exclusive use during
periods when your presence is required at the Fort Mill Operations Center a furnished two-bedroom condominium in the local area. 
 10.
Company Plane. While you are employed, you may use the Company plane for business travel, when necessary, subject to quarterly review by the Human Resources Committee of the Board; provided that you will be required to reimburse the
Company in an amount equivalent to a first class commercial fare for any passengers traveling with you on the Company plane for reasons other than business. You will be entitled to use the Company plane for personal reasons for up to 24 hours per
calendar year during the Employment Term, and hereby acknowledge and agree that you will be solely responsible for any taxes incurred by you with respect to this benefit. 
 11. Employee Benefits. (a) While you are employed, you will be eligible to participate in the employee benefit plans and programs generally available to the Company’s senior Canadian-based employees
as in effect from time to time, on the same basis as the Company’s other employees, subject to the terms and provisions of such plans and programs. Detailed information about the benefit plans and about our Human Resources policies and programs
has been provided to you. You will receive a minimum of four weeks paid vacation per year. 
 You and your spouse will be provided with
continued health insurance coverage under your current BUPA International Plan (the “BUPA Plan”) at the Company’s expense until such time as alternative arrangements are in place which provide to your satisfaction coverage at
least equivalent in scope to you and your spouses’ current coverage under the BUPA Plan. 
 (b) You shall also receive additional
financial planning and medical benefits on the same basis as, and to the extent that, such benefits are provided to members of the Management Committee. 
 (c) While you are employed by the Company, you will be reimbursed by the Company for initiation fees and annual dues for one business lunch, athletic or country club in Montreal. 
 12. Expenses. The Company will reimburse you for all reasonable expenses incurred by you in connection with your performance of services under
this letter agreement in accordance with the Company’s policies, practices and procedures. 
 13. Relocation. (a) We have
agreed that you will relocate to Montreal, Quebec in connection with your acceptance of this offer of employment. Except as otherwise 

  

					
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provided herein, the Company will assume and pay expenses incurred in connection or as a result of your relocation to Montreal in accordance with its North
American Assignment Policy for localized employees, varied to the extent necessary to apply it so as to achieve a comparable result in the context of a move from Europe to Canada. Any questions in this regard shall be determined by the Human
Resources Committee of the Board acting reasonably. In this connection, the settlement allowance contemplated by section 4.3.2 of the policy shall be CDN$225,000 and, to the extent that this amount exceeds payments made by the Company and properly
chargeable to this allowance, the balance shall be paid to you on the earlier of 90 days after your purchase of a residence in Montreal and December 31, 2009 (but in no event prior to January 1, 2009). 
 (b) You will be reimbursed for reasonable legal, financial and tax planning expenses associated with your employment by the Company and your relocation
to Montreal. 
 14. Termination of Employment. 
 (a) You are free to terminate your employment at any time for any reason whatsoever; provided that you provide the Company with six months prior written notice of your termination, or such lesser period as shall be
agreed by the Human Resources Committee of the Board (the “Resignation Notice Period”). During the Resignation Notice Period you shall continue to receive your base salary and continue to receive the compensation and benefits
associated with your employment described generally in this letter agreement. The Company may elect in its sole discretion to place you on paid leave and suspend your duties and responsibilities for all or any part of such Resignation Notice Period.
During the Resignation Notice Period, you shall not perform services for any other business or employer. During the Resignation Notice Period, the Company may also elect to terminate your employment prior to the termination of the Resignation Notice
Period and pay you the outstanding Base Salary for the balance of the Resignation Notice Period in a lump sum. Notwithstanding the foregoing, any payment or benefit provided under this Section 14(a) following your Separation from Service that
is subject to Section 409A of the Code (as hereinafter defined) will be paid at the same time and in the same manner that the severance allowance or other comparable benefit described in Section 14(b) is required to be paid. If you are
terminated before termination of the Resignation Notice Period and paid salary as set forth in the preceding two sentences (as applicable), you will not be entitled to any additional payment or other benefits which you otherwise would have accrued
or received during the Resignation Notice Period or the remainder of the Resignation Notice Period. Actions taken by the Company pursuant to this Section 14(a) shall not entitle you to any severance or other benefits under Section 14(b) or
(c) or otherwise. 
 (b) The Company reserves the right to terminate your employment at any time for any reason whatsoever and with or
without notice, subject to the provisions of this Section 14. Upon a termination of your employment by the Company for reasons other 

  

					
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than (i) death or Cause, (ii) a breach by you of your obligations under Sections 15 – 20, inclusive, or of any representation or warranty made
by you in this letter agreement or (iii) a material breach by you of any other term or condition of this letter agreement, subject to your execution, delivery and non-revocation within 21 days after your termination of a general release in a
form provided by the Company, and notwithstanding any provisions of the Domtar Severance Program for Management Committee Members (the “Domtar Severance Program”) (a copy of which has been provided to you), this letter agreement or
any plan or other document referenced in this letter agreement to the contrary, you will receive the following payments and benefits: 
  

	 	(i)	a severance allowance of 24 months (such period, the “Severance Period”) of your Base Salary at the rate in effect at the time of termination, such severance
allowance to be paid in accordance with the terms of the Domtar Severance Program; provided that, if such termination is due to disability, your monthly disability payments during the Severance Period shall be reduced by an amount equal to your
monthly Base Salary rate in effect at the time of termination, but in no month shall the reduction exceed the amount of your disability payment. If you remain disabled at the end of the Severance Period, you shall be entitled to disability payments
under the Company’s disability policies, as amended from time to time, as if your disability had first occurred immediately prior to the end of the Severance Period. 

  

	 	(ii)	 (x) the bonus you would have received pursuant to the Annual Incentive Plan for the year in which such termination by the Company occurs if you had continued in
employment based on achievement of the applicable performance criteria for such year, multiplied by a fraction, the numerator of which is the number of days in such calendar year prior to your Separation from Service and the denominator of which is
the total number of days in such calendar year, (y) if such termination by the Company occurs after the end of a calendar year, any bonus you otherwise would have received pursuant to the Annual Incentive Plan for such calendar year that has
not been paid as of the date of termination and (z) for each calendar year during the Severance Period, a payment equal to (1) the average of the bonus payments received by you under the Annual Incentive Plan for the two years immediately
preceding the year in which such termination occurs or (2) in the event that the period of your employment by the Company at the time of termination is less than two years, your target bonus payment for the year of termination, in either case
multiplied by a fraction, the numerator of which is the number of days in the Severance Period during such calendar year and the denominator of which is the total number of days in such calendar year (it being understood that the aggregate of such
payments shall equal but not exceed 

  

					
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two times such bonus average or target bonus as applicable), with any payment to which you become entitled under clause (x), (y) or (z) to be made
on the date in the following calendar year that bonuses for the relevant calendar year are paid to the members of the Management Committee but in no event later than March 15 of such following calendar year; 

  

	 	(iii)	(x) continued coverage under the Company’s health insurance policies, subject, if applicable, to Section 24(c) or (y) if the BUPA Plan is still in effect as of the
date of termination, continued health insurance coverage thereunder at the Company’s expense, subject, if applicable, to Section 24(d), in either case until the last day of the Severance Period or, if earlier, the date on which coverage
from another employer is obtained; 

  

	 	(iv)	in the event that such termination by the Company occurs prior to your receipt of the Make-Whole Payment, the Make Whole Payment shall be paid to you within 60 days following your
Separation from Service; 

  

	 	(v)	in the event that such termination by the Company occurs less than 70 days after commencement of your employment, your Replacement DSUs will immediately vest, and will be payable in
the form of cash or shares of the Company’s common stock (as elected by you) (or, if such Replacement DSUs have not yet been granted, a cash payment of CDN $415,000 will be made to you) within 60 days after your Separation from Service,

  

	 	(vi)	all awards granted to you under the Stock Incentive Plan, including any unvested Options, PCRSUs and RSUs shall continue to vest, become exercisable, be paid or settled (as
applicable) and otherwise be treated under the governing agreements and the Stock Incentive Plan as if you had remained in employment through the last day of the Severance Period; 

  

	 	(vii)	you shall accrue service credit under the DB SERP for the duration of the Severance Period; 

  

	 	(viii)	to the extent not already expressly provided for in this Section 14(b) (and excluding the benefits provided under this Section 14(b)) you shall be entitled to all other
benefits, payments and consideration provided under the Domtar Severance Program, the Domtar North American Assignment Policy and other Domtar policies (as such programs and policies may be amended from time to time) providing other payments,
benefits, and consideration on a termination of employment for reasons other than (x) death or Cause, (y) a breach by you of your obligations under Sections 15 – 20, inclusive, or of any representation or warranty made by you in this
letter agreement, or (z) a material breach by you of any other term or condition of this letter agreement. 

