CONFIDENTIAL AMENDED AND RESTATED DISTRIBUTORSHIP AGREEMENT

1.

DEFINITIONS

1.1.

For purposes of this Agreement, the capitalized terms defined below and elsewhere in this Agreement have the meanings so defined, and such definitions apply to both singular and plural forms:

(a)

“Products” means both LED Products and Wafer Products.

(b)

“LED Products” means visible or ultraviolet light emitting diodes (LEDs) in die form that are fabricated by or for Manufacturer using Group III-nitride materials on silicon carbide wafers and that Manufacturer makes generally available to customers for purchase during the term of this Agreement.

(c)

“Wafer Products” means silicon carbide wafers, either without epitaxial layers or with silicon carbide epitaxial layers deposited thereon, made by or for Manufacturer and that Manufacturer makes generally available to customers for purchase during the term of this Agreement.

(d)

“Territory A” means the country of Japan.

(e)

“Territory B” means the countries of the Republic of China (Taiwan), Singapore and the Philippines.

(f)

“Territory C” means the countries of [***], the Republic of Korea, the Republic of Indonesia, Thailand and Malaysia.

(g)

“Territory” means Territory A, Territory B and Territory C, collectively.

(h)

“Liaison Office” means the representative office established by Manufacturer, through an Affiliate, in the Tokyo, Japan area.

(i)

“Affiliate” of a designated person means any person that controls, is controlled by, or is under common control with the named person, whether directly or through one or more intermediaries, where “control” means possession of the power to direct the management, operations or policies of the controlled person through stock ownership, contract or other arrangements.

1.2.

For purposes of this Agreement, “person” shall be construed broadly to mean any individual, corporation, partnership or other legal entity, and the terms “fiscal quarter” and “fiscal year” shall refer to the respective accounting periods used by Manufacturer.

2.

TERM

2.1.

Subject to the provisions of Sections 8.6(a) and 9.2, the term of this Agreement (the “Term”) shall extend for a period of five (5) years commencing June 23, 2002 and ending June 24, 2007, unless sooner terminated in accordance with the provisions of this Agreement.

2.2.

Subject to the provisions of Sections 8.6(a) and 9.2, the Term shall be renewed from year to year thereafter unless one party gives the other party a written notice electing not to renew this Agreement at least ninety (90) days prior to the expiration of the then existing term or any renewal thereof.

2.3.

The parties acknowledge and agree that neither is obligated to continue its business relationship with the other after the effective date of any termination of this Agreement or the expiration date if this Agreement is not renewed.

3.

DESIGNATION

3.1.

Distributor will serve as the strategic partner and exclusive distributor of Manufacturer for distribution of Products in Territory A during the Term of this Agreement. Section 4.1 below defines the exclusive nature of Distributor’s appointment in Territory A.

3.2.

Subject to the provisions in Section 4.2 below, Distributor will serve as a non-exclusive distributor for distribution of the Products in Territory B and Territory C during the Term of this Agreement.

4.

EXCLUSIVITY; NON-EXCLUSIVE TERRITORIES

4.1

During the Term of this Agreement and subject to Distributor’s compliance with its obligations in Section 5 below, except as otherwise provided in Sections 8.2(d) and 9.4 below, Manufacturer will not, without Distributor’s written consent, directly or through any Affiliate sell Products to any person other than Distributor for shipment by Manufacturer into Territory A. This Section 4.1 shall not be construed to restrict Manufacturer or its Affiliates from selling or authorizing the sale of Products to persons outside Territory A.

4.2

Distributor’s appointment in Territory B and Territory C is non-exclusive. Distributor shall not advise any customer or potential customer in such territories that it may only purchase Products from Distributor. Customers in such territories shall be free to choose to purchase Products directly from Manufacturer or from another distributor, as applicable. With respect to marketing, sales and deliveries by Distributor in Territory C, Distributor may [***]. Subject to any applicable export restrictions, Distributor may request that Manufacturer [***]. If the customer prefers to purchase Products directly from Manufacturer, the provisions of Section 10 will apply upon request for assistance by Manufacturer.

5.

DUTIES OF DISTRIBUTOR

5.1

Distributor agrees to perform and comply with the following during the Term of this Agreement:

(a)

It will use its best efforts, to the fullest extent commercially reasonable, to promote the sale of the Products within the Territory through its sales and merchandising programs in order to obtain and sustain the maximum sales of Products in the Territory and will solicit orders for and sell the Products within the Territory.

