Document:

exv4w3

 

EXHIBIT 4.3

STOCKHOLDERS’ AGREEMENT

between

OPNEXT, INC.

and each of

HITACHI, LTD.

CLARITY PARTNERS, L.P.

CLARITY OPNEXT HOLDINGS I, LLC

and

CLARITY OPNEXT HOLDINGS II, LLC

Dated as of July 31, 2001

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 1.
	 	Board of Directors	 	 	2	 
	 
	 	 	 	 	 	 
	Section 2.
	 	Actions Requiring Board and Clarity Director Approval	 	 	3	 
	 
	 	 	 	 	 	 
	Section 3.
	 	Covenants	 	 	10	 
	 
	 	 	 	 	 	 
	Section 4.
	 	Accounting Consolidation Matters	 	 	12	 
	 
	 	 	 	 	 	 
	Section 5.
	 	Freedom of Action	 	 	14	 
	 
	 	 	 	 	 	 
	Section 6.
	 	Qualified Public Offering	 	 	14	 
	 
	 	 	 	 	 	 
	Section 7.
	 	Restrictions on Transfer of Stockholder Shares	 	 	16	 
	 
	 	 	 	 	 	 
	Section 8.
	 	Transfer Prior to an Initial Public Offering	 	 	18	 
	 
	 	 	 	 	 	 
	Section 9.
	 	Transfer Following an Initial Public Offering	 	 	19	 
	 
	 	 	 	 	 	 
	Section 10.
	 	Call Option	 	 	20	 
	 
	 	 	 	 	 	 
	Section 11.
	 	Purchase of the Clarity Parties’ Stockholder Shares by the Company	 	 	21	 
	 
	 	 	 	 	 	 
	Section 12.
	 	Nonsolicitation and Noncompetition	 	 	22	 
	 
	 	 	 	 	 	 
	Section 13.
	 	Legends	 	 	24	 
	 
	 	 	 	 	 	 
	Section 14.
	 	Definitions	 	 	24	 
	 
	 	 	 	 	 	 
	Section 15.
	 	Amendment and Waiver	 	 	31	 
	 
	 	 	 	 	 	 
	Section 16.
	 	Severability	 	 	31	 
	 
	 	 	 	 	 	 
	Section 17.
	 	Entire Agreement	 	 	32	 
	 
	 	 	 	 	 	 
	Section 18.
	 	Successors and Assigns	 	 	32	 
	 
	 	 	 	 	 	 
	Section 19.
	 	Counterparts	 	 	32	 
	 
	 	 	 	 	 	 
	Section 20.
	 	Remedies	 	 	32	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 21.
	 	Notices	 	 	32	 
	 
	 	 	 	 	 	 
	Section 22.
	 	Governing Law; Arbitration	 	 	34	 
	 
	 	 	 	 	 	 
	Section 23.
	 	Business Days	 	 	35	 
	 
	 	 	 	 	 	 
	Section 24.
	 	Descriptive Headings	 	 	35	 
	 
	 	 	 	 	 	 
	Section 25.
	 	Confidentiality	 	 	35	 
	 
	 	 	 	 	 	 
	Section 26.
	 	Delivery by Facsimile	 	 	36	 
	 
	 	 	 	 	 	 
	Section 27.
	 	Payments in U.S. Dollars	 	 	36	 
	 
	 	 	 	 	 	 
	Section 28.
	 	Submission to Jurisdiction; Waivers	 	 	36	 

 

 

STOCKHOLDERS’ AGREEMENT

     THIS STOCKHOLDERS’ AGREEMENT (this “Agreement”) is made as of July 31, 2001 by and
among OpNext, Inc., a Delaware corporation (the “Company”), Hitachi, Ltd., a corporation
organized under the laws of Japan (“Hitachi”), Clarity Partners, L.P., a Delaware limited
partnership (“Clarity”), Clarity OpNext Holdings I, LLC, a Delaware limited liability
company (“Holdings I”) and Clarity OpNext Holdings II, LLC, a Delaware limited liability
company (“Holdings II,” and together with Clarity and Holdings I, the “Clarity
Parties,” and each, a “Clarity Party”). Hitachi and the Clarity Parties are
collectively referred to herein as “Stockholders.” Capitalized terms used herein are
defined in Section 14 hereof.

     WHEREAS, Hitachi and the Clarity Parties desire to jointly own a corporation that will,
through its subsidiaries, be the successor to the Business.

     WHEREAS, pursuant to the terms of a Business Transfer Agreement dated as of December 6, 2000,
Hitachi made a capital contribution, in the form of a cash payment, to OpNext Japan, Inc., a
corporation organized under the laws of Japan and a wholly-owned subsidiary of Hitachi (“OpNext
Japan”), and OpNext Japan used such contributed funds to purchase the Business.

     WHEREAS, pursuant to the terms of an Amended and Restated Stock Purchase Agreement (the
“Stock Purchase Agreement”), and a Stock Contribution Agreement, each dated as of the date
hereof (the “Stock Contribution Agreement”), Hitachi contributed 100% of the equity
interests in OpNext Japan to the Company in exchange for 105,000,000 shares of the Company’s Class
A Common Stock, par value $0.01 per share, each of which has ten votes per share (the “Class A
Common”); and pursuant to the terms of the Stock Purchase Agreement, the Clarity Parties
purchased the number of shares of Class A Common set forth next to the name of each Clarity Party
on Annex A attached hereto.

     WHEREAS, Hitachi and Clarity presently anticipate that the Company will issue 15% of its
equity to employees in the form of stock options, 20% for mergers and acquisitions, 10% in an
initial public offering, and 5% to strategic investors, at such times and in such amounts as are
approved by the Company’s board of directors.

     WHEREAS, the Company and the Stockholders desire to enter into this Agreement for the purpose,
among others, of (i) establishing the composition of the Company’s Board of Directors (the
“Board”), (ii) limiting the manner and terms by which the Common Stock may be transferred
and (iii) establishing the terms and agreements concerning the parties’ relationships and providing
for the corporate governance of the Company. This Agreement is being executed and is becoming
effective concurrently with the Closing under the Stock Purchase Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
to this Agreement hereby agree as follows:

 

 

     Section 1. Board of Directors.

     (a) From and after the date hereof and until all of the provisions of this Section 1
cease to be effective, each Stockholder shall vote all of its or his Common Stock and any other
Voting Securities of the Company over which such Stockholder has voting control and shall take all
necessary or desirable actions within its or his control (whether in its or his capacity as a
stockholder, director, member of a Board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall
take all necessary and desirable actions within its control (including, without limitation, calling
special Board and stockholder meetings), so that:

     (i) the authorized number of directors on the Board shall be established at five (5)
directors;

     (ii) the following Persons shall be elected to the Board on the Closing Date:

     (A) three (3) representatives designated by Hitachi (the “Hitachi
Directors”);

     (B) one (1) representative designated by Clarity (the “Clarity
Director”); and

     (C) the Chief Executive Officer of the Company (the “Management
Director”);

     (iii) the removal from the Board (with or without cause) of any Hitachi Director or
Clarity Director shall be at the written request of the Stockholder originally entitled to
designate such director, but only upon such written request and under no other
circumstances;

     (iv) if the Management Director ceases to be the Chief Executive Officer of the
Company, he shall be removed as a director promptly after his employment in such office
ceases; and

     (v) in the event that any Hitachi Director, Clarity Director or Management Director
ceases to serve as a member of the Board during his/her term of office, the resulting
vacancy on the Board shall be filled in the manner provided in subsections
1(a)(ii)(A) through (C) above, as the case may be.

     (b) The Company shall pay the reasonable out-of-pocket expenses incurred by each director in
connection with attending the meetings of the Board and any committee thereof.

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     (c) The provisions of this Section 1 shall terminate automatically and be of no
further force and effect upon the first to occur of (i) an Initial Public Offering or (ii) a Sale
of the Company; provided that the parties acknowledge and agree that Clarity shall be
entitled to maintain for itself the rights set forth in Section 1(a)(ii)(B),
notwithstanding such termination so long as the Clarity Parties and their Affiliates own Voting
Securities of the Company possessing more than 10% of the total voting power of all outstanding
Voting Securities of the Company.

     (d) If any party fails to designate a representative to fill a directorship pursuant to the
terms of this Section 1, and following notice from the Company, the election of an
individual to such directorship shall be accomplished in accordance with the Company’s by-laws and
applicable law.

     (e) Clarity shall have the right to designate two Observers to the Board, who shall be
entitled to attend all meetings of the Board and to receive all notices of Board meetings and other
materials distributed to directors, but who shall not be entitled to vote. Notwithstanding the
foregoing, Hitachi and the Company shall have the right to withhold from the Observers any
confidential information which the Company, Hitachi or the Hitachi Directors deem to be
inappropriate to disclose to such Observers (and shall have the right to exclude such Observers
from any portion of a board meeting where such confidential information is discussed). Such
Observers shall initially be Stephen P. Rader and Fumio Uehara.

     (f) No party has taken or shall take any action that conflicts with, or for the purpose or
with the effect of frustrating or circumventing, the provisions of this Section 1,
including, without limitation, the grant of a proxy to, or entering into a separate voting
agreement with, a third party, without the consent of the other parties.

     Section 2. Actions Requiring Board and Clarity Director Approval.

     (a) Actions Requiring Board Approval. So long as any share of Class A Common remains
outstanding, the Company shall not, and shall not permit any Subsidiary to, without the approval of
the Board:

     (i) Dividends. Directly or indirectly declare or pay any dividends or make any
distributions upon any of the Company’s capital stock or other equity securities;

     (ii) Issuances. Except as contemplated in Section 7(c) hereof,
authorize, issue, sell or enter into any agreement providing for the issuance (contingent or
otherwise), or permit any Subsidiary to authorize, issue, sell or enter into any agreement
providing for the issuance (contingent or otherwise) of, (a) any notes or debt securities
containing equity features (including, without limitation, any notes or debt securities
convertible into or exchangeable for equity securities, issued in connection with the
issuance of equity securities or containing profit participation features) or (b) any equity
securities (or any securities convertible into or exchangeable for any equity
securities) or

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rights to acquire any equity securities, other than the issuance of equity
securities by a Subsidiary to the Company or another Subsidiary;

     (iii) Indebtedness. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness exceeding $1 million in
any single transaction and/or an aggregate principal amount of $10 million outstanding at
any time on a consolidated basis;

     (iv) Agreements with Insiders. Except for entering into this Agreement and the
agreements permitted by the Stock Purchase Agreement, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any Subsidiary’s
officers, directors, employees, stockholders (or with any of their respective Affiliates) or
with any individual related by blood, marriage or adoption to any such individual or with
any entity in which any such Person or individual owns a beneficial interest, except for
customary employment arrangements and benefit programs on reasonable terms and except for
such agreements, transactions, commitments or arrangements that do not exceed $1 million in
the aggregate on a consolidated basis during any 12-month period;

     (v) Amendment of Governing Documents. Except as expressly contemplated by this
Agreement, make, or permit any Subsidiary to make, any amendment to the Company’s
Certificate of Incorporation or by-laws or to any Subsidiary’s certificate of incorporation
or bylaws (or comparable charter documents with respect to a foreign entity), as applicable,
including without limitation any amendment that alters any terms or rights of any security
of the Company;

     (vi) Business Plan and Budget. Approve any business plan or annual budget of
the Company or any of its Subsidiaries for any fiscal year or years or deviate therefrom in
any material respect with respect to any one line item or in the aggregate;

     (vii) Mergers and Consolidations. Merge or consolidate with any Person or
permit any Subsidiary to merge or consolidate with any Person;

     (viii) Liquidations, Bankruptcy or Restructurings. Liquidate, dissolve, elect
to declare bankruptcy or effect a recapitalization or reorganization in any form of
transaction (including, without limitation, any reorganization into a limited liability
company, a partnership or any other non-corporate entity which is treated as a partnership
for federal income tax purposes) with respect to the Company or any Subsidiary;

     (ix) Loans; Guaranties; Investments. Make, or permit any Subsidiary to make,
any loans or advances to, guarantees for the benefit of, or Investments in, any Person
(other than a Wholly Owned Subsidiary) exceeding $500,000 in any individual

4

 

transaction and/or $5 million in the aggregate on a consolidated basis during any
twelve-month period, except for Permitted Investments;

     (x) Capital Expenditures. Make any capital expenditure (including, without
limitation, payments with respect to capital leases, as determined in accordance with US
GAAP consistently applied) exceeding $500,000 in any individual transaction;

     (xi) Agreements. Become subject to, or permit any of its Subsidiaries to
become subject to, (including, without limitation, by way of amendment to or modification
of) any agreement or instrument which by its terms would (under any circumstances) restrict
the Company’s right to perform the provisions of this Agreement, the Stock Purchase
Agreement, any of the Collateral Agreements, the Certificate of Incorporation or the
Company’s by-laws;

     (xii) Liens. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Liens other than Permitted
Liens;

     (xiii) Acquisitions. Acquire, or permit any Subsidiary to acquire, any
interest in any company or business (whether by a purchase of assets, purchase of stock,
merger or otherwise), or enter into any joint venture;

     (xiv) Leases. Enter into any lease or other rental agreement (excluding
capital leases, as determined in accordance with US GAAP consistently applied) under which
the amount of the aggregate lease payments exceeds $500,000 in any individual transaction;

     (xv) Material Change in the Scope of the Business. Enter into, or permit any
Subsidiary to enter into, the ownership, active management or operation of any business
other than the design, development, manufacturing, marketing, distribution and sale of
Restricted Products.

     (xvi) Long-Term Supply Agreements. Become subject to, or permit any of its
Subsidiaries to become subject to (including, without limitation, by way of renewal of,
amendment to or modification of) any agreement relating to the purchase of any supplies or
materials by the Company or Subsidiary, as the case may be, and having a term greater than
one year;

     (xvii) Licensing Agreements. Become subject to, or permit any of its
Subsidiaries to become subject to (including, without limitation, by way of renewal of,
amendment to or modification of) any material agreement, entered into other than in the
normal course of business operations, relating to the license of Intellectual Property
Rights;

5

 

     (xviii) Repurchase of Securities. Directly or indirectly repurchase or
otherwise acquire, or permit any Subsidiary to repurchase or otherwise acquire, any of the
Company’s or any Subsidiary’s capital stock or other equity securities (including, without
limitation, warrants, options and other rights to acquire such capital stock or other equity
securities), except for repurchases of Common Stock from employees of the Company and its
Subsidiaries upon termination pursuant to arrangements approved by the Board so long as no
default under any material agreement of the Company or Subsidiary is caused by any such
repurchase;

     (xix) Sale of Assets. Sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, assets of the Company and its
Subsidiaries exceeding $100,000 (computed on the basis of the greater of book value,
determined in accordance with US GAAP consistently applied, or fair market value, determined
by the Board in its reasonable good faith judgment) in any transaction or series of related
transactions or sell or permanently dispose of any of its or any Subsidiary’s material
Intellectual Property Rights;

     (xx) Employment of Senior Executives and Managers. Hire or terminate any
senior executive or manager of the Company or any Subsidiary or increase any compensation
(including salary, bonuses and other forms of current and deferred compensation) payable to
any senior executive or manager of the Company or any Subsidiary or create or eliminate any
senior executive or management position with the Company or any Subsidiary;

     (xxi) Incentive Plans. Amend or modify any stock option plan or employee stock
ownership plan as in existence as of the Closing, adopt any new stock option plan or
employee stock ownership plan or issue any shares of Common Stock to its or its
Subsidiaries’ employees other than pursuant to the Company’s existing stock option and
employee stock ownership plans; and

     (xxii) Selection of Professionals. Appoint or retain any professional advisors
of the Company or any Subsidiary (including, without limitation, any legal counsel,
accounting firm, underwriter, investment banking firm or engineering consultant).

     The provisions of this Section 2(a) are intended only as policy guidelines for the
operation of the Company and are not intended to limit the Board’s rights and duties under
applicable law. The Board may change these guidelines at any time.

          (b) Actions Requiring Approval of the Clarity Director.

     (i) So long as any Clarity Party holds any shares of Class A Common, the Company shall
not, and shall not permit any Subsidiary to, without the approval of
the Board including the approval of the Clarity Director, take any of the following
actions:

6

 

     (A) Dividends. Directly or indirectly declare or pay any dividends or
make any distributions upon any of the Company’s or any Subsidiary’s (other than
distributions to Wholly Owned Subsidiaries) capital stock or other equity
securities;

     (B) Issuances. Except as contemplated in Section 7(c) hereof,
authorize, issue, sell or enter into any agreement providing for the issuance
(contingent or otherwise), or permit any Subsidiary to authorize, issue, sell or
enter into any agreement providing for the issuance (contingent or otherwise) of (a)
any notes or debt securities containing equity features (including, without
limitation, any notes or debt securities convertible into or exchangeable for equity
securities, issued in connection with the issuance of equity securities or
containing profit participation features) or (b) any equity securities (or any
securities convertible into or exchangeable for any equity securities) or rights to
acquire any equity securities, other than issuances of equity securities by a
Subsidiary of the Company or another Wholly Owned Subsidiary and issuances pursuant
to the Stock Option Plan (as defined in the Stock Purchase Agreement);

     (C) Indebtedness. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, Indebtedness exceeding
$1 million and/or an aggregate principal amount of $10 million outstanding at any
time on a consolidated basis;

     (D) Agreements with Insiders. Except for entering into the Collateral
Agreements and the transactions set forth therein, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with Hitachi or any of Hitachi’s
Affiliates or any of their respective officers, directors, employees, stockholders
(or any of their respective Affiliates) or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
Person or individual owns a beneficial interest, except for customary employment
arrangements and benefit programs on reasonable terms and except for such
agreements, transactions, commitments or arrangements that do not exceed $1 million
in the aggregate on a consolidated basis during any 12-month period and which are no
less favorable to the Company or such Subsidiary than the Company or such Subsidiary
could otherwise obtain from non-Affiliates;

     (E) Amendment of Governing Documents. Except as expressly contemplated
by this Agreement, make or permit any Subsidiary to make, any amendment to the
Company’s Certificate of Incorporation or by-laws or to any

7

 

Subsidiary’s certificate of incorporation or by-laws (or comparable charter
documents with respect to a foreign entity), including without limitation any
amendment that alters any terms or rights of any security of the Company;

     (F) Material Change in the Scope of the Business. Enter into, or
permit any Subsidiary to enter into any business involving activities other than
those activities described in Section 12(b)(ii).

     (G) Mergers and Consolidations. Merge or consolidate with any Person
or permit any Subsidiary to merge or consolidate with any Person other than a Wholly
Owned Subsidiary, or agree to any Sale of the Company;

     (H) Loans; Guaranties; Investments. Make, or permit any Subsidiary to
make, any loans or advances to, guarantees for the benefit of, or Investments in,
any Person (other than a Wholly Owned Subsidiary), exceeding $5,000,000 in the
aggregate on a consolidated basis during any 12-month period, other than a Permitted
Investment or acquire any assets outside the ordinary course of business in excess
of $5,000,000 in the aggregate on a consolidated basis;

     (I) Repurchase of Securities. Directly or indirectly repurchase,
redeem or otherwise acquire, or permit any Subsidiary to repurchase, redeem or
otherwise acquire, any of the Company’s or any Subsidiary’s capital stock or other
equity securities (including, without limitation, warrants, options and other rights
to acquire such capital stock or other equity securities), except for repurchases of
Common Stock from employees of the Company and its Subsidiaries upon termination
pursuant to arrangements approved by the Board so long as no default under any
material agreement of the Company or Subsidiary is caused by any such repurchase and
except for repurchases expressly permitted by this Agreement;

     (J) Changes in Tax or Accounting Policies. Make any change in the
Company’s or any Subsidiary’s accounting policies unless such change is not
reasonably expected to be adverse to the Company or any such Subsidiary or, if such
change is reasonably expected to be adverse to the Company or such Subsidiary, the
Company or such Subsidiary is indemnified by Hitachi on terms reasonably acceptable
to Clarity. Make any election to report the Company’s or any Subsidiary’s financial
results on a basis other than US GAAP. Make any tax election or assert any position
in any Tax Return with respect to the Company or any of its Subsidiaries in response
to a specific concern or position of Hitachi unless such election or position could
not reasonably be expected to be adverse to the Company or any of its Subsidiaries
(or, if such election or assertion is reasonably expected to be adverse to the
Company or such Subsidiary, such

8

 

election or assertion shall be permitted if the Company or such Subsidiary is
indemnified by Hitachi on terms reasonably acceptable to Clarity).

     (K) Liquidations, Bankruptcy or Restructurings. Liquidate, dissolve,
elect to declare bankruptcy or effect a recapitalization or reorganization in any
form of transaction (including, without limitation, any reorganization into a
limited liability company, a partnership or any other non-corporate entity which is
treated as a partnership for federal income tax purposes) or do any of the foregoing
for a Subsidiary;

     (L) Pledge of Assets; Credit Support. Pledge the assets of the Company
or any Subsidiary (including the Business) or require any Stockholder to grant a
lien on any of its Stockholder Shares or otherwise provide credit support to the
Company or any Subsidiary; and

     (M) Sale of Assets. Sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, more than 10% of the consolidated
assets of the Company and its Subsidiaries (computed on the basis of the greater of
book value, determined in accordance with US GAAP consistently applied, or fair
market value, determined by the Board in its reasonable good faith judgment) in any
transaction or series of related transactions or sell or permanently dispose of any
of its or any Subsidiary’s material Intellectual Property Rights.

     (ii) The provisions of this Section 2(b) shall terminate upon the earliest
of (a) the consummation of an Initial Public Offering and (b) the consummation of a Sale
of the Company.

     (c) Applicability. The provisions of this Section 2 shall not apply to the
entering into of the Stock Purchase Agreement and the Collateral Agreements and the consummation of
the transactions permitted by such agreements.

     (d) Arbitration. With respect to any proposed action of the Company or any Subsidiary
that is submitted to the Board during the five-year period following the Closing and is subject to
Section 2(b), Hitachi may not submit such matter to the arbitration provisions of
Section 22 of this Agreement unless and until the matter was both supported by the Hitachi
Directors and rejected by the Clarity Director at two consecutive regularly scheduled Board
meetings and, as a result, the Board affirmatively rejected such proposed action. The arbitrators
shall be empowered to resolve the dispute on a binding basis. If the arbitrators find in favor of
Hitachi, the approval of the Clarity Director shall no longer be required for the Board to take
such action and, if the arbitrators find in favor of the Clarity Parties, such matter will not be
put before the Board again without Clarity’s consent.

9

 

     Section 3. Covenants.

     (a) Financial Statements and Other Information. Following the Closing, for so long as
such Stockholder holds any shares of Class A Common, the books and records of the Company shall be
maintained in English and the financial accounts shall be kept and stated in US Dollars and US GAAP
and the Company shall deliver to each Stockholder:

     (i) Within 45 days after the end of each quarterly accounting period in each fiscal
year, unaudited consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the beginning of the fiscal
year to the end of such quarter, and unaudited consolidated balance sheets of the Company
and its Subsidiaries as of the end of such quarter, setting forth, in each case, comparisons
to the Company’s annual budget and to the corresponding period in the preceding fiscal year,
and all such statements shall be prepared in accordance with US GAAP, consistently applied,
subject to the absence of footnote disclosures and to normal year-end adjustments, and shall
be certified by the Company’s chief financial officer;

     (ii) within 90 days after the end of each fiscal year, audited consolidated statements
of income and cash flows of the Company and its Subsidiaries for such fiscal year, and
audited consolidated balance sheets of the Company and its Subsidiaries as of the end of
such fiscal year, setting forth in each case comparisons to the Company’s annual budget and
to the preceding fiscal year, all prepared in accordance with US GAAP, consistently applied;

     (iii) at least ten days prior to the beginning of each fiscal year, an annual budget
prepared on a monthly basis with respect to statements of income and on a quarterly basis
with respect to cash flows and balance sheets for the Company and its Subsidiaries for such
fiscal year (displaying anticipated statements of income and cash flows and balance sheets),
and promptly upon preparation thereof any other significant budgets prepared by the Company
and any revisions of such annual or other budgets, and within 30 days after any such period
in which there is a material deviation from the annual budget, an Officer’s Certificate
explaining the deviation and what actions the Company has taken and proposes to take with
respect thereto; and

     (iv) promptly (but in any event within five Business Days) after the discovery or
receipt of notice thereof, any default under or breach of, any material agreement to which
it or any of its Subsidiaries is a party, any condition or event which is reasonably likely
to result in any material liability under any statute or regulation relating to public
health and safety, worker health and safety or pollution or protection of the environment or
any other material adverse change, event or circumstance affecting the Company or any
Subsidiary (including, without limitation, the filing of any material litigation against the
Company or any Subsidiary or the existence of any dispute with any Person which involves a
reasonable likelihood of such litigation being commenced), and

10

 

an Officer’s Certificate specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose to take with respect
thereto;

     (v) with reasonable promptness, such other information and financial data concerning
the Company and its Subsidiaries as any Person entitled to receive information under this
Section 3(a) may reasonably request.

     Notwithstanding the foregoing, the provisions of this Section 3(a) shall cease to be
effective so long as the Company (i) is subject to the periodic reporting requirements of the
Securities Exchange Act and continues to comply with such requirements and (ii) promptly provides
to each Person otherwise entitled to receive information pursuant to this Section 3(a) all
reports and other materials filed by the Company with the Securities and Exchange Commission
pursuant to the periodic reporting requirements of the Securities Exchange Act; provided
that so long as any shares of Class A Common remain outstanding, the Company shall continue to
deliver to each Stockholder (so long as such Stockholder holds any Class A Common) the information
specified in subsection 3(a)(iv).

     Except as otherwise required by law or judicial order or decree or by any governmental agency
or authority, each Person entitled to receive information regarding the Company and its
Subsidiaries under Section 3(a) shall use its best efforts to maintain the confidentiality
of all nonpublic information obtained by it hereunder which the Company has reasonably designated
as proprietary or confidential in nature; provided that each such Person may disclose such
information in connection with the sale or permitted transfer of any Common Stock if such Person’s
transferee agrees in writing to be bound by the provisions hereof. Notwithstanding the foregoing,
the parties to this Agreement acknowledge that they are subject to nondisclosure obligations under
the other Collateral Agreements, and agree that no party may obtain or disclose any information
hereunder in order to avoid such party’s obligations under such other Collateral Agreements.

     (b) Inspection of Property. Subject to the final paragraph of Section 3(a),
the Company shall permit any representatives designated by a Stockholder (so long as such
Stockholder holds any Class A Common), upon reasonable notice and during normal business hours, to
(i) visit and inspect any of the properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations
with the directors, officers, key employees and independent accountants of the Company and its
Subsidiaries. The presentation of an executed copy of this Agreement by any such Stockholder to
the Company’s independent accountants shall constitute the Company’s permission to its independent
accountants to participate in discussions with such Persons.

     (c) Current Public Information. At all times after the Company has filed a
registration statement with the Securities and Exchange Commission pursuant to the requirements of
either the Securities Act or the Securities Exchange Act, the Company shall file

11

 

all reports required to be filed by it under the Securities Act and the Securities Exchange
Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action to the extent required to enable the sale of securities of the
Company pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a registration statement on
Form S-2 or S-3 or any similar registration form hereafter adopted by the Securities and Exchange
Commission.

     (d) Consultation With Clarity. In the preparation of its annual business plan and
budget, representatives of the Company shall consult with Clarity and shall in good faith consider
the views expressed by Clarity with respect to such plan and budget.

     (e) Place of Business. The parties acknowledge that the Company will have its
principal place of business in the United States. It is agreed that such principal place of
business initially will be in the State of New Jersey.

     Section 4. Accounting Consolidation Matters.

     (a) The parties acknowledge their mutual intention that, except as specified below and subject
to the terms of this Section 4, Hitachi shall continue to own such voting and equity
ownership interest in the Company and shall have such other management rights as are necessary in
the reasonable professional opinion of Hitachi’s independent public accountants to permit Hitachi
to consolidate the accounts of the Company for purposes of publicly reporting Hitachi’s financial
results in the United States and in Japan and in connection with Hitachi’s issuance of securities
(as determined in accordance with both US GAAP and Japanese GAAP). The provisions of this
Section 4 shall be construed in accordance with the foregoing statement of intention.

     (b) Without the prior written consent of Hitachi, the Company shall not:

     (i) issue any equity securities (or any securities convertible into or exchangeable for
equity securities), which issuance would cause Hitachi to own, directly or indirectly, in
the aggregate less than a majority of the Voting Securities of the Company on a
fully-diluted basis; provided that, in the event that a different percentage is
necessary to permit consolidation (as determined in accordance with both US GAAP and
Japanese GAAP), then such percentage shall be substituted for the foregoing percentage and,
if necessary, Hitachi shall be afforded the rights under paragraph (c) below in
order to increase its percentage ownership; or

     (ii) otherwise take or fail to take any action that would have the result (as
determined in accordance with either US GAAP or Japanese GAAP) that Hitachi is unable to
consolidate the Company for purposes of reporting Hitachi’s financial results
(as determined in accordance with both US GAAP and Japanese GAAP); provided
that,

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in the event of a change in US GAAP or Japanese GAAP such that it is impossible or
unreasonably difficult or disadvantageous to the Company for the Company to take or fail to
take such action and Hitachi may continue to consolidate the Company’s results of operations
by increasing its ownership interest in the Company, Hitachi shall be limited to the rights
under paragraph (c) below.

     (c) In the event that Hitachi determines to consent to any issuance of securities in a
Dilutive Transaction or in the event of a Change in Consolidation GAAP, then Hitachi shall have the
right to purchase additional Class A Common or other securities, as the case may be, from the
Company in order to maintain its ownership percentages at the level necessary to permit Hitachi to
continue to consolidate the Company’s financial results. If Hitachi proposes to exercise such
right, it may at its election purchase either Class A Common or, in the case of a Dilutive
Transaction, the type of security that is being issued in the Dilutive Transaction. Any such
purchase shall be for cash. The purchase price shall be the same price as is being paid in (or, in
the case of a convertible or exchangeable security or an acquisition of property rights or a
business, implied by) the Dilutive Transaction (as reflected in the Company’s financial reporting)
or, if such price is not readily ascertainable or there is a Change in Consolidation GAAP, shall be
the fair value of such Common Stock or other security as mutually agreed upon by Clarity or
Hitachi. If no such agreement is reached within 30 days of Hitachi’s determination to exercise its
rights under this paragraph, then the price at which such securities may be purchased by Hitachi
shall be determined by an independent investment banker appointed by the Board.

     (d) In the event of any Change in Consolidation GAAP, Hitachi shall, as promptly as
practicable prior to exercising its rights hereunder, provide to the Clarity Parties the written
opinion of its independent outside accountant, in form and substance reasonably acceptable to
Clarity, setting forth the nature of the Change in Consolidation GAAP and their view that such
change requires one or more of the actions contemplated by this Section 4 in order to
permit Hitachi to continue to consolidate the accounts of the Company.

     (e) For purposes of this Section 4, “US GAAP” means generally accepted
accounting principles as in effect from time to time in United States and generally applicable to
Japanese companies that are publicly traded in the United States or are offering securities in the
United States, applied on a basis consistent in all material respects (except for changes concurred
in by Hitachi’s independent public accountants) with the most recent audited consolidated financial
statements of Hitachi as are publicly released in United States or are required to be filed or
publicly disclosed in the United States to permit the sale of securities; “Japanese GAAP”
means generally accepted accounting principles as in effect from time to time in Japan and
generally applicable to Japanese companies that are publicly traded in Japan or are offering
securities in Japan, applied on a basis consistent in all material respects (except for changes
concurred in by Hitachi’s independent public accountants) with the most recent audited consolidated
financial statements of Hitachi as are publicly released in Japan or are required to be filed or
publicly disclosed in Japan to permit the sale of securities; “Dilutive Transaction”
means the issuance of securities in any transaction or series of related transactions that
would

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result in Hitachi’s ownership being reduced below the percentage threshold set forth in
subsection (i) of Section 4(b) above; and a “Change in Consolidation GAAP”
means a change in US GAAP or Japanese GAAP such that a different percentage than that set forth in
subsection (i) of Section 4(b) above shall be required in order for Hitachi to
continue to consolidate the results of the Company for financial reporting purposes or such that
the circumstances contemplated by the proviso to subsection (b)(ii) above shall
occur.

     Section 5. Freedom of Action. The Company and the Stockholders expressly
acknowledge that, subject to the confidentiality provisions of the final paragraph of Section
3(a) and the non-compete provisions of Section 12, (i) the Stockholders and their
respective Affiliates are permitted to have, and may presently or in the future have, businesses,
investments or other business relationships with entities engaged in the Business other than
through the Company or any of its Subsidiaries (an “Other Business”), (ii) the Stockholders
and their respective Affiliates have and may develop businesses or strategic relationships with
businesses that are and may be competitive or complementary with the Company or any of its
Subsidiaries, (iii) none of the Stockholders and their respective Affiliates will be prohibited by
virtue of their investments in the Company or its Subsidiaries or their service on the Board from
pursuing and engaging in any such activities, (iv) none of the Stockholders and their respective
Affiliates will be obligated to inform the Company or the Board of any such opportunity,
relationship or investment, (v) the Company, the other Stockholders and their respective Affiliates
and any future stockholders will not acquire or be entitled to any interest or participation in any
Other Business as a result of the participation therein of any Stockholder, or any of its
Affiliates, and (vi) the involvement of the Stockholders and their respective Affiliates in any
Other Business will not constitute a conflict of interest by such Persons with respect to the
Company or any of its Subsidiaries or the other Stockholder or any of its Affiliates. For purposes
of this Section 5, the Stockholders and the Company acknowledge and agree that, with
respect to the Clarity Parties or their Permitted Transferees, the term “Affiliates” shall be
deemed to include (in addition to Persons otherwise constituting “Affiliates” as defined in
Section 14 hereof) any of the investors or other owners of (i) any Clarity Party and/or its
Affiliates and (ii) the predecessor fund of Clarity and the Affiliates of such predecessor fund.

     Section 6. Qualified Public Offering.

     (a) IPO Request Notice. Within ten days of a written request by a Stockholder (an
“IPO Request Notice”), the parties hereby agree to pursue and complete as promptly as
possible thereafter a Qualified Public Offering; provided that, in order to constitute a
valid IPO Request Notice for purposes hereof, such request must be accompanied by a written letter
from one or more of the investment banking firms identified on Schedule 6(a) attached
hereto, which letter states that, in their reasonable judgment, based on then current market
conditions, it is reasonably likely that a Qualified Public Offering can be successfully
consummated; provided further that the preceding provision shall be applicable only
if the Company is cooperating by providing such investment banking firms with such information as is
reasonably requested by such investment banking firms, subject to the Company’s receipt of an
appropriate confidentiality agreement from such firms. Without limiting the generality of the

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foregoing, the parties agree to vote, and to cause their respective designees to the Board to vote,
in favor of any such Qualified Public Offering.

     (b) Cooperation; Filings. Following receipt of any IPO Request Notice, the
Stockholders and the Company shall promptly cooperate in preparing, and shall use reasonable
efforts to cause the Company to promptly file with the Securities and Exchange Commission (the
“SEC”), a registration statement on Form S-1 with respect to the issuance of common stock
of the Company (such Form S-1, and any amendments or supplements thereto, the “Form S-1”)
and to cause the shares to be approved for listing on the New York Stock Exchange or for quotation
on The Nasdaq Market, Inc. National Market (NASDAQ), subject to official notice of issuance.
Hitachi shall provide the Company with such accounting support as is commercially practicable and
reasonable as the predecessor of the Business. The terms of the Qualified Public Offering shall
be, unless agreed by Hitachi and Clarity, as recommended by the underwriters taking into account
market conditions.

     (c) Comments; Amendments. Each of the Stockholders and the Company shall use
reasonable best efforts to have the Form S-1 declared effective by the SEC and to keep the Form S-1
effective as long as is necessary to consummate the Qualified Public Offering. The Stockholders
and the Company agree that each shall, as promptly as practicable after receipt thereof, provide
the other parties copies of any written comments and advise the other parties of any oral comments,
with respect to the Form S-1 received from the SEC. The parties shall cooperate and provide the
other with a reasonable opportunity to review and comment on any amendment or supplement to the
Form S-1 prior to filing such with the SEC and will provide each other with a copy of all such
filings made with the SEC. Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by reference) to the Form S-1 shall be made
without the approval of the Stockholders, which approval shall not be unreasonably withheld or
delayed. Each of the Stockholders shall furnish all information concerning it and the holders of
its capital stock as may be reasonably requested in connection with preparation of the Form S-1.

     (d) Effectiveness, etc. Each party will advise the other parties, promptly after it
receives notice thereof, of the time when the Form S-1 has become effective, the issuance of any
stop order, the suspension of the qualification of the Common Stock of the Company for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Form S-1. If at any time
prior to such effective time any information relating to any Stockholder, or any of such
Stockholder’s respective Affiliates, officers, directors, partners or members, should be discovered
by such Stockholder, which information should be set forth in an amendment or supplement to the
Form S-1 (or any preliminary prospectus included therein) so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading,
the party which discovers such information shall promptly notify the
other parties hereto and, to the extent required by law, rules and regulations, an appropriate
amendment or supplement describing such information shall be promptly filed with the SEC and
disseminated to prospective purchasers of securities in the offering. The parties further agree to

15

 

prepare, execute and deliver such documents, financial statements and agreements, including without
limitation a customary lock-up agreement, as are required by relevant securities laws, the rules of
the applicable securities exchange, the underwriters or as are necessary or desirable to effect a
Qualified Public Offering.

     (e) Definition of Qualified Public Offering. For purposes of this Section,
“Qualified Public Offering” means a public offering of common stock of the Company, that is
to be firmly underwritten by any one or more of the internationally recognized investment banking
firms set forth on the list of investment banking firms referenced in Subsection (a),
pursuant to a registration statement on Form S-1 under the Securities Act, provided that
(i) the pre-money valuation of the total equity of the Company on a fully diluted basis is
reasonably expected to be, at the time of the investment bank’s proposal, at least equal to (A)
$1.786 billion during the three-year period immediately following the Closing or (B) $2.5 billion
thereafter and (ii) the aggregate gross proceeds to the Company are reasonably expected to be, at
the time of the investment bank’s proposal, not less than (A) $125 million (before deducting
underwriting discounts or commissions), during the three-year period immediately following the
Closing or (B) $175 million thereafter (before deducting underwriting discounts or commissions).

     (f) Abandonment of a Qualified Public Offering. Notwithstanding the foregoing
provisions of this Section 6, in the event that a registration initiated as a Qualified
Public Offering is not able to be consummated consistent with the requirements of, and at or above
the thresholds provided in, the definition of a Qualified Public Offering, then the Board may
determine to abandon the proposed Qualified Public Offering.

     (g) Holdback. Notwithstanding the foregoing provisions of this Section 6, the
Company may postpone for up to 120 days from the date of the IPO Request Notice either the filing
or the effectiveness of a registration statement for a Qualified Public Offering if the Board has
determined and promptly notifies the Stockholders in writing that in its reasonable good faith
judgment (i) a material event has occurred or is likely to occur with respect to the Company or one
of its Subsidiaries that has not been publicly disclosed and, if disclosed, could reasonably be
expected to materially and adversely affect the Company and its ability to consummate the Qualified
Public Offering or (ii) the Qualified Public Offering could reasonably be expected to interfere
with any financing, acquisition or corporate reorganization involving the Company. The Company may
not exercise its rights to delay a Qualified Public Offering hereunder more than once in any
twelve-month period.

     Section 7. Restrictions on Transfer of Stockholder Shares.

     (a) Transfer by Hitachi of Stockholder Shares. Subject to the terms of this
Section 7, Hitachi and its Permitted Transferees to which it transfers Stockholder Shares
shall not Transfer any interest in their respective Stockholder Shares to a Person other than to a
Permitted Transferee, until the earliest of (i) the fifth anniversary of the Closing Date
and (ii) the consummation of a Qualified Public Offering; provided that thereafter, Hitachi
and its Permitted Transferees shall have no restriction on the Transfer of their respective
Stockholder Shares other

16

 

than restrictions imposed by applicable laws or regulations and/or as
expressly set forth in this Agreement and such shares shall not be pledged.

     (b) Transfer by the Clarity Parties of Stockholder Shares. No Clarity Party shall
Transfer any interest in its Stockholder Shares to a Person other than to a Permitted Transferee,
except pursuant to the provisions of this Section 7 or Section 8, 9,
10 or 11 hereof or pursuant to a Public Sale.

     (c) Conversion of Class A Common. Notwithstanding anything contained to the contrary
herein, each Stockholder agrees that, prior to any Transfer of Common Stock to any Person (other
than a Transfer to Hitachi or to a Permitted Transferee), and as a condition to such Transfer, it
will convert such shares that are shares of Class A Common into shares of Class B Common pursuant
to the terms set forth in the Company’s Certificate of Incorporation.

     (d) Condition to Transfer. Prior to any Transfer of Stockholder Shares (other than
pursuant to a Public Sale or a Sale of the Company) to any Person that is consummated prior to a
Qualified Public Offering, and as a condition to such Transfer, the transferring holder of
Stockholder Shares shall cause the prospective transferee to be bound by this Agreement and (if
such Permitted Transferee was not previously a party to this Agreement) to execute and deliver to
the Company and the other Stockholders a counterpart of this Agreement. The restrictions contained
in this Agreement will continue to be applicable to each Stockholder Share after any Transfer, and
in the event of any Transfer of Stockholder Shares to any Person, such subsequent holder (other
than a Company) of Stockholder Shares shall be deemed to be a “Stockholder” for the
purposes of this Agreement upon such transferee’s execution and delivery of a counterpart to this
Agreement (if the transferee was not previously a party to this Agreement).

     (e) Violations. Any Transfer or attempted Transfer of any Stockholder Shares in
violation of any provision of this Agreement shall be void, and the Company shall not record such
Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of
such shares for any purpose.

     (f) Permitted Transfers. Except as set forth in Section 7(d) hereof, the
restrictions set forth in this Section 7 shall not apply with respect to any Transfer of
Stockholder Shares by any Stockholder to or among its Affiliates (collectively referred to herein
as “Permitted Transferees”); provided that the restrictions contained in this
Section 7 shall continue to be applicable to the Stockholder Shares after any such
Transfer. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this
Agreement by making one or more transfers to one or more Permitted Transferees and then disposing
of all or any portion of such party’s interest in any such Permitted Transferee. For purposes of
this Agreement, the Stockholders and the Company acknowledge and agree that, with respect to the Clarity Parties
or their Permitted Transferees, the term “Affiliates” shall be deemed to include (in addition to
Persons otherwise constituting “Affiliates” as defined in Section 14 hereof) any of the
investors or other owners of (i) any Clarity Party and/or its Affiliates and (ii) the predecessor
fund of

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Clarity and the Affiliates of such predecessor fund, and the Clarity Parties or such
Permitted Transferees shall be entitled to transfer the Stockholder Shares to such Affiliates
pursuant to the terms of this Section 7.

     Section 8. Transfer Prior to an Initial Public Offering.

     (a) During the period beginning on the third anniversary of the Closing and ending upon the
consummation of an Initial Public Offering, each Clarity Party may Transfer its Stockholder Shares
pursuant to the terms of this Section 8.

     (b) Prior to making any Transfer of any Stockholder Shares (other than a Public Sale), each
Clarity Party proposing to Transfer any of its Stockholder Shares shall deliver a written notice
(an “Offer Notice”) to the Company and Hitachi. The Offer Notice shall disclose in
reasonable detail the proposed number of Stockholder Shares to be transferred, the proposed terms
and conditions of the Transfer, the identity of the prospective transferee(s) (if known) and
valuation of such Stockholder Shares to be transferred.

     (c) If such Clarity Party is offering to sell all of its Stockholder Shares pursuant to the
Offer Notice, then the Company may elect to purchase all (but not less than all) of the
Stockholder Shares specified in the Offer Notice, at a price equal to the aggregate valuation
contained in the Offer Notice for such Stockholder Shares and on the terms specified in the Offer
Notice, by delivering written notice of such election to such Clarity Party and Hitachi as soon as
practical, but in any event within 15 Business Days after the date on which the Offer Notice is
received by the Company and Hitachi. If the Offer Notice covers less than all of such Clarity
Party’s Stockholder Shares or the Company has not elected to purchase all such Stockholder Shares
within such 15 Business-Day period, then Hitachi may elect to purchase all (but not less than all)
of the Stockholder Shares specified in the Offer Notice, at a price equal to the aggregate
valuation contained in the Offer Notice for such Stockholder Shares and on the terms specified in
the Offer Notice, by delivery of written notice of such election to such Clarity Party, the Company
and each other Stockholder (other than Hitachi) as soon as practical but in any event within 15
Business Days after receipt of the Offer Notice by the Company and Hitachi. If the Company or
Hitachi has elected to purchase Stockholder Shares from such Clarity Party, the transfer of such
shares shall be consummated as soon as practical after the delivery of its election to purchase to
such Clarity Party, but in any event within 15 Business Days after the expiration of such
15-Business-Day election period. If Hitachi and, if applicable, the Company have not elected to
purchase all of the Stockholder Shares within their election period, such Clarity Party may, within
60 days after the expiration of such election period and subject to the provisions of
subsection (d) below, transfer such Stockholder Shares to one or more third parties (other
than a Competitor) at a price no less than the aggregate valuation contained in the Offer
Notice for such Stockholder Shares and on other terms no more favorable to the transferees
thereof than offered to the Company and, if applicable, Hitachi in the Offer Notice. Any
Stockholder Shares not transferred within such 60 day period shall be subject to a new Offer Notice
and reoffered to the Company and Hitachi under this Section 8 prior to any subsequent
Transfer. The purchase price specified in any Offer Notice shall be payable solely in cash at the

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closing of the transaction or, at such Clarity Party’s election, in installments over time, and no
Stockholder Shares may be pledged.

     (d) The provisions of this Section 8 will not apply to Transfers of Stockholder Shares
by the Stockholders (i) to or among any of their Permitted Transferees or (ii) pursuant to
Sections 10 or 11 hereof.

     Section 9. Transfer Following an Initial Public Offering.

     (a) Following the consummation of an Initial Public Offering, each Clarity Party may Transfer
its Stockholder Shares subject to the terms of this Section 9.

     (b) If at any time following consummation of an Initial Public Offering any Clarity Party or
Clarity Parties propose to Transfer Stockholder Shares which represent more than 5% of the total
number of shares of Common Stock then outstanding (other than in a Public Sale), prior to making
any such Transfer, such Clarity Parties shall deliver an Offer Notice to the Company and Hitachi
via facsimile or electronic transmission with receipt confirmed. The Offer Notice shall disclose
in reasonable detail the proposed number of Stockholder Shares to be transferred, the proposed
terms and conditions of the Transfer and the identity of the prospective transferee(s) (if known).
If such Clarity Parties are offering to sell all of their Stockholder Shares pursuant to the Offer
Notice, then the Company may elect to purchase all (but not less than all) of the Stockholder
Shares specified in the Offer Notice at the price and on the terms specified therein by delivering
written notice of such election to such Clarity Parties and Hitachi as soon as practical but in any
event within five Business Days after the delivery of the Offer Notice to the Company and Hitachi
via facsimile or electronic transmission with receipt confirmed. If the Offer Notice covers less
than all of such Clarity Parties’ Stockholder Shares or the Company has not elected to purchase all
of the Stockholder Shares within such five-Business-Day period, then Hitachi may elect to purchase
all (but not less than all) of the Stockholder Shares specified in the Offer Notice at the price
and on the terms specified therein by delivering written notice of such election to such Clarity
Parties and the Company as soon as practical but in any event within five Business Days after such
delivery of the Offer Notice. If the Company or, if applicable, Hitachi has elected to purchase
Stockholder Shares from such Clarity Parties, the transfer of such shares shall be consummated as
soon as practical, but in any event within five Business Days after the expiration of the election
period of Hitachi and, if applicable, the Company. If Hitachi and, if applicable, the Company have
not elected to purchase all of the Stockholder Shares being offered, such Clarity Parties may,
within five Business Days after the expiration of such election period and subject to the
provisions of subsection (d) below, transfer such Stockholder Shares to one or more third
parties (other than a Competitor) at a price no less than the price per share specified in the Offer Notice and on
other terms no more favorable to the transferees thereof than offered to the Company and Hitachi in
the Offer Notice. Any Stockholder Shares not transferred within such five-Business-Day period
shall be reoffered to the Company and Hitachi under this Section 9 prior to any subsequent
Transfer. The purchase price specified in any Offer Notice shall be payable solely in cash at the

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closing of the transaction or, at such Clarity Party’s election, in installments over time, and no
Stockholder Shares may be pledged.

     (c) The provisions of Section 9(b) will not apply to Transfers of Stockholder Shares
by the Stockholders (i) to or among any of their Permitted Transferees or (ii) pursuant to
Sections 10 or 11 hereof.

     (d) The provisions of Sections 9(b) and 9(c) shall continue with respect to
each Stockholder Share until the earliest of (i) the date on which such Stockholder Share
has been transferred in a Public Sale, and (ii) the consummation of a Sale of the Company.

     Section 10. Call Option.

     (a) In the event that, on or after the fifth anniversary of the Closing, a proposed action of
the Company or any Subsidiary that is subject to Section 2(b) is submitted to the Board
for consideration and such action is both supported by the Hitachi Directors and rejected by the
Clarity director at two consecutive regularly scheduled Board meetings and, as a result, the Board
has affirmatively rejected the proposed action, then the Company shall have the right to purchase
all (but not less than all) of the Stockholder Shares held by the Clarity Parties by delivering
written notice to the Clarity Parties within 60 days of the date of such final rejection (the
“Call Date”); provided, however, Hitachi shall not be entitled to exercise
this right if such rejected action required any Clarity Party to extend capital to, or otherwise
incur liabilities (contingent or otherwise) on behalf or for the benefit of the Company or any of
its Subsidiaries, or to grant any liens on any of the property of any Clarity Party.

     (b) Upon delivery of the notice specified in subsection (a), the Company and the
Clarity Parties shall promptly determine the Call Price hereunder, and within 60 days after the
Call Price has been determined, the Company shall purchase and each Clarity Party shall sell such
Clarity Party’s Stockholder Shares for an amount equal to the Call Price of such Stockholder Shares
(in immediately available US funds) and the closing of such sale shall take place at a mutually
agreeable time and place. At the time of sale, each Clarity Party shall deliver to the Company
duly executed instruments transferring title to such Clarity Party’s Stockholder Shares free and
clear of all liens and encumbrances, against payment therefor by certified check payable to such
Clarity Party or by wire transfer of immediately available funds to an account designated by such
Clarity Party.

     (c) As used in this Section 10 the term “Call Price” shall mean an amount
equal to 105% of the aggregate Fair Market Value of the Stockholder Shares to be purchased pursuant
to this Section 10, which shall be determined as of the Call Date.

     (d) The Company may, in its sole discretion, assign to Hitachi its right to purchase
Stockholder Shares pursuant to this Section 10.

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     (e) The provisions of this Section 10 shall terminate upon the earliest of (i)
the consummation of a Sale of the Company and (ii) the consummation of an Initial Public Offering.

     Section 11. Purchase of the Clarity Parties’ Stockholder Shares by the
Company.

     (a) The Company shall have the obligation to purchase or otherwise acquire the Stockholder
Shares held of record by the Clarity Parties at such times, in such manner and for such
consideration as set forth below in this Section 11.

     (b) At any time during the two-year period beginning on the earliest to occur of (x) the third
anniversary of the Closing Date or (y) a Change of Control of Hitachi, Clarity may demand a
determination of the Fair Market Value (a “Determination Notice”) for purposes of this
Section 11. After the receipt of any Determination Notice, the Company and Clarity shall
promptly determine the Fair Market Value hereunder and within 30 days after the Fair Market Value
has been determined, Clarity may demand purchase of the Stockholder Shares held by the Clarity
Parties (the “Put Notice”), in whole or in part, at an amount equal to the Put Price by
notice to the Company; provided that the Clarity Parties shall be entitled to no more than
one demand pursuant to this Section 11. The Put Price shall be payable by the Company in
U.S. dollars to the Clarity Parties on the twentieth Business Day after receipt of the Put Notice
by wire transfer of immediately available funds to the account(s) designated by the Clarity Parties
upon surrender of certificates representing the Stockholder Shares that are the subject of such Put
Notice.

     (c) As used in this Section 11, the term “Put Price” shall mean an amount
equal to 95% of the aggregate Fair Market Value of the securities to be purchased pursuant to the
Put Notice, which shall be determined as of the date of the Determination Notice.

     (d) The Company may, in its sole discretion, assign to Hitachi its obligation to repurchase
Stockholder Shares pursuant to this Section 11.

     (e) Hitachi hereby irrevocably and unconditionally guarantees to the Clarity Parties the full
and punctual performance of the Company’s obligation to purchase Stockholder Shares from the
Clarity Parties under this Section 11, in case of the Company’s failure to perform such
obligations for any reason, including without limitation the Company being precluded from
performing its obligation as a matter of law or otherwise. Hitachi hereby agrees that its
obligations hereunder are separate and independent of the obligations of the Company and shall be
as primary obligor, and not as surety, and such guarantee shall be unaffected by any invalidity,
irregularity or unenforceability of this Section 11, any failure to enforce the provisions
of this Section 11, the discontinuance of Hitachi’s ownership interest in the Company
or any merger or reorganization or similar event or proceeding affecting the Company or any waiver,
modification, amendment, consent or indulgence granted to the Company with respect thereto by the
Clarity Parties, the recovery of any judgment against the Company or any action to enforce the
same, or any other circumstances which may otherwise constitute a legal or equitable defense

21

 

to or discharge of the obligations of a surety or a guarantor. Hitachi hereby waives any right to
require the Clarity Parties to first proceed against or attempt to collect or require performance
from the Company. This Guarantee is a guarantee of payment and performance and not of collection.
All payments hereunder shall be made free and clear of, and without deduction or withholding for or
on account of, any taxes, levies, fees, imposts, duties, expenses, commissions, withholdings,
assessments or other charges.

     (f) The provisions of this Section 11 shall terminate upon the earliest of (i)
the consummation of a Sale of the Company, (ii) the consummation of an Initial Public Offering and
(iii) the closing of the Company’s purchase of the Stockholder Shares of the Clarity Parties
pursuant to a Purchase Notice in accordance with the terms of this Section 11.

     Section 12. Nonsolicitation and Noncompetition.

     (a) During the period beginning on the Closing and ending at the earlier of (i) one year after
the date of an Initial Public Offering and (ii) such time as Hitachi and its Permitted Transferees
no longer hold at least a majority of the Voting Securities of the Company, Hitachi shall not, and
shall cause its Subsidiaries to not, participate or engage in or otherwise invest in, directly or
indirectly, any area of the world, the business of designing, developing, manufacturing (or having
manufactured), marketing, distributing or selling the following fiber optical products, in each
case which are dedicated to use in or intended to be used in telecommunications applications
(“Restricted Products”): transmitters, receivers, transceivers, laser diode modules, photo
diode modules, parallel optical interconnectors, lasers, photodiodes, modulators, amplifier
modules, optical switches and optical wave guides.

     (b) Notwithstanding anything in Section 12(a) to the contrary but subject to the
additional restrictions and obligations set forth in the SIC Letter Agreement:

     (i) Hitachi and its Affiliates shall be permitted to design, develop, manufacture (or
have manufactured), market, distribute and sell Restricted Products through its SIC;

     (ii) Hitachi and its Affiliates shall be permitted to design, develop, manufacture (or
have manufactured), market, distribute and sell any Restricted Products that Hitachi or any
Affiliate of Hitachi may be designing, developing, manufacturing (or having manufactured),
marketing, distributing or selling on the Closing Date;

     (iii) The provisions of this Section 12 shall not restrict in any manner the
activities of (A) Hitachi Cable, Ltd. and its subsidiaries, (B) any other present entities
which currently have publicly traded equity securities outstanding and which are listed on
Schedule 12(b)(iii) including their subsidiaries, (C) any future entities which may
issue or have publicly traded equity securities outstanding and which are not wholly owned
by Hitachi, and (D) any present or future joint ventures to which Hitachi or any of
its entities previously described in this clause (iii) is a party; and

22

 

     (iv) Hitachi and its Subsidiaries may hereafter purchase, or otherwise become
affiliated with or participate in, any entity engaged in the design, development,
manufacturing (or having manufactured), marketing, distributing and selling of any
Restricted Products unless the aggregate gross revenues of such enterprise for its most
recently completed fiscal year derived from such activities were greater than either (i) 15%
of the total gross revenues of such enterprise or (ii) $100 million (and Hitachi and its
Subsidiaries may hereafter acquire a controlling interest in any entity that is engaged in
such activities, even if the aggregate gross revenues of such enterprise for its most
recently completed fiscal year derived from such activities were greater than 15% of the
entity’s total gross revenues and/or $100 million, so long as Hitachi shall use reasonable
efforts to divest, as soon as reasonably practicable, a portion of its interest in such
enterprise relating to such activities such that the gross revenues test set forth above
would not be exceeded after giving effect to such divestiture).

     (c) The parties hereto recognize that the laws and public policies of various jurisdictions
may differ as to the validity and enforceability of covenants similar to those set forth in this
Section 12. Hitachi acknowledges that the provisions of this Section 12 are
reasonable and necessary to protect and preserve the business of the Company, that the Clarity
Parties entered into this Agreement and the Stock Purchase Agreement on the basis of this provision
and that the Company and the Clarity Parties would be irreparably damaged if Hitachi were to breach
the covenants set forth in this Section 12. It is the intention of the parties that the
provisions of this Section 12 be enforced to the fullest extent permissible under the laws
and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability
(or the modification to conform to such laws or policies) of any provisions of this Section
12 shall not render unenforceable, or impair, the remainder of the provisions of this
Section 12. Accordingly, if any provision of this Section 12 shall be determined
to be invalid or unenforceable, such invalidity or unenforceability shall be deemed to apply only
with respect to the operation of such provision in the particular jurisdiction in which such
determination is made and not with respect to any other provision or jurisdiction.

     (d) The parties hereto acknowledge and agree that any remedy at law for any breach of the
provisions of this Section 12 would be inadequate, and Hitachi hereby consents to the
granting by any court of an injunction or other equitable relief, without the necessity of actual
monetary loss being proved, in order that the breach or threatened breach of such provisions may be
effectively restrained.

     (e) Hitachi acknowledges that its current customary practice is to request the approval of the
general manager of any division or Subsidiary of Hitachi prior to soliciting or hiring any employee
of such division or Subsidiary, and Hitachi will use its best efforts to continue this customary
practice with respect to the Business on and after the Closing Date.

     (f) The parties acknowledge that nothing in this Section 12 is intended to restrict
Hitachi or any of its Affiliates from continuing or seeking to do business with any Person

23

 

who is a customer or supplier of the Company, subject to compliance the noncompetition provisions of this
Section 12 and the SIC Letter Agreement.

     Section 13. Legends.

     (a) Each certificate evidencing Stockholder Shares and each certificate issued in exchange for
or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially the following
form:

“The securities represented by this certificate are subject to a
Stockholders’ Agreement dated as of July 31, 2001 among the issuer
of such securities (the “Company”) and certain of the
Company’s stockholders, as amended and modified from time to time.
A copy of such Stockholders’ Agreement shall be furnished without
charge by the Company to the holder hereof upon written request.”

The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding as
of the date hereof. The legend set forth above shall be removed from the certificates evidencing
any shares which cease to be Stockholder Shares.

     (b) Until (a) the securities represented by such certificate are effectively registered under
the Securities Act or (b) the holder of such securities delivers to the Corporation a written
opinion of counsel in form and substance reasonably satisfactory to the Board to such holder to the
effect that such legend is no longer necessary under the Securities Act, the Corporation will cause
each certificate representing its securities to be stamped or otherwise imprinted with a legend to
substantially the following effect:

“The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and thus may not be
transferred unless so registered or unless an exemption from registration is
available.”

     Section 14. Definitions.

     “Affiliate” of any particular Person means any other Person controlling, controlled by
or under common control with such particular Person, where “control” means the possession, directly
or indirectly, of the power to direct the management and policies of a Person whether through the
ownership of voting securities, contract or otherwise.

     “Agreement” has the meaning set forth in the introductory paragraph as the same may be
amended from time to time.

24

 

     “Board” has the meaning set forth in the recitals.

     “Business” shall mean Hitachi’s fiber optic component business of designing,
developing, manufacturing, distributing, marketing and selling Products operated by Hitachi’s
Telecommunications Systems Division as of January 30, 2001, and as operated by OpNext Japan between
January 31, 2001 and the Closing Date.

     “Call Date” has the meaning set forth in Section 10(a).

     “Call Price” has the meaning set forth in Section 10(c).

     “Certificate of Incorporation” means the Company’s certificate of incorporation, as
amended from time to time.

     “Change in Consolidation GAAP” has the meaning set forth in Section 4(e).

     “Change of Control” means one or more related transactions in which, after giving
effect to such transaction(s), any Person or “group” (as such term is used for purposes of
Section 13(d) of the Securities Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of Stockholder Shares representing more than 50% of the total outstanding Voting
Securities.

     “Clarity” has the meaning set forth in the preamble. Except as provided in
Section 18, upon any transfer of all Stockholder Shares once held by Clarity, such
transferee (other than the Company or Hitachi) shall for all purposes be deemed to be “Clarity”
upon becoming a party hereto.

     “Clarity Party” and “Clarity Parties” have the meanings set forth in the
preamble. Upon any transfer of Stockholder Shares by a Clarity Party to any of its Permitted
Transferees, such transferee shall for all purposes be deemed to be a “Clarity Party” upon becoming
a party hereto.

     “Clarity Director” has the meaning set forth in Section 1(a)(ii)(B).

     “Class A Common” has the meaning set forth in the recitals.

     “Class B Common” means the Company’s Class B Common Stock, $0.01 per value per share.

     “Closing” has the meaning set forth in the Stock Purchase Agreement.

     “Closing Date” has the meaning set forth in the Stock Purchase Agreement.

25

 

     “Collateral Agreements” shall have the meaning set forth in the Stock Purchase
Agreement.

     “Common Stock” means, collectively, the Class A Common, the Class B Common and any
other class or series of common stock issued by the Company.

     “Company” has the meaning set forth in the preamble.

     “Competitor” means any Person or an Affiliate of any Person, directly or indirectly
actively engaged in the design, development, manufacturing (or having manufactured), marketing,
distribution or sale of Restricted Products with annual revenues related to such activities of at
least $100 million.

     “Determination Notice” has the meaning set forth in Section 11(b).

     “Dilutive Transaction” has the meaning set forth in Section 4(e).

     “Fair Market Value” means, with respect to a Stockholder Share, the fair market value
thereof as of the date of valuation, based upon an orderly sale to a willing, unaffiliated buyer in
an arm’s length transaction. Fair Market Value shall be determined as follows:

     (a) A representative of Clarity and a representative of Hitachi shall first attempt, acting in
good faith and using diligent efforts, to agree on the Fair Market Value.

     (b) If the representative of Clarity and the representative of Hitachi fail to agree on the
Fair Market Value within 20 days, each shall submit their respective determination of the Fair
Market Value to a separately selected internationally recognized investment banking firm.

     (c) The investment banking firms shall be instructed to determine the Fair Market Value (as a
firm number and not a range) within twenty (20) days of their respective engagements. In the event
that the higher of these two values is not more than 130% of the lower, the average of the two
values shall be the Fair Market Value. In the event that the higher value is more than 130% of the
lower, the representative of Hitachi and the representative of Clarity shall attempt in good faith
to reach an agreement concerning the Fair Market Value. If they cannot reach agreement after a
period not to exceed five (5) days, the two investment banking firms shall jointly select within
five (5) days a third internationally recognized
investment banking firm. The third investment bank shall be instructed to determine its
estimation of the Fair Market Value (as a firm number and not a range) within twenty (20) days of
its engagement, and the Fair Market Value shall be an average calculated as (x) the sum of two (2)
of the three (3) values determined by the investment banking firms which are closest in number to
each other (y) divided by two (2); provided that if one of the three values is equidistant
from the other two values, then the Fair Market Value shall be such equidistant value.

26

 

     “Form S-1” has the meaning set forth in Section 6(b).

     “Hitachi” has the meaning set forth in the preamble. Except as provided in
Section 18, upon any Transfer of all Stockholder Shares once held by Hitachi, such
Transferee (other than the Company or the Clarity Parties) shall for all purposes be deemed to be
“Hitachi” upon becoming a party hereto.

     “Hitachi Directors” has the meaning set forth in Section 1(a)(ii)(A).

     “Indebtedness” means at a particular time, without duplication, (i) any indebtedness
for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money,
(ii) any indebtedness evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other
current liabilities incurred in the ordinary course of business), (iv) any commitment by which a
Person assures a creditor against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a
Person (including, without limitation, guarantees in the form of an agreement to repurchase or
reimburse), (vi) any obligations under capital leases with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations
a Person assures a creditor against loss, (vii) any indebtedness secured by a Lien on a Person’s
assets and (viii) any unsatisfied obligation for “withdrawal liability” to a “multiemployer plan”
as such terms are defined under ERISA.

     “Initial Public Offering” means the first sale in an underwritten public offering
registered under the Securities Act of shares of the Company’s Common Stock.

     “Intellectual Property Rights” means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade names, logos and
corporate names and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable
works and registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software, data, data bases
and documentation thereof, (vi) trade secrets and other confidential information (including,
without limitation, ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium).

     “Investment” as applied to any Person means (i) any direct or indirect purchase or
other acquisition by such Person of any notes, obligations, instruments, stock, securities or

27

 

ownership interest (including partnership interests and joint venture interests) of any other
Person and (ii) any capital contribution by such Person to any other Person.

     “IPO Request Notice” has the meaning set forth in Section 6(a).

     “Japanese GAAP” has the meaning set forth in Section 4(e).

     “Liens” means any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (including, without limitation, any conditional sale or other title retention agreement or
lease in the nature thereof), any sale of receivables with recourse against the Company, any
Subsidiary or any Affiliate, any filing or agreement to file a financing statement as debtor under
the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party
of property leased to the Company or any Subsidiaries under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the ordinary course of business).

     “Management Director” has the meaning set forth in Section 1(a)(ii)(C).

     “Observers” means Stephen P. Rader and Fumio Uehara or such other persons, who shall
be reasonably acceptable to Hitachi as Clarity may designate from time to time.

     “Offer Notice” has the meaning set forth in Section 8(b).

     “OpNext Japan” has the meaning set forth in the recitals.

     “Other Business” has the meaning set forth in Section 5.

     “Permitted Investment” means (a) reasonable advances to employees of less than
$100,000 in the ordinary course of business, and (b) Investments having a stated maturity no
greater than one year from the date of the Company makes such Investment in (1) obligations of the
United States government or any agency thereof or obligations guaranteed by the United States
government, (2) certificates of deposit of commercial banks having combined capital and surplus of
at least $50 million or (3) commercial paper with a rating of at least “Prime-1” by Moody’s
Investors Service, Inc.

     “Permitted Liens” means:

          (i) tax liens with respect to taxes not yet due and payable or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves have been established in
accordance with generally accepted accounting principles, consistently applied;

28

 

          (ii) deposits or pledges made in connection with, or to secure payment of, utilities or
similar services, workers’ compensation, unemployment insurance, old age pensions or other social
security obligations;

          (iii) purchase money security interests in any property acquired by the Company or any
Subsidiary to the extent permitted by this Agreement;

          (iv) interests or title of a lessor under any lease permitted by this Agreement;

          (v) mechanics’, materialmen’s or contractors’ liens or encumbrances or any similar lien or
restriction for amounts not yet due and payable;

          (vi) easements, rights-of-way, restrictions and other similar charges and encumbrances not
interfering with the ordinary conduct of the business of the Company and its Subsidiaries or
detracting from the value of the assets of the Company and its Subsidiaries;

          (vii) liens outstanding on the date hereof which secure Indebtedness and which are described
in the schedules to this Agreement; and

          (viii) liens assumed by the Company or a Subsidiary in connection with the other transactions
contemplated by this Agreement.

     “Permitted Transferee” has the meaning set forth in Section 7(f) hereof.

     “Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political subdivision thereof.

     “Products” shall mean, collectively, transmitters, receivers, transceivers, laser
diode modules, photo diode modules, parallel optical interconnectors, lasers, photodiodes,
modulators, amplifier modules, optical switches and optical wave guides.

     “Public Sale” means any sale of Stockholder Shares to the public pursuant to an
offering registered under the Securities Act or, after the consummation of an Initial Public
Offering, to the public through a broker, dealer or market maker pursuant to the provisions of Rule
144 adopted under the Securities Act.

     “Put Notice” has the meaning set forth in Section 11(b).

     “Put Price” shall have the meaning set forth in the Stock Purchase Agreement.

     “Qualified Public Offering” has the meaning set forth in Section
6(e).

29

 

     “Restricted Products” has the meaning set forth in Section 12(a).

     “Sale of the Company” means the sale of the Company pursuant to which such party or
parties acquire (i) capital stock of the Company possessing the voting power under normal
circumstances to elect a majority of the Company’s board of directors (whether by merger,
consolidation or sale or transfer of the Company’s capital stock), excluding a sale by Hitachi of
stock which represents such a majority interest or (ii) all or substantially all of the Company’s
assets determined on a consolidated basis.

     “SEC” has the meaning set forth in Section 6(b).

     “Securities Act” means the Securities Act of 1933, as amended, or any similar federal
law then in force.

     “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.

     “SIC” means the Semiconductor & Integrated Circuits group of Hitachi, Ltd., which is
presently engaged in the development, design, engineering, manufacture and sale of integrated
circuits, and any successor thereto so long as it (or they) remain an organizational component of
Hitachi, Ltd. and remain responsible for such activities.

     “SIC Letter Agreement” means the Letter Agreement dated April 18, 2001 between
Clarity, Hitachi and the Company attached hereto as Exhibit A.

     “Stockholder Shares” means (i) any Common Stock purchased or otherwise acquired by any
Stockholder, (ii) any capital stock or other equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of any class or series of capital
stock of the Company held by a Stockholder. As to any particular shares constituting Stockholder
Shares, such shares shall cease to be Stockholder Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the registration statement
covering them or (y) sold to the public through a broker, dealer or market maker pursuant to Rule
144 (or any similar provision then in force) under the Securities Act.

     “Stockholders” has the meaning set forth in the preamble.

     “Stock Purchase Agreement” means the Amended and Restated Stock Purchase Agreement
dated as of the date hereof by and among the Company, Hitachi and the Clarity Parties, as the same
may be amended from time to time.

30

 

     “Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership, association or other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the limited liability company,
partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other business entity if such
Person or Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the managing director
or general partner of such limited liability company, partnership, association or other business
entity.

     “Transfer” means, with respect to any Stockholder Share, the sale, transfer,
assignment, pledge or other disposition (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law) of such share.

     “US GAAP” has the meaning set forth in Section 4(e).

     “Voting Securities” means the equity securities of the Company which possess the right
to vote on all matters submitted to the stockholders of the Company generally.

     “Wholly Owned Subsidiary” means, with respect to any Person, a Subsidiary of which all
of the outstanding capital stock or other ownership interests are owned by such Person or another
Wholly Owned Subsidiary of such Person.

     Section 15. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be effective against the
Company or the Stockholders unless such modification, amendment or waiver is approved in writing by
the Company, Hitachi and the Clarity Parties. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.

     Section 16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or affect the
validity, legality or enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced

31

 

in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.

     Section 17. Entire Agreement. Except as otherwise expressly set forth herein
and in the SIC Letter Agreement, this Agreement embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way. Notwithstanding the foregoing, this
Agreement shall not become effective and binding unless and until the Closing occurs.

     Section 18. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the Company and its
successors and permitted assigns and the Stockholders and any subsequent holders of Stockholder
Shares and the respective successors and permitted assigns of each of them, so long as they hold
Stockholder Shares; provided that (a) the rights of Clarity under Section 1 and
Section 2(b) hereof may not be assigned, in each case without the prior written approval of
Hitachi, (b) the rights of Hitachi under Sections 1, 8, 9, 10, and
11 hereof may not be assigned to a Person who is not a Permitted Transferee, in each case
without the prior written approval of Clarity and (c) the rights of Hitachi under Section 4
and the obligations of Hitachi under Section 11(e) may not be assigned to any Person
(including a Permitted Transferee), in each case without the prior written approval of Clarity.

     Section 19. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together shall constitute
one and the same agreement.

     Section 20. Remedies. The Company and the Stockholders shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company and any Stockholder may in its sole
discretion apply to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.

     Section 21. Notices. Any notice provided for in this Agreement shall be in
writing and, unless otherwise specified herein, shall be either personally delivered, or mailed
first class mail (postage prepaid) or sent by reputable overnight courier service (charges prepaid)
to the parties at the address set forth below or at such address or
to the attention of such other person as the recipient party has specified by prior written
notice to the sending party. Notices shall be deemed to have been given hereunder when delivered
personally, five days after deposit in the U.S. mail or Japan mail and one day after deposit with
a reputable overnight courier service. The addresses for the Company and the Stockholders are:

32

 

If to the Company:

	 	 	 	 	 	 	 	 	 
	 	 	OpNext, Inc.
	 	 	246 Industrial Way
	 	 	Eatontown, NJ 07724
	 	 	Attention:	 	Board of Directors
	 	 	 	 	 	 	Chief Executive Officer
	 
	 	 	 	 	 	 	 	 
	 	 	with copies, which will not constitute notice to the Company, to:
	 
	 	 	 	 	 	 	 	 
	 	 	Hitachi, Ltd.
	 	 	6, Kanda-Surugadai 4-chome
	 	 	Chiyoda-ku
	 	 	Tokyo, 101-8010 Japan
	 	 	Attention:	 	Senior Group Executive, Information & Telecommunication
	 	 	 	 	Systems Group
	 
	 	 	 	 	 	 	 	 
	 

	 	and	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Clarity Partners, L.P.
	 	 	100 North Crescent Drive
	 	 	Beverly Hills, CA 90210-5403
	 	 	Attention:	 	 	 	David Lee

	 	 	 	 	 	 	 	 	 
	If to Hitachi:
	 
	 	 	 	 	 	 	 	 
	 	 	Hitachi, Ltd.
	 	 	6, Kanda-Surugadai 4-chome
	 	 	Chiyoda-ku
	 	 	Tokyo, 101-8010 Japan
	 	 	Attention:	 	Senior Group Executive, Information & Telecommunication
	 	 	 	 	Systems Group
	 
	 	 	 	 	 	 	 	 
	 	 	with a copy, which will not constitute notice to Hitachi, to:
	 
	 	 	 	 	 	 	 	 
	 	 	Kirkland & Ellis
	 	 	200 East Randolph Drive
	 	 	Chicago, IL 60601
	 	 	Attention:	 	William A. Streff, Jr., Esq.
	 	 	 	 	Michael G. Timmers, Esq.

33

 

If to any Clarity Party:

	 	 	 	 	 	 	 	 	 
	 	 	c/o Clarity Partners, L.P.
	 	 	100 North Crescent Drive
	 	 	Beverly Hills, CA 90210-5403
	 	 	Attention: David Lee
	 
	 	 	 	 	 	 	 	 
	 	 	with a copy to, which will not constitute notice to such Clarity Party, to:
	 
	 	 	 	 	 	 	 	 
	 	 	Irell & Manella LLP
	 	 	1800 Avenue of the Stars, Suite 900
	 	 	Los Angeles, CA 90067
	 	 	Attention:	 	Richard L. Bernacchi, Esq.
	 	 	 	 	Ian C. Wiener, Esq.

     Section 22. Governing Law; Arbitration.

     (a) The corporate law of the State of Delaware shall govern all issues and questions
concerning the relative rights of the Company and its stockholders. All other issues and questions
concerning the construction, validity, interpretation and enforceability of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of
the State of Delaware, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware. In furtherance of
the foregoing, the internal law of the State of Delaware shall control the interpretation and
construction of this Agreement (and all schedules and exhibits hereto), even though under that
jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.

     (b) The parties agree that subject to requirements of Section 2(d) and except for (A)
determination of Fair Market Value, (B) the specific remedy set forth in Section 10(a)
relating to disputed Board action, and (C) actions seeking injunctive relief, all disputes arising
under or related to this Agreement shall be resolved solely by binding arbitration and that the
dispute resolution provisions of this agreement are exclusive. An arbitration may be initiated by
any Clarity Party or Hitachi (or its successors or permitted assigns) on behalf of itself and its
Affiliates by written notice to the other, which notice shall specify in reasonable detail the
dispute being submitted to arbitration. The arbitration provided for in this agreement shall take
place (i) if the issues of such arbitration primarily relate to the U.S. operations of the Company,
in New York, New York, or such other city as Clarity reasonably determines would minimize the
disruption to the Company’s operations caused by the arbitration and the Company’s expenses related
to such arbitration, (ii) if the issues of such arbitration primarily relate to the Japanese
operations of the Company, in Tokyo, Japan, or (iii) if the issues do not primarily relate to the
U.S. or Japanese operations of the Company, in the city in which the Company has its headquarters
(or, if such headquarters are not located in a city, the city closest thereto), or such

34

 

other place as determined by the arbitrators to minimize the disruption to the Company’s operations caused by
the arbitration and the Company’s expenses related to such arbitration. The arbitration
proceedings shall be in English and in accordance with the rules of the American Arbitration
Association. The arbitration shall be held before and decided by a panel of three neutral
arbitrators, with Hitachi and Clarity each selecting one arbitrator and the two selected
arbitrators choosing a third, neutral arbitrator. In no event shall any party be entitled to
receive, and the arbitrators shall not be empowered to award, punitive or exemplary damages. In
addition, the arbitrators shall not have the authority to hear or determine any claim seeking
primarily injunctive relief, or to issue any remedy in the nature of injunctive relief. The
decision of the arbitrators may be confirmed in a court if the losing party does not act in
accordance with the arbitral award within 45 days of the date of such award, and shall be final and
not be appealable for any reason.

     (c) Unless otherwise determined by the arbitrators, the fees and expenses of the parties
incurred in connection with, or defending, the arbitration (including, without limitation, all
attorneys’ fees and costs), the arbitrators and any other third party costs associated with the
arbitration (e.g., court reporters, etc.) shall be borne in full by the party that does not prevail
in the arbitration.

     Section 23. Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday in either New York,
New York or Tokyo, Japan, the time period shall automatically be extended to the business day
immediately following such Saturday, Sunday or legal holiday.

     Section 24. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this Agreement.

     Section 25. Confidentiality.

     (a) With respect to any information furnished to a Stockholder pursuant to this Agreement
which the Stockholder reasonably understands to be proprietary or confidential in nature, the
Stockholder shall maintain the confidentiality of all such information in accordance with such
Stockholder’s policies for the protection of its own nonpublic information.

     (b) The limitations set forth in this Section 25 shall not apply with respect to the
disclosure of any information (A) to such Stockholder’s employees, auditors, counsel or other
professional advisors, to Affiliates or to another Stockholder, if the disclosing Stockholder or
any of its Affiliates, in its sole discretion, determines that it is reasonably necessary for such
Person to have access to such information, provided that any such Person agrees to be bound
by the provisions of this Section 25 to the extent as such Stockholder, (B) as has become
or previously was generally available to the public other than by reason of a breach of this
Section 25 by such Stockholder or has become available to such Stockholder on a
non-confidential basis, (C) as may be required or appropriate in any report, statement or testimony
submitted to any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such

35

 

Stockholder (it being understood that, to the extent practicable, such
Stockholder shall provide the Company prompt notice to any such event and cooperate in good faith
to enable the Company to participate to protect its interest in such confidential information), (D)
as may be required or appropriate in response to any summons or subpoena or in connection with any
litigation, (E) in order to comply with any law, order, regulation or ruling applicable to such
Stockholder, and (F) to any prospective transferee in connection with any contemplated sale or
transfer of any of Company’s securities held by such Stockholder; provided that such
prospective transferee agrees to be bound by the provisions of this Section 25 to the same
extent as such Stockholder.

     (c) Notwithstanding the foregoing, the parties to this Agreement acknowledge that they are
subject to nondisclosure obligations under the other Collateral Agreements, and agree that no party
may obtain or disclose any information hereunder in order to avoid such party’s obligations under
such other Collateral Agreements.

     Section 26. Delivery by Facsimile. This Agreement, the agreements referred to
herein, and each other agreement or instrument entered into in connection herewith or therewith or
contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and
delivered by means of a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same binding legal effect as
if it were the original signed version thereof delivered in person. At the request of any party
hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute
original forms thereof and deliver them to all other parties. No party hereto or to any such
agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the
fact that any signature or agreement or instrument was transmitted or communicated through the use
of a facsimile machine as a defense to the enforceability of a contract and each such party forever
waives any such defense.

     Section 27. Payments in U.S. Dollars. All payments to be made by the parties
pursuant to the terms of this Agreement shall be in United States dollars.

     Section 28. Submission to Jurisdiction; Waivers. With respect to disputes not
required to be submitted to arbitration hereunder (including actions for injunctive relief or for
confirmation or enforcement of an arbitration award), each party to this Agreement hereby
irrevocably and unconditionally:

     (a) submits for itself and its property in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of Delaware, the courts of the United
States of America situated in Delaware and appellate courts from any thereof;

     (b) consents that any such action or proceeding may be brought in such courts, and waives any
objection that it may now or hereafter have to the venue of any such

36

 

action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

     (c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth herein or at such other address of which the agent
shall have been notified pursuant thereto, to the extent permitted by law; and

     (d) agrees that nothing contained herein shall affect the right to effect service of process
in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.

*     *     *     *

37

 

SIGNATURE PAGE TO STOCKHOLDERS’ AGREEMENT

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first
above written.

	 	 	 	 	 	 	 
	 	 	OPNEXT, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Harry L. Bosco	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	Harry L. Bosco
	 	 	 	 	Chief Executive Officer and President
	 
	 	 	 	 	 	 
	 	 	CLARITY PARTNERS, L.P.
	 
	 	 	 	 	 	 
	 	 	By:	 	CLARITY GENPAR, LLC,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	David Lee
	 	 	 	 	Managing Member
	 
	 	 	 	 	 	 
	 	 	CLARITY OPNEXT HOLDINGS I, LLC
	 	 	By:	 	Clarity Partners, L.P., its Manager
	 
	 	 	 	 	 	 
	 	 	By:	 	CLARITY GENPAR, LLC,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	David Lee
	 	 	 	 	Managing Member
	 
	 	 	 	 	 	 
	 	 	CLARITY OPNEXT HOLDINGS II, LLC
	 	 	By:	 	Clarity Partners, L.P., its Manager
	 
	 	 	 	 	 	 
	 	 	By:	 	CLARITY GENPAR, LLC,
	 	 	 	 	its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	David Lee
	 	 	 	 	Managing Member
	 
	 	 	 	 	 	 
	 	 	HITACHI, LTD.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Masaaki Hayashi	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	Masaaki Hayashi
	 	 	 	 	Senior Vice President and Director
	 	 	 	 	Senior Group Executive,
	 	 	 	 	Information & Telecommunication Systems Group

 

 

Annex A

Class A Common Stock of the Clarity Parties

	 	 	 	 	 
	Name	 	Shares of Class A Common Stock	 
	Clarity Partners, L.P.
	 	 	12,648,298	 
	Clarity OpNext Holdings I, LLC
	 	 	22,500,000	 
	Clarity OpNext Holdings II, LLC
	 	 	9,851,702	 

 

 

Schedule 6(a)

List of Eligible Underwriters

	 	 	 
	1.

	 	ABN AMRO Securities
	2.

	 	Bank of America Securities (Montgomery Division)
	3.

	 	Bear Stearns
	4.

	 	CIBC World Markets
	5.

	 	Credit Lyonnais
	6.

	 	Credit Suisse First Boston
	7.

	 	Daiwa Securities
	8.

	 	Deutsche Banc Alex Brown
	9.

	 	Dresdner Kleinwort Benson
	10.

	 	First Union Securities
	11.

	 	Goldman Sachs & Co.
	12.

	 	HSBC
	13.

	 	ING Baring
	14.

	 	JP Morgan Securities
	15.

	 	Lehman Brothers Inc.
	16.

	 	Merrill Lynch & Co.
	17.

	 	Morgan Stanley Dean Witter
	18.

	 	Nomura Securities
	19.

	 	Prudential Securities
	20.

	 	Robertson Stephens
	21.

	 	Salomon Smith Barney
	22.

	 	Schroder Securities
	23.

	 	SG Cowen
	24.

	 	Societe General Securities
	25.

	 	Thomas Weisel Partners
	26.

	 	UBS Warburg (Paine Webber)
	27.

	 	Wachovia

 

 

Schedule 12(b)(iii)

Entities With Publicly Traded Equity Securities

Hitachi Cable, Ltd.

Hitachi AIC Inc.

Hitachi Business Solution Co., Ltd.

Hitachi Chemical Co., Ltd.

Hitachi Construction Machinery Co., Ltd.

Hitachi Credit (U.K.) PLC

Hitachi Credit Corporation

Hitachi Denshi, Ltd.

Hitachi Electronics Engineering Co., Ltd.

Hitachi Information Systems, Ltd.

Hitachi Kiden Kogyo, Ltd.

Hitachi Maxell, Ltd.

Hitachi Medical Corporation

Hitachi Metals Techno, Ltd.

Hitachi Metals, Ltd.

Hitachi Plant Engineering & Construction Co., Ltd.

Hitachi Power Metals Co., Ltd.

Hitachi Software Engineering Co., Ltd.

Hitachi Tool Engineering, Ltd.

Hitachi Transport Systems, Ltd.

Japan Servo Co., Ltd.

Nissei Sangyo Co., Ltd.

Shin-kobe Electronic Machinery Co., Ltd.

Hanashima Electric Wire Co., Ltd.

Hitachi Plant Construction & Service

Tonichi Kyosan Cable, Ltd.

 

 

FIRST AMENDMENT TO STOCKHOLDERS’ AGREEMENT

     THIS FIRST AMENDMENT TO STOCKHOLDERS’ AGREEMENT (this “Amendment”) is entered into as
of October 1, 2002, by and among OpNext, Inc., a Delaware corporation (the “Company”),
Hitachi Ltd., a corporation organized under the laws of Japan (“Hitachi”), Clarity
Partners, L.P., a Delaware limited partnership (“Clarity”), Clarity OpNext Holdings I, LLC,
 a Delaware limited liability company (“Clarity Holdings I”) and Clarity OpNext Holdings
II LLC, a Delaware limited liability company (“Clarity Holdings II”).

W I T N E S S E T H:

     WHEREAS, the parties hereto have entered into that certain Stockholders’ Agreement, dated as
of July 31, 2001 (as amended, supplemented or otherwise modified prior to the date hereof, the
“Existing Agreement”; and as amended by this Amendment and as the same may be further
amended, supplemented or otherwise modified from time to time, the “Agreement”);

     WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meaning
ascribed to them in the Existing Agreement;

     WHEREAS, the Company and Hitachi have entered into that certain Stock Purchase Agreement,
dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the
“Opto-Device Stock Purchase Agreement”), pursuant to which OpNext has agreed, subject to
the terms and conditions stated therein, to purchase all of the outstanding capital stock of Opto
Device, Ltd., a corporation organized under the laws of Japan (“Opto-Device”); and

     WHEREAS, in connection with the Company’s purchase of the capital stock of Opto-Device and the
other transactions contemplated by the Opto-Device Stock Purchase Agreement, the parties wish to
amend certain terms of the Existing Agreement as set forth herein;

     NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to amend the Existing Agreement as follows:

     Section 1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning
ascribed to them in the Existing Agreement.

     Section 2. Amendment to Section 12 of the Existing Agreement. Section 12 of the Existing Agreement is hereby amended by deleting said Section in its
entirety and by substituting, in lieu thereof, the following:

     “Section 12. Nonsolicitation and Noncompetition.

     (a) During the period beginning on the Closing and ending at the earlier of (i) one year after
the date of an Initial Public Offering and (ii) such time as Hitachi and its Permitted Transferees
no longer hold at least a majority of the Voting Securities of the Company

1

 

(the “Non-Competition Period”), Hitachi shall not, and shall cause its Subsidiaries to not,
participate or engage in or otherwise invest in, directly or indirectly, any area of the world, the
business of designing, developing, manufacturing (or having manufactured), marketing, distributing
or selling the following fiber optical products, in each case which are dedicated to use in or
intended to be used in telecommunications applications (“Restricted Products”): transmitters,
receivers, transceivers, laser diodes, laser diode modules, photo diode modules, parallel optical
interconnectors, lasers, photodiodes, modulators, amplifiers modules, optical switches, infra-red
emitting diodes and optical wave guides.

     (b) During the Non-Competition Period, Hitachi shall not, and shall cause its Wholly-Owned
Subsidiaries to not, participate or engage in or otherwise invest in, directly or indirectly, any
area of the world, the business of designing, developing, manufacturing (or having manufactured),
marketing, distributing or selling Restricted Products, including licensing its Intellectual
Property related to Restricted Products to third parties except (i) as part of a global cross
license and (ii) any other form of agreement so long as such agreement does not adversely affect
the ongoing business of the Company, other than on behalf of the Company and its Subsidiaries as a
sales agent or distributor.

     (c) Notwithstanding anything in Section 12(a) and Section 12(b) to the
contrary:

     (i) Intentionally omitted;

     (ii) Intentionally omitted;

     (iii) The provisions of this Section 12 shall not restrict in any
manner the activities of (A) Hitachi Cable, Ltd. and its subsidiaries, (B) any other
present entities which currently have publicly traded equity securities outstanding
and which are listed on Schedule 12(b)(iii) including their subsidiaries,
(C) any future entities which may issue or have publicly traded equity securities
outstanding and which are not wholly owned by Hitachi, and (D) any present or future
joint ventures to which Hitachi or any of its entities previously described in this
clause (iii) is a party; and

     (iv) Hitachi and its Subsidiaries may hereafter purchase, or otherwise become
affiliated with or participate in, any entity engaged in the design, development,
manufacturing (or having manufactured), marketing, distributing and selling of any
Restricted Products unless the aggregate gross revenues of such enterprise for its
most recently completed fiscal year derived from such activities were greater than
either (i) 15% of the total gross revenues of such enterprise or (ii) $100 million
(and Hitachi and its Subsidiaries may hereafter acquire a controlling interest in
any entity that is engaged in such activities, even if the aggregate gross revenues
of such enterprise for its most recently completed fiscal year derived from such
activities were greater than 15% of the entity’s total gross
revenues and/or $100 million, so long as Hitachi shall use reasonable efforts
to divest, as soon as reasonably practicable, a portion of its interest in such
enterprise relating to such activities such that the gross revenues test set forth
above would not be exceeded after giving effect to such divestiture).

2

 

     (d) The parties hereto recognize that the laws and public policies of various jurisdictions
may differ as to the validity and enforceability of covenants similar to those set forth in this
Section 12. Hitachi acknowledges that the provisions of this Section 12 are
reasonable and necessary to protect and preserve the business of the Company, that the Clarity
Parties entered into this Agreement and the Stock Purchase Agreement on the basis of this provision
and that the Company and the Clarity Parties would be irreparably damaged if Hitachi were to breach
the covenants set forth in this Section 12. It is the intention of the parties that the
provisions of this Section 12 be enforced to the fullest extent permissible under the laws
and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability
(or the modification to conform to such laws or policies) of any provisions of this Section
12 shall not render unenforceable, or impair, the remainder of the provisions of this
Section 12. Accordingly, if any provision of this Section 12 shall be determined
to be invalid or unenforceable, such invalidity or unenforceability shall be deemed to apply only
with respect to the operation of such provision in the particular jurisdiction in which such
determination is made and not with respect to any other provision or jurisdiction.

     (e) The parties hereto acknowledge and agree that any remedy at law for any breach of the
provisions of this Section 12 would be inadequate, and Hitachi hereby consents to the
granting by any court of an injunction or other equitable relief, without the necessity of actual
monetary loss being proved, in order that the breach or threatened breach of such provisions may be
effectively restrained.

     (f) Hitachi acknowledges that its current customary practice is to request the approval of the
general manager of any division or Subsidiary of Hitachi prior to soliciting or hiring any employee
of such division or Subsidiary, and Hitachi will use its best efforts to continue this customary
practice with respect to the Business on and after the Closing Date.

     (g) The parties acknowledge that nothing in this Section 12 is intended to restrict
Hitachi or any of its Affiliates from continuing or seeking to do business with any Person who is a
customer or supplier of the Company, subject to compliance the noncompetition provisions of this
Section 12.”

     Section 3. References to Agreement. All references in the Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or
words of like import shall mean and be a reference to the Agreement as amended and modified hereby.

     Section 4. Effectiveness. This Amendment shall become effective as of the date first written above.

     Section 5. Continuing Validity of Existing Agreements. (a) Except as specifically amended above, the Existing Agreement shall remain in full
force and effect and is hereby ratified and confirmed.

     (b) The parties agree that the SIC Letter Agreement is superceded in all respects by this
Amendment.

     Section 6. Governing Law. This Amendment shall be governed by the laws of the State of Delaware.

3

 

     Section 7. Counterparts. This Amendment may be executed simultaneously in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     Section 8. April 18th Side Letter. This Amendment supercedes, in its entirety, the SIC Letter Agreement, and such SIC Letter
Agreement shall no longer be of any force and effect.

4

 

SIGNATURE PAGE TO FIRST AMENDMENT TO STOCKHOLDERS’ AGREEMENT

     IN WITNESS WHEREOF, the parties have executed this First Amendment to Stockholders’
Agreement as of the date first written above.

	 	 	 
	OPNEXT, INC.
	 
	 	 
	By:

	 	/s/ Harry L. Bosco
	 

	 	 
	 

	 	Harry L. Bosco
	 

	 	Chief Executive Officer and President
	 
	 	 
	CLARITY PARTNERS, L.P.
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS I, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS II, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member

 

	 	 	 
	HITACHI, LTD.
	 
	 	 
	By:

	 	/s/ Masaaki Hayashi
	 

	 	 
	 

	 	Masaaki Hayashi
	 

	 	Senior Vice President and Director

SIGNATURE PAGE TO FIRST AMENDMENT TO STOCKHOLDERS’ AGREEMENT (CONT.)

 

 

2005 AMENDMENT

TO

THE STOCKHOLDERS AGREEMENT BETWEEN OPNEXT, INC.

AND EACH OF HITACHI, LTD., CLARITY PARTNERS, L.P., CLARITY OPNEXT

HOLDINGS I, LLC AND CLARITY OPNEXT HOLDINGS II, LLC

     THIS SECOND AMENDMENT (the “Amendment”) to the Stockholders Agreement is made as
of June 30, 2005, by and among OpNext, Inc., a corporation organized and existing under the laws of
the state of Delaware (the “Company”), Hitachi, Ltd., a corporation organized under the
laws of Japan (“Hitachi”), Clarity Partners, L.P., a Delaware limited partnership
(“Clarity”), Clarity OpNext Holdings I, LLC, a Delaware limited liability company
(“Holdings I”) and Clarity OpNext Holdings II, LLC, a Delaware limited liability company
(“Holdings II,” and together with Clarity and Holdings I, the “Clarity Parties,”
and each, a “Clarity Party”). Capitalized terms used but not otherwise defined herein will
have the meanings set forth in the Stockholders Agreement.

     1. The Company, Hitachi and the Clarity Parties are parties to a Stockholders Agreement,
dated as of July 31, 2001 (as amended, supplemented or otherwise modified prior to the date hereof,
the “Stockholders Agreement”).

     2. The Company, Hitachi and the Clarity Parties now wish to amend the
Stockholders Agreement pursuant to Section 15 thereof.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     A. Section 10(a) of the Stockholders Agreement is hereby amended in its entirety to read
as follows:

In the event that, on or after the sixth anniversary of the Closing, a proposed action of the
Company or any Subsidiary that is subject to Section 2(b) is submitted to the Board for
consideration and such action is both supported by the Hitachi Directors and rejected by the
Clarity director at two consecutive regularly scheduled Board meetings and, as a result, the Board
has affirmatively rejected the proposed action, then the Company shall have the right to purchase
all (but not less than all) of the Stockholder Shares held by the Clarity Parties by delivering
written notice to the Clarity Parties within 60 days of the date of such final rejection (the
“Call Date”); provided, however, Hitachi shall not be entitled to exercise
this right if such rejected action required any Clarity Party to extend capital to, or otherwise
incur liabilities (contingent or otherwise) on behalf or for the benefit of the Company or any of
its Subsidiaries, or to grant any liens on any of the property of any Clarity Party.

     B. Section 11(b) of the Stockholders Agreement is hereby amended in its entirety to read as
follows:

     At any time beginning on the third anniversary of the Closing Date and ending on July 31,
2007, Clarity may demand a determination of the Fair Market Value (a “Determination
Notice”) for purposes of

 

 

this Section 1.1. After the receipt of any Determination Notice, the Company and
Clarity shall promptly determine the Fair Market Value hereunder and within 30 days after the Fair
Market Value has been determined, Clarity may demand purchase of the Stockholder Shares held by the
Clarity Parties (the “Put Notice”), in whole or in part, at an amount equal to the Put
Price by notice to the Company; provided that the Clarity Parties shall be entitled to no
more than one demand pursuant to this Section 11. The Put Price shall be payable by the
Company in U.S. dollars to the Clarity Parties on the twentieth Business Day after receipt of the
Put Notice by wire transfer of immediately available funds to the account(s) designated by the
Clarity Parties upon surrender of certificates representing the Stockholder Shares that are the
subject of such Put Notice.

     C. This Amendment may be executed in one or more counterparts, any one of which may bear the
signature of fewer than all of the signatories hereto, but all of which taken together shall
constitute one agreement.

     D. Except as expressly set forth herein, the terms and provisions of the Stockholders
Agreement remain in full force and effect and the parties hereby ratify and affirm the Stockholders
Agreement.

     E. The terms and provisions of the Stockholders Agreement shall govern this Amendment.

2

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Stockholders
Agreement to be duly executed and delivered as of the date first above written.

	 	 	 
	OPNEXT, INC.
	 
	 	 
	By:

	 	/s/ Harry L. Bosco
	 

	 	 
	 

	 	Harry L. Bosco
	 

	 	Chief Executive Officer and President
	 
	 	 
	CLARITY PARTNERS, L.P.
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS I, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS II, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:

	 	/s/ David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	HITACHI, LTD.
	 
	 	 
	By:

	 	/s/ Isao Ono
	 

	 	 
	 

	 	Isao Ono
	 

	 	Executive Vice President and Executive Officer

3

 

THIRD AMENDMENT TO STOCKHOLDERS’ AGREEMENT

     THIS THIRD AMENDMENT TO STOCKHOLDERS’ AGREEMENT (this “Agreement”) is entered
into as of January 23, 2007 by and among Opnext, Inc., a Delaware corporation (the
“Company”), Hitachi, Ltd., a corporation organized under the laws of Japan
(“Hitachi”), Clarity Partners, L.P., a Delaware limited partnership (“Clarity”),
Clarity OpNext Holdings I, LLC, a Delaware limited liability company (“Holdings I”) and
Clarity OpNext Holdings II, LLC, a Delaware limited liability company (“Holdings II”),

WITNESSETH:

     WHEREAS, the parties hereto have entered into that certain Stockholders’ Agreement, dated as
of July, 31, 2001 (as amended, supplemented or otherwise modified prior to the date hereof, the
“Existing Agreement”; and as amended by the First Amendment to the Stockholders’ Agreement
dated as of October 1, 2002 and by this Amendment and as the same may further amended, supplemented
or otherwise modified from time to time, the “Agreement”);

     WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meaning
ascribed to them in the Existing Agreement;

     WHEREAS, in connection with the Company’s filing of a registration statement on Form S-1, the
parties wish to amend certain terms of the Existing Agreement as set forth herein;

     NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to amend the Existing Agreement as follows:

     Section 1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to them in the Existing Agreement.

     Section 2. Amendment to Section 7(c) of the Existing Agreement. Section 7(c) is
hereby amended by adding the following sentence at the end of Section 7(c):

     “Notwithstanding anything contained to the contrary herein, each Stockholder agrees that each
share of Class A Common Stock shall convert automatically into one issued, fully paid and
non-assessable share of Class B Common Stock upon the approval thereof by the affirmative vote of a
majority of directors of the Board; provided, however, that in the event that the Company’s initial
public offering (the “IPO”) is not completed on or prior to April 30, 2007, each
Stockholder agrees to take all action necessary to, as soon as reasonably practicable thereafter,
exchange each share of common stock converted pursuant to this Section 7(c) into one share of
newly-issued Class C Common Stock, which Class C Common Stock shall have the same rights as the
shares of Class A Common Stock previously converted pursuant hereto.”

     Section 4. Amendment to add a new Section 29. The Existing Agreement is hereby
amended to add the following new Section 29:

 

 

     “Notwithstanding anything contained to the contrary herein, each party hereto agrees that this
Agreement shall automatically terminate immediately upon the consummation of the Company’s IPO,
provided however, that Section 25 shall survive any such termination.”

     3. References to Agreement. All references in the Agreement to “this Agreement”,
“hereunder”. “hereof”, “herein” or words of like import shall mean and be a reference to the
Agreement as amended and modified hereby.

     Section 4. Effectiveness. This Amendment shall become effective as of the date first
written above.

     Section 5. Continuing Validity of Existing Agreements. Except as specifically
amended above, the Existing Agreement shall remain in full force and effect and is hereby ratified
and confirmed.

     Section 6. Governing Law. This Amendment shall be governed by the laws of the State
of Delaware.

     Section 7. Counterparts. This Amendment may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to the Stockholders’
Agreement as of the date first written above.

	 	 	 
	OPNEXT, INC.
	 
	 	 
	By:
	 	/s/    Harry L. Bosco
	 

	 	 
	 

	 	Harry L. Bosco
	 

	 	Chief Executive Officer and President
	 
	 	 
	CLARITY PARTNERS, L.P.
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:
	 	/s/    David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS I, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:
	 	/s/    David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member
	 
	 	 
	CLARITY OPNEXT HOLDINGS II, LLC
	By: Clarity Partners, L.P., its Manager
	 
	 	 
	By:

	 	CLARITY GENPAR, LLC,
	 

	 	its general partner
	 
	 	 
	By:
	 	/s/    David Lee
	 

	 	 
	 

	 	David Lee
	 

	 	Managing Member

Signature Page to Amendment to Stockholders’ Agreement

 

 

	 	 	 
	HITACHI, LTD.
	 
	 	 
	By:
	 	/s/  Naoya Takahashi
	 

	 	 
	 

	 	Naoya Takahashi

Vice President and Executive Officer

Signature Page to Amendment to Stockholders’ AgreementEX-10.12

 

Exhibit 10.12

 

RESEARCH AND DEVELOPMENT AGREEMENT

by and between

HITACHI, LTD.

and

OPNEXT JAPAN, INC.

 

Dated as of July 31, 2001

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section 1. Definitions
	 	 	6	 
	 
	 	 	 	 
	(a) “Affiliate”
	 	 	6	 
	(b) “Assigned IP”
	 	 	6	 
	(c) “Average Man-Month Cost”
	 	 	6	 
	(d) “Business”
	 	 	6	 
	(e) “Commercially Reasonable Efforts”
	 	 	6	 
	(f) “Confidential Information”
	 	 	6	 
	(g) “Cure Period”
	 	 	6	 
	(h) “Current R&D Projects”
	 	 	6	 
	(i) “Dispute Notice”
	 	 	7	 
	(j) “Existing R&D Agreements”
	 	 	7	 
	(k) “Future R&D Projects”
	 	 	7	 
	(l) “Hitachi R&D IP”
	 	 	7	 
	(m) “Intellectual Property”
	 	 	7	 
	(n) “Inventor”
	 	 	7	 
	(o) “Jointly Developed Intellectual Property”
	 	 	7	 
	(p) “Licensed Hitachi R&D IP”
	 	 	7	 
	(q) “Licensed IP”
	 	 	7	 
	(r) “Losses”
	 	 	7	 
	(s) “Mark-Up”
	 	 	7	 
	(t) “Mark-Up Fee”
	 	 	7	 
	(u) “Minority-Owned Affiliate”
	 	 	8	 
	(v) “Monthly Cost”
	 	 	8	 
	(w) “New Development Costs”
	 	 	8	 
	(x) “Old Development Costs”
	 	 	8	 
	(y) “OpNext Japan R&D IP”
	 	 	8	 
	(z) “Person”
	 	 	8	 
	(aa) “Project Manager”
	 	 	8	 
	(bb) “R&D Plan”
	 	 	8	 
	(cc) “R&D Procedures”
	 	 	8	 
	(dd) “R&D Project”
	 	 	8	 
	(ee) “R&D Support”
	 	 	9	 
	(ff) “Second Closing”
	 	 	9	 
	(gg) “Second Closing Date”
	 	 	9	 
	(hh) “Subsidiary”
	 	 	9	 
	(ii) “Total Project Cost”
	 	 	9	 
	(jj) “Wholly-Owned Subsidiary”
	 	 	9	 
	 
	 	 	 	 
	Section 2. Research and Development Obligations
	 	 	9	 
	 
	 	 	 	 
	(a) Current Research and Development
	 	 	9	 
	(b) Future Research and Development
	 	 	10	 
	(i) Meetings
	 	 	10	 
	(ii) Requests and Forecasts
	 	 	10	 
	(iii) Support
	 	 	10	 

- 2 -

 

	 	 	 	 	 
	(c) Assignment and License of OpNext Japan R&D IP
	 	 	10	 
	(i) Assignment and License
	 	 	10	 
	(ii) Termination Conditions
	 	 	11	 
	(iii) Review of Obligations
	 	 	11	 
	 
	 	 	 	 
	Section 3. Exclusions from Research and Development Obligations
	 	 	11	 
	 
	 	 	 	 
	(a) Hitachi
	 	 	11	 
	(b) OpNext Japan
	 	 	12	 
	 
	 	 	 	 
	Section 4. Ownership of Intellectual Property Rights
	 	 	12	 
	 
	 	 	 	 
	(a) OpNext Japan’s Intellectual Property
	 	 	12	 
	(b) Hitachi’s R&D Intellectual Property
	 	 	12	 
	(c) Jointly Developed Intellectual Property
	 	 	12	 
	(i) Hitachi Owned
	 	 	12	 
	(ii) Jointly Owned
	 	 	12	 
	(iii) OpNext Japan Owned
	 	 	13	 
	(d) Ownership Determination
	 	 	14	 
	 
	 	 	 	 
	Section 5. Cross License of Intellectual Property
	 	 	14	 
	 
	 	 	 	 
	(a) OpNext Japan R&D IP License
	 	 	14	 
	(b) Hitachi R&D IP License
	 	 	14	 
	(c) Transfer of Licensed IP
	 	 	14	 
	(d) Termination Conditions
	 	 	15	 
	(e) Review of Obligations
	 	 	15	 
	 
	 	 	 	 
	Section 6. Covenants to Protect Intellectual Property
	 	 	15	 
	 
	 	 	 	 
	(a) Notice of Infringement
	 	 	15	 
	(b) Infringement Suits on Jointly Developed Intellectual Property
	 	 	16	 
	(c) Infringement of Licensed Hitachi R&D IP
	 	 	16	 
	 
	 	 	 	 
	Section 7. Inventor Compensation
	 	 	16	 
	 
	 	 	 	 
	Section 8. Warranties and Limitations
	 	 	16	 
	 
	 	 	 	 
	(a) Existing R&D Agreements
	 	 	16	 
	(b) Disclaimer of Warranties
	 	 	16	 
	(c) Indemnification by Hitachi
	 	 	17	 
	(d) IP Infringement Indemnification
	 	 	17	 
	(e) Indemnification by OpNext Japan
	 	 	18	 
	(f) Limitation of Liability
	 	 	18	 
	 
	 	 	 	 
	Section 9. Expenses
	 	 	18	 
	 
	 	 	 	 
	Section 10. Termination
	 	 	18	 
	 
	 	 	 	 
	Section 11. Confidentiality
	 	 	18	 
	 
	 	 	 	 
	(a) Confidentiality Obligations
	 	 	19	 
	(b) Exclusions
	 	 	19	 
	(c) Injunctive Relief
	 	 	20	 
	(d) Ownership
	 	 	20	 
	(e) Press Releases and Announcements
	 	 	20	 

- 3 -

 

	 	 	 	 	 
	Section 12. Export Control
	 	 	20	 
	 
	 	 	 	 
	Section 13. Notices
	 	 	20	 
	 
	 	 	 	 
	Section 14. Amendment and Waiver
	 	 	22	 
	 
	 	 	 	 
	Section 15. Assignment
	 	 	22	 
	 
	 	 	 	 
	Section 16. Counterparts
	 	 	22	 
	 
	 	 	 	 
	Section 17. Delivery by Facsimile
	 	 	22	 
	 
	 	 	 	 
	Section 18. Exhibits and Schedules
	 	 	23	 
	 
	 	 	 	 
	Section 19. Further Assurances
	 	 	23	 
	 
	 	 	 	 
	Section 20. Governing Law
	 	 	23	 
	 
	 	 	 	 
	Section 21. Dispute Resolution
	 	 	23	 
	 
	 	 	 	 
	Section 22. Interpretation
	 	 	23	 
	 
	 	 	 	 
	Section 23. No Strict Construction
	 	 	24	 
	 
	 	 	 	 
	Section 24. Recordation
	 	 	24	 
	 
	 	 	 	 
	Section 25. Relationship of the Parties
	 	 	24	 
	 
	 	 	 	 
	Section 26. Schedules or Exhibits
	 	 	24	 
	 
	 	 	 	 
	Section 27. Severability
	 	 	24	 
	 
	 	 	 	 
	Section 28. Submission to Jurisdiction; Waivers
	 	 	24	 
	 
	 	 	 	 
	Section 29. Survival
	 	 	25	 
	 
	 	 	 	 
	Section 30. Third-Party Beneficiaries
	 	 	25	 
	 
	 	 	 	 
	Section 31. Entire Agreement
	 	 	25	 

- 4 -

 

 RESEARCH AND DEVELOPMENT AGREEMENT

          THIS RESEARCH AND DEVELOPMENT AGREEMENT (the “R&D Agreement”) is made as of July 31,
2001, by and between HITACHI, LTD., a corporation existing under the laws of Japan
(“Hitachi”) and OPNEXT JAPAN, INC., a corporation existing under the laws of Japan and a
Wholly-Owned Subsidiary of OpNext, Inc., a Delaware corporation (“OpNext Japan”), pursuant
to the terms of the Business Transfer Agreement, dated December 6, 2000 (the “Business Transfer
Agreement”) and the Intellectual Property License Agreement, dated July 31, 2001 (the “IP
License Agreement”), both of which have been entered into between Hitachi and OpNext Japan, the
Stock Contribution Agreement, dated July 31, 2001 entered into between Hitachi and OpNext, Inc.,
and a Stock Purchase Agreement dated September 19, 2000 the “Existing Purchase Agreement,”
as amended by the Amended and Restated Stock Purchase Agreement of even date herewith and as
further amended, supplemented or otherwise modified from time to time, the “Stock Purchase
Agreement”) and the Stockholders’ Agreement dated July 31, 2001 (the “Stockholders’
Agreement”), both among OpNext, Inc., Hitachi and Clarity Partners, L.P., a Delaware limited
partnership (“Clarity”), Clarity OpNext Holdings I, a Delaware limited liability company
(“Holdings I”) and Clarity OpNext Holdings II, a Delaware limited liability company
(“Holdings II,” together with Clarity and Holdings I, the “Clarity Parties”). All
capitalized terms used herein but not defined have the meanings ascribed to such terms in the IP
License Agreement, Stock Contribution Agreement, Stockholders’ Agreement and Stock Purchase
Agreement.

RECITALS

          WHEREAS, Hitachi has entered into a Stock Purchase Agreement with OpNext, Inc. and Clarity,
pursuant to which Hitachi agreed to, among other things, capitalize OpNext Japan and to cause
OpNext Japan to use such funds to purchase Assets from Hitachi pursuant to the terms set forth in
the Business Transfer Agreement and as a condition to closing under such Stock Purchase Agreement,
Hitachi agreed to provide research and development support to OpNext Japan as requested;

          WHEREAS, the Business Transfer Agreement provides the terms and conditions under which Hitachi
sold to OpNext Japan all of the Assets, which are necessary or reasonably required for the
operation of the fiber optic component business of Hitachi’s Telecommunication Systems Division.
The IP License Agreement, which is being concurrently executed herewith, provides the terms and
conditions under which Hitachi will be licensing to OpNext Japan the Intellectual Property rights,
which are necessary or reasonably required for the operation of the Business and which were not
transferred/assigned under the Business Transfer Agreement;

          WHEREAS, Hitachi has expertise necessary to provide “R&D Support” (as defined below); and

          WHEREAS, OpNext Japan desires to receive “R&D Support” from Hitachi, and Hitachi desires to
provide such “R&D Support” on the terms and conditions set forth in this R&D Agreement.