  

					
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 For the avoidance of doubt, no awards shall be granted under the Stock Incentive Plan after your
Separation from Service. 
 No severance or other benefits shall be payable upon your resignation from employment or if you engage in any of
the actions described in Sections 15-20 of this letter agreement. 
 Severance and other benefits provided under this Section 14
includes any pay in lieu of notice and severance pay required by law and, except as expressly provided herein, is in lieu of and not in addition to any severance or other benefits payable under any applicable Domtar severance policy. 
 (c) Any benefits payable to you pursuant to this Section 14 will be in full satisfaction of all liabilities to you under this letter agreement and
with respect to any other claim you may have in conjunction with your termination of employment. These benefits will not be subject to any offset, mitigation or other reduction as a result of your receiving salary or other benefits by reason of your
securing other employment. If you die before the payments, benefits and other consideration have been paid or provided to you under Section 14, such payments, benefits and other consideration shall be paid or provided to your estate or your
designated beneficiary, as applicable. 
 (d) For purposes of this letter, “Cause” means (i) your willful
failure to perform substantially your duties as an officer and employee of the Company (other than due to physical or mental illness), (ii) your engaging in serious misconduct that is injurious to the Company, (iii) your
having been convicted of a crime that constitutes an indictable offense under the Canadian Criminal Code or a felony under U.S. law, (iv) your willful unauthorized disclosure of Confidential Information or violation of the Confidential
Information and Intellectual Property Agreement or (v) your material breach of any provision of this letter agreement. For the avoidance of doubt, a termination by the Company due to disability shall be deemed a termination without Cause
entitling you to the payments, benefits and other consideration set forth in Sections 14(b) and (c). 
 (e) Upon a termination of your
employment due to retirement, you shall participate in the DB SERP as described in Section 8 and be entitled to receive such post-retirement payments and benefits as are provided under the plans, policies and programs of the Company in which
you participate as of the date of your retirement, as the same may be amended from time to time. 
 15. Unauthorized Disclosure.
During your employment with the Company and at all times thereafter, except as required pursuant to your good faith exercise of your duties under Section 1 of this letter agreement, you will not, except with the express consent of 

  

					
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the Board of Directors or its authorized representative, disclose any confidential or proprietary trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans, manufacturing plans, management organization information, operating policies or manuals, business plans, financial records, packaging design or other financial, commercial,
business or technical information (i) relating to the Company or any of its subsidiaries or affiliates or (ii) that the Company or any of its subsidiaries or affiliates (collectively, the “Company Group”) may
receive belonging to suppliers, customers or others who do business with the Company or any of their respective affiliates (collectively, “Confidential Information”) to any third person unless such Confidential Information has been
previously disclosed to the public or is in the public domain (other than by reason of your breach of this letter agreement). 
 You agree to
sign the Company’s form of Confidential Information and Intellectual Property Agreement (a copy of which has been provided to you). 
 16. Non-Competition. While you are employed, and during the period commencing on the date of your Separation from Service and ending 24 months thereafter (such period, the “Restriction Period”), you agree that
you shall not, directly or indirectly, engage in business with, serve as an agent or consultant to, become a general partner, member, principal or important stockholder or equity holder (other than a holder of less than 2% of the
outstanding voting shares of any publicly held entity) of or become employed in a senior-level management position by, any person, firm or other entity that competes with the Business (as hereinafter defined) of the Company Group in North America,
except where (i) the business of such person, firm or other entity that competes with the business of the Company Group is negligible or incidental to the primary business of such firm such that less than 10% of the consolidated revenues of
such person, firm or other entity comes from the competing business, (ii) your interest or association with such person, firm or other entity does not and will not in any way relate to the business of the Company Group, and (iii) prior to
your commencing any such employment, you certify in writing to the Company that the position satisfies the requirements of clauses (i) and (ii) above and that you have informed such entity of the restrictions on your activities contained
in this letter agreement. Whether any such person, firm or entity competes with the Business of the Company Group shall be determined in good faith by the Board. For purposes of this letter agreement, “Business” shall mean the
business of the Company Group as described in the Company’s most recent annual report on Form 10-K during your employment or at the time of your Separation from Service, as applicable, or other similar report under the Company’s securities
law or stock exchange requirements at such time. 
 17. Non-Solicitation of Employees. During the Restriction Period, you agree that
you shall not, directly or indirectly, for your own account or for the account of any other person or entity with which you are or shall become associated in any capacity, (i) solicit for employment, employ or otherwise interfere with
the relationship of the Company 

  

					
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Group with any person who at any time during the twelve months preceding such solicitation, employment or interference is or was employed by or otherwise
engaged to perform services for the Company Group, other than any such solicitation or employment during your employment with the Company on behalf of the Company Group, or (ii) induce any employee of the Company Group who is
a member of management to engage in any activity which you are prohibited from engaging in under any of Sections 15 – 20, inclusive or to terminate his or her employment with the Company Group. For purposes of this Section 17,
the placement of “help wanted” advertisements, postings on internet job sites and searches by employment search companies which are not specifically targeting employees of the Company Group shall not result in a violation of this
Section 17. 
 18. Non-Solicitation of Customers. During the Restriction Period, you shall not, directly or indirectly,
(i) induce or attempt to induce any customer, distributor, supplier or other business relation of the Company Group to cease doing business with, or reduce the amount of business conducted with, the Company Group or (ii) solicit or
otherwise attempt to establish for yourself or any other person, firm or entity anywhere in North America any business relationship of a nature that is competitive with the Business or relationship of any member of the Company Group with any
person, firm or corporation which was a customer, client or distributor of any member of the Company Group during the period during which you are employed or during the twelve-month period preceding the date of your Separation from Service (and
whom you came into contact with or had knowledge of as a result of your employment with the Company), other than any such solicitation for the benefit of the Company Group during your employment with the Company Group. 
 19. Return of Documents. In the event of the termination of your employment for any reason, you shall deliver to the Company Group all of its
property and non-personal documents and data of any nature and in whatever medium pertaining to your employment with the Company Group, and you shall not take with you any such property, documents or data of any description or any reproduction
thereof, or any documents containing or pertaining to any Confidential Information. 
 20. Certain Understandings, Injunctive Relief with
Respect to Covenants. 
 (a) You acknowledge and agree that your covenants, obligations and agreements under this letter with respect to
noncompetition, nonsolicitation, confidentiality and Company Group property relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the Company Group
irreparable injury for which adequate remedies are not available at law. Therefore, you agree that the Company Group shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as
a court of competent jurisdiction may deem necessary or appropriate to restrain you from committing any violation of the covenants, obligations or agreements referred to in this 

  

					
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Section 20. These injunctive remedies are cumulative and in addition to any other rights and remedies the Company Group may have. You and the Company
Group hereby irrevocably submit to the exclusive jurisdiction of the United States Federal and Delaware State courts, in each case located in the State of Delaware, in respect of the injunctive remedies set forth in this Section 20 and the
interpretation and enforcement of Sections 15 – 20, inclusive, insofar as such interpretation and enforcement relate to any request or application for injunctive relief in accordance with the provisions of this Section 20, and the
parties hereto hereby irrevocably agree that (i) the sole and exclusive appropriate venue for any suit or proceeding relating solely to such injunctive relief shall be in such a court, (ii) all claims with respect to any
request or application for such injunctive relief shall be heard and determined exclusively in such a court, (iii) any such court shall have exclusive jurisdiction over the person of such parties and over the subject matter of any
dispute relating to any request or application for such injunctive relief and (iv) each hereby waives any and all objections and defenses based on forum, venue or personal or subject matter jurisdiction as they may relate to an
application for such injunctive relief in a suit or proceeding brought before such a court in accordance with the provisions of this Section 20. 
 (b) You and the Company Group agree that you will have a prominent role in the management of the business, and the development of the goodwill, of the Company Group and will establish and develop relations and
contacts with the principal customers and suppliers of the Company Group in Canada, the United States and the rest of the world, all of which constitute valuable goodwill of, and could be used by you to compete unfairly with, the Company Group.

 (c) You acknowledge that (i) in the course of your employment with the Company Group, you will obtain confidential information
and trade secrets concerning the worldwide business and operations of the Company Group; (ii) the covenants and restrictions contained in Sections 15 – 20, inclusive, are intended to protect the legitimate interests of the
Company Group to protect its goodwill, trade secrets and other confidential information; and (iii) you agree to be bound by such covenants and restrictions and to enter into this letter. 
 21. Indemnification. The Company will enter into an Indemnification Agreement with you in the same form as entered into with the directors of the
Company, a copy of which form has been previously provided to you. 
 22. Immigration Matters. You will use all reasonable efforts to
cooperate with the Company in (i) satisfying all applicable Canadian and U.S. legal requirements allowing you to legally work in Montreal, Quebec, Canada and travel to the Company’s offices in Fort Mill, South Carolina, (ii) obtaining
a Canadian work permit and (iii) obtaining visas and other documentation or approvals necessary for business travel to the United States. In the event that, notwithstanding your full cooperation as required by the preceding sentence, you are
unable to obtain a Canadian work permit and as a result, are 

  

					
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unable to commence work with the Company by the date of the Company’s 2009 annual meeting of stockholders, you shall be deemed to have been
terminated by the Company without Cause and will be entitled to the payments, benefits and other consideration set forth in Section 14(b) and (c). 
 23. Representations and Warranties. You represent and warrant that (1) you will not possess as of the date of commencement of, and during your employment with, the Company, any material, tangible,
confidential or proprietary information, including documents, files, disks, or other materials in whatever medium, belonging to your former employer or its affiliates; (2) as of the date you commence employment with the Company, you have not
solicited any employees of your former employer or its affiliates to change their association with your former employer or its affiliates; (3) you are not subject to any agreements or restrictive covenants with any former employer or any other
person or entity that (i) prevent your entering into employment with the Company, or (ii) limit your ability to perform for the Company the duties of President and Chief Executive Officer (except to the extent you may be subject to
pre-existing confidentiality obligations or prohibited from solicitation of employees for a limited period of time) and that you conducted a due diligence review of copies of all agreements you may have entered into with your former employer to
ensure that this is correct; (4) you are not a United States taxpayer; (5) all representations and warranties made by you in the course of your application to the Company are true and correct and you have not made any material
misrepresentation or omission in the course of your application to the Company regarding employment or your ability to perform the position offered; (6) no representations were made to you concerning this offer or the terms or conditions of
your anticipated employment except as expressly set out in this letter and (7) you have and will comply with the terms of the letter agreement, dated September 12, 2008, related to confidentiality (the “Confidentiality
Letter”). 
 24. Section 409A. 
 (a) For purposes of this letter agreement, “Separation from Service” shall mean a separation from service within the meaning of section 409A of the United States Internal Revenue Code of 1986, as
amended (the “Code”), and the United States treasury regulations promulgated thereunder (“Section 409A”). 
 (b) Notwithstanding anything else contained in this letter agreement to the contrary, if you are a “specified employee” within the meaning of Section 409A (a “Specified Employee”), any payment required to be
made to you hereunder or otherwise upon or following the date of termination of your employment that is subject to Section 409A shall be delayed until after the six month anniversary of your Separation from Service to the extent necessary to
comply with, and avoid imposition on you of any tax penalty imposed under, Section 409A. Should payments be delayed in accordance with the preceding sentence, the accumulated payment that would have been made but for the 

  

					
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period of the delay shall be paid in a single lump sum during the 10 day period following the six month anniversary of your Separation from Service.

