Distribution Agreement with John P. Kummer AG

Exhibit 10.7

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Distribution Agreement with John P. Kummer AG

This Distributor Agreement (“Agreement”) is made as of this eighteenth day of July, by and between Applied Precision, Inc., a Washington corporation with its principal place of business at 1040 12th Avenue NW, Issaquah, Washington 98027 (hereinafter referred to as “API”) and John P. Kummer AG, a corporation duly organized under the laws of Switzerland with its principal place of business at Zimmelstrasse 48, CH-63 14 Unterageri, Switzerland, (hereinafter referred to as “the Distributor”).

RECITALS:

WHEREAS, API, a developer and manufacturer of automated semiconductor systems for probe card analysis, scrub/probe mark analysis and probe card cleaning (the “Products,” as more fully described below), which are currently being sold by API; and

WHEREAS. API is interested in having the Distributor, a distributor, seller and provider of products and services complimentary to those produced by API, distribute the Products in the Territory (as defined below), and the Distributor is interested in serving as API’s [*] for the Products in the Territory (as defined below), all in accordance with the terms of this Agreement;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

The following terms will have the following meanings for purposes of this Agreement:

1.1 “API Logos” means the API Logos and/or trademarks set forth in Exhibit B.

1.2 “Base System” means one unit of Product containing the standard features as listed in Exhibit A.

1.3 “Customer” means the final, end-user of the Product.

1.4 “Effective Date” means the date this Agreement is signed and becomes effective.

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1.5 “Patents” means any and all utility and design patent applications and issued patents, United States or foreign, held by API and which apply to the Products.

1.6 “Products” means the products described in Exhibit A attached hereto and made a part hereof, and any upgrade, updates, future models or versions of such products that may be developed and/or manufactured by API during the term of this Agreement for the target markets described in Exhibit A. Product(s) will include Base System(s), optional components (as listed in Exhibit A), and parts.

1.7 “Software” means the task-specific or industry-specific software programs and/or functionality, which is within and a part of the Product.

1.8 “Territory” means the countries of [*]

1.9 “Trademarks” mean Product names and variations of names that are selected by API and are used by API in connection with the Products pursuant to the terms of this Agreement.

1.10 “Transfer Price” means the cost of Product to the distributor net of shipping, taxes, duties and insurance. Transfer Price is set forth in Exhibit D attached hereto and made a part hereof.

ARTICLE 2

APPOINTMENT AS [*]

2.1 Distributor . API hereby appoints the Distributor as its [*] of Products in the Territory from the Effective Date though July  25, 2004 and the Distributor accepts this appointment. [*]

2.2 Licensee . API hereby grants to the Distributor a non-exclusive, limited license, with the right to sublicense the Software within the Products for use within the Products, in the Territory from the Effective Date through the remaining term of this Agreement. The Software is licensed, not sold, to the Distributor to permit the Distributor to sublicense the embedded Software as part of its distribution of the Product. This license agreement confers no right, title, or ownership in the Software other than the specific grant contained herein. This license grant is only for use solely in connection with the use of the Product. The Distributor may not, in whole or in part, copy, reproduce, translate, reverse engineer, derive source or object code from, modify, disassemble or reverse assemble, decompile, modify, alter, publicly display, or create derivative or merged works based on the Software, or remove any proprietary notices or labels from the Product. The Product is integrated with the Software and the Distributor will not disassemble or pull apart the Software from the Product. If the Distributor violates any of these terms of this limited license, its license to distribute the Software will automatically terminate.

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2.3 [*]

2.4 All Other Rights Reserved . All rights not expressly granted in the Agreement are reserved to API, including but not limited to API’s rights to have Products manufactured by a third party.

ARTICLE 3

NAME SELECTION AND

PATENT AND TRADEMARK PROTECTION

3.1 Current Product Logos . During the term of this Agreement API will be free to use trademarks, labels and graphics of its choice. All use of API’s names, brands or logos as may be authorized by API under this Agreement will be in accordance with the trademark license granted in Section  3.5 of this Agreement.

3.2 Product Name Selection . The product name for the Products will be: “PrecisionPoint™” for the probe card analyzer; “microBurst™” for the contact resistance reduction system, and “waferWoRx™” for the probing process analysis system. These Product names will be used without change unless API consents to such change in writing.

3.3 Patent and Trademark Applications . API will, in its sole discretion, file and prosecute utility and design patent applications or obtain patent protection pursuant to the International Patent Cooperation Treaty in respect of the Products in the United States, Canada, Japan and the countries of the European Union. A list of current API patents and patent applications is included as Exhibit C. API will, in its sole discretion, register Trademarks as API determines are appropriate for the Products, A list of current trademarks are included in Exhibit B.

3.4 Ownership . API will own all proprietary rights with respect to the Products, including, without limitation all copyrights, Trademarks, all artwork, graphics, and advertising prepared by API in connection with the Products, trade secrets, Patents, and other proprietary rights therein.

3.5 API Trademark License .

(a) API hereby grants to the Distributor during the term of this Agreement, an [*] , non-transferable, personal license in the Territory to use the API Logos and/or

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Trademarks set forth in Exhibit B to this Agreement (the “API Logos”) on the Products and their associated packaging and in electronic and print media and for any other related purpose agreed to in advance in writing by API. The Distributor’s use of the API Logos will be solely in connection with the Products and such other related purposes as are agreed upon in advance in writing by API, and will at all times be in accordance with the terms of this Agreement and API’s then current logo use guidelines. Except as expressly provided in this Section 3.6 , this Agreement does not grant the Distributor any right, title, interest, or license in or to any of API’s names, logos, trade dress, designs, or other trademarks.

(b) The Distributor will provide to API copies of the brochures, advertising and other promotional materials prepared by the Distributor and which use the Trademarks or API Logos. The Distributor will send three (3) copies to API within thirty (30) days of the first distribution of the brochures, advertising or other promotional materials.

(c) The Distributor acknowledges, as between the Distributor and API, API’s sole ownership of the API Logos worldwide and all associated goodwill. The Distributor’s use of the API Logos, as between the parties, will inure solely to the benefit of API. The Distributor hereby assigns and will assign in the future to API all rights it may acquire by operation of law or otherwise in the API Logos, including all applications and registrations therefore, along with the goodwill associated therewith.

(d) API has the sole right to, and in its sole discretion may commence, prosecute or defend, and control any action concerning the API Logos. The Distributor will not contest the validity of, by act or omission jeopardize, or take any action inconsistent with, API’s rights or goodwill in the API Logos in any country, including attempted registration of the API Logos, or use or register any mark or logo confusingly similar thereto.

3.6 Third Party Infringement of API Logos, Trademarks/Products . In the event either party becomes aware of or otherwise has notice that a third party may be infringing the API Logos, Trademarks and/or Products in the Territory (including, without limitation the copyrights, Patents, trade secrets or other proprietary rights therein) that party will promptly notify the other party. API will thereafter take legal and other steps API deems reasonably necessary in response to such potential third party infringement. API may resolve or settle any infringement claim it may have against any third party with regard to the API Logos, Trademarks and/or the Products (“Infringement Claim”) in any manner it deems reasonably appropriate. API may grