Document:

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                                                               Exhibit 10.14

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
October 8, 2003 by and between Kinetics Holdings Corporation, a Delaware
corporation (the "Employer," "Kinetics" or "Company"), and John Goodman (the
"Employee").

         WHEREAS, Employer, a current employee of Kinetics, desires to retain
         the services of Employee, and Employee desires to continue to provide
         his services in exchange for compensation, Employer hereby agrees that
         it shall offer to continue to employ Employee, and Employee agrees that
         he shall accept such continued employment, under the terms and
         conditions hereinafter set forth, the parties hereby agree as follows.

          1.   Position and Title. Employee will be employed by Kinetics as its
               General Counsel upon the date hereof (the "Effective Date") and
               continuing thereafter until December 31, 2005 (the "Term"), or
               until earlier termination pursuant to Section 6. Employee will
               have overall responsibility for the management of the Company's
               legal affairs and such other duties as the Company may reasonably
               require, and shall report directly to its Chief Executive Officer
               (the "CEO"). Employee will be expected to devote Employee's full
               working time and attention to the business of Kinetics, and
               Employee will not render services to any other business without
               the prior approval of the CEO or, directly or indirectly, engage
               or participate in any business that is competitive in any manner
               with the business of Kinetics. Employee will also be expected to
               comply with and be bound by the Company's operating policies,
               procedures and practices that are from time to time in effect
               during the term of Employee's employment.

          2.   Cash Compensation.

          Base Salary. Employee's annual base salary is $250,000. Employee's
          annual base salary shall be reviewed and increased from time to time
          at the discretion of the CEO, in consultation with the Compensation
          Committee

          Bonus Compensation. Employee's cash bonus for 2003 shall be $200,000,
          and shall be payable upon the execution hereof. Employee's performance
          bonus in each of 2004 and 2005 shall be earned on the basis of
          employee's performance against a defined set of metrics, to be
          determined through agreement by the Employee and the CEO (in
          consultation with the Compensation Committee), and shall be in
          writing. For such periods, Employee would be eligible for a bonus
          equal to 30%-120% of his then-current base salary. Eligibility for the
          2004 and 2005 bonus shall be dependant upon continued employment
          including being on the payroll on the last day of each year. All
          unpaid amounts of Employee's annual bonus shall be paid not later than
          the 91st day of the following year.

3.   Vacation: Employee shall be eligible for three (3) weeks of vacation
     annually, which shall accrue pursuant to the Company's normal vacation
     accrual policy.

4.   Other Benefits. Employee will be eligible for the normal health insurance,
     401(k), any employee stock purchase plan and other benefits that are
     offered to all Kinetics senior executives of similar rank and status.

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5.   Stock Options. Employee shall be eligible to participate in the Company's
     employee equity compensation programs at a level consistent with that of
     other Kinetics senior executives of similar rank and status and as provided
     by the program or plan.

6.   Employment and Termination. Employee's employment with Kinetics will be
     at-will and may be terminated by Employee or by Kinetics at any time for
     any reason. Employee may terminate his employment upon written notice to
     the CEO for any reason, including "Good Reason," as provided below;

          a.   Employee may terminate his employment upon written notice to the
               CEO at any time at Employee's discretion without Good Reason
               ("Voluntary Termination");

          b.   Employee may terminate his employment upon written notice to the
               CEO at any time at Employee's discretion with Good Reason (an
               "Constructive Termination");

          c.   Kinetics may terminate Employee's employment upon written notice
               to Employee at any time following a determination by the CEO, the
               Compensation Committee or the Board, upon a finding that there is
               "Cause," as defined below, for such termination ("Termination for
               Cause");

          d.   Kinetics may terminate Employee's employment upon written notice
               to Employee at any time in the sole discretion of the CEO, the
               Compensation Committee or the Board, without a determination that
               there is Cause for such termination ("Termination without
               Cause");

          e.   Employee's employment will automatically terminate upon
               Employee's death or upon Employee's disability as determined by
               the Company ("Termination for Death or Disability"); provided
               that "disability" shall mean Employee's inability to perform
               Employee's essential job responsibilities with or without
               reasonable accommodation. Due to the critical importance of this
               position to the Company, it is agreed that it would be an undue
               hardship for the Employee to be on a medical leave of absence for
               a period exceeding 180 consecutive days or 180 days in the
               aggregate in any 12-month period.

7.   Definitions. As used in this Agreement, the following terms have the
     following meanings:

          a.   "Good Reason" means:

                    i.   a material reduction in Employee's duties that is
                         inconsistent with Employee's position as General
                         Counsel of Kinetics or a change in Employee's reporting
                         relationship such that Employee no longer report
                         directly to the CEO;

                    ii.  Employee's no longer being General Counsel of Kinetics
                         or, in the case of a Change in Control, of the
                         surviving entity or acquirer that results from any
                         Change in Control;

                    iii. any reduction in Employee's base annual salary or
                         target bonus (other than in connection with a general
                         decrease in the salary or target bonuses for all
                         officers of Kinetics) without Employee's consent;

                    iv.  a material breach by Kinetics of any of its obligations
                         hereunder after providing Kinetics with written notice
                         and an opportunity to cure within 30 business days;

                    v.   a requirement by Kinetics that Employee relocate
                         Employee's principal office to a facility more than 50
                         miles from Kinetics' current headquarters; or

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                    vi.  failure of any successor to assume this agreement
                         pursuant to Section 14(b) below.

          b.   "Cause" means:

                    i.   gross negligence or willful misconduct in the
                         performance of Employee's duties to Kinetics that has
                         resulted or is likely to result in substantial and
                         material damage to Kinetics. No act or failure to act
                         by Employee shall be considered "willful" if done or
                         omitted by Employee in good faith with reasonable
                         belief that Employee's action or omission was in the
                         best interests of Kinetics,

                    ii.  material failure in the performance of Employee's
                         duties to Kinetics (other than gross negligence or
                         willful misconduct described above) after a written
                         demand for substantial performance is delivered to
                         Employee by the Company which specifically identifies
                         the manner in which the Company believes Employee have
                         not substantially performed Employee's duties and
                         Employee have been provided with a reasonable
                         opportunity, of not less than 30 days, to cure any
                         alleged material failure in performance;

                    iii. commission of any act of fraud with respect to
                         Kinetics; or

                    iv.  conviction of a felony or a crime involving moral
                         turpitude either of which causes or reasonably could
                         cause material harm to the business and affairs of
                         Kinetics.

          c.   "Change in Control" means

                    i.   The acquisition (other than from the Company) by any
                         person, entity or "group", within the meaning of
                         section 13(d) (3) or 14 (d) (2) of the Securities and
                         Exchange Act of 1934 (the "Exchange Act"), (excluding,
                         for this purpose, Kinetics or its subsidiaries, or any
                         employee benefit plan of Kinetics or its subsidiaries
                         which, or any current holder of more than 5% of the
                         Company's outstanding securities whom acquires
                         beneficial ownership of voting securities of Kinetics)
                         of beneficial ownership (within the meaning of Rule
                         13d-3 promulgated under the Exchange Act) of 50% or
                         more of either the then outstanding shares of common
                         stock or the combined voting power of the Kinetics'
                         then outstanding voting securities entitled to vote
                         generally in the election of directors; or

                    ii.  the individuals who, as of the date hereof, constitute
                         the Board (the "Incumbent Board") cease for any reason
                         to constitute at least a majority of the Board,
                         provided that any person becoming a director subsequent
                         to the date hereof whose election, or nomination for
                         election by Kinetics' shareholders, was approved by a
                         vote of at least a majority of the directors then
                         comprising the Incumbent Board (other than an election
                         or nomination of an individual whose initial assumption
                         of the office is in connection with an actual or
                         threatened election contest relating to the election of
                         the directors of Kinetics, as such terms are used in
                         Rule 14a-l 1 of Regulation 14A promulgated under the
                         Exchange Act) shall be, for the purposes of this
                         Agreement, considered as though such person were a
                         member of the Incumbent Board; or

                    iii. Approval of the stockholders of Kinetics of a
                         reorganization, merger or consolidation, in each case,
                         with respect to which persons who were the stockholders
                         of Kinetics immediately prior to such reorganization,
                         merger or consolidation do not, immediately thereafter,
                         own more than 50% of the combined voting power entitled
                         to vote generally in the election of directors of the
                         reorganized, merged or consolidated company's then
                         outstanding voting securities, or a liquidation or
                         dissolution of Kinetics or of the sale of all or
                         substantially all of the assets of Kinetics.

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8.   Separation Benefits. Upon termination of Employee's employment with
     Kinetics for any reason, Employee will receive payment for all unpaid
     salary and vacation accrued to the date of Employee's termination of
     employment; and Employee's benefits will be continued under Kinetics' then
     existing benefit plans and policies for so long as provided under the terms
     of such plans and policies and as required by applicable law. Under certain
     circumstances, subject to Employee's execution of a termination and general
     release agreement, Employee will also be entitled to receive severance
     benefits as set forth below. Kinetics' termination and general release
     agreement will contain provisions specifying that Employee will not solicit
     employees for a period of one year after any final payment, that Employee
     shall not compete to the extent legally enforceable while receiving
     payments from the Employer, that the termination and general release
     agreement shall be confidential, that neither Employee nor Kinetics shall
     disparage the other party, and that Employee shall have no waivable claims
     against Kinetics that survive that agreement, other than as set forth in
     Section 13, below. Within sixty days of the signing of this Agreement the
     parties shall agree upon a model termination and general release agreement
     available to be used in conjunction with this Section.

9.   Severance Benefits.

          a.   In the event of a Voluntary Termination or a Termination for
               Cause, Employee will not be entitled to Severance Benefits. In
               the event of Employee's Constructive Termination or Termination
               without Cause during the Term of this Agreement after September
               30, 2003, Employee will be entitled to:

                    i.   A severance payment equal to eighteen months of
                         Employee's then-current annual base salary. All amounts
                         due under this Section 9 shall be payable as follows:
                         20% within seven days, 30% within 60 days, and the
                         remaining unpaid balance within 180 days from the date
                         of such termination, in accordance with Kinetics'
                         normal payroll practices with such payroll deductions
                         and withholdings as are required by law, provided, that
                         Employee provide Kinetics with reasonable transition
                         services during such period after the date of
                         termination; and

                    ii.  Accelerated vesting and exercisability of that portion
                         of Employee's outstanding unvested options to purchase
                         Kinetics Common Stock that would have vested within two
                         years from the date of the Constructive Termination or
                         Termination without Cause, with ail vested options
                         exercisable for a period of two years from the date of
                         Employee's Constructive Termination or Termination
                         without Cause.

     For the purpose of this agreement, termination by death or disability shall
     not create eligibility for the severance benefits provided for a
     Constructive Termination or a Termination Without Cause.

          b.   If Employee's severance and other benefits provided for in this
               Section 9 constitute "parachute payments" within the meaning of
               Section 280G of the Code and, but for this subsection, would be
               subject to the excise tax imposed by Section 4999 of the Internal
               Revenue Code, then Employee's severance and other benefits under
               this Section 9 will be payable, at Employee's election, either in
               full or in such lesser amount as would result, after taking into
               account the applicable federal, state and local income taxes and
               the excise tax imposed by Section 4999, in Employee's receipt on
               an after-tax basis of the greatest amount of severance and other
               benefits.

          c.   No payments due Employee hereunder shall be subject to mitigation
               or offset.

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10.  Indemnification Agreement. Within 60 days of the Effective Date, Kinetics
     will enter into a standard form of indemnification agreement for officers
     and directors to indemnify Employee against certain liabilities Employee
     may incur as an officer or director of Kinetics. It is intended that this
     agreement will provide for the maximum indemnification reasonably available
     for acts or failure to act when the conduct is within the scope of the
     officer's or director's actual or apparent authority.

11.  No Solicitation. During the term of Employee's employment with Kinetics and
     for one year thereafter, Employee will not, on behalf of Employee or any
     third party, solicit or attempt to induce any employee of Kinetics to
     terminate his or her employment with Kinetics.

12.  Arbitration. The parties agree that any dispute regarding the
     interpretation or enforcement of this agreement shall be decided by
     confidential, final and binding arbitration conducted by Judicial
     Arbitration and Mediation Services ("JAMS") under the then existing JAMS
     rules rather than by litigation in court, trial by jury, administrative
     proceeding or in any other forum. The filing fees and arbitrator's fees and
     costs in such arbitration will be borne by Kinetics. The parties will be
     entitled to reasonable discovery of essential matters as determined by the
     arbitrator. In the arbitration, the parties will be entitled to all
     remedies that would have been available if the matter were litigated in a
     court of law.

13.  Survival. In the event that this Agreement expires or is terminated,
     Kinetics' payment obligations to Employee as set forth herein shall survive
     such expiration or termination. Following the expiration hereof, any
     continuation of Employee's employment with the Company shall be unaffected
     by the terms hereof, and shall be upon terms determined by the Company and
     subject to the Company's regular employment policies applicable to other
     senior executives of Kinetics.

14.  Miscellaneous.

          a.   Attorneys Fees. If a legal action or other proceeding is brought
               for enforcement of this agreement because of an alleged dispute,
               breach, default, or misrepresentation in connection with any of
               the provisions of this agreement, the prevailing party shall be
               entitled to recover reasonable attorneys' fees and costs
               incurred, both before and after judgment, in addition to any
               other relief to which they may be entitled.

          b.   Successors. This agreement is binding on and may be enforced by
               Kinetics and its successors and assigns and is binding on and may
               be enforced by Employee and Employee's heirs and legal
               representatives. Any successor to Kinetics or substantially all
               of its business (whether by purchase, merger, consolidation or
               otherwise) will in advance assume in writing and be bound by all
               of Kinetics' obligations under this agreement.

          c.   Notices. Notices under this agreement must be in writing and will
               be deemed to have been given when personally delivered or two
               days after mailed by U.S. registered or certified mail, return
               receipt requested and postage prepaid. Mailed notices to Employee
               will be addressed to Employee at the home address that Employee
               has most recently communicated to Kinetics in writing. Notices to
               Kinetics will be addressed to its CEO with copy to the Chief
               Financial Officer at Kinetics' corporate headquarters.

          d.   Waiver. No provision of this agreement will be modified or waived
               except in writing signed by Employee and an officer of Kinetics
               duly authorized by its Board of Directors.

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               No waiver by either party of any breach of this agreement by the
               other party will be considered a waiver of any other breach of
               this agreement.

          e.   Entire Agreement. This agreement, along with the Confidentiality,
               Development and Nondisclosure Agreement between Employee and the
               Company dated on or about November 31, 1998, represents the
               entire agreement between us concerning the subject matter of
               Employee's employment by Kinetics, unless otherwise referenced in
               this Agreement.

          f.   The provisions of this Agreement shall be deemed severable and
               the invalidity or unenforceability of any provision shall not
               affect the validity and enforceability of the other provisions
               hereof. If any provision of this Agreement is unenforceable for
               any reason whatsoever, such provision shall be appropriately
               limited and given effect to the extent that it may be
               enforceable.

          g.   Governing Law. This agreement will be governed by the laws of the
               State of California without reference to conflict of laws
               provisions.

The parties hereto acknowledge and agree to the terms of this Agreement by their
signatures below, effective as of the date first written above.

KINETICS GROUP, INC.                            EMPLOYEE

/s/ David J. Shimmon                            /s/ John Goodman
--------------------------                      -------------------------------
David J. Shimmon, CEO                           John Goodman

Acknowledged & Agreed this____________day of October 2003 by the Compensation
Committee of the Company's Board of Directors.

/s/ William Matthes
------------------------------
William Matthes, Member<PAGE>
                                                                   Exhibit 10.15

                             GLOBAL SUPPLY AGREEMENT

                         APPLIED MATERIALS CONFIDENTIAL

This Global Supply Agreement dated and effective as of June 1, 2002 is by and
between Applied Materials, Inc., a Delaware corporation, having places of
business in Santa Clara, California and Austin, Texas, and Kinetics Fluid
Systems, Inc., a California corporation, having places of business in Santa
Clara, California, and Austin, Texas.

In consideration of the mutual promises and consideration provided for in this
Agreement, the parties agree as follows:

DEFINITIONS

The following capitalized terms will have the meanings given below when used in
this Agreement:

"Agreement" means this Global Supply Agreement, all its Exhibits and
Attachments, and all Specifications for Items, all as amended from time to time,
and all Applied Purchase Orders and other Authorized Demand Signals that may be
issued for the purchase of Items (including Services). When used with reference
to the purchase of a particular Item or Items, "Agreement" means those
provisions of the foregoing that apply to such Item or Items and to the
transaction for such purchase.

"Applied's Standard Terms and Conditions of Purchase" means Exhibit 1 to this
Agreement.

"Applied" means Applied Materials, Inc., and all of its domestic and
international divisions and subsidiaries.

"Applied IP" has the meaning given in the IPA.

"Applied System(s)" means capital equipment sold by Applied that incorporates a
Fluid Delivery System.

"Asset Purchase Agreement" means the Asset Purchase Agreement dated June 25,
1999 between Applied Materials, Inc. and Kinetics Fluid Systems, Inc., as
amended and supplemented from time to time.

"Attachment" means one of the documents, records or instruments identified as an
"Attachment" on the List of Exhibits and Attachments set out in this Agreement.

"Authorized Demand Signal" means an order or record issued by Applied to
Supplier pursuant to Section 2.1.5.1.

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT AND AN
UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED WITH THE SECURITY AND
EXCHANGE COMMISSION
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"Bus Route" or "Blanket Order" means an arrangement, method or agreement for the
order and purchase of goods under which the buyer issues a standing, blanket or
open order (under which quantities may be indeterminate, forecasted, or
otherwise provided for) and then periodically specifies quantities for delivery
through summary orders, issuance of a purchase order document, or by electronic
or other notice.

"Business Day" means a day that is not a Saturday, a Sunday, or a holiday or
operating shut down day under the most current fiscal year operating calendar of
Applied in effect under this Agreement.

"Committed Delivery Date" means the date on which Supplier shall deliver a
completed Item and all required documentation to Applied, as determined under
Sections 2.1.5.2 and 2.1.5.3. As to Services for which a Purchase Order is the
"Authorized Demand Signal," the "Committed Delivery Date" means each date
established by such Purchase Order for completion of Services and delivery of
work product or other deliverables to Applied.

"Confidential Information" means all of the following: (a) "Confidential
Information," as such term is defined by the IPA, a Design SOW, a DSA or a DVA
(each as defined below), (b) Internal Applied Data, as defined below, and new
product plans of Applied that are included as Confidential Information under
Section 2.9.2 below, and (c) "Confidential Information" or "Proprietary
Information" of, or received from, Applied or Supplier, under (and as such
term(s) are defined in) any NDA now in effect or hereafter in effect (but in any
case, only for the period applicable under the IPA, NDA or other agreement, as
applicable).

"Configurable Subassemblies" means those configurable products identified by a
non-repeating part numbering system established by Applied (in which a
Subassembly part numbering follows a particular convention, i.e., XXXX-cont.). A
Configurable Subassembly may contain a number of Piece Parts, Modules or devices
(or a combination thereof) that are electrically and/or mechanically connected
and perform a specific function. An FDS is a Configurable Subassembly.

"Configuration Engineering Services" means the engineering services requested by
Applied and provided by Supplier for Applied (i) in the preparation of the Bill
of Materials ("BOM") that conforms to, and is configured to, the requirements of
the standard manufacturing options for an FDS as specified and designed by
Applied (a "Configured BOM"), including system design information identified by
Applied through its Authorized Demand Signal or (ii) in the preparation of a
revised Configured BOM pursuant to a Configuration Change Request.

"CCR Services" means the Configuration Engineering Services or CES Services
provided by Supplier pursuant to Applied's CCR.

"CCR" means Applied's request for CES Services or Configuration Engineering
Services in the revision of a Configured BOM or CES Package, which request is
issued after Supplier's acceptance of the applicable SSR or NSO order.

"Contract Price" means the price for an Item, including a Service, established
by or in accordance with Attachment 1 or, as to Services for which pricing is
not determined under

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Attachment 1, the price for Services established by or in accordance with the
applicable Applied Purchase Order issued under this Agreement.

"CES Package" means all documentation, drawings, specifications and information
prepared or provided by Supplier to implement and record a CES.

"CES Services" means the engineering services provided by Supplier pursuant to
Applied's request to Supplier for a Customer Engineering Special.

"CES" or "Customer Engineering Special" means a modification to an existing
standard Fluid Delivery System configuration, wherein the modification involves
either (1) the specification by the customer of alternative Piece Part(s) or
Module(s), or alternative manufacturer of a Piece Part or Module, instead of
Applied's default standard Piece Parts or Modules, or (2) the modification of
the FDS interface to the customer's facility, e.g., power connection(s), gas
connection(s), water connection(s) or physical mounting. CES does not include,
and CES Services do not include engineering or design services required as a
result of, the specification by an Applied customer of a new requirement or
process that requires research and development, or design.

"CPS" means Applied's Installed Customer Productivity Support organization,
formerly known as the Installed Base Service & Support organization, and any
successor organization (such organization being sometimes referred to as "IBSS"
or "CPS").

"Design Services," "Design SOW," "Design Services Agreement," and "DSA" have the
meanings given in the IPA.

"Development Services," "Development Services Agreement," and "DVA" have the
meanings given in the IPA.

"ECO" means an Engineering Change Order issued by Applied to change a
Specification or to make another Engineering Change under (and as defined in)
Section 4.1.1 below or approved by Applied to authorize a change in a
Specification or to make another Engineering Change under Section 4.1.1 below.

"ERS Program" means Applied's "Evaluated Receipts Settlement Program," which is
a system for payment by Applied for Items purchased hereunder, as described in
Section 2.11.1.3 below.

"Exhibit" means one of the documents, records or instruments identified as an
"Exhibit" on the list of Exhibits and Attachments set out in this Agreement.

"FDS" or "Fluid Delivery System" has the meaning given in the IPA. The term FDS
includes (unless otherwise limited by particular provisions of this Agreement)
Volume Manufacturing FDS, Pilot FDS, R&D FDS and NSO FDS.

"First Article" means a new Item, an Item with revised Specifications (including
drawings), or an Item manufactured after a change in Supplier's (or a sub-tier
supplier's) manufacturing location, manufacturing process or any other change
that, pursuant to the QRD (defined below) or the Quality Framework Document
(Attachment 15 to this Agreement), requires the change or the

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affected Item to be evaluated and accepted by Applied prior to delivery to
Applied or use in manufacturing of Items under this Agreement.

"Internal Applied Data" means all non-public, proprietary information from any
source that is recorded, displayed, maintained or accessed on Applied's SPR,
SSR, NSR, CCR or any internal database, subject to the exclusions of Section
4.1, clauses (i) through (v) of the IPA.

"IP Rights" has the meaning given in the IPA.

"Item" or "Items" means FDS(s), Module(s), other Subassembly(ies), Piece Part(s)
and any other good(s) or Service(s) that (a) Supplier is to provide to Applied
under this Agreement pursuant to any Authorized Demand Signal and (b) are
identified in, or have pricing terms determined as set forth in, Attachment 1
and any amendments to Attachment 1 or are identified in and have pricing terms
set forth in an Applied Purchase Order issued as an Authorized Demand Signal
under this Agreement. Items (excluding Services) shall be deemed to constitute
"goods" as that term is defined in, and used in, the Uniform Commercial Code as
adopted in California, including amendments to such statutes. Certain exclusions
affecting "Items" are also set out in Section 1.4 below.

"Manufacturing Process" has the meaning given in the IPA.

"MFC" means mass flow controller.

"Module" means those standard or configurable parts that may be identified by a
single Applied part number, that contain multiple Piece Parts and that are sold
by Supplier to Applied on a recurring basis as separate units or as assemblies
for use in FDSs, NSOs or other fluid delivery products.

"NDA" means any and all agreements between Applied and Supplier for
confidentiality, nondisclosure or limitation on use of Confidential Information.
Such term, unless otherwise indicated in this Agreement, includes the IPA.

"New Product Transition" or "NPT" means the transition, in accordance with
criteria approved by Applied, of an FDS or Applied System from R&D Manufacturing
to Pilot Manufacturing, or from Pilot Manufacturing to Volume Manufacturing.

"New Product Transition Services" or "NPT Services" means the manufacturing,
engineering and documentation preparation services necessary for New Product
Transition. The particular requirements for each NPT Services project will be
defined in Applied's Purchase Order for NPT Services issued pursuant to an
RFP/RFQ process, and will generally include (when appropriate to the particular
project and with compensation to be negotiated) evaluation of product structure
tree(s), identification of open design issues and of product options (released
or not released), appropriate assembly and test fixture specifications,
definition and requirements, engineering of tooling and test fixtures, and
documentation preparation.

"NSO" or "Non-System Order" means a Subassembly or other Item (excluding an FDS)
that (a) is ordered by Applied for Volume Manufacturing, Pilot Manufacturing or
R&D use and

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(b) either is to be installed or incorporated in a previously manufactured
Configurable Subassembly or is to be used by Applied for R&D purposes.

"NSR" means a nonstandard request for an Item to be manufactured by Supplier,
which request will include basic process, platform, fab, and chamber information
and other information to describe the Item ordered.

"Piece Parts" means piece parts that are contained in Subassemblies or that are
provided by Supplier to Applied separately from a Subassembly.

"Pilot FDSs" means FDSs manufactured by Supplier for incorporation into Applied
Systems under Applied's Pilot Manufacturing program.

"Pilot Manufacturing" excludes R&D Manufacturing and means (i) manufacturing in
the United States of America of FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition, and/or (ii)
manufacturing of FDSs or Modules in each other country which is specifically
identified from time to time in an Attachment to this Agreement as a country in
which Supplier may provide FDSs or Modules that have not been released for
Volume Manufacturing by completion of New Product Transition.

"Product Development Process" means Applied's process and management procedures
for its new product development programs employed to control design and delivery
of Applied's products.

"Purchase Order," (i) when used to describe a method of ordering Items, means
that method of ordering (sometimes also referred to as "Spot Buy") under which
Applied issues Authorized Demand Signals in accordance with Section 2.1.5.1,
including SSRs, NSRs and Purchase Orders (as defined in the following clause
(ii)), that identify or describe particular Items to be manufactured or provided
to Applied; and (ii) when used to describe an order issued by Applied for
particular Item(s), means Applied's order for particular Item(s) contained in an
Applied purchase order form, except that the provisions of this Agreement
(including Exhibit 1 to this Agreement) shall be a part of each purchase order
form issued as a Purchase Order under this Agreement and shall supersede and
replace in their entirety the terms and conditions stated on the reverse side of
the purchase order form. The Purchase Order method is distinguished from the Bus
Route method. The Purchase Order method will be utilized for the ordering of
FDSs by Applied from Supplier. When used in Section 2.2.3, "Spot Buy" refers to
Supplier's method, arrangement or agreement for the purchase of Piece Parts
under a Purchase Order method.

"QRD" means the "Quality Requirements Document for Manufactured Assemblies --
Kinetics Gas Systems," attached to this Agreement as Attachment 20, as such
document is modified from time to time.

"R&D" means the development, design and related scientific analysis (a) for new
or modified capital equipment for use or application in any Applied System; and
(b) for the prototype manufacture of such new or modified capital equipment.

"R&D Manufacturing" means the manufacturing of FDSs or Modules on a prototype or
other limited basis for use by Applied for R&D purposes.

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"R&D Services" means Design Services and Development Services required for R&D
or R&D Manufacturing. R&D Services may include creation of product definitions
and functional requirements, schematics, product structure trees, electronic
valve assignments, definition of test requirements, determination and resolution
of manufacturing engineering issues, and the manufacture of one or more
prototypes. CES Services are not included in the term R&D Services.

"RFP," "RFQ," or "RFP/RFQ" means, as applicable, Applied's Request for Proposal
or Request for Quotation process, as applicable, or a combination of such
processes.

"SAT" means the Supply Account Team (or successor organization) assigned to
Supplier by Applied.

"Services" means Configuration Engineering Services, CES Services, CCR Services,
NPT Services, Design Services, Development Services, and other services
performed by Supplier for Applied pursuant to this Agreement, the IPA (to the
extent applicable), or (as to Design Services or Development Services) the
relevant DSA or DVA.

"SMT" means Applied's Subsystem Management Team (or successor organization)
assigned to Supplier by Applied.

"Source Inspection" means any inspection at Supplier's facilities required by
the quality provisions of this Agreement, including the QRD or the Quality
Framework, Attachment 15.

"Spares" means Items ordered by Applied's CPS pursuant to Section 2.1.5 below.

"Specifications" means authorized drawings, designs, specifications,
instructions relating to installation, assembly and testing, and manufacturing
and product requirements that are applicable to an Item. Specifications include
any ECOs applicable to an Item and information of the types set out above that
is included in, or referred to in, an SSR, NSR, CCR or Purchase Order issued as
to an Item.

"SPR" or "System Production Report" means, as to Volume Manufacturing FDSs,
Pilot Manufacturing FDSs, and NSO Items, Applied's schedule for anticipated
production of Applied Systems and NSOs, which is posted by Applied from time to
time and updated at least weekly for Supplier's electronic access and review,
identifying the Applied Systems and NSO transactions for which Supplier (subject
to the provisions of this Agreement) is anticipated to provide FDSs or NSOs
under this Agreement.

"Standard Services" means any or all of the following: Configuration Engineering
Services; CCR Services; CES Services; and NPT Services.

"Standard Subassemblies" means those products discretely identified by a single
Applied part number. A Standard Subassembly may contain a number of Piece Parts,
Modules or devices (or a combination thereof) that are electrically and/or
mechanically connected and performs a specific function.

"Subassemblies" means both Standard Subassemblies and Configurable
Subassemblies.

                                       6
<PAGE>
"Supplier" means Kinetics Fluid Systems, Inc., a California corporation, and (x)
all unincorporated divisions of Kinetics Fluid Systems, Inc. and (y) those
subsidiaries and affiliates of Kinetics Fluid Systems, Inc. that are approved
(through written supplement to this Agreement) by Applied as permitted to
perform supply or service obligations hereunder. Unit Instruments, Inc. shall
not be included in the term "Supplier" unless a written amendment to this
Agreement, executed by all parties, so provides. As set out in Section 1.4
below, this Agreement does not apply to goods, products, parts or services that
are the subject of agreement(s) previously entered into with Applied by Insync
Systems, Inc., even though Supplier has succeeded to such prior agreement(s) by
merger.

"Supplier Performance Plan" means a formal performance plan for Supplier in the
form of Attachment 16, as modified from time to time. Attachment 16 is the
Supplier Performance Plan in effect on the Effective Date.

"System Specification Report" or "SSR" means Applied's internally generated
report of basic process, platform, fab and chamber information and requirements
describing an order for an Applied System requiring FDS or other Item(s), or for
an NSO, from Supplier, as the same is posted by Applied to the Applied website
designated for Supplier access or as otherwise furnished to Supplier.

"UCC" means the Uniform Commercial Code, as adopted, amended and in effect in
the State of California from time to time, which is currently codified in the
California Commercial Code.

"Volume Manufacturing FDSs" means FDSs manufactured by Supplier for
incorporation into Applied Systems in Applied's Volume Manufacturing operations.

"Volume Manufacturing" or "VMO" means (i) manufacturing in the United States of
America of those FDSs or Modules that are released by Applied for Volume
Manufacturing from Pilot Manufacturing following completion of New Product
Transition, and also (ii) manufacturing of FDSs or Modules in each other country
which is specifically identified from time to time in an Attachment to this
Agreement as a country in which Supplier may provide FDSs or Modules that have
been released by Applied for Volume Manufacturing from Pilot Manufacturing
following completion of New Product Transition.

"Will" or "shall" have the same meaning and are used to convey an affirmative
duty or obligation (i.e., a requirement).

Capitalized terms used in this Agreement and defined in other provisions will
have the meanings in this Agreement given in such other provision(s). Unless
otherwise indicated, references to Sections, provisions, paragraphs or like
terms are to such elements of this Agreement and to all subsections or subparts
of the referenced Section, provision or paragraph, and "hereof," "herein" and
like words refer to this Agreement as a whole and not to a particular provision,
also unless otherwise indicated. "Including" or "includes" does not indicate a
limitation. Capitalized terms defined in the text of this Global Supply
Agreement that are also used in its Attachments or Exhibits are used in the
Attachments and Exhibits as defined in the text of the Global Supply Agreement,
unless the context of usage indicates otherwise.

                                       7
<PAGE>
1.    SCOPE.

1.1.  Description of Agreement.

This Agreement defines the terms and requirements applicable between Applied and
Supplier with respect to the supply of Items by Supplier to Applied and to
matters related to such supply that are covered by this Agreement; each party
agrees to observe, perform under and comply with this Agreement. Applied may,
from time to time, issue Authorized Demand Signals to Supplier for the purchase
of Items. Upon acceptance (including deemed acceptance) of each Authorized
Demand Signal, and for valuable consideration received, Supplier agrees that it
shall, throughout the term of this Agreement, sell and deliver the Item(s)
covered by each such Authorized Demand Signal under and in compliance with this
Agreement. Decisions regarding future purchases from Supplier will be based in
part upon Supplier's performance under this Agreement, and Supplier's
achievement toward Applied's business objectives.

1.2.  Addresses and Contact Persons; Notices.

      1.2.1. Contact Persons.

      The persons to receive notices generally under this Agreement and the
      procedures for notice are set out in Section 1.2.2. The following
      individual contact persons are identified for convenience of the parties
      and certain of the persons listed below are designated, in specific
      sections of this Agreement, as the person(s) to receive or initiate
      certain specific notices or actions. Each party may change any of its
      contact persons or other information in this Section 1.2.1 from time to
      time. Upon any such change, notice of the change shall be given promptly
      to the other party through the person(s) specified to receive notice under
      Section 1.2.2 below, and until such notice is given the change shall not
      be effective as to the other party.

      SUPPLIER CONTACT PERSONS:  KINETICS FLUID SYSTEMS, INC.

      Senior Vice President:  Joe Foster
      Phone:  (408) 935-4570
      Facsimile:  (408) 934-6302
      E-mail address:  jfoster@kineticsgroup.com

      Vice President Operations:  Brad Sander
      Phone:  (512) 246-5100
      E-mail address:  bsander@kineticsgroup.com

      Vice President Sales:  Mark Thomas
      Phone:  (408) 935-4592
      E-mail address:  mthomas@kineticsgroup.com

                                       8
<PAGE>
      Senior Director of Operations - Round Rock Division:  Mark Hutson
      Phone:  (512) 246-5103
      E-mail address:  mhutson@kineticsgroup.com

      Director of Operations - Milpitas Division:  Shireen Zekanoski
      Phone:  (408) 934-4603
      E-mail address:  szekanoski@kineticsgroup.com

      Customer Service Manager (Austin):  Geoff Chriswisser
      Phone:  (512) 246-5852
      E-mail address:  gchriswisser@kineticsgroup.com
      Cell phone:  (512) 917-4670 Pager:  (888) 789-1928

      Customer Service Manager (Milpitas):  Sapana Talwalker
      Phone:  (408) 935-7414
      Email address:  stalwalker@kineticsgroup.com
      Cell phone:  (408) 621-6605 Pager:  (408) 388-0687

      Engineering Manager:  John Rowland
      Phone:  (512) 246-5841
      E-mail address:  jrowland@kineticsgroup.com

      Quality Manager (Round Rock):  Dave Thomas
      Phone:  (512) 246-5775
      E-mail address:  dthomas@kineticsgroup.com

      Quality Manager (Milpitas):  Tina Caspar
      Phone:  (408) 935-4595
      E-mail address:  tcaspar@kineticsgroup.com

      Finance Manager (Milpitas):  Diep Ha
      Phone:  (408) 935-7470
      E-mail address:  dha@kineticsgroup.com

      Finance Manager (Round Rock):  Paul Senecal
      Phone:  (512) 246-5104
      E-mail address:  psenecal@kineticsgroup.com

      Customer Service Manager-Warranty Claims:  Mark Kitchen
      Phone:  (512) 246-5848
      E-mail address:  mkitchen@kineticsgroup.com

      Senior Counsel - Austin:  Nicol Hebert
      Phone:  (512) 246-9092
      E-mail address:  nhebert@kineticsgroup.com

                                       9
<PAGE>
      Milpitas Division Address:
      1463 Center Pointe Drive, Milpitas, CA 95035

      Austin/Round Rock Division Address:
      200 C. Parker Drive, Austin, Texas 78728

      APPLIED CONTACT PERSON:

      Craig Romick, Supply Account Team Lead, M/S 3300
      Applied Materials, Inc., 9700 Highway 290E, Austin Texas 78724
      Phone:  512-272-2535
      Facsimile:  (512) 272-3908 Attn: Craig Romick
      E-mail:  Craig_A_Romick@amat.com

      1.2.2. Notices.

      Notices required or permitted under this Agreement shall be given in
      writing, which shall include facsimile and e-mail transmission with
      receipt confirmed (either electronically or by the recipient or on behalf
      of the recipient) to the recipient, at the recipient's current business
      address, facsimile number or e-mail address, addressed to Supplier or
      Applied, as the case may be, and to the attention of the persons specified
      below, except as otherwise provided in this Agreement. If hand-delivered
      or transmitted by facsimile or e-mail, notice is effective at the time of
      receipt at the designated business address, facsimile number or e-mail
      address or on the next Business Day after receipt if receipt occurs after
      5:00 p.m. (local time of recipient) or on a non-Business Day; if sent by
      nationally recognized courier or express service (e.g., Federal Express,
      Airborne, Express Mail or equivalent service), or by mail (which shall be
      certified mail -- return receipt requested), notice is effective on the
      Business Day of receipt, or the next Business Day after receipt, if
      receipt occurs on a non-Business Day.