 (c) Notwithstanding anything else contained in this letter agreement to the contrary, in the event that any continued health coverage to
which you become entitled under Section 14(b)(iii)(x) is subject to Section 409A, such benefits shall be administered as follows: 
  

	 	(i)	If you would otherwise be eligible to elect continued health coverage under Section 4980B of the Code (COBRA) (x) if permitted by the applicable plan and applicable law,
your coverage under the applicable health insurance policies maintained by the Company will remain in effect until the last day on which you would otherwise be eligible for COBRA coverage if you had elected such coverage and paid the applicable
premiums (the “COBRA Period”) and the Company shall reimburse you for the excess of the cost of obtaining comparable health insurance coverage for the portion of the Severance Period (if any) that extends beyond the COBRA Period
over your cost of continued coverage for the COBRA Period; or (y) if not so permitted, the Company shall reimburse you for the excess of the cost of COBRA coverage over what would have been your cost of continued coverage for the COBRA Period
under the applicable health insurance policies had you been permitted to continue coverage for the COBRA Period, and the excess of the cost of obtaining comparable health insurance coverage for the portion of the Severance Period (if any) that
extends beyond the COBRA Period over what would have been your cost of continued coverage for the COBRA Period under the applicable health insurance policies had you been permitted to continue coverage for the COBRA Period; provided that, if you are
a Specified Employee you will pay the full cost of any health coverage for which you would otherwise be reimbursed under clause (x) or (y), as applicable, during the six-month period following the date of your Separation from Service, with the
full amount of such costs to be reimbursed to you on the first payroll date following the six-month anniversary of the date or your Separation from Service. If you obtain equivalent or better coverage elsewhere, this coverage will terminate.

  

	 	(ii)	 If you would not otherwise be eligible to elect COBRA coverage, your coverage under the applicable health insurance policies maintained by the Company will remain
in effect until the last day of the Severance Period; provided that, if you are a Specified Employee you will pay the full cost of any such health coverage provided to you for the six-month period following the date of your Separation from Service,
with the full amount of such costs to be reimbursed to you on the first payroll date following 

  

					
		  	13	  	

	 	 
the six-month anniversary of the date or your Separation from Service. If you obtain equivalent or better coverage elsewhere, this coverage will terminate.

 (d) Notwithstanding anything else contained in this letter agreement to the contrary, in the event that any continued
health coverage to which you become entitled under Section 14(b)(iii)(y) is subject to Section 409A, if are a Specified Employee you will pay the full cost of any such health coverage provided to you for the six-month period following the
date of your Separation from Service, with the full amount of such costs to be reimbursed to you on the first payroll date following the six-month anniversary of the date or your Separation from Service. 
 (e) Except as expressly provided otherwise in Sections 24(c) and (d), any reimbursement payment or benefit under this agreement that is subject to
Section 409A shall be administered and paid as follows: (i) the Company shall reimburse any expense or cost due to you pursuant to this letter agreement, provided that you have submitted to the Company appropriate documentation evidencing
the particular expense or cost as promptly as possible and in any event within 90 days after the end of the calendar year in which the expense is incurred by you; (ii) the Company shall pay for any benefits in kind provided pursuant to this
agreement and, provided that appropriate documentation evidencing the particular expense or cost is timely submitted in accordance with the requirements of clause (i), shall make any reimbursement due to you under this letter agreement as promptly
as possible, and in no event later than the last day of your taxable year following the taxable year in which the related expense was incurred; (iii) the amount of any reimbursement or in-kind benefit provided under this agreement in one
taxable year shall not affect the amount of any reimbursement or in-kind benefit provided to you in any other taxable year; and (iv) no entitlement to any reimbursement or in-kind benefit provided under this letter agreement shall be subject to
liquidation or exchange for another benefit. 
 (f) It is intended that any payment, reimbursement or in-kind benefit under this letter
agreement be administered in a manner consistent with the requirements, where applicable, of Section 409A in a manner to avoid the imposition of immediate tax recognition and additional taxes pursuant to Section 409A. Neither the Company
nor any of its directors, officers or employees shall have any liability to you in the event such Section 409A applies to any payment, reimbursement or in-kind benefit provided pursuant to this letter agreement in a manner that results in
adverse tax consequences for you or any of your beneficiaries or transferees. 
 25. General Provisions. 
 (a) No provisions of this letter agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is
approved by the Human Resources Committee of the Board and is agreed to in a writing signed by you 

  

					
		  	14	  	

 
and such Company officer as may be specifically designated by the Human Resources Committee to the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or provision of this letter agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. 
 (b) No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof,
have been made by either party, other than as set forth expressly in this letter agreement and in the Confidentiality Letter. This letter agreement and the Confidentiality Letter codifies all of your entitlements before, during and following a
termination of your employment with the Company and supersedes and replaces any and all prior agreements or understandings, whether written or oral, which may have existed with respect to the subject matter hereof or otherwise in relation to your
employment or termination of employment with the Company. The invalidity or unenforceability of any one or more provisions of this letter agreement will not affect the validity or enforceability of any other provision of this letter agreement, which
will remain in full force and effect. This letter agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. 
 (c) You agree that you will abide by and adhere to all laws and rules and regulations of the various regulatory and/or self-regulatory organizations of
which the Company or any of its affiliates or related entities are members, as well as all internal rules, regulations, policies and codes of conduct that the Company has established. 
 (d) All amounts payable to you hereunder will be paid net of any and all applicable income or employment taxes required to be withheld therefrom under
applicable Canadian or foreign, provincial or local laws or regulations. 
 (e) The validity, interpretation, construction and performance of
this letter agreement will be governed by the laws of the State of Delaware and, where applicable, the federal laws of the United States of America without regard to any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this letter to the substantive law of another jurisdiction. In the event that any provision or portion of this letter shall be determined to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this letter shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. You may not assign this letter; however, the Company may assign this letter to any of its affiliates or
successors. 
 (f) The parties have expressly requested that this letter agreement be drafted in English. Les parties ont expressément
requis que cette entente soit rédigée en anglais. 
  

					
		  	15	  	

 If the foregoing accurately sets forth the terms of your employment with the Company, please so indicate
by signing below and returning one signed copy of this letter agreement to me by 5:00 p.m., Eastern Daylight Time on October 3, 2008 (the “Execution Time”). This offer of employment shall remain outstanding until the Execution
Time, provided that the Company retains the right to rescind this offer of employment in the event of a breach by you of your obligations under the Confidentiality Letter or if it becomes aware of circumstances which, if you were employed by the
Company, would constitute the basis for a termination of your employment by the Company for Cause. If we have not received a signed copy of this letter agreement by the Execution Time, this offer of employment, and this letter agreement, and all
other terms and conditions outlined shall automatically lapse, terminate and be of no further effect. 
  

					
		  	16	  	

									
	Sincerely,	 		 	
			
	DOMTAR CORPORATION	 		 	
					
	By:	 	/s/ Harold H. MacKay	 		 	By:	 	/s/ Brian M. Levitt
		 	Harold H. MacKay	 		 		 	Brian M. Levitt
		 	Chairman of the Board of Directors	 		 		 	Chairman of the
		 		 		 		 	Human Resources Committee

  

			
	 ACCEPTED AND AGREED
 as of this 1st day of
October, 2008

		
	By:	 	/s/ John D. Williams
		 	John D. Williams

  

					
		  	17Supply Agreement, dated September 29, 2008, between the Company and DEI

 Exhibit 10.1 
 CONFIDENTIAL TREATMENT - Asterisked material has been 
 omitted and filed separately with the Securities and Exchange 
 Commission pursuant to a request for confidential treatment. 
 SUPPLY AGREEMENT 
 THIS SUPPLY AGREEMENT (the “Agreement”) is
effective as of September 29th, 2008 (the “Effective Date”) by and between Delta Electronics, Inc., an R.O.C. corporation having its principal place of business at 186 Ruey Kuang Road, Neihu Taipei 11491 Taiwan, R.O.C. (hereafter
referred to as “DEI”), and PECO II, Inc., an Ohio corporation having its principal place of business at 1376 State Highway 598, Galion, Ohio 44833 (hereafter referred to as “PECO”). 
 WHEREAS, DEI, DEI Logistics (USA) Corporation (with respect to Section 19.14 only) and PECO entered into a Strategic Supply
Agreement, dated March 28, 2006, as amended by Amendment No. 1 to Supply Agreement, and Amendment No. 2 to Strategic Supply Agreement (as amended, the “Prior Agreement”); and 
 WHEREAS, each of DEI and PECO desire to terminate and supersede the Prior Agreement 
 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows: 
 1. EXHIBITS AND DEFINITIONS.