- 5 -

 

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
to this R&D Agreement hereby agree as follows:

Section 1. Definitions. The following terms, when used herein with initial capital
letters, shall have the respective meanings set forth in this Section 1.

          (a) “Affiliate” of any particular Person shall mean any other Person controlling,
controlled by or under common control with such particular Person, where “control” means the
possession, directly or indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.

          (b) “Assigned IP” shall have the meaning set forth in Section 5(b) of the Stock
Contribution Agreement.

          (c) “Average Man-Month Cost” shall have the meaning as set forth in Exhibit C.

          (d) “Business” shall mean Hitachi’s fiber optic component business of designing,
developing, manufacturing, marketing, distributing and selling Products operated by Hitachi’s
Telecommunications Systems Division as of the First Closing and as operated by OpNext Japan between
the First Closing and the Second Closing Date.

          (e) “Commercially Reasonable Efforts” shall mean diligent and commercially reasonable
and expeditious efforts to accomplish a task or objective in a manner that is at least equal to the
efforts, quality and resources devoted by a party that such party would apply to its own high
priority task or objective under similar circumstances.

          (f) “Confidential Information” shall mean any information not generally known to the
public that is made or disclosed in contemplation of this R&D Agreement or any information related
to the Business that is disclosed or made available to the receiving party pursuant to this R&D
Agreement that the receiving party reasonably understands to be proprietary or confidential,
including all of the following: (i) prototypes, files, analyses, techniques, systems,
formulae, research, records, documentation, models, data, databases, ideas, inventions, designs,
developments, devices, methods and processes (whether or not patentable and whether or not reduced
to practice); (ii) know-how; (iii) Assigned IP; (iv) Licensed IP; (v) Hitachi R&D IP; (vi) OpNext
Japan R&D IP; and (vii) other Intellectual Property rights. In addition, Confidential Information
shall include the terms and conditions of this R&D Agreement.

          (g) “Cure Period” shall have the meaning set forth in Section 2(c)(ii) of this R&D
Agreement.

          (h) “Current R&D Projects” shall mean the research and development projects (including
any planned or proposed research and development projects) related to the Business existing as of
March 31, 2001, as set forth in Exhibit A.

- 6 -

 

          (i) “Dispute Notice” shall have the meaning set forth in Section 21 of this R&D
Agreement.

          (j) “Existing R&D Agreements” shall have the meaning set forth in Section 3(a) of this
R&D Agreement.

          (k) “Future R&D Projects” shall mean research and development projects related to the
Business to be undertaken by OpNext Japan and/or its Affiliates or by Hitachi on behalf of OpNext
Japan, on and after April 1, 2001.

          (l) “Hitachi R&D IP” shall have the meaning set forth in Section 4(b) of this R&D
Agreement.

          (m) “Intellectual Property” shall mean all: (i) patents, patent applications, patent
disclosures and inventions (including all extensions, reexaminations, reissues, continuations and
renewals related thereto); (ii) copyrights (registered or unregistered and all renewals thereof)
and copyrightable works and registrations and applications for registration thereof; (iii) mask
works and registrations and applications for registration thereof; (iv) computer software, data,
databases and documentation thereof; and (v) trade secrets and other confidential information
(including ideas, formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications, designs, plans,
proposals, technical data, operating, maintenance and safety materials and drawings, test
procedures, test data, sources of materials and supplies, financial and marketing plans and
customer and supplier lists and information). Intellectual
Property, as referred to in this R&D Agreement, refers to rights throughout the world,
including any equivalent of any of the foregoing in any jurisdiction or under any laws, regulations
or treaties.

          (n) “Inventor” shall have the meaning set forth in Section 7 of this R&D Agreement.

          (o) “Jointly Developed Intellectual Property” shall mean all Intellectual Property
resulting from an R&D Project under this R&D Agreement in accordance with Section 4(c)(ii) hereof,
and shall exclude Hitachi R&D IP, Licensed IP and Assigned IP.

          (p) “Licensed Hitachi R&D IP” shall have the meaning set forth in Section 5(b) of this
R&D Agreement.

          (q) “Licensed IP” shall have the meaning set forth in Section 3(a) of the IP License
Agreement.

          (r) “Losses” shall have the meaning set forth in Section 8(c) of this R&D Agreement.

          (s) “Mark-Up” shall have the meaning as set forth in Exhibit C.

          (t) “Mark-Up Fee” shall mean the fee that Hitachi will charge to OpNext Japan for
Hitachi’s past investment in Hitachi R&D IP and Jointly Developed Intellectual

- 7 -

 

Property that Hitachi agrees to transfer to OpNext Japan as described in Section 4(c)(iii) and shall be
determined in accordance with the formula set forth in Exhibit C.

          (u) “Minority-Owned Affiliate” shall mean any entity, that a party, directly or
indirectly, at any time, owns or controls twenty percent (20%) to fifty percent (50%) of the voting
equity shares or securities convertible into such shares.

          (v) “Monthly Cost” shall have the meaning as set forth in Exhibit C.

          (w) “New Development Costs”
shall mean all of the costs related to a particular R&D Project incurred after commencement of
such R&D Project on and after April 1, 2001, including operating expenses and charges for the use
of any tangible property made available for use in the R&D Project but shall not include the
consideration for the use of any existing or underlying Intellectual Property owned or controlled
by either party that is used for such R&D Project.

          (x) “Old Development Costs” shall mean all of the costs incurred prior to commencement
of a particular R&D Project for development of any existing or underlying Intellectual Property
owned or controlled by either party that is used for such R&D Project, including operating expenses
and charges for the use of any tangible property made available for use in developing such existing
or underlying Intellectual Property.

          (y) “OpNext Japan R&D IP” shall mean: (i) Intellectual Property resulting from the
Current R&D Projects, that has been assigned by Hitachi to OpNext Japan pursuant to Section 2(c)(i)
below; (ii) Intellectual Property that can be clearly identified as that resulting from Future R&D
Projects (excluding any Hitachi R&D IP and Licensed IP) for which OpNext Japan has paid one-hundred
percent (100%) of the New Development Costs; and (iii) Jointly Developed Intellectual Property
under 4(c)(ii) or Hitachi owned IP under 4(c)(i) that Hitachi has agreed to transfer to OpNext
Japan and OpNext Japan has paid a Mark-Up Fee to Hitachi in accordance with Section 4(c)(iii) and
Exhibit C.

          (z) “Person” shall mean any individual, corporation, partnership, limited liability
company, business trust, association, joint stock company, trust, unincorporated organization,
joint venture, firm or other entity or a government or any political subdivision or agency,
department or instrumentality thereof.

          (aa) “Project Manager” shall have the meaning set forth in Exhibit D.

          (bb) “R&D Plan” shall mean the plan, which conforms to the requirements of Exhibit
D (“R&D Procedures”), prepared jointly by Hitachi and OpNext Japan defining the details
of each research and development project related to the Business and the timetable for each such
project.

          (cc) “R&D Procedures” shall mean the procedures set forth in Exhibit D.

          (dd) “R&D Project”
shall mean Current R&D Project and/or Future R&D Project, as applicable.

- 8 -

 

          (ee) “R&D Support” shall mean research and development support in connection with the
Business provided by Hitachi to OpNext Japan in conformance with the requirements of the R&D
Procedures set forth in Exhibit D.

          (ff) “Second Closing” shall mean the closing of the Stock Purchase Agreement.

          (gg) “Second Closing Date” shall mean the date on which the Second Closing occurs.

          (hh) “Subsidiary” shall mean, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the limited liability company,
partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other business entity if such
Person or Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity gains or losses or
shall be or control the managing director or general partner of such limited liability company,
partnership, association or other business entity.

          (ii) “Total Project Cost” shall have the meaning as set forth Exhibit C.

          (jj) “Wholly-Owned Subsidiary” shall mean, with respect to any Person, any
corporation, limited liability company, partnership, association or other business entity of which
(i) if a corporation, one-hundred percent (100%) of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Wholly-Owned Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership, association or other
business entity, all of the limited liability company, partnership or total ownership interest
thereof is at the
time owned or controlled, directly or indirectly, by any Person or one or more other
Wholly-Owned Subsidiaries of that Person or a combination thereof.

Section 2. Research and Development Obligations.

          (a) Current Research and Development. OpNext Japan will have the right to continue
the Current R&D Projects attached as Exhibit A to this R&D Agreement. Hitachi will use
Commercially Reasonable Efforts to provide R&D Support.

- 9 -

 

          Hitachi and Clarity shall work together to review the Current R&D Projects. Clarity will
have the right to approve Exhibit A to the extent deemed necessary or desired in its sole
discretion.

          Hitachi will make Commercially Reasonable Efforts to list all the Current R&D Projects on
Exhibit A hereto which schedule may be amended by the parties’ mutual written consent. For
nine (9) months following the Second Closing, Hitachi and OpNext Japan agree to cooperate in
supplementing Exhibit A to include all the Current R&D Projects.

          (b) Future Research and Development. During the term of this R&D Agreement, Hitachi
will provide R&D Support, as requested, to OpNext Japan for Future R&D Projects in accordance with
the R&D Procedures. Hitachi will provide such R&D Support consistent with the following:

               (i) Meetings. Hitachi and OpNext Japan will hold quarterly joint review meetings to
determine and update the R&D Plan for Future R&D Projects.

               (ii) Requests and Forecasts. Based on the R&D Plan developed in accordance with the
R&D Procedures, OpNext Japan will require assistance on a binding basis from Hitachi on specific
Future R&D Projects for the upcoming twelve (12) month period. OpNext Japan will also provide
Hitachi with a non-binding forecast of Future R&D Projects that OpNext Japan expects to request
from Hitachi for the twelve (12) month period following such twelve (12) month period. Hitachi and
OpNext Japan will update such forecasts during the quarterly meetings described in Section 2(b)(i)
above.

               (iii) Support. Hitachi will be obligated to use Commercially Reasonable Efforts to
provide continuous R&D Support for the Future R&D Projects in accordance with the specific binding
requests (to be performed in the upcoming twelve (12) month period) from OpNext Japan and for all
specific non-binding projects that OpNext Japan forecasts to be requested from Hitachi on a binding
basis within the twelve (12) month period following the
end of such twelve (12) month period. Hitachi will use Commercially Reasonable Efforts to be
able to support the balance of the non-binding forecast.

          (c) Assignment and License of OpNext Japan R&D IP.

               (i) Assignment and License. Hitachi shall assign, and does hereby assign, to OpNext
Japan all right, title and interest in and to all Intellectual Property resulting from the Current
R&D Projects and which shall be listed on Exhibit B, which is capable of assignment, to the
extent such assignment did not occur under the Business Transfer Agreement. Such Intellectual
Property shall be deemed to be OpNext Japan R&D IP. Hitachi also shall license, and does hereby
license effective as of the First Closing Date, all Intellectual Property resulting from the
Current R&D Projects, which has not been assigned and is not capable of assignment, to OpNext Japan
on a fully paid-up, non-exclusive, perpetual and irrevocable basis, to use, make, have made, sell,
advertise, offer to sell, lease, import, export and supply products and services throughout the
world, unless otherwise terminated according to the provisions of this R&D Agreement. Such licensed

- 10 -

 

Intellectual Property shall be deemed to be Licensed IP subject to the terms and conditions of the
IP License Agreement.

               (ii) Termination Conditions. Such license shall not be terminated or its exploitation
enjoined, until and unless: (i) OpNext Japan has committed a material breach of its obligations
under this R&D Agreement, Hitachi has given written notice of such breach to OpNext Japan and such
breach remains uncured after sixty (60) days of receiving notice of such breach (the “Cure
Period”), or, in the case of a breach, which cannot be cured within such Cure Period, OpNext
Japan has not instituted within such Cure Period steps necessary to remedy the default and/or
thereafter has not diligently pursued the same to completion; or (ii) OpNext Japan has committed an
incurable material breach. In the event the breach is a curable breach that cannot be cured within
the Cure Period but with respect to which OpNext Japan has instituted steps necessary to remedy the
default and is thereafter diligently pursuing such cure, both parties shall negotiate to determine
whether further pursuit of such cure is reasonable. If the parties cannot agree on a resolution in
such negotiations, then this issue shall be referred to arbitration pursuant to the arbitration
procedures set forth in Exhibit E hereto to decide whether such breach can be cured or any
other alternative remedy should be adopted. In the event the breach is an incurable breach, the
parties agree that the matter shall be referred to arbitration pursuant to the arbitration
procedures set forth in Exhibit E hereto to determine the appropriate remedy. In the event
that either party submits the dispute to arbitration, both parties shall cooperate in such binding
arbitration in accordance with Exhibit E.

               (iii) Review of Obligations. The obligations set forth in this Section 2(c) shall
expire on the tenth (10th) anniversary of the Second Closing Date; provided,
however, that the license under OpNext Japan R&D IP existing as of the tenth
(10th) anniversary of the Second Closing Date shall continue, under reasonable terms and
conditions to be agreed between the parties, until
the expiration of all of such OpNext Japan R&D IP. Notwithstanding the foregoing, if one (1)
of the conditions set forth in Section 2(c)(ii) is met, Hitachi may elect to be completely relieved
of its obligations set forth in this Section 2(c). If Hitachi elects to be relieved of its
obligations under this Section 2(c), the parties shall renegotiate in good faith and on
commercially reasonable terms a new license governing the OpNext Japan R&D IP.

Section 3. Exclusions from Research and Development Obligations

          (a) Hitachi. Nothing contained in this R&D Agreement shall limit in any way Hitachi’s
ability to continue to conduct research and development activities for other Hitachi business
units, including its Affiliates and Subsidiaries, including any fiber optical component business
(e.g., semiconductors and cable) subject to the Nonsolicitation or Noncompetition provision
in Section 12 of the Stockholders’ Agreement; provided, however, the terms and
conditions of this R&D Agreement shall be subject to the terms and conditions of any existing
agreements related to the governmental R&D projects, the joint R&D projects with national and
public universities or private universities, the R&D projects requested by other Hitachi
Subsidiaries or the joint R&D projects with any other agency or organization (collectively, the
“Existing R&D Agreements”). Prior to the commencement of any R&D Project, Hitachi shall
disclose to OpNext Japan any restrictions contained in the Existing R&D Agreements related to such
R&D Project.

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          (b) OpNext Japan. Nothing in this R&D Agreement shall in any way limit OpNext Japan’s
ability to conduct its own, or utilize other third parties to conduct on its behalf, research and
development projects.

Section 4. Ownership of Intellectual Property Rights.

          (a) OpNext Japan’s Intellectual Property. OpNext Japan will own all right, title and
interest, throughout the world in and to OpNext Japan R&D IP. OpNext Japan shall have the right to
apply, in its own name and at its own expense, for Intellectual Property protection in the OpNext
Japan R&D IP. Hitachi shall cooperate with OpNext Japan in a reasonable manner in obtaining such
protection, including, obtaining signatures of Hitachi Inventors and/or officials on official
papers.

          (b) Hitachi’s R&D Intellectual Property. Hitachi will solely own all Intellectual
Property rights that result from all of its other research and development projects including the
Intellectual Property referenced in Section 4)(c)(i), excluding Jointly Developed Intellectual
Property and/or OpNext Japan R&D IP (“Hitachi R&D IP”). Hitachi shall have the right to
apply, in its own name and at its own expense, for Intellectual Property protection in Hitachi R&D
IP and, if requested, OpNext Japan shall cooperate with Hitachi in any reasonable manner in
obtaining such
protection, including, obtaining signatures of OpNext Japan Inventors and/or officials on
official papers.

          (c) Jointly Developed Intellectual Property. All right, title and interest in and to
Jointly Developed Intellectual Property, other than OpNext Japan R&D IP and Hitachi R&D IP, shall
be determined in accordance with this Section 4(c).

               (i) Hitachi Owned. If the R&D Project is jointly funded by OpNext Japan and Hitachi,
unless (ii) or (iii) below applies, the resulting Intellectual Property will be treated as Hitachi
R&D IP in accordance with Section 4(b) and will be solely owned by Hitachi.

               (ii) Jointly Owned.

                    (1) If the R&D Project is jointly funded by the parties and either: (1) OpNext Japan
contributes fifty percent (50%) or more of the New Development Costs to the R&D Project; or (2)
OpNext Japan contributes less than fifty percent (50%) of the New Development Costs to the R&D
Project but the parties determine through good faith negotiations that OpNext Japan contributed to
the R&D Project in some other fashion, and in both (1) and (2) above the resulting Intellectual
Property can clearly be identified with reasonable certainty as that resulting from such R&D
Project, then such Intellectual Property shall be deemed Jointly Developed Intellectual Property
and shall be owned jointly by the parties and either party may practice such Jointly Developed
Intellectual Property without an accounting or compensation to, or the consent of, the other party.
Except as set forth in Section 4(c)(iii) below, if either party desires to license any of its
rights to the Jointly Developed Intellectual Property herein to a third party, it shall obtain the
prior written consent of the other party hereto. Each party shall have the right to apply, in both
parties’ names, for Intellectual Property protection in the Jointly Developed Intellectual
Property. The parties shall agree on the proper way and strategy for proceeding with all

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protection of the Jointly Developed Intellectual Property in accordance with the R&D Procedures.
All expenses incurred in obtaining and maintaining Intellectual Property protection in the Jointly
Developed Intellectual Property shall be equally shared by the parties. In the event that one (1)
of the parties elects not to seek or maintain patent or other intellectual or industrial property
protection for any Jointly Developed Intellectual Property in any particular country or not to
share equally in the expenses thereof with the other party, the other party shall have the right to
seek or maintain such protection at its sole expense in such country and shall have full control
over the prosecution and maintenance thereof even though title to any patent or other intellectual
or industrial property protection issuing therefrom shall be jointly owned by the parties.

                    (2) To the extent OpNext Japan shares the costs of its proportion of the joint funding as
described in (1) above, with either OpNext R&D-USA or any other Wholly-Owned Subsidiary of OpNext,
Inc. for an R&D Project that is jointly funded by Hitachi and OpNext Japan, OpNext Japan shall have
the right to license any Jointly Developed Intellectual Property arising from such R&D Project and
the right to
sublicense any Hitachi R&D IP associated with such Jointly Developed Intellectual Property, to
OpNext R&D USA and such other Wholly-Owned Subsidiary of OpNext, Inc., as the case may be;
provided, however, the following conditions are met: (i) OpNext Japan obtains
Hitachi’s reasonable prior consent; and (ii) OpNext R&D-USA and such other Wholly-Owned Subsidiary
of OpNext, Inc. abide by the terms and conditions of this R&D Agreement. Notwithstanding the
foregoing, if any such license invokes any Japanese tax issues then Hitachi shall not be obliged to
consent to such license to OpNext R&D-USA and/or such other Wholly-Owned Subsidiary of OpNext, Inc.
without entering into a separate agreement with OpNext R&D-USA and/or such other Wholly-Owned
Subsidiary of OpNext, Inc. under reasonable terms and conditions to be agreed upon between the
relevant parties to address such tax issues. Notwithstanding the foregoing, neither OpNext R&D USA
nor any such Wholly-Owned Subsidiary of OpNext, Inc. shall have any ownership rights in such
Jointly Developed Intellectual Property.

               (iii) OpNext Japan Owned.

                    (1) If OpNext Japan desires and Hitachi agrees in its reasonable discretion, OpNext Japan may
purchase the Intellectual Property resulting from an R&D Project that is either owned by Hitachi
under Section 4(c)(i) or jointly owned by the parties under Section 4(c)(ii), but excluding Hitachi
R&D IP and Licensed IP, by reimbursing Hitachi for any New Development Costs incurred by Hitachi in
such R&D Project and paying a Mark-Up to Hitachi in accordance with the formula set forth in
Exhibit C hereto.

                    (2) If OpNext Japan desires and Hitachi agrees in its reasonable discretion, OpNext Japan may
purchase the Intellectual Property resulting from an R&D Project that is either owned by Hitachi
under Section 4(c)(i) or jointly owned by the parties under Section 4(c)(ii) including the Hitachi
R&D IP and Licensed IP on which such Intellectual Property is based or derived, by paying a Mark-Up
Fee. For the purposes of determining such Mark-Up Fee, the parties shall consider the extent of
Hitachi’s New Development Costs, Hitachi’s Old Development Costs and the fair market value of such

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technology (other than Assigned IP, Licensed IP and OpNext Japan R&D IP assigned pursuant to
Section 2(c)(i)).

          (d) Ownership Determination. Prior to the commencement of an R&D Project, the Hitachi
and OpNext Japan Project Managers shall discuss in good faith the ownership of the Intellectual
Property resulting from such R&D Project based upon the principles listed above. If the parties’
Project Managers cannot agree on the ownership of the Intellectual Property, the management of both
parties shall discuss in good faith the ownership of the Intellectual Property resulting from such
R&D Project. If the management is unable to come to an agreement on such ownership issues
(including clear identification of the Intellectual Property resulting from such R&D Project, New
Development Costs, Old Development Costs, OpNext Japan’s non-monetary contribution to the R&D
Project and the Mark-Up Fee, if applicable), the parties shall refer this issue to arbitration
pursuant to the arbitration procedures set forth in Exhibit E hereto. In the event that it
is impractical to resolve the disputed issue prior to the commencement of the R&D Project
(e.g., the parties are unsure as
to what extent underlying technology will be utilized or cannot determine the identification
of Intellectual Property resulting from the R&D Project, the New Development Costs, Old Development
Costs, OpNext Japan’s non-monetary contribution to the R&D Project or Mark-Up Fee), either party
may elect to proceed with the R&D Project and defer resolution of the disputed issue until a later
date; provided that if the parties remain in disagreement after such later date, the parties shall
then refer the issue to arbitration as described above. In the event that either party submits the
dispute to arbitration, both parties shall cooperate in such binding arbitration in accordance with
Exhibit E.

Section 5. Cross License of Intellectual Property.

          (a) OpNext Japan R&D IP License. OpNext Japan will license, and does hereby license
effective as of the First Closing Date, the OpNext Japan R&D IP to Hitachi and its Wholly-Owned
Subsidiaries on a fully paid-up, non-exclusive, perpetual and irrevocable basis, to use, make, have
made, sell, advertise, offer to sell, lease, import, export and supply products and services
throughout the world, provided, however, that Hitachi and its Wholly-Owned
Subsidiaries shall not have the right to sublicense OpNext Japan R&D IP to any entity without the
consent of OpNext Japan.

          (b) Hitachi R&D IP License. Hitachi will license, and does hereby license effective
as of the First Closing Date, the Hitachi R&D IP relevant to the Business to OpNext Japan on a
fully paid-up, non-exclusive, perpetual and irrevocable basis, to use, make, have made, sell,
advertise, offer to sell, lease, import, export and supply products and services throughout the
world (“Licensed Hitachi R&D IP”). Hitachi also will grant, and hereby does grant, to
OpNext Japan the right to freely sublicense the Licensed Hitachi R&D IP to its Subsidiaries, to
OpNext, Inc. and OpNext, Inc.’s Subsidiaries; provided, however, that OpNext Japan
will not have the right to sublicense any Licensed Hitachi R&D IP that is developed or filed after
the Second Closing Date to any entity other than OpNext, Inc. or OpNext Japan’s or OpNext, Inc.’s
Wholly-Owned Subsidiary, without the consent of Hitachi.

          (c) Transfer of Licensed IP. In the event a Subsidiary or division of Hitachi that is
the owner of the Licensed IP or Hitachi R&D IP is sold or otherwise

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transferred by Hitachi, Hitachi will make necessary arrangements to secure a license under the terms and conditions of the IP
License Agreement for OpNext Japan from the new owner such that OpNext Japan can continue to use
such Licensed IP and/or Hitachi R&D IP until such Licensed IP or Hitachi R&D IP, respectively,
expires.

          (d) Termination Conditions. Such a license of OpNext Japan R&D IP to Hitachi and of
Licensed Hitachi R&D IP to OpNext Japan shall not be terminated or its exploitation enjoined, until
and unless: (i) the licensee has committed a material breach of its obligations under this R&D
Agreement, the licensor has given written notice of such breach to the licensee and such
breach remains uncured during the Cure Period, or, in the case of a breach which cannot be
cured within such Cure Period, the licensee has not instituted within such Cure Period steps
necessary to remedy the default and/or thereafter has not diligently pursued the same to
completion; or (ii) the breaching party has committed an incurable material breach. In the event
the breach is a curable breach that cannot be cured within the Cure Period but the licensee has
instituted steps necessary to remedy the default and is thereafter diligently pursuing such cure,
both parties shall negotiate to determine whether further pursuit of the cure is reasonable. If
the parties cannot agree on a resolution in such negotiations, then this issue shall be referred to
arbitration pursuant to the arbitration procedures set forth in Exhibit E hereto to decide
whether such breach can be cured or any other alternative remedy should be adopted. In the event
the breach is an incurable breach, the parties agree that the matter shall be referred to
arbitration pursuant to the arbitration procedures set forth in Exhibit E hereto to
determine the appropriate remedy. In the event that either party submits the dispute to
arbitration, both parties shall cooperate in such binding arbitration in accordance with
Exhibit E.

          (e) Review of Obligations. The obligations set forth in this Section 5 shall expire
on the tenth (10th) anniversary of the Second Closing Date of the Stock Purchase
Agreement; provided, however, that the licenses under OpNext Japan R&D IP and
Licensed Hitachi R&D IP existing as of the tenth (10th) anniversary of the Second
Closing Date shall continue, under reasonable terms and conditions to be agreed between the
parties, until the expiration of all of such OpNext Japan R&D IP and Licensed Hitachi R&D IP.
Notwithstanding the foregoing, if one (1) of the conditions set forth in Section 5(d) is met, the
non-breaching party may elect to be completely relieved of its obligations set forth in this
Section 5. If a party elects to be relieved of its obligations under this Section 5(d), the
parties shall renegotiate in good faith and on commercially reasonable terms a new license
governing the OpNext Japan R&D IP and/or Licensed Hitachi R&D IP, as applicable.

Section 6. Covenants to Protect Intellectual Property.

          (a) Notice of Infringement. If either party learns of facts that may constitute an
infringement of any of the Intellectual Property covered by this R&D Agreement or of any
allegations that there has been an infringement of such Intellectual Property, it shall promptly
notify the owner of the Intellectual Property of such possible infringement. With respect to
Jointly Developed Intellectual Property, each party shall notify the other party of such possible
infringement. No party shall have any duty to conduct any investigation or to make any inquiry
with respect to any such alleged infringement.

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          (b) Infringement Suits on Jointly Developed Intellectual Property. If both parties
agree to initiate appropriate action to cause any infringement of Jointly Developed Intellectual
Property to cease, including if necessary bringing suit to enjoin such infringement, the parties
shall share the expense and split any damages or other court compensation equally, or in some other
proportion to be agreed by the parties prior to
initiating an action. If upon notice of infringement of Jointly Developed Intellectual
Property, a party elects not to initiate any action, the other party shall have the option to
initiate appropriate action to cause any infringement to cease, including if necessary bringing
suit to enjoin such infringement; and such party shall then be solely responsible for expenses and
shall retain any damages and other court compensation awarded but such party shall not enter into a
settlement agreement without the prior written consent of the other party, which shall not be
unreasonably withheld, unreasonably delayed or unreasonably conditioned.

          (c) Infringement of Licensed Hitachi R&D IP. To the extent a competitor of the
Business is infringing the Licensed Hitachi R&D IP in OpNext Japan’s reasonable business judgment
and such infringement is material to the Business, Hitachi will protect OpNext Japan’s interest
either by prosecuting the Intellectual Property rights on behalf of OpNext Japan or by taking some
other appropriate action that will not have a Material Adverse Effect on the ongoing business of
OpNext Japan, provided, however, that any such action taken by Hitachi shall not materially
adversely affect any other Affiliates of or business units of Hitachi. Both parties shall consult
and cooperate with each other in determining how to respond to the infringing activities. Upon the
resolution of such infringement by settlement or otherwise, any damages, profits and awards of
whatever nature recoverable for such infringement shall, after deducting the parties’ expenses, be
reasonably allocated between the parties based on the facts and circumstances of the infringement.
Both parties will reasonably consider the option of settling any such matter by granting a
sublicense of all or portion of the Licensed Hitachi R&D IP.