      The persons specified to receive notices under the Agreement as provided
      in this Section 1.2.2 are:

            FOR APPLIED,

            Craig Romick, Supply Account Team Lead, at the address given above
            in Section 1.2.1,

            with a copy to:

            Barry Quan, Vice President-Legal Affairs, Applied Materials, Inc.,
            Legal Department, 2881 Scott Blvd., Building 20, Santa Clara,
            California 95050.
            Telephone:  (408) 986-7930, Facsimile:  (408) 986-2836,
            E-mail:  Barry_Quan@amat.com;

                                       10
<PAGE>
            FOR SUPPLIER,

            Joe Foster, Senior Vice President, 2805 Mission College Blvd., Santa
            Clara, California 95054, and whose telephone and facsimile numbers
            and e-mail address are given above in Section 1.2.1,
            with a copy to:

            (a) Brad Sander, Vice President Operations at the address given
            above in Section 1.2.1, and

            (b) John Goodman, Vice President and General Counsel, 2805 Mission
            College Blvd., Santa Clara, California 95054. Telephone: (408)
            588-4422, Facsimile: (408) 576-0196, E-mail:
            jgoodman@kineticsgroup.com.

      Either party may specify that notices to it, and any required copies of
      same, be provided to no more than three persons, and notice shall be
      effective as to a party when it has been given as above provided to all
      persons so specified. Further, each party may, from time to time, change
      the persons(s) specified to receive notice under this Section 1.2.2.
      Notice of such a change shall be given to the person(s) specified to
      receive notice for the other party under this Section 1.2.2, and such
      change shall be effective when notice thereof is effective under the
      procedures of this Section 1.2.2.

In certain instances, notice may also be given to one or more "Guarantors" under
and for purposes of the "Performance Guaranty Agreement" (such terms being
defined below) relating to this Agreement. The persons to receive such notice(s)
are set out in such Performance Guaranty Agreement.

1.3.  Entire Agreement; Related Agreements; Modification; Prior Transactions.

      1.3.1.      Certain Related Agreements.

      In addition to this Agreement, the parties and certain affiliates of
      Supplier have entered into and delivered concurrently with this Agreement
      certain other agreements related to, and constituting part of the
      consideration for, this Agreement (the "Related Agreements"). The Related
      Agreements are the following:

            (i) an Acknowledgement and Supplement agreement of even date
            herewith to the Asset Purchase Agreement;

            (ii) two Acknowledgement and Supplement agreements of even date
            herewith to the two Facilities Use Agreements between the parties
            and dated, respectively, June 28, 1999, as to Applied's facilities
            in Austin, Texas, and September 20, 1999, as to Applied's facilities
            in Santa Clara County, California, as the same have been amended
            (such Facilities Use Agreements, as amended,

                                       11
<PAGE>
            being called the "FUAs");

            (iii) An Amended and Restated Intellectual Property Agreement of
            even date herewith (such agreement, as amended from time to time,
            being called the "IPA"); and

            (iv) a Performance Guaranty Agreement of even date herewith of
            Kinetics Holdings Corporation (sometimes called "KHC") and The
            Kinetics Group, Inc. (sometimes called "KGI") (such agreement, as
            amended from time to time, being called the "Performance Guaranty
            Agreement" and such corporations being collectively called
            "Guarantors") with and for the benefit of Applied.

      1.3.2. Entire Agreement.

      This Agreement and the Related Agreements set forth the entire
      understanding and agreement of the parties as to the subject matter of
      this Agreement and of the Related Agreements. From and after the Effective
      Date (defined below) of this Agreement, this Agreement and the Related
      Agreements supersede, in accordance with their respective terms and
      subject to the other provisions below in this Section 1.3.2, all prior
      agreements, understandings, negotiations and discussions between the
      parties as to the subject matter of this Agreement and of the Related
      Agreements.

            1.3.2.1. In addition to this Agreement and the Related Agreements,
            other agreements now in effect between Applied and Supplier and
            referred to in Section 1.3.2.2, clause "third" below, relate to the
            subject matter of this Agreement and provide Applied or Supplier
            with rights in or licenses of Confidential Information or
            intellectual property of the other party, or protect or limit the
            use by either of Confidential Information or intellectual property
            of the other party (the "Separate Confidential Information
            Agreements"). The Separate Confidential Information Agreements shall
            remain in effect for the respective terms thereof and each of such
            agreements shall control as to the matters covered by such Separate
            Confidential Information Agreements, subject to Section 1.3.2.2.

            1.3.2.2. In the event (and to the extent) of conflict between or
            among any of the documents set out in this Section 1.3.2.2,
            precedence shall be given as follows (except as otherwise expressly
            agreed in writing, with reference to this Agreement or to the other
            affected agreement):

                  first, to any DVA entered into by Applied and Supplier, and
                  then to the IPA ;

                  second, to this Agreement (other than its incorporated
                  Exhibits or Attachments, unless and to the extent otherwise
                  provided expressly by this Agreement);

                                       12
<PAGE>
                  third, to any DSA, and then to any applicable Separate
                  Confidential Information Agreement (including any NDA) other
                  than the IPA, a DVA or DSA;

                  fourth, to Exhibit 1 to this Agreement, and then to all
                  Attachments and other Exhibits (if any) to this Agreement;

                  fifth, to Specifications, to other technical documents
                  incorporated in this Agreement (other than Attachments), and
                  then to Authorized Demand Signals; and

                  sixth, to any of the Related Agreements that are not
                  specifically identified above for precedence.

            1.3.2.3. From and after the Effective Date (defined below), this
            Agreement supersedes and replaces in its entirety the Amended and
            Restated Comprehensive Supplier Agreement dated as of June 28, 1999,
            as amended and extended through the Effective Date (the "CSA"), so
            that the term of the CSA expires concurrently with this Agreement
            becoming effective on its Effective Date, except as to those
            obligations, rights and liabilities arising under such CSA that have
            accrued at or prior to the Effective Date, or that hereafter accrue
            with respect to transactions between the parties that have occurred
            under and pursuant to such CSA at or prior to the Effective Date
            (including, by way of example, obligations, rights and liabilities
            relating to Items provided prior to the Effective Date of this
            Agreement), as to which the CSA shall continue in effect in
            accordance with its terms. In this regard, the parties specifically
            agree (i) that pricing for Items for which an SSR or Purchase Order
            issued under the CSA has been accepted, under the procedures
            described in Section 2.1.5.1 below, prior to the Effective Date
            shall be determined under the CSA, and (ii) that, except for such
            pricing of those Items within clause (i) above, the provisions of
            this Agreement will apply to Items that are delivered after the
            Effective Date but were ordered under the CSA prior to the Effective
            Date of this Agreement.

      1.3.3. Provisions Continuing in Effect.

      Following any termination, cancellation, or expiration of this Agreement,
      the provisions of each of Articles 2, 3, 5, 9,11, 21, 22, and 27 of
      Exhibit 1 and Sections 2.9.1.1.D, 2.9.2, 4.8, 7 and 9 of this Agreement
      will remain in full force and effect, unless specifically terminated by
      mutual written agreement between the parties, until the respective stated
      expiration of such provisions. The termination, cancellation or expiration
      of this Agreement shall not relieve a party of its obligations and
      liabilities that accrue or arise under or in connection with this
      Agreement through the time of, or in connection with, termination,
      cancellation or expiration of this Agreement (or thereafter under or in
      connection with provisions that survive as set out above), which
      obligations and liabilities and related claims, demands and causes of
      action shall continue until the expiration of the applicable period for
      the bringing of claims under controlling statutes of limitation or repose.
      The various Related Agreements and Separate Confidential

                                       13
<PAGE>
      Information Agreements (including NDAs) shall terminate or continue in
      effect as provided in such agreements.

      1.3.4. Modification.

      No amendment to or modification of this Agreement will be binding unless
      in writing and signed by a duly authorized representative of each party,
      except for amendments or modifications which Applied is permitted to
      initiate by posting or notice under this Section 1.3.4. The Attachments to
      this Agreement that are identified on the List of Exhibits and Attachments
      following the signature page of this Agreement as subject to modification
      or amendment by Applied upon notice (the "Implementation Attachments"),
      will be deemed to be the most current versions of such Attachments, as
      updated and revised from time to time by Applied in accordance with this
      Section 1.3.4.

      Unless prohibited by law or by separate modification of this Agreement, to
      initiate a modification or amendment of an Implementation Attachment,
      Applied will either (i) post updates or revisions to current versions of
      such Attachment on the Applied website which shall be designated for
      Supplier's use and made available to Supplier, or (ii) provide other
      written or electronic notice to Supplier of the revision or update, which
      notice shall be sent or given to Supplier's Senior Counsel - Austin
      identified in Section 1.2.1 above.

      If Supplier fails to object within thirty (30) calendar days after the
      date (i) on which such modification or amendment to an Implementation
      Attachment was posted on Applied's website (provided that Supplier had
      timely notice of posting of such modification or amendment through notice
      on the Applied website designated for Supplier's use) or (ii) on which
      such other notice was provided to Supplier, then such Attachment, as
      modified or amended, shall be deemed to be accepted by Supplier as the
      Attachment to this Agreement and shall be effective as the applicable
      Attachment upon the expiration of such thirty (30) day period.

      Any update or revision to an Attachment that is initiated by Applied's
      posting of the update or revision on the applicable Applied web site and
      that would have the effect of amending this Agreement (other than the
      modification or amendment of the affected Attachment) shall be effective
      only if Supplier fails to object within thirty (30) days after written,
      electronic or other actual notice of such update or revision is received
      by Supplier. Notice of such an update or revision subject to this
      provision shall be given to Supplier's Senior Counsel - Austin, as above
      identified.

1.4.  Items Covered.

All Items supplied (including Services other than Development Services) to
Applied by Supplier, even if sold pursuant to a separate Purchase Order, will be
covered by this Agreement; provided that the terms, provisions and conditions of
this Agreement (if any) applicable to Services rendered pursuant to a DVA shall
be determined in accordance with the DVA. This Agreement does not apply to
goods, parts, products or services that Unit Instruments, Inc., or any other
subsidiary or affiliate of Supplier provides to Applied. This Agreement likewise
does not apply to goods, parts, products or services provided to Applied
pursuant to the currently effective Global Supply Agreement dated as of October
27, 2000 (with execution dates of October 4, 2000

                                       14
<PAGE>
and October 19, 2000), for weldments and other items provided to Applied by
Insync Systems, Inc. (now merged into, and a division of, Supplier), or pursuant
to subsequent agreements for such goods, parts, products or services, even
though Supplier is successor by merger to Insync Systems, Inc. Such other
agreement(s) for goods, parts, products or services shall continue in effect in
accordance with their respective terms, but shall not affect this Agreement. New
Items may be added to Attachment 1 upon mutual written agreement of Applied and
Supplier from time to time.

1.5.  Duration of Agreement.

This Agreement is effective and commences on and as of June 1, 2002 (the
"Effective Date").

This Agreement will remain in effect for a term of thirty-six (36) months, from
the Effective Date through May 31, 2005 (the "Initial Term"), unless and to the
extent earlier terminated or cancelled in accordance with its provisions. At any
time before expiration of the Initial Term, Applied may, at Applied's option,
extend the term of this Agreement (subject to all other provisions of this
Agreement) for an additional period of up to 6 months, by notifying Supplier in
writing of such extension. The Initial Term shall include the period of such an
extension.

2. LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK.

2.1.  Operation and Management of Orders.

      2.1.1. Operating Calendar & Holidays.

      This Agreement operates on the basis of Applied's current fiscal year
      operating calendar, shown in Attachment 2, as modified from time to time.
      Recognized holidays and operating shut down days are as shown on such
      calendar. Supplier shall, unless commercially impracticable, adjust its
      operations, holidays and any shut down days as necessary to provide all
      Items (including Services) and meet its other agreements and obligations
      in accordance with this Agreement. Applied may, in accordance with Section
      1.3.4, modify its calendar as needed for its operations, which may result
      in the requirement for production support seven days a week, twenty-four
      hours a day.

      2.1.2.      Monthly Volume Summaries.

      Supplier will prepare periodic summary reports showing quantities of FDSs
      and Modules projected by Applied for manufacture by Supplier (the "Monthly
      Volume Summaries"), and Supplier will retain a copy or electronic record
      of at least one (1) Monthly Volume Summary for each month during the term
      of this Agreement. Supplier will retain such copies and records for audit
      purposes for a minimum of twelve (12) months following the end of the
      month for which the respective Monthly Volume Summary was prepared. All of
      Applied's SPRs and other reports regarding Items or Applied Systems and
      the information provided by Applied in such SPRs and reports are Applied
      Confidential Information, to be used only by Supplier to meet its
      obligations to Applied under this Agreement and treated by Supplier as
      Confidential Information of Applied. The Monthly Volume Summaries are
      Confidential Information of each of Applied and Supplier to the

                                       15
<PAGE>
      extent of their respective Confidential Information included in, or used
      in the preparation of, any Monthly Volume Summary.

      2.1.3. Manufacture and Delivery.

      Supplier will manufacture, provide, sell and deliver all Items to Applied
      for which an Authorized Demand Signal has been issued and accepted or
      deemed accepted. Supplier will deliver all such Items to the locations, in
      the quantities, and at the times specified in or determined from the
      applicable Authorized Demand Signal, as accepted or deemed accepted, as
      such Authorized Demand Signal is modified pursuant to this Agreement and
      as otherwise required by a controlling provision of this Agreement.

            2.1.3.1.  Delivery Mechanics.

            The specific mechanics and requirements for delivery of Items to
            Applied are set out in Attachment 3, and other delivery and
            transportation terms and requirements are set out in Section 2.10.3.
            Applied and Supplier may provide, by subsequent written agreement,
            that Supplier shall manufacture and deliver Items on a lean
            manufacturing system; if so, the requirements and specific mechanics
            to be followed for lean manufacturing shall be as shown in
            Attachment 3, subject to such modifications as may be mutually
            agreed at the time.

            2.1.3.2.  Delivery Dates.

            Supplier shall deliver each Item to Applied on its Committed
            Delivery Date, as determined under Section 2.1.5.2, as the same may
            be modified pursuant to or as provided by Section 2.1.5.3 (or
            Section 2.1.4) or extended pursuant to Section 4.2.4(b). Supplier
            may make actual delivery of an Item no more than three (3) Business
            Days prior to the Committed Delivery Date; unless an earlier actual
            delivery date is permitted pursuant to Section 2.5.3. Delivery shall
            not be made after an Item is cancelled as provided in this
            Agreement, except as provided in Section 2.3.3(a). Supplier shall
            use all commercially reasonable efforts to make delivery of an Item
            on a date requested by Applied pursuant to Section 2.1.4.4. If Items
            are purchased under a Blanket Order (Bus Route) procedure, Items
            under the Blanket Order procedures shall be delivered at the date,
            time and location specified in the applicable Bus Route delivery
            requirements.

            The provisions of Section 2.1 shall control over provisions of
            Attachment 3 with regard to determination of actual and permitted
            dates of delivery.

      2.1.4. Change in Delivery Date.

            2.1.4.1. Applied may request Supplier to accelerate the manufacture,
            completion and delivery of any Item to a date other than the
            Committed Delivery Date then established under Section 2.1.5 below.
            A request for accelerated delivery shall be issued by a written or
            electronic record transmitted to Supplier to the attention of

                                       16
<PAGE>
            the Customer Service Manager or Director of Operations (including
            Senior Director of Operations) at the affected facility. A request
            for accelerated delivery may propose modification of the delivery
            date of one or more scheduled Items.

            2.1.4.2. Supplier will respond to the request for accelerated
            delivery within forty-eight (48) hours (measured during Business
            Days and under prevailing Pacific Time), after its receipt of the
            request. Supplier will include in its response the following:
            changes in price for accelerated manufacture, completion and
            delivery; impact of requested accelerated manufacture, completion
            and delivery on other Items for which an Authorized Demand Signal
            has been issued or which are listed on the most recent SPR;
            additional NSR or CCR information required; and limitations or
            requirements applicable to the response. Upon request by either
            party, Applied and Supplier will consult regarding the request for
            accelerated delivery during such forty-eight (48) hour period to
            facilitate Supplier's response and to resolve questions as to the
            request or response.

            2.1.4.3. Promptly upon receipt of Supplier's response to the request
            for accelerated delivery, Applied will review such response and
            consult with Supplier regarding any additional information needed by
            Applied or Supplier. Upon agreement of the parties pursuant to such
            request and response, Applied shall issue a revised Authorized
            Demand Signal and include in such revised Authorized Demand Signal
            the new Committed Delivery Date and all changes in price or other
            cost, established in accordance with the request and response.

            2.1.4.4. A request for a change accelerating delivery by three (3)
            Business days or less from the applicable Committed Delivery Date is
            not an accelerated delivery subject to this Section, and the
            Contract Price for the Item will not (due to the acceleration of
            delivery) be changed. Likewise, the Committed Delivery Date shall
            not be deemed to be altered, unless otherwise expressly agreed,
            pursuant to a request for accelerated delivery of three (3) Business
            days or less.

      2.1.5. Orders for Items.

      Orders for Items may be issued by Applied under the following methods of
      ordering:

            Bus Route or Blanket Order: If Bus Route Orders apply, then Applied
            will send via daily EDI transmission an Authorized Demand Signal to
            Supplier containing Applied's material requirements for Items, which
            will be organized according to part numbers and will represent
            Applied's daily purchase from Supplier. Unless otherwise agreed by
            Applied and Supplier by written amendment to this Agreement, the
            Blanket Order or Bus Route method shall not be used for the ordering
            and delivery of Items.

            Purchase Order: As needed by Applied, Applied will issue Authorized
            Demand Signals for one or more Items to Supplier under the
            procedures set out in Section 2.1.5.1. Each Authorized Demand Signal
            shall apply to the particular Item(s) specified in that signal.

                                       17
<PAGE>
            Authorized Demand Signals for orders by Applied under this Agreement
            may be issued by Applied using any of the methods provided for in
            Section 2.1.5.1.

            2.1.5.1.  Authorized Demand Signals.

            Each Authorized Demand Signal issued by Applied constitutes
            Applied's offer to purchase from Supplier, in accordance with and
            subject to this Agreement, the Item(s) identified in such Authorized
            Demand Signal. Supplier agrees that (subject to the refusal terms of
            this Agreement and to Section 4.11 of this Agreement) it will accept
            the Authorized Demand Signals issued by Applied and sell, provide
            and deliver, in accordance with and subject to this Agreement
            (including delivery in accordance with provisions regarding
            Committed Delivery Date), all Items for which an Authorized Demand
            Signal is accepted or deemed accepted by Supplier. Issuance of a
            Purchase Order as an Authorized Demand Signal may be made by e-mail
            transmission or by facsimile transmission, or, if such transmission
            services are not available, by mail or hand delivery, and shall be
            effective when transmitted or delivered to Supplier's Customer
            Service Manager - Austin, or Customer Service Manager - Milpitas, as
            appropriate. Issuance of an Authorized Demand Signal to Supplier
            through website posting by Applied and acceptance of such posted
            Authorized Demand Signals is effective between the parties as
            provided in other provisions below in this Section 2.1.5.1.

            A.    Issuance of Authorized Demand Signal.

                  1. VMO or Pilot FDSs, NSOs, and Modules. An Authorized Demand
                  Signal for Volume Manufacturing FDSs, Pilot Manufacturing
                  FDSs, NSOs or Modules is issued by Applied posting, at the
                  Applied website designated for Supplier's access (or, at such
                  times that website access is unavailable, by transmission by
                  e-mail or facsimile to, or other delivery to, Supplier's
                  Customer Service Manager - Austin or Milpitas, as
                  appropriate), an SSR, NSR, or equivalent spreadsheet, report
                  or record of basic FDS or other Item Specification, which
                  identifies the FDS or other Item(s) being ordered and includes
                  the Applied Project Number or Applied "Spec Id" number. If
                  Applied elects to provide an Applied Configured BOM pursuant
                  to Section 2.1.5.1.A.4.c below (Coordination as to Services),
                  Applied shall issue (or make available by electronic means)
                  the Applied Configured BOM as part of the Authorized Demand
                  Signal.

                  The SSR, NSR, or equivalent spreadsheet, report or record so
                  posted or furnished (and including an Applied Configured BOM
                  if such is provided) is an "Authorized Demand Signal."

                  Applied may also order Modules through an RFP/RFQ process and
                  issuance of a Purchase Order, as provided in Section
                  2.1.5.1.A.3 below.

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<PAGE>
                  2. R&D. An Authorized Demand Signal for Items for Applied's
                  R&D purposes is issued by Applied in either of the following
                  ways:

                        (a) for FDSs, Modules and NSOs that do not require
                        Design Services or Development Services, by issuing (or
                        furnishing) an SSR, NSR or equivalent spreadsheet,
                        report or record of basic Specification to Supplier in
                        the manner provided in Paragraph A.1 above; or

                        (b) for any Item to be manufactured in connection with
                        or as a deliverable under a Design Services Agreement or
                        Development Services Agreement, by issuance to Supplier
                        of the Purchase Order that is a part of the relevant
                        Design Services Agreement, or the Purchase Order for the
                        Development Services Agreement, in each instance based
                        on Supplier's proposals or quotations received by
                        Applied through an RFP/RFQ process and as agreed by the
                        parties pursuant to the RFP/RFQ process.

                  The SSR, NSR or equivalent spreadsheet, report or record, or
                  Purchase Order, for FDS or other Items ordered for R&D
                  purposes is an "Authorized Demand Signal." Authorized Demand
                  Signals for R&D purposes shall be issued by electronic
                  transmission (including e-mail or facsimile transmission), or
                  by delivery of a written Purchase Order to Supplier to the
                  attention of Supplier's Customer Service Manager -Milpitas. If
                  an Item is to be manufactured in connection with or as a
                  deliverable in connection with Design Services or Development
                  Services, the Authorized Demand Signal must include the
                  Purchase Order for such Services and the Authorized Demand
                  Signal is not effective until that Purchase Order is accepted
                  or deemed accepted.

                  3. Spares and Certain Modules. An Authorized Demand Signal for
                  Spares or for Modules not ordered through the issuance and
                  acceptance of an SSR ("Non SSR Modules") is issued by Applied
                  when it issues a Purchase Order to Supplier, to the attention
                  of Supplier's Customer Service Manager - Warranty based on
                  Supplier's proposals or quotations received by Applied through
                  the RFP/RFQ process. A Purchase Order so issued is an
                  "Authorized Demand Signal." A Purchase Order issued as an
                  Authorized Demand Signal for Spares or Non SSR Modules, issued
                  pursuant to an RFP/RFQ process and in conformity with
                  Supplier's proposal or quotation (or as agreed by the parties
                  pursuant to such process), is deemed accepted on issuance.

                  4. Services. An Authorized Demand Signal for Services is
                  issued as follows:

                        a. Configuration Engineering Services, CES Services and
                        CCR Services.

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<PAGE>
                        (i)   For Configuration Engineering Services, by issuing
                              the SSR for the Applied System for which
                              Configuration Engineering is to be performed, or,
                              as to Configuration Engineering Services that are
                              CCR Services incident to a CCR, by issuing the
                              CCR.

                        (ii)  For CES Services, by issuing an NSR incident to an
                              SSR, and for CES Services that are CCR Services
                              incident to a CCR, by issuing the CCR.

                  Issuance of an NSR, SSR, CCR or Purchase Order as to Services
                  under this Section 2.1.5.1.A.4.a shall be made as follows:

                        with respect to VMO or Pilot FDSs, NSOs or Modules, by
                        posting electronic record of the NSR or SSR on the
                        Applied website designated by Supplier's access (or as
                        otherwise provided by Section 2.1.5.1.A as to Purchase
                        Orders, and in other circumstances as there provided
                        for), or,

                              with respect to NSRs, SSRs or Purchase Orders for
                              Items for which posting is not used, by e-mail or
                              facsimile transmission (or as otherwise provided
                              by Section 2.1.5.1.A as to Purchase Orders, and in
                              other circumstances as there provided for), or

                              with respect to CCR Services, by e-mail or
                              facsimile transmission, or by hand delivery (if
                              e-mail or facsimile transmission is not
                              available), of the CCR to Supplier, to the
                              attention of the Supplier contact person to whom
                              the initial order to which the CCR relates was
                              issued.

                        b. Other Services.

                  All other Services (including NPT Services) shall be ordered
                  through a Request for Proposal/Request for Quotation process,
                  pursuant to which the Authorized Demand Signal will be an
                  Applied Purchase Order issued in accordance with this Section
                  2.1.5.1.A.4.b. Design Services or Development Services shall
                  only be ordered through an RFP/RFQ process and by issuance of
                  an Applied Purchase Order conforming to Supplier's response to
                  the RFP/RFQ (or as is otherwise agreed by the parties pursuant
                  to the RFP/RFQ process). If Item(s) are to be manufactured in
                  connection with, or as a deliverable under, a Design Services
                  Agreement or Development Services Agreement, the Purchase
                  Order that is a part of the Design Services Agreement, or that
                  is issued for the Development Services Agreement, must also
                  include the order for such Item(s). Further, a Purchase Order
                  for Design Services or for Development Services shall also be
                  issued in accordance with the IPA (including provisions of the
                  IPA applicable to a DSA or DVA.) The IPA (and any DVA, as
                  applicable)

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<PAGE>
                  shall control and have priority in the event of conflict with
                  this Agreement in accordance with Section 1.3.2.2 above.

                     c. Coordination as to Services.

                  (i) Applied may, at the time it issues the Authorized Demand
                  Signal for an Item, elect to provide to Supplier the
                  Configured BOM for the Item that would otherwise be prepared
                  by Supplier as part of its Configuration Engineering Services
                  (the "Applied Configured BOM"). If Applied elects to provide
                  an Applied Configured BOM for an Item, the Authorized Demand
                  Signal for the Item will be the SSR, NSR or equivalent
                  spreadsheet, report or record plus the Applied Configured BOM
                  issued with and included in the SSR, NSR or equivalent
                  document.

                  If Applied does not issue an Applied Configured BOM as part of
                  its Authorized Demand Signal in accordance with this Section
                  2.1.5.1.A.4.c, then Supplier shall perform those Services that
                  are ordered pursuant to the Authorized Demand Signal as
                  determined under other provisions of Section 2.1.5.1.A.4, and
                  Applied shall pay for Services so performed at the rates
                  applicable under the cost model (Attachment 1).

                  (ii) Applied shall be responsible for engineering services in
                  the preparation of an Applied Configured BOM. Supplier shall
                  not be required to perform or provide engineering review of an
                  Applied Configured BOM prior to commencing the manufacture of
                  the Item.

                  (iii) Supplier will advise Applied of defects in an Applied
                  Configured BOM that are identified by Supplier in the
                  manufacture of the Item. If an Applied Configured BOM is
                  defective:

                        (a) Supplier is excused from compliance with the
                        Committed Delivery Date applicable at the time the
                        defect in the Applied Configured BOM was identified;

                        (b) Applied will re-engineer the Applied Configured BOM
                        to correct the defect(s), or, upon mutual written
                        agreement pursuant to an RFP/RFQ process (which includes
                        e-mail and facsimile records of the agreement), Supplier
                        will re-engineer the Applied Configured BOM to correct
                        the defect(s) pursuant to the Purchase Order issued
                        through the RFP/RFQ process;

                        (c) Changes in Piece Parts for an Item that result from
                        re-engineering of an Applied Configured BOM pursuant to
                        this Section 2.1.5.1.A.4.c. (excluding changes involving
                        digital line-side configurable MFCs) shall be treated as
                        ***s in accordance

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                        with Section 2.8 of this Agreement if occurring within
                        the period covered by Section 2.8.3.1;

                        (d) Applied and Supplier shall negotiate in good faith
                        to determine an adjusted Committed Delivery Date; and

                        (e) Appropriate written modifications of the Committed
                        Delivery Date shall be made upon mutual agreement.

                  (iv) Supplier shall review the documentation and information
                  provided as part of each Authorized Demand Signal and shall
                  coordinate its Services so that Supplier provides or performs
                  those Services necessary or appropriate under the Authorized
                  Demand Signal and its related documentation or information.

                  (v) The parties may, by mutual written agreement, amend the
                  scope of or charges for Services for repeat build Items.

                     d. Quotation of CES Charges.

                  (i) Applied may require that Supplier provide "Quoted CES
                  Charges" (as such term is defined below) as to one or more
                  product line(s), type(s) or model(s) of Applied Systems. The
                  Applied SAT Team Lead for Supplier shall notify Supplier's
                  Engineering Manager that Quoted CES Charges are required, and
                  such notice shall specify the Applied product line(s), type(s)
                  or model(s) of Applied Systems for which Quoted CES Hours are
                  required, the date on which Supplier shall commence providing
                  such quotes, and the person at Applied to whom the Quoted CES
                  Charges shall be sent. Quotations setting out Quoted CES
                  Charges shall be provided by Supplier by e-mail or facsimile
                  transmission to the person so identified.

                  (ii) "Quoted CES Charges" means the charges for CES Services
                  that Supplier is to perform pursuant to an Authorized Demand
                  Signal for CES Services under Section 2.1.5.1.A.4.a that are
                  in excess of 20 hours as to a Volume Manufacturing FDS or 40
                  hours as to a Pilot Manufacturing FDS, or such higher
                  reportable charges threshold as may be specified in the notice
                  requiring Supplier to provide quotations. Supplier may charge,
                  in addition to Quoted CES Charges, for two (2) hours of
                  engineering services for the release of a Configured BOM
                  through Applied's ECO procedures applicable to an Item when
                  Supplier performs Configuration Engineering Services or CCR
                  Services as to the Configured BOM, without having to include
                  such charges for release of the Configured BOM in its quote.

                  (iii) If Quoted CES Charges are required with respect to a
                  Volume Manufacturing FDS or Pilot Manufacturing FDS for which
                  the Authorized Demand Signal (for the FDS and related CES
                  Services) is the NSR incident to the primary SSR (a
                  "Conditional ADS") Supplier shall accept

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<PAGE>
                  or refuse the Conditional ADS within the time period otherwise
                  applicable to that Authorized Demand Signal. The obligations
                  of Supplier and Applied with respect to a Conditional ADS upon
                  its acceptance under other provisions of Section 2.1.5.1 are,
                  however, subject to subsequent agreement on Quoted CES
                  Charges, as provided in this Section 2.1.5.1.A.4.d. Within two
                  (2) Business Days after the date of acceptance of a
                  Conditional ADS, Supplier shall provide its quotation of hours
                  and amounts to be charged for Quoted CES Services to Applied.
                  Until Applied accepts (or is deemed to have accepted) the time
                  and amount for Quoted CES Services shown on the quotation of
                  Quoted CES Charges, the affected Conditional ADS shall be
                  subject to Applied's acceptance of the quote for Quoted CES
                  Services and until such acceptance the Conditional ADS shall
                  not be binding as to Applied; Supplier, however, shall not
                  revoke its acceptance of the Conditional ADS or withdraw its
                  quote of Quoted CES Charges.

                  (iv) Applied may reject or accept a quotation of Quoted CES
                  Services by e-mail, facsimile or other record or writing (but
                  not by telephone or voice-mail) at any time prior to the time
                  acceptance is deemed to occur by the following sentence. If a
                  quote for Quoted CES Services is not rejected by Applied
                  within two (2) Business Days after the quote is issued to
                  Applied, then the quote for Quoted CES Services shall be
                  deemed accepted by Applied. Upon Applied's acceptance of the
                  quotation of Quoted CES Charges, the related Conditional ADS
                  Demand Signal becomes binding on and agreed to by both
                  Supplier and Applied at such time. The Committed Delivery Date
                  shall be determined based on such date of acceptance of the
                  quotation of Quoted CES Services. Applied's notice of
                  rejection of Quoted CES Services shall be issued to Supplier's
                  Engineering Manager. If Applied rejects a quote for Quoted CES
                  Services, then Supplier and Applied shall promptly negotiate
                  as to the scope, time and costs for Quoted CES Services. If
                  the parties agree on the scope, time and costs for Quoted CES
                  Services after a quote is rejected, then Supplier shall issue
                  a revised quote for Quoted CES Services and upon Applied's
                  issuance of an acceptance of such revised quote, the related
                  Authorized Demand Signal shall be binding on and is agreed to
                  by both Supplier, and the Committed Delivery Date shall be
                  determined based on the date of acceptance of the revised
                  quote by Applied.

                  (v) Except in those instances in which a quotation of Quoted
                  CES Charges applies and has been accepted, CCR Services are
                  not subject to the procedures for quotation and acceptance in
                  this Section 2.1.5.1.A.4.d. If, after a quote of Quoted CES
                  Charges has been accepted, Applied changes the relevant SSR or
                  NSR and such change affects CES Services previously quoted and
                  accepted, then (a) Supplier shall promptly requote its Quoted
                  CES Charges to include additional CES Services (or CCR
                  Services) resulting from the changes in SSR or NSR, (b)
                  Applied shall promptly accept or reject the Quoted CES
                  Charges, as so requoted,

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<PAGE>
                  (c) requoted Quoted CES Charges accepted by Applied shall
                  become part of the Contract Price of the Item(s) affected; and
                  (d) the parties shall negotiate in good faith to determine an
                  adjusted Committed Delivery Date (if any) due to changes in
                  the SSR or NSR that adversely affect Supplier's ability to
                  meet the otherwise applicable Committed Delivery Date.

                  (vi) A charge for up to two (2) hours for engineering services
                  for release of a Configured BOM through Applied's ECO
                  procedures applicable to the Item may be made in addition to
                  Quoted CES Services.

            B. Acceptance and Refusal. Each Authorized Demand Signal issued by
            Applied in compliance with Section 2.1.5.1.A and not timely refused
            by Supplier as provided by this Section 2.1.5.1.B is agreed to have
            been accepted and is effective between Applied and Supplier upon the
            expiration of the period specified for Supplier's refusal.

                  1. VMO or Pilot FDSs, NSOs and Modules. Supplier may refuse an
                  Authorized Demand Signal issued by Applied for purchases
                  within the scope of Paragraph A.1. (a) for error by Applied in
                  the SSR, CCR, or NSR (or equivalent document), (b) as
                  exceeding Supplier's capacity or flexibility requirements
                  determined under Section 2.5 (except as to CCRs), or (c) for
                  failure to provide a required NSR or to provide an Applied
                  Configured BOM that should have been part of the Authorized
                  Demand Signal under Section 2.1.5.1.A.4.c, but not for other
                  reasons. Supplier shall effect a refusal to accept an SSR,
                  CCR, or NSR (or equivalent document) by posting its refusal on
                  Supplier's Master Production Schedule document as maintained
                  on an Applied server, or (if server access is unavailable) by
                  e-mail or facsimile transmission to the Applied purchasing
                  representative for the Applied organization issuing the SSR,
                  CCR, or NSR. Refusal shall be made within ninety-six (96)
                  hours (measured during Business Days and under prevailing
                  Pacific Time) after Applied's issuance of the Authorized
                  Demand Signal for orders in this category.

                  2. R&D. Supplier may refuse an Authorized Demand Signal issued
                  by Applied initiated by the SSR process for R&D purchases
                  within the scope of Paragraph A.2 for (a) error by Applied in
                  the SSR or NSR (or equivalent document), (b) incomplete design
                  or unresolved manufacturing issues, (c) as exceeding
                  Supplier's capacity or flexibility requirements under Section
                  2.5 below, or (d) failure to provide a required NSR, but not
                  otherwise. Supplier shall effect a refusal to accept an R&D
                  SSR order (or equivalent) by posting its refusal on Supplier's
                  Master Production Schedule document as maintained on an
                  Applied server, or (if server access is unavailable) by e-mail
                  or facsimile transmission to the purchasing representative for
                  the Applied organization issuing the Authorized Demand Signal.
                  Refusal shall be made within five (5) Business Days after
                  posting of the R&D SSR. A Purchase Order issued as

                                       24
<PAGE>
                  an Authorized Demand Signal for an R&D purchase pursuant to an
                  RFQ/RFP process and in conformity with the proposal or
                  quotation received from Supplier and the requirements of
                  Section 2.1.5.1.A.2 where applicable (or as agreed by the
                  parties pursuant to such RFP/RFQ process) is deemed accepted
                  upon its issuance.

                  3. Services. With respect to those Standard Services that are
                  required for or are incident to the manufacture of an Item or
                  Items for which the Authorized Demand Signal is an SSR or NSR
                  (or equivalent spreadsheet or record), the corresponding
                  Authorized Demand Signal for Standard Services is accepted or
                  deemed accepted upon and by the acceptance or deemed
                  acceptance of the SSR or NSR. An Authorized Demand Signal for
                  CCR Services is deemed accepted upon and by acceptance or
                  deemed acceptance of the CCR under Section 2.1.5.1.B.1. A
                  Purchase Order constituting an Authorized Demand Signal for
                  other Services, issued in accordance with Section 2.1.5.1.A.4,
                  is deemed accepted upon issuance, whether for Services
                  required for or incident to manufacture of an Item or Items,
                  or otherwise.

                  4. Assurance to Supplier. In addition to the matters set out
                  above in this Section 2.1.5.1.B as grounds for refusal of an
                  Authorized Demand Signal, Supplier may also refuse an
                  Authorized Demand Signal in the circumstances allowed by
                  Section 2609 of the UCC.

            2.1.5.2.  Committed Delivery Dates.

                  A. Except as provided for in Paragraph B, C or D below in this
                  Section 2.1.5.2, the Committed Delivery Date for Volume, Pilot
                  and R&D Items shall be determined in accordance with
                  applicable cycle times in effect at the time the Authorized
                  Demand Signal is accepted or deemed accepted under the
                  following schedule:

                        Volume: From the date of acceptance or deemed acceptance
                        of Authorized Demand Signal ***.

                        Pilot: From the date of acceptance or deemed acceptance
                        of Authorized Demand Signal ***.

                        R&D: From the date of acceptance or deemed acceptance of
                        Authorized Demand Signal when issued by SSR, ***; and,
                        for R&D Items for which a Purchase Order is issued, ***
                        from the date of issuance of the Purchase Order, unless
                        another date is specified in the Purchase Order.

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                  B. The Committed Delivery Date for NSO Items shall be *** from
                  the date of acceptance or deemed acceptance of the Authorized
                  Demand Signal; the Committed Delivery Date for Modules shall
                  be *** from the date of acceptance or deemed acceptance of the
                  Authorized Demand Signal.

                  C. Services for Items ordered through an SSR, NSR, CCR or
                  equivalent process shall be provided and completed as required
                  to achieve the applicable Committed Delivery Date for the
                  Items. Services for which the Authorized Demand Signal is a
                  Purchase Order (or DSA or DVA, if applicable) shall be
                  provided in accordance with the applicable Purchase Order (or
                  DSA or DVA, if applicable) and its Committed Delivery Date or
                  other delivery or completion requirements of such Purchase
                  Order (or DSA or DVA, if applicable).