 1.1 Exhibits. The following Exhibits are incorporated into and made a part of this Agreement. These Exhibits may be modified or
adjusted as provided for in this Agreement. 
 1.1.1 Exhibit A – Products 
 1.1.2 Exhibit B – Pricing 
 1.1.3 Exhibit C – Minimum Order requirements 
 1.2 Definitions. As used in this Agreement, the terms
defined below shall have the following meanings: 
 1.2.1 “Affiliate” means any entity which directly or
indirectly controls, or is under common control with, or is controlled by, such party. As used in this definition, “control” (and its correlative meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through beneficial ownership of securities or other ownership interests, by contract or otherwise). 
 1.2.2 “Business Day” means a day that is not Saturday, Sunday or a statutory or civic holiday in the State of Ohio or any
other day on which banking institutions are not required to be open in the State of Ohio. 
 1.2.3 “DEI
System” means a System principally designed and manufactured by DEI as supplied to PECO pursuant to this Agreement. 
 1.2.4
“DEI Technology” means (i) any and all Technology with respect to, related to and/or derived from the Products, and (ii) any and all Technology developed solely by DEI. For clarification, a PECO System includes
DEI Technology because it necessarily incorporates a Module. PECO products that do not include Modules are not covered under this definition. 
 1.2.5 “Documentation” means the user manuals, reference manuals, guides or portions thereof, supplied by DEI to PECO and which DEI may update from time to time. 

 1.2.6 “Intellectual Property Rights” means any or all of the following
and all rights in, arising out of, or associated therewith: (1) all United States and foreign patents and utility models and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries including without limitation, invention disclosures; (2) all trade secrets and other rights in know-how and confidential or
proprietary information; (3) all copyrights, copyrights registrations and applications therefor and all other rights corresponding thereto throughout the world; (4) all industrial designs and any registrations and applications therefor
throughout the world; (5) all rights in World Wide Web addresses and domain names and applications and registrations therefor; (6) all rights in trade names, trade dress, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor and all goodwill associated therewith throughout the world; and (7) any similar corresponding or equivalent foreign rights to any of the foregoing anywhere in the world, including moral
rights. 
 1.2.7 “Modules” means DEI’s proprietary modules, including converters, rectifiers and
inverters, as set forth on Exhibit A. 
 1.2.8 “Order” means a written description of the name and quantity
of Products PECO desires to purchase that is sent to DEI pursuant to Section 3.2.1 hereof. 
 1.2.9 “PECO
System” means a System offered by PECO to PECO customers that incorporates at least one (1) Module and may include the addition of other components purchased from DEI, but exclusive of DEI System. 
 1.2.10 “Person” means any individual, corporation, partnership, firm, association, joint venture, joint stock company,
trust, unincorporated organization or other entity, including any governmental entity. 
 1.2.11 “Prices”
means the prices for Products as set forth in Exhibit B or any amendment of Exhibit B as shall be agreed to, in writing, by DEI and PECO. 
 1.2.12 “Products” means the Modules and/or DEI Systems as listed in Exhibit A including any improvements, updates, modifications, and derivatives thereof furnished to PECO by DEI or
by PECO to DEI during the Term of this Agreement, and any such other DEI products as DEI and PECO shall, from time to time, agree, in writing, to add to Exhibit A. It is understood that the provision of any such improvements, updates,
modifications, and derivatives shall be at DEI’s sole discretion and may be subject to additional fees and/or additional terms and conditions. Notwithstanding the foregoing, in no event shall “Products” include any products,
components, or other assets that are acquired, received, attained, procured or otherwise obtained by DEI in connection with a Transaction occurring during the term hereof. “Transaction,” as used in this provision above, means any
transaction entered into by DEI, whereby DEI (i) acquires any person (or related group of persons) whether by tender or exchange offer made directly to the stockholders, open market purchases or any other transaction or series of transactions,
of fifty percent (50%) (or the such lesser percentage as is permitted in those jurisdictions where the maximum percentage permitted by law is lower than 50%) or more of the capital stock entitled to elect the members of the board of directors
or other analogous governing body of such entity, (ii) enters into a merger, reverse merger or consolidation with any person (or related group of persons); or (iii) otherwise acquires through asset sale or otherwise all or any portion of
the business or assets of any other person. 
 1.2.13 “System” means a complete self-contained unit
(cabinet), capable of providing a primary function and that incorporates one (1) or more subsystems or products. 
  

 2 

 1.2.14 “Technology” means any or all of the following: (1) works of
authorship including, without limitation, computer programs, algorithms, routines, source code and executable code, whether embodied in software or otherwise, and documentation provided for use therewith; (2) inventions (whether or not
patentable) and improvements; (3) proprietary and confidential information, including, without limitation, technical data and customer and supplier lists, trade secrets, know how and techniques; (4) databases, data compilations and
collections; (5) processes, tools, devices, methods, prototypes, schematics, bread boards, net lists, mask works, test methodologies and hardware development tools; and (6) all instantiations of the foregoing in any form and embodied in
any media. 
 2. RIGHTS. 
 2.1 Rights. 
 2.1.1 Subject to the terms of this Agreement, DEI grants PECO, and PECO
accepts, a nontransferable right to purchase and incorporate Modules into PECO Systems and to market, promote, sell and distribute the Modules, PECO Systems and/or the DEI Systems to PECO customers. Modules may only be distributed in their
unmodified form, as originally received from DEI, or as modified by DEI (except that Modules may be incorporated into PECO Systems as set forth herein). PECO may modify the DEI Systems (exclusive of Modules) purchased hereunder to conform with the
specifications of PECO customers. 
 2.1.2 PECO shall ensure that the Products are accurately represented to PECO customers as to
quality, function, purpose and compatibility. 
 2.2 Proprietary Rights; No Modification. PECO shall not remove, alter, cover or
obfuscate any copyright notices or other proprietary rights notices placed on or embedded in the Products by DEI and all Products distributed by PECO shall contain the copyright and other proprietary notices in the same manner in which DEI
incorporates such notices on or in the Products. PECO agrees to take all reasonable steps to protect the Products and Documentation from unauthorized copy or use. Any source code in the Products represents and embodies trade secrets of DEI or PECO.
Such source code and embodied trade secrets are not licensed to PECO or DEI and any modification, addition, or deletion is strictly prohibited. PECO or DEI shall not, and shall not allow any Person to, modify, alter, reverse engineer, disassemble or
decompile the Products or any portion thereof, and PECO shall use commercially reasonable efforts to enforce such restrictions. 
 3.
FORECASTS, ORDERING, DELIVERY, AND ACCEPTANCE. 
 3.1
Forecasts. On or before the first day of each month (“Forecast Date”) during the Term, PECO shall provide DEI with a non-binding six (6) month rolling Product specific purchase forecast for Orders for the Products. 
 3.2 Orders. 
 3.2.1 Any Order
by PECO shall be deemed a firm commitment to take the goods specified and shall be binding upon PECO. Orders must be received by DEI not less than sixty (60) days prior to the requested shipping date (“Leadtime”). Orders shall be sent
in writing by letter, email or fax, shall specify requested shipping dates and shall be subject to written acceptance by DEI. PECO may use its standard purchase order form or other document to order Products; however, the terms and conditions of
this Agreement shall supersede any different, conflicting, or additional terms on PECO’s order forms and all such terms are hereby specifically objected to and will be of no force or effect. All Orders must, at a minimum, include the Product
name/description, quantity (by Product), and the applicable price, as well as such other information as DEI may reasonably request from time to time. Further, PECO agrees that it shall not submit an Order for less than the number of units of Product
specified in Exhibit C without 

  

 3 

 
DEI’s prior written approval. DEI reserves the right to accept or reject Orders from PECO that are not in accordance with pricing and terms of this
Agreement. Orders or changes to Orders will not be accepted over the telephone. 
 3.2.2 DEI will use reasonable efforts to process
and ship all Orders in accordance with requested delivery dates. DEI reserves the right to add, delete from, or modify, upon at least thirty (30) days advance notice to PECO, the design, model or specifications of the Products. DEI further
shall notify PECO one hundred eighty (180) days prior to a discontinuance of manufacture, sales or license of any product covered by this Agreement. DEI or its Affiliate shall be committed to, at PECO’s expense, supporting parts and
technical assistance of discontinued Products ten (10) years from the date any Product is discontinued, provided that the parts for such Products are available in the market. 
 3.3 Cancellations and re-scheduling window. 
 The
parties agree that PECO shall be limited to the cancellation liabilities set forth in the table below and that PECO and DEI agree to rescheduling terms in the table below, both in the event of a change by PECO in any purchase order. 
  