Section 7. Inventor Compensation. Both parties acknowledge and agree that in the event
that any employee of Hitachi or employee of OpNext Japan (hereinafter referred to as the
“Inventor”) creates any Intellectual Property under this R&D Agreement, the owner of such
Intellectual Property shall pay a certain amount of compensation to such Inventor, taking into
account the Inventor’s contribution, and according to the terms and conditions mutually agreed to
by the parties.

Section 8. Warranties and Limitations

          (a) Existing R&D Agreements. Hitachi represents and warrants that the terms and
conditions of the Existing R&D Agreements shall not have a material impact on OpNext Japan’s
ability to conduct its research and development activities pursuant to this R&D Agreement or the
ownership of or other rights in any Intellectual Property that may result from such activities, and
that Hitachi will make Commercially Reasonable Efforts to consult and cooperate with OpNext Japan
to eliminate or minimize any negative impact arising from the terms and conditions of any Existing
R&D Agreements.

          (b) Disclaimer of Warranties.
Hitachi expressly disclaims all representations and warranties, express or implied, in
connection with the R&D Support

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provided pursuant to this R&D Agreement, including the warranties
of non-infringement and title and the implied warranties of merchantability and fitness for a
particular purpose. Such R&D Support is provided on an “as is” basis, except as set forth on
Exhibit D.

          (c) Indemnification by Hitachi. From and after the Second Closing, Hitachi shall
indemnify OpNext Japan and its Affiliates and each of their respective officers, directors,
members, stockholders, partners, employees and agents (as applicable) and hold them harmless from
any loss, liability, damage or expense (including court costs and reasonable attorneys’ fees) (the
“Losses”) suffered or incurred by any such indemnified party to the extent arising from:
(i) any breach of any representation or warranty of Hitachi contained in this R&D Agreement; or
(ii) any breach of any covenant of Hitachi contained in this R&D Agreement; except to the extent
that OpNext Japan, its Affiliates, their agents and/or their independent contractors have
tortiously contributed in an intentional or grossly negligent manner to the event in question.
Notwithstanding the foregoing, in no event shall Hitachi indemnify OpNext Japan under this
indemnity provision for claims under Section 8(c)(i) brought on or after two (2) years after the
Second Closing Date and in no event shall Hitachi’s obligations under this provision exceed an
amount of four hundred and twenty-eight point six million dollars ($428.6 million).

          (d) IP Infringement Indemnification. With respect to third party patent or copyright
infringement claims or trade secret misappropriation claims regarding products, processes or
methods related to the Business as it is conducted after the Second Closing, Hitachi and OpNext
Japan shall jointly defend such action but only to the extent that such claim involves OpNext Japan
R&D IP resulting from the Current R&D Projects or Hitachi R&D IP. If a third party patent or
copyright infringement claim or trade secret misappropriation claim is made against OpNext Japan
for a new product design that is developed on or after April 1, 2001: (i) Hitachi shall be
responsible for the settlement amount of any such claim (provided that prior written approval is
obtained) or the resulting liability of any such claim only to the extent such claim results from a
Current R&D Project; (ii) OpNext Japan shall be responsible for the settlement amount of any such
claim (provided that prior written approval is obtained) or the resulting liability of any such
claim to the extent that it arises from OpNext Japan R&D IP for which OpNext Japan has paid one
hundred percent (100%) of the New Development Costs irrespective of whether such claim results from
a Current R&D Project or a Future R&D Project; and (iii) both parties shall be jointly responsible
for the settlement amount of any such claim (provided that prior written approval is obtained) for
the resulting liability of any such claim to the extent it arises from Jointly Developed
Intellectual Property in the same proportion as the parties agreed to allocate the New Development
Costs prior to commencement of the R&D Project. To the extent there is a dispute regarding the
allocation of the parties’ liabilities under this subsection, the parties shall negotiate in good
faith what the allocation of liability should be. If the parties are unable to agree even after
good faith negotiations, the parties shall submit the issue to arbitration pursuant to the
arbitration procedures set forth in Exhibit E hereto. In the event that either party
submits the
dispute to arbitration, both parties shall cooperate in such binding arbitration in accordance
with Exhibit E. Notwithstanding the foregoing, in no event shall either party indemnify the
other under this infringement and misappropriation indemnity provision for claims brought on or
after two (2) years after the Second Closing Date of the Stock Purchase Agreement and in no event
shall either party’s obligations under this provision exceed an amount of four hundred and
twenty-eight point six million dollars

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($428.6 million). The indemnification under this Section 8
shall be provided in accordance to the procedures set forth in Section 11 of the IP License
Agreement.

          (e) Indemnification by OpNext Japan. From and after the Second Closing, OpNext Japan
shall indemnify Hitachi and its Affiliates and each of their respective officers, directors,
members, stockholders, partners and employees (as applicable) against and hold them harmless from
any Losses suffered or incurred by any such indemnified party to the extent arising from: (i) any
breach of any representation or warranty by OpNext Japan contained in this R&D Agreement; or (ii)
any breach of any covenant of OpNext Japan contained in this R&D Agreement; except to the extent
that Hitachi, its Affiliates, their agents and/or their independent contractors have tortiously
contributed in an intentional or grossly negligent manner to the event in question. Notwithstanding
the foregoing, in no event shall OpNext Japan indemnify Hitachi under this indemnity provision for
claims under Section 8(e)(i) brought on or after two (2) years after the Second Closing Date and in
no event shall OpNext Japan’s obligations under this provision exceed an amount of four hundred and
twenty-eight point six million dollars ($428.6 million).

          (f) Limitation of Liability. Neither party shall be liable to the other party or any
third party for any special, consequential, exemplary or incidental damages (including lost or
anticipated revenues or profits relating to the same), arising from any claim relating to this R&D
Agreement, whether such claim is based on warranty, contract, tort (including negligence or strict
liability) or otherwise, even if an authorized representative of such party is advised of the
possibility or likelihood of same.

Section 9. Expenses. OpNext Japan shall be charged for R&D Support on the same basis that
Hitachi’s Wholly-Owned Subsidiaries are allocated research and development charges for their
activities, provided that in no event shall such terms be less advantageous from OpNext Japan’s
perspective, than those terms which could be reasonably expected to be obtained in an arms-length
transaction. Notwithstanding the foregoing, OpNext Japan acknowledges and agrees that if it
exercises its rights under Section 4(c)(iii), OpNext Japan shall pay a Mark-Up Fee to Hitachi.
Whether or not the transactions contemplated hereby are consummated, and except as otherwise
specifically provided in this R&D Agreement, all costs and expenses incurred in connection with
this R&D Agreement and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.

Section 10. Termination.
This R&D Agreement will automatically terminate and be of no further force or effect upon the
termination of the Stock Purchase Agreement or upon the tenth (10th) anniversary of the
Second Closing Date; provided, however, that the following provisions of this R&D
Agreement survive termination of this R&D Agreement: (i) Section 11 relating to the obligation of
the parties to keep confidential certain information and data (ii) Section 5(e) to the extent that
the Licensed Hitachi R&D IP and/or OpNext Japan R&D IP has not expired; (iii) Sections 8(a), 8(b),
8(c), 8(d), 8(e) and 8(f) relating to indemnification; and (iii) Section 9 relating to expenses, or
any other term which specifically states that it survives termination of this R&D Agreement.

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Section 11. Confidentiality.

          (a) Confidentiality Obligations. Confidential Information will not be disclosed or
made available by the receiving party, directly or indirectly, to any third party, except as shall
be agreed to in writing by the disclosing party. Each of the parties agrees to take all reasonable
steps to preserve the confidentiality of the other’s Confidential Information in accordance with
their respective policies for the protection of their own non-public information (which policies
shall provide at least reasonable protection) and agrees that it will be made available only to
those employees as shall have a need to see and use for the purpose of fulfilling that party’s
obligations under this R&D Agreement, and any such employee shall be informed of the confidential
nature of the Confidential Information and shall be required to observe the confidentiality
obligations in respect thereof. The receiving party shall ensure that all Confidential Information
received by it is kept separate (together with all information generated by the receiving party
therefrom) from all documents and other records of the receiving party, and that it shall not use,
reproduce, transfer or store any of the Confidential Information in an extremely accessible place.

          (b) Exclusions.

               (i) The limitations set forth in this Section 11 shall not apply with respect to the
disclosure of any information: (i) to the receiving party’s employees, auditors, counsel,
other professional advisors, sublicensees authorized under the terms of this R&D Agreement
(Sections 2(c) and 5(a) for OpNext Japan R&D IP and Section 5(b) for Hitachi R&D IP) or suppliers
if the receiving party or any of its sublicensees authorized under the terms of this R&D Agreement
(Sections 2(c) and 5(a) for OpNext Japan R&D IP and Section 5(b) for Hitachi R&D IP), in its sole
discretion, determines that it is reasonably necessary for such Person to have access to such
information, provided that any such Person agrees to be bound by the provisions of this Section
11(a) to the same extent as the receiving party; (ii) as has become or previously was generally
available to the public other than by reason of a breach of this Section 11(a) by the receiving
party or has become available to the receiving party on a non-confidential basis after the Second
Closing Date; (iii) as may be required or appropriate in any report, statement or testimony
submitted to any municipal, state or federal regulatory body having or claiming to have
jurisdiction over the receiving party (it being understood that, to the extent practicable, the
receiving party shall provide the disclosing party prompt notice to any such event and cooperate in
good faith to enable the disclosing party to participate to protect its interest in such
confidential information); (iv) as
may be required or appropriate in response to any summons or subpoena or in connection with
any litigation; and (v) in order to comply with any law, order, regulation or ruling applicable to
the receiving party.

               (ii) Notwithstanding Section 11(a)(i), to the extent that after the Second Closing Date,
Hitachi desires to disclose to Hitachi Minority-Owned Affiliates and/or suppliers OpNext Japan R&D
IP, Hitachi shall notify OpNext Japan of such desire and propose the terms and conditions of an
appropriate nondisclosure agreement into which OpNext Japan and the corresponding Hitachi
Minority-Owned Affiliate or supplier may enter. OpNext Japan agrees that within fifteen (15)
business days of receipt of such request and proposed nondisclosure agreement, OpNext Japan shall,
at its sole discretion, either: (i) enter into the proposed nondisclosure agreement and directly
provide the requested confidential information to the Hitachi Minority-Owned Affiliate or supplier;
(ii) propose reasonably modified terms and conditions of the nondisclosure agreement under which

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OpNext Japan will provide the requested confidential information to Hitachi’s Minority-Owned
Affiliate or supplier; or (iii) commence discussions with Hitachi to reach a resolution of OpNext
Japan’s concerns with respect to such disclosure, if OpNext Japan believes such disclosure is not
in the best interest of the parties. In the event that OpNext Japan elects to exercise option (ii)
or (iii), the parties agree to negotiate in good faith and on reasonable terms to resolve the
situation within a reasonable amount of time, which shall not exceed fifteen (15) Business Days of
OpNext Japan’s provision of such a response. If the parties cannot agree on a resolution in such
negotiations, then this issue shall be referred to arbitration pursuant to the arbitration
procedures set forth in Exhibit E hereto. In the event that either party submits the
dispute to arbitration, both parties shall cooperate in such binding arbitration in accordance with
Exhibit E.

          (c) Injunctive Relief. The parties acknowledge and agree that money damages would be
inadequate to remedy any breach of the confidentiality obligations in this Section 11 and that the
non-breaching party shall be entitled to obtain equitable remedies with respect to any such breach,
including injunctive relief.

          (d) Ownership. All Confidential Information furnished hereunder shall be and remain
the exclusive property of the disclosing party, and the receiving party agrees to promptly return
to the disclosing party, upon the disclosing party’s request, all documents, samples and other
material in the possession, custody or control of the receiving party that bear or incorporate any
part of the Confidential Information, including all copies made by the receiving party, except as
otherwise provided herein.

          (e) Press Releases and Announcements. Each party agrees to consult with the other as
to the general nature of any news releases or public statements with respect to the transactions
contemplated by this R&D Agreement, and use Commercially Reasonable Efforts not to issue any news
releases or public statements inconsistent with results of such consultations. Subject to
applicable
laws or the rules of any applicable securities exchange, each party shall use Commercial
Reasonable Efforts to enable the other party to review and comment on all such news releases prior
to the release thereof.

Section 12. Export Control. Each party shall comply and have its Subsidiaries or
Affiliates comply with any applicable export laws and regulations and obtain any and all export
licenses and/or governmental approvals, if necessary. In the event a licensee (under Sections 2
and 5 above) is unable to obtain any required export license or other governmental approval, and as
a result the licensor (under Sections 2 and 5 above) suffers or will suffer irreparable harm as a
result of the licensee’s failure, the parties acknowledge and agree that money damages would be
inadequate and that the licensor shall be entitled to obtain injunctive or other similar equitable
remedies with respect to any such breach.

Section 13. Notices. Any notice provided for in this R&D Agreement shall be in writing and
shall be either personally delivered, mailed first class (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to the parties at the address set forth below or at
such address or to the attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given hereunder on the
date delivered when delivered personally, seven (7) days after

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deposit in the U.S. mail or Japanese
mail and three (3) days after deposit with a reputable overnight courier service. The addresses
for OpNext Japan and Hitachi are:

If to OpNext Japan:

OpNext Japan, Inc.

216 Totsuka-cho, Totsuka-ku

Yokohama-shi, 244-8567, Japan

Attention: Harry L. Bosco

with a copy, which will not constitute notice to OpNext, to:

Kirkland & Ellis

200 East Randolph Drive

Chicago, IL 60601

Attention: William A. Streff Jr., Esq.

with a copy, which shall not constitute notice to OpNext, to:

Irell & Manella LLP

1800 Avenue of the Stars, Suite 900

Los Angeles, CA 90067

Attention: Richard L. Bernacchi, Esq.

                 Ian C. Wiener, Esq.

with a copy, which will not constitute notice to OpNext, to

Hitachi, Ltd.

6, Kanda-Surugadai 4-chome

Chiyoda-ku

Tokyo, 101-8010 Japan

Attention: Senior Group Executive, Information & Telecommunication

                Systems Group

and with a copy, which will not constitute notice to OpNext, to:

Clarity Partners, L.P.

100 North Crescent Drive

Beverly Hills, CA 90210-5403

Attention: David Lee

If to Hitachi:

Hitachi, Ltd.

6, Kanda-Surugadai 4-chome

Chiyoda-ku

Tokyo, 101-8010 Japan

Attention: Senior Group Executive, Information & Telecommunication

                Systems Group

- 21 -

 

with a copy, which will not constitute notice to Hitachi, to:

Kirkland & Ellis

200 East Randolph Drive

Chicago, IL 60601

Attention: William A. Streff Jr., Esq.

with a copy, which will not constitute notice to Hitachi, to:

Hitachi, Ltd.

Research & Development Group

New Marunouchi Bldg.,

5-1, Marunouchi 1-chome

Chiyoda-ku, Tokyo, 100-8220 Japan

Attention: President

with a copy, which will not constitute notice to Hitachi, to:

Clarity Partners, L.P.

100 North Crescent Drive

Beverly Hills, CA 90210-5403

Attention: David Lee

Section 14. Amendment and Waiver.
No amendment of any provision of this R&D Agreement shall be valid unless the same shall be in
writing and signed by OpNext Japan and Hitachi. The failure of any party to enforce any of the
provisions of this R&D Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every provision of this R&D
Agreement in accordance with its terms.

Section 15. Assignment. Except as set forth below, this R&D Agreement and any rights and
obligations hereunder shall not be assignable or transferable by OpNext Japan or Hitachi (including
by operation of law in connection with a merger or sale of stock, or sale of substantially all the
assets, of OpNext Japan or Hitachi) without the prior written consent of the other party and any
purported assignment without such consent shall be void and without effect.

Section 16. Counterparts. This R&D Agreement may be executed in one or more counterparts,
each of which shall be an original and all of which taken together shall constitute one and the
same agreement.

Section 17. Delivery by Facsimile. This R&D Agreement, the agreements referred to herein,
and each other agreement or instrument entered into in connection herewith or contemplated hereby,
and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or instrument and
shall be considered to have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such agreement or
instrument, each other party hereto shall reexecute original forms thereof and deliver them to all
other parties. No party hereto or to

- 22 -

 

any such agreement or instrument shall raise the use of a
facsimile machine to deliver a signature or the fact that any signature or agreement or instrument
was transmitted or communicated through the use of a facsimile machine as a defense to the
enforceability of a contract and each such party forever waives any such defense.

Section 18. Exhibits and Schedules. All Exhibits and Schedules annexed hereto or referred
to herein are hereby incorporated in and made a part of this R&D Agreement as if set forth in full
herein.

Section 19. Further Assurances. During the term of this R&D Agreement and at all times
thereafter, each party shall provide to the other party, at its request, reasonable cooperation and
assistance (including the execution and delivery of affidavits, declarations, oaths, assignments,
samples, exhibits, specimens and any other documentation) as necessary to effect the terms of this
R&D Agreement.

Section 20. Governing Law.
Except for Section 8(a), this R&D Agreement shall be governed by and construed in accordance
with the laws of Japan without giving effect to any choice-of-law or conflict-of-law provision or
rule (whether of Japan or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than of Japan. Section 8(a) shall be governed by and construed in accordance
with the laws of the U.S. and the State of New York without giving effect to any choice-of-law or
conflict-of-law provision or rule (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State of New York.
Regardless of the law applied, because this contract is in English, the terms and conditions of
this contract will be interpreted in accordance with the meaning of the words in American
colloquial English, notwithstanding any meaning of any word when translated into its Japanese
equivalent.

Section 21. Dispute Resolution. In the event of any dispute under this R&D Agreement, as a
condition precedent to either party seeking arbitration, in connection therewith, the parties will
attempt to resolve such dispute by good faith negotiations (except for actions seeking injunctive
relief). Such negotiations shall first involve the individuals designated by the parties as having
general responsibility for the R&D Agreement. If such negotiations do not result within thirty
(30) days from written notice of either party indicating that a dispute exists (a “Dispute
Notice”) in a resolution of the dispute, OpNext Japan shall nominate one (1) corporate officer
of the rank of vice president or higher and Hitachi shall nominate one (1) corporate officer of the
rank of Board Director or higher, which corporate officers shall meet in person and attempt in good
faith to negotiate a resolution to the dispute. In the event the corporate executives are unable
to resolve the dispute within forty-five (45) days of receipt by either party of a Dispute Notice,
a party may refer the matter to arbitration (except in the case of disputes arising under Section
11(c) for which the parties may seek injunctive relief). In the event that either party submits the
dispute to arbitration, both parties shall cooperate in such binding arbitration in accordance with
Exhibit E.

Section 22. Interpretation. The headings and captions contained in this R&D Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this R&D Agreement are for reference
purposes only and do not constitute a part of this R&D

- 23 -

 

Agreement. The use of the word “including”
herein shall mean “including without limitation.”

Section 23. No Strict Construction. Notwithstanding the fact that this R&D Agreement has
been drafted or prepared by one of the parties, OpNext Japan and Hitachi confirm that both they and
their respective counsel have reviewed, negotiated and adopted this R&D Agreement as the joint
agreement and understanding of the parties, and the language used in this R&D Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule
of strict construction shall be applied against any Person.

Section 24. Recordation.
This R&D Agreement effects a transfer and license of rights in certain Intellectual Property
and may be recorded in appropriate recordal repositories to evidence such transfer and license of
rights.

Section 25. Relationship of the Parties. The parties hereto are independent contractors.
The rights, obligations and liabilities of the parties shall be several and not joint or collective
and nothing contained in this R&D Agreement shall be construed as creating a partnership, joint
venture, agency, employment, trust or other association of any kind, each party being individually
and independently responsible as set forth in this R&D Agreement.

Section 26. Schedules or Exhibits. The disclosures set forth in any of the Schedules or
Exhibits attached hereto that related to any exception to a particular representation and warranty
made hereunder shall be taken to relate to each other Schedule or Exhibit setting forth an
exception to a representation and warranty made hereunder 5o the extent it is reasonable to expect
that such disclosure relates to such other representation and warranty. The inclusion of
information in the Schedules or Exhibits hereto shall not be construed as an admission that such
information is material to the Assets, the Business or Hitachi. In addition, matters reflected in
the Schedules or Exhibits are not necessarily limited to matters required by this R&D Agreement to
be reflected in such Schedules or Exhibits. Such additional matters are set forth for
informational purposes only and do not necessarily include other matters of a similar nature.
Prior to the Second Closing, Hitachi shall have the right to supplement, modify or update the
Schedules or Exhibits hereto to reflect changes in the ordinary course of the Business prior to the
Second Closing; provided, however, that any such supplements, modifications or
updates shall be subject to the written consent of Clarity.

Section 27. Severability. Whenever possible, each provision of this R&D Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this R&D Agreement is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of any other provision of this R&D Agreement in
such jurisdiction or affect the validity, legality or enforceability of any provision in any other
jurisdiction, but this R&D Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 28. Submission to Jurisdiction; Waivers. With respect to disputes not required to
be submitted to arbitration hereunder (including actions for injunctive relief under Section

- 24 -

 

11, or
for confirmation or enforcement of an arbitration) each party to this R&D Agreement (including any
third-party beneficiaries to this R&D Agreement) hereby irrevocably and unconditionally:

                         (i) submits for itself and its property in any legal action or proceeding relating to this R&D
Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive
general jurisdiction of the courts of Japan situated in Tokyo, Japan;

                         (ii) consents that any such action or proceeding may be brought in such courts, and waives any
objection that it may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;

                         (iii) agrees that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to such party at its address set forth herein or at such other address of which
the agent shall have been notified pursuant thereto, to the extent permitted by the laws of Japan;
and

                         (iv) agrees that nothing contained herein shall affect the right to effect service of process
in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.

Section 29. Survival. To the extent the terms of this R&D Agreement provide for rights,
interest, duties, claims, undertakings and obligations subsequent to the termination or expiration
of this R&D Agreement other than a termination caused by the termination of the Stock Purchase
Agreement, such terms of this R&D Agreement shall survive such termination or expiration, including
but not limited to the terms of Sections 1, 4, 6, 8 (subject to the two year survival period from
the Second Closing Date), 9, 11, 12, 18, 19, 20, 21, 22, 23, 26, 27, 28, 29, 30 and 31.

Section 30. Third-Party Beneficiaries. OpNext Japan and Hitachi acknowledge and agree that
this R&D Agreement is intended not only for the benefit of themselves and their Subsidiaries and
for purposes of Section 11(b)(ii) their Minority-Owned Affiliates but also for the benefit of the
Clarity Parties, OpNext, Inc. and OpNext Inc.’s Subsidiaries and Minority-Owned Affiliates.

Section 31.
Entire Agreement. Except as otherwise expressly set forth herein and except as
set forth in the other agreements executed in connection with the Stock Purchase Agreement, this
R&D Agreement and the other agreements executed in connection with the Stock Purchase Agreement
embody the complete agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related to the subject
matter hereof in any way. The provisions of all of the agreements executed in connection with the
Stock Purchase Agreement shall be construed to give effect to the provisions of all of the
agreements to the greatest extent possible; provided, however, that to the extent
that any clauses or terms in this R&D Agreement conflict with the concurrently
executed IP License Agreement, then the IP License Agreement shall govern, except for the following
provisions contained in this R&D Agreement, which shall govern: Sections 2, 3, 4, 5, 8 and 10.

*****

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          SIGNATURE PAGE TO R&D AGREEMENT

          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly
authorized officers as of the date first written above.

	 	 	 	 	 	 	 
	 	 	OPNEXT JAPAN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Junsuke Kusanagi
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Junsuke Kusanagi	 	 
	 

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	HITACHI, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Masaaki Hayashi
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Masaaki Hayashi	 	 
	 

	 	 	 	Senior Vice President and Director	 	 
	 

	 	 	 	Senior Group Executive, Information &	 	 
	 

	 	 	 	Telecommunication Systems Group	 	 

Clarity Partners, L.P., Clarity OpNext Holdings I, LLC and Clarity OpNext Holdings II, LLC hereby
acknowledge, for all purposes of the Stock Purchase Agreement, that it has approved and agreed with
the form of this Agreement.

	 	 	 	 	 	 	 
	 	 	CLARITY PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	CLARITY GENPAR, LLC,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	David Lee	 	 
	 

	 	 	 	Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	CLARITY OPNEXT HOLDINGS I, LLC	 	 
	 

	 	By:
	 	Clarity Partners, L.P., its Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	CLARITY GENPAR, LLC,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	David Lee	 	 
	 

	 	 	 	Managing Member	 	 

 

 

	 	 	 	 	 	 	 
	 	 	CLARITY OPNEXT HOLDINGS II, LLC	 	 
	 

	 	By:
	 	Clarity Partners, L.P., its Manager
	 
	 	 	 	 	 	 
	 

	 	By:
	 	CLARITY GENPAR, LLC,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Lee
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	David Lee	 	 
	 

	 	 	 	Managing Member	 	 

SIGNATURE PAGE TO R&D AGREEMENT (cont.)

 

 

EXHIBIT A

CURRENT R&D PROJECTS

Attached.

 

 

 

 

EXHIBIT B

CURRENT R&D IP

Attached.

 

 

 

 

EXHIBIT C

CALCULATION OF MARK-UP FEE

The Mark-Up Fee for purposes of Section 4(c)(iii)(1) shall be calculated as set forth below.

     1. For any applicable R&D Project, Hitachi shall determine the monthly average cost per
personnel for each Hitachi research laboratory in accordance with Section 9 of this R&D Agreement
(the “Average Man-Month Cost”).

     2. The Average Man-Month Cost shall then be multiplied by the number of
personnel devoting or billing to time to the R&D Project for one month (the “Monthly
Cost”).

     3. The Monthly Costs shall then be multiplied by the number of months (or the
pro rata portion thereof) during which work was performed on the R&D Project (the “Total
Project Cost”).

     4. “Mark-Up” shall mean the amount equal to at least twenty-percent
(20%) of
the Total Project Cost but less than or equal to forty percent (40%) of the Total Project Cost that
OpNext Japan may pay to Hitachi in accordance with Section 4(c)(iii). The Mark-Up may be increased
above 20% to the extent that both Hitachi and OpNext Japan discuss in good faith and agree that new
Intellectual Property of significantly greater value than the ordinary level is anticipated to be
created or invented at the outset of the R&D Project. The parties acknowledge that in most
situations the Mark-Up Fee shall range between 20%-40%, provided, however, that the Mark-Up may
be increased above 40% to the extent that both parties discuss in good faith and agree to the
extent of Hitachi’s contribution to the R&D Project and/or the result of the R&D Project is greater
than expected. To the extent the Mark-Up is more than 40%, the total Mark-Up shall not exceed 60%
of the portion of the Total Project Cost paid or incurred by OpNext Japan for such R&D Project.

     5. Mark-Up Fee = Hitachi’s New Development Costs incurred in the R&D
Project + Mark-Up (20%-40% x Total Project Cost) or (40% and above x Total Project Cost not to
exceed 60% of the portion of the Total Project Cost paid or incurred by OpNext Japan for such R&D
Project).

 

 

EXHIBIT D

R & D PROCEDURES

     Hitachi and OpNext Japan will comply with the following procedures and requirements in
connection with all R&D Project(s):

R & D Plan

     1. Hitachi and OpNext Japan will each designate a project manager for all R&D Projects with
supervisory responsibility for all R&D Projects (a “Project Manager”) within thirty (30) days after
the Second Closing Date. Such Project Managers shall meet and prepare an initial R&D Plan within
sixty (60) days after the Second Closing Date, covering all Current R&D Projects and all Future R&D
Projects then planned by OpNext Japan. Both Project Managers will cooperate fully in the
preparation of such R&D Plan and shall not unreasonably withhold, unreasonably delay or
unreasonably condition approval of such R&D Plan.

     2. The R&D Plan shall be updated and amended by the Hitachi Project Manager at least quarterly
subject to the OpNext Japan Project Manager’s written approval, which will not be unreasonably
withheld, unreasonably delayed or unreasonably conditioned.

     3. The Project Managers (together with such other personnel as they deem appropriate) shall
meet on a quarterly basis to prepare an updated and amended R&D Plan covering the next three (3)
months. Each will cooperate fully in such preparation and shall not unreasonably withhold,
unreasonably delay or unreasonably condition approval of such R&D Plan. In addition, Project
Managers shall report the updated-status of each R&D Project in accordance with the milestones
agreed upon at the beginning of such R&D Project.