                  D. For any Items not otherwise governed by the preceding terms
                  for which the initial Authorized Demand Signal is an Applied
                  Purchase Order, the Committed Delivery Date shall be the
                  delivery date set out in such Purchase Order.

                  E. By mutual written agreement, the parties may amend the
                  cycle times provided in this Section 2.1.5.2 with respect to
                  one or more Item(s). The parties will consult together,
                  identify and, upon mutual written agreement, implement
                  reductions in cycle time for repeat build Item(s).

            2.1.5.3 Modification of Committed Delivery Dates.

                  A. For Items for which the Committed Delivery Date is
                  established pursuant to Section 2.1.5.2.A or B, the Committed
                  Delivery Date may be changed only with Supplier's approval;
                  provided that any Committed Delivery Date may be changed,
                  without Supplier's approval, as provided in Section 2.3.2. The
                  delivery date for an Item as modified as provided in Section
                  2.3.2 shall become the "Committed Delivery Date" for such
                  Item.

                  B. For Items for which the Committed Delivery Date is
                  established by a Purchase Order issued under Sections 2.1.5.1
                  and 2.1.5.2, the Committed Delivery Date shall be modified
                  only through issuance of a revised Purchase Order, or pursuant
                  to Section 2.3.2.

                  C. The Committed Delivery Date for an Item may also be
                  modified pursuant to Section 2.1.4 or Section 2.1.5.1.A.4.c.
                  or d.

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            2.1.6. Electronic Commerce.

            For transactions conducted by electronic means (other than
            facsimile, internet or e-mail transmission), Supplier is required to
            communicate with Applied using the then current EDI ANSI standards
            and encouraged to use either GEIS, EDICT or other approved software.
            Facsimile, internet and e-mail transmissions shall be made using
            commercially available systems compatible with Applied's e-mail,
            internet and facsimile applications.

            The parties agree that they shall conduct transactions hereunder by
            various electronic means and will rely upon electronic means to
            issue Authorized Demand Signals, to enter into purchase and sale
            transactions, and to exchange delivery and order information under
            this Agreement. To the extent electronic means are not accessible or
            become otherwise unavailable due to technical difficulties or due to
            the effect of any law or regulation governing electronic
            transactions (collectively "Unavailability"), the parties agree: (1)
            that any transactions entered into, and any delivery or order
            information received, by electronic means prior to the
            Unavailability date will remain valid, and Supplier and Applied
            shall honor their respective obligations; and (2) that they will
            continue to conduct their transactions, to the extent of the
            Unavailability, by other than electronic means, such as written form
            or fax as contemplated in Section 2.1.5 of this Agreement. This
            Agreement shall not require all transactions to be conducted by
            electronic means. If required by applicable law, a separate
            agreement concerning electronic transactions between Applied and
            Supplier will set out other terms that will control as to certain
            aspects of electronic transactions.

            2.1.7. Pro Forma.

                  2.1.7.1. Estimated Pro Forma.

                  No later than three (3) Business Days prior to Supplier's
                  shipment of each Item to Applied for which the Contract Price
                  is determined under Attachment 1, Supplier shall transmit its
                  preliminary "pro forma invoice" (a "Pro Forma") for such Item.
                  The preliminary Pro Forma shall identify the Item(s) covered,
                  shall calculate the Contract Price by applying the appropriate
                  elements of the cost model set out in Attachment 1, and shall
                  specify separately any charges (stated separately as to each
                  applicable category) for ***s, Reconfigure Items, Relabel
                  Items, Restock Items (as such terms are defined below), and
                  any other charges included as applicable to the Item(s) but
                  not provided for in Attachment 1. The preliminary Pro Forma
                  shall be delivered by e-mail (or upon request by Applied, by
                  fax or hand delivery) to the finance representative of the
                  Applied organization issuing the Authorized Demand Signal, and
                  to such other persons as Applied may reasonably request. The
                  preliminary Pro Forma shall identify charges for Standard
                  Services by category.

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                  2.1.7.2. Final Pro Forma.

                  At the time of Supplier's shipment of each Item to Applied for
                  which the Contract Price is determined under Attachment 1,
                  Supplier shall transmit to Applied its final Pro Forma for
                  such Item. The final Pro Forma shall contain all information,
                  costs and charges applicable to the Item, including all
                  elements described in Section 2.1.7.1, and shall be delivered
                  in the manner and to the persons specified in Section 2.1.7.1.
                  The final Pro Forma shall further identify separately for each
                  category of Standard Services the charges for that category of
                  Service and the portions of such charges attributable to
                  Configuration Engineering Services, CES Services, and
                  engineering for the release of the Bill of Materials for the
                  Item through Applied's ECO procedures, as applicable.

2.2.  Definition of Terms for Certain Provisions Affecting Prices or Charges.

      2.2.1 The definitions set out in this Section shall apply in determining
      charges, credits and payments under Sections 2.8 (***), 2.14 (Provisions
      for Reconfiguration or Restocking), 3.1.4 (Further Agreements as to
      Pricing) through 3.1.6 (Adjustment for ***), and 4.11 (Wind Down
      Provisions).

      Each of these sections will provide further definitions or procedures that
      will control the particular matters to which it applies.

      2.2.2 For the purposes of Section 2.2 and the sections identified in
      Section 2.2.1, Piece Parts (including MFCs) installed on or removed from
      an Item are classified in one of the following categories:

            i)    NonReusable Materials

            ii)   NonConsumable Materials

            iii)  NonConsumable MFCs

            iv)   Consumable Materials

            v)    Consumable MFCs

            vi)   Floor Stock Scrap.

      2.2.3 The following provisions and definitions apply generally for the
      purposes of Section 2.2 and the Sections indicated above:

            (a) "NonReusable Materials" means those Piece Parts, excluding Floor
            Stock Scrap, used in the manufacture of an Item that are (i) missing
            or damaged at the time of inspection prior to disassembly and
            teardown (as Reconfigure or Restock

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            Items only), (ii) damaged in the course of disassembly and teardown
            when using commercially reasonable practices, or (iii) obsolete and
            no longer meet current revision levels of applicable specifications.

            (b) "Floor Stock Scrap" means those Piece Parts removed from an Item
            in the course of disassembly and teardown that have a unit cost of
            $10.00 or less.

            (c) "Consumable Materials" are all recoverable Piece Parts for an
            Item other than NonReusable Materials, NonConsumable Materials,
            NonConsumable MFCs and Floor Stock Scrap.

            (d) "NonConsumable Materials" consists of Bus Route NonConsumable
            Materials, and Spot Buy NonConsumable Materials.

            (e) "Bus Route NonConsumable Materials" are those *** Piece Parts
            for an Item that *** on a Bus Route basis and have been used in, or
            delivered to Supplier for, the manufacture of the Item at the
            Relevant Date that are *** (x) Supplier's *** for such Piece Parts
            over the *** following the Relevant Date times (y) ***.

            (f) "Spot Buy NonConsumable Materials" are those *** Piece Parts for
            an Item that *** on a Spot Buy basis and have been used in, or
            delivered to Supplier for (or for which Supplier has issued its
            non-cancelable purchase order), the manufacture of the Item at the
            Relevant Date, that are *** (x) Supplier's *** for such Piece Parts
            over the *** following the Relevant Date, times (y) ***.

            (g) "NonConsumable MFCs" are those MFCs (excluding *** configurable
            MFCs) that have been used in, or delivered to Supplier for (or for
            which Supplier has issued its non-cancelable purchase order), the
            manufacture of the Item at the Relevant Date, and that are in excess
            of Supplier's then applicable *** (calculated separately for Spot
            Buy and Bus Route MFCs using the methodology for Spot Buy
            NonConsumable Materials and for Bus Route NonConsumable Materials)
            for such MFCs current at the Relevant Date. NonConsumable MFCs shall
            be handled only under provisions for NonConsumable MFCs, and not
            through charges for NonConsumable Materials.

            (h) Supplier's "Current Average Cost of Materials" shall be the
            average cost to Supplier calculated with respect to quantities ***
            and taking into account the *** of the affected Piece Part under the
            method employed by Supplier on the Effective Date and in accordance
            with generally accepted accounting principles in effect in the
            United States of America and consistently applied. The "Current
            Average Cost of Materials" as so determined is subject to adjustment
            under Sections 3.1.5 and 3.1.6 of this Agreement.

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            (i) Supplier's "Standard Cost of Materials" is the materials cost
            charged by Supplier to Applied for Piece Parts incorporated in Items
            sold to Applied and conforming to the schedule or database of
            materials costs then in effect and maintained by Supplier on its
            Oracle (or other enterprise accounting system) database. The
            "Standard Cost of Materials" as so determined is subject to
            adjustment under Sections 3.1.5 and 3.1.6 of this Agreement.

            (j) "MRP Demand" means the demand for an affected Piece Part under
            the manufacturing requirements planning standards employed in the
            industry.

            (k)   "Relevant Date" means the following:

                  1) For *** charges (Section 2.8.3), the date on which the ***
                  is requested by Applied.

                  2) For Restock Items and Reconfigure Items (Section 2.14), the
                  date on which the Item is classified by Applied as a Restock
                  Item or Reconfigure Item.

            (l) Each Piece Part shall be included in only one category of
            charge.

            (m) Supplier shall return to Applied's Asset Recovery Management
            organization, or destroy if so instructed by Applied, all Piece
            Parts for which a cancellation charge is made, except for Floor
            Stock Scrap and NonConsumable MFCs (to be retained by Supplier).

2.3.  Cancellation of Items.

      2.3.1.      Items Subject to Cancellation.

      Applied may cancel Items in accordance with this Section 2.3 at any time
      by written or electronic notice (but not telephone or verbal notice) to
      Supplier's Customer Service Manager (Austin or Milpitas, as applicable) as
      designated in Section 1.2, between (a) the date on which Applied's
      Authorized Demand Signal has been accepted or deemed accepted and (b) the
      Committed Delivery Date. Applied may withdraw order(s) for Item(s) set out
      in Authorized Demand Signal(s) issued, but not accepted or deemed
      accepted, at any time prior to acceptance or deemed acceptance.

      2.3.2.      Deferral.

      Without cancellation of an Item, Applied may defer the delivery date of
      any Item(s) for a period of up to *** following the initially applicable
      Committed Delivery Date ***. To defer delivery, Applied shall give notice
      of deferral, to the Supplier contact person and in the manner provided
      under Section 2.3.1, no later than *** before the Committed Delivery Date
      in effect at the time of deferral; provided that the cumulative period of

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      deferral as to each Item shall not exceed *** from the initially
      applicable Committed Delivery Date.

      In exercising its rights of deferral under this Section 2.3.2, Applied
      will consult with Supplier with respect to the date that will become the
      new Committed Delivery Date resulting from deferral so that, to the extent
      consistent with Applied's requirements for manufacturing and shipment of
      Applied Systems, such new Committed Delivery Date is not unreasonably
      burdensome to Supplier, taking into account the available manufacturing
      capacity and flexibility capabilities of Supplier through the new
      Committed Delivery Date. Applied shall, however, be entitled to set the
      new Committed Delivery Date as required for its timely manufacturing and
      shipment of Applied Systems.

      2.3.3.      Cancellation.

      If Applied cancels an Item (including as a cancellation any Item as to
      which Applied does not initiate delivery of an Item within the *** period
      provided by Section 2.3.2 following a deferral), the costs, expenses and
      charges arising from such cancellation (including failure to initiate
      delivery) shall be governed by the following terms:

            (a) If cancellation occurs less than *** calendar days before the
            Committed Delivery Date, then Applied shall purchase the Item at its
            ***, the Item shall be delivered to Applied only if requested by
            Applied, and the Item may be classified by Applied as a *** Item
            under Section *** below. Applied shall have no obligation to
            Supplier arising from cancellation except those under this Section
            2.3.3(a).

            (b) All costs, expenses and charges for cancellation of Items, other
            than cancellations to which Section 2.3.3(a) applies, are accounted
            for and included in the cost or pricing model (Attachment 1) and
            shall be the sole responsibility of Supplier. Applied shall have no
            obligation to Supplier arising from cancellations to which Section
            2.3.3(a) does not apply.

      2.3.4.      Applicability; Payment.

            (a) If an Item that has been deferred under Section 2.3.2 is
            subsequently cancelled, Section 2.3.3(a) applies if either (a) the
            cancellation occurs *** before the Committed Delivery Date as then
            applicable following deferral, or (b) the Item was initially
            deferred *** prior to the original Committed Delivery Date.

            (b) The Pro Forma for an Item purchased pursuant to Section 2.3.3(a)
            shall be issued by Supplier to Applied within *** after the date on
            which cancellation becomes effective, and such purchase amount shall
            be payable (and subject to prompt payment discount) under the terms
            of Section 2.11.

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      2.3.5.      Other Rights.

      Applied's rights of cancellation are in addition to, and shall be
      independent of its rights under, and the limitations of, Section 2.14 of
      this Agreement, except as to Items that become classified under Section
      2.14 pursuant to Section 2.3.3(a).

      2.3.6.      Services.

      If Services for which a Purchase Order was issued are cancelled, and such
      cancelled Services are not CES Services, Configuration Engineering
      Services or CCR Services performed on a cancelled Item, Supplier shall
      charge for its Services actually performed through the date of
      cancellation, at rates and in accordance with the applicable Purchase
      Order.

2.4.  Response Time, Turnaround and Implementation Time.

This Section establishes the methods by which Applied will communicate its
Production Issues to Supplier and the time periods for Supplier to respond and
implement solutions.

      2.4.1.      Production Issues.

      A "Production Issue" is an interruption or stoppage of any of Applied's
      manufacturing operations in the United States of America (as, or
      equivalent to, a "line down" situation) that results from a failure of an
      Item to conform to warranty, from other defect in or damage to an Item
      delivered by Supplier, a failure or interruption in the timely delivery of
      Items by Supplier on Committed Delivery Dates, or from other failure in
      Supplier's performance under this Agreement. Applied shall notify Supplier
      of a Production Issue by telephone, cell-phone or pager to the following
      persons:

            Supplier's Customer Service Manager at Austin or Milpitas, as
            appropriate, using the contact information set out in Section 1.2.1.

      Supplier shall contact the Applied originator of a notice of Production
      Issue within *** of the issuance by Applied of the notice of a Production
      Issue. This notice and response procedure is not subject to Section 1.2.2.

      2.4.2.      Turnaround and Implementation Time.

      Supplier will, in the case of a Production Issue, repair, replace and
      correct Item(s), deliver (or restore delivery of) Items, and otherwise
      resolve and correct such Production Issue in accordance with the following
      requirements:

            (a) Supplier shall commence its repair, replacement, correction or
            solution of a Production Issue within one (1) hour after its
            response to Applied and shall complete the repair, replacement,
            correction or solution within the time period

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            necessary to meet Applied's production requirements, not to exceed
            *** after its response to Applied, unless a longer time is required
            for completion in accordance with best practices in the industry.

            (b) Supplier shall provide timely status reports to Applied
            regarding the repair, replacement, correction or solution to assist
            Applied in managing its manufacturing operations affected by the
            Production Issue.

2.5.  Capacity Planning and Flexibility Requirements.

      2.5.1 Capacity Planning.

            (a) Supplier will use commercially reasonable efforts to plan its
      manufacturing capacity, including materials, staff, engineering support,
      facilities, and other production factors in order to:

            have capacity adequate for projected quantities and projected
            delivery dates shown in Applied's SPR, as released to Supplier and
            as revised from time to time (and at least weekly);

            have additional capacity available to supply Items ordered through
            Purchase Orders as Authorized Demand Signals but not previously
            shown on the SPR provided to Supplier; and

            to implement adjustments in operations and manufacturing to comply
            with the flexibility requirements applicable under Section 2.5.2.

            (b) As part of its capacity planning, Supplier shall review with
      Applied's Supplier Performance Management organization and any Applied
      organization subsequently performing its functions (the "SPM") on a
      monthly basis (as part of its monthly performance review) Supplier's
      manufacturing capacity and Supplier's capability to increase such capacity
      when and as changes occur in Applied's manufacturing volumes and
      requirements. Supplier shall advise Applied at such monthly meetings of
      Supplier's manufacturing capacity as planned by Supplier under Section
      2.5.1 (a) and, in consultation with the Applied SPM, determine appropriate
      changes in manufacturing capacity for periods covered in the monthly
      performance review (collectively, the "Capacity Projections") The Capacity
      Projections shall be made a part of the Supplier Performance Plan
      (Attachment 16) and shall provide capacity at least equal to the rolling
      *** forecast of the then-current SPR for Items anticipated to be provided
      by Supplier.

      2.5.2 Flexibility.

            In addition to manufacturing capacity planning under Section 2.5.1,
      Supplier shall also use commercially reasonable efforts to plan for and to
      implement manufacturing

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      flexibility capabilities in addition to Supplier's manufacturing capacity.
      Supplier shall review such plans and capabilities with Applied's SPM at
      least monthly (as part of the monthly performance review activity) and, in
      consultation with the Applied SPM, establish manufacturing flexibility
      levels applicable to Supplier as part of the Supplier Performance Plan
      (Attachment 16) consistent with known or anticipated changes in Applied's
      manufacturing volumes, delivery dates and product requirements. Supplier's
      manufacturing flexibility levels shall at least allow for manufacturing
      volumes and output to *** over Supplier's basic manufacturing capacity
      established and reported to Applied, from time to time, in accordance with
      Section 2.5.1 within a given *** period.

      2.5.3.      Acceptance; Delivery.

            (a) Supplier shall not refuse to accept, on the basis of the
      quantity of Items involved, Authorized Demand Signals under Section
      2.1.5.1 that are within current manufacturing capacities, production
      volumes, and operating levels or are within Capacity Projections or
      flexibility levels included in the Supplier Performance Plan. Supplier
      shall also advise Applied (upon request) regarding additional volumes of
      Items that are within increases in such capacities, volumes and levels,
      beyond the Capacity Projections and flexibility levels under the Supplier
      Performance Plan, that Supplier can achieve through use of commercially
      reasonable efforts.

            (b) If week to week variations in the quantities of Items
      deliverable under Authorized Demand Signals, together with changes in
      Committed Delivery Dates through deferral of Items pursuant to Section
      2.3.3 cause the volumes of Items that are to be delivered in a weekly
      period to exceed Supplier's delivery volumes provided for by the Supplier
      Performance Plan and if Supplier is not able to complete and make delivery
      of the quantities solely due to such variations (and exclusive of any
      delivery volume limitations or other problems resulting from Supplier's
      failure or inability to achieve capacity and flexibility levels
      established for the affected periods under the Supplier Performance Plan)
      , then Applied will allow Supplier to deliver Items that are affected by
      the excessive increase for that period up to a maximum of two (2) weeks in
      advance of the applicable Committed Delivery Dates. Such early delivery
      allowance shall be in effect only to the extent and for the period
      commercially necessary to enable Supplier to comply with the Committed
      Delivery Date(s) of Items exceeding its capacity and flexibility levels,
      and in no event later than the time revised capacity or flexibility
      requirements can be established on a commercially reasonable basis.

      This Section 2.5 does not alter the provisions of this Agreement in
      Section 2.3 (Cancellation of Items), Section 2.14 (Provisions for
      Reconfiguration or Restocking), or Section 2.8 (***).

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2.6.  On-Site Support Requirements.

Supplier may be asked by Applied to provide appropriate or necessary personnel
required to support on-site operations at Applied's facilities. On-site
representatives will comply with all Applied facilities requirements. Applied,
at its sole discretion, may require Supplier to execute an On-site
Representative Agreement, in the form set forth in Attachment 18, and may
require the On-site Representative to execute an NDA joinder in the form
required by the On-Site Representative Agreement, prior to issuing a building
badge to Supplier's representative(s) or permitting access to Confidential
Information. Supplier agrees to notify Applied immediately of any changes in its
staffing assignments involving those individuals with access to Applied's
facilities or IS&T systems, applications or databases.

In the event that Supplier's personnel will provide such support at the premises
of a customer of Applied, Supplier agrees to comply with the requirements and
restrictions imposed by such customer for access to its premises (in addition to
the terms of any On-site Representative Agreement executed by Supplier).

2.7.  [Omitted]

2.8.  ***.

      2.8.1.      Modifications and ***s.

      In addition to its rights of cancellation under Section 2.3 and of
      relabeling, reconfiguration and restocking under Section 2.14, Applied
      shall have the right to modify the SSR or Specifications for Items after
      the issuance and acceptance of any Authorized Demand Signal and prior to
      the actual delivery of the Item. Changes initiated by Applied as to an
      Item through changes to an SSR or Specifications (including those
      initiated by Applied as ECOs) *** covered by this Section 2.8 are *** or
      "***s."

      2.8.2.      Scope of ***s.

      An *** includes only changes initiated by Applied *** the *** of an
      Authorized Demand Signal and excludes changes resulting from other
      requests for CES Services, CCR Services or Configuration Engineering
      Services, and design or engineering changes attributable to Supplier.
      Changes that involve *** are not ***s.

      2.8.3.       Charges for ***s.

      Applied shall pay for charges for ***s ("***") determined under the
      following terms:

            1.    If the *** is requested *** prior to the then applicable
                  Committed Delivery Date, the *** Charges shall be the ***:
                  Supplier's Standard Cost of Materials for Bus Route
                  NonConsumable Materials, Supplier's Standard Cost of Materials
                  for Spot Buy NonConsumable Materials, 70%

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                  of Supplier's Standard Cost of Materials for NonConsumable
                  MFCs, and Supplier's Standard Cost of Materials for
                  NonReusable Materials, applied to Piece Parts removed from the
                  affected Item as a result of the ***. *** for materials
                  resulting from an *** shall be shown as a separate line item
                  materials charge in Supplier's Pro Forma for the affected Item
                  and become a part of the Contract Price for an Item.

            2.    If the *** is requested *** or more prior to the then
                  applicable Committed Delivery Date, no *** Charges shall
                  apply.

            3.    Supplier shall also charge for, as a rate per hour charge in
                  accordance with the terms of Attachment 1, but subject to the
                  terms of Section 2.1.5.1.A.4.d as to "Quoted CES Charges" and
                  Section 2.1.5.1.A.4.c as to "Coordination of Services," the
                  actual CES, CCR and Configuration Engineering Services
                  resulting from an ***, as part of the Contract Price for the
                  affected Item.

      Supplier shall maintain a record of the Piece Parts removed from an Item
      or classified as NonConsumable or NonReusable as a result of ***s, and
      Supplier shall identify all NonConsumable and NonReusable Materials
      (excluding Floor Stock Scrap) by preparation of a Bill of Materials for
      NonConsumable and NonReusable Materials (the "NRM BOM"), classified by the
      affected Applied System or affected Purchase Order, which NRM BOM will be
      invoiced on the Pro Forma for the Item and will be retained by Supplier
      for a period of one (1) year from the invoice date for the ***. All
      removed Piece Parts, excluding NonConsumable MFCs, for which an *** is
      made to Applied shall be delivered to Applied's Asset Recovery Management
      Unit.

2.9.  Information.

      2.9.1.      Applied Internal Databases.

      Supplier may be given electronic access to Internal Applied Data, and such
      access may, at Applied's sole discretion, be subject to certain further
      limitations and requirements on Supplier, including Supplier-provided
      employee control lists, audit rights and the requirement that Supplier's
      employees execute a joinder in the IPA as to confidentiality with Applied.
      This access, if granted, and all Internal Applied Data accessed shall be
      used solely by Supplier and only to directly facilitate Supplier's
      production and delivery of Items to support Applied's requirements.
      Supplier's access to, and utilization of, all Internal Applied Data is
      subject to the confidentiality provisions and obligations of the IPA with
      respect to Confidential Information and the terms of this Agreement and
      any applicable NDA between the parties. Applied may terminate Supplier's
      access to Internal Applied Data at any time at the discretion of Applied.

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      If Applied terminates Supplier's access to Internal Applied Data under
      this Section, whether with or without cause, then Applied and Supplier
      shall promptly consult to develop alternative ways of providing Supplier
      with access to Internal Applied Data for the purpose of Supplier's
      performance under this Agreement.

            2.9.1.1.  Applied IS&T Services.

                  A. Applied and Supplier have agreed on the services and scope
                  of services *** for voice and data telecommunication and ***
                  to Applied ***, all for Supplier's use in the performance of
                  its obligations under this Agreement and the Related
                  Agreements, as more fully set out in the "***" attached to
                  this Agreement as Attachment 21 (the "IS&T Services" and the
                  "IS&T Agreement"), as such is modified by the provisions of
                  this Section 2.9.1.1 regarding costs and rates of charge. The
                  IPA and the Tooling Loan Agreement (Attachment 19) also set
                  out rights and obligations of Applied and Supplier with
                  respect to the services, *** and telecommunications and access
                  services provided under the IS&T Agreement. Applied and
                  Supplier each shall perform, provide, pay for and observe such
                  IS&T Agreement, as herein modified, as part of this Agreement
                  from and after the Effective Date hereof for the term of this
                  Agreement, as the same may be amended from time to time.

                  B. All charges and costs payable by Supplier pursuant to the
                  "Custom IS Services Service Level Agreement" as in effect
                  between Applied and Supplier pursuant to the FUAs prior to the
                  Effective Date through the Effective Date have been resolved
                  by the parties through, and are payable by Supplier to the
                  extent provided for by, separate agreements. From and after
                  the Effective Date, Applied will *** not be *** charges and
                  costs for IS&T Services *** of the IS&T Agreement for initial
                  set-up activities or for additional services requested by
                  Supplier.

                  C. Except as provided below, failure by Applied to furnish the
                  IS&T Services to any extent, or any cessation thereof, shall
                  not render Applied liable in any respect for damages to either
                  person or property, and such failure or cessation shall not
                  relieve Supplier from performing as provided in this
                  Agreement, except to the extent that such failure to perform
                  on the part of Supplier is excused under Article 23(b) of
                  Exhibit 1. If IS&T Services are not restored by the fifteenth
                  (15th) Business Day after cessation or failure by Applied to
                  furnish such Services, Supplier may terminate the IS&T
                  Agreement with respect to the particular IS&T Services
                  affected. To the extent so terminated, neither Supplier nor
                  Applied shall have any further rights or obligations under the
                  IS&T Agreement from and after the date of termination except
                  for any rights or obligations that expressly survive
                  termination of the IS&T Agreement.

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                  Termination by Supplier under this paragraph shall not relieve
                  Supplier of its obligations for performance under this
                  Agreement, but such performance shall be excused to the extent
                  provided by Article 23(b) of Exhibit 1, or the time for
                  performance shall be equitably adjusted.

                  D.    Access  to IS&T Services.  The IS&T Services are those
                  services to be provided by Applied, as specified in the IS&T
                  Agreement.

                        D.1. Access Restriction. Access to Applied's network and
                        the Confidential Information contained thereon is
                        granted to Supplier solely to facilitate the performance
                        of Supplier's obligations under this Agreement and the
                        IPA, is limited to the specific information,
                        applications, systems, time periods and personnel
                        approved by Supplier and Applied and is subject to the
                        obligations regarding confidentiality of Article 4 of
                        the IPA. Access is subject to and Supplier agrees to be
                        governed by business control and information protection
                        policies, standards, and guidelines of Applied. Use of
                        any other Applied information, applications, systems or
                        in other time periods or by other personnel is expressly
                        prohibited. This prohibition applies even when
                        information or an application or system that Supplier is
                        authorized to access serves as a gateway to other
                        information, application(s) or system outside the scope
                        of Supplier's authorization. Without limiting the
                        foregoing, Supplier shall be responsible for the
                        implementation and execution of security measures as to
                        its operations and personnel designed to comply with the
                        above obligations and to insure that access granted
                        hereunder will not impair the integrity and availability
                        of Applied's information, applications and systems.

                        D.2. Provision of Information. Supplier agrees to take
                        commercially reasonable actions to provide to Applied
                        all employee and other information that is reasonably
                        necessary for Applied to approve or disapprove, as the
                        case may be, access and use by any Supplier employees,
                        consultants, agents or representatives to the Applied
                        network. Furthermore, Supplier agrees to advise Applied,
                        as soon as reasonably possible, of any changes in the
                        status or identities of those employees, consultants,
                        agents, or representatives to whom Applied has granted
                        access and use.

                        D.3. Audit Rights. Supplier acknowledges that Applied
                        has a vested interest in assuring that Supplier complies
                        with its obligations of confidentiality. Accordingly,
                        Supplier agrees that Applied may take all steps that
                        Applied, in its sole discretion, believes are useful in
                        limiting and controlling Supplier's access to the
                        Applied network and the Applied Confidential Information

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                        presented or accessed thereby, including the provision
                        of passwords, the utilization of security checks, and
                        the issuance of user identifications that restrict
                        Supplier's access, provided that such discretion shall
                        be reasonably exercised. Supplier also agrees that
                        Applied, upon prior notice to Supplier's Senior Director
                        of Operations - Round Rock, or Director of Operations -
                        Milpitas, as appropriate, and at reasonable times, may
                        audit Supplier's access to the Applied network and use
                        of Applied Confidential Information, including
                        inspection or audit of Supplier's facilities, inventory,
                        records, documentation and personnel, with respect to
                        compliance with the requirements of this Section 2.9.1.
                        Applied, in its sole discretion, will decide the
                        frequency and extent of such audits, provided that such
                        discretion shall be reasonably exercised. Applied agrees
                        to cooperate with Supplier to limit the burden to
                        Supplier of any such audits and to implement steps to
                        protect the Applied Confidential Information.

                        D.4. Segregation of Applied Confidential Information.
                        Supplier agrees: to segregate the Applied Confidential
                        Information that it receives; to take all other
                        reasonable steps to keep Applied Confidential
                        Information separate from Supplier information or
                        information of others to which Supplier has access; and
                        to assure that the Applied Confidential Information is
                        readily locatable and identifiable.

                        D.5. Effect of Failure to Comply. Supplier agrees that
                        its failure to comply in any material respect with any
                        duty or obligation pursuant to this Section 2.9.1.1.D
                        constitutes a breach of its confidentiality obligations
                        under the IPA and that Applied may initiate termination
                        pursuant to Section 5.2.3 of the IPA.

                        D.6. Need to Know. The parties will cooperate to limit
                        the number of Supplier's employees accessing and
                        utilizing the Applications and Databases (as such are
                        defined in the IPA) to only those employees reasonably
                        necessary for Supplier to perform its duties and
                        obligations under this Agreement and the Related
                        Agreements. The parties agree, however, that Applied
                        retains final approval concerning access to and
                        utilization of any such Applications and Databases.
                        Supplier agrees to have all current employees with
                        access to Applied Confidential Information execute an
                        Employee Joinder (in the form attached to the IPA)
                        within two (2) weeks after the execution and delivery of
                        this Agreement, and to forward a copy of each signed
                        Joinder to Applied, by transmission to Applied
                        Materials, Inc., Attn: Law Department, 9700 Highway
                        290E, M/S 3100, Austin, Texas 78724. Thereafter,
                        Supplier agrees to provide to Applied, as soon as
                        reasonably possible and to its Law Department at the
                        above

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                        address, a copy of an executed Joinder for each employee
                        receiving Applied Confidential Information. In this
                        regard, for those Supplier employees requiring access to
                        the Applied computer network, Supplier will forward the
                        original executed Joinders concurrently with the
                        respective request for access to the Applied Law
                        Department at the above address. For those Supplier
                        employees receiving Applied Confidential Information,
                        but for whom access to the Applied computer network is
                        not required, Supplier will forward copies of executed
                        Joinders to the Applied Law Department, at the above
                        address. The liability of Supplier and any of its
                        employees involved for any violation of the provisions
                        of this Agreement or of the IPA regarding Applied's
                        Confidential Information, shall be joint and several. If
                        an employee violates any of the provisions of this
                        Agreement or the IPA regarding Applied's Confidential
                        Information after the time his or her employment with
                        Supplier has terminated and if Supplier, as part of its
                        exit interviews and procedures, specifically advised
                        such former employee of the continuing nature of his or
                        her obligation regarding such Confidential Information,
                        then Supplier shall not have such joint and several
                        liability to Applied for such subsequent violation by
                        such former employee by reason of the previous
                        employment relationship.

      2.9.2.      Applied New Product Plans.

      Supplier will, on occasion and at Applied's discretion, be invited to
      forums in which Applied's new product plans are shared. Any Applied new
      product plans provided to Supplier are Confidential Information of Applied
      and are subject to the confidentiality provisions of Article 4 of the IPA
      and of this Agreement, and any applicable NDA executed in connection with
      the forum(s) at which such plans are shared.

      2.9.3.      Compliance with Securities Laws.

      Supplier agrees that the Internal Applied Data and Applied new product
      plans contain Confidential Information of or disclosed by Applied to
      Supplier and to those of its employees, contractors, representatives, and
      agents receiving such Confidential Information or new product plans solely
      for performance of Supplier's obligations to Applied, and that possession
      of Confidential Information which is material, non-public information
      concerning companies with publicly-traded securities prohibits Supplier
      and its employees, contractors, representatives and agents with direct or
      indirect access to such Confidential Information from (1) buying or
      selling such companies' publicly traded securities (stock, options, etc.)
      ("insider trading") until after such Confidential Information has been
      disclosed to the public and absorbed by the market (at least two business
      days), and (2) passing the Confidential Information on to anyone who may
      buy or sell such companies' securities ("tipping"). Supplier shall comply
      with (and shall direct its employees, contractors, representatives and
      agents to comply with) all federal and state securities laws prohibiting
      insider trading and tipping, and shall immediately

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      notify Applied if Supplier violates any such laws or if Supplier becomes
      aware of any such violation by any of its employees, contractors, agents
      or representatives. Supplier also agrees to execute additional NDAs or
      other agreements as may be required to comply with applicable securities
      laws. Applied has established a corporate policy prohibiting insider
      trading and tipping by all members of its workforce as to its securities
      and as to securities of companies other than Applied. Applied will
      maintain a policy against such insider trading and tipping in effect
      throughout the term of this Agreement.

2.10. Packaging and Transportation.

      2.10.1.     Packaging and Shipment.

      Supplier will have all Items packaged "ready for use" in accordance with
      Applied's packaging Specification (Attachment 6a). Supplier will mark and
      identify every Item in compliance with Applied's part marking
      identification Specifications and requirements (Attachment 6b). In
      addition, Applied may require specific fit-for-use packaging for certain
      Items and/or deliveries.

      2.10.2.     Bar Coding.

      All shipments of Items shall be bar coded to Applied's Specifications in
      Attachment 5.

      2.10.3.     Transportation Requirements.

            2.10.3.1.  F.O.B Destination.

            Supplier shall ship all Items "F.O.B. Destination," provided that
            allocation of risk of loss and terms for passage of title otherwise
            applicable as to Items shipped by Supplier may be varied by the
            provisions of this Agreement. Applied will specify the applicable
            destination point, which may be an Applied Facility or another
            location. Supplier shall ship all Items in accordance with Applied's
            Corporate Routing Guide (Attachment 7), including use of approved
            carriers. Supplier shall ship all Items to accomplish delivery of
            all Items at the applicable destination point, on time.

            2.10.3.2.  Freight and Delivery Costs.

            Except for Items shipped by Supplier on Supplier owned trucks
            pursuant to prior written approval by Applied and except as provided
            below for Items shipped with freight prepaid with prior approval,
            all freight and delivery costs for Items shall be specified as
            "Freight Collect" on bills of lading or shipping receipts, to be
            paid directly by Applied. With prior written approval by Applied,
            Supplier may prepay freight and delivery costs (to be shown as
            "Freight Paid and Charged Back" on the bills of lading or shipping
            receipts) and invoice Applied for the actual amounts of such costs.
            Applied will not pay freight and delivery costs in excess of the
            costs determined under the Corporate Routing Guide for applicable
            delivery methods. Applied will not pay any freight and delivery
            costs if Supplier uses a carrier that is not approved under
            Applied's Corporate Routing Guide. Any

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<PAGE>
            variance in these requirements must be approved by Applied in
            advance, in writing.

            2.10.3.3.  Risk of Loss; Title.

            For all Items shipped Freight Collect or "Freight Prepaid and
            Charged Back" in accordance with 2.10.3.2 and by a carrier approved
            by Applied, Applied shall bear all risk of loss as to such Items
            while in transit. For those Items that, with Applied's prior written
            approval, are shipped using Supplier owned trucks, Supplier shall
            bear all risk of loss as to all such Items while in transit and
            continuing until Applied or its designee has acknowledged receipt of
            the Items at the specified destination point. Acknowledgment of
            receipt occurs when Applied enters the receipt of the Items in
            Applied's data and accounting system. Applied shall be responsible,
            however, for any loss as to an Item occasioned by the gross
            negligence of its employees, acting within the scope of their
            employment, regardless of whether there has been acknowledgement of
            receipt or passing of title as to such Item.

2.11. Payment.

      2.11.1.     Invoices; Certain Acceptance Terms.

      (a) Invoices (other than for Services invoiced under Section 2.11.1(c)
      below) shall contain the following information: Purchase Order number,
      Item number, description, sizes, quantities, unit prices, and extended
      totals in addition to tax amounts and any other information requested. Pro
      Formas shall comply with Section 2.1.7. Applied's payment of an invoice or
      other account, or payment made under an ERS Program, does not in itself
      represent unconditional acceptance of Items or preclude revocation of
      acceptance.

      (b) If Services are included in an invoice described in Section 2.11.1(a),
      Supplier shall provide on the invoice the charges for each category of
      Service, and the portions of such charges attributable to Configuration
      Engineering Services, CES Services, engineering for Design Services or
      Development Services, and engineering for the release of the Bill of
      Materials for the Item through Applied's ECO procedures, as applicable.

      (c) When Supplier has completed Services which are not related to an Item
      for which Supplier is to issue a Pro Forma or an invoice and has delivered
      any work product or other deliverables related to the Services, Supplier
      shall issue an invoice or other notice of completion of Services and
      delivery (a "Completion Notice") to Applied, to the attention of the
      purchasing representative of the Applied organization issuing the relevant
      Authorized Demand Signal, which may have been a Purchase Order that is
      part of a DSA or that was issued for a DVA. A Completion Notice shall
      include: the Applied Purchase Order number, the date(s) of completion and
      delivery, a description of the Services performed and work product or
      other deliverables delivered, and the Applied representative to whom
      delivery was made. A Completion Notice may be issued by

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      Supplier in invoice form or as an e-mail or letter, and may be delivered
      by mail, facsimile, or e-mail transmission.