					
	Period before ex-factory date	 	Cancellation Charges	 	Re-scheduling Window
	Less than 2 weeks	 	Finished goods, WIP, and materials	 	No delivery re-scheduling or cancellation is allowed
	2 to 4 weeks	 	WIP and materials	 	Delivery re-scheduling request may be discussed mutually, depending on the material and
production status.
	4 to 8 weeks	 	Materials	 
	8 weeks or more	 	No Liabilities	 

 3.4 Inspection. DEI will perform out going inspection and implement Quality
Assurance procedures in conformance with product specifications. PECO will perform inspection of Products purchased from DEI, depending on, but not limited to, Product complexity, Product performance history, risk of nonconforming material, direct
ship to stock status of DEI, each according to PECO quality procedures. DEI will be notified as soon as reasonably practicable, normally within three (3) Business Days of receipt but in any event no more than fifteen (15) Business Days of
any nonconforming material found in any Products, whether in receiving inspection or any point within the manufacturing process. If nonconforming material is identified in a Product, PECO will notify DEI in writing regarding any Products that
materially fail to meet DEI’s published Product specifications. Depending on various factors, including but not limited to PECO customers demand or complexity of repairs, PECO and DEI will jointly decide the best method to resolve the
nonconformance which may include a return of the Products to DEI, repairs by PECO, or some form of both. If both DEIC and PECO agree to return Products to DEI, PECO shall request from DEI a return material authorization (a “RMA”), either
by e-mail, mail or telefax following a proper explanation of the rejection. Returns shall be performed in accordance with DEI’s RMA procedure. Upon the condition that DEI agrees, rejected goods should be returned freight prepaid to DEI within
ten business days of rejection and receipt from DEI of a return authorization. As promptly as possible, but not later than sixty (60) days after receipt by DEI of properly rejected Products, DEI shall, at its option and expense, either repair
or replace such Products. The party shipping Products pursuant to this Section 3.4 shall bear the entire risk of loss for Products during shipment. Any insurance proceeds payable in respect to any loss for any Products to the extent of any loss
incurred during shipment shall be paid to the party bearing the risk of loss for such Products to the extent of the loss incurred. DEI shall reimburse PECO for any costs of transportation incurred by PECO in connection with the return to DEI of
properly rejected Products. In the case of improperly rejected or returned Products, PECO shall pay transportation charges in both directions. 
  

 4 

 4. PRICES AND SHIPPING TERMS.

 4.1 Prices. Pricing and shipping terms for products is set forth in Exhibit B. The parties agree to negotiate in good faith a new
product/volume pricing matrix by [*], which upon written acceptance by the parties shall replace the current Exhibit B. Subject to the provisions of this Section 4, prices shall be firm for a period of [*] following the adoption of the new
product/volume pricing matrix by the parties. After the expiration of [*] following the adoption of the new product/volume-pricing matrix, DEI may change the prices, upon thirty (30) day written notification to PECO. During the [*] of period,
DEI is entitled to change the prices if the material costs increase. Notwithstanding the foregoing, if DEI and PECO mutually agree on specially modified pricing for the Products with respect to a PECO customers and a specific project, such specially
modified pricing shall supersede and replace the pricing for such Products and project as stated in Exhibit B with respect solely to such PECO customers and project and such specially modified pricing shall remain in effect for the full term of any
agreement entered into by PECO and such PECO customers with respect to such Products and project. 
 4.2 [*] 
 4.3 Payment Terms. Payment for Product purchased by PECO shall be paid in US dollars to DEI [*] from the date of each invoice. [*] BUYER
shall effect the payment by electronic remittance. In the event that PECO fails to make payment on time for any invoice, DEI reserves the right to stop shipping. 
 4.3.1 BUYER shall effect the payment by electronic remittance. In the event that PECO fails to make payment on time for any invoice, DEI reserves the right to stop shipping. 
 4.3.2 DEI may, at its discretion, declare all sums immediately due and payable in the event of a breach by PECO of any of its material
obligations to DEI under this Agreement, including but not limited to, the failure of PECO to comply with credit terms. 
 4.3.3
Interest shall accrue upon any delinquent payments owed by PECO as to which DEI has made a final written demand for payment, at the maximum rate allowed by London Interbank Offered Rate (LIBOR). In the event that it becomes necessary for DEI to
institute litigation to collect sums owed by PECO, PECO shall be responsible for reasonable attorney’s fees and other costs incurred by DEI in connection with such litigation, if DEI prevails therein. 
 4.4 Taxes. Prices do not include and are net of any foreign or domestic governmental taxes or charges of any kind that may be applicable to
the sale, licensing, marketing, or distribution of the Products, including without limitation excise, sales, use, property, license, value-added taxes, franchise, income, withholding or similar taxes, customs or other import duties or other taxes,
tariffs or duties other than taxes. Any such taxes shall be the sole responsibility of PECO. 
 5. OTHER
OBLIGATIONS OF PECO. PECO’s obligations under this Agreement shall, without limitation, include the following: 
 5.1 Services. PECO shall be solely responsible for order processing, customer service to PECO customers and inventory maintenance. 
 5.2 Training. DEI may from time to time conduct training programs. The reasonable costs for attending such training sessions provided by
DEI, such as travel and lodging, shall be PECO’s sole responsibility. 
 5.3 Compliance. PECO acknowledges that it is
familiar with and will comply with and be solely responsible for its obligations under all laws, rules and regulations related to distribution and/or sale of the Modules, DEI Systems and/or PECO Systems, as applicable. PECO shall keep a record of
all written and oral complaints concerning the Products. PECO shall promptly 
  

	*	Portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

  

 5 

 
inform DEI of all suspected Product defects, safety problems or any information associated with the safety of the Product and shall promptly notify DEI in
writing of any third party dispute involving a Product. 
 5.4 Indemnity. At DEI’s option and election, PECO shall
indemnify, defend and hold DEI and any of its officers, directors, employees, agents, investors, shareholders, administrators, affiliates, related companies, divisions, subsidiaries, predecessor and successor corporations, and harmless from and
against any claims, suits, losses, damages, liabilities, costs and expenses (including reasonable attorney’s fees) incurred by DEI arising from or relating to personal injury, death or property damage, arising out of or related to(i)
PECO’s modifications of Products/DEI Systems, (ii) DEI's manufacture of any Product in compliance with PECO's design, tooling, specification, instruction, and/or using any of PECO's designated or consigned material, component or part, or
(iii) abuse, misuse, neglect, repair, alteration, modification, tampering, improper transportation, installation, operation, testing, storage or maintenance; provided that DEI promptly notifies PECO in writing of any such claim and promptly
tenders the control of the defense and settlement of any such claim to PECO at PECO’s expense and with PECO’s choice of counsel. DEI shall cooperate with PECO, at PECO’s expense, in defending or settling such claim and DEI may join in
defense with counsel of its choice at its own expense. 
 6. OTHER OBLIGATIONS OF
DEI. DEI shall have the following obligations under this Agreement: 
 6.1 Marketing and Promotion. DEI shall
provide PECO with electronic copies of sales aids, data sheets, product profiles, brochures, and other materials to assist PECO in the promotion and sales of Products. Additional marketing materials will be made available to PECO in accordance with
DEI’s then current policy regarding same. PECO may copy and/or translate some or all of such literature and advertising copy and incorporate such in its own product literature. In the event that PECO elects to copy and/or translate materials
provided by DEI, all materials provided by Distribution shall include all copyright, trademark and other proprietary legends included in the original material furnished by DEI and DEI shall own all rights in such translations. 
 6.2 Indemnity. At PECO’s option and election, DEI shall indemnify, defend and hold the PECO and any of its officers, directors,
employees, agents, investors, shareholders, administrators, affiliates, related companies, divisions, subsidiaries, predecessor and successor corporations, and assigns harmless from and against any claims, suits, losses, damages, liabilities, costs
and expenses (including reasonable attorney’s fees) incurred by PECO arising from or relating to personal injury, death or property damage, arising out of or related to unmodified Modules and DEI Systems, as delivered by DEI,; provided that
PECO promptly notifies DEI in writing of any such claim and promptly tenders the control of the defense and settlement of any such claim to DEI at DEI’s expense and with DEI’s choice of counsel. PECO shall cooperate with DEI, at DEI’s
expense, in defending or settling such claim and PECO may join in defense with counsel of its choice at its own expense. 
 7.
TRADEMARKS. 
 7.1 Trademarks. During the term of this Agreement, PECO shall
have the right to indicate to the public that it is authorized to sell DEI’s products and to advertise the Products under the trademarks, marks, and trade names that DEI may designate from time to time (“DEI’s Trademarks”). All
representations of DEI’s Trademarks that PECO intends to use shall be exact copies of those used by DEI or shall first be submitted to DEI for approval (which shall not be unreasonably withheld) of design, color and other details. In addition,
PECO shall fully comply with all reasonable guidelines, if any, communicated by DEI concerning the use of DEI’s Trademarks. All DEI Systems sold to PECO under this Agreement shall be resold only in the original packages, and shall not 

  