(b)

Distributor will furnish Manufacturer with reports on the following matters in writing not less frequently than the period shown, and promptly upon request at such other times as Manufacturer may request in writing, with the report to be delivered to Manufacturer and/or the Liaison Office as indicated below unless otherwise requested by Manufacturer:

(c)

In addition, in its role as the strategic partner of Manufacturer for distribution of the Products in Territory A, Distributor will cooperate with Manufacturer and the Liaison Office to establish, to the fullest practicable extent, a “transparent interface” between Manufacturer and customers for the Products such that the Liaison Office is kept fully informed of all developments relating to customers for the Products and that the Product sales and marketing efforts of Distributor are coordinated with the efforts of the Liaison Office. Without limiting the foregoing, upon request Distributor will make available to the Liaison Office copies of all quotes, invoices, customer correspondence and other records relating to the sale and marketing of the Products in Territory A and in Territory C.

(d)

Distributor will at all times conduct its affairs under this Agreement in accordance with the highest standards of business ethics and propriety. It will comply with all applicable laws and regulations in performing its obligations under this Agreement and will apply for and obtain (at its own expense) all licenses and approvals necessary to perform its obligations hereunder except as provided in Section 12.2.

(e)

Without Manufacturer’s prior written consent, neither Distributor nor its directors, officers, agents or employees shall at any time during the Term of this Agreement, directly or indirectly, (i) establish any Product distribution branch or maintain any Product distribution depot outside the Territory, or (ii) manufacture, distribute, represent, sell or otherwise handle any products that, in the reasonable opinion of Manufacturer, [***], including without limitation [***]; provided that the foregoing limitations as provided in this Section 5.1(e) will only apply to [***].

(f)

Distributor will not market, sell or otherwise distribute Products purchased under this Agreement outside the Territory except as may be authorized by Manufacturer in writing from time to time. Distributor will not, without Manufacturer’s prior written consent, which consent will not be unreasonably withheld, sell or otherwise distribute the Products purchased under this Agreement to a person other than an end user customer. Notwithstanding any language herein to the contrary, the parties hereto confirm that [***].

(g)

Distributor will appoint at least one employee within its organization to coordinate the performance of its responsibilities under this Agreement.

(h)

Distributor shall be responsible for obtaining any required licenses, permits and other governmental approvals necessary for the export of Products from the United States and their import into the Territory, except as provided in Section 12.2, and will otherwise comply with all export and import laws and regulations applicable to its activities under this Agreement.

6.

DUTIES OF MANUFACTURER

6.1

Subject to Section 7 below, Manufacturer agrees to use its best efforts, to the fullest extent commercially reasonable, to meet the requirements of Distributor for Products during the Term of this Agreement and to perform and comply with the following during the Term of this Agreement:

(a)

Manufacturer shall [***] unless Distributor’s exclusivity with respect to such Product(s) or territory is no longer in effect as otherwise provided in this Agreement.

(b)

Manufacturer shall maintain the Liaison Office, either directly or through an Affiliate, and shall staff such office with one or more full-time personnel, to provide support for sales of the Products in Territory A.

(c)

Manufacturer shall furnish to Distributor, at no cost, such catalogues, specifications and technical data literature as Manufacturer makes available to its customers generally and shall provide the materials in such quantities as Distributor may reasonably request to support is sales of the Products in the Territory.

(d)

Manufacturer will invite Distributor to participate in any discussions between the Liaison Office or Manufacturer and Distributor’s customers concerning Products to be purchased in connection with this Agreement provided that Distributor agrees to be bound by the same restrictions on information disclosed in such discussions as the customer and in any event, such discussions will be subject to the provisions in Section 14 below.

(e)

Subject to availability, Manufacturer shall supply Distributor Products in accordance with this Agreement in quantities adequate to the Distributor’s reasonable requirements for sales in the Territory. In the event orders for Products exceed Manufacturer’s ability to manufacture and deliver them, Manufacturer will allocate to the Distributor [***], which allocation Manufacturer shall determine in its sole discretion exercised in good faith; provided, however, that in no event shall Manufacturer treat the Distributor less favorably than it will any of Manufacturer’s other customers for the Products in allocating such supply.

(f)

Manufacturer shall provide training services to sales and service personnel of Distributor at the Liaison Office or at Manufacturer’s principal offices to such scope and extent as reasonably necessary for the Distributor to promote sales and service of the Products in the Territory. Nothing in this clause or elsewhere in this Agreement shall be construed to require Manufacturer to disclose proprietary and confidential information.