      (d) (i) Applied may reject any Item (including Services handled under
      Section 2.11.1(d)(ii)) until receipt of that Item has been acknowledged by
      entry of the receipt in Applied's data and accounting system (a "Receipt
      Entry"). Applied's Receipt Entry is deemed to be acceptance of the Item(s)
      identified in the Receipt Entry, in accordance with and subject to the
      terms of this Agreement. Supplier agrees that Applied may revoke its
      acceptance as to any Item or Items deemed accepted through Receipt Entry
      that do not conform to the warranty terms applicable to the Item(s) and
      are not timely corrected, repaired or replaced by Supplier in compliance
      with Section 7.2.2, as the value of such Item(s) to Applied is
      substantially impaired. Revocation of acceptance as to such Item(s) shall
      be made within a reasonable time after Applied discovers the defect or
      nonconformity and is not effective until Applied notifies Supplier of
      revocation.

            (ii) Services performed or provided by Supplier pursuant to a
      Purchase Order, DSA or DVA will be handled under the preceding Receipt
      Entry procedures by issuance of an Applied "in-house packing slip."
      Acceptance of such Services by Applied for purposes of payment shall not
      occur until all of the following have occurred: (i) an Applied Purchase
      Order, DSA or DVA, as applicable, has been issued for such Services; (ii)
      the Services have been completed and all work product deliverables have
      been delivered to Applied in accordance with the Purchase Order, DSA or
      DVA; (iii) Supplier has delivered its Completion Notice for the Services
      to Applied in accordance with the applicable Purchase Order, DSA or DVA;
      and (iv) Applied has issued its "in-house packing slip" to initiate
      payment of the amounts charged under the Completion Notice, whether by
      check, electronic funds transfer or otherwise.

            (iii) Acceptance of Items or of Services, as described above, is
      acceptance for purposes of payment and shall not impair any remedy or
      right of Applied, or warranty or other obligation of Supplier, under this
      Agreement or applicable law other than that of rejection of Item(s) deemed
      accepted that are governed by the UCC and rights equivalent to rejection
      as to Services governed by laws other than the UCC. All payments made by
      Applied will be subject to adjustment for errors, shortages or
      nonconformity with warranty provisions, and to revocation of acceptance
      where applicable.

            2.11.1.1.  Delivery of Invoices.

            All invoices must be sent directly to Applied's Accounts Payable
            Department in Austin:

            Accounts Payable
            Applied Materials
            9700 US Highway 290 East M/S 4200
            Austin, TX  78724-1199

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<PAGE>
            2.11.1.2.  Method of Payment.

            Applied is authorized by Supplier to make payments under this
            Agreement by either check or electronic funds transfer. Supplier
            will provide Applied with the required bank routing coordinates and
            other information that may be required by Applied to establish
            electronic funds transfer capability.

            2.11.1.3.  ERS Program.

            If Supplier participates in Applied's ERS Program, Supplier will
            provide Pro Formas pursuant to Section 2.1.7, but otherwise will not
            provide invoices to Applied for sales of Items to which that program
            applies. Supplier will be responsible for the verification of all
            prices and quantities prior to shipment and will enter that
            information on the Pro Forma for each Item. All applicable sales and
            use tax will be remitted to Supplier with payment by Applied. ERS
            payments will be subject to adjustment for errors, shortages,
            non-conformities or defects, as well as prompt payment discounts.

            2.11.1.4.  Packing Slips.

            Supplier must include a valid packing slip number or package ID on
            each package or shipment.

      2.11.2.     ***.

      Payment terms will be ***

            a. if payment is made from Supplier's invoice, then from the later
            of (i) Applied's receipt of Supplier's invoice, in form and
            substance acceptable to Applied, for the Item(s), or (ii) delivery
            of, and Applied's entry of receipt for, the Item(s) in Applied's
            data and accounting system.

            b. if payment is made under the ERS Program, then from the date of
            Applied's entry of its receipt of the Item(s) in Applied's data and
            accounting system.

      If payment is made within *** after the applicable date under clause (a)
      or (b) ***.

      2.11.3.     Offsets, Debits.

      Applied may at any time set off any amount owed by Applied to Supplier
      against any amount owed by Supplier (whether in Supplier's name or in the
      name of Insync Systems, Incorporated) to Applied.

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      Applied anticipates implementing, in the Third Quarter of its 2002 fiscal
      year, a procedure under which Applied will issue to Supplier notices of
      scheduled debits or offsets approximately *** in advance of the execution
      of such debit or offset. Applied will advise Supplier if Applied will not
      be able to implement such procedure in the anticipated period with use of
      commercially reasonable efforts, and the parties will negotiate in good
      faith to determine if alternative notice procedures can be established by
      the parties. Notices of debits or offsets under such a procedure, if
      implemented, shall be given to Supplier's Finance Manager.

      2.11.4.     Effect of Payment.

      Time and method of payment shall not alter the time at which title to
      Items passes to Applied, nor shall payment, in itself, preclude Applied
      from the exercise of remedies under this Agreement or as permitted by law,
      in each instance in accordance with this Agreement.

      2.11.5.     Reconciliation of Payment Discrepancies.

      Attachment 22 to this Agreement sets out agreements of Applied and
      Supplier as to any claims of Supplier with respect to "Payment
      Discrepancies," as such term is defined in Attachment 22.

      To the extent permitted by Attachment 22, Applied may initiate
      amendment(s) of such Attachment 22 by posting of an amendment on the
      Applied website to which Supplier has access in accordance with Section
      1.3.4, and each amendment so initiated becomes effective if Supplier does
      not object to the amendment within thirty (30) days of such posting.
      Amendments that the terms of Attachment 22 exclude from such website
      modification procedure shall be made in accordance with the provisions of
      such attachment.

2.12.   Disaster Recovery Plan.

Supplier shall develop and provide to Applied, upon request, reasonable
information describing or evidence of a disaster recovery plan that includes
emergency back up capacity, and appropriate record protection and recovery.
Applied shall have the right to verify Supplier's internal processes for
compliance with this provision.

2.13. Performance Constraints.

      2.13.1.     Constraints.

      Supplier shall use commercially reasonable efforts to anticipate material
      constraints affecting its ability to perform its obligations under this
      Agreement. If Supplier believes that any such constraints are reasonably
      likely to materially and adversely affect its performance under this
      Agreement, Supplier will inform Applied's Subsystems

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      Management Team and Supply Chain Management organizations (through the
      contact persons designated for Supplier by those organizations) thereof
      and of action plans to resolve them. Typical constraints might include,
      but are not limited to:

            a.    Consumption over forecast

            b.    Consumption under forecast

            c.    Quality problems

            d.    Capacity/production problems

            e.    Sub-tier supplier supply-chain management problems

2.14. Provisions for Reconfiguration or Restocking.

      2.14.1. "Affected Items."

      This Section 2.14 applies to those FDS, NSO, Module and Spares Items which
      have been delivered to Applied by Supplier pursuant to an Authorized
      Demand Signal issued under Section 2.1.5, which conform to applicable
      requirements (including Specifications) of this Agreement, and which,
      subsequent to delivery to Applied (and prior to shipment by Applied to its
      customer), Applied identifies for relabeling, reconfiguration, or return
      and restock based on Applied's current manufacturing requirements
      ("Affected Items"). As to Items that Applied identifies as Affected Items,
      Applied shall use its commercially reasonable efforts to locate Applied
      customers that will purchase Affected Items, so that such will be treated
      as Relabel or Reconfigure Items, rather than as Restock Items.

      2.14.2. Categories.

      Applied shall notify Supplier of those Items that are identified as
      Affected Items by Applied from time to time. Applied's notice to Supplier
      of the Affected Items so classified shall be given by fax or e-mail notice
      to Supplier's Customer Service Manager in Austin or Milpitas, as
      appropriate. Applied will classify Affected Items in the following
      categories:

            a.    Relabel Items

            b.    Reconfigure Items

            c.    Restock Items

      2.14.3. "Relabel Items."

      An Affected Item which Applied determines is appropriate for relabeling
      and/or minor reworking (for which no re-testing is required) at Applied's
      facility, to meet the requirements of an Applied customer, is a "Relabel
      Item."

            2.14.3.A. Applied shall issue new or revised configuration, labeling
            and related Specifications and completion requirements (the "Revised
            SSR") to Supplier for each Relabel Item at the time when Applied has
            determined the particular manufacturing requirements of Applied and
            its customer. Within

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<PAGE>
            ninety-six (96) hours (measured during Business Days and under
            prevailing Pacific Time) following receipt of the Revised SSR,
            Supplier will determine if the Revised SSR requires any CES Services
            or Configuration Engineering Services, beyond Configuration
            Engineering Services required solely to relabel, and if the
            completion requirements are feasible. Unless (i) Supplier
            specifically refuses (under the standards applicable to refusal of
            an initial SSR) the new or Revised SSR for the Relabel Item within
            forty-eight (48) hours (measured during Business Days and under
            prevailing Pacific Time) following the time Supplier has made the
            determinations under the preceding sentence, or (ii) Supplier
            determines, with Applied's concurrence, that CES Services or
            Configuration Engineering Services, beyond Configuration Engineering
            Services solely to relabel, are required by the Revised SSR,
            Supplier shall rework and relabel each Relabel Item at the Applied
            manufacturing facility where that Item is held. Such reworking and
            relabeling shall be performed by Supplier in compliance with all
            requirements of the Agreement applicable to such Item, including
            Applied's new or Revised SSR issued under this Section 2.14.3; as
            reworked and relabeled, the Relabel Item shall be deemed a new Item
            for warranty, performance and other provisions of this Agreement.

            2.14.3.B. The total charge from Supplier to Applied for each Relabel
            Item shall be ***.

            2.14.3.C. Upon notice to Supplier, to be sent to the attention of
            Supplier's Customer Service Manager - Austin or - Milpitas, as
            appropriate, Applied may change the classification of a Relabel Item
            to another category, whether or not work under the applicable SSR
            has been initiated or completed. Pricing for a Relabel Item that is
            changed to a Restock Item after the work has been performed by
            Supplier for the relabeling shall be calculated as if such had
            originally been a ***.

      2.14.4. "Reconfigure Items."

      An Affected Item (i) which Applied determines (after consultation with
      Supplier as to the scope of work involved) is appropriate for reworking,
      reconfiguration (including related CES or Configuration Engineering
      Services) and testing at Supplier's facilities to meet the requirements of
      Applied or its customer(s), and (ii) for which Applied has issued a new or
      Revised SSR from which a new Committed Delivery Date is determined, is a
      "Reconfigure Item." Unless Supplier specifically refuses the applicable
      new or Revised SSR within ninety-six (96) hours (measured during Business
      Days and under prevailing Pacific Time) after its issuance by Applied
      (under the standards applicable to refusal of an initial SSR) the SSR
      shall be deemed accepted by Supplier and the Committed Delivery Date shall
      (unless otherwise mutually agreed) be determined by the standard cycle
      time for the Item based on the date of acceptance or deemed acceptance.

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            2.14.4.A. Upon Supplier's acceptance or deemed acceptance of a
            Revised SSR, Applied will ship Reconfigure Items to Supplier, at
            Applied's cost and risk of loss until delivery to Supplier's
            receiving dock. Supplier shall have risk of loss and shall hold all
            Reconfigure Items as bailee for Applied from the time the Item is
            delivered to Supplier's receiving dock. Supplier shall maintain in
            force insurance covering Reconfigure Items against risks and in
            amounts that are appropriate to protect the interests of Applied in
            such goods. Applied shall include, as part of its shipment to
            Supplier, any safety notice required for the Affected Item, to
            include a notice that the Affected Item has not been exposed to
            toxic or corrosive gases or chemicals and that no decontamination is
            required.

            2.14.4.B. Applied shall issue a new SSR or a Revised SSR for each
            Reconfigure Item when Applied has determined the particular
            manufacturing requirements of Applied and its customer and prior to
            shipment of the Reconfigure Item to Supplier. Supplier will perform
            applicable CES Services, Configuration Engineering Services and CCR
            Services and reconfigure, rework, test, and relabel each Reconfigure
            Item at Supplier's facility. Such CES Services, Configuration
            Engineering Services and CCR Services, reconfiguration, reworking,
            testing, and relabeling shall be performed by Supplier in compliance
            with all requirements and Specifications of the Agreement applicable
            to such Item, including Applied's new SSR or Revised SSR issued
            under this Section 2.14.4, and as reconfigured, reworked, tested and
            relabeled, the Reconfigure Item shall be deemed a new Item for
            warranty, performance and other provisions of this Agreement.

            2.14.4.C. The total charge from Supplier to Applied for each
            Reconfigure Item shall be equal to the sum of:

                  ***

            2.14.4.D. Upon notice to Supplier, whether or not the
            reconfiguration has been initiated or completed, which notice shall
            be given by e-mail or fax transmission to the attention of
            Supplier's Customer Service Manager - Austin or - Milpitas, as
            appropriate, Applied may direct that Supplier cease work on a
            Reconfigure Item or may change the classification of a Reconfigure
            Item. Applied shall specify in its notice under this Section
            2.14.4.D whether the Item as to which work is to cease shall then
            become a new Reconfigure Item, a Relabel Item, or a Restock Item;
            alternatively, Applied may direct that it be delivered as an
            incomplete Reconfigure Item. The date of the notice of conversion
            shall be deemed the date of receipt by Supplier of the Item as a
            Restock, Relabel, or new Reconfigure Item. If the Item is changed
            from a Reconfigure Item to a Restock Item, Section 2.14.5 shall
            apply after that date.

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            2.14.4.E. Each completed Reconfigure Item shall be shipped to
            Applied by Supplier in accordance with the terms of the Agreement
            and on the Committed Delivery Date. Supplier shall provide its Pro
            Forma for the Reconfigure Item in accordance with Section 2.1.7 and
            payment shall be handled under the applicable payment procedures for
            new Items. Applied shall review the Pro Forma under the applicable
            pricing model, shall advise Supplier of any dispute as to the Pro
            Forma amount, and then issue its Purchase Order in accordance with
            the pricing model, the above terms as to Reconfigure Items, and the
            Pro Forma (as revised, if necessary).

            2.14.4.F. All NonReusable and NonConsumable Materials removed by
            Supplier from a Reconfigure Item (other than NonConsumable MFCs,
            missing parts and Floor Stock Scrap) shall be returned to Applied in
            accordance with Applied's Asset Recovery Management process.

            2.14.4.G. If Applied directs Supplier to cease work on a Reconfigure
            Item under Section 2.14.4.D above without delivery of same to
            Applied, such Item shall be treated as a Restock Item under Section
            2.14.5 as of the date of the direction to cease work. Supplier
            shall, however, charge Applied for the following amounts, which
            shall be determined in addition to the amounts payable with respect
            to the Restock Item:

                  ***

      2.14.5. "Restock Items."

      Affected Items returned by Applied for disassembly and restocking by
      Supplier as set out in Sections 2.14.5 and 2.14.6 are "Restock Items."
      Applied will ship Restock Items to Supplier, at Applied's cost and risk of
      loss until delivery to Supplier's receiving dock. Supplier shall have risk
      of loss from the time the Restock Item is delivered to its receiving dock.
      Supplier shall acquire all Restock Items (including all materials and
      Piece Parts other than NonConsumable Materials or NonReusable Materials
      and Floor Stock Scrap) from Applied. Supplier shall deliver to Applied any
      applicable tax exemption certificates and shall pay any applicable tax.
      Supplier shall return all NonReusable Materials and NonConsumable
      Materials to Applied in accordance with Applied's Asset Recovery
      Management process (or destroy, as instructed by Applied). Applied shall
      include, as part of its shipment to Supplier, any safety notice required
      for the Affected Item, to include a notice that the Affected Item has not
      been exposed to toxic or corrosive gases or chemicals and that no
      decontamination is required.

      2.14.6. Restocking Process and Charges.

            2.14.6.A. Within ten (10) days after completion of disassembly of
            each Restock Item by Supplier, Supplier shall (i) immediately record
            and notify

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            Applied under Section 2.14.6.C below of, all NonConsumable and
            NonReusable Materials (as defined in Section 2.2.3) and deliver a
            detailed listing of all Piece Parts; (ii) restock, or (as to
            NonConsumable and NonReusable Materials) return, all Piece Parts,
            and (iii) deliver to Applied the Reconfiguration/Tear-Down
            Reconciliation Form ("Reconciliation Form") for each Restock Item.
            The Reconciliation Form shall specify the amount for which Supplier
            shall acquire the Consumable Materials and NonConsumable MFCs from
            the Restock Item, which amount payable by Supplier is equal to the
            total of ***.

            Supplier must identify on the Reconciliation Form prices for all
            NonReusable Materials and NonConsumable Materials (excluding Floor
            Stock Scrap) for each Restock Item being handled under this Section,
            which prices shall be *** NonReusable Materials or NonConsumable
            Materials. Any NonReusable Materials and NonConsumable Materials
            prices exceeding *** as to the particular material or Piece Part,
            and the disposition of each MFC, shall be set out on a NRM BOM that
            will be delivered with the Reconciliation Form and calculated at ***
            MFC or other Piece Part.

            2.14.6.B. Supplier shall deliver the Reconciliation Form to Applied
            as required by Section 2.14.6.A. Applied shall audit such form for
            compliance with the terms of this Section 2.14 and for any
            NonReusable Materials or NonConsumable Materials with costs in
            excess of $250.00. The Reconciliation Form shall not be released for
            processing and payment until Applied has approved same under
            Sections 2.14.6.B and C.

            2.14.6.C. Supplier shall return all NonConsumable and NonReusable
            Materials to Applied (other than missing parts or materials and
            NonConsumable MFCs) at Applied's Asset Recovery Management location,
            or destroy such NonConsumable and NonReusable Materials if so
            directed by Applied, in writing.

      2.14.7. Provisions as to Restocked or Removed Parts.

      A.    Supplier shall identify and return to Applied (for Asset Recovery
      Management by Applied) all NonReusable Materials removed from any Affected
      Item and shall scrap or destroy all Floor Stock Scrap. Supplier accepts
      all Restock Items and all Piece Parts and materials removed or obtained
      from any other Affected Item (not identified by it, and returned, as
      NonReusable Materials or scrapped as Floor Stock Scrap) (collectively,
      "Goods") "AS IS."

      B.    EXCEPT FOR THE WARRANTY IN PARAGRAPH D BELOW, APPLIED MAKES NO
      WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE GOODS OR
      ANY PART THEREOF. APPLIED HEREBY DISCLAIMS WITH RESPECT TO THE GOODS ALL
      IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR

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      FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF TITLE AND OF
      NONINFRINGEMENT.

      C.    WITH RESPECT TO SUCH GOODS AND EXCEPT AS TO MATTERS COVERED BY THE
      WARRANTY OF PARAGRAPH D BELOW, IN NO EVENT SHALL APPLIED BE LIABLE FOR ANY
      DAMAGES THAT ARE EXCLUDED DAMAGES UNDER ARTICLE 17 OF EXHIBIT 1 TO THIS
      AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED OR SUPPLIER HAS BEEN
      ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES AND
      SUPPLIER WAIVES ANY LIABILITY OF APPLIED FOR ANY SUCH DAMAGES.

      D.    Applied WARRANTS to Supplier: (a) that none of the Goods returned as
      Reconfigure Items or Restock Items shall have been exposed to toxic or
      corrosive gases or chemicals; (b) that as to any Items returned to
      Supplier as a result of a warranty claim of Applied under this Agreement
      or pursuant to Section 5.2.1, Applied will have decontaminated and
      prepared for safe handling under all applicable safety and environmental
      laws and regulations any such Items delivered to Supplier that have been
      exposed to toxic or corrosive gases or chemicals while in Applied's
      possession; (c) that all applicable safety and environmental notices and
      labels shall be affixed to or provided with the delivery of any such Goods
      or Items; and (d) that none of such Goods have been delivered to any
      person other than Applied or Supplier following Applied's receipt of same.
      The limitations of Paragraph C above do not apply to the warranties set
      out in this Section 2.14.7.D.

      2.14.8. Processing and Payments.

      Supplier shall calculate the amount payable by it for Restock Items in
      accordance with the provisions of this Section 2.14, and shall authorize
      Applied to charge Supplier for the Restock Item by issuing the
      Reconciliation Form and related NRM BOM. Applied shall review the
      Reconciliation Form and NRM BOM and shall charge and collect from Supplier
      the calculated amount payable to Applied for the Restock Item by debit
      memo or other offset against amounts otherwise payable by Applied to
      Supplier. If Applied believes that additional amounts are properly payable
      by Supplier in excess of the calculated amount, it shall promptly advise
      Supplier of such claim and the parties shall review the determination of
      the amount payable by Supplier for the affected Restock Item. If the
      parties do not agree on the proper charge to be made within 30 days after
      the dispute arises, the parties shall proceed under the Business Review
      Process as defined in Section 7 below to attempt resolution of the
      dispute. Applied shall not effect a debit or other offset (in excess of
      the amount initially calculated by Supplier) until the parties have failed
      to reach agreement and have failed to reach a resolution within the time
      allowed for the Business Review Process.

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3. PRICING FRAMEWORK

3.1.  Contract Prices.

      3.1.1. Pricing and Cost Model of Attachment 1.

      Attachment 1 contains the contract terms agreed upon with respect to the
      following: (i) the pricing and cost model, which set out the elements and
      calculations by which Contract Prices are determined on an ongoing basis;
      *** indicated periods during the term of the Agreement. Any modifications
      to Attachment 1 must be made in accordance with Section 1.3.4 of this
      Agreement. Supplier shall price and sell, and Applied shall purchase, all
      Items in accordance with this Agreement, including Attachment 1. Supplier
      will provide R&D Items at non-discriminatory prices that take into
      consideration the total value of Applied's business with Supplier.

      Applied and Supplier have established pricing for certain Services on a
      rate-per-hour basis as part of Attachment 1 or in other provisions of this
      Agreement. Unless otherwise agreed at the time, pricing for Services
      provided by Supplier pursuant to Purchase Order(s) will be determined at
      applicable rates set out in Attachment 1.

      The Contract Prices of additional and/or revised Items will be based upon
      applicable elements of the pricing or cost model set forth in Attachment
      1.

      Attachment 1 is sometimes referred to as the "cost model" or "pricing
      model" for the Agreement.

      3.1.2. Application of Prices.

      On the Effective Date and in accordance with Section 1.3.2.3, the pricing
      for Items shall be determined pursuant to this Agreement, including
      Attachment 1; provided that pricing under this Agreement shall not apply
      to FDSs or other Items for which an SSR or Purchase Order has been
      accepted (based on the procedures of Section 2.1.5.1 hereof) prior to the
      Effective Date.

      Specific circumstances may result in a review of Agreement terms,
      including Contract Prices. These circumstances include, but are not
      limited to:

            a.    Volume increases or decreases resulting in an increase or
                  decrease in the value of the Agreement of over 20%;

            b.    Addition or deletion of Items to the Agreement increasing or
                  decreasing the value of the Agreement over 20%;

            c.    Cost increases or reductions exceeding those committed in
                  Supplier's Performance Plan; and

            d.    Reductions or increases in market prices for equivalent
                  materials and services.

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      Any amendment or change in terms shall be made in accordance with Section
      1.3.4 of this Agreement. Nothing contained in this Section 3.1 shall
      require either party to amend or change any term of this Agreement.

      3.1.3. Pricing Model.

      The parties have anticipated that changes will occur in the design,
      Specifications, Piece Parts, and other elements of Items to be provided
      pursuant to this Agreement and have negotiated the pricing model shown in
      Attachment 1 to accommodate such changes and to apply to Items that are
      affected by such change. The pricing model is agreed to apply
      appropriately to Items as changed in the future. However, if unanticipated
      changes not within the contemplation of the parties have a material and
      adverse impact on the operation of the pricing model, and alternative
      pricing is not agreed to by the parties at the time, then the Item(s)
      affected shall be removed from this Agreement. Such removal shall not be
      classified as a partial termination.

      3.1.4. Further Agreements as to Pricing.

      (a)   Upon request made by Applied through the SAT Team Lead for Supplier
      and delivered to Supplier's Vice President - Sales, Applied and Supplier
      will review pricing models proposed by Applied from time to time,
      including by way of example, option based pricing models. The parties may,
      by mutual written amendment to this Agreement, implement one or more
      alternative pricing models with respect to those Item(s) identified in or
      made subject to such alternative pricing model(s) by such amendment. The
      Items or Piece Parts subject to an alternative pricing model shall not be
      subject to Section 3.1.5 or Section 3.1.6 unless the parties expressly so
      provide in the amendment implementing the relevant alternative pricing
      model.

      (b)   (i)   The prices of Piece Parts sold to Applied, whether
      incorporated in FDSs or otherwise sold to Applied, shall be as follows:

            A.    Non-Unit MFCs (defined below in Section 3.1.4(b)(ii) shall be
            ***;

            B. All other Piece Parts ***; and

            C.    Adjustments to the foregoing prices shall be made in
            accordance with Section 3.1.5 and 3.1.6.

            (ii)  MFCs sold pursuant to this Agreement that are not Unit MFCs
      (the "Non-Unit MFCs") *** MFCs manufactured or sold by Supplier's
      affiliate Unit Instruments, Inc. ("Unit MFCs") shall be sold to Applied at
      ***

      (c)   Upon request of Applied or Supplier, the parties shall confer and
      establish milestones and criteria applicable for the transition of Item(s)
      from R&D Manufacturing

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      to Pilot Manufacturing, and from Pilot Manufacturing to Volume
      Manufacturing and further shall develop, based on milestones and criteria
      established, checklists and procedures appropriate to the transition of
      the affected Item(s). An illustrative form of NPT checklist is attached to
      this Agreement as Attachment 23.

      3.1.5. *** Terms.

      (a)   The "Commodity Classifications" are *** "Weldments," and "Unit MFC."
      Guidelines for determining the Commodity Classification applicable to a
      particular Commodity for each periodic reclassification are set out in
      Section 3.1.5.1(d). The *** are the periods, denominated periods 1 through
      5 and stated as monthly periods from June 1, 2002 and ending on the last
      date of the indicated month, in the table set out in Section 3.1.5 (d).

      (b)   Prior to each *** and in accordance with Sections 3.1.5 and 3.1.6,
      Supplier will prepare a preliminary table of Commodity Classifications for
      all Commodities. Supplier and Applied shall review and consult on, and
      agree to, the actual classification of Commodities for *** for purposes of
      the *** Matrix for the ***. Each actual classification of Commodities
      agreed upon by the parties shall be attached to this Agreement as part of
      Attachment 24.

      (c)   Two weeks prior to each *** and in accordance with the table
      classifying Commodities as agreed upon by the parties and with Sections
      3.1.5 and 3.1.6 , Supplier shall prepare a *** under Section 3.1.5.1 (e)
      that specifies *** for each Piece Part that is to be incorporated in any
      FDS forecasted to be built during that *** and is included in the
      Commodity Classification to which *** in the next *** ("Forecasted Piece
      Part"). The Applied Forecast to be used in preparing a *** Matrix shall be
      the most recent Applied Forecast reflected in Supplier's MRP system as of
      the date which is *** prior to the beginning of the applicable *** (the
      "*** Forecast"). Supplier shall then implement such pricing for each
      Forecasted Piece Part used in an Item ordered during the *** or that is
      sold to Applied under this Agreement as a separately purchased Item
      (excluding in this latter case Unit MFCs). In addition, Supplier shall
      also *** in accordance with Section 3.1.6 for all Piece Parts for which
      *** apply as a result of ***.

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      (d)   The *** and *** for each Commodity Classification are as follows:

<TABLE>
<CAPTION>
       ***        *** FOR ***      *** FOR ***      *** % FOR ***        ***
                  COMMODITIES      COMMODITIES                        % FOR ***
      ------      -----------      -----------      -------------     ----------
<S>               <C>              <C>              <C>               <C>
      #1/***          ***              ***               ***             ***
      #2/***          ***              ***               ***             ***
      #3/***          ***              ***               ***             ***
      #4/***          ***              ***               ***             ***
      #5/***          ***              ***               ***             ***
</TABLE>

            3.1.5.1 Calculation of New ***.

      (a)   Initial Classifications. Attachment 24 to this Agreement is the
      initial table of Commodity Classifications and ***, agreed upon by the
      parties as of the Effective Date and applicable for *** No. 1, classifying
      all Piece Parts into ***: ***.

      (b)   Periodic Reclassifications. Not later than *** prior to the
      beginning of each *** after the first period, Supplier shall deliver to
      Applied (to the attention of the Supplier's SAT Team Lead at Applied)
      Supplier's proposed classification table of all Commodities for the next
      ***. Applied and Supplier shall promptly review and negotiate in good
      faith to establish the classification table for Commodities, utilizing the
      classification guidelines set out in Section 3.1.5.1(d) below. If the
      parties fail to agree upon the classification table to be used within ten
      (10) Business Days after Suplier's delivery of the proposed classification
      table, either party may initiate the Business Review Process of Section
      7.2.5 with respect to such failure as a "Dispute."

      (c)   Special Provisions. Special provisions related to prices applicable
      to Piece Parts affected by *** (as such term is defined in Section 3.1.6)
      will be governed by Section 3.1.6, and those provisions shall control over
      the *** provisions of Section 3.1.5 to the extent of any conflict.

      (d)   Commodity Classification Guidelines. In preparing the Commodity
      Classification table for each ***, Supplier and Applied shall utilize the
      guidelines of this Section 3.1.5(d), subject to the exclusions applicable
      under Section 3.1.5.2.

            A.    Guidelines for *** Commodities Classification.

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            *** Commodities will include all Commodities that are identified by
            the parties under any of the following descriptions:

                  (i)   Sheet metal, cables, harnesses, and hardware and such
                  other Commodities as are set out as *** on the initial table
                  of Commodity Classifications in Attachment 24.

                  (ii)  All Commodities for which Supplier has had authority to
                  select the supplier or source of such Commodity, whether as a
                  no-preference choice or because neither Applied nor its
                  customers have required a specific source or supplier provided
                  that the Piece Parts meet Applied design requirements and, if
                  applicable, the provider is a qualified supplier, in at least
                  *** of the FDSs which Applied has ordered from Supplier in the
                  9 month period preceding the start of the applicable ***.
                  Examples of Commodities that will be evaluated under this
                  guideline are valves, transducers, filters and similar
                  Commodities.

            B.    Guidelines for *** Commodity Classification.

            *** Commodities are Commodities that are not now or hereafter
            classified as ***, and include, by way of example, ***.

            C.    Status Change.

            Once a Commodity is classified as ***, that Commodity (to include,
            as to a commodity group, all Piece Parts in such group) remains
            classified as *** during the remainder of the Agreement and shall
            not be reclassified in a periodic reclassification process.

            D.    MFCs.

            MFCs are not treated as ***. Unit MFCs shall have pricing
            adjustments made in accordance with the table set out in Section
            3.1.5(d).

            E.    Weldments.

            Weldment Commodities will include all weldments that are
            incorporated in an FDS ordered by Applied under this Agreement.
            After the first ***, Supplier may treat the Weldment Commodities and
            the *** Commodities as one Commodity Classification for purposes of
            calculation of the Total Gross Dollars, the *** and new Piece Part
            pricing applicable pursuant to Sections 3.1.5.1(e) (4), (5) and (6)
            of this Agreement.

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      (e)   ***. Each *** Matrix for a *** *** shall reflect:

            (1)   The Commodity Classification of each Forecasted Piece Part.

            (2)   The pricing then in effect for each Forecasted Piece Part
            within the Commodity Classification to which the reduction will
            apply. After the initial price reduction is made with respect to a
            particular Forecasted Piece Part, whether as a result of the *** or
            application of a Negotiated Price under Section 3.1.6. below,
            references in this Agreement (including these *** terms) to
            applicable Piece Part prices will mean such prices as then adjusted
            under Sections 3.1.5 and 3.1.6.

            (3)   The forecasted demand for each Forecasted Piece Part during
            the applicable *** based on the *** Forecast.

            (4)   The total gross dollars forecasted for the entire list of
            Forecasted Piece Parts in the Commodity Classification based on the
            *** Forecast, to which a percentage reduction applies during the
            applicable *** ("Total Gross Dollars"). Total Gross Dollars equals
            the sum of the then current Forecasted Piece Part pricing (i.e., the
            prices actually charged to Applied by Supplier immediately prior to
            the start of the applicable ***) multiplied by the respective
            forecasted demand in the *** Forecast.

            (5)   The *** dollar amount *** which is the product of the ***
            multiplied by the Total Gross Dollars.

            (6)   The new Piece Part pricing which represents Kinetics'
            allocation of the *** across the list of Forecasted Piece Parts.
            Supplier shall use commercially reasonable methods in its allocation
            of the *** and its selection of new Piece Part pricing. However, the
            difference between the Total Gross Dollars and the sum of the new
            Piece Part pricing multiplied by the respective forecasted demand in
            the applicable *** Forecast must equal the *** Percentage for the
            applicable ***.

            3.1.5.2 Exclusion; Particular Terms.

      (a)   A particular Piece Part shall not be classified or included in the
      *** (either as a Forecasted Part utilized in calculating the *** or as a
      Piece Part to which a *** shall apply pursuant to a ***) until the first
      *** that occurs *** Piece Part is first assigned a part number.

      (b)   A particular Piece Part that is a non-recurring purchase resulting
      from a CES requirement shall not be included as a Forecasted Piece Part
      and Supplier shall provide a list of such excluded Piece Parts with the
      affected ***.

      (c)   Prices of Unit MFCs under a *** apply only to purchases of Unit
      MFC's that are incorporated in an FDS ordered by Applied under this
      Agreement.

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      (d)   Prices of *** are not subject to the *** terms of this Section
      3.1.5.

      3.1.6. Adjustment for ***.

      (a)   Applied may ***

      (b)   The parties shall meet at least once per quarter to coordinate their
      respective efforts related to existing commitments from, or ongoing
      negotiations with, ***. *** This notice will be given to Supplier's Vice
      President Sales.

      (c)   The ***:

            (1)   If the *** for that Piece Part, the price charged to Applied
            ***.

            (2)   If the Negotiated Price for a Piece Part is below Supplier's
            Current Average Cost for such part, *** under this Section 3.1.6.

            (3)   ***.

3.2.  Volume.

Applied does not commit to buy a specific volume, quantity, or percentage of any
Piece Part or Item from Supplier, and Applied may buy the same or similar Piece
Part or Item from multiple sources.

3.3.  Export.

Applied may require, from time to time, Supplier to ship Items to locations
outside of the United States of America. Supplier will prepare the export
paperwork and be the exporter of record. Supplier must utilize Applied's
preferred carriers for the export of the Items. Applied will pay the freight
charges based on Applied's rates with its preferred carriers. Applied will be
responsible for importing the goods into the destination country.

3.4.  Currency.

All prices shall be quoted by Supplier in U. S. dollars; prices for foreign
manufactured Items will not be adjusted to reflect changes in the exchange rate.
Supplier is encouraged to obtain any necessary currency exchange protection
which it deems appropriate.

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4. TECHNICAL FRAMEWORK.

4.1.  Engineering Change Orders.

      4.1.1. ECO Procedures.

      (a)   Applied may change its Specifications at any time and generate a
      proposed ECO with respect to such change. An Applied Supplier Engineer may
      review with Supplier the Applied proposed ECOs that affect any Item(s).

      (b)   Supplier shall utilize one of the following procedures to initiate
      or request any engineering change to an Item or a change affecting
      Specifications (an "Engineering Change"):

            i)    Supplier may prepare and submit for approval a proposed ECO
            for an Engineering Change if such action is authorized under
            Supplier's Manufacturing Engineering Authority ("MEA"), as defined
            in Applied's documentation of its ECO procedures and standards in
            effect from time to time and provided to Supplier (a "Supplier
            ECO"); or

            ii)   Supplier may request an ECO to authorize an Engineering Change
            through a Request for Engineering Action ("REA") if such request is
            authorized under Supplier's MEA (a "Supplier Request"); or

            iii)  Supplier may initiate the development of an Engineering Change
            by submitting a Supplier Problem Sheet (Attachment 13) (an "SPS") to
            the SPS Administrator designated for Supplier.

      (c)   Changes to which an SPS or the ECO process applies shall not be
      implemented by Supplier (and Supplier shall not ship any Items with any
      Engineering Change) until written permission to proceed is given by
      Applied as required by its applicable SPS and ECO procedures. Applied will
      provide, in writing (to the attention of Supplier's Engineering Manager)
      or by release on Applied's current ECO database, notice of approved ECOs
      (Attachment 12), indicating the effective dates of all changes. Unless
      otherwise notified, Applied's receiving inspection will inspect to the
      latest revision in effect at the time of receipt of Items.

      (d)   If Applied has not responded to an SPS, REA or proposed ECO within
      the time period indicated in this Paragraph (d), Supplier may request
      review of the SPS, REA or proposed ECO by the SMT Supplier Engineer for
      Supplier. Applied is not obligated to approve any SPS, REA or proposed
      ECO. The response time for purposes of this Paragraph (d) is eighteen (18)
      days after initial submission of a proposed ECO or REA or after initial
      submission of an SPS.

      (e)   Each Supplier ECO and Supplier Request shall be handled in
      accordance with applicable MEA procedures and shall not modify or
      eliminate any requirement of the Quality Framework Document (Attachment
      15) or the QRD (Attachment 20) for review

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      and approval by Applied prior to implementation. Each Engineering Change
      initiated as a Supplier Request or Supplier ECO shall, prior to
      implementation by Supplier:

      (i) have been released by Supplier to Applied's assigned organizations for
      REA or ECO review and approval under the REA and ECO workflow and approval
      routing requirements of Applied in effect at the time;

      (ii) have been properly completed and documented under Applied's REA and
      ECO workflow and preparation requirements, including

            (a)   the document control process,

            (b)   applicable safety checklists, and

            (c)   other safety engineering or information requirements, as in
            effect at the time; and

      (iii) have been approved, in writing (to include electronic authorization)
      as required by Applied's ECO, REA or other applicable approval procedures.