 6 

 
be relabeled or otherwise marked, except as otherwise agreed by the parties, or to indicate PECO as the territorial source of the Product or as otherwise
required by governmental regulations in force. All Products shall be labeled according to the guidelines set forth in Exhibit C. PECO shall promptly report to DEI any unauthorized use, duplication, copying or reproduction whatsoever of DEI’s
name, trade name, trademark, logo, patents, copyrights or any other identifying material by any other person or entity whatsoever. 
 7.2
Trademark Restrictions. In no event may PECO use or authorize any use of any of DEI’s Trademarks in any domain name whether registered, owned, or operated by or on behalf of DEI. Any violation of the foregoing shall be deemed a material
breach of this Agreement that is incapable of cure, entitling DEI to terminate this Agreement immediately upon notice to PECO. PECO shall not alter or remove any of DEI’s Trademarks affixed to the Products by DEI. Except as set forth in this
Section 7, nothing contained in this Agreement shall grant or shall be deemed to grant to PECO any right, title or interest in or to DEI’s Trademarks. PECO will not challenge or assist others to challenge DEI’s Trademarks (except to
the extent such restriction is expressly prohibited by applicable law) or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to those of DEI. Upon termination of this Agreement, PECO shall
immediately cease to use any and all of DEI’s Trademarks except to continue to sell the Product in its inventory if authorized hereunder. 
 7.3 Registered User Agreements. DEI and PECO shall enter into registered user agreements with respect to DEI’s Trademarks pursuant to applicable trademark law requirements in countries in which the Products are sold. PECO shall
be responsible for proper filing of the registered user agreement with government authorities in countries in which the Products are sold and shall pay all costs or fees associated with such filing. 
 8. JOINT ACTIVITIES. 
 8.1 Relationship Managers. Each party shall appoint a representative as a relationship manager who shall be the primary contact for implementing and administering the terms and conditions of this Agreement
(“Relationship Managers”). The Relationship Managers should meet quarterly, alternating between each company’s principal place of business. 
 8.2 Joint Cooperation. the parties expect to engage in joint exploration and discussions (“Joint Cooperation”) with respect to System-level design and component-level design. Any such joint
development projects shall be subject to a separately negotiated written joint development agreement (“Joint Development Agreement”). 
 9. WARRANTIES AND DISCLAIMERS. 
 9.1 General Warranty. Each party hereby
represents and warrants to the other that (i) such party has the right, power and authority to enter into this Agreement and to fully perform all of its obligations, including the granting of licenses, hereunder; (ii) entering into this
Agreement does not violate any agreement or obligation existing between such party and any third party; (iii) such party has and will maintain with all of its employees written agreements sufficient to enable such party to perform its
obligations hereunder with confidentiality terms at least as restrictive as those provided herein. 
 9.2 Product Warranty. DEI
shall provide PECO with its standard one (1)-year plus three (3) months warranty for the Products, based on the DEI manufacturing date code PECO shall not make any express warranty on behalf of DEI with regard to the Products other than as may
be provided by DEI from time to time and as set forth in DEI’s product literature. Any other warranty made by PECO to its customers with respect to the Products shall not obligate DEI in any way and PECO shall indemnify, defend and hold
harmless DEI and any of its officers, directors, employees, agents, investors, shareholders, administrators, affiliates, related companies, divisions, subsidiaries, predecessor and successor corporations, and assigns from third party claims in
accordance with Section 5.4 of this Agreement. 
  

 7 

 9.3 Notification and Remedy. With respect to any warranty, PECO will immediately notify DEI in
writing if it becomes aware, during the warranty period, that a Product fails to conform to the warranty. Upon its verification of any claim of defect or nonconformity of a unit of the Products during the Term, DEI will use commercially reasonable
efforts to either, at its option, (i) repair the Product or have PECO repair the Product, at a mutually agreed cost, or (ii) provide a replacement thereof to the extent necessary to honor DEI’s warranty. The foregoing states
DEI’s sole liability for any failure of the Products to conform to each warranty. 
 9.4 Recalls. If DEI decides to
recall, replace or take other action with respect to any Products, it will notify PECO by rapid means of communication and PECO shall immediately cease sales of any units of Product in its possession or control, which are subject to the action until
the course of action to be taken has been determined. The reasonable and justifiable costs of recovering Product in the field and its replacement in any action affecting a Product will be borne by DEI 
 9.5 Disclaimer. EXCEPT AS SET FORTH IN SECTIONS 9.1 AND 9.2, DEI DOES NOT MAKE ANY WARRANTY TO PECO, WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, WITH RESPECT TO PRODUCTS, SPECIFICATIONS, SUPPORT, SERVICE OR ANY OTHER MATERIALS CONTEMPLATED HEREUNDER, AND DEI SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, AND FITNESS FOR A PARTICULAR PURPOSE.

 10. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, TO THE
EXTENT ALLOWED BY LAW, THE LIABILITY OF DEI TO ANY PERSON WITH RESPECT TO THE PRODUCTS AND/OR THE RELATIONSHIP DESCRIBED IN THIS AGREEMENT, WHETHER BASED ON CONTRACT, INCLUDING BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT THEORY,
SHALL IN NO EVENT EXCEED THE AMOUNT OF MONEY PAID TO DEI PURSUANT TO THIS AGREEMENT PRIOR TO THE EVENT OR CIRCUMSTANCES GIVING RISE TO SUCH LIABILITY, AND IN THE CASE OF LIABILITY RELATING TO ANY ALLEGEDLY DEFECTIVE OR INFRINGING UNIT OF PRODUCTS,
SHALL, UNDER ANY LEGAL OR EQUITABLE THEORY, BE FURTHER LIMITED TO REPLACEMENT OF THE UNIT, OR IF IMPRACTICAL, RETURN OF THE PURCHASE PRICE PAID BY PECO FOR SUCH UNIT. DEI SHALL IN NO EVENT BE LIABLE TO ANY PERSON FOR ANY LOST PROFITS, LOST DATA,
COST OF PROCUREMENT OF SUBSTITUTE GOODS, OR FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, EVEN IF DEI HAS BEEN INFORMED OF THE POSSIBILITY THEREOF AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
STATED HEREIN. THE PARTIES AGREE THAT THIS SECTION REPRESENTS A REASONABLE ALLOCATION OF RISK. 
 11. CONFIDENTIAL
INFORMATION. 
 11.1 Confidential Information. Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing, the parties agree that the receiving party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any Confidential Information of the other
party. “Confidential Information” means (i) information disclosed in tangible form that is marked “confidential” or with other similar designation to indicate its confidential or proprietary nature, or
(ii) information disclosed orally, where such information is either (A) of the type usually 

  

 8 

 
considered confidential or proprietary in the disclosing party’s industry or (B) otherwise indicated to be confidential or proprietary by the
disclosing party at the time of the initial disclosure thereof and confirmed in writing as confidential or proprietary by the disclosing party within thirty (30) days after such disclosure. Subject to the provisions of Section 8, the
parties agree that the following shall be considered the “Confidential Information” of a disclosing party without the requirement that such information be designated as in writing as “Confidential” or with some other similar
designation by the disclosing party: knowledge and information that may be learned or obtained by a receiving party, its agents, servants or employees with respect to the conduct and details of the disclosing party’s business, including but not
limited to, product sales or other financial information, all aspects of the technology for manufacture of the Products, the processes, formulas, machinery, equipment, utensils and arts of manufacture used by a party and its designs or methods of
manufacture, as well as its trade secrets and customer lists. Notwithstanding the foregoing, Confidential Information shall not include information that, in each case as demonstrated by written documentation: (i) was already or becomes lawfully
known to the receiving party, other than under an obligation of confidentiality, at the time of disclosure; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party
or became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement; or (iii) was developed by the receiving party
without reference to any information or materials disclosed or provided by the disclosing party. 
 11.2 Confidentiality of
Agreement. PECO agrees that the terms and conditions of this Agreement shall be treated as the Confidential Information of DEI; provided that PECO may disclose the terms and conditions of this Agreement: (i) to legal counsel;
(ii) in confidence, and as necessary to its accountants, banks, and financing sources and their advisors; (iii) in connection with evaluation of a potential merger of PECO, except where the party that would be merging with or acquiring
PECO is a competitor of DEI; (iv) in confidence, and to legal counsel in connection with the enforcement of this Agreement or rights under this Agreement, or (v) as advisable or required in connection with any government or regulatory
filings, including without limitation filings with the Securities and Exchange Commission and its counterparts in other jurisdictions. 
 11.3 Compelled Disclosure. Nothing in Section 11.1 or Section 11.2 will prevent disclosure of either or both the terms and conditions of this Agreement or of the receiving party’s Confidential Information
generally if, in the opinion of the receiving party’s legal counsel, such disclosure is required to be made in a judicial, administrative or governmental proceeding pursuant to a subpoena, deposition, interrogatory, civil investigative demand
or similar process or order. In that event, however, the receiving party shall provide notice to the disclosing party (unless notice is prohibited by order, subpoena or law) before disclosing any of the Confidential Information. In making such
disclosure, the receiving party may disclose only that portion of the Confidential Information required to be disclosed and shall use reasonable efforts to obtain assurance that confidential treatment will be accorded the information. The receiving
party is not, however, under any obligation to seek a protective order.  
 12. INSURANCE. To the extent that
PECO is required to carry insurance with respect to agreements with PECO customers, then PECO shall provide comparable insurance to DEI, including naming DEI as an additional insured. 
 13. PECO STATUS. For the purpose of carrying out this Agreement, PECO shall be and act as independent contractor and not as an
agent or employee of DEI and shall not have the power to bind, and agrees not to attempt to bind, DEI to any contract without prior written approval thereof from DEI. 
  