(g)

Manufacturer shall be responsible for furnishing to Distributor, [***], such packing material as may be reasonably required for re-packing Products received from Manufacturer for shipment to Distributor’s customers.

7.

SALES OF PRODUCTS

7.1

All sales of the Products from Manufacturer to Distributor shall be made pursuant to written purchase orders submitted by Distributor to Manufacturer and acknowledged in writing by Manufacturer. Within [***] after receipt of a purchase order submitted hereunder, Manufacturer will issue a written order acknowledgement confirming Product prices [***]. Each order placed by Distributor and acknowledged in writing by Manufacturer hereunder shall constitute an individual sales contract (each hereinafter an “Individual Contract”). Notwithstanding any language herein to the contrary, shipments dates confirmed by Manufacturer in a written order acknowledgement do not represent

(a)

Products shall be delivered F.O.B. Seller’s manufacturing facilities by delivery to a transportation company designated or approved by Purchaser. Title and risk of loss shall pass to Distributor upon delivery to the transportation company. All transportation charges and expenses, including the cost of insurance against loss or damage in transit, shall be Distributor’s responsibility.

(b)

Except for any warranty claim covered by Section 7.1(d) below, in the event any Product does not conform to the terms of the Individual Contract, the non-conformity will be reported in writing to Manufacturer as soon as possible. In the case of shipping damage or other non-conformity discoverable upon reasonable inspection (such as, by way of illustration, shipment shortages, incorrect Products, broken wafers and torn tape), the non-conformity shall in any event be reported in writing no later than [***] after the date Products are shipped by Manufacturer to Distributor or such claim shall be deemed waived; provided that Distributor [***]. In all other cases, the non-conformity shall be reported as a warranty claim under Section 7.1(d) below in writing within [***] after shipment of the Product. Any non-conformity not reported within [***] after shipment of the Product shall be deemed waived.

(c)

Manufacturer’s sole obligation with respect to Products reported to be non-conforming no later than [***] after the date Products are shipped by Manufacturer to Distributor shall be to issue a [***] credit memorandum to Distributor for the quantity and price invoiced for any such Products determined by Manufacturer to be non-conforming, which credit memorandum may be used [***]. Manufacturer is not required to refund money pursuant to such credit memoranda. All non-conforming Products must be returned to Manufacturer for verification of the non-conformity, and Distributor must obtain a return authorization from Manufacturer prior to shipment of the non-conforming Products. Provided that it is able to verify [***] the non-conformity, Manufacturer will use commercially reasonable efforts to [***] to Distributor within [***] after Manufacturer’s receipt of the report of non-conformity as provided in Section 7.1 (b). Upon receipt of the non-conforming Products, Manufacturer will [***] the [***] credit memorandum [***]. Upon [***], Manufacturer will issue a new invoice [***], which invoice shall be the controlling document related to such purchase for purposes of determining the parties’ rights and obligations under this Agreement, including, without limitation, the Product warranty, [***] Reserve and [***] Reserve provisions (as otherwise provided herein); provided that, for the purpose of determining (i) whether the minimum purchase commitment for such quarter has been met, and (ii) whether Distributor’s inventory meets or exceeds the Inventory Cap, such Products shall be deemed purchased [***]. This Section 7.1(c) states the exclusive remedy of Distributor with respect to non-conforming Products, except as to any warranty claim covered by Section 7.1(d) below.

(d)

Manufacturer warrants to Distributor that Products shipped hereunder will meet such specifications as have been expressly agreed to in writing by the parties hereto, provided the Products are used in accordance with the applicable specifications. This warranty is extended only to Distributor and does not constitute a warranty to either Distributor’s customers or other end-users or to any sub-distributor, [***]. All claims under this warranty must be reported in

(e)

In connection with the determination of the Annual MPC for fiscal year [***] as provided in Section 9.2 below, the parties in good faith will review the [***] warranty period provided for in this Agreement [***]. The warranty period may be [***] if and when Manufacturer and Distributor are able to obtain sufficient customer acceptance of such change.

(f)

THE WARRANTY IN SECTION 7.1(d) IS IN LIEU OF ALL OTHER WARRANTIES RELATING TO THE PRODUCTS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, OR IMPOSED BY STATUTE OR OTHERWISE. ALL IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, ARE EXPRESSLY DISCLAIMED BY MANUFACTURER. Distributor shall make no representations or warranties on behalf of the Manufacturer with respect to the Products or otherwise.