4.2.  Tooling.

      4.2.1. General Tooling Provisions.

      (a)   Except as otherwise set forth in Section 4.2 or as otherwise agreed
      by the parties in a separate writing, special dies, tools, patterns, test
      fixtures, and like equipment (collectively, "Tooling") used in the
      manufacture of Items shall be furnished by and at the expense of Supplier
      and shall be owned by Supplier. As to those items of Tooling covered in
      Sections 4.2.2 and 4.2.3 (the "Test Fixture Hardware" and "Test Fixture
      Software," such latter term being defined in Section 4.2.3(c)), the terms
      of Sections 4.2.2 and 4.2.3 shall apply and not the terms of this Section
      4.2.1.

      (b)   Supplier agrees that Applied may, at Applied's option, purchase from
      Supplier Tooling to which this Section 4.2.1 applies that is unique to the
      Items or is unique to the manufacture of Items, *** Pursuant to such
      option, Applied may purchase from time to time (but subject to the
      limitations and requirements of Section 4.2.4(c)) items of such Tooling at
      the fair market value of such Tooling, as determined at the time of the
      exercise by Applied of this option. As part of such purchase and without
      additional consideration, Supplier shall assign to Applied, or if such
      assignment is not possible, license on a royalty-free, non-terminable
      basis, all IP Rights associated with such Tooling, including software (if
      any) associated with such Tooling ***. In this regard, Supplier will
      obtain from its employees, consultants, agents and representatives, as
      necessary, all assignments necessary for assignment of IP Rights to
      Applied.

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      (c)   Prior to acquisition of an item of Tooling that is unique to the
      Items or is unique to the manufacture of Items, Supplier will provide a
      separate line item quote for any such item of Tooling (excluding, however,
      Tooling subject to provisions of Sections 4.2.2 or 4.2.3) that Supplier
      will acquire for use in the manufacture of Items after the Effective Date.
      If Applied accepts such quote under such procedures, Applied will pay the
      cost of such Tooling separately, title to the Tooling shall be held by
      Applied, and the parties shall execute and deliver a Tooling Loan
      Agreement (or a supplement or schedule to an existing Tooling Loan
      Agreement) as to such Tooling. Supplier will establish appropriate
      accountability and tracking of any Tooling owned by Applied.

      (d)   Supplier shall not at any time use Tooling owned by Applied
      ("Applied Tooling") for the production of goods for persons other than
      Applied or in any manner other than in performance of Supplier's
      obligations under this Agreement, without Applied's written approval.
      Applied and Supplier shall execute a tooling loan agreement of even date
      with this Agreement in the form of Attachment 19 (the "Tooling Loan
      Agreement") for any Applied Tooling in Supplier's possession, or a
      supplement or schedule to include such Applied Tooling under an existing
      Tooling Loan Agreement.

      4.2.2. Current FDS Test Fixtures.

      (a)   The FDS test fixtures (including, for purposes of this Section 4.2,
      the gas panel alignment fixture) identified on Schedule 4.2.2(a) to this
      Agreement (the "Purchased FDS Test Fixtures") were purchased by Supplier
      from Applied. Each Purchased FDS Test Fixture (i) shall be located only at
      premises approved, in writing and in advance, by Applied (subject to the
      provision below as to changes of location among facilities of Supplier),
      and (ii) shall be used by Supplier solely to perform its obligations under
      this Agreement for manufacturing Applied FDSs to be sold to Applied
      pursuant to this Agreement. Further, Supplier grants and extends to all
      Purchased FDS Test Fixtures a security interest in favor of Applied to
      secure performance by Supplier of its obligations in respect of repurchase
      of the Purchased FDS Test Fixtures by Applied pursuant to Section 4.2.2(b)
      below.

      Supplier may, upon at least ten (10) calendar days prior notice to Applied
      given to Applied's Supply Account Team Lead as specified under Section
      1.2.2 above, relocate any of the Purchased FDS Test Fixtures from their
      current locations to any manufacturing facility of Supplier in Milpitas,
      California, Austin, Texas or Round Rock, Texas.

      (b)   Supplier grants to Applied the right, exercisable from time to time
      by Applied, at its option, whether or not default has occurred under this
      Agreement but subject to the requirements of Section 4.2.4(c) below, to
      purchase from Supplier any or all of the Purchased FDS Test Fixtures(s)
      and all then existing hardware modifications and improvements to such
      fixture(s). The purchase price for such Purchased FDS Test Fixture(s)
      shall be equal to the following percentages of the purchase price
      initially paid by Supplier to Applied for such Purchased FDS Test Fixtures
      and modifications and improvements: ***. Upon payment of such purchase
      price Supplier shall convey to

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      Applied, and Applied shall be the owner of, such test fixture(s) and all
      IP rights in or to such test fixture(s) (***). Supplier agrees to assign
      to Applied as part of such purchase and without additional consideration,
      and to obtain from its employees, consultants, agents and representatives,
      as necessary, all assignments of, all IP Rights it or they may have
      relating to the Purchased FDS Test Fixture(s) (***).

      (c)   The FDS test fixtures identified on Schedule 4.2.2(c) to this
      Agreement are owned by Applied (the "Applied Test Fixtures") and are
      provided to Supplier under the terms of the Tooling Loan Agreement and
      shall be located only at premises approved by Applied in writing and in
      advance, and shall be used by Supplier solely to perform its obligations
      under this Agreement for manufacturing Applied FDSs to be sold to Applied
      pursuant to this Agreement.

      (d)   The FDS test fixtures identified on Schedule 4.2.2(d) are owned by
      Supplier (the "Supplier Test Fixtures"). *** Improvements, additions and
      alterations to the Supplier Test Fixtures (excluding Improved Software, as
      defined below) shall be procured, purchased, funded and owned by Supplier.

      4.2.3. Future FDS Test Fixtures.

      (a)   Capacity FDS Hardware.

      Supplier shall regularly consult with Applied's SPM regarding such new FDS
      test fixture hardware and any modifications to existing FDS test fixture
      hardware (excluding modifications to the ***) that Supplier will need
      within the following six (6) month period either (i) to meet manufacturing
      capacity and flexibility requirements under the Supplier Performance Plan
      then in effect, (ii) to achieve production levels established pursuant to
      its capacity planning under Section 2.5.1, or (iii) to achieve increases
      in manufacturing capacity and flexibility, production volumes or operating
      levels to accommodate changes in quantities of Items under Section 2.5.2
      (the "Capacity FDS Hardware"), and to develop operational requirements for
      the Capacity FDS Hardware and a schedule for the acquisition and
      installation of such hardware, together with any related software. Applied
      shall provide or purchase all items of Capacity FDS Hardware that are, in
      its commercially reasonable judgment, necessary and appropriate for the
      purposes set out above in this Section 4.2.3(a). All Capacity FDS Hardware
      purchased or provided by Applied shall be owned by Applied and shall be
      subject to the Tooling Loan Agreement and this Agreement and upon request
      by Applied shall be identified by a supplement to Schedule 4.2.2(c) as
      Applied Test Fixtures. Whether or not default has occurred under this
      Agreement but subject to the requirements and limitations of Section
      4.2.4(c) below, Applied shall have the right to remove or otherwise take
      possession of such Capacity FDS Hardware.

      (b)   Product Change Hardware and Improved Software.

      Supplier shall regularly consult with the Applied SAT Lead regarding (i)
      any new or modified hardware for test fixtures that will be used to
      manufacture or test any FDS, Module, or other Item for Applied, which new
      or modified hardware will be needed as a result of new Applied products,
      modifications of existing Applied products, or new or

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      modified testing requirements or Specifications for Applied products that
      Supplier may be selected to manufacture or supply Items for (the "Product
      Change Hardware") and (ii) any new or modified software for test fixtures
      that will be used to manufacture or test any FDS, Module or other Item for
      Applied, which new or modified software will be needed as a result of new
      Applied products, modifications of existing Applied products, or new or
      modified testing requirements or Specifications for Applied products that
      Supplier may be selected to manufacture or supply Items for, or changes in
      Supplier's manufacturing capacities, equipment or volumes (the "Improved
      Software"). Applied (including its SAT Lead and the Tooling and Test
      Organization) shall regularly consult with Supplier as to new Applied FDS
      products and modifications of existing Applied FDS products that Supplier
      may be selected to manufacture and as to changes in Applied's FDS test
      requirements. Supplier will use commercially reasonable efforts to
      identify and advise the SAT Lead of Product Change Hardware and Improved
      Software, the need for which is known to Supplier, that will result from
      such new or modified products, testing, manufacturing requirements, or
      Specifications.

      Applied shall have the option to provide or purchase all items of Product
      Change Hardware and Improved Software that, in its commercially reasonable
      judgment, are necessary and appropriate for the manufacture and testing of
      FDSs, Modules or other Items for Applied, but shall not be required to
      provide or purchase Product Change Hardware or Improved Software. Supplier
      will not acquire or install Improved Software not purchased or provided by
      Applied. All Product Change Hardware and Improved Software purchased or
      provided by Applied shall be owned by Applied and, in the case of Product
      Change Hardware and Improved Software, be subject to the Tooling Loan
      Agreement and this Agreement and upon request by Applied shall be
      identified by a supplement to Schedule 4.2.2(c) as Applied Test Fixtures.
      Whether or not default has occurred under this Agreement, but subject to
      the requirements of Section 4.2.4(c) below, Applied shall have the right
      to remove or otherwise take possession of such Product Change Hardware.

      (c)   Right to Remove or Copy Software.

      Applied owns, has provided to Supplier and has paid the cost of the
      software currently used in the testing operation of all test fixtures
      listed on Schedules 4.2.2(a)-(d) (the "Current TF Software"). (The Current
      TF Software, the software for Capacity FDS Hardware and the Improved
      Software are the "Test Fixture Software.") Any Test Fixture Software in
      Supplier's possession may be copied by Applied at any time or times, upon
      reasonable notice to Supplier, to the attention of Supplier's Engineering
      Manager. Test Fixture Software in Supplier's possession may also be
      removed by Applied at any time or times; provided that as to removal of
      Test Fixture Software, Applied shall give the notice and comply with the
      other requirements of Section 4.2.4(c) below. Applied shall have the right
      to hold all source code and original documentation of Test Fixture
      Software. Applied shall have the obligation to maintain the Test Fixture
      Software, and Supplier shall cooperate with Applied in such maintenance.

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      4.2.4. General Application.

      (a)   Supplier shall not at any time use Test Fixture Hardware or the Test
      Fixture Software (other than the Supplier Test Fixtures and hardware or
      software that, in each instance (i) are not provided or purchased by
      Applied under Sections 4.2.3(a)-(c) or (ii) do not constitute Applied IP)
      for the production of goods for persons other than Applied or in any
      manner other than in performance of Supplier's obligations under this
      Agreements without Applied's written approval. Any such Test Fixture
      Hardware in Supplier's possession shall be subject to this Agreement, the
      IPA, and also the Tooling Loan Agreement; the Test Fixture Software shall
      be subject to this Agreement, the Tooling Loan Agreement, and also the
      IPA.

      (b)   If Applied fails to provide or delays providing (after notice by
      Supplier, given to Applied's SMT Operations Manager, that the failure or
      delay will affect Committed Delivery Dates), items of Capacity FDS
      Hardware, Product Change Hardware or Improved Software that are required
      for the manufacture and testing of new FDSs, Modules or other Items for
      Applied Systems, modifications of existing Applied Systems, or new or
      modified testing requirements or Specifications for Applied Systems that
      Supplier is selected to manufacture or to supply Items for, or changes in
      Supplier's manufacturing capacities, equipment or volumes, after the
      Effective Date, then, to the extent of delays in testing and delivery that
      result directly from such failure of Applied after notice under this
      Section 4.2.4(b), the Committed Delivery Date of the Items(s) so delayed
      shall be extended for a period equal to the period of Applied's failure or
      delay in providing such hardware or software.

      (c)   Applied may exercise any of its options or rights to purchase,
      repossess, or remove any Tooling or Test Fixture Hardware and Test Fixture
      Software, to the extent provided for in this Section 4.2, at any time,
      without the occurrence or continuance of a default by Supplier, but only
      in connection with a termination or cancellation of this Agreement, in
      whole or in part. If exercised in connection with a partial termination or
      cancellation, the right of Applied shall extend only to such items of
      Tooling, Test Fixtures and Test Fixture Software that are reasonably
      required for or in connection with the manufacture and testing of those
      Items (including Applied System product lines) as to which the termination
      or cancellation relates. Applied shall give Supplier prior notice under
      Section 1.2.2 of Applied's intent to purchase, repossess or remove any
      Tooling, Test Fixtures or Test Fixture Software or other items which it
      owns or may acquire hereunder, which shall be given at a time reasonably
      in advance of acquisition or relocation to allow Supplier to complete
      production of Items affected by the cancellation or termination and for
      which an Authorized Demand Signal has been issued, provided that notice
      given at least eight (8) weeks (or a period equal to such lesser product
      cycle time as may be applicable to the affected Items at the time) prior
      to the repossession, removal or purchase shall be deemed reasonable.

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4.3.  Design Changes and Resolution.

(a)   Supplier will not make changes to the Specifications, form, fit, function
or manufacturing process of Item(s), without having first complied with the
applicable requirements of Sections 4.1, 4.3, 4.4, and 4.5 of this Agreement.

(b)   Supplier shall not subcontract any Design Service or Development Service
except as permitted by and in compliance with the IPA and shall not utilize in
any Services any consultant, contractor, or employee for whom an executed
joinder in the confidentiality provisions of the IPA has not been delivered to
Applied. Supplier shall implement changes affecting Items and resulting from
Design Services or Development Services only upon obtaining prior written
approval required under applicable ECO, Applied Product Definition Form, and
other procedures from Applied's Supplier Engineer designated for Supplier and,
as applicable, as required by the DSA or DVA.

4.4.  Process Changes and Resolution.

Supplier shall be responsible for its compliance and compliance by its sub-tier
suppliers, subcontractors, providers and special process suppliers with
manufacturing requirements, Specifications and provisions of the QRD and Quality
Framework and shall inform Applied of any special process or other sub-tier
supplier, provider or subcontractor changes to Items, including any changes in
the manufacturing process of Supplier or of a sub-tier supplier, special process
supplier, subcontractor or provider, even when Specifications are being met
(excluding changes in physical layout of Supplier's manufacturing plant or in
Supplier's manufacturing line design). Supplier must receive approval in writing
from Applied with respect to the implementation of each such change. As required
by the QRD, Supplier must use special process suppliers from the list set forth
in Attachment 14.

4.5.  QRD and Special Process Requirements.

      4.5.1 Critical and Source Specific Materials.

      The manufacture, processes, Specifications, manufacturing processes and
      requirements of and for, and the providers of, Piece Parts, Modules,
      assemblies or Subassemblies designated as "Critical" or "Source Specific"
      pursuant to the QRD, and any Subassemblies transitioned to a sub-tier
      supplier or subcontractor (the "Critical and Source Specific Materials")
      shall comply with Applied's QRD, Quality Framework, and Special Process
      Supplier requirements in or pursuant to Attachments 14, 15 and 20 to this
      Agreement and documents or procedures referred to therein, all as revised
      from time to time. Supplier shall not make or authorize any change in any
      of the foregoing without prior written approval by Applied pursuant to the
      Quality Framework, QRD and Special Process Supplier requirements and
      related documents and procedures.

      4.5.2 Supplier's Subcontractors.

      Supplier will ensure that all sub-tier suppliers, providers and
      subcontractors of Supplier who have access (directly or indirectly) to
      Applied's Specifications or Internal Applied Data or other Confidential
      Information sign and are governed by a confidentiality

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      agreement with Supplier that is similar in form and substance to the
      confidentiality provisions of the IPA applicable to Supplier, and Sections
      2.9.1 and 2.9.2 of this Agreement. Approval by Applied of a sub-tier
      supplier, provider, or subcontractor selected by Supplier shall not alter
      Supplier's obligations to Applied.

      4.5.3. Costs of Supplier Change.

      The party initiating a change in a subcontractor, provider or sub-tier
      supplier to Supplier for Source Specific Parts shall bear the costs of
      qualifying the new sub-tier supplier, provider or subcontractor for the
      affected Piece Part, material or other element.

      4.5.4. Waivers.

      In addition to the provisions of Section 9.4 of this Agreement, if Applied
      waives any drawing, Specification or other requirement for one or more of
      the Items, it will not constitute a waiver as to remaining Items to be
      delivered, unless stated by Applied in writing.

4.6.  First Articles and Source Inspections.

First Article and Source Inspections shall be conducted in compliance with the
QRD and Quality Framework and the documents and procedures referred to therein.

4.7.  Applied's Right to Subcontract.

Applied may at its discretion elect to contract with a manufacturer, integrator
or outsource provider of Subassemblies (a "Subassembler"), which Subassemblies
will incorporate or include Item(s) Applied may purchase under this Agreement.
Applied will advise Supplier of the new Subassembler and of the Items affected.
Supplier understands that the selection and sourcing of any Items to be
incorporated or included in Subassemblies to be provided by the Subassembler
will be made by the Subassembler, and that, pursuant to Article 17 of Exhibit 1,
Applied may assign this Agreement, in whole or in part, in connection with its
contract with the Subassembler.

4.8.  Product Support

      4.8.1. Global Technical Support and Product Support.

      (a)   Technical Support. Supplier shall provide a telephone support system
      for global technical assistance to Applied, seven days a week, 24 hours a
      day, at no additional charge. Supplier shall include as part of its
      technical support hot pager contact for access at times outside Supplier's
      normal operating periods. Supplier is expected to use commercially
      reasonable efforts to provide a resolution to Applied's requests for
      technical assistance.

      (b)   Product Support. In addition to support, repair and replacement
      services covered by other provisions of this Agreement and in addition to
      the above technical support, Supplier will, upon request by Applied,
      provide support globally to Applied (and at the direction of Applied, to
      Applied's customers) for all Items that Supplier provides to

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      Applied, to include repair, replacement or correction of Items. SUPPLIER
      agrees to have an established and, at Applied's request, deployable global
      product support service capability. Supplier may utilize one or more
      affiliates of Supplier, Supplier distributor(s) or other qualified
      entities designated by Supplier and acceptable to Applied to meet this
      requirement. If support services provided by Supplier are not covered as
      warranty obligations to be provided pursuant to Section 7 of this
      Agreement, Supplier will be compensated for the services so provided as
      agreed by the parties on a case by case basis or under standard pricing as
      agreed. Except as required for those requests, if any, for global support
      covered by Section 2.4, when Applied has not been able to resolve a
      defect, failure or problem affecting an Item through the above technical
      support process, Kinetics shall respond to each request for global support
      from Applied and propose a plan for the correction, solution, repair or
      replacement within forty-eight (48) hours (as to requests initiated by
      Applied's Customer Engineer), and as to all other requests from Applied,
      within a period that is prompt under commercially reasonable standards
      considering the nature and urgency of the request.

      4.8.2. Product Support Period.

      Supplier agrees to maintain the capability to provide Items and to provide
      the same types and level of global product service and technical support
      to Applied described in Section 4.8.1 above, for all of the Items, for a
      minimum of ten years from the date of the last shipment of an Item to
      Applied under this Agreement to Applied for its manufacturing operations
      (the "Post Term Support"), in addition to meeting Supplier's warranty
      obligations. Upon Applied's request, Supplier shall provide Post Term
      Support on a time and materials basis, at rates and cost determined as set
      out in Section 4.8.1 above.

      4.8.3. Product Post Term Support Options.

      (a)   If Supplier desires to modify or reduce its Post Term Support
      obligation, Supplier agrees, as a condition of such a reduction or
      modification, that Supplier shall have prepared a transition and support
      plan for Post Term Support and shall have obtained Applied's approval, not
      to be unreasonably withheld, of such plan. As part of such plan, Supplier
      shall have negotiated (and obtained such approval from Applied of) a
      contract for Post Term Support (including capability to provide Items and
      the provision of global product support and technical support) to be
      provided by a financially responsible entity with established capability
      and expertise and a license to such third party of IP Rights to meet the
      requirements for Post Term Support, to the extent Supplier desires to
      reduce or modify its obligations for Post Term Support.

      (b)   If, after the use of commercially reasonable efforts, Supplier has
      not located a third party to provide Items as required for modification or
      reduction of Post Term Support obligations of Supplier or to negotiate a
      contract for the provision of Items under Post Term Support as described
      in Section 4.8.3(a), then Supplier shall provide in good faith all
      assistance reasonably required by Applied for Applied to provide or obtain
      the Items for which Supplier has Post Term Support obligations and, for
      such purpose, Applied shall have and may exercise the license in respect
      of cover pursuant to Section 3.13 of the IPA. If Supplier fails in any
      respect (other than as to arrangements for the provision of Items) to
      provide Post Term Support, or to have obtained approval of a

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      transition and support plan under Section 4.8.3(a), then Supplier shall
      provide in good faith all assistance reasonably required by Applied for
      Applied to provide or obtain the affected Post Term Support and, for such
      purpose, Applied shall have and may exercise the license in respect of
      cover pursuant to Section 3.13 of the IPA.

4.9.  Periodic Business Review.

Applied and Supplier shall periodically review their activities and agreements
through a formal business review process. As part of such business review
process during any Wind Down Period, the parties shall determine if Supplier
holds any documentation of a Future Modification (as defined in the IPA) in
which Applied holds any rights as owner or licensee pursuant to the IPA or any
DSA or DVA, which documentation Supplier is required to deliver to Applied
pursuant to the IPA, but which documentation has not been delivered to Applied
(the "Deliverable Documentation"). Supplier shall promptly deliver to Applied,
upon identification of same, upon subsequent request by Applied, any Deliverable
Documentation.

4.10. [Omitted].

4.11. Wind Down Provisions.

(a)   The "Wind Down Period" is the period preceding expiration or termination
of this Agreement that is applicable under the following provisions:

      (i)   With respect to the expiration of this Agreement, a period of up to
      *** that is designated by Applied as the Wind Down Period, which period
      shall commence on the date specified in a notice by Applied (given under
      Section 1.2.2) that a Wind Down Period shall apply in connection with the
      expiration of this Agreement. If the otherwise applicable term of this
      Agreement would expire prior to the end of such designated Wind Down
      Period, Applied shall extend the term of this Agreement to the last day of
      the Wind Down Period by an extension pursuant to Section 1.5, so that the
      term of the Agreement shall automatically be extended to and expire upon
      the last day of the designated Wind Down Period.

      (ii)  If Applied terminates this Agreement pursuant to Article 25 of
      Exhibit 1 to this Agreement or Article 26 of Exhibit 1 to this Agreement,
      the Wind Down Period shall be a period of up to *** that is designated by
      Applied in its notice (given under Section 1.2.2) exercising such right of
      termination, which period commences on the date the notice of termination
      is issued and ends on the date termination is effective, which effective
      date of termination shall be set out in the notice of termination and
      shall comply with the requirements of this Section 4.11 and of Article 25
      or 26 (as applicable) of Exhibit 1. If Supplier *** the Wind Down Period
      shall be a period of at least *** that is designated by Supplier in its
      notice *** which period commences on the date the notice *** is issued and
      ends on the date *** is effective, which effective date *** shall be set

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      out in the notice *** and shall comply with the requirements of this
      Section 4.11 and of ***.

If termination is in part and not in whole, the Wind Down Period shall apply
with respect to that portion of the Agreement affected by the termination.
During the Wind Down Period, Supplier shall continue to supply all Items for
which an Authorized Demand Signal is issued and accepted or deemed accepted
under this Agreement. The parties shall use commercially reasonable efforts and
cooperate so that Items for which Authorized Demand Signals are issued and
accepted during or prior to commencement of the Wind Down Period will have
Committed Delivery Dates on or before the end of the Wind Down Period. Supplier
and Applied each shall perform its agreements and obligations regarding the Wind
Down Period under the IPA and this Agreement. The Wind Down Period continues
from the date it commences until the date termination or expiration is
effective.

(b)   The provisions of Section 4.8 shall apply during, and continue in effect
after, the Wind Down Period, without limitation of other survival provisions of
this Agreement.

(c)   No later than the conclusion of the Wind Down Period (and, when applicable
for a partial termination, then as to the portion affected):

      (i)   Supplier shall convey its title, if any, to, and shall deliver to
      Applied, ***. In the event of Termination for Default or an expiration of
      the term of this Agreement, Applied shall have the option, but not an
      obligation, to purchase from Supplier the Remaining Consumable Materials.
      ***. Prices for partially completed Items shall be determined by applying
      the cost model (Attachment 1) to actual materials consumed or installed in
      the partially completed Item, and by a charge for actual Services
      performed and actual manufacturing labor (at the rate for work in
      Supplier's facility). The price payable by Applied for Remaining
      Consumable Materials shall be determined under Section 4.11(d) below.
      Supplier shall not charge for documentation of or relating to, Applied IP.

      (ii)  Supplier and Applied shall have performed and discharged their
      respective obligations under the IPA and this Agreement.

      (iii) Supplier will return all Tooling, capital or other equipment
      (including any Tooling and capital equipment that Applied has acquired
      ownership rights in as a result of exercising its rights under this
      Agreement) and material owned by Applied. Supplier will be responsible for
      the packaging and transportation costs associated with the return of these
      items if the termination is for default; Applied shall be responsible for
      such packaging and transportation costs in all other events.

      (iv)  Applied and Supplier shall each have paid the other all amounts then
      due and payable under this Agreement and any Related Agreement, except for
      amounts in bona fide dispute.

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(d)   "Remaining Consumable Materials" shall be determined as follows: Supplier
shall record and report to Applied, within 10 days after the date notice of
termination is given, *** following the date on which notification is given, ***
affected by the notification over the following ***. The "Remaining Consumable
Materials" is the quantity of *** that were actually on hand, or for which
Supplier had issued noncancellable purchaser orders, that were not used or
consumed in the course of operations under the Agreement. The charge or price
for Remaining Consumable Materials is determined *** for the *** at the date of
notification.

(e)   During the period after notification and prior to termination, Applied and
Supplier shall negotiate the terms of and charges for Restock or Reconfigure
Items, and the formula provisions of Sections 2.14.4 and 2.14.6 shall not apply.
Supplier shall not be required, during a Wind Down Period relating to
termination, to accept Restock Items or Reconfigure Items that are first
designated as such during such a Wind Down Period. The provisions of this
Agreement as to cancellation of Items and as to ***s, however, are not modified
during a Wind Down Period.

5.    NONCONFORMANCE.

5.1.  Nonconformance and Corrective Action.

      5.1.1. [Omitted.]

      5.1.2. Supplier Corrective Action Request.

      Applied will complete a "Supplier Corrective Action Request" (Attachment
      10) pursuant to ISO 9000 processes to record and request corrective action
      for recurring nonconformities. Upon receipt of a Supplier Corrective
      Action Request, Supplier will promptly respond as appropriate and use best
      industry practices to cure the nonconformities and the cause of
      nonconformity. A corrective action process to resolve nonconformance will
      be documented and used by the parties. In addition, Supplier will
      participate in continuous improvement plans and programs as defined by
      Applied and Supplier.

5.2.  Applied Nonconformance and Corrective Action.

      5.2.1. Items Affected.

      Applied will, at its option, return Items at Applied's expense that do not
      conform to Applied's requirements due to Applied's errors or damage caused
      by Applied. These Items will be returned to Supplier for repair or
      potential rework. Applied may, at its option, require Supplier to repair a
      Subassembly at Applied's facility. If Applied returns an Item to Supplier
      under this Section 5.2.1, Applied shall deliver to Supplier with such
      Item, when returned, certification of decontamination and preparation for
      safe handling if the Item has been exposed to toxic or corrosive gases or
      chemicals, in compliance with Section 2.14.7.D.

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      5.2.2.      Standard Repair Costs.

      Except for instances for which the parties have established "standard"
      repair costs (labor, Items and freight) for Items not covered under
      warranty, Supplier shall charge, and Applied shall pay, for non-warranty
      repair or correction of Items on a time and materials basis. Materials
      shall be charged at the ***; Supplier's labor charges for repairs
      performed at Supplier's facilities shall not exceed ***. If Supplier is
      required to provide labor at Applied facilities to meet repair times for
      Production Issue Items, the labor cost will not exceed ***.

      Supplier will assess repair and rework costs and timing and quote same to
      Applied before work is performed. Upon approval of Supplier's quote,
      Applied will issue its Purchase Order for such costs. Applied may at its
      option elect (a) to have the Item repaired or reworked, or (b) to purchase
      a new Item at pricing determined under Attachment 1. Supplier shall
      prepare its quotation based on the completion terms of Section 5.2.3 and
      shall advise Applied as part of its quotation if more than five (5)
      Business Days will be required.

      5.2.3.      Time for Repair.

      Supplier shall repair, replace, or correct defects or defective Items
      resulting from Applied's error or damage within *** after Applied notifies
      Supplier of the defect or damage (unless a longer period is required in
      the use of best professional practices), or at such other time as is
      agreed by the parties as part of the issuance of Applied's Purchase Order,
      except for Items Applied identifies as a Production Issue in its initial
      notice under Section 2.4, as to which Supplier shall respond and act in
      accordance with Section 2.4.2. Costs and pricing for repair of damages or
      defects caused by Applied error will be established under Section 5.2.2
      above.

      5.2.4.      Return of Items.

      Items repaired or reworked by Supplier will be shipped in accordance with
      generally applicable transportation and packaging requirements. Supplier
      will deliver such Items to Applied at the times determined under Section
      5.2.3 above. Prior to Supplier's return of a repaired or reworked Item to
      Applied, Supplier will mark such Item with Applied's part number, serial
      number, range and gas (if applicable). Applied shall pay costs of
      transportation and bear the risk of loss or damage during transit of
      repaired or reworked Items, whether or not such Items meet warranty or
      other requirements.

6. SUPPLIER PERFORMANCE PLAN.

As part of this Agreement, Applied and Supplier have prepared a Supplier
Performance Plan, which is Attachment 16 to this Agreement. Supplier's
performance and compliance with the applicable Supplier Performance Plan shall
be reviewed in periodic business review meetings

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conducted by Applied's SPM. A recurring failure of Supplier to perform at (or to
achieve) the standards set, or to comply with terms of, the Supplier Performance
Plan will be deemed a Dispute for purposes of Section 7.2.5, as to which either
party may initiate the Business Review Process and, if such recurring failure is
material, may be the basis of an action by Applied under Article 25(a)(iii) of
Exhibit 1. A recurring failure for purposes of this Section 6 and of the
Supplier Performance Plan is a failure that occurs in at least ***.

7.    WARRANTIES AND REMEDIES.

7.1.  Supplier Warranty.

      7.1.1.      Basic Warranty.

      Subject to the limitations set out in Section 7.1.4 below, Supplier
      warrants to Applied, for the warranty period set out in Section 7.1.3
      below, that each Item delivered to Applied (excluding Services separately
      warranted under Section 7.1.2 below):

            (a)   will be free from defects in materials, workmanship and
            manufacture, and will be of good title;

            (b) will conform to (i) all Specifications, and (ii) those
            requirements of (or made applicable through) the following documents
            and Sections of this Agreement applicable to such Item: the Quality
            Requirements Document (Attachment 20); the Process Qualification
            Program in effect at the time of manufacture under the QRD and
            applicable to the Item; the Quality Framework (Attachment 15);
            Special Process Suppliers (Attachment 14); and Sections 4.4 and 4.5
            of this Agreement;

            (c) will have been manufactured in compliance with those provisions
            of the Quality Requirements Document (Attachment 20), Process
            Qualification Program in effect at the time of manufacture under the
            QRD and applicable to the Item, Quality Framework (Attachment 15),
            the Supplier Performance Plan (Attachment 16), and Sections 4.4 and
            4.5 of this Agreement, applicable to the manufacture of such Item
            and with manufacturing standards suitable for the manufacture of
            high quality, process sensitive components of Applied Systems
            ("Suitable Manufacturing Standards"); and will consist of new
            materials and Piece Parts;

            (d) will be of merchantable quality and fit for the intended purpose
            of use with or incorporation in Applied Systems for semiconductor
            wafer fabrication, flat panel display fabrication, thin film
            application processes or manufacturing, toxics abatement or
            recycling, or wafer inspection and metrology, as applicable; and

            (e) will, to the extent of Configuration Engineering Services, CES
            Services, CCR Services, NPT Services and Design Services or
            Development Services,

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            provided by Supplier, be free from defect in such Services
            excluding, however, any defects caused by error in the applicable
            product design that was not itself caused by Supplier or its
            Services.

      7.1.2.      Services.

      As to Services, for the warranty period set out in Section 7.1.3 below and
      subject to the limitations set out in Section 7.1.4 below, Supplier
      warrants to Applied that its Services have been performed in a competent,
      professional and workmanlike manner, and are free from defect and in
      accordance with the best professional practices of the industry.

      7.1.3.      Warranty Period.

      The warranty period applicable under this Agreement commences on the date
      of delivery to Applied of the Item (and, as to Services, commences upon
      completion of the Service and delivery of the completed work product and
      any other deliverables to Applied) and extends for a period of *** after
      such date *** subject, however, to applicable limitations under Section
      7.1.4(iii), and provided that Supplier's warranty period as to a Third
      Party OEM Component (as defined in Section 7.1.5. below) extends *** If
      Applied's warranty to the Applied customer by whom the Item is used or
      purchased expires during Supplier's stated 24 month warranty period, ***
      If Applied's warranty to the Applied customer by whom the Item is used or
      purchased does not have a stated period or term, ***

      7.1.4.      Limitations on Warranty.

      Supplier's warranties under this Agreement are subject to the following
      limitations:

            (i) Supplier makes NO WARRANTIES under this Agreement, whether
            express, implied, statutory or otherwise, except those warranties
            provided in this Agreement. The remedies provided for in or through
            this Agreement (and as to Services, where applicable, provided for
            in or through the IPA, DSAs, or DVAs) constitute the sole and
            exclusive remedies of Applied with respect to Items that fail to
            conform to such warranties. EXCEPT FOR THE WARRANTIES EXPRESSLY SET
            FORTH IN THIS SECTION 7.1 AND THOSE EXPRESSLY PROVIDED IN THE IPA
            AND ANY DSAS OR DVAS, (A) SUPPLIER DISCLAIMS ALL OTHER WARRANTIES,
            EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE WITH RESPECT TO ITEMS
            (INCLUDING SERVICES) INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES
            OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
            PARTICULAR PURPOSE, AND (B) THE ITEMS ARE PROVIDED "AS IS."

            (ii) In determining whether an Item is of a quality that is
            merchantable (Section 7.1.1(d) above), an Item must be of a quality
            at least equal to the standards of minimum acceptability for the
            same or like Items that are employed by Applied at the time of its
            manufacture; however, such standards shall not limit application of,
            or excuse compliance with, specific warranty requirements of

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            Section 7.1.1 above applicable to the specific Item. In determining
            whether an Item is of a quality that is merchantable, the standards
            for merchantable quality of the Item shall be those that are
            currently applied at the time of its manufacture. In determining
            whether an Item is fit for its intended purpose, such warranty shall
            extend to use or incorporation in semiconductor wafer fabrication,
            flat panel display fabrication, thin film application processes or
            manufacturing, toxics abatement or recycling, or wafer inspection
            and metrology systems, as applicable, employed in processes (a) that
            are customary or generally contemplated within the industries using
            such systems, or (b) that are specifically identified by Applied to
            Supplier, in writing (including e-mail, facsimile and posting of
            information on the Applied website designated for Supplier's access)
            as an intended use.

            (iii) Supplier's warranties do not extend to defects, failure or
            malfunction of an Item to the extent such failure, defect or
            malfunction (a) results from conformance by Supplier with
            Specifications prepared by Applied, provided that this exclusion
            shall not alter or limit Supplier's warranties of its Services; (b)
            is caused by accident, negligence, misuse, alteration, modification
            or tampering of or caused by any person other than Supplier, or (c)
            is caused by use or operation in environments or for processes that
            are not customary or generally contemplated in those industries
            using semiconductor wafer fabrication, flat panel display
            fabrication, thin film application processes or manufacturing,
            toxics abatement or recycling, or wafer inspection and metrology
            systems, as applicable, or not specifically identified by Applied to
            Supplier as intended uses or environments.

      7.1.5.      Third Party OEM Components.

            (a) A "Third Party OEM Component" is any product (i) that is
            identified by an Applied Commodity Code (under Applied's Commodity
            Code Document 0250-10856) with an initial designator equal to or
            greater than "0500" and (ii) for which the original manufacturer's
            warranty is for a period of at least thirteen (13) months from the
            date of Supplier's purchase and expressly runs to Applied or has
            been validly assigned to Applied by Supplier. The foregoing
            provision as to products with an initial Commodity Code designator
            equal to or greater than "0500" includes products: (i) that are
            identified by Applied Commodity Codes with initial designators
            between "0220" and "0229" but that would otherwise be assigned
            Applied Commodity Codes with an initial designator greater than
            "0500"; and also, (ii) that are new products to which a Commodity
            Code initial designator greater than "0500" would be assigned under
            the terms of Applied Document Commodity Code Document 0250-10856 as
            in effect on the Effective Date.

            (b)   ***

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            (c) Effective on the shipment by Applied to its customer of the Item
            or Applied System containing a Third Party OEM Component, Supplier
            assigns to Applied, to the fullest extent permitted by applicable
            law and agreements, all of Supplier's warranties, warranty rights
            and recoveries from or against each manufacturer and supplier of
            each Third Party OEM Component installed or incorporated in the Item
            or Applied System that may not be enforced by Applied, unless so
            assigned. Supplier will cooperate with Applied in Applied's
            enforcement of and recovery under such assigned or available
            warranties of Third Party OEM Components, including the execution
            and delivery of such further instruments as Applied may reasonably
            request to perfect and protect the foregoing assignment or rights of
            Applied, provided that Supplier shall not be required to bear costs
            and expenses of such cooperation that are not reasonable under the
            circumstances. If, following the date of assignment to Applied of
            the warranty and warranty rights and recoveries, Supplier is sued
            and such warranty and warranty rights or recoveries are reasonably
            required for Supplier's defense of, or for the assertion of
            counterclaim against, the claims against Supplier, Applied will
            cooperate with Supplier with respect to such warranty and warranty
            rights and recoveries and, upon reasonable terms and
            indemnification, assign back to Supplier, to the extent so required,
            the warranty and warranty rights or recoveries.