     4. Each R&D Plan shall cover all matters reasonably requested by the Project Managers,
including the following:

          4.1 A timetable for the R&D Support to be provided for each R&D Project, including minor and
major milestones.

          4.2 A list of deliverables and specifications for each R&D Project.

          4.3 A budget and payment schedule in Japanese Yen for each R&D Project.

          4.4 Assignment of Hitachi personnel and other resources to each R&D Project.

          4.5 Test procedures for evaluation of deliverables.

          4.6 Acceptance criteria for deliverables and for final acceptance of work product for each R&D
Project, including suitability for efficient and cost-effective manufacturing.

 

 

          4.7 Reporting procedures for notifying OpNext Japan of any problems or delays encountered by
Hitachi that might affect the budget or the timetable for each R&D Project.

          4.8 Ownership of Intellectual Property developed during an R&D Project or incorporated into
the deliverables from an R&D Project.

OpNext Japan’s Obligations

     1. OpNext Japan shall use Commercially Reasonable Efforts to ensure that its Project Manager
complies with all of the requirements of this Exhibit D.

     2. At least thirty (30) days prior to the date(s) by which Hitachi is required to prepare or
amend the R&D Plan, OpNext Japan will submit to Hitachi work orders for each new R&D Project it
desires to have included in such R&D Plan, specifying in commercially reasonable detail the
specifications and other requirements for such R&D Project.

     3. OpNext Japan shall make all payments required for R&D Projects in Japanese Yen.

Hitachi’s Obligations

     1. Hitachi shall provide R&D Support in accordance with this Exhibit D and
the R&D Agreement to which it is attached.

     2. Hitachi shall at all times during the term of the R&D Agreement maintain the personnel,
facilities and resources necessary to carry out the R&D Projects reasonably requested by OpNext
Japan.

     3. Prior to commencing any R&D Project, Hitachi shall inform OpNext Japan in writing if
Hitachi anticipates that any Hitachi R&D IP or any Intellectual Property of any other person may,
will or should be incorporated into any of the deliverables for such R&D Project, including any
license terms applicable to such Hitachi R&D IP or other Intellectual Property. Similarly, Hitachi
shall so inform OpNext Japan at any time during an R&D Project that Hitachi determines that any
Hitachi R&D IP or any such Intellectual Property may, will or should be incorporated into any such
deliverable. The parties shall negotiate in good faith and on reasonable terms to agree on whether
or not such Hitachi R&D IP or other Intellectual Property will be incorporated into any of the
deliverables and on the applicable license terms.

     4. Hitachi shall make available all the necessary personnel, facilities and resources to
comply with the project timetable for each R&D Project. Hitachi shall use Commercially Reasonable
Efforts to complete each R&D Project in accordance with the project timetable and shall take steps
to minimize any delays, including providing additional resources if necessary to ensure timeliness;
provided, however, if the Hitachi does not comply with the project timetable,
OpNext Japan may terminate the R&D Project. If Hitachi has taken Commercially Reasonable Efforts to
complete such R&D Project and has taken

 

 

reasonable steps to minimize any delays, and for reasons beyond Hitachi’s (not in its capacity as a
shareholder of OpNext, Inc.) control such R&D Project has been delayed, OpNext Japan shall pay all
reasonable expenses incurred by Hitachi up until the time of the termination of such R&D Project.
Hitachi shall be responsible for compliance with all applicable laws relating to such personnel,
facilities and resources and for any claims or liabilities relating so thereto, including personal
injury, property damage and/or product liability.

     5. Within sixty (60) days after the Second Closing Date, Hitachi shall propose invention
disclosure, record keeping procedures and processing guidelines covering the procedures for
obtaining invention disclosures and identification of other Intellectual Property discovered or
developed during each R&D Project under this R&D Agreement, documentation requirements and a
timetable for applying for or registering patent applications, copyright registration and other
forms of Intellectual Property protection (“IP Procedures”), subject to OpNext Japan’s
written approval, which shall not be unreasonably withheld, unreasonably delayed or unreasonably
conditioned. Hitachi shall also make available records and documentation to support the ownership
of the Intellectual Property resulting from each R&D project under this R&D Agreement during the
term of the R&D Agreement and for the respective terms of the patents provided, however, if both
parties reasonably agree to abandon any such Intellectual Property, Hitachi shall not be obligated
to maintain any records for such abandoned Intellectual Property. Hitachi shall maintain creation
and discovery documentation of any Intellectual Property resulting from an R&D Project under this
R&D Agreement in accordance with Hitachi’s standard business practice during the term of the R&D
Agreement. At OpNext Japan’s request, Hitachi shall provide access to and copies of any such
documentation that pertains solely to the Jointly Developed Intellectual Property that is
jointly-owned under Section 4(c)(ii) of this R&D Agreement, to OpNext Japan and Hitachi shall
maintain such documentation for a one-month period after OpNext Japan has been notified of a patent
application filing. OpNext Japan shall also have the right to request copies of creation and
discovery documentation for Hitachi R&D IP resulting from an R&D Project under Section 4(c)(i) of
this R&D Agreement provided that: (i) such request is made within one month from the time OpNext
Japan is notified by Hitachi of a patent application filing; (ii) such documentation is material to
OpNext Japan’s business; and (iii) Hitachi approves to provide the copies of such documentation to
OpNext Japan, such approval not to be unreasonably withheld, unreasonably delayed or unreasonably
conditioned. Notwithstanding the above, Hitachi shall maintain the creation and discovery
documentation for Hitachi R&D IP resulting from an R&D Project under Section 4(c)(i) of this R&D
Agreement until it has determined whether such documentation shall be provided to OpNext Japan.

     6. Prior to commencing and during each R&D Project, Hitachi shall notify OpNext Japan in
writing to the extent Hitachi believes that any Hitachi R&D IP or Intellectual Property of any
other person could be utilized in connection with such R&D Project and which might or would reduce
the cost or timetable for such R&D Project. The parties shall negotiate in good faith and on
reasonable terms to agree on whether or not to include such Hitachi R&D IP or other Intellectual
Property in the R&D Project and on the applicable license terms.

 

 

     7. Hitachi shall provide to OpNext Japan reasonable training, documentation and manuals in
connection with each R&D Project, except materials subject to the restriction under Third Party
License Agreements.

     8. Hitachi represents, warrants and covenants that the R&D Support provided by Hitachi and the
deliverables and other work product from each R&D Project and the use, manufacturing, sale,
license, lease or other distribution of thereof by OpNext Japan will comply with all applicable
laws and regulations.

     9. Hitachi shall obtain assignments from all employees or other personnel working on any of
the R&D Projects that are sufficient under all applicable laws to grant to Hitachi ownership of all
Intellectual Property developed during each R&D Project that Hitachi has agreed to assign to OpNext
Japan.

     10. During the term of the R&D Agreement Hitachi will provide reasonable post-acceptance
support to OpNext Japan with respect to the deliverables and products resulting from each R&D
Project.

General

     All correspondence and other communications between the parties in connection with R&D
Projects shall be primarily conducted in the Japanese language, provided both parties shall
cooperate with each other in facilitating any translations of these documents
into the English language.

 

 

EXHIBIT E

ARBITRATION PROCEDURES

	a.	 	Appointment of Arbitrators. The arbitration shall be heard and determined by a panel
of three (3) persons. Each party shall have the right to designate one (1) member of the
panel. The party requesting arbitration shall communicate its request in writing, identifying
the nature of the dispute and the name of its arbitrator, to the other party (“Arbitration
Request”). The other party shall then name, in writing, its arbitrator within fifteen
(15) Business Days (as defined in the Stock Purchase Agreement) after receipt of the
Arbitration Request. Failure or refusal of the other party to name its arbitrator within the
fifteen (15) day time period shall empower the only appointed arbitrator to name the second
arbitrator. Within twenty-five (25) Business Days after the Arbitration Request, the two (2)
arbitrators shall mutually select a third impartial and neutral arbitrator to the panel. If
the two (2) arbitrators are unable to agree upon an arbitrator within forty-five (45) Business
Days after the Arbitration Request then within sixty-five (65) Business Days after the
Arbitration Request, the ICC shall appoint a third arbitrator.
	 
	b.	 	Governing Law and ICC. All disputes submitted to arbitration under this R&D
Agreement shall be governed by the laws specified in the agreement that is the subject of the
dispute. The arbitration rules of the International Chamber of Commerce (“ICC”) shall apply
to any arbitration under this R&D Agreement, except to the extent the provisions of this
Exhibit E vary therefrom. ICC shall administer the arbitration. Decisions of the
panel shall be made by majority vote. The panel may not award punitive damages, injunctions,
specific performance or temporary restraining orders.
	 
	c.	 	Expedited Schedule. The arbitration shall be conducted on an expedited schedule.
Unless otherwise agreed by the parties, the parties shall make their initial submissions to
the panel within seventy five (75) Business Days after the Arbitration Request. Within one
hundred twenty (120) Business Days after the Arbitration Request, each party shall supply to
the other party all documents that such party intends to introduce or upon which such party
intends to rely in connection with such proceeding, as well as a list of any and all witnesses
whose testimony such party intends to introduce in connection with such proceeding (with a
brief summary of their area of testimony). Additional documents or witnesses may be
introduced only if a majority of the arbitrators determine that good cause has been shown.
Each party shall also have the right to submit written briefs to the arbitrators in accordance
with a timetable to be established by the arbitrators. Unless agreed by the parties
otherwise, the hearing shall commence within one hundred fifty (150) Business Days after the
Arbitration Request and shall be completed within two hundred twenty five (225) Business Days
after the Arbitration Request.

 

 

	d.	 	Discovery. The parties shall be entitled to discovery of all documents and
information reasonably necessary for a full understanding of any dispute raised in the
arbitration relating to this R&D Agreement. The parties may use all methods of discovery
available under the Japanese Code of Civil Procedure and/or the United States Federal Rules of
Civil Procedure, including depositions, requests for admission and requests for production of
documents. The time periods applied to these discovery methods shall be set by the panel so
as to permit compliance with the scheduling provisions of this Exhibit E.
	 
	e.	 	Communication with Arbitrators. Each party shall communicate with the arbitrators
only in the presence of the other party or by writing delivered to the ICC for transmittal to
the arbitrators and the other party.
	 
	f.	 	Prompt Award. Unless otherwise agreed by the parties, the award shall be made
promptly by the panel (in any event, no later than thirty (30) Business Days from the closing
of the hearing). Unless otherwise agreed by the parties, the decision and award by the panel
shall be reasoned, explain the basis of the decision and be in writing. Any failure to render
the award within the foregoing time period shall not affect the validity of such award.
	 
	g.	 	Binding Decisions. The decision or award rendered or made in connection with the
arbitration shall be final and binding upon the parties thereto. The prevailing party may
present the decision or award to any court of competent jurisdiction for confirmation, and
such court shall enter forthwith an order confirming such decision or award. The arbitration
award shall allocate the expenses of the arbitrator(s) and of the arbitration, between the
parties in a manner corresponding to the extent to which one (1) party prevails over the
other.
	 
	h.	 	Location. Based upon the factors set forth below, the arbitrators shall select one
or more of the following cities for the location of the arbitration proceedings: Tokyo,
Japan; London, United Kingdom; or New York, U.S.A. The arbitrators shall take into account:
(i) the relationship between the acts and circumstances surrounding the dispute and the
arbitration location; (ii) the availability and location of witnesses; and (iii) the
accessibility and location of evidence.
	 
	i.	 	Confidentiality. All arbitration proceedings undertaken pursuant to this Exhibit
E and any awards or decisions resulting therefrom shall be deemed to be confidential
between the parties thereto. To the extent either party maintains in good faith that any
documents submitted or testimony introduced in connection with such arbitration contains
confidential information or trade secrets, the parties shall negotiate in good faith in an
effort to reach agreement regarding terms and conditions for keeping such materials and
testimony confidential. If the parties are unable to agree upon such terms, the arbitrators
shall have the right to impose appropriate restrictions to maintain the confidentiality of any
confidential information or trade secrets in connection with the arbitration.

 

 

FIRST AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT

          THIS FIRST AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT (this “Amendment”) is entered into
as of October 1, 2002 (the “Amendment Date”) by and among Hitachi, Ltd., a corporation
existing under the laws of Japan (“Hitachi”), OpNext Japan, Inc., a corporation existing
under the laws of Japan (“OpNext Japan”) and a Wholly-Owned Subsidiary of OpNext, Inc., a
Delaware corporation (“OpNext”) and Opto-Device, Ltd., a corporation existing under the
laws of Japan (“Opto-Device”). All capitalized terms used herein but not defined herein
shall have the meanings ascribed to such terms in the OpNext Japan R&D Agreement (as defined below)
or Opto-Device Stock Purchase Agreement (as defined below).

RECITALS

          WHEREAS, Hitachi and OpNext Japan have entered into that certain Research and Development
Agreement dated as of July 31, 2001 (the “R&D Agreement”);

          WHEREAS, pursuant to the terms of the Business Transfer Agreement, dated July 24, 2002, by and
between Hitachi and Opto-Device (the “Opto-Device Business Transfer Agreement”), and the
Stock Purchase Agreement, dated October 1, 2002, by and between Hitachi and OpNext (the
“Opto-Device Stock Purchase Agreement”), Hitachi and OpNext Japan desire to amend
the R&D Agreement in accordance with this Amendment;

          WHEREAS, the Opto-Device Business Transfer Agreement provides the terms and conditions under
which Hitachi sold to Opto-Device all of the Assets, which are necessary or reasonably required for
the operation of the HTS Business (as defined below) and SIC Business (as defined below);

          WHEREAS, simultaneously with the execution of this Amendment, Hitachi and OpNext are entering
into the Opto-Device Stock Purchase Agreement pursuant to which OpNext will acquire all of the
outstanding capital stock of Opto-Device; and

          WHEREAS, Hitachi, OpNext Japan and Opto-Device desire to enter into this Amendment to amend
the R&D Agreement to provide that Opto-Device shall agree to be bound by the R&D Agreement on
substantially the same terms and conditions as OpNext Japan, to expand the scope of the R&D
Agreement to include research and development support related to the SIC Business and the HTS
Business, in addition to the OpNext Japan Business (as defined below), and to extend the term of
the R&D Agreement to the tenth (10th) anniversary of the Closing Date of the Opto-Device
Stock Purchase Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
to this Amendment hereby agree as follows:

1

 

Section 1. Amendment Date.

          This Amendment shall be effective as of October 1, 2002. R&D Projects requested by OpNext
Japan prior to the Amendment Date shall be governed by the R&D Agreement. R&D Projects requested
by either OpNext Japan or Opto-Device after the Amendment Date shall be governed by the R&D
Agreement as amended by this Amendment. This Amendment and any amendments made to the provisions
of the R&D Agreement shall have no retroactive effect. For the purposes of Opto-Device and Future
R&D Projects related to the HTS Business and SIC Business, references in the R&D Agreement to the
First Closing Date and Second Closing Date shall mean the Amendment Date.

Section 2. Additional Party.

          The preamble of the R&D Agreement shall be amended to include Opto-Device as a party to the
R&D Agreement as amended by this Amendment and all references to “OpNext Japan” in the R&D
Agreement shall be deemed to refer to both OpNext Japan and Opto-Device. For the avoidance of
doubt, with respect to ownership of “OpNext Japan R&D IP” and “Jointly Developed Intellectual
Property,” references to “OpNext Japan” shall be deemed to refer to OpNext Japan if OpNext Japan
funded the development of such intellectual property or to Opto-Device if Opto-Device funded the
development of such intellectual property. Where the R&D Agreement refers to the “parties” to the
R&D Agreement, such term shall be interpreted as the context so requires (for instance, in certain
provisions, such as those relating to expenses, the “parties” shall be deemed to refer to (i)
Hitachi and OpNext Japan or (ii) Hitachi and Opto-Device).

Section 3. Amendments to Section 1.

          (1) Section 1 of the R&D Agreement is hereby amended by deleting clause (b) in its entirety
and replacing it with the following clause (b):

     (b) “Assigned IP” shall have the meaning set forth in Section 5(b) of
the Stock Contribution Agreement and the meaning set forth in Section 5(b) of the
Opto-Device Stock Purchase Agreement.

          (2) Section 1 of the R&D Agreement is hereby amended by deleting clause (d) in its entirety
and replacing it with the following clause (d):

     (d) “Business” shall mean the OpNext Japan Business, the HTS Business
and the SIC Business.

          (3) Section 1 of the R&D Agreement is hereby amended by deleting clause (h) in its entirety
and replacing it with the following clause (h):

     (h) “Current R&D Projects” shall mean (i) with respect to OpNext
Japan, the research and development projects (including any planned or proposed
research and development projects) related to OpNext Japan Business existing as of
March 31, 2001, as set forth in

2

 

Exhibit A and (ii) with respect to
Opto-Device, the research and
development projects (including any planned or proposed research and
development projects) related to the HTS Business or the SIC Business existing as
of October 1, 2002 as set forth in Exhibit A, as applicable.

          (4) Section 1 of the R&D Agreement is hereby amended by deleting clause (k) in its entirety
and replacing it with the following clause (k):

     (k) “Future R&D Projects” shall mean research and development projects
related to (1) the OpNext Japan Business to be undertaken by OpNext Japan and/or
its Affiliates or by Hitachi on behalf of OpNext Japan, on and after April 1, 2001
and (2) the SIC Business or the HTS Business to be undertaken by Opto-Device and/or
its Affiliates or by Hitachi on behalf of Opto-Device, on and after October 1,
2002.

          (5) Section 1 of the R&D Agreement is hereby amended by deleting clause (q) in its entirety
and replacing it with the following clause (q):

     (q) “Licensed IP” shall have the meaning set forth in Section 3(a) of
the IP License Agreement and the meaning set forth in Section 3(a) of the
Opto-Device IP License Agreement (as defined below).

          (6) Section 1 of the R&D Agreement is hereby amended by deleting clause (w) in its entirety
and replacing it with the following clause (w):

     (w) “New Development Costs” shall mean (1) all of the costs related to
a particular R&D Project incurred after commencement of such R&D Project on and
after April 1, 2001 with respect to R&D Projects relating to the OpNext Japan
Business and (2) all of the costs related to a particular R&D Project incurred
after commencement of such R&D Project on and after October 1, 2002 with respect to
R&D Projects relating to the SIC Business or the HTS Business. New Development
Costs shall include operating expenses and charges for the use of any tangible
property made available for use in the R&D Project but shall not include the
consideration for the use of any existing or underlying Intellectual Property owned
or controlled by either party that is used for such R&D Project.

          (7) Section 1 of the R&D Agreement is hereby amended by adding the following clauses:

     (kk) “HTS Business” shall mean the business of manufacturing
opto-device laser diodes, laser diode modules, photo diodes, modulators and
infra-red emitting diodes for telecommunication, information application and
industrial uses operated by Hitachi Tohbu Semiconductor, Ltd. as of October 1,
2002.

3

 

     (ll) “SIC Business” shall mean the business of designing, developing,
manufacturing, selling and distributing opto-device laser diodes, laser diode
modules, photo diodes, modulators and infra-red emitting diodes for
telecommunication, information application and industrial uses operated by
Hitachi’s Semiconductor and Integrated Circuits Group as of October 1,
2002.

     (mm) “OpNext Japan Business” shall mean Hitachi’s fiber optic
component business of designing, developing, manufacturing, marketing, distributing
and selling Products (as defined in the Stock Contribution Agreement) operated by
Hitachi’s Telecommunications Systems Division as of the First Closing and as
operated by OpNext Japan between the First Closing and the Second Closing Date.

     (nn) “Opto-Device IP License Agreement” shall mean that certain
Intellectual Property License Agreement, dated as of October 1, 2002, by and
between Hitachi and Opto-Device.

     (oo) “Opto-Device Stock Purchase Agreement” shall mean that certain S
tock Purchase Agreement, dated October 1, 2002, by and between Hitachi and OpNext.

Section 4. Amendments to Section 3.

          Section 3(a) of the OpNext R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following clause 3(a):

     3(a) Hitachi. Nothing contained in this R&D Agreement shall limit in
any way Hitachi’s ability to continue to conduct research and development
activities for other Hitachi business units, including its Affiliates and
Subsidiaries, including any fiber optical component business (e.g.,
semiconductors and cable) subject to the Nonsolicitation or Noncompetition
provision in Section 12 of the Stockholders’ Agreement, as amended by the First
Amendment to Stockholders’ Agreement b y among OpNext, Inc., Hitachi, Clarity,
Holdings I and Holdings II (and as otherwise amended, supplemented or modified from
time to time); provided, however, the terms and conditions of this
R&D Agreement shall be subject to the terms and conditions of any existing
agreements related to the governmental R&D projects, the joint R&D projects with
national and public universities or private universities, the
R&D projects requested by other Hitachi Subsidiaries or the joint R&D projects
with any other agency or organization (collectively, the “Existing R&D
Agreements”). Prior to the commencement of any R&D Project, Hitachi shall
disclose to OpNext Japan any restrictions contained in the Existing R&D Agreements
related to such R&D Project.

4

 

Section 5. Amendments to Section 5.

          (1) Section 5 of the R&D Agreement is hereby amended by deleting clause (a) in its entirety
and replacing it with the following clause (a):

               (a) OpNext Japan R&D IP License.

          (i) OpNext Japan will license, and does hereby license effective as of the
First Closing Date, the OpNext Japan R&D IP to Hitachi and its Wholly-Owned
Subsidiaries on a fully paid-up, non-exclusive, perpetual and irrevocable basis, to
use, make, have made, sell, advertise, offer to sell, lease, import, export and
supply products and services throughout the world. For the avoidance of doubt,
this R&D Agreement does not grant Hitachi or its Wholly-Owned Subsidiaries the
right to sublicense the OpNext Japan R&D IP and Hitachi and its Wholly-Owned
Subsidiaries shall not have the right to sublicense the OpNext Japan R&D IP without
the prior written consent of OpNext Japan, not to be unreasonably withheld,
unreasonably delayed or unreasonably conditioned.

          (ii) Status of Wholly-Owned Subsidiaries.

                    (1) License to OpNext Japan R&D IP. If at any time a Wholly-Owned
Subsidiary of Hitachi ceases to remain a Wholly-Owned Subsidiary of Hitachi,
Hitachi shall provide written notice of such change to OpNext Japan in accordance
with Section 13 of this R&D Agreement and the license under OpNext Japan R&D IP
existing as of the date such Wholly-Owned Subsidiary ceases to remain a
Wholly-Owned Subsidiary, shall continue, pursuant to the terms and conditions of
this R&D Agreement; provided, however, for any OpNext Japan R&D IP
that is developed after a Wholly-Owned Subsidiary ceases to remain a Wholly-Owned
Subsidiary, the parties shall negotiate in good faith and on commercially
reasonable terms a new license governing such Intellectual Property.

                    (2) Sublicenses. For the avoidance of doubt, this R&D Agreement does
not grant Wholly-Owned Subsidiaries of Hitachi the right to sublicense the OpNext
Japan R&D IP and an entity that ceases to remain a Wholly-Owned Subsidiary of
Hitachi shall not have the right to sublicense the OpNext Japan R&D IP without the
prior
written consent of OpNext Japan, not to be unreasonably withheld, unreasonably
delayed or unreasonably conditioned; provided, however, that to the
extent any sublicenses have been granted with OpNext Japan’s prior written consent
with respect to the OpNext Japan R&D IP during the time such entity is a
Wholly-Owned Subsidiary of Hitachi, such sublicenses shall continue, pursuant to
the terms and conditions of this R&D Agreement and such sublicense.

5

 

          (2) Section 5(b) of the R&D Agreement is hereby amended by inserting “(i)” after the section
heading “Hitachi R&D IP License.” and before the first sentence of such section and adding the
following clause (ii):

     (ii) Status of Subsidiaries. If at any time a Subsidiary or
Wholly-Owned Subsidiary of OpNext Japan or a Subsidiary or Wholly-Owned Subsidiary
of OpNext ceases to remain a Subsidiary or Wholly-Owned Subsidiary (as appropriate)
to the extent any sublicenses have been granted by OpNext Japan or OpNext to such
entity with respect to the Licensed Hitachi R&D IP during the time such entity is
such a Subsidiary or Wholly-Owned Subsidiary (as appropriate), such sublicenses of
Licensed Hitachi R&D IP existing as of the date such entity ceases to remain a
Subsidiary or Wholly-Owned Subsidiary (as appropriate) shall continue, pursuant to
the terms and conditions of this R&D Agreement and such sublicense.

Section 6. Amendments to Section 6.

          (1) Section 6(c) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following clause (c):

     (c) Infringement of Licensed Hitachi R&D IP. To the extent a
competitor of the Business is infringing the Licensed Hitachi R&D IP in OpNext
Japan’s reasonable business judgment and such infringement is material to either
(x) the OpNext Japan Business or (y) the SIC Business and the HTS Business,
Hitachi, in its sole discretion, will protect OpNext Japan’s interest by either:
(i) initiating and maintaining legal proceedings with respect to such alleged
infringement or misappropriation against any such Person on behalf of OpNext Japan
or (ii) by taking some other appropriate action that will not have a Material
Adverse Effect on the ongoing business of OpNext Japan, Inc. or Opto-Device, Ltd.;
provided that with respect to clauses (i) and (ii), the parties shall consult and
cooperate with each other in determining how to respond to the infringing
activities. For the avoidance of doubt, Hitachi may or may not consult with OpNext
Japan, Inc. or Opto-Device, Ltd. prior to determining whether to pursue (i) or
(ii). Upon the resolution of such infringement by settlement or otherwise, any
damages, profits and awards
of whatever nature recoverable for such infringement shall, after deducting
the parties’ expenses, be reasonably allocated between the parties based on the
facts and circumstances of the infringement. The parties will reasonably consider
the option of settling any such matter by granting a sublicense of all or portion
of the Licensed Hitachi R&D IP.

6

 

          (2) Section 6 of the R&D Agreement is hereby amended by adding the following clause (d):

     (d) Guaranty.

     (i) Hitachi.

                    (1) Hitachi will use reasonable best efforts to cause its Wholly-Owned
Subsidiaries (for so long as they are Wholly-Owned Subsidiaries) to comply with the
terms and conditions of this R&D Agreement and Hitachi shall be liable for any
breach of such terms and conditions.

                    (2) Hitachi will use reasonable best efforts to cause its Wholly-Owned
Subsidiaries that cease to remain Wholly-Owned Subsidiaries to comply with the
terms and conditions of this R&D Agreement applicable to such entities and Hitachi
shall be liable for any breach of such terms and conditions.

               (ii) OpNext Japan. OpNext Japan will use reasonable best efforts to
cause its sublicensees authorized pursuant to Section 5(b) to comply with the terms
and conditions of this R&D Agreement applicable to such entities and sublicense,
and OpNext Japan shall be liable for any breach of such terms and conditions.

Section 7. Amendments to Section 8.

          Section 8 of the R&D Agreement is hereby amended by adding after clause (f) the following
clauses:

     (g) Indemnification by Hitachi. From and after October 1, 2002,
Hitachi shall indemnify Opto-Device and its Affiliates and each of their respective
officers, directors, members, stockholders, partners, employees and agents (as
applicable) and hold them harmless from any Losses suffered or incurred by any such
indemnified party to the extent arising from: (i) any breach of any representation
or warranty of Hitachi contained in this R&D Agreement; or (ii) any breach of any
covenant of Hitachi contained in this R&D Agreement; except to the extent that
Opto-Device, its Affiliates, their agents and/or their independent contractors have
tortiously contributed in an intentional or grossly negligent manner to
the event in question. Notwithstanding the foregoing, in no event shall
Hitachi indemnify Opto-Device under this indemnity provision for claims under
Section 8(g)(i) brought on or after one (1) year after October 1, 2002 and in no
event shall Hitachi’s obligations under this provision exceed an amount of one
billion (1,000,000,000) Yen.