 9 

 14. ASSIGNMENT. PECO may not assign, transfer, subdivide or otherwise deal with any
obligations or benefit under this Agreement, through operation of law or otherwise, without the prior written consent of DEI. Any attempted assignment in violation of this Section shall be null and void. 
 15. TERM AND TERMINATION. 
 15.1 Term. The term of this Agreement shall commence on the Effective Date and shall remain in effect for twelve (12) months thereafter,
subject to early termination pursuant to Sections 15.2 and 16.3 below (the “Term”). This Agreement may be renewed for an agreed upon term by mutual written agreement of the parties. 
 15.2 Termination for Change of Control. In the event that PECO undergoes a Change of Control, PECO may not assign, transfer, subdivide or
otherwise deal with any obligations or benefit under this Agreement, through operation of law or otherwise, without the prior written consent of DEI. Any attempted assignment in violation of this Section shall be null and void. The term
“Change of Control” with respect to an entity means the occurrence of one or more of the following: (i) the acquisition by any person (or related group of persons), whether by tender or exchange offer made directly to the
stockholders, open market purchases or any other transaction or series of transactions, of more than fifty percent (50%) of the capital stock entitled to elect the members of the board of directors or other analogous governing body of such
entity; (ii) a merger or consolidation in which such entity is not the surviving entity, except for a transaction in which the securities of such entity immediately prior to consummation of such merger or consolidation are converted by means of
such merger or consolidation into securities representing more than fifty percent (50%) of the total combined voting power of the surviving entity; or (iii) any reverse merger in which such entity is the surviving entity but in which the
securities of such entity immediately prior to consummation of such reverse merger represent less than fifty percent (50%) of the total combined voting power of such entity’s capital stock outstanding immediately after consummation of such
merger. 
 15.3 Termination by Either Party. Either party may terminate this Agreement prior to its expiration and upon thirty
(30) days’ written notice if: (a) a party breaches any material term of this Agreement and the breaching party has not cured the breach within such thirty (30) day period; (b) a party is the subject of a liquidation or
insolvency, or the filing of bankruptcy, or similar proceeding(s) (provided that in the case of involuntary proceedings, such proceedings are not dismissed within sixty (60) days of filing); or (c) the other party ceases to actively engage
in business. 
 15.4 Effect of Termination. 
 15.4.1 If proper notice of termination is given for any reason, DEI shall be entitled to reject or cancel without liability all or part of any previously accepted Orders received from PECO after such notice,
but prior to the effective date of termination. Notwithstanding any credit terms made available to PECO prior to that time, any shipments during said period shall be paid for by wire transfer prior to such shipment. Upon termination of this
Agreement, the due date of all invoices for Product shall automatically be accelerated so that they shall become due and payable on the effective date of termination, even if longer terms have been provided previously. 
 15.4.2 All rights and licenses of PECO hereunder shall automatically be terminated except that PECO may continue only to sell, in accordance with
normal business practice and the terms of this Agreement, Products previously shipped to it by DEI as set forth in Section 4.2 above. 
 15.4.3 Each party shall, within thirty (30) days of the effective date of termination, return to the other party all of the other party’s Confidential Information then in a party’s possession, custody or control.

  

 10 

 15.4.4 Upon the termination of this Agreement in accordance with its terms, except for
obligations incurred prior to the effective date of termination, neither party shall have any obligation to the other party, or to any employee, agent or representative of a party, for compensation or for damages of any kind, whether on account of
loss by a party, or by such employee agent or representative of present or prospective sales, investments, compensation or goodwill; provided, however, that nothing in this section shall relieve PECO of any liability for willful misconduct, gross
negligence, or breach of contract. Each party, for itself and on behalf of each of its employees, agents and representatives, hereby waives any rights which may be granted to it or them under the laws and regulations of the countries in which the
Products are sold or otherwise which are not granted to it or them by this Agreement. Without limiting the generality of the foregoing, PECO understands and acknowledges that any contract or other arrangements it enters into with any third parties
with respect to Product will be subject and subordinate to the rights of termination set forth in this Agreement; provided, however, DEI’s obligation pursuant to Section 3.2.2 shall not be superseded or terminated by virtue of the
termination of this Agreement upon (i) this Agreement’s natural expiration or (ii) DEI’s material breach. PECO will indemnify and hold the DEI Indemnitees harmless from any and all liability, loss, damages, costs or expenses
incurred by DEI in connection with claims by any such third party made because of the termination of this Agreement. 
 15.5 Survival.
Upon any termination or expiration of this Agreement the provisions of Sections 1, 2.2, 3.2.2 (subject to Section 15.4.4 above), 5.3, 5.4, 7.2, 9.1, 9.2 (only with respect to the first and third sentences, and only for so long as a warranty
period extends beyond the Term (provided that the obligation to negotiate as set forth in the third sentence shall not survive)), 9.3 (only for so long as a warranty period extends beyond the Term), 9.4, 9.5, 10—13, 15.4, 15.5, 17 and 18, and
all payment obligations incurred prior to the effective date of such termination or expiration (and all related payment provisions) shall survive. All other provisions of this Agreement shall terminate. 
 16. EVENTS BEYOND CONTROL. The obligations of either party to perform under this
Agreement shall be excused if such failure to perform or any delay is caused by matters such as acts of God, strikes, civil commotion, riots, war, revolution, acts of governments, lack of adequate production capacity, failure or delay in plant start
up, breakdown of machinery, shortage of raw materials, equipment, fuel, transportation, or containers, or any other cause whether similar or dissimilar to those enumerated that are reasonably beyond the control of the party obligated to perform.
Upon the occurrence of such an event, the duties and obligations of the parties shall be suspended for the duration of the event preventing proper performance under this Agreement; provided however that if such suspension shall occur, the parties
shall meet and attempt to arrive at a mutually acceptable compromise within the spirit and intent of this Agreement, and if such a reasonable compromise cannot be reached in good faith, then either party may terminate this Agreement upon thirty
(30) days written notice. 
 17. NOTICE. Notices shall be sent by certified or registered mail to
the address set forth in this Agreement, or to such other address as the receiving party shall have designated by notice in writing. Notices shall be effective on mailing. 
  

 11 

			
	Notice to be sent to:	  	 Delta Electronics, Inc. 
 186 Ruey
Kuang Road, Neihu
 Taipei 11491
 Taiwan, R.O.C.

 Attention: Michael Tan, Manager, Corporate Legal Affairs
 Fax: 886-2-8797-3241
  
 PECO II Inc.
 1376 State Route 598
 Galion, Ohio 44833
 Fax: 419-468-9164
 Attention: President &
CEO
  
 With a copy to:
  
 Porter Wright Morris & Arthur LLP
 41 S. High Street
 Columbus, Ohio 43215
 Fax: 614-227-2100
 Attention: Curtis A.
Loveland

 18. MISCELLANEOUS. 
 18.1 Discussions. In the tenth (10th) month of the Term of this Agreement, the parties agree to negotiate in good faith, for a period not to
exceed 30 days, a possible extension of the Term and/or the duration of the rights granted in Section 2.1.1, it being understood that neither party shall be obligated to modify or amend this Agreement 
 18.2 Necessary Actions. Each party agrees to perform any further acts and execute and deliver any and all further documents and/or instruments
which may be reasonably necessary to carry out the provisions of this Agreement and the transactions contemplated hereby. 
 18.3 Waiver;
Amendment. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Further, no changes or modifications or waivers can be made to this Agreement
unless evidenced in writing and signed for on behalf of both parties. 
 18.4 Severability. If any provision of this Agreement
shall be determined to be unenforceable, all other provisions shall remain in full force and effect and the affected provision shall be construed so as to be enforceable to the maximum extent possible. 
 18.5 Governing Law; Jurisdiction; Arbitration.  
 18.5.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONTROLLED BY, CONSTRUED AND ENFORCED ACCORDING TO THE LAWS OF THE STATE OF DELAWARE, U.S.A., EXCLUDING ITS CHOICE OF LAW PROVISIONS AND ALSO EXCLUDING THE UNITED
NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS. 
 18.5.2 Exclusive Jurisdiction. With respect to
any matter based upon or arising out of this Agreement or the transactions contemplated hereby that seeks temporary or injunctive relief or specific performance, each of the parties (a) irrevocably consents to the exclusive jurisdiction and
venue of the state courts of the State of Delaware located in New Castle County, (b) agrees 

  

 12 

 
that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons, (c) waives the defense of an
inconvenient forum and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and such process, and (d) agrees that a final judgment in such legal proceeding shall be final, binding and
enforceable in any court of competent jurisdiction. Each party agrees not to commence any legal proceedings subject to this Section 18.5.2 except in such courts. Binding Arbitration. Each party irrevocably agrees and
acknowledges that, subject only to Section 18.5.2 above, any claim, dispute, controversy or other matter based upon, arising out of or relating to this Agreement or the transactions contemplated hereby, including (i) as to the
existence, validity, enforceability or interpretation of any such claim, (ii) the performance, breach, waiver or termination of any provision in dispute, (iii) any such claim in tort, or (iv) any such claim raising questions of law,
in each case, whether arising before or after termination of this Agreement (each a “Disputed Claim”), shall be resolved, as between the parties, exclusively and solely by binding arbitration in accordance with
Section 18.5.4. Any Disputed Claim shall be resolved exclusively and solely by binding arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”) and in
accordance with the following: (a) there shall be three (3) arbitrators, one of whom shall be a member of the American College of Trial Lawyers (who shall chair the arbitration panel) and one of whom shall be a certified public accountant;
(b) the arbitration shall take place in Wilmington, Delaware, and in no other place; (c) the arbitration shall be conducted in accordance with the procedural laws of the U.S. Federal Arbitration Act, to the extent not inconsistent with the
Rules or this Section 18.5.4; (d) subject to legal privileges, each party shall be entitled to conduct discovery in accordance with the Federal Rules of Civil Procedure; (e) at the arbitration hearing, each party shall be
permitted to make written and oral presentations to the arbitration panel, to present testimony and written evidence and to examine witnesses; (f) the arbitration panel shall have the power to grant temporary or permanent injunctive relief and
to order specific performance; (g) the arbitration panel shall have the power to order either party to pay, or to allocate between the parties, the fees and expenses of the arbitrators and of the American Arbitration Association and to order
either party to pay all or a portion of the other party’s attorneys’ fees and expenses incurred in connection with a Disputed Claim and the arbitration; and (h) the arbitration panel shall issue a written decision explaining the bases
for the final ruling, and such decision shall be final and binding on the parties hereto, and not subject to appeal, and enforceable in any court of competent jurisdiction. 
 18.5.5 Other Remedies; Specific Performance. 
 (a) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. 
 (b) It is accordingly agreed that the parties shall be entitled to
seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. 
 18.6 Headings. Headings herein are for convenience of reference only and shall in no way affect interpretation of this Agreement.