      7.1.6.      Debit Recoveries.

            (a) Prior to Applied's initiation of a debit or other offset under
            Section 2.11.3 to effect a recovery for a warranty claim of Applied
            against Supplier, Applied shall advise Supplier, to the attention of
            Supplier's Customer Service Manager - Warranty Claims (in addition
            to the notice to Supplier's Finance Manager as provided by Section
            2.11.3) of the expected debit or offset amount and shall ship to
            Supplier for inspection the Item for which Applied proposes to
            effect a debit or offset based on its warranty claim (the "Warranted
            Part"). Supplier shall cooperate in arranging for delivery and shall
            provide, promptly upon request by Applied and without prejudice to
            Supplier as to warranty coverage, Supplier's Return Materials
            Authorization ("RMA") for the return of the Warranted Part under
            this Section 7.1.6. Applied shall not use debits or offsets to
            recover amounts for warranty claims as to Services only.

            (b) If a Warranted Part has been destroyed or is not available to
            Applied for delivery for purposes of the debit process under this
            Section, Applied will not initiate a debit process for the warranty
            claim. If Applied fails to effect delivery of the Warranted Part to
            Supplier under Section 7.1.6 (a), the debit or offset shall be
            recredited in full. If Applied does not proceed under this Section,
            Applied retains and may pursue all its other remedies. Applied is
            not required to proceed under this Section to assert or recover for
            its warranty claims against Supplier; this Section only applies to
            debits or offsets relating to warranty claims.

            (c) If, after Supplier's examination of a Warranted Part, Supplier
            disputes the debit, offset or warranty coverage, Supplier shall
            notify its assigned Supplier

                                       75
<PAGE>
            Quality Engineer ("SQE") at Applied and shall specify the amount
            Supplier requests to be re-credited ("Disputed Amount"). This
            notification and specification of the Disputed Amount must in any
            event be given to Applied within thirty (30) days after the RMA
            delivery of the Warranted Part to Supplier. If the SQE approves the
            Supplier's request, the Disputed Amount shall be recredited.

            (d) If the SQE and Supplier do not agree on the amount to be
            re-credited, or on the disposition of the claim, Supplier may (i)
            accept the determination of the SQE or (ii) initiate the Business
            Review Process for resolution of the dispute as described in Section
            7.2.5.

      7.1.7.      Survival of Warranties.

      Supplier's warranties shall survive any delivery, acceptance, inspection,
      or payment by Applied, except as expressly provided otherwise in this
      Section 7.1. Applied's approval of Supplier's material or design will not
      relieve Supplier of the warranties established in this Agreement.

7.2.  Applied's Remedies.

This Section 7.2 sets out obligations of Supplier and provides remedies of
Applied for Supplier's failure to make timely delivery of Item(s) and for breach
of Supplier's warranties as to Items. In addition to the remedies for such
failure of delivery and for breach of warranty provided for in this Section 7.2,
Applied has the remedies and rights provided under Articles 22 and 25 of Exhibit
1 (subject to the limitations and requirements of such Articles and of Article
21 of Exhibit 1). Provisions for recovery of damages by Applied in this Section
7.2 or in Article 25 are subject to applicable limitations under Article 21 of
Exhibit 1.

      7.2.1.      Failure to Deliver.

      If Supplier fails to deliver one or more Items (or to provide Services
      with completed work product and deliverables) on the Committed Delivery
      Date or otherwise at the times provided by the applicable Authorized
      Demand Signal or as agreed by the parties:

            (a) Supplier shall initiate all actions necessary to complete and
            deliver the Items (or provide Services, work product and
            deliverables) promptly, without notice or demand by Applied. All
            increased costs and expenses for completion and delivery that result
            from Supplier's failure to timely deliver Items (or provide
            Services, work product and deliverables) shall be paid by Supplier.
            Supplier shall use the most expeditious manner commercially
            available to effect completion and delivery of Item(s), Services,
            work product and deliverables.

            (b) If the failure constitutes or results in a Production Issue
            under Section 2.4, Supplier shall comply with that Section of this
            Agreement.

            (c) If Supplier fails to comply with Section 2.4, where applicable,
            or if Supplier otherwise fails to cure the late delivery promptly
            after the applicable

                                       76
<PAGE>
            Committed Delivery Date or repudiates, Applied may recover its
            damages resulting from the failure to comply or deliver, from late
            delivery or from repudiation and may exercise all remedies available
            pursuant to the UCC and, as to Services and related deliverables,
            may recover its damages and exercise all remedies provided by law or
            equity. Where applicable, the procedures and limitations of (or,
            provided for through) Section 7.1.6, 7.2.1(d), or 7.2.1(e) and of
            Article 21 of Exhibit 1 will apply to exercise, enforcement and
            recovery by Applied.

            (d) Prior to effecting cover under the preceding paragraph (c),
            Applied shall give notice of its intent to cover, which notice shall
            be given to Supplier's Customer Service Manager in Austin or
            Milpitas, as applicable by e-mail or facsimile transmission and by
            voice message (telephone, pager, or voice mail). The notice of
            intent to cover shall identify the Item(s) for which cover is
            intended, and shall specify the Cover Period (defined below). Within
            24 hours (measured during Business Days and under prevailing Pacific
            Time) from the time notice is so given, Supplier shall notify
            Applied (in the same manner as provided for the notice to Supplier)
            by e-mail or facsimile notice to the Supply Account Team Lead
            specified in Section 1.2.1 if Supplier will provide to Applied the
            Item(s) within the Cover Period or if Supplier declines to proceed.
            If Supplier elects to provide such Item(s), Supplier shall provide
            such Item(s) on or before the expiration of the Cover Period at the
            original Contract Price. The "Cover Period" is that period which is
            reasonable under the circumstances for the Item(s), or
            equivalent(s), to be completed and delivered (but not to exceed the
            period within which the Item(s), or equivalent(s), can be obtained
            from a source other than Supplier).

            (e) (i) Prior to effecting cancellation through termination for
            default, in part, with respect to the particular affected Item(s),
            as a remedy pursuant to clause (c) above, Applied shall give notice
            of intent to cancel to Supplier's Customer Service Manager in Austin
            or Milpitas, as appropriate, and may (but shall not be required to)
            initiate the Business Review Process under Section 7.2.5. This
            cancellation through termination for default as to particular
            Item(s) shall not be limited by or conducted under Article 25 of
            Exhibit 1, but Applied may proceed to exercise such right by notice
            to Supplier. If Applied does elect to utilize the Business Review
            Process and the failure is not resolved by the Business Review
            Process, when applicable, or if Supplier fails to perform in a
            material respect under a resolution developed by the Business Review
            Process, Applied may give notice of default and cancel this
            Agreement as to the particular Item(s) without compliance with
            Article 25 of Exhibit 1.

                  (ii) If Applied intends to effect cancellation as to more than
            the particular affected Item(s) through termination for default
            (which may be in part or in whole), Applied shall proceed in
            accordance with Article 25 of Exhibit 1 and the Business Review
            Process.

                                       77
<PAGE>
      7.2.2 Defective Items.

      If Supplier delivers Items (or provides Services) that do not conform to
      the warranty terms applicable to the Item(s) or Service(s) (a "Defective
      Item"), Applied shall give written notice (including notice by e-mail,
      facsimile or other electronic record) to Supplier's Customer Service
      Manager in Austin or Milpitas, as appropriate, of the Defective Item, and
      thereafter:

            (a) Supplier shall promptly correct, repair or replace, at
            Supplier's cost and expense, the Defective Item(s) without further
            notice from or demand by Applied. As to Services, Supplier's
            obligations include the prompt correction or re-performance of the
            Services and any work product or other deliverables. Supplier shall
            use the most expeditious commercially available means to effect
            repair, replacement or correction, including the provision of a new
            Item in lieu of repair. Applied may require repair, replacement or
            correction at Applied's facility.

            (b) If the failure constitutes or results in a Production Issue
            under Section 2.4, Supplier shall comply with that Section. If the
            failure is subject to Section 5.1.2, as applicable under this
            Agreement, Supplier shall comply with that Section of this
            Agreement.

            (c) If Supplier fails to comply with Section 2.4, where applicable,
            or if Supplier otherwise fails to promptly repair, replace or
            correct any Defective Item(s) or if Supplier repudiates, Applied may
            recover its damages resulting from such failure and may exercise all
            remedies available pursuant to the UCC (to include revocation of
            acceptance) and, as to Services and related deliverables, may
            recover its damages and exercise all remedies provided by law or
            equity. Applied may, as part of its recovery, include premium costs
            for expedited delivery. Where applicable, the procedures and
            limitations of (or, provided for through) Section 7.1.6, 7.2.2(e)
            and (f), and Article 21 of Exhibit 1 will apply to exercise,
            enforcement and recovery by Applied.

            (d) (i) Applied will utilize the procedures of this Section 7.2.2(d)
            to make repair, replacement or correction of a Defective Item in
            those instances in which (a) Supplier fails to comply with Section
            2.4, if applicable, (b) Supplier fails to correct, repair or replace
            the Defective Item within the period requested by Applied or
            otherwise established by the parties or this Agreement, or (c) the
            Defective Item has been shipped to or is installed at an Applied
            customer location.

                  (ii) When Applied effects repair, replacement or correction of
            a Defective Item under this Section 7.2.2(d), Applied shall be
            entitled to recover, and Supplier shall pay to Applied each of the
            following that applies:

                  1. The cost of goods obtained or used by Applied to make the
                  repair, replacement or correction of the Defective Item, and
                  of any necessary engineering or similar services relating to
                  such goods.

                                       78
<PAGE>
                  2. The cost of freight or shipping and of taxes for the goods
                  obtained for the repair, replacement or correction, and for
                  the return of any Defective Item(s).

                  3. The cost of labor required to remove, repair, replace and
                  reinstall a Defective Item (if repaired) and remove and
                  reinstall other Piece Parts necessary to the repair,
                  correction or replacement.

            Costs of labor shall be determined at Applied's then standard labor
            rates; if labor is provided at facilities of Applied's customers or
            through the Applied CPS organization, the labor charge by Applied to
            Supplier shall be equal to the field service labor charge calculated
            at Applied's CPS rates (not to exceed ***). Costs of engineering
            services shall be determined by Applied at its customary rates, then
            in effect, not to exceed ***. This Section 7.2.2(d) shall not limit
            Applied's other remedies or recoveries provided for in (but subject
            to the limitations of) other provisions of this Agreement.

            (e) Prior to effecting replacement under paragraph (d) above of a
            Defective Item that is an FDS, Applied shall give notice of its
            intent to make such a replacement, which notice shall be given to
            Supplier's Customer Service Manager in Austin or Milpitas, as
            appropriate, by e-mail or facsimile transmission and by voice
            message (telephone, pager, or voice mail). The notice of intent to
            replace shall identify the Item(s) for which such replacement is
            intended, and shall specify the Replacement Period (defined below).
            Within 24 hours (measured during Business Days and under prevailing
            Pacific Time) from the time notice is so given, Supplier shall
            notify Applied (in the same manner as provided for the notice to
            Supplier) by e-mail or facsimile notice to the Supply Account Team
            Lead specified in Section 1.2.1 if Supplier will replace the Item(s)
            within the Replacement Period or if Supplier declines to proceed. If
            Supplier elects to replace such Item(s), Supplier shall replace such
            Item(s) on or before the expiration of the Replacement Period. The
            "Replacement Period" is that period which is reasonable under the
            circumstances for the Item(s), or equivalent(s), to be replaced (but
            not to exceed the period within which the Item(s), or equivalent(s),
            can be obtained from a source other than Supplier).

            (f) If Applied intends to cancel the Agreement as to more than the
            particular affected Item(s) through termination for default (which
            may be in part or in whole) as a result of Supplier's breach or
            default under this Section, Applied shall proceed in accordance with
            Article 25 of Exhibit 1 and the Business Review Process.

            (g) If Applied makes a warranty claim with respect to an Item that
            has been modified or repaired, Applied shall include as part of the
            documentation of such claim the maintenance and service record
            relating to the modification or repair.

----------

* Confidential Treatment Requested

                                       79
<PAGE>
      7.2.3.      Cumulative Remedies.

      The remedies of Applied and Supplier shall be cumulative, and no election
      of remedies shall occur.

      7.2.4.      Remedies for Other Breach or Default.

            7.2.4.1. Subject to the exclusions provided in this Section 7.2.4 or
            provided in Article 25 of Exhibit 1 to this Agreement, if Supplier
            or Applied fails to comply with, observe or perform any term,
            provision or condition of this Agreement, or otherwise defaults
            under or breaches any term, provision or condition of this
            Agreement, the other party shall initiate the Business Review
            Process prior to proceeding to enforce or exercise its rights,
            remedies and actions available to it under this Agreement or under
            applicable law.

            7.2.4.2. The requirement in Section 7.2.4.1 of initiation of the
            Business Review Process shall not apply: (a) to the enforcement or
            exercise of equitable rights or remedies, and actions seeking
            equitable relief; or (b) to claims, matters, remedies, and actions
            that are provided for in Section 7.2.1 or Section 7.2.2 with respect
            to particular Item(s).

            7.2.4.3. If Supplier or Applied has failed to comply with, observe
            or perform, or otherwise has defaulted under or breached, any term,
            provision or condition of this Agreement, then (after any applicable
            period of notice or consultation applicable under this Agreement and
            after conclusion of the Business Review Process, where applicable)
            the other party may proceed to enforce or exercise its rights and
            remedies as provided under this Agreement or as provided by law or
            equity (subject to procedural requirements of this Agreement and,
            where applicable, to the limitations of Article 21 of Exhibit 1 to
            this Agreement), all as it may elect, concurrently and in the
            alternative, without waiver or election by the pursuit of any one or
            more right, remedy or action.

            7.2.4.4. In this Agreement, the phrase "term, provision or
            condition" shall include any term, provision, condition, covenant,
            agreement, representation, warranty, obligation, indemnity,
            undertaking, requirement, or other part of this Agreement or of
            another indicated agreement, and such phrase shall be so construed
            unless the context clearly requires otherwise.

      7.2.5 Business Review Process.

            7.2.5.1. With respect to any dispute, issue, controversy or claim of
            breach arising under this Agreement (a "Dispute"), either party may
            initiate the process described in this Section 7.2.5 (the "Business
            Review Process") to seek resolution of the Dispute. Except as
            specifically provided to the contrary in this Agreement, compliance
            with the Business Review Process is not a condition or requirement
            to the exercise of any legal remedies or proceedings, to the
            exercise of rights or remedies provided by or under this Agreement,
            or to other action by a person.

                                       80
<PAGE>
            7.2.5.2. The Business Review Process is initiated by a Notice from
            Applied or Kinetics to the other of a Dispute, which notice shall be
            given under Section 1.2.2, and a request for review of the Dispute
            under the Business Review Process. Upon such Notice and request,
            Applied shall designate a representative at its director level or
            higher, and Kinetics shall designate a representative at its
            director level or higher, to constitute their representatives for
            this Business Review Process. These representatives shall promptly
            confer and use commercially reasonable efforts in good faith to
            resolve the Dispute. The Business Review Process shall continue for
            twenty (20) Business Days after the date on which the party
            initiating the process designates its representative, unless
            otherwise agreed by the two representatives. If the Dispute is not
            resolved through the Business Review Process or a party fails to
            comply with, perform or observe the terms for cure, correction or
            waiver of the breach, default or Dispute established through the
            Business Review Process, then all parties shall be free to pursue
            all rights, remedies and relief as may be available, without further
            application of the Business Review Process or other provision for
            cure or correction.

8.    AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION; INTERPRETATION.

8.1   Amendments and Modifications.

Subject to Section 1.3 above, amendments or modifications to this Agreement must
be in writing, signed by a duly authorized representative for each of Supplier
and Applied, traced by revision or amendment numbers and attached to this
original Agreement. The master copy of this Agreement and any revisions are to
be maintained by Applied.

8.2   Captions and Construction.

Headings and captions in this Agreement are for the convenience of the parties
only and shall not affect the interpretation or construction of this Agreement.
The provisions of this Agreement (including Exhibits and Attachments) shall be
construed as a whole, each supplementing the other, except for instances of
conflict which shall be governed by Section 1.3.2.2 as to precedence. This
Agreement, including also any Purchase Order issued for Items, shall control
over any invoice, delivery ticket, or other document issued by Supplier.
References to a party's internal business organization shall refer to such
organization and successor organizations performing similar functions.

8.3   Interpretation.

Supplier and Applied have each participated fully in the negotiation and
preparation of this Agreement. Each party has engaged its own legal counsel and
has relied upon its own representatives, employees and counsel, and not the
other party or its counsel, in the negotiation and preparation of this
Agreement. The rule that a contract shall be construed against the party
drafting the agreement and statutes of like effect, including California Civil
Code Section 1654, shall not apply to the construction or interpretation of this
Agreement.

                                       81
<PAGE>
9.    PROVISIONS OF GENERAL APPLICATION.

9.1.  Independent Contractor.

Throughout the term of this Agreement, the relationship between Applied and
Supplier shall be that of independent contractors. Nothing set forth herein or
in any Related Agreement shall be deemed or construed to render the parties
joint venturers, partners, or employer and employee, and under no circumstances
may either party hold itself out to be a partner, employee, franchisee,
representative, servant or agent of the other party. Neither party is authorized
to make any commitment or representation on the other's behalf. Neither party
may create any obligations or responsibilities on behalf of or in the name of
the other party. Throughout the term of this Agreement, if the term
"partnership," "partner," or "development partner" or the like is used to
describe the parties' relationship, Applied and Supplier agree to make it clear
to third parties that these terms refer only to the spirit of cooperation
between them and neither describe, nor expressly or implicitly create, the legal
status of partners or joint venturers. Each party also agrees not to make false
or misleading statements, claims or representations about the other party, its
products or the relationship of the parties.

9.2.  No Third Party Beneficiary.

Each and all of the agreements, covenants, obligations, duties, conditions,
terms, warranties, representations and benefits in or arising under this
Agreement, whether express or implied by law, are and shall be solely for the
benefit of the parties to this Agreement and the respective permitted
successors, assigns, and legal representatives of each party hereto. It is the
express intention and agreement of Applied and Supplier that no entity not a
party to this Agreement (including any customer of Applied) shall be or shall be
deemed a third-party beneficiary of this Agreement, or of any of its agreements,
covenants, obligations, duties, conditions, terms, warranties, representations
and benefits.

9.3.  Severability.

Any provision or provisions of this Agreement or of any Related Agreement that
are determined by a final judgment or order of a court of competent jurisdiction
to be invalid or unenforceable in any jurisdiction or as to any person or
circumstance shall be reformed, as permitted by law, so as to be valid and
enforceable, and, if (or to the extent) not so reformed, shall be severed, and
the remainder of the affected agreement or agreements shall continue in effect
and be enforced, construed and applied without such severed provision(s).

9.4   Waiver.

Any provision, right, remedy or requirement of this Agreement may be waived by
the party entitled to the benefit thereof by written waiver, signed by such
party. A waiver so made or given shall extend only to the specific matter or
event, and shall be effective only to the extent, specifically provided for in
such waiver. A waiver of any breach or default under this Agreement shall not be
construed as a continued waiver of other breaches of the same, or of any other,
provision of this Agreement, nor as a bar to, or waiver of, any right or remedy
as to any subsequent event, occurrence, default or breach. Except as provided
above as to written waivers, no act, omission, or course of conduct or of
performance shall be deemed to constitute a waiver

                                       82
<PAGE>
hereunder. In furtherance of the preceding provision, if Applied or Supplier
delays or fails to insist on strict performance of any of the terms, conditions,
provisions, requirements, covenants or obligations set forth in this Agreement,
such delay or failure shall not constitute a waiver.

9.5.  Successors and Assigns.

This Agreement shall be binding upon, and shall inure to the benefit of, each
party and its respective permitted successors and assigns.

9.6.  Execution.

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original, and such counterparts
shall constitute one and the same instrument. Each Party shall receive a
duplicate original of the counterpart copy or copies executed by it. For
purposes hereof, a facsimile copy of this Agreement, including the signature
pages hereto, shall be deemed to be an original. Notwithstanding the foregoing,
the Parties shall deliver original execution copies of this Agreement to one
another as soon as practicable following execution thereof.

10.   REPRESENTATIONS AND WARRANTIES OF THE PARTIES.

Each party (the "Warranting Party") warrants and represents to the other party
that:

      (a) the Warranting Party is a corporation duly incorporated, validly
      existing and in good standing under the laws of the jurisdiction in which
      it is organized, with full corporate power and authority to carry on its
      business as it is now being conducted;

      (b)   the Warranting Party has full power and corporate authority to
      enter into this Agreement;

      (c) the execution, delivery and performance of this Agreement has been
      duly authorized by the Warranting Party, and does not and will not violate
      any other agreement, any provision of the charter or organizational
      documents of the Warranting Party or any applicable law, regulation,
      decree, judgment or order of any regulatory government agency or any court
      of competent jurisdiction, which violation would have a material adverse
      effect on the Warranting Party;

      (d) except as provided herein, the Warranting Party will not enter into
      any agreement, the execution and/or performance of which violates any term
      of this Agreement;

      (e) the Warranting Party is not a party to any agreement calling for the
      payment to, or receipt from, any third party by the Warranting Party of
      any commission, gratuity, or other similar thing or amount in
      consideration of the other party's entry into this Agreement;

      (f) this Agreement has been duly executed and delivered by the Warranting
      Party and constitutes a valid and binding obligation of the Warranting
      Party, enforceable against the Warranting Party in accordance with its
      terms, except that such enforceability may be

                                       83
<PAGE>
      subject to bankruptcy, insolvency, reorganization, moratorium, or similar
      laws now or hereafter in effect relating to creditors' rights and to
      general equitable principles (whether enforcement is sought through legal
      or equitable proceedings).

11.    ACCEPTANCE AND EXECUTION.

This Agreement is executed and delivered by each of the undersigned parties,
acting through its officer or other representatives, duly authorized to act for
and on behalf of the indicated party, and is effective on and as of the
Effective Date.

Accepted:

Applied Materials, Inc.                   Kinetics Fluid Systems, Inc.

BY:   /s/ Paul Hohlstein                  BY:    /s/ Dan Rubin
   ---------------------------------          ---------------------------------

      Name:  Paul Hohlstein                      Name:   Dan Rubin
            ------------------------                   ------------------------

      Title: Vice President                      Title:  President
            ------------------------                   ------------------------

      Date:  5/21/02                             Date:   5/21/02
            ------------------------                   ------------------------

                                       84
<PAGE>
                        LIST OF EXHIBITS AND ATTACHMENTS

                           EXHIBITS

Exhibit 1:  Applied's Standard Terms & Conditions

<TABLE>
<CAPTION>
                                                                   * INDICATES
                                                                   ATTACHMENTS
                                                                    THAT HAVE
                                                                   NOTIFICATION
                                                                    REVISION
                                                                   PROCESS ON
                        ATTACHMENTS                                 WEB SITE
                        -----------                                 --------
<S>                                                                <C>
1.  List of Items and Pricing Mechanism

2.  Corporate Fiscal Calendar                                            *

3.  Delivery Mechanics and Lean Product Delivery System                  *

4.  Forecast Mechanism                                                   *

5.  Bar Code Specifications                                              *

6.  a. Packaging (0250-00098)  b. Marking (0250-01033)                   *
    Specifications

7.  Transportation Routing Guide                                         *

8.  Electronic Funds Transfer Process and Evaluated Receipts             *
    Settlement

9.  NDA [N/A]

10. Supplier Corrective Action Form                                      *

11. Supplier Quality Data Form                                           *

12. Engineering Change Notice Form                                       *

13. Supplier Problem Sheet                                               *

14. List of Approved Special Process Suppliers                           *

15. Quality Framework                                                    *
</TABLE>
<PAGE>
<TABLE>
<S>                                                                <C>
16. Supplier Performance Plan (Including Metrics and Targets)
    (not a website document)

17. Certificate of Conformance                                          *

18. On-site Representative Agreement                                    *

19. Tooling Loan Agreement

20. Quality Requirements Document

21. ***

22. Agreement for Accounting Reconciliation Procedures
    (Accounts Payable Payment Discrepancy Letter)

23. NPT Checklist (Section 3.1.4)

24. Classification of Piece Parts *** (Section 3.1.5)

25. Schedules 4.2.2(a), 4.2.2(c) and 4.2.2(d)
</TABLE>

*     Updates and current versions of these Attachments are posted on Applied's
      website which is available to Supplier for purposes of Section 1.3.

----------

* Confidential Treatment Requested
<PAGE>
                                  ATTACHMENT 18

                                     FORM OF

                        ON-SITE REPRESENTATIVE AGREEMENT

This On-Site Representative Agreement ("Agreement") is made this  day of
____, by and between Applied Materials, Inc. ("Applied") and Kinetics Fluid
Systems, Inc. ("Supplier") (collectively referred to as the "Parties").

Whereas, Supplier provides parts or services to Applied or desires to sell parts
or services to Applied under the terms of, and pursuant to, a Global Supply
Agreement effective as of June 1, 2002 ("GSA"); and

Whereas, the Parties agree that if certain duties and functions were to be
performed by an employee of Supplier on Applied's premises or at an Applied
facility it would facilitate Supplier's performance and benefit both Supplier
and Applied;

Now, therefore the Parties agree as follows:

1.    Statement of Work

      Supplier will assign, at no cost to Applied, an individual on-site
      representative ("OSR") to perform, on Applied's premises, functions ("OSR
      Functions") described in the Statement of Work attached hereto as Exhibit
      No. 1 (the "SOW").

      Supplier agrees to notify Applied immediately of any changes in its
      staffing assignments involving the OSR, or in the OSR Functions, whereby
      access to Applied's facilities or IS&T systems may no longer be essential
      to performing the OSR Functions.

2.    Status of OSR

      The OSR is an employee of Supplier, subject to its right of direction,
      control and discipline. The OSR is not an employee of Applied, nor shall
      he or she be entitled to any rights, benefits, or privileges of an Applied
      employee. Prior to the commencement by the OSR of an assignment at
      Applied, Supplier represents that it will review this Agreement with the
      OSR, inform the OSR of the obligations under this Agreement and the
      "Joinder" required under this Agreement, and have the OSR enter into a
      "Kinetics Employee Joinder" in the form set out in Schedule 4.4
      ("Joinder") to the Restated and Amended Intellectual Property Agreement
      between Applied and Supplier of even date with the
<PAGE>
      GSA (the "IPA").

3.    Confidentiality and Performance

      Applied shall inform the OSR of hours of access to Applied's premises,
      pertinent safety regulations, and all other requirements which Applied
      deems necessary. The OSR shall comply with any applicable policies and
      regulations of Applied. Compliance with all policies and regulations of
      Applied is mandatory and is the responsibility of both the OSR and
      Supplier; failure to comply with these policies and regulations will be
      cause for immediate removal of the OSR from the premises.

      Supplier agrees that the OSR Functions to be performed by the OSR will
      comply with this Agreement, including Attachments 1 and 2 to this OSR
      Agreement, and will also comply with any purchase, confidentiality,
      supplier-planner access, nondisclosure, intellectual property, joint
      design, joint development or other agreements that may be in effect
      between Supplier and Applied and including the Amended and Restated
      Intellectual Property Agreement with an Effective Date of June 1, 2002
      (the "Related Agreements") at the time this Agreement is executed by the
      Parties or that is subsequently in effect.

4.    OSR Associated Expenses

      All salary, benefits, and travel and business expenses for OSR will be the
      sole responsibility of Supplier.

5.    Access

      Subject to Applied's approval and the completion of the security
      background check, the OSR may be granted access to the following:

            -     Only those specific Applied facilities to which the OSR
                  requires access in order to perform the tasks stated in the
                  SOW

            -     Telephone and fax lines (for matters related to Applied only)

            -     Computer/modem and/or database or system information access as
                  deemed necessary by Applied in order for the OSR to perform
                  the tasks stated in the SOW.

      If a Joinder is attached to this Agreement and executed by the OSR, then
      such Joinder shall apply to all "Confidential Information" (as therein
      defined), and all Applied databases, applications and servers, that the
      OSR obtains, accesses or is exposed to as a result of the OSR Functions
      under this Agreement. If a Joinder is not attached and executed by the
      OSR, the OSR shall not have access to any information that is
      confidential, proprietary, or sensitive or to any Applied databases,
      applications or servers.
<PAGE>
6.    Termination of Agreement

      This Agreement may be terminated immediately by either Party at any time
      without penalty; if not earlier terminated, this Agreement shall terminate
      upon completion of the tasks identified in the SOW.

7.    Entire Agreement

      This Agreement, including its Attachments, and together with all Related
      Agreements constitutes the entire agreement between Supplier and Applied
      Materials with respect to OSR Functions, and with respect to OSR Functions
      it supersedes all preexisting agreements or arrangements, except for (a)
      the GSA and any Facilities Use Agreement as in effect for Applied
      facilities which the OSR may access, (b) any Supplier-Planner Access
      Agreement now or hereafter in effect, (c) any claims or causes of action
      of Applied relating to breach of a pre-existing OSR agreement or
      arrangement, and (d) any ongoing duty or obligation(s) of Supplier under a
      pre-existing OSR agreement or arrangement. In the event of any conflict
      between the terms of this Agreement and the terms of a Related Agreement,
      the GSA or any Facilities Use Agreement as in effect for Applied
      facilities which the OSR may access, precedence shall be given in
      accordance with Section 1.3.2.2 of the GSA.

Kinetics Fluid Systems, Inc.                    Applied Materials, Inc.
("Supplier")                                    ("Applied")

By:                                             By:
      ------------------------                        ------------------------

Its:                                            Its:
      ------------------------                        ------------------------

Date :                                          Date:
      ------------------------                        ------------------------
<PAGE>
Exhibit 1 - Statement of Work

(On-site Representative Agreement)

This Attachment describes the activities and services included in the OSR
Functions of the Supplier's OSR. Changes in the OSR Functions may be made by
agreement of Applied and Supplier. The OSR Functions include

      -     Daily consultation with Applied's representatives concerning
            Supplier performance, production or project scheduling, and
            resolution of problems or errors.

      -     Evaluation and reporting of problems or errors, and of anticipated
            problems, and constraints or delays.

      -     Consultation with Applied's engineering and production
            representatives concerning product quality, product delivery, and
            product technical problems and revisions.

      -     [To be added and revised by Applied's representatives.]

      -     [To be added and revised by Applied's representatives.]
<PAGE>
                                    EXHIBIT 2

                        On-Site Representative Agreement

            The "Joinder" required by this On-Site Representative Agreement is
            the "Kinetics Employee Joinder" set out in Schedule 4.4 to the
            Amended and Restated Intellectual Property Agreement of the Parties
            identified in this On-Site Representative Agreement.

<PAGE>
                                 ATTACHMENT 19

                             TOOLING LOAN AGREEMENT

      This Tooling Loan Agreement, is dated as of June 1, 2002 (the "Effective
Date"), and made by and between Applied Materials, Inc., a Delaware corporation
("Applied"), and Kinetics Fluid Systems, Inc., a California corporation
("Supplier"). This Tooling Loan Agreement, together with all Attachments hereto,
is referred to herein as the "Agreement." This Agreement is entered into in
connection with the Global Supplier Agreement between Applied and Supplier,
which itself has an effective date of June 1, 2002 ("GSA"), and is the Tooling
Loan Agreement referred to in Sections 4.2.1 through 4.2.4 of the GSA.

      Solely for Supplier's use in fulfilling its obligations to Applied under
the GSA, under Design Services Agreements and Development Services Agreements
entered into from time to time as contemplated by the GSA (the terms "Design
Services Agreement" and "Development Services Agreement" being used herein as
defined in the GSA), and under the Amended and Restated Intellectual Property
Agreement of even date ("IPA"), Applied has agreed to loan to Supplier, on the
terms and conditions contained herein, the property identified in the
Attachments to this Agreement (collectively, the "Tooling"), which Attachments
will be updated from time to time. The Tooling includes the FDS test fixtures
identified in Schedule 4.2.2.(c) to the GSA, the *** provided under the "IS&T
Agreement" identified in Section 2.9.1.1 of the GSA, and *** in or used in the
operation of such test fixtures ***. The GSA, Design Services Agreements,
Development Services Agreements, and the IPA, all as amended from time to time,
are collectively called the "Operational Agreements."

      In consideration of the premises, the agreements of the parties set forth
herein and in the Operational Agreements, and Applied's lending the Tooling to
Supplier, Applied and Supplier agree as follows:

1.0   Ownership.

      (a)   Title to and ownership of the Tooling (other than *** "Third Party
Applications", as such term is defined in the IPA) shall remain exclusively in
Applied at all times, and Supplier

----------
* Confidential Treatment Requested
<PAGE>
shall have no ownership or beneficial interest therein, except as provided in
Section 1.3 (b) as to Supplier Provided Improvements. Title to and ownership of
*** Third Party Applications shall remain exclusively in the owner of same, and
Supplier shall have no ownership or beneficial interest therein. Supplier shall
affix and maintain prominently on each item of Tooling a label indicating that
the Tooling is owned by Applied or the other owner thereof. All additions,
attachments, alterations, and modifications to the Tooling (except for ***)
shall become part of the Tooling and the exclusive property of Applied or the
other owner thereof.

      (b)   Supplier authorizes Applied to file this Agreement or any copy
hereof, as well as to make any other filings, in any jurisdiction as Applied may
deem appropriate to protect its interests or those of any other owner of
Tooling. Upon Applied's request, Supplier shall execute or obtain from third
parties and deliver to Applied such statements or other instruments as Applied
deems necessary or advisable to confirm or perfect the interests of Applied or
other owner in the Tooling, including filings under the Uniform Commercial Code
and landlord or mortgagee waivers, and Supplier hereby grants to Applied the
right to execute Supplier's name thereon where permitted by law.

      (c)   Supplier shall, at its expense, protect and defend title to the
Tooling of Applied or other owner against all persons claiming against or
through Supplier, at all times keeping the Tooling free from any legal process
or encumbrance whatsoever including but not limited to liens, attachments,
levies, executions and other claims by third parties, and shall give Applied
immediate written notice of any such third party claim and shall indemnify
Applied against any cost, liability or loss caused thereby.

      (d)   The Tooling is, and shall at all times be and remain, personal
property notwithstanding that the Tooling or any part thereof may now be, or
hereafter become, in any manner affixed or attached to real property or any
improvements thereon.

1.1   Delivery.

      Applied shall package the Tooling for shipment to Supplier to provide for
handling and protection of the Tooling sufficient to comply with the carrier's
requirements and consistent with the manner in which Applied packages shipments
of a like nature for its own use. Absent Applied's agreeing otherwise in
writing, Applied shall arrange shipping as it deems appropriate to the
applicable destination specified in the Attachment applicable to the item of
Tooling. Upon delivery of the Tooling to Supplier, Supplier shall inspect the
Tooling. If Supplier believes the Tooling is not in good working order and
repair, it shall notify Applied promptly in writing. If such notice is not
received by Applied within five business days after installation of the Tooling
by Supplier, then Supplier shall be deemed to have accepted the Tooling, and the
Tooling shall be deemed in good working order and repair.

1.2   Risk of Loss.

----------
* Confidential Treatment Requested
<PAGE>
      Supplier shall bear all risks of loss, damage or destruction to the
Tooling from and after the date the Tooling is delivered to Supplier until
Applied accepts return of the Tooling. During such period, Supplier shall
maintain, in addition to any other insurance required under its other contracts
with Applied, all risk insurance with respect to the Tooling, comprehensive
general liability insurance covering bodily injury, property damage, contractual
liability, products liability and completed operations and workers compensation
and employer's liability insurance with financially sound and reputable insurers
in amounts and on terms customarily insured against in similar circumstances (or
in such greater amounts or on such different terms as may be requested by
Applied). Supplier shall furnish evidence of such insurance to Applied prior to
execution of this Agreement, and such insurance shall require the insurer to
give at least 30 days' advance notice to Applied of any material alteration or
cancellation thereof (at least 10 days' prior notice as to cancellation for
nonpayment of premiums). In the event of any loss or damage to the Tooling,
Supplier shall pay Applied within 45 days following the event of loss or damage
the amount of loss or damage to the Tooling, which, in the event of a total loss
shall be the value of the item of Tooling. Applied shall have the discretion to
determine whether to replace any item of Tooling that is lost, damaged or
destroyed.

1.3   Use, Maintenance and Alteration.

      (a)   Supplier shall cause each item of Tooling to be installed and used
at the applicable location set forth in the Attachment applicable to the item,
and shall not copy, remove, reinstall or modify any software, and shall not
relocate any Tooling to any other location (except as provided in Section 4.2.2
(a) of the GSA) without Applied's prior written permission. Except as otherwise
agreed in writing by Applied, Supplier shall use the Tooling solely to fulfill
its obligations to Applied under one or more of the Operational Agreements, all
in compliance with this Agreement and the Operational Agreements. Supplier shall
operate, protect, maintain and calibrate the Tooling in compliance with all
applicable laws, rules and regulations (including those relating to safety), the
conditions of all applicable insurance policies and best industry practices
(including any maintenance schedules delivered by Applied or furnished by the
Tooling manufacturer or distributor). Supplier shall obtain training for the
Supplier personnel who will operate the Tooling, and Supplier shall operate the
Tooling in compliance with such training. Under no circumstances shall Supplier
operate the Tooling in a manner which could cause injury or death to any person
or damage or injury to any property, including the Tooling. If Applied or the
Tooling manufacturer or distributor specifies certain parties who are authorized
to service the Tooling or special equipment required to maintain or calibrate
the Tooling, Supplier shall use such authorized parties and/or special
equipment. Supplier shall maintain logs and reports of the maintenance and
operation of the Tooling and permit Applied, on reasonable prior notice, to
inspect the Tooling to determine whether the Tooling is being used, protected,
maintained and calibrated in accordance with this Agreement and to make copies
of such logs and reports. Supplier shall correct immediately any deficiencies
disclosed by such inspection upon notice from Applied. No such inspection or
lack of inspection by Applied shall in any way diminish the sole responsibility
of Supplier for the proper use, protection, maintenance and calibration of all
Tooling. If an item of Tooling becomes inoperable, Supplier shall (subject to
the limitations of
<PAGE>
Section 1.3(b) below) make immediate reasonable attempts to restore it to
operating condition before requesting assistance from Applied's *** Department.