7.2

During the Term of this Agreement, no later than [***] before the start of the next fiscal quarter, Distributor will issue to Manufacturer a blanket purchase order (“Blanket PO) for the next fiscal quarter equal to the amount of the minimum purchase commitment for LED Products for such quarter. Blanket POs are for billing and administrative purposes only, shall not be considered as Individual Contracts under Section 7.1 above, will not be acknowledged in writing by Manufacturer and do not constitute a firm commitment by Distributor to purchase LED Products. Unless otherwise agreed, Manufacturer will reference the Blanket PO on its shipping and billing documents. If the aggregate purchase price of LED Products actually purchased by Distributor during a fiscal quarter

7.3

During the Term of this Agreement, each week Distributor will issue to Manufacturer a [***] forecast of its LED Product requirements (the “Product Forecast”). The quantities indicated in the Product Forecast represent the number of units of each LED Product that Distributor requests to be shipped by Sunday of the stated week. Distributor will update the Product Forecast on [***]. The aggregate purchase price of LED Products requested for any fiscal quarter may not exceed [***] without Manufacturer’s prior written approval of such increase. If Distributor fails to timely update the Product Forecast, [***], the quantities for the new week of the rolling Product Forecast will be deemed to be zero unless and until advised otherwise. Subject to Sections 7.7, 9.3 and 9.4 of this Agreement, the quantities and types of LED Products forecasted to be delivered within [***] (the “Firm Commitment Portion”) shall be firm and may not be modified by Distributor. At Distributor’s option, [***]. Although non-binding, Distributor will use commercially reasonable efforts to provide accurate forecasts for the remaining weeks of the Product Forecast, with particular attention to the accuracy of the [***]. [***], Distributor will provide Manufacturer a purchase order for the Products ordered [***], which purchase order shall be considered an Individual Contract pursuant to Section 7.1 above and will be stated in U.S. dollars as provided in Section 8.4 below. Notwithstanding the foregoing, the Product prices for such Firm Commitment Portion [***]. Manufacturer is authorized to accept and ship LED Products against the Firm Commitment Portion of the Product Forecast unless Distributor has notified Manufacturer that the Inventory Cap has been reached pursuant to Section 9.3 of this Agreement. Manufacturer will target to ship in accordance with Distributor’s requested delivery dates all quantities and types of LED Products that have been a firm commitment for at least [***]. Shorter lead times may be available from time to time upon request. If Manufacturer is unable to ship Products in accordance with Distributor’s requested delivery date, Manufacturer will [***] in accordance with Section 7.1 above.

7.4

In determining the quantity of LED Products to be included in the Firm Commitment Portion, Distributor will evaluate the value of its inventory of New Products (as defined in Section 9.3 below) (the “Inventory”), the value of Products scheduled to be shipped to customers during the remainder of the fiscal quarter (as set forth in the Product Forecast), the Inventory Cap, the Firm Commitment Portion for the remainder of the fiscal quarter and the minimum purchase commitment for that fiscal quarter (the “MPC”). [***].

7.5

Notwithstanding the foregoing, Distributor’s purchase commitment in Section 9.1 below is not conditioned upon its issuance of Blanket POs or Product Forecasts. Even if Distributor does not issue purchase orders, its purchase commitment in Section 9.1 below is valid except as otherwise expressly provided in this Agreement.

7.6

For the avoidance of doubt, orders of Wafer Products are not subject to the provisions in Sections 7.2 through 7.5 above. Lead-times for Wafer Products will vary based on the specifications of the Wafer Products, and Manufacturer will provide an estimate of the applicable lead-time upon request. From time to time hereunder, Distributor will provide Manufacturer purchase orders for Wafer Products, which purchase orders shall be considered Individual Contracts pursuant to Section 7.1 above after acknowledgement by Manufacturer and will be stated in U.S. dollars as provided in Section 8.4 below.

7.7

Even after an Individual Contract has been executed, Distributor may request [***]. In such case, Manufacturer will consider the request and determine in its sole discretion whether to [***]. If Manufacturer agrees to [***], the parties will execute an amended Individual Contract.

7.8

Notwithstanding any language in this Agreement or any predecessor agreement to the contrary, the provisions set forth in this Section 7 shall apply with respect to Product Forecasts and purchase orders issued by Distributor in fiscal year 2004 for Products to be shipped in FY05. Further, upon the Execution Date, the quantities and types of LED Products forecasted to be shipped within [***] from such date shall become the Firm Commitment Portion.