  

 13 

 18.7 Conflicting Terms. Such terms and conditions of PECO’s Orders, invoices or other
sales documents, as may be in conflict in whole or in part with the provisions of this Agreement shall be of no force or effect whatsoever and the provisions of this Agreement shall be controlling in any such instance. It is the intention of both
parties that the acceptance, even in writing, of any such purchase or sales document not constitute a modification or amendment of, or addition to, the terms of this Agreement unless accompanied by a typed letter of agreement conspicuously entitled
“Amendment of Agreement” which begins with a proposal to amend the Agreement and specifies exactly each change to be made and which is signed by an authorized officer of both parties. 
 18.8 Subcontracting. DEI may subcontract any of its rights and/or obligations, in part or in whole, pursuant to this Agreement at any time without
restriction. 
 18.9 Registrations. If this Agreement is required to be registered with any governmental authority in the
United States, PECO shall cause such registration to be made and shall bear any expense or tax payable in respect thereof. 
 18.10
Compliance With Laws. The parties shall each comply with all applicable federal, state, and local laws and regulations in performing its duties hereunder. 
 18.11 Entire Agreement. This Agreement, and all exhibits attached hereto, constitutes the entire understanding and contract between the parties pertaining to the subject matter hereof and supersedes any and all
prior and contemporaneous, oral or written representations, communications, understandings, and agreements between the parties with respect to the subject matter hereof, including without limitation that certain OEM/ODM Partnership Agreement between
PECO II, Inc. and Delta Electronics, Inc., together with all exhibits attached thereto, which is hereby terminated in its entirety by the parties as of the Effective Date hereof. The parties acknowledge and agree that neither of the parties is
entering into this Agreement on the basis of any representations or promises not expressly contained herein. 
 18.12 Construction of
Agreement. Except where the context clearly requires to the contrary: (i) each reference in this Agreement to a designated “Article,” “Section,” “Schedule,” “Exhibit,” “Attachment” or
“Appendix” is to the corresponding Article, Section, Schedule, Exhibit, Attachment or Appendix of or to this Agreement; (ii) “including” shall mean “including, without limitation”; and (iii) the parties hereto
agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in the construction or interpretation of this Agreement. 
 18.13 Counterparts. For convenience of the parties hereto, this Agreement may be executed in one or more counterparts, each of which shall be
deemed an original for all purposes. 
 [Signature Page Follows] 
  

 14 

									
	AGREED TO AND ACCEPTED BY:	 		 		 	
			
	DELTA ELECTRONICS, INC. (“DEI”)	 		 	PECO II INC. (“PECO”)
					
	By:	 	 /s/ Herman Chang
	 		 	By:	 	 /s/ Eugene Peden

	Name:	 	Herman Chang	 		 	Name:	 	Eugene Peden
	Title:	 	General Manager of NTBU	 		 	Title:	 	V.P. Operations
	Place:	 	Changli, Taoyuan, Taiwan	 		 	Place:	 	Galion, Ohio

 EXHIBIT A 
 PRODUCTS (TO BE RESTATED) 
  

					
	 Category
	  	 Series
	  	 Delta P/N

	Converter	  	DC-DC	  	DCS-24/20A A-S
	Converter	  	DC-DC	  	DCS-48/10A A-S
	Inverter	  	Inverter	  	ESI125N102AB A
	Inverter	  	Inverter	  	ESI125N202AB A
	Inverter	  	Inverter	  	ESI24N102AB A
	Inverter	  	Inverter	  	ESI24N102AB B
	Inverter	  	Inverter	  	ESI48I202AB D
	Inverter	  	Inverter	  	ESI48N102AB A
	Inverter	  	Inverter	  	ESI48N102AB B
	Inverter	  	Inverter	  	ESI48N202AB A
	Rectifier	  	HDS-7200	  	ESR-48/120A A-S
	Rectifier	  	HDS-3000	  	ESR-24/100D A-S
	Rectifier	  	HDS-3000	  	ESR-48/50D A-S
	Rectifier	  	MCS-3000	  	ESR-24/100A A-S
	Rectifier	  	MCS-3000	  	ESR-24/100B A-S
	Rectifier	  	MCS-1800	  	ESR-48/30D A-S
	Rectifier	  	MCS-1800	  	ESR-24/50D A-S
	Rectifier	  	MCS-600	  	ESR-48/10B A-S
	Shelf	  	HDS-3000	  	SA-11F/EE C-S
	Shelf	  	DC-DC	  	SB-18K/HG H-S
	System	  	HDS-3000	  	ES24/1200-NDA03
	System	  	HDS-3000	  	ES24/1200-NDC01
	System	  	HDS-3000	  	ES48/200-NEA01
	System	  	MCS-3000	  	ES24/1200-GDA09
	System	  	MCS-3000	  	ES24/1200-GDA11
	System	  	MCS-3000	  	ES24/1200-GEA02
	System	  	MCS-3000	  	ES24/600-GEA01
	System	  	MCS-3000	  	ES48/1200-GDA09
	System	  	MCS-3000	  	ES48/1200-GDA10
	System	  	MCS-1800	  	ES24/200-JAA03
	System	  	DC-DC	  	ES24/80-KAA01
	System	  	BDFB	  	ES48/3600-PEA01
	System	  	BDFB	  	ES48/3600-PFA01

 EXHIBIT B (TO BE RESTATED) 
 PRICING and SHIPPING TERMS 
 Shipping Terms are: FOB Origin.(Incoterms 2000) 
  

							
	 Category
	  	 Series
	  	 Delta P/N
	  	 Price to Peco II

	Converter	  	DC-DC	  	DCS-24/20A A-S	  	[*]
	Converter	  	DC-DC	  	DCS-48/10A A-S	  	[*]
	Inverter	  	Inverter	  	ESI125N102AB A	  	[*]
	Inverter	  	Inverter	  	ESI125N202AB A	  	[*]
	Inverter	  	Inverter	  	ESI24N102AB A	  	[*]
	Inverter	  	Inverter	  	ESI24N102AB B	  	[*]
	Inverter	  	Inverter	  	ESI48I202AB D	  	[*]
	Inverter	  	Inverter	  	ESI48N102AB A	  	[*]
	Inverter	  	Inverter	  	ESI48N102AB B	  	[*]
	Inverter	  	Inverter	  	ESI48N202AB A	  	[*]
	Rectifier	  	HDS-7200	  	ESR-48/120A A-S	  	[*]
	Rectifier	  	HDS-3000	  	ESR-24/100D A-S	  	[*]
	Rectifier	  	HDS-3000	  	ESR-48/50D A-S	  	[*]
	Rectifier	  	MCS-3000	  	ESR-24/100A A-S	  	[*]
	Rectifier	  	MCS-3000	  	ESR-24/100B A-S	  	[*]
	Rectifier	  	MCS-1800	  	ESR-48/30D A-S	  	[*]
	Rectifier	  	MCS-1800	  	ESR-24/50D A-S	  	[*]
	Rectifier	  	MCS-600	  	ESR-48/10B A-S	  	[*]
	Shelf	  	HDS-3000	  	SA-11F/EE C-S	  	[*]
	Shelf	  	DC-DC	  	SB-18K/HG H-S	  	[*]
	System	  	HDS-3000	  	ES24/1200-NDA03	  	[*]
	System	  	HDS-3000	  	ES24/1200-NDC01	  	[*]
	System	  	HDS-3000	  	ES48/200-NEA01	  	[*]
	System	  	MCS-3000	  	ES24/1200-GDA09	  	[*]
	System	  	MCS-3000	  	ES24/1200-GDA11	  	[*]
	System	  	MCS-3000	  	ES24/1200-GEA02	  	[*]
	System	  	MCS-3000	  	ES24/600-GEA01	  	[*]
	System	  	MCS-3000	  	ES48/1200-GDA09	  	[*]
	System	  	MCS-3000	  	ES48/1200-GDA10	  	[*]
	System	  	MCS-1800	  	ES24/200-JAA03	  	[*]
	System	  	DC-DC	  	ES24/80-KAA01	  	[*]
	System	  	BDFB	  	ES48/3600-PEA01	  	[*]
	System	  	BDFB	  	ES48/3600-PFA01	  	[*]

  

	*	Portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 EXHIBIT C 
 MINIMUM ORDER REQUIREMENTS 
  

	 	•	 	 Spare Parts: 

  

	 	¡	 	 Boards: [*] 

  

	 	¡	 	 Components: [*] 

  

	 	•	 	 Racks/Shelves: [*] 

  

	 	•	 	 DEI Systems: [*] 

  

	 	•	 	 Modules: [*] 

  

	*	Portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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