      (b)   Without the prior written consent of Applied, Supplier shall not
make any alterations, modifications or additions to the Tooling except as
provided in this Section 1.3(b). Further, Supplier shall comply with the IPA, as
such applies to all Tooling or to the use of or rights in Tooling. Modifications
or improvements to Tooling that constitute Capacity FDS Hardware or Product
Change Hardware provided or purchased by Applied pursuant to Section 4.2.3 of
the GSA shall be owned by Applied as part of the Tooling. Supplier may acquire
and install on the Tooling, *** and shall own, those alternations,
modifications, improvements or additions to Tooling that are items of Capacity
FDS Hardware or Product Change Hardware that have been proposed by Supplier and
Applied does not provide or procure under the procedures of Section 4.2.3 of the
GSA and do not constitute Applied IP (the "Supplier Provided Improvements").

      (c)   Costs associated with Applied approved or directed alterations,
modifications, improvements or additions, as well as any third-party calibration
services required to keep the Tooling within specified dimensional or sampling
tolerances, shall be borne by Applied. Supplier shall not undertake, or incur
any costs associated with, such activity until an authorizing purchase order has
been received from the Applied organization ordering the Items that require
usage of the Tooling.

      (d)   Routine care, maintenance, and calibration performed by Supplier as
part of normal operations shall be done at no cost to Applied.

      (e)   Supplier shall comply with the requirements of the Test Engineering
Test Fixture Support Work Instruction (Form SEG0011) which can be found at
http://***

1.4   Reserved Rights; Return of Tooling.

      (a)   Applied may at its discretion, which discretion is to be reasonably
exercised, access, inspect, modify, upgrade, replace, or remove from use any
Tooling. Applied may also direct Supplier to allow Applied or its
representatives to use Tooling at Supplier's location on a temporary basis as
part of Applied's efforts to review and develop its products and processes.
Supplier agrees to accept, subject to the terms of this Agreement, and
incorporate into its manufacturing, testing and other processes any item of
Tooling designated and furnished by Applied.

      (b)   To the extent practicable, Applied will give Supplier reasonable
advance notice of any action by Applied under the preceding Section 1.4 (a) or
that would otherwise make the Tooling unavailable for use by Supplier on a
temporary or permanent basis. If Applied requires a temporary or permanent
cessation of use of any Tooling and such results in delays in Supplier's testing
or delivery of Items under the GSA, then the extension period provided to
Supplier under Section 4.2.4(b) of the GSA shall apply until Tooling required
for testing or completion of Items is returned to use or replaced by Applied,
unless otherwise agreed at the time.

----------
* Confidential Treatment Requested
<PAGE>
      (c)   At the time of termination or expiration of the GSA, in whole or in
part, and also as provided in Section 4.2.4 of the GSA, Applied may exercise
rights to purchase, repossess or remove Tooling in accordance with the GSA and
this Agreement and the procedures of Section 4.2.4 of the GSA. In the event of
Termination for Default pursuant to the GSA, Applied may require that Supplier
return any or all items of Tooling to Applied, and in that event Supplier shall
return such item(s) of Tooling, labeled and shipped in accordance with Applied's
then current policies and specifications, which Supplier shall obtain from
Applied. Supplier shall deliver each such item of Tooling at the appropriate
location (which may be Supplier's facility in those instances in which Applied
is proceeding under Section 4.2.4 of the GSA) in proper operating order, free
from any legal process or encumbrance whatsoever. As to items of Tooling to
which the IPA applies, Supplier shall also comply with Section 5.3 of the IPA
upon termination or expiration of the IPA. If Supplier shall fail to deliver, as
required, any item of Tooling in good working order and condition (reasonable
wear and tear excepted), Supplier shall be responsible for all costs and
expenses incurred by Applied in replacing the Tooling or in returning the
Tooling to such required condition or any reduction in the value as a result
thereof.

      (d)   Upon receipt of notice from Applied that Applied will purchase,
repossess or remove Tooling, Supplier shall remove from the affected Tooling all
Supplier Provided Improvements. If Supplier has not removed such Supplier
Provided Improvements at the time Applied takes possession of the Tooling
pursuant to the notice, Applied shall be entitled to remove such improvements,
using commercially reasonable procedures, and shall tender possession of such
removed Supplier Provided Improvements to Supplier.

2.0   Exclusions of Warranties.

      SUPPLIER ACCEPTS EACH ITEM OF TOOLING "AS IS" AND "WITH ALL FAULTS."
SUPPLIER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO INSPECT THE TOOLING, AND
THAT SUPPLIER IS EXPERIENCED IN THE OPERATION AND MAINTENANCE OF SUCH TOOLING.
APPLIED MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE TOOLING OR ANY PART THEREOF. APPLIED HEREBY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
NONINFRINGEMENT; PROVIDED, THAT THE EXCLUSION AND DISCLAIMERS OF THIS AGREEMENT
ARE, HOWEVER, SUBJECT TO, AND SHALL NOT ALTER, IMPAIR OR MODIFY, ANY WARRANTIES
MADE BY APPLIED IN THE IPA OR GSA THAT ARE APPLICABLE TO TOOLING.

2.1   Exclusion of Certain Damages.

      IN NO EVENT SHALL APPLIED BE LIABLE FOR ANY SPECIAL, INDIRECT, PUNITIVE,
CONSEQUENTIAL OR CONTINGENT DAMAGES ("EXCLUDED DAMAGES") THAT ARISE FROM OR
RELATE TO THIS AGREEMENT FOR ANY REASON, WHETHER OR NOT APPLIED HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, AND APPLIED EXCLUDES AND SUPPLIER WAIVES ANY
LIABILITY OF APPLIED FOR ANY SUCH EXCLUDED DAMAGES; PROVIDED, THAT THIS
EXCLUSION AS TO EXCLUDED DAMAGES IS, HOWEVER, SUBJECT TO AND
<PAGE>
SHALL NOT ALTER, IMPAIR OR MODIFY ANY INDEMNITY OBLIGATION OF APPLIED PURSUANT
TO THE IPA OR GSA THAT IS APPLICABLE TO TOOLING OR THIS AGREEMENT.

3.0   [Omitted.]

3.1   Intellectual Property.

      (a)   Nothing in this Agreement shall be deemed to grant to Supplier any
license or other right under any of Applied's intellectual property (including,
without limitation, Applied's patents, copyrights, trade and service marks,
trade secrets and Confidential Information, such latter term being used as
defined in the IPA) for Supplier's own benefit or to provide or offer Items or
other products or services to any party other than Applied.

      (b)   The IPA shall apply to and govern the rights and obligations of
Applied and of Supplier with respect to "IP Rights" and "Confidential
Information" (as such terms are defined in the IPA) in or relating to Tooling,
including ***, ***, and *** in or used in the operation of *** or ***

3.2   Injunctive Relief; Reports.

      Supplier acknowledges and agrees that Applied would suffer immediate and
irreparable harm for which monetary damages would be an inadequate remedy if
Supplier were to breach its obligations under Sections 1.4 or 3.1. Supplier
further acknowledges and agrees that equitable relief would be appropriate to
protect Applied's rights and interests if such a breach were to arise, or were
threatened, or were asserted.

4.0   Entire Agreement; Amendments.

      (a)   This Agreement (including the Attachments hereto and provisions
incorporated herein by reference), provisions of the GSA applicable to Tooling
(including Section 4.2 of the GSA), those provisions of the IPA applicable to
Tooling (including related software) and the IS&T Agreement (such term being
used as defined in the GSA), all as amended, set forth the entire understanding
and agreement of the parties as to the loan of the Tooling and supersede all
prior agreements, understandings, negotiations and discussions between the
parties as to such subject matter. The parties may be, or may become, parties to
other agreements relating to the manufacture or sale of products to Applied or
the provision of services to Applied, which other agreements shall govern their
respective subject matters.

      (b)   No amendment to, modification of or waiver of any provision of this
Agreement will be binding unless in writing and signed by a duly authorized
representative of the party sought to be bound.

----------
* Confidential Treatment Requested
<PAGE>
4.1   Notices.

      Revisions, updates or other amendments or modifications to this Agreement
(including Attachments) shall be effective only if in set out in a writing (or
other record) executed (or authenticated) by each of Applied and Supplier, and
communications hereunder may be given by mail, fax or e-mail to the individuals
listed below.

      Supplier:

                  (Name)           Joe Foster, Senior Vice President

                  (Address 1)      2805 Mission College Blvd.

                  (Address 2)      Santa Clara, California  95054

                  (Phone)          (408) 935-4570

                  (FAX)            (408) 934-6302

                  (E-mail)         jfoster@kineticsgroup.com

Applied:

Applied Materials, Inc.

9700 U.S. Hwy 290 East M/S 3300

Austin, Texas  78724

Phone: 512-272-2535

Fax:   512-272-3908

Attn:  Mr. Craig Romick (email address is: Craig_A_Romick@AMAT.com)

Each party shall advise the other in writing of any change to such party's
contact persons.

4.2   Applicable Law; Consent to Jurisdiction; Venue.

      This Agreement shall be governed by, subject to and construed in
accordance with the internal laws of the State of California, excluding
conflicts of law rules. The parties incorporate by reference Article 11 of
Exhibit 1 of the GSA and agree that the provisions of such Article apply to this
Agreement.

4.3   Assignments.
<PAGE>
      The parties incorporate by reference Article 17 of Exhibit 1 of the GSA
and agree that the provisions of such Article apply to this Agreement.

4.4   Waiver.

      In the event Applied delays or fails to insist on performance of any of
the terms and conditions set forth herein or delays or fails to exercise any of
its rights or privileges under this Agreement, such delay or failure shall not
constitute a waiver of such terms, conditions, rights or privileges.

4.5   Indemnity by Supplier.

      SUPPLIER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS APPLIED FROM AND
AGAINST, AND SHALL SOLELY AND EXCLUSIVELY BEAR AND PAY, ANY AND ALL CLAIMS,
SUITS, LOSSES, PENALTIES, DAMAGES (WHETHER ACTUAL, PUNITIVE, CONSEQUENTIAL OR
OTHERWISE) AND ALL LIABILITIES AND THE ASSOCIATED COSTS AND EXPENSES, INCLUDING
ATTORNEY'S FEES, EXPERT'S FEES, AND COSTS OF INVESTIGATION (ALL OF THE FOREGOING
BEING COLLECTIVELY CALLED "INDEMNIFIED LIABILITIES"), WHICH ARISE FROM OR RELATE
TO, OR ARE FOR, PERSONAL INJURY, DEATH, OR DAMAGE TO OR LOSS OF TANGIBLE
PROPERTY RESULTING (IN WHOLE OR IN PART) FROM THE USE OR OPERATION OF THE
TOOLING BY SUPPLIER, OTHER THAN (A) AS A RESULT OF DEFECTS IN THE TOOLING
EXISTING AT THE TIME OF DELIVERY TO SUPPLIER OR (B) FOR INFRINGEMENT OR OTHER
MATTERS AS TO WHICH APPLIED HAS WARRANTY OR INDEMNITY OBLIGATIONS TO SUPPLIER.
THIS INDEMNITY IS SUBJECT TO, AND SHALL NOT ALTER, IMPAIR OR MODIFY, ANY
WARRANTY OR INDEMNITY BY APPLIED OR SUPPLIER TO OR FOR THE BENEFIT OF THE OTHER
UNDER THE IPA OR GSA.

4.6   Supplier's Expense and Risk; Taxes.

      Supplier shall perform all of its obligations hereunder at its own expense
and risk, including without limitation those specified herein as being at
Supplier's expense. Supplier shall be responsible for paying any use tax
assessed in connection with the loan of Tooling contemplated by this Agreement.

4.7   Captions and Severability.

      Captions in this Agreement are for the convenience of the parties only and
shall not affect the interpretation or construction of this Agreement. In the
event any provision of this Agreement is held to be invalid or unenforceable,
such provision shall be severed from the remainder of this Agreement, and such
remainder will remain in force and effect.

4.8   Counterparts and Attachments.

      This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Particular items of Tooling subject to this Agreement may be added or deleted by
the parties from time to time; as items are added or deleted, a new Attachment
(or an amendment to a current Attachment) to this Agreement shall be executed by
the parties to identify changes in Tooling.
<PAGE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be signed
hereto by their respective duly authorized officers, all as of the Effective
Date.

APPLIED:                                      SUPPLIER:

APPLIED MATERIALS, INC.                       KINETICS FLUID SYSTEMS, INC.

By:        /s/ Paul Hohlstein                 By:        /s/ Dan Rubin
   -------------------------------               -------------------------------

Name:      Paul Hohlstein                     Name:      Dan Rubin
   -------------------------------               -------------------------------

Title:     Vice President                     Title:     President
   -------------------------------               -------------------------------
<PAGE>
                                  ATTACHMENT 1

The initial Attachment 1 consists of:

      (a)   Schedule 4.2.2(c) to the GSA as of the Effective Date;

      (b)   The Test Fixture Software (as defined in Section 4.2.3(c) of the
      GSA, and which is not required to be scheduled);

      (c)   The *** identified on Addendum A to the IS&T Agreement and all ***
      *** the Third Party Applications set out on Schedule 2.3.8 to the IPA and
      the *** identified under Applied's Software and Databases in Schedule 2.8
      to the IPA; and

      (d)   The Applied Test Fixture Software identified under Applied's
      Software and Databases in Schedule 2.8 to the IPA.

----------
* Confidential Treatment Requested
<PAGE>
As to Tooling delivered after the Effective Date, the following form shall be
used:

                           Supplement to Attachment 1

Applied Materials, Inc. ("Applied") and the below named Supplier ("Supplier")
agree that the property described below to Supplier has been delivered to
Supplier as "Tooling" under, and is subject to, that certain Tooling Loan
Agreement dated as of _________ __, _____ between Applied and the Supplier:

Place of Delivery for Tooling and any Packaging or Shipping Instructions:

[Enter "Deliver To" Address]

<TABLE>
<CAPTION>
Detailed Description of Each Item of Tooling        Identification Number          Agreed Value
--------------------------------------------        ---------------------          ------------
<S>                                                 <C>                            <C>

--------------------------------------------        ---------------------          ------------

--------------------------------------------        ---------------------          ------------

--------------------------------------------        ---------------------          ------------

TOTAL VALUE OF TOOLING: $ TBD
</TABLE>

Dated:
      ------------------------
<PAGE>
APPLIED MATERIALS, INC.                     KINETICS FLUID SYSTEMS, INC.

By:                                         By:
   ---------------------------------           ---------------------------------

Name:                                       Name:
     -------------------------------             -------------------------------

Title:                                      Title:
      ------------------------------              ------------------------------
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                        <C>
DEFINITIONS..............................................................................................   1

1.    SCOPE..............................................................................................   8

      1.1.  Description of Agreement.....................................................................   8

      1.2.  Addresses and Contact Persons; Notices.......................................................   8

            1.2.1.    Contact Persons....................................................................   8

            1.2.2.    Notices............................................................................  10

      1.3.  Entire Agreement; Related Agreements; Modification; Prior Transactions.......................  11

            1.3.1.    Certain Related Agreements.........................................................  11

            1.3.2.    Entire Agreement...................................................................  12

            1.3.3.    Provisions Continuing in Effect....................................................  13

            1.3.4.    Modification.......................................................................  14

      1.4.  Items Covered................................................................................  14

      1.5.  Duration of Agreement........................................................................  15

2.    LOGISTICS, ORDERING AND OPERATIONAL FRAMEWORK......................................................  15

      2.1.  Operation and Management of Orders...........................................................  15

            2.1.1.    Operating Calendar & Holidays......................................................  15

            2.1.2.    Monthly Volume Summaries...........................................................  15

            2.1.3.    Manufacture and Delivery...........................................................  16

            2.1.4.    Change in Delivery Date............................................................  16

            2.1.5.    Orders for Items...................................................................  17

            2.1.6.    Electronic Commerce................................................................  26

            2.1.7.    Pro Forma..........................................................................  27

      2.2.  Definition of Terms for Certain Provisions Affecting Prices or Charges.......................  28

      2.3.  Cancellation of Items........................................................................  30

            2.3.1.    Items Subject to Cancellation......................................................  30

            2.3.2.    Deferral...........................................................................  30

            2.3.3.    Cancellation.......................................................................  30

            2.3.4.    Applicability; Payment.............................................................  31

            2.3.5.    Other Rights.......................................................................  31

            2.3.6.    Services...........................................................................  31

      2.4.  Response Time, Turnaround and Implementation Time............................................  31

            2.4.1.    Production Issues..................................................................  31

            2.4.2.    Turnaround and Implementation Time.................................................  32

      2.5.  Capacity Planning and Flexibility Requirements...............................................  32
</TABLE>
<PAGE>
<TABLE>
<S>                                                                                                        <C>
            2.5.1     Capacity Planning..................................................................  32

            2.5.2     Flexibility........................................................................  33

            2.5.3.    Acceptance; Delivery...............................................................  33

      2.6.  On-Site Support Requirements.................................................................  34

      2.7.  [Omitted]....................................................................................  34

      2.8.  ***..........................................................................................  34

            2.8.1.    Modifications and ***s.............................................................  34

            2.8.2.    Scope of ***s......................................................................  34

            2.8.3.     Charges for ***s..................................................................  35

      2.9.  Information..................................................................................  35

            2.9.1.    Applied Internal Databases.........................................................  35

            2.9.2.    Applied New Product Plans..........................................................  39

            2.9.3.    Compliance with Securities Laws....................................................  39

      2.10. Packaging and Transportation.................................................................  40

            2.10.1.   Packaging and Shipment.............................................................  40

            2.10.2.   Bar Coding.........................................................................  40

            2.10.3.   Transportation Requirements........................................................  40

      2.11. Payment......................................................................................  41

            2.11.1.   Invoices; Certain Acceptance Terms.................................................  41

            2.11.2.   ***................................................................................  43

            2.11.3.   Offsets, Debits....................................................................  44

            2.11.4.   Effect of Payment..................................................................  44

            2.11.5.   Reconciliation of Payment Discrepancies............................................  44

      2.12.   Disaster Recovery Plan.....................................................................  44

      2.13. Performance Constraints......................................................................  45

            2.13.1.   Constraints........................................................................  45

      2.14. Provisions for Reconfiguration or Restocking.................................................  45

            2.14.1.   "Affected Items."..................................................................  45

            2.14.2.   Categories.........................................................................  45

            2.14.3.   "Relabel Items."...................................................................  46

            2.14.4.   "Reconfigure Items."...............................................................  46

            2.14.5.   "Restock Items."...................................................................  49

            2.14.6.   Restocking Process and Charges.....................................................  49

            2.14.7.   Provisions as to Restocked or Removed Parts........................................  50
</TABLE>

----------
* Confidential Treatment Requested
<PAGE>
<TABLE>
<S>                                                                                                        <C>
            2.14.8.   Processing and Payments............................................................  51

3.    PRICING FRAMEWORK..................................................................................  51

      3.1.  Contract Prices..............................................................................  51

            3.1.1.    Pricing and Cost Model of Attachment 1.............................................  51

            3.1.2.    Application of Prices..............................................................  52

            3.1.3.    Pricing Model......................................................................  52

            3.1.4.    Further Agreements as to Pricing...................................................  53

            3.1.5.    *** Terms..........................................................................  53

            3.1.6.    Adjustment for ***.................................................................  57

      3.2.  Volume.......................................................................................  58

      3.3.  Export.......................................................................................  58

      3.4.  Currency.....................................................................................  58

4.    TECHNICAL FRAMEWORK................................................................................  59

      4.1.  Engineering Change Orders....................................................................  59

            4.1.1.    ECO Procedures.....................................................................  59

      4.2.  Tooling......................................................................................  60

            4.2.1.    General Tooling Provisions.........................................................  60

            4.2.2.    Current FDS Test Fixtures..........................................................  61

            4.2.3.    Future FDS Test Fixtures...........................................................  62

            4.2.4.  General Application..................................................................  64

      4.3.  Design Changes and Resolution................................................................  65

      4.4.  Process Changes and Resolution...............................................................  65

      4.5.  QRD and Special Process Requirements.........................................................  65

            4.5.1     Critical and Source Specific Materials.............................................  65

            4.5.2     Supplier's Subcontractors..........................................................  65

            4.5.3.    Costs of Supplier Change...........................................................  66

            4.5.4.    Waivers............................................................................  66

      4.6.  First Articles and Source Inspections........................................................  66

      4.7.  Applied's Right to Subcontract...............................................................  66

      4.8.  Product Support..............................................................................  66

            4.8.1.    Global Technical Support and Product Support.......................................  66

            4.8.2.    Product Support Period.............................................................  67

            4.8.3.    Product Post Term Support Options..................................................  67

      4.9.  Periodic Business Review.....................................................................  68
</TABLE>

----------
* Confidential Treatment Requested
<PAGE>
<TABLE>
<S>                                                                                                        <C>
      4.10. [Omitted]....................................................................................  68

      4.11. Wind Down Provisions.........................................................................  68

5.    NONCONFORMANCE.....................................................................................  70

      5.1.  Nonconformance and Corrective Action.........................................................  70

            5.1.1.    [Omitted.].........................................................................  70

            5.1.2.    Supplier Corrective Action Request.................................................  70

      5.2.  Applied Nonconformance and Corrective Action.................................................  70

            5.2.1.    Items Affected.....................................................................  70

            5.2.2.    Standard Repair Costs..............................................................  71

            5.2.3.    Time for Repair....................................................................  71

            5.2.4.    Return of Items....................................................................  71

6.    SUPPLIER PERFORMANCE PLAN..........................................................................  71

7.    WARRANTIES AND REMEDIES............................................................................  72

      7.1.  Supplier Warranty............................................................................  72

            7.1.1.    Basic Warranty.....................................................................  72

            7.1.2.    Services...........................................................................  73

            7.1.3.    Warranty Period....................................................................  73

            7.1.4.    Limitations on Warranty............................................................  73

            7.1.5.    Third Party OEM Components.........................................................  74

            7.1.6.    Debit Recoveries...................................................................  75

            7.1.7.    Survival of Warranties.............................................................  76

      7.2.  Applied's Remedies...........................................................................  76

            7.2.1.    Failure to Deliver.................................................................  76

            7.2.2     Defective Items....................................................................  77

            7.2.3.    Cumulative Remedies................................................................  79

            7.2.4.    Remedies for Other Breach or Default...............................................  80

            7.2.5     Business Review Process............................................................  80

8.    AMENDMENTS AND MODIFICATIONS; CAPTIONS AND CONSTRUCTION; INTERPRETATION............................  81

      8.1   Amendments and Modifications.................................................................  81

      8.2   Captions and Construction....................................................................  81

      8.3   Interpretation...............................................................................  81

9.    PROVISIONS OF GENERAL APPLICATION..................................................................  81

      9.1.  Independent Contractor.......................................................................  81

      9.2.  No Third Party Beneficiary...................................................................  82

      9.3.  Severability.................................................................................  82

      9.4   Waiver.......................................................................................  82
</TABLE>
<PAGE>
<TABLE>
<S>                                                                                                        <C>
      9.5.  Successors and Assigns.......................................................................  83

      9.6.  Execution....................................................................................  83

10.   REPRESENTATIONS AND WARRANTIES OF THE PARTIES......................................................  83

11.   ACCEPTANCE AND EXECUTION...........................................................................  84
</TABLE>

<PAGE>
APPLIED MATERIALS CONFIDENTIAL

EXHIBIT 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE
Table of Contents
<TABLE>
<CAPTION>
<S>                                                                        <C>
1.  Acceptance..............................................................1

2.  Confidential Information................................................1

3.  Intellectual Property Rights and Ownership Thereof......................1

4.  [Omitted]...............................................................1

5.  Press Releases/Public Disclosure Not Authorized.........................1

6.  Pricing.................................................................2

7.  Duty Drawback and Country of Manufacture................................3

8.  Ozone Depleting Chemical ("ODC")........................................3

9.  Compliance With Laws....................................................4

10. Equal Employment Opportunity............................................4

11. Applicable Law, Consent to Jurisdiction and Venue.......................4

12. Notice of Labor Disputes................................................5

13. Taxes...................................................................5

14. [Omitted]...............................................................5

15. Insurance...............................................................5

16. Certain Events and Notices; Financial Information.......................6

17. Assignment and Succession..............................................11

18. Gratuities.............................................................14

19. [Omitted]..............................................................14

20. [Omitted]..............................................................14

21. Disclaimers and Limitations of Liability as to Excluded Damages........14

22. Indemnity..............................................................15

23. Force Majeure..........................................................18

24. Changes................................................................18

25. Termination for Default; Other Remedies................................19

26. Termination for Convenience............................................22

27. Post-termination Obligations...........................................24
</TABLE>
<PAGE>

Exhibit 1
APPLIED MATERIALS STANDARD TERMS AND CONDITIONS OF PURCHASE

1.   Acceptance.

     The terms and conditions stated in these Applied Materials Standard Terms
and Conditions of Purchase are an integral part of the Global Supply Agreement
between the parties to which this Exhibit 1 is attached ("Agreement") and which
covers the purchase of Items, as defined in such Agreement. Defined terms used
herein shall have the meanings ascribed to them in other provisions of the
Agreement unless otherwise defined in this Exhibit 1. Additional or different
terms or conditions of purchase will not be applicable unless accepted in
writing by a duly authorized representative of each of Supplier and Applied.

2.   Confidential Information.

     (a) Supplier and Applied, respectively, will comply with each NDA executed
by Supplier or Applied, as applicable, with or for the benefit of the other,
whether now or hereafter in effect; subject, however, to the provisions of the
Agreement as to priority among conflicting agreements.

     (b) The obligations of the parties with respect to Confidential Information
under and for purposes of the Agreement are governed by the IPA. Such
obligations include those arising pursuant to Sections 2.9.1.1.D and 2.9.2 of
the Agreement and Article 5(a) of this Exhibit 1.

3.   Intellectual Property Rights and Ownership Thereof.

     Rights of the parties in, ownership of, and other matters relating to
intellectual property under and for purposes of the Agreement shall be governed
by the IPA.

4.   [Omitted]

5.   Press Releases/Public Disclosure Not Authorized.

     (a) The Agreement and Related Agreements contain Confidential Information
of Applied and Supplier, and such Confidential Information is protected as set
out in the IPA. As part of their respective obligations under the IPA as to
Confidential Information, neither Supplier nor Applied shall disclose to any
third party, including any governmental authority, or publicly release the terms
of the Agreement or of any Related Agreement without the prior written approval
of the other party; provided, however, that subject to its compliance with this
Article 5(a), either party may make any public disclosure (which shall include
disclosure in the course of litigation, as well as under other applicable law,
rule or regulation) it believes in good faith that it is required to make by
applicable law, rule or regulation. The disclosing party: shall notify the other
party in advance of such a disclosure or release; shall take commercially
reasonable efforts (at least equal to the efforts such party takes to protect
the confidentiality of its own information) to protect the confidentiality of
the Confidential Information of the other party in the Agreement, which shall
include deleting the financial terms and other Confidential Information of the
other party in the Agreement from (or requesting such deletion or equivalent
protection or confidential treatment where approval by a court or governmental
authority is required) disclosure or public

<PAGE>

release when permitted by applicable law, rule or regulation. Section 4.1(v) of
the IPA may also apply in regard to disclosures.

     (b) Further, and without limiting the foregoing provision, Supplier and
Applied, respectively, will not, without the prior written approval of the
other, issue any press release, advertising, publicity or public statement or in
any way engage in any other form of public disclosure that indicates the
relationship of the parties (except for disclosures as may be made under, and in
compliance with, requirements applicable under Article 5(a) and disclosure of
the existence of the Agreement), or implies any endorsement by Applied of
Supplier or Supplier's products or services.

     (c) Any requests or notices under this Article 5 must be made in writing
and submitted to the person(s) designated to receive notices under Section 1.2.2
of the Agreement.

6.   Pricing.

     (a) ***

     (b) In no event shall Supplier quote, or shall Applied receive, prices that
would be unlawfully discriminatory under any applicable law. ***

     (c) A "Covered Product" is a good sold by Supplier (i) that is not an FDS
(unless the FDS is a standard product for which configuration options have been
designed by Supplier as the manufacturer and developer of the FDS), (ii) that is
regularly sold by Supplier to persons other than Applied, and (iii) that is
similar in form, fit and function to an Item under this Agreement.

7.   Duty Drawback and Country of Manufacture.

     (a) Duty Drawback

     Supplier will provide Applied, or any agent designated by Applied for this
purpose, with all U.S. Customs entry and shipment data concerning applicable
Items that Applied determines is necessary for Applied to qualify for duty
drawback ("Duty Drawback Information"). Such data shall include information and
receipts for duties paid, directly or indirectly, on all Items that are either
imported or contain imported Piece Parts. Such data shall further include serial
numbers, unique part numbers, lot numbers and any other data that will assist
Applied in identifying imported Items sold to Applied. This data will be
provided to Applied within thirty (30) days after the end of each calendar
quarter and shall be accompanied by a completed Certificate of Delivery of
Imported Merchandise or Certificate of Manufacture and Delivery of Imported
Merchandise (Customs Form 331) as promulgated pursuant to U. S. 19 CFR 191.

     (b) Country of Manufacture

     Supplier shall provide Applied with country of manufacture data for each
Item Supplier provides to Applied. This data shall identify each Item by Applied
part number and shall list the corresponding country of manufacture for the
Item. This data shall be provided to Applied within fifteen (15) days after the
end of each month and as requested by Applied. If Supplier is a United States
manufacturer of any Item supplied to Applied, as defined by United States
Customs regulations, Supplier shall, on an annual basis and in accordance with
Applied's written instructions, provide Applied with a signed manufacturer's
affidavit.

--------
* Confidential Treatment Requested

<PAGE>

     (c) All information to be provided to Applied under this Article 7 shall be
sent to the attention of:

     Manager, Customs Compliance
     Applied Materials
     2881 Scott Blvd.
     M/S 2041
     Santa Clara, CA  95050

     or any agent designated by Applied in writing to Supplier.

8.   Ozone Depleting Chemical ("ODC").

     In the event that the Items are manufactured with or contain Class I ODCs,
as defined under Section 602 of the Federal Clean Air Act (42 USC Section 7671a)
and implementing regulations, or if Supplier believes that such a condition
exists with respect to any one or more Items, Supplier shall notify Applied
prior to performing any further work with respect to such Items pursuant to the
Agreement. Applied shall have the right to: (a) terminate the Agreement as to
such Items, upon notice and without penalty, and without application of the
termination procedures of Articles 25 and 26; and, in addition, (b) return any
and all Items delivered that are found to contain or have been manufactured with
Class I ODCs. Supplier shall pay (or if already paid by Applied, then reimburse
Applied for) all costs of shipping, special handling, and returning, for labor
to remove and replace, and for the purchase price paid by Applied as to such
Items.

9.   Compliance With Laws.

     Supplier represents and warrants that no law, rule or ordinance of the
United States, any state, any other governmental agency, or any country has been
or will be violated in manufacturing or supplying the Items purchased, or to be
purchased, under the Agreement.

10.  Equal Employment Opportunity.

     Supplier represents and warrants that it is in compliance with Executive
Order 11246, any amending or supplementing Executive Orders and implementing
regulations, unless exempted.

11.  Applicable Law, Consent to Jurisdiction and Venue.

     (a) THE AGREEMENT SHALL BE GOVERNED BY, SUBJECT TO, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, EXCLUDING
CONFLICTS OF LAW RULES. THE PARTIES AGREE THAT ANY SUIT ARISING OUT OF THE
AGREEMENT FOR ANY CLAIM OR CAUSE OF ACTION, WHETHER IN CONTRACT, IN TORT,
STATUTORY, AT LAW OR IN EQUITY, SHALL EXCLUSIVELY BE BROUGHT IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, THE SUPERIOR
COURTS OF SANTA CLARA COUNTY, CALIFORNIA, THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION, OR THE TEXAS STATE DISTRICT
COURTS OF TRAVIS COUNTY, TEXAS, PROVIDED THAT SUCH COURT HAS JURISDICTION OVER
THE SUBJECT MATTER OF THE ACTION. EACH PARTY AGREES THAT EACH OF THE NAMED
COURTS SHALL HAVE PERSONAL JURISDICTION OVER IT AND CONSENTS TO SUCH
JURISDICTION. EACH PARTY FURTHER AGREES THAT VENUE OF ANY SUIT ARISING OUT OF
THE AGREEMENT IS PROPER AND APPROPRIATE IN ANY OF THE COURTS IDENTIFIED ABOVE.
<PAGE>

     (b) WITH RESPECT TO TRANSACTIONS TO WHICH THE 1980 UNITED NATIONS
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS WOULD OTHERWISE
APPLY, THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE AGREEMENT, INCLUDING
THESE TERMS AND CONDITIONS, SHALL NOT BE GOVERNED BY THE PROVISIONS OF THE 1980
UNITED NATIONS CONVENTION OF CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.
APPLICABLE LAWS OF THE STATE OF CALIFORNIA, INCLUDING THE UNIFORM COMMERCIAL
CODE AS ADOPTED THEREIN (BUT EXCLUSIVE OF SUCH 1980 UNITED NATIONS CONVENTION),
SHALL GOVERN THE AGREEMENT AND ALL TRANSACTIONS RELATED TO THE AGREEMENT (EXCEPT
TO THE EXTENT THE PROVISIONS OF SUCH APPLICABLE LAWS HAVE BEEN MODIFIED OR
SUPERSEDED BY EXPRESS PROVISIONS OF THIS AGREEMENT).

12.  Notice of Labor Disputes.

     Whenever an actual or potential labor dispute, or any government embargo or
regulatory or tribunal proceedings relating thereto, is delaying or threatens to
delay the timely performance of the Agreement, Supplier will immediately notify
Applied of such dispute and furnish all relevant details, regardless of whether
said dispute arose directly or indirectly as a result of an actual or potential
dispute within the Supplier's sub-tier supply base or Supplier's own operations.

13.  Taxes.

     (a) Supplier shall not charge or collect sales or use tax for Items for
which an applicable sales and use tax exemption or resale certificate is
provided by Applied. For all other Items, Supplier will include all applicable
federal, state, and local taxes, where applicable, on Supplier's invoices, or
(when payment is made under Applied's ERS Program) in Pro Formas, stated as a
separate item.

     (b) Supplier may request from Applied information or documentation of facts
relating to Supplier's periodic application for property tax abatement or tax
reduction under rules regarding a "Texas Freeport Exemption"; Applied will
provide reasonable cooperation and assistance to Supplier in responding to
requests by Supplier for this purpose through provision of information or
completion of documentation to support Supplier's application(s) for such tax
benefits.

14.  [Omitted]

15.  Insurance.

     (a) Supplier shall maintain (i) comprehensive general liability insurance
covering bodily injury, property damage, contractual liability, products
liability and completed operations, (ii) Worker's Compensation and employer's
liability insurance, and (iii) auto insurance, all in such amounts as are
necessary to insure against the risks to Supplier's operations.

     (b) Minimally, Supplier will obtain and keep in force, insurance of the
types and in the amounts set forth below:
<PAGE>

<TABLE>
<CAPTION>
              Insurance                              Minimum Limits of Liability
<S>           <C>                                    <C>
              Worker's Compensation                  ***
              Employer's Liability                   ***
              Automobile Liability                   *** per occurrence
              Comprehensive General Liability
              (including Products Liability)         *** per occurrence
              Umbrella/Excess Liability              *** per occurrence
</TABLE>

     All policies must be primary and non-contributing and shall include Applied
as an additional insured. Supplier will require, and will use commercially
reasonable efforts to verify, that each of its subcontractors carries at least
the same insurance coverage and minimum limits of insurance as Supplier is
required to carry pursuant to the Agreement. Supplier shall notify Applied at
least thirty (30) days prior to the cancellation or implementation of any
material change in the foregoing policy coverage that would affect Applied's
interests. Upon request, Supplier shall furnish to Applied as evidence of
insurance a certificate of insurance stating that the coverage would not be
canceled or materially altered without thirty (30) days prior notice to Applied
or, as to cancellation for failure to pay premiums, without ten (10) days prior
notice to Applied.

16.  Certain Events and Notices; Financial Information.

16.1 Certain Events and Notices.

     (a) As used in this Exhibit 1, a "Notice Event" means any of the following:
(i) a change in the person or persons with power to direct, or to cause the
direction of, management or policies of Supplier or of any Guarantor; (ii) a
change, however such occurs (including, by way of example, sale, purchase,
merger, or business combination), in the ownership of capital stock of Supplier
or of any Guarantor for which notice is to be given under Article 16.1(b) below;
(iii) a sale or disposition of all or substantially all of the assets of
Supplier, or sale or disposition of a line of business of Supplier or of all or
substantially all of the assets of Supplier relating to or used in a line of
business, whether or not the Agreement is assigned; or (iv) a sale or
disposition of all or substantially all of the assets of a Guarantor, or a sale
or disposition of a line of business of a Guarantor or of all or substantially
all the assets of a Guarantor relating to or used in a line of business, which
sale or disposition results in (or will result in) a material change in the
nature of the business of such Guarantor or in a material adverse change in the
financial condition of the Guarantors as a whole.

     (1)  A Notice Event may result from a single transaction or from a series
          of related transactions. Transactions with a single person, with a
          group of persons covered by Section 13(d)(3) of the Securities
          Exchange Act of 1934 (the "Exchange Act"), or with persons under
          common control shall be considered a single transaction.

     (2)  A "Public Offering Event" is the issuance by Supplier or any Guarantor
          of capital stock to the public in an underwritten public offering of
          capital stock registered

--------
* Confidential Treatment Requested

<PAGE>
          pursuant to a registration statement on Form S-1 with the federal
          Securities and Exchange Commission.

     (b) Supplier shall provide (and shall cause an affected Guarantor to
provide) notice to Applied in accordance with Section 1.2.2 of the Agreement as
to matters provided for by this Section 16.1(b).