8.

PRICES AND PAYMENT TERMS

8.1

Pricing for LED Products purchased under this Agreement will be determined as follows:

(a)

For LED Products ordered by Distributor in accordance with Sections 7.1 and 7.3 above that are confirmed by Manufacturer for shipment during Manufacturer’s 2005 fiscal year (“FY05”), the unit price payable by Distributor for LED Products will be [***]. For LED Products ordered by Distributor in accordance with Sections 7.1 and 7.3 above that are confirmed by Manufacturer for shipment during Manufacturer’s 2006 fiscal year (“FY06”), the unit price payable by Distributor for LED Products will be [***]. For LED Products ordered by Distributor in accordance with Sections 7.1 and 7.3 above that are confirmed by Manufacturer for shipment during Manufacturer’s 2007 fiscal year (“FY07”), the unit price payable by Distributor for LED Products will be [***].

(b)

The “LED Resale Price” shall be [***]. If the LED Resale Price is stated in Japanese yen it will be converted to U.S. dollars as provided in Section 8.4 below. Manufacturer may, after consultation with Distributor, reduce its suggested LED Resale Price effective upon written notice to Distributor. In that event, [***]. In the event of a significant change in market conditions or in prices for products of a competitor of Manufacturer, the parties will review and discuss possible changes to the terms of this Agreement and/or the LED Resale Prices, as needed, to allow Distributor to offer its customers competitive prices [***].

(c)

Notwithstanding any language in this Agreement or any predecessor agreement to the contrary, purchase orders issued by Distributor in fiscal year 2004 for Products to be shipped by Manufacturer during FY05 shall be based on Product prices determined in accordance with the terms set forth in this Section 8.1.

8.2

Pricing for Wafer Products purchased under this Agreement will be determined as follows:

(a)

For Wafer Products ordered by Distributor in accordance with Sections 7.1 and 7.6 above that are confirmed by Manufacturer for shipment during the Term of this Agreement, the unit price payable by Distributor for Wafer Products will be [***].

(b)

The initial “Wafer Resale Price” shall be [***]. If the Wafer Resale Price is stated in Japanese yen, it will be converted to U.S. dollars as provided in Section 8.4 below. Manufacturer may, after consultation with Distributor, reduce its

(c)

In addition, Distributor will be entitled to a bonus at the end of each fiscal quarter of FY05 equal [***]. Such bonus shall be paid only by issuance of a credit memorandum. Credit memoranda issued under this Section 8.2(c) may be exchanged only to purchase additional Wafer Products from Manufacturer, and Manufacturer is not required to refund money pursuant to such credit memoranda. With respect to bonuses for FY06 and FY07, the parties will discuss in good faith and seek to mutually agree upon the [***] for earning bonuses and such bonus rate provided that the [***] for earning bonuses in such subsequent fiscal periods [***] to take into consideration prevailing market conditions and Manufacturer’s manufacturing capabilities.

(d)

If the cumulative Wafer Product orders by Distributor [***] do not equal or exceed [***], then, notwithstanding any language herein to the contrary, Manufacturer either directly or through any Affiliate shall be permitted to sell Wafer Products to any person for shipment by Manufacturer into Territory A.

8.3

All taxes, duties and the like now or hereafter imposed by any jurisdiction with respect to the sale, manufacture, delivery or transportation of Products (except income taxes of Manufacturer) will be for the account of Distributor, and if paid or required to be paid by Manufacturer, the amount thereof will be added to and become part of the price payable by Distributor.

8.4

Products will be invoiced upon shipment at Product prices determined as provided below, and payment will be due [***]. Payment shall be made in U.S. dollars by T/T remittance to an account designated by Manufacturer. Where applicable, credit memoranda will be applied to invoiced amounts and only the net amount remaining after application of the credit memoranda will be due and payable. Invoiced amounts not paid when due will accrue interest, at the lesser of [***] per annum or the maximum rate permitted by law, from the date of the invoice until the date paid. If the LED Resale Price or Wafer Resale Price is stated in U.S. dollars, the unit prices for purchase orders for such Products will be determined as provided in Sections 8.1(a) and 8.2(a), respectively, and such amounts will not be subject to further adjustment for currency rate fluctuations or other changes. If the LED Resale Price or Wafer Resale Price is stated in Japanese yen, Manufacturer and Distributor will share the risk of currency exchange rate fluctuations as follows.

(a)