     (h) IP Infringement Indemnification. With respect to third party
patent or copyright infringement claims or trade secret misappropriation claims
regarding products, processes or methods related to the Business as it is conducted
after October 1, 2002, Hitachi and Opto-Device shall jointly defend such action but
only to the extent that such

7

 

claim involves OpNext Japan R&D IP resulting from (a)
the Current R&D Projects related to the HTS Business or the SIC Business or (b)
Hitachi R&D IP. If a third party patent or copyright infringement claim or trade
secret misappropriation claim is made against Opto-Device for a new product design
that is developed on or after October 1, 2002: (i) Hitachi shall be responsible for
the settlement amount of any such claim (provided that prior written approval is
obtained) or the resulting liability of any such claim only to the extent such
claim results from a Current R&D Project related to the HTS Business or the SIC
Business; (ii) Opto-Device shall be responsible for the settlement amount of any
such claim (provided that prior written approval is obtained) or the resulting
liability of any such claim to the extent that it arises from OpNext Japan R&D IP
relating to the HTS Business or the SIC Business for which Opto-Device has paid one
hundred percent (100%) of the New Development Costs irrespective of whether such
claim results from a Current R&D Project or a Future R&D Project; and (iii)
Opto-Device and Hitachi shall be jointly responsible for the settlement amount of
any such claim (provided that prior written approval is obtained) for the resulting
liability of any such claim to the extent it arises from Jointly Developed
Intellectual Property in the same proportion as the parties agreed to allocate the
New Development Costs prior to commencement of the R&D Project. To the extent
there is a dispute regarding the allocation of the parties’ liabilities under this
subsection, the parties shall negotiate in good faith what the allocation of
liability should be. If the parties are unable to agree even after good faith
negotiations, the parties shall submit the issue to arbitration pursuant to the
arbitration procedures set forth in Exhibit E hereto. In the event that
either party submits the dispute to arbitration, both parties shall cooperate in
such binding arbitration in accordance with Exhibit E. Notwithstanding the
foregoing, in no event shall either party indemnify the other under this
infringement and misappropriation indemnity provision for claims brought on or
after one (1) year after October 1, 2002 and in no event shall either party’s
obligations under this provision exceed an amount of one billion (1,000,000,000)
Yen. The indemnification under this Section 8 shall be provided in accordance to
the procedures set forth in Section 11 of the Opto-Device IP License Agreement.

     (i) Indemnification by Opto-Device. From and after October 1, 2002,
Opto-Device shall indemnify Hitachi and its Affiliates and each of their respective
officers, directors, members, stockholders, partners and employees (as applicable)
against and hold them harmless from any Losses suffered or incurred by any such
indemnified party to the extent arising from: (1) any breach of any representation
or warranty by Opto-Device contained in this R&D Agreement; or (2) any breach of
any covenant of Opto-Device contained in this R&D Agreement; except to the extent
that Hitachi, its Affiliates, their agents and/or their independent contractors
have tortiously contributed in an intentional or grossly negligent manner to the
event in question. Notwithstanding the foregoing,

8

 

in no event shall Opto-Device
indemnify Hitachi under this indemnity provision for claims under Section 8(i)(l)
brought on or after one (1) year after October 1, 2002 and in no event shall
Opto-Device’s obligations under this provision exceed an amount of one billion
(1,000,000,000) Yen.

     (j) Limitations on Indemnification.

               For the avoidance of doubt:

               (1) an indemnifying party’s liability under Sections 8(c)(i), 8(d) and 8(e)(i)
of this R&D Agreement, Sections 11(b), 11(c)(i) and 11(d)(i) and (iii) of the IP
License Agreement or Sections 13(a)(i) and 13(a)(v), 13(b), 13(c) and 13(d)(i) and
13(d)(vi) (as Sections 13(a) and 13(d) relate to Assigned IP, Licensed IP or any
other Intellectual Property relevant to the OpNext Japan Business) of the Stock
Contribution Agreement in the aggregate shall in no event exceed four hundred and
twenty-eight point six million dollars ($428.6 million); and

               (2) an indemnifying party’s liability under Sections 11(b), 11(c)(i) and
11(d)(i) and (iii) of the Opto-Device IP License Agreement or Sections 17(a)(i) and
17(a)(iv), 17(b), 17(c) and 17(d)(i) and 17(d)(vi) (as Sections 17(a) and 17(d)
relate to Assigned IP, Licensed IP or any other Intellectual Property relevant to
the SIC Business and HTS Business) of the Stock Purchase Agreement or Sections
8(g)(i), 8(h) and 8(i)(1) of this R&D Agreement in the aggregate shall in no event
exceed one billion Yen (¥ 1,000,000,000).

Section 8. Amendments to Section 10.

          Section 10 of the R&D Agreement is hereby amended by deleting Section 10 in its entirety and
replacing it with the following Section 10:

Section 10. Termination. This R&D Agreement will automatically terminate
and be of no further force or effect upon the tenth (10th) anniversary
of the Closing Date of the Opto-Device Stock Purchase
Agreement; provided, however, that the following provisions of this
R&D Agreement survive termination of this R&D Agreement: (i) Section 11 relating to
the obligation of the parties to keep confidential certain information and data
(ii) Section 5(e) to the extent that the Licensed Hitachi R&D IP and/or OpNext
Japan R&D IP has not expired; (iii) Section 8 relating to indemnification; and
(iii) Section 9 relating to expenses, or any other term which specifically states
that it survives termination of this R&D Agreement.

Section 9. Amendments to Section 15.

          Section 15 of the R&D Agreement is hereby amended by deleting Section 15 in its entirety and
replacing it with the following Section 15:

9

 

Section 15. Assignment. Except as set forth below, this R&D Agreement and
any rights and obligations hereunder shall not be assignable or transferable by
OpNext Japan or Hitachi or Wholly-Owned Subsidiaries (whether or not it is a
Wholly-Owned Subsidiary at the time) of OpNext Japan or Hitachi (including by
operation of law in connection with a merger or sale of stock, or sale of
substantially all the assets, of OpNext Japan or Hitachi or Wholly-Owned
Subsidiaries of OpNext Japan or Hitachi) without the prior written consent of the
other party and any purported assignment without such consent shall be void and
without effect; provided, however, that this R&D Agreement, in its
entirety, shall be assignable by OpNext Japan (or any successor to OpNext Japan) to
OpNext, Inc. or any Wholly-Owned Subsidiary of OpNext, Inc.

Section 10. Hitachi Communication Technologies.

          The R&D Agreement is hereby amended by adding a new section 32 as follows:

Section 32. Hitachi Communication Technologies, Ltd. For purposes of this
R&D Agreement, the defined term “Wholly-Owned Subsidiary” shall not include
Hitachi’s Wholly-Owned Subsidiary, Hitachi Communication Technologies, Ltd.

Section 11. Amendments to Exhibits.

          (a) Exhibit A to the R&D Agreement is hereby amended by adding to such Exhibit the document
attached to this Amendment as Exhibit A-1 (Current R&D Projects related to the HTS Business and the
SIC Business).

          (b) Exhibit B to the R&D Agreement is hereby amended by adding to such Exhibit the document
attached to this Amendment as Exhibit B-1 (Intellectual Property resulting from the Current R&D
Projects related to the HTS Business and the SIC Business).

Section 12. No Other Amendments.

          Except as expressly set forth herein, all other terms and conditions of the R&D Agreement
shall remain unmodified, in full force and effect and shall apply to this Amendment.

Section 13. Governing Law.

          This Amendment shall be governed by and construed in accordance with the laws of Japan without
giving effect to any choice-of-law or conflict-of-law provision or rule (whether of Japan or any
other jurisdiction) that would cause the application of the laws of any jurisdiction other than of
Japan. Regardless of the law applied, because this contract is in English, the terms and
conditions of this contract will be interpreted in

10

 

accordance with the meaning of the words in
American colloquial English, notwithstanding any meaning of any word when translated into its
Japanese equivalent.

Section 14. Dispute Resolution.

          In the event of any dispute under this Amendment, as a condition precedent to either party
seeking arbitration, in connection therewith, the parties will attempt to resolve such dispute by
good faith negotiations (except for actions seeking injunctive relief). Such negotiations shall
first involve the individuals designated by the parties as having general responsibility for the
R&D Agreement. If such negotiations do not result within thirty (30) days from written notice of
either party indicating that a dispute exists (a “Dispute Notice”) in a resolution of the
dispute, Opto-Device shall nominate one (1) corporate officer of the rank of vice president or
higher and Hitachi shall nominate one (1) corporate officer of the rank of Board Director or
higher, which corporate officers shall meet in person and attempt in good faith to negotiate a
resolution to the dispute. In the event the corporate executives are unable to resolve the dispute
within forty-five (45) days of receipt by either party of a Dispute Notice, a party may refer the
matter to arbitration (except in the case of disputes arising under Section 11(c) for which the
parties may seek injunctive relief). In the event that either party submits the dispute
to arbitration, both parties shall cooperate in such binding arbitration in accordance with
Exhibit E to the R&D Agreement.

Section 15. Interpretation.

          The headings and captions contained in this Amendment and in any Exhibit are for reference
purposes only and do not constitute a part of this Amendment. The use of the word “including”
herein shall mean “including without limitation.”

Section 16. Severability.

          Whenever possible, each provision of this Amendment shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Amendment held to be
invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other provision of this Amendment
in such jurisdiction or affect the validity, legality or enforceability of any provision in any
other jurisdiction, but this Amendment shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never been contained
herein.

Section 17. Counterparts.

          This Amendment may be executed in one or more counterparts, each of which shall be an original
and all of which taken together shall constitute one and the same agreement.

*****

11

 

SIGNATURE PAGE TO FIRST AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT

          IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly
authorized officers as of the Amendment Date.

	 	 	 	 	 	 	 
	 	 	OPNEXT JAPAN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Tadayuki Kanno
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Tadayuki Kanno	 	 
	 

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	HITACHI, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Satoru Ito
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Satoru Ito	 	 
	 

	 	 	 	President and Chief Executive Officer,	 	 
	 

	 	 	 	Semiconductor & Integrated Circuits	 	 
	 
	 	 	 	 	 	 
	 	 	OPTO-DEVICE, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Yasutoshi Kashiwada
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Yasutoshi Kashiwada	 	 
	 

	 	 	 	President	 	 

 

 

EXHIBIT A-1

Current R&D Projects related to the HTS Business and the SIC Business

Attached

A-1

 

 

 

EXHIBIT B-1

Intellectual Property resulting from the Current R&D Project related to th HTS

Business and the SIC Business

Attached

B-1

 

 

 

SECOND AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT

          THIS SECOND AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT (this “Amendment”) is entered into
as of October 27, 2006 (the “Amendment Date”), by and between Hitachi, Ltd., a corporation
existing under the laws of Japan (“Hitachi”) and Opnext Japan, Inc., a corporation existing
under the laws of Japan (“Opnext Japan”) and a Wholly-Owned Subsidiary of Opnext, Inc., a
Delaware corporation (“Opnext, Inc.”), and successor by merger to Opto-Device, Ltd., a
corporation formerly existing under the laws of Japan (“Opto-Device”). All capitalized
terms used herein but not defined herein shall have the meaning ascribed to such terms in the R&D
Agreement (as defined below).

RECITALS

          WHEREAS, Hitachi and Opnext Japan have entered into that certain Research and Development
Agreement dated as of July 31, 2001 (the “Original R&D Agreement”), as amended by the First
Amendment thereto dated as of October 1, 2002 (the “First Amendment” and together with the
any other amendments to the Original R&D Agreement, the “R&D Agreement”); and

          WHEREAS, Hitachi and Opnext Japan desire to enter into this Amendment to further amend the R&D
Agreement as set forth herein.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
to this Amendment hereby agree as follows:

Section 1. Amendment Date.

          This Amendment shall be effective as of the Amendment Date. This Amendment and any amendments
made to the provisions of the R&D Agreement hereunder shall have no retroactive effect.

Section 2. Amendment.

          (1) Section 1(o) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:

“Jointly Developed Intellectual Property” shall mean all Intellectual
Property resulting from an R&D Project under this R&D Agreement in accordance with
Section 4(c)(ii) hereof, and shall exclude Hitachi R&D IP, Licensed IP and Assigned
IP and Opnext Japan R&D IP.

          (2) Section 2(c)(ii) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following Section 2(c)(ii):

(ii) Termination Conditions. Such license shall not be terminated or its
exploitation enjoined, until and unless: (i) Opnext Japan has committed

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a material breach of its obligations under this R&D Agreement, Hitachi has given
written notice of such breach to Opnext Japan and such breach remains uncured after
sixty (60) days of receiving notice of such breach (the “Cure Period”), or,
in the case of a breach that cannot be cured within such Cure Period, Opnext Japan
has not instituted within such Cure Period steps necessary to remedy the default
and/or thereafter has not diligently pursued the same to completion; or (ii) Opnext
Japan has committed an incurable material breach. In the event the breach is a
curable breach that cannot be cured within the Cure Period but with respect to
which Opnext Japan has instituted steps necessary to remedy the default and is
thereafter diligently pursuing such cure, both parties shall negotiate to determine
whether further pursuit of such cure is reasonable. If the parties cannot agree on
a resolution in such negotiations, then this issue shall be referred to arbitration
pursuant to the arbitration procedures set forth in Exhibit E hereto to
decide whether such breach can be cured or any other alternative remedy should be
adopted. In the event the breach is an incurable breach, (i) the parties agree
that the matter shall be referred to arbitration pursuant to the arbitration
procedures set forth in Exhibit E hereto to determine the appropriate
remedy, and (ii) Opnext Japan shall provide an on-going plan to address the
prevention of such a breach occurring again reasonably acceptable to Hitachi within
sixty (60) days of written notice of the breach and shall implement and comply with
such plan within the time period set forth in such plan. In the event that either
party submits the dispute to arbitration, both parties shall cooperate in such
binding arbitration in accordance with Exhibit E.

          (3) Section 2(c)(iii) of the R&D Agreement is hereby amended by deleting it in its entirety
and replacing it with the following Section 2(c)(iii):

          (iii) License Term. The license to the Intellectual Property licensed
pursuant to Section 2(c)(i) shall be irrevocable and: (i) with respect to patent
rights, shall survive for so long as any applicable patent is valid; and (ii) with
respect to all other Intellectual Property, shall be perpetual.

          (4) The last sentence of Section 4(a) of the R&D Agreement is hereby amended by deleting it in
its entirety and replacing it with the following sentence:

          Hitachi shall cooperate with Opnext Japan in a reasonable manner in obtaining
such protection, including, obtaining signatures of Hitachi employees, contractors
and/or officials on official papers.

          (5) The last sentence of Section 4(b) of the R&D Agreement is hereby amended by deleting it in
its entirety and replacing it with the following sentence:

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          Hitachi shall have the right to apply, in its own name and at its own expense,
for Intellectual Property protection in Hitachi R&D IP and, if requested, Opnext
Japan shall cooperate with Hitachi in any reasonable manner in obtaining such
protection, including, obtaining signatures of Opnext Japan employees, contractors
and/or officials on official papers.

          (6) Section 4(c)(ii)(1) of the R&D Agreement is hereby amended by deleting it in its entirety
and replacing it with the following Section 4(c)(ii)(1):

          (1) If the R&D Project is jointly funded by the parties and either: (A)
Opnext Japan contributes fifty percent (50%) or more of the New Development Costs
to the R&D Project; or (B) Opnext Japan contributes less than fifty percent (50%)
of the New Development Costs to the R&D Project but (i) one or more employees or
contractors (other than employees of Hitachi or its Subsidiaries) of Opnext Japan
are “inventors” under the applicable patent laws of the applicable jurisdiction or
(ii) the parties determine through good faith negotiations that Opnext Japan
contributed to the R&D Project in some other fashion, and in both (A) and (B) above
the resulting Intellectual Property can clearly be identified with reasonable
certainty as that resulting from such R&D Project, then such Intellectual Property
shall be deemed Jointly Developed Intellectual Property and shall be owned jointly
by the parties and either party may practice such Jointly Developed Intellectual
Property without an accounting or compensation to, or the consent of, the other
party. Except as set forth in Section 4(c)(iii) below, if either party desires to
license any of its rights to the Jointly Developed Intellectual Property herein to
a third party, it shall obtain the prior written consent of the other party hereto.
Each party shall have the right to apply, in both parties’ names, for Intellectual
Property protection in the Jointly Developed Intellectual Property. The parties
shall agree on the proper way and strategy for proceeding with all protection of
the Jointly Developed Intellectual Property in accordance with the R&D Procedures.
All expenses incurred in obtaining and maintaining Intellectual Property protection
in the Jointly Developed Intellectual Property shall be equally shared by the
parties. In the event that one (1) of the parties elects not to seek or maintain
patent or other intellectual or industrial property protection for any Jointly
Developed Intellectual Property in any particular country or not to share equally
in the expenses thereof with the other party, the other party shall have the right
to seek or maintain such protection at its sole expense in such country and shall
have full control over the prosecution and maintenance thereof even though title to
any patent or other intellectual or industrial property protection issuing
therefrom shall be jointly owned by the parties.

          (7) Section 5(d) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following Section 5(d):

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     (d) Termination Conditions. Such a license of Opnext Japan R&D IP to
Hitachi and of Licensed Hitachi R&D IP to Opnext Japan shall not be terminated or
its exploitation enjoined, until and unless: (i) the licensee has committed a
material breach of its obligations under this R&D Agreement, the licensor has given
written notice of such breach to the licensee and such breach remains uncured
during the Cure Period, or, in the case of a breach which cannot be cured within
such Cure Period, the licensee has not instituted within such Cure Period steps
necessary to remedy the default and/or thereafter has not diligently pursued the
same to completion; or (ii) the breaching party has committed an incurable material
breach. In the event the breach is a curable breach that cannot be cured within
the Cure Period but the licensee has instituted steps necessary to remedy the
default and is thereafter diligently pursuing such cure, both parties shall
negotiate to determine whether further pursuit of the cure is reasonable. If the
parties cannot agree on a resolution in such negotiations, then this issue shall be
referred to arbitration pursuant to the arbitration procedures set forth in
Exhibit E hereto to decide whether such breach can be cured or any other
alternative remedy should be adopted. In the event the breach is an incurable
breach, (i) the parties agree that the matter shall be referred to arbitration
pursuant to the arbitration procedures set forth in Exhibit E hereto to
determine the appropriate remedy, and (ii) the breaching party shall provide an
on-going plan to address the prevention of such a breach occurring again reasonably
acceptable to non-breaching party within sixty (60) days of written notice of the
breach and shall implement and comply with such plan within the time period set
forth in such plan. In the event that either party submits the dispute to
arbitration, both parties shall cooperate in such binding arbitration in accordance
with Exhibit E.

          (8) Section 5(e) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following Section 5(e):

     (e) License Term and Review of Obligations.

     (i) License Term. The license to the Opnext Japan R&D IP to Hitachi
and Licensed Hitachi Future R&D IP (as defined below) to Opnext Japan shall be
irrevocable and: (i) with respect to patent rights, shall survive for so long as
any applicable patent is valid; and (ii) with respect to all other Opnext Japan R&D
IP and Licensed Hitachi Future R&D IP, shall be perpetual. For purposes of this
Section, the term “Licensed Hitachi Future R&D IP” means Licensed Hitachi
R&D IP resulting from a Future R&D Project. Notwithstanding the foregoing, (A) if
one (1) of the conditions set forth in Section 5(d) is met, (x) Hitachi may
terminate the licenses to Licensed Hitachi R&D IP that is developed or filed on or
after the effective date of termination and (y) the licenses granted Opnext Japan
to Licensed Hitachi Future R&D IP developed or filed prior to the effective date of
termination shall continue pursuant to

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the terms and conditions set forth herein and (B) if one (1) of the conditions
set forth in Section 5(d) is met, (x) Opnext Japan may terminate the licenses to
Opnext Japan R&D IP that is developed or filed on or after the effective date of
termination and (y) the licenses granted Hitachi to Opnext Japan R&D IP developed
or filed prior to the effective date of termination shall continue pursuant to the
terms and conditions set forth herein.

     (ii) Review of Obligations. The obligations set forth in this Section
5 with respect to Licensed Hitachi Other R&D IP (as defined below) shall expire on
the tenth (10th) anniversary of the Second Closing Date of the Stock Contribution
Agreement; provided, however, that the licenses under Licensed Hitachi Other R&D IP
existing as of the tenth (10th) anniversary of the Second Closing Date shall
continue, under reasonable terms and conditions to be agreed between the parties,
until the expiration of all of such Licensed Hitachi Other R&D IP. Notwithstanding
the foregoing, if one (1) of the conditions set forth in Section 5(d) is met,
Hitachi may elect to be completely relieved of its obligations set forth in this
Section 5 with respect to Licensed Hitachi Other R&D IP. If Hitachi elects to be
relieved of its obligations under this Section 5(d), the parties shall renegotiate
in good faith and on commercially reasonable terms a new license governing the
Licensed Hitachi Other R&D IP. For purposes of this Section, the term “Licensed
Hitachi Other R&D IP” means any Licensed Hitachi R&D IP other than Licensed Hitachi
Future R&D IP. For the avoidance of doubt, the expiration or termination of Opnext
Japan’s rights under this R&D Agreement with respect to Licensed Hitachi Other R&D
IP will in no way affect Opnext Japan’s rights with respect to such Licensed
Hitachi Other R&D IP, if any, under any other agreement to which Opnext Japan is a
party.

          (9) Section 10 of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:

     This R&D Agreement will automatically terminate and be of no further force or
effect upon the fifth anniversary of an Initial Public Offering (as defined in the
Stockholders’ Agreement); provided, however, that the provisions of this R&D
Agreement identified in Section 29 shall survive expiration or termination of this
R&D Agreement.

          (10) Section 11(a) of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following Section 11(a):

     (a) Confidentiality Obligations. Confidential Information will not
be disclosed or made available by the receiving party, directly or indirectly, to
any third party, except as shall be agreed to in writing by the disclosing party.
Each of the parties agrees to take all reasonable steps to

5

 

preserve the confidentiality of the other’s Confidential Information in
accordance with their respective policies for the protection of their own
non-public information (which policies shall provide at least reasonable
protection) and agrees that it will be made available only to those employees and
contractors as shall have a need to see and use for the purpose of fulfilling that
party’s obligations under this R&D Agreement, and any such employee and contractor
shall be informed of the confidential nature of the Confidential Information and
shall be required to observe the confidentiality obligations in respect thereof.
The receiving party shall ensure that all Confidential Information received by it
is kept separate (together with all information generated by the receiving party
therefrom) from all documents and other records of the receiving party, and that it
shall not use, reproduce, transfer or store any of the Confidential Information in
an extremely accessible place.

          (11) Section 15 of the R&D Agreement is hereby amended by adding the following clause at the
end:

provided, however, that this R&D Agreement, in its entirety, shall be assignable by
Opnext Japan (or any successor to Opnext Japan) to Opnext, Inc. or any Wholly-Owned
Subsidiary of Opnext, Inc. For the avoidance of doubt, the parties agree that an
Initial Public Offering (as defined in the Stockholders’ Agreement) shall not
require the consent of Hitachi.

          (12) Section 29 of the R&D Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:

Section 29. Survival. To the extent the terms of this R&D Agreement provide for
rights, interest, duties, claims, undertakings and obligations subsequent to the
termination or expiration of this R&D Agreement other than a termination caused by
the termination of the Stock Purchase Agreement, such terms of this R&D Agreement
shall survive such termination or expiration, including but not limited to the
terms of Sections 1, 4, 5 (with respect to licenses to Intellectual Property (other
than Licensed Hitachi Other R&D IP) granted hereunder prior to the effective date
of such termination), 6, 8 (subject to the two year survival period from the Second
Closing Date), 9, 11, 12, 18, 19, 20, 21, 22, 23, 26-34.

          (13) A new Section 33 is hereby added to the R&D Agreement which provides as follows:

Section 33. Bankruptcy. The parties agree that if a party becomes a debtor
or debtor-in-possession under Title 11 of the United States Code (the
“Bankruptcy Code”): (i) in the event of a rejection or proposed rejection
of this R&D Agreement under Section 365 of the Bankruptcy Code, any and all rights
licensed pursuant to this R&D Agreement shall be

6

 

deemed to fall within the definition of “intellectual property” under Section 101
of the Bankruptcy Code and, in connection therewith, Section 365(n) of the
Bankruptcy Code shall be implicated by such rejection or proposed rejection; and
(ii) notwithstanding Section 365(c) of the Bankruptcy Code or applicable
non-bankruptcy law which prohibits, restricts or conditions the assignment or
assumption of this R&D Agreement or any of the rights therein, but subject to the
debtor-in-possession or trustee, as applicable, otherwise complying with the
requirements of Section 365 of the Bankruptcy Code for assumption, the
debtor-in-possession or trustee in bankruptcy may assume this R&D Agreement. The
parties agree that if a party files for bankruptcy under the laws of any other
jurisdiction, the terms of this section will apply to the extent necessary to
preserve the rights provided in this Section 33.

          (14) A new Section 34 is hereby added to the R&D Agreement which provides as follows:

Section 34. Injunctive Relief. Each party acknowledges and agrees that the
other party’s Intellectual Property and Confidential Information are valuable
property of such other party and that a material breach of this R&D Agreement
(including unauthorized use of Intellectual Property or disclosure of Confidential
Information) will cause irreparable injury for which the injured party does not
have an adequate remedy at law and for which monetary remedies are not sufficient.
Each party shall be entitled to seek equitable relief (including the granting of
injunctive relief in that party’s favor) without the obligation of posting a bond
if the other party makes or threatens a material breach of this R&D Agreement
(including unauthorized use of Intellectual Property or disclosure of Confidential
Information). Each party agrees that equitable relief is not exclusive of other
remedies to which the other party may be entitled at law or in equity as a result
of any such material breach of this R&D Agreement (including any unauthorized use
or disclosure of that party’s Intellectual Property or Confidential Information).

Section 3. No Other Amendments.

          Except as expressly set forth herein, all other terms and conditions of the R&D Agreement
shall remain unmodified, in full force and effect and shall apply to this Amendment.

Section 4. Governing Law.

          This Amendment shall be governed by and construed in accordance with the laws of Japan without
giving effect to any choice-of-law or conflict-of-law provision or rule (whether of Japan or any
other jurisdiction) that would cause the application of the laws of any jurisdiction other than of
Japan. Regardless of the law applied, because this contract is in English, the terms and
conditions of this contract will be interpreted in

7

 

accordance with the meaning of the words in American colloquial English, notwithstanding any
meaning of any word when translated into its Japanese equivalent.

Section 5. Dispute Resolution.

          In the event of any dispute under this Amendment, as a condition precedent to either party
seeking arbitration, in connection therewith, the parties will attempt to resolve such dispute by
good faith negotiations (except for actions seeking injunctive relief). Such negotiations shall
first involve the individuals designated by the parties as having general responsibility for the
R&D Agreement. If such negotiations do not result within thirty (30) days from written notice of
either party indicating that a dispute exists (a “Dispute Notice”) in a resolution of the
dispute, Opnext Japan shall nominate one (1) corporate officer of the rank of vice president or
higher and Hitachi shall nominate one (1) corporate officer of the rank of Board Director or
higher, which corporate officers shall meet in person and attempt in good faith to negotiate a
resolution to the dispute. In the event the corporate executives are unable to resolve the dispute
within forty-five (45) days of receipt by either party of a Dispute Notice, a party may refer the
matter to arbitration (except in the case of disputes arising under Section 11(c) or Section 34 of
the R&D Agreement for which the parties may seek injunctive relief). In the event that either party
submits the dispute to arbitration, both parties shall cooperate in such binding arbitration in
accordance with Exhibit E to the R&D Agreement.

Section 6. Interpretation.

          The headings and captions contained in this Amendment and in any Exhibit are for reference
purposes only and do not constitute a part of this Amendment. The use of the word “including”
herein shall mean “including without limitation.”

Section 7. Severability.

          Whenever possible, each provision of this Amendment shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Amendment held to be
invalid, illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Amendment in such jurisdiction or affect
the validity, legality or enforceability of any provision in any other jurisdiction, but this
Amendment shall be reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

Section 8. Order of Precedence. To the extent of a conflict between this Amendment and the
First Amendment, the terms and conditions of this Amendment shall control.

8

 

     Section 9. Counterparts.

          This Amendment may be executed in one or more counterparts, each of which shall be an original
and all of which taken together shall constitute one and the same agreement.

* * * * *

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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized
officers as of the Amendment Date.

	 	 	 	 	 	 	 
	OPNEXT JAPAN, INC.

	 	 	 	HITACHI, LTD.	 	 
	 
	 	 	 	 	 	 
	/s/ Kei Oki
 

	 	 	 	/s/ Naoya Takahashi
 

	 	  
	Name: Kei Oki

	 	 	 	Name: Naoya Takahashi	 	 
	Title: President

	 	 	 	Title: Vice President and Executive Officer	 	 

SIGNATURE PAGE TO SECOND AMENDMENT TO OPNEXT JAPAN R&D AGREEMENT

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