     (1)  If a Notice Event will result from a transaction to which Supplier or
          any Guarantor is a party, Supplier shall give (and shall cause the
          affected Guarantor to give) notice to Applied, in accordance with
          Section 1.2.2 of the Agreement, (i) except when such notice would
          violate applicable securities laws or regulations or another
          obligation of confidentiality, (x) at least five (5) Business Days
          prior to the date of actual public disclosure of the transaction or,
          if earlier, the date such public disclosure should have been made if
          Supplier or the affected Guarantor, as applicable, were a company with
          publicly traded securities, but (y) in any event no later than
          twenty-one (21) calendar days prior to the closing or consummation of
          such transaction, and (ii) of the consummation or closing of such
          transaction, at the time of such closing or consummation. The Notice
          Event shall not occur, however, until the closing or consummation of
          the transaction(s) or event(s) that cause or will result in the Notice
          Event. If the giving of notice to Applied under this Article
          16.1(b)(1) is restricted by an obligation of confidentiality, Supplier
          (or such Guarantor) shall make a good faith effort to obtain approval
          or consent to give the notice provided for in this Article 16.1(b)(1).

     (2)  If securities of Supplier or any Guarantor are or are to be the
          subject of a Public Offering Event, Supplier shall give (and shall
          cause an affected Guarantor to give) Applied notice of (and
          concurrently with) each of the following: the filing of a registration
          statement with respect to any such securities; and a registration
          statement becoming effective as to any securities of Supplier or any
          Guarantor.

     (3)  Supplier shall, in addition to notices provided for in Article
          16.1(b)(1) and (2), give (and shall cause an affected Guarantor to
          give) notice to Applied in accordance with Section 1.2.2 of the
          Agreement of each of the following events, occurrences or
          transactions, each of which is a Notice Event:

          (i)  Notice shall be given promptly upon the occurrence of any Notice
               Event of a type covered by Article 16.1(a)(i), (iii) or (iv)
               above.

          (ii) If Supplier or a Guarantor does not have capital stock registered
               with the federal Securities and Exchange Commission, a Notice
               Event occurs upon, and the affected company shall give Applied
               notice promptly upon (a) the acquisition of ownership of ten
               percent (10%) or more of the outstanding capital stock of such
               company by any person that is a Competitor (as defined below) of
               Applied, and also promptly upon (b) the acquisition of ownership
               of twenty-five percent (25%) or more of the outstanding capital
               stock of such company by any person, whether or not a Competitor
               of Applied.
<PAGE>

         (iii) If any class of capital stock of Supplier or any Guarantor is
               registered with the federal Securities and Exchange Commission, a
               Notice Event occurs (with respect to the company having
               registered stock) upon, and the affected company shall give
               Applied notice promptly upon, (a) the acquisition of ownership of
               five percent (5%) or more of the outstanding capital stock of
               each such a class by a person that is a Competitor of Applied in
               a transaction to which Supplier, any Guarantor, or any Affiliate
               of Supplier or a Guarantor is a party, and (b) (x) receipt of a
               Schedule 13D pursuant to the Exchange Act, or (y) Supplier or any
               Guarantor having actual knowledge of, any acquisition of
               ownership of five percent (5%) or more of the outstanding capital
               stock of such a registered class. Notice under this clause (b)
               shall be given (where notice is received by Supplier or the
               affected Guarantor through the receipt of a Schedule 13D) by
               forwarding a copy of such schedule to Applied.

          (iv) If any capital stock of any class of Supplier or any Guarantor is
               registered with the federal Securities and Exchange Commission,
               the affected company shall give Applied notice of the occurrence
               of any event reportable pursuant to Item 1 of Form 8-K as in
               effect pursuant to the Exchange Act by notice given concurrently
               with filing of the report or announcement of such event.

     (c)  The following provisions and definitions are part of this Article
          16.1:

     (1)  In addition to notices provided for above, Supplier shall give (and
          shall cause each Guarantor to give) to Applied, on the 15th day of
          each January and July during the term of this Agreement, a schedule
          showing the name of each owner of five percent (5%) or more of the
          ownership of capital stock of Supplier or any Guarantor as of January
          1 and July 1 of such year. This requirement shall apply only to those
          companies that do not have publicly traded securities.

     (2)  In compliance with the confidentiality obligations of the IPA,
          Supplier shall not provide Confidential Information of, or received
          from, Applied to any third party in connection with a Notice Event or
          the negotiation or evaluation of same, without Applied's prior written
          consent (and upon such conditions as Applied may require). Information
          received by Applied from Supplier or a Guarantor pursuant to Article
          16.1(b) and Article 16.1(c)(1) shall be deemed Confidential
          Information of Supplier under Article 4 of the IPA, subject to the
          exclusions of Section 4.1 of the IPA.

     (3)  References to "capital stock" shall include any equity interest,
          ownership interest or like right or interest, such as interests of
          members in a limited liability company. References to "ownership"
          shall include legal or beneficial ownership or the right to vote.

     (4)  A "Competitor" of Applied means (I) any person identified to Supplier
          by Applied as a competitor in any of the Fields of Use (as specified
          below) through written notice given in accordance with Section 1.2.2
          of the Agreement, if Applied elects

<PAGE>

          to provide such a notice or (II) any person that an executive officer
          of Supplier knows is a competitor of Applied in any Field of Use. The
          information in a notice from Applied under this Article 16.1(c)(4)(I)
          is Confidential Information of Applied, subject to the exclusions of
          Section 4.1 of the IPA. The "Fields of Use" applicable to this
          definition of Competitor are the design, manufacturing and marketing
          of: (a) semiconductor wafer fabrication equipment, (b) wafer
          inspection and metrology equipment, (c) flat panel display fabrication
          equipment, (d) wafer fabrication factory control software, (e) toxics
          abatement or recycling equipment, or (f) thin film application
          processes.

     (5)  "Affiliate" means any person that directly or indirectly controls, is
          under common control with, or is controlled by, Supplier or any
          Guarantor.

     (6)  "Promptly" means, for purposes of this Article 16.1 only, not later
          than the third Business Day after the occurrence of the event or
          transaction for which notice is to be given.

     (7)  The following are excluded from "Notice Event":

          a)   The acquisition of ownership of capital stock by a person that,
               on the Effective Date, owns 5% or more of the outstanding capital
               stock of any class of Supplier or of the affected Guarantor,
               unless such acquisition constitutes or results in another Notice
               Event.

          b)   A change in corporate form of Supplier or a Guarantor that does
               not alter the ownership, management or control of the Supplier or
               Guarantor, such as conversion from a corporation to a limited
               liability company through a transaction in which ownership and
               control are maintained as such existed in a corporate form prior
               to the conversion.

          c)   A distribution of all outstanding capital stock of Supplier or
               KGI to the shareholders of KHC in proportion to their ownership
               in KHC.

          d)   A merger, consolidation or business combination of Supplier with
               or into, or a sale of all outstanding stock of Supplier to,
               another entity that is wholly owned (directly or indirectly) by
               KHC that does not cause or result in a material change in the
               nature of the business conducted by Supplier prior to such event
               or in a material adverse change in the management or operations
               of Supplier.

          e)   A merger, consolidation or business combination of KGI with or
               into, or a sale of all outstanding stock of KGI to, another
               entity that is wholly owned (directly or indirectly) by KHC that
               does not cause or result in a material change in the nature of
               the business conducted by KGI prior to such event or in a
               material adverse change in the financial condition of the
               Guarantors as a whole.

<PAGE>

16.2 Financial Information of Supplier and Guarantors.

     (a) Supplier will provide Applied with financial information, and shall
cause KHC to provide to Applied financial information, as follows: (i) within 90
days after the end of each fiscal year, and within 45 days after the end of each
fiscal quarter, financial statements for such year or period as to KHC, to
include the balance sheet, statement of income, and statement of cash flow (on a
consolidated basis with its subsidiaries) of KHC, such annual (but not
quarterly) financial statements to have been audited by independent certified
public accountants of recognized national standing; and (ii) from time to time
such additional financial information as Applied may reasonably request. All
financial statements of KHC shall be prepared on the basis of generally accepted
accounting principles in effect in the United States of America ("GAAP"),
consistently applied. Applied's request for financial information from Supplier
or from KHC to be provided through Applied's Form F-15 shall be deemed a
reasonable request under clause (ii) of this Article 16.2(a) when Applied has
determined that it requires information in addition to that contained in the KHC
financial statements referred to in Article 16.2(a)(i). Information on Form F-15
is not required to be presented in compliance with GAAP.

     (b) Supplier agrees to keep true, complete and accurate books and records,
of Supplier's costs and other information relevant to price and cost reduction
provisions of the Agreement and billings by Supplier to Applied under the
Agreement. Supplier will provide:

     (1)  upon request by Applied's Supply Chain Management organization or
          successor organization of Applied performing the functions of such
          organization ("SCM"), made on a case by case basis, a complete costed
          bill of materials for those FDS(s) delivered to Applied that are
          specified in the applicable request(s), to include detailed Piece Part
          costs at Supplier's Standard Cost of Materials, Current Average Cost
          of Materials, or other Piece Part price, in each case as applicable to
          the Piece Parts in such bill of materials, to be provided to Applied's
          SCM organization or to such other recipient at Applied as specifically
          identified in instructions given to Supplier by Applied's SCM through
          the Supply Account Team Lead;

     (2)  upon request by Applied's SCM, access to Supplier's books and records
          (at Supplier's facilities and during regular business hours) to
          determine the accuracy of Supplier's Piece Part prices charged to
          Applied and, as applicable, Supplier's adjustments thereto under cost
          reduction provisions of the Agreement (including Sections 3.1.5 and
          3.1.6); and

     (3)  copies of its books and records (or access to its books and records),
          upon request and upon reasonable notice, for review or audit during
          regular business hours (to include access to original records or data)
          to reconcile differences between the parties as to billings and
          payments. At the conclusion of a review or audit as to billing and
          payment differences, Applied shall provide to Supplier a report with
          reasonably detailed supporting information from Applied's books and
          records to support the conclusions reached with respect to such
          differences.

     (c) Upon mutual agreement of the parties after request by Applied, Applied
(or independent nationally recognized accountants designated by Applied and
reasonably acceptable to Supplier) shall have the right, at Applied's expense
and upon reasonable notice, to conduct

<PAGE>

audits of all of Supplier's books and records and of any financial statements or
other information provided by Supplier. This Article 16.2(c) does not limit
Applied's rights under Article 16.2(b).

17.  Assignment and Succession.

     (a) The Agreement shall be binding upon, and inure to the benefit of, each
of the parties and its respective successors and permitted assigns. Neither
Supplier nor Applied shall assign, transfer to or permit to vest in another
person the Agreement, or its rights, interests and obligations under the
Agreement, in whole or in part, whether voluntarily or by operation of law, (i)
without the express, prior written consent of the other party, or (ii) except as
permitted by the following provisions of this Article 17, as applicable.

     (b) Applied may assign the Agreement in whole or in part to any other
person(s), as follows:

(i)            Assignment in whole or in part is permitted if Applied remains
          obligated, either primarily or equally with the assignee, for
          performance of the obligations assigned by Applied;

(ii)           Assignment in whole or in part is permitted in connection with,
          or to effect, a change in manufacturing operations resulting from an
          agreement between Applied and a Subassembler under Section 4.7 of the
          Agreement, or to accomplish a change in manufacturing of any Applied
          Systems relating to such an agreement;

(iii)          Assignment in whole or in part is permitted in connection with,
          or to effect, a sale or transfer of assets used in manufacturing
          operations of Applied Systems, where such occurs to facilitate or as
          part of any bona fide change in the organization or structure of the
          manufacturing or integration of Applied Systems, which may include
          manufacture or integration by a third party, and which may be related
          to changes as to any product line(s), type(s) or model(s) of Applied
          System(s), line(s) of business of Applied, or geographic or other
          reorganization; or

(iv)           Assignment in whole or in part is permitted in connection with,
          or to effect, arrangements or agreements for outsourcing, contract,
          turnkey or similar manufacturing, or for modular build, of Applied
          Systems or assemblies or subassemblies, where such occurs to
          facilitate (or as part of) any bona fide change in the organization or
          structure of the manufacturing or integration of Applied Systems,
          which may include manufacture or integration by a third party, and
          which may be related to changes as to any product line(s), type(s) or
          model(s) of Applied System(s), line(s) of business of Applied, or
          geographic or other reorganization.

An assignee from Applied under an assignment made by Applied pursuant to this
Article 17(b) may not further assign, either in whole or in part, the Agreement
(or the portion of the Agreement assigned to the assignee) without the prior
written consent of Supplier to such subsequent assignment.
<PAGE>

     (c) A transfer or vesting of the Agreement, and rights and obligations
hereunder, in whole but not in part, in another person in the event of or
incident to a merger, consolidation or business combination to which Applied is
a party shall be permitted.

     (d) Supplier may assign the Agreement, in whole or in part, to any other
person, and the Agreement may be transferred to, or vest in, another person, in
whole but not in part, by reason of a merger, consolidation or business
combination to which Supplier is a party, as follows:

(i)            Assignment, in whole or in part, is permitted if, after notice
          from Supplier under Article 17(f), Applied (x) has determined, in the
          reasonable discretion of Applied, that: (A) such person is reasonably
          likely to qualify, or is then qualified, as a "preferred" supplier
          under the then-current standards of Applied, without prejudice to
          subsequent assessments during the term of the Agreement; (B) such
          person and the terms of the assignment do not present an adverse risk
          to Applied with respect to: manufacturing process, delivery cycle
          time, product pricing, quality, or financial responsibility or
          condition; (C) such person and the terms of the assignment do not
          present an adverse risk to Applied with respect to protection,
          confidentiality, misuse or misappropriation of, access to, or control
          over confidential or proprietary information, trade secrets and like
          property of Applied (or in which it has an interest); (D) such person
          and the terms of the Assignment do not present an adverse risk to
          Applied that a Competitor of Applied (or an Affiliate of such a
          Competitor (as the terms Competitor and Affiliate are defined in
          Article 16.1(c)) would be or become a party to, or in control of a
          party to, the Agreement or the Related Agreements; and (y) has issued
          its written consent based on such determination. In its assessment as
          to financial responsibility and condition under Clause B above,
          Applied may consider whether the Performance Guaranty Agreement will
          continue in effect as to the Agreement (or portion assigned).

(ii)           Transfer or vesting, in whole but not in part, is permitted in
          the event of a merger, consolidation or business combination of
          Supplier with or into, or a sale of all outstanding stock of Supplier
          to, another entity that is wholly owned (directly or indirectly) by
          KHC, or as part of a transfer of a substantial part of the assets of
          Supplier to a third party that is wholly owned (directly or
          indirectly) by KHC, provided that a transaction under this Article
          17(d)(ii) does not cause or result in a material change in the nature
          of the business conducted by Supplier prior to such transaction or a
          material adverse change in the management or operations of Supplier.

     (e) Any assignee or successor of Applied or Supplier shall also assume, be
bound by and be (or become) a party to and obligated under this Agreement, the
IPA and other Related Agreements (as such agreements are then in effect), either
in whole (if the permitted assignment or other transaction is as to the
Agreement in whole), or in part (if in part).

     (f) Each party shall endeavor to provide the other with prior written
notice and, if applicable, a request for consent with respect to a transaction
to which this Article 17 applies, and a brief description of the transaction and
of the assignee or transferee at least seventy-five

<PAGE>

(75) days before the closing of such transaction. Further, each party shall give
the other party, at least fifteen (15) days prior to the closing of such a
transaction, written notice of, and, if applicable, a request for consent as to,
any proposed or permitted transaction to which this Article 17 applies and a
brief description of the transaction and of the assignee or transferee of such
transaction, if not previously provided. Failure to give such notice shall not,
by itself, affect the validity of such assignment or transfer as between the
parties thereto.

     (g) In the event of, and to the extent of, an assignment, merger or other
transaction to which Supplier is a party with respect to the Agreement of a type
described in Article 17(d), Supplier shall maintain during the period prior to
the assignment, merger or such other transaction becoming effective the supply
of Item(s) without interruption or delay and without breach of other provision
of the Agreement. An assignment or transfer of this Agreement, or of obligations
hereunder, shall not apply to, or relieve an assigning or transferring party of,
the obligations, liabilities and debts accrued, incurred or existing at the date
of assignment or transfer or subsequently accruing, arising, or existing under
or in connection with transactions between the parties prior to such date, but
the assigning or transferring party shall remain primarily and directly
obligated and liable for such obligations, liabilities and debts.

     (h) Any assignment, merger or other transaction subject to this Article 17
that is not made in compliance with this Article 17, shall, at the option of the
party (Applied or Supplier, as the case may be) that is not a party to such
assignment, merger or other transaction, be deemed a breach of and a default
under the Agreement and not be binding upon that party. The party, Applied or
Supplier, exercising such option to declare breach and default shall give
written notice of such exercise to the other party, and shall not be required to
proceed with any period of review or cure under Article 25, however, the party
so in breach shall continue to be bound by, and shall perform and observe all
its obligations applicable under this Agreement through the conclusion of a Wind
Down Period, if applicable, and thereafter under provisions that survive.

     (i) Assignment of this Agreement in part shall mean that all rights,
interests and obligations of the party assigning and all terms, provisions and
conditions of the Agreement shall be assigned to and assumed by (or apply to)
the assignee with respect to the Item(s), product line(s), type(s) or model(s)
of Applied System(s) or FDSs, or line(s) of business to which the assignment
applies (the "Assigned Products"). Notwithstanding the foregoing, (i) only those
pricing provisions (whether set forth in Attachment 1 or elsewhere in the
Agreement) applicable to Assigned Products affected by the assignment shall be
assigned to the assignee and (ii) the liability of Supplier to Applied and any
assignee(s) of Applied *** below shall be apportioned pursuant to the assignment
among Applied and each assignee *** liability of Supplier to Applied and such
assignee(s) ***. In the event of an assignment, the parties shall cooperate in
the implementation of operational processes and procedures to effect the
assignment.

18.  Gratuities.

     Supplier represents and warrants that it has not offered or given and will
not offer or give any gratuity to induce any person or entity to enter into,
execute or perform the Agreement or any other agreement between Supplier and
Applied. Upon Applied's written request, an officer of Supplier shall certify in
writing that Supplier has complied with and continues to comply with this
Article. Any breach of this representation and warranty shall be a material
breach of the Agreement and any other agreement between Applied and Supplier.

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* Confidential Treatment Requested
<PAGE>

19.  [Omitted]

20.  [Omitted]

21.  Disclaimers and Limitations of Liability as to Excluded Damages.

     (a) As used in this Article 21, "Excluded Damages" means all special,
indirect, punitive, consequential or contingent damages that arise from or
relate to the Agreement.

     (b) The exclusions and limitations of this Article 21 as to the liabilities
of Applied *** for Excluded Damages are expressly made a part of the Agreement
and are accepted by each party.

     (c) Subject to the exceptions provided in Article 21(e), Applied EXCLUDES
all liability to Supplier for Excluded Damages, whether or not Applied has been
advised of the possibility of such Excluded Damages.

     (d) ***

     (e) An exclusion or limitation, as applicable, that is provided by this
Article 21 shall only apply to Excluded Damages and further shall not apply to
damages of any type, obligations of a party, or claims or liabilities against a
party that:

(i)            arise from or relate to matters covered by an indemnity under
          Article 22 of this Exhibit 1;

(ii)           arise from or relate to the IPA, or matters covered by an
          indemnity under the IPA; or

(iii)          arise from or relate to, or are for, personal injury, death, or
          damage to or loss of tangible property.

22.  Indemnity.

     (a) Supplier's Indemnity Obligation. In the event a third party brings a
claim or asserts liability against Applied alleging that Items or the work
product of Services ("Work Product"), as provided by Supplier under this
Agreement, or the manufacture, use, sale or offer for sale of such Items or Work
Product by Applied or the use of same by Applied's customers infringes,
misappropriates or otherwise violates third party IP Rights (an "Applied Third
Party Claim"), SUPPLIER SHALL DEFEND, INDEMNIFY AND OTHERWISE HOLD HARMLESS
APPLIED against such Applied Third Party Claim, including the payment of
reasonable fees and expenses of any attorneys and other professionals employed
by Applied in accordance with Article 22(f) in defending the Applied Third Party
Claim and the payment of any judgment finally awarded against Applied or the
payment of any settlement amount agreed to by Supplier to settle such Applied
Third Party Claim. Supplier will not be liable for any settlement of an Applied
Third Party

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* Confidential Treatment Requested
<PAGE>

Claim made by Applied without Supplier's consent, except as provided in Article
22(h) below.

     (b) Exceptions to Supplier's Indemnity Obligation. Supplier's obligations
pursuant to Article 22(a) will not apply to any claims or assertions of
liabilities if: (x) Supplier would not otherwise be liable for inducing or
contributing to infringement, misappropriation or other violation; and (y) the
infringement, misappropriation or other violation: (1) was unavoidably caused by
Supplier's compliance with specifications or designs furnished and required by
Applied or by Applied's non-compliance with Supplier's prior written advice or
warning of a possible and likely infringement, misappropriation or other
violation relating to such compliance, or (2) arises from a combination not
performed by Supplier of Items and/or Work Product with other equipment,
hardware, software, materials or components not provided by Supplier and any
such claim or assertion of infringement, misappropriation or other violation
would not arise but for such combination, or (3) is a direct result of
Supplier's combination of components mandated by Applied.

     (c) ***

     (d) Reduction of Indemnification Amounts. The amount that any party is or
may be required to pay to or on behalf of any other person pursuant to an
indemnity under this Article 22 shall be reduced (including retroactive
reduction or reimbursement) by (i) any amounts received by an indemnified party
from an insurance carrier or paid and resolved by an insurance carrier on behalf
of the insured indemnified party (in a manner that results in no further
liability to the indemnified person), in either case net of any applicable
premium

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* Confidential Treatment Requested

<PAGE>

adjustment, retrospectively rated premium, deductible, retention, cost or
reserve paid or held by or for the benefit of the insured, or (ii) any other
amounts or tax benefits actually recovered by or on behalf of such indemnified
person in reduction of such payment. If an indemnified person shall have
received the payment required by this Article 22 from an indemnifying party and
shall subsequently actually receive insurance proceeds or other amounts or tax
benefits in respect of such payment as specified above, then such indemnified
person shall pay to such indemnifying party a sum equal to the amount of any
such double recovery actually received. This provision shall not, however,
operate to relieve a party of liability to an insurer subrogated to the rights
of the insured.

     (e) Indemnified Party's Obligations. A party seeking indemnification (i)
shall give the other party prompt written notice of any Applied Third Party
Claim or Supplier Third Party Claim, as applicable (each a "Third Party Claim"),
that may give rise to any indemnification obligation under this Article 22,
together with the estimated amount (if reasonably available) of such Third Party
Claim, and (ii) shall provide reasonable cooperation and assistance to the
indemnifying party in the defense and/or settlement of such claim, including, to
the extent reasonably requested, the retention, and the provision to the
indemnifying party (which shall pay the reasonable costs incurred in providing
or collecting such records) of records and information reasonably relevant to
such Third Party Claim. Failure to give such notice or to provide the
cooperation provided for herein shall not affect the indemnification obligations
hereunder in the absence of material prejudice to the indemnifying party. Except
for the foregoing obligation to pay the reasonable costs incurred in providing
or collecting records, the indemnifying party shall not be liable under this
Article 22 for any internal personnel costs or expenses (including

<PAGE>

opportunity costs) suffered or incurred by the indemnified party in connection
with a Third Party Claim.

     (f) Selection of Counsel. The indemnifying party shall have the right to
conduct and control the defense and, as herein provided, settlement (at its own
expense) of any such Third Party Claim through counsel of its own choosing by so
notifying the party seeking indemnification within thirty (30) calendar days of
the indemnifying party's first receipt of notice of the Third Party Claim;
provided, however, that any such counsel shall be reasonably satisfactory to the
party seeking indemnification. If the indemnifying party assumes such defense,
the party seeking indemnification shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. If, under applicable standards of
professional conduct, a conflict with respect to any significant issue between
any indemnified party and the indemnifying party exists in respect of such Third
Party Claim, the indemnifying party shall also pay the reasonable fees and
expense of such additional counsel as may be required to be retained by reason
of such conflict.

     (g) Indemnified Party's Consent to Settlement. The indemnifying party shall
not, without the prior written consent of the indemnified party: (i) agree to
the settlement, compromise or discharge of such Third Party Claim unless, by its
terms, such settlement, compromise or discharge actually, fully and finally
discharges the indemnified party from the full amount of liability in connection
with such Third Party Claim; nor (ii) agree to the entry of any judgment or
enter into any settlement that: (1) provides for injunctive or other
non-monetary relief adversely affecting the indemnified party, or (2) does not
include as an unconditional term thereof the giving of a release for all
liability with respect to such claim by each claimant or plaintiff to each
indemnified party that is the subject of such Third Party Claim.

     (h) Consequences of Breach by Indemnifying Party. In the event that the
indemnifying party does not assume and conduct the defense of a Third Party
Claim in accordance with this Article 22, or fails to perform any of its other
obligations under Article 22(a), (c), (f) or (g), and therefore is in breach of
its obligations under this Article 22: (i) the indemnified party may defend such
Third Party Claim in any manner it reasonably may deem appropriate (and the
indemnified party need not consult with, or obtain any consent from, the
indemnifying party in connection therewith); (ii) the indemnified party may
consent to the entry of any judgment or enter into any settlement with respect
to such Third Party Claim, provided that, before so consenting to entry of
judgment or entering into a settlement : (1) the indemnified party gives the
indemnifying party written notice of the terms of the proposed consent judgment
or settlement, and (2) the indemnifying party does not thereafter comply with
its obligations under this Article 22 in respect of the Third Party Claim and,
within three Business Days after receipt of such notice, give to the indemnified
party a signed written statement acknowledging that the indemnifying party is
liable under this Article 22 in respect of the Third Party Claim and undertakes
to comply promptly with its obligations under this Article 22; and (iii) subject
to compliance by the indemnified party with the foregoing obligations, as
applicable, the indemnifying party will remain liable to the fullest extent
provided in this Article 22.

     (i) IPA Indemnity Obligations. The indemnities and related obligations
under this Article 22 are in addition to the indemnities and related obligations
provided in the IPA; however, this Article 22 shall not apply to any Third Party
Claim that is also subject to an

<PAGE>

indemnity provided in the IPA. Accordingly, the indemnity provisions in the IPA
shall supersede the provisions of this Article 22 in respect of any Third Party
Claim to which the IPA indemnity applies, to avoid any double indemnity
liability or conflicting indemnity liability. The parties' indemnity obligations
as to matters covered by the IPA shall be as provided in the IPA, except as to
Excluded Damages that are limited by Article 21(d).

     (j) Relation to Warranty Terms. Limitations or disclaimers of warranties
shall not be construed or applied to alter or affect the obligations and
liabilities of Applied or Supplier, as the case may be, that arise under or are
provided for by the indemnity provisions of this Article 22 or of the IPA.

23.  Force Majeure.

     (a) A failure by either party to perform its obligations under the
Agreement due to causes, events or conditions beyond its control and without the
fault or negligence of the party shall be deemed excusable during the period in
which the cause of the failure persists. Such causes may include, but not be
limited to, acts of God or the public enemy, acts of the government in either
sovereign or contractual capacity, fires, floods, epidemics, strikes, freight
embargoes and unusually severe weather. If the failure to perform by Supplier is
caused by the default of a sub-tier supplier of Supplier, and such default
arises out of causes beyond the control of both Supplier and sub-tier supplier,
and without the fault or negligence of either of them, Supplier will not be
liable for any excess cost for failure to perform, unless the supplies or
services to be furnished by the sub-tier supplier were obtainable from other
sources in sufficient time to permit Supplier to meet the required delivery
releases of Items. When Supplier or Applied becomes aware of any potential force
majeure condition as described above, that party shall immediately notify the
other of the condition and provide relevant details.

     (b) A failure by Supplier to perform its obligations under this Agreement
will be deemed excused to the extent caused by Applied's failure to timely
perform its obligations under the FUAs or under the IS&T Agreement (as such is
modified by the Agreement), each as in effect from time to time, including but
not limited to, an interruption in services or failure to provide or maintain
services that Applied is obligated to provide under an FUA or such IS&T
Agreement, which interruption or failure is not timely cured by Applied,
adversely affects Supplier's ability to perform under the Agreement, and
Supplier is unable to perform through use of available alternative services.

24.  Changes.

     Applied may at any time, by a written order and without notice to
Guarantors, make changes within the general scope of the Agreement to any one or
more of the following:

     (a) Specifications;

     (b) method of shipment or packing;

     (c) place and date of delivery; or

     (d) place and date of inspection or acceptance.
<PAGE>

     Changes in costs, pricing or other terms resulting from changes made
pursuant to this Article shall be determined pursuant to the Agreement. If any
such change not otherwise provided for under the Agreement causes an increase or
decrease in the cost of or time required for performance of the Agreement, an
equitable adjustment shall be made in the Contract Price or delivery schedule,
or both, and the Agreement shall be modified in writing accordingly. No claim by
Supplier for adjustment under this Article 24 shall be valid unless in writing
and received by Applied within sixty (60) days from the date of receipt by
Supplier of the notification of change, provided, however, such period may be
extended upon the written approval of Applied. However, nothing in this Article
shall excuse Supplier from proceeding with the Agreement as changed or amended.

25.  Termination for Default; Other Remedies.

     (a) Any of the following events, failures, occurrences or breaches and,
when applicable with respect to an event, failure, occurrence or breach to which
Article 25(a)(i) or (a)(iii) applies, the failure of Supplier, after notice by
Applied under Article 25(b), to cure or correct same, if curable, during the
Business Review Process under Section 7.2.5 of the Agreement (or such period as
is established by the Business Review Process) shall constitute a "Default"
under the Agreement:

(i)            the recurring material failure by Supplier to deliver Items on
          time and in compliance with the warranty provisions of the Agreement;

(ii)           Supplier's becoming insolvent; the filing by Supplier of a
          voluntary petition under any bankruptcy, insolvency or like law; the
          filing against Supplier of an involuntary petition under any
          bankruptcy, insolvency or like law (which is not dismissed within 45
          days after its filing); the making of an assignment by Supplier for
          the benefit of creditors; and/or any material adverse change in the
          business, properties, operation or condition (financial or otherwise)
          of Supplier;

(iii)          other than those failures to which Article 25(a)(i) applies, the
          material failure by Supplier to perform, observe, or comply with any
          term, provision, or condition of the Agreement, including recurring
          failures that together constitute a material failure, or the
          occurrence of any event or condition constituting a default or breach
          in a material respect under any term, provision or condition of the
          Agreement; or

(iv)           (a) the occurrence of any event or condition constituting a
          material default under or breach of any provision of (i) the
          Performance Guaranty Agreement, as in effect from time to time, or
          (ii) the APA or an FUA, as in effect from time to time, without cure
          or correction after notice pursuant to the APA or an FUA, as
          applicable, or (b) the exercise by Applied of a right of termination
          of the IPA in accordance with its terms pursuant to Section 5.2 of the
          IPA.

Upon the occurrence of a Default, Applied shall have the right, at its option,
to terminate the Agreement, either in whole or in part. A termination in part
for Default shall apply to the Items, product line(s), type(s) or model(s) of
Applied Systems or FDSs, or line(s) of business affected

<PAGE>

by the Default and as to which Applied exercises its right to terminate for
Default (the "Terminated Products").

A termination of the Agreement in part for a default or the exercise of other
rights and remedies pursuant to Section 7.2.1 or Section 7.2.2 with respect to
the particular Item(s) affected shall not be subject to the procedural
requirements of this Article 25. A default as to which Section 7.2.1 or Section
7.2.2 applies may, however, also become an element of a Default under this
Article 25. In addition to its rights of termination for Default as to the
Agreement under this Article 25, Applied shall have the rights provided by the
UCC as to transactions governed by such statute (and by other law of the State
of California where the UCC does not apply) to terminate for default (or cancel)
or revoke acceptance with respect to any particular Item(s) and to recover its
damages in connection with such Item(s), without the application of the
procedures of this Article 25 or the Business Review Process.

     (b) Following the occurrence of an event, failure, occurrence or breach
that constitutes or may constitute a Default under Article 25(a), Applied may,
at its sole option, initiate and proceed with termination of the Agreement, as
follows:

          (i) Applied shall give initial notice to Supplier, in accordance with
          Section 1.2.2 of the Agreement, which shall include the following:
          notice of the Default or potential Default and of Applied's intent to
          terminate the Agreement; notice that the parties shall proceed with
          the Business Review Process as referred to in Article 25(a) with
          respect to an event, failure, occurrence or breach to which Article
          25(a)(i) or 25(a)(iii) applies, (except that a breach as to the 15 day
          notice under Article 17(f) shall not be subject to the Business Review
          Process); notice of any event, occurrence, failure or breach which is
          determined by Applied to be an incurable or uncorrectable Default; and
          notice of the period of cure or correction for any event, occurrence,
          failure or breach (that is curable or correctable but not otherwise
          subject to the Business Review Process) established by Applied in such
          notice (such a period to be not less than ten (10) days).

          (ii) If (x) the event, occurrence, failure, or breach has not been
          cured to Applied's reasonable satisfaction at or before the expiration
          of the Business Review Process (where applicable) or of such period
          for cure or correction as is established by such process, or at the
          expiration of such other period (of not less than ten (10) days)
          established by Applied for matters not otherwise subject to the
          Business Review Process, or (y) the event, occurrence, failure or
          breach is incurable, Applied may at such time or at any time
          thereafter issue a written or electronic notice of termination (a
          "Notice of Termination for Default"), and the Agreement shall
          terminate on and as of the date for termination specified in the
          Notice of Termination for Default.

     (c) ***

     (d) ***

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      (e) (i) The rights and remedies of each party pursuant to this Article
25 or any other provision of the Agreement for any purpose are in addition to
and shall not limit or preclude resort to any other rights and remedies provided
by agreement, by law (subject to procedural requirements of the Agreement) or in
equity. With respect to equitable relief, a party may proceed to seek and obtain
such relief, where authorized under applicable law, without the declaration of a
Default *** or compliance with other procedural requirements of the Agreement.

          (ii) In the event of a Default ***, the non-defaulting party shall
retain, and may exercise, all rights and remedies provided for by this Agreement
or other applicable law for the recovery of damages and/or other relief or
remedies with respect to the failure, breach, default or other event (subject,
however, to applicable limitations of the Agreement as to damages and to
procedural requirements of the Agreement). Termination of the Agreement for
Default *** shall constitute "cancellation" under the UCC.

     (f) Damages shall not be recoverable with respect to Items for which no
Authorized Demand Signal has been accepted by Supplier prior to the effective
date of termination.

26.  Termination for Convenience.

     (a) Applied may terminate the Agreement with respect to some or all of the
Items at any time for Applied's convenience (to "terminate for convenience" or a
"Termination for Convenience"), by giving Supplier written or electronic notice
of such Termination for Convenience in accordance with Section 1.2.2 of the
Agreement, which notice shall state the extent of the termination and the
conduct requested of Supplier in connection therewith as to matters described in
Article 27 below, but excluding Article 27(v) (a "Notice of Termination for
Convenience"). Upon the effective date of the Notice of Termination for
Convenience, the Agreement shall terminate to the extent indicated in the Notice
of Termination for Convenience, and Applied shall pay to Supplier the
Termination Charges as determined in accordance with paragraphs (c) and (d)
below.

     (b) Each Notice of Termination for Convenience shall:

(i)            Specify the Item(s), product lines, types of Applied Systems, or
          other method by which the Item(s) or scope of the Termination for
          Convenience will be determined, if less than all.

(ii)           Specify the effective date of the Termination for Convenience,
          which shall be at least three (3) months after the date of issuance of
          the Notice of Termination for Convenience.

(iii)          Provide such instructions or procedures as shall in Applied's
          commercially reasonable judgment be appropriate to implement Section
          4.11 of the Agreement as to the Termination for Convenience.

Upon a Termination for Convenience of the Agreement in whole or in part by
Applied, Supplier shall promptly follow Applied's directions as set forth on the
Notice of Termination for

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Convenience, and the parties shall implement the Wind Down Procedures of Section
4.11, as applicable.

     (c) Within ninety (90) days from the effective date of termination pursuant
to a Notice of Termination for Convenience, Supplier shall deliver to Applied a
written statement setting forth all of Supplier's claims in connection with the
Termination of Convenience (the "Termination Charges"), in the form and
containing such documentation as required by Applied. Failure by Supplier to
deliver such claim for Termination Charges within said ninety (90) day period
shall constitute a waiver by Supplier of all claims against Applied for such
Termination for Convenience and a release of all Applied's liability arising out
of such Termination for Convenience.

     (d) If Applied does not agree with the amount specified in Supplier's claim
for Termination Charges, Applied and Supplier will attempt to agree upon a
reasonable amount for Termination Charges. If Applied and Supplier fail to agree
upon such an amount within *** after receipt by Applied of the claim for
Termination Charges from Supplier, then the Termination Charges will be
conclusively presumed to be the sum of the following (provided that no costs
shall be duplicated):

(iv)          ***

(v)           ***

(vi)          ***

(vii)         ***

     (c) The provisions of this Article 26 apply solely to a Termination for
Convenience by Applied and shall not affect or impair any right of Applied to
terminate the Agreement due to the default or breach of Supplier as provided in
Article 25 or to seek any remedies in the event of such breach or default of
Supplier as otherwise permitted.

     (d) Applied shall have the right to initiate Termination for Convenience,
in whole or in part, based on the occurrence of a Notice Event. Such right to
terminate for convenience shall not limit Applied's right to terminate for
convenience, in whole or in part, at any other time.

27.  Post-termination Obligations.

     On the date termination of the Agreement becomes effective as specified in
the applicable Notice of Termination for Default or for Convenience, Supplier
shall (i) stop work being performed by Supplier pursuant to the Agreement, (ii)
cancel orders for parts and/or materials with Supplier's sub-tier suppliers and
cease ordering any such parts and/or materials, (iii) cancel work being
performed by Supplier's sub-tier suppliers for Supplier for the Agreement, (iv)
assign to Applied Supplier's interests in contracts with Supplier's sub-tier
suppliers (to the extent such contracts are assignable, are for goods used in
the manufacture of Items, and any required consents to assignment are obtained),
(v) (except in the case of Termination for Convenience) make commercially
reasonable efforts to furnish Applied with releases of claims from Supplier's

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sub-tier suppliers resulting from orders and/or work canceled by Supplier, (vi)
protect all property in which Applied has or may acquire an interest, and (vii)
comply with the provisions of this Agreement, and of the TLA as to Tooling, Test
Fixtures and Wind Down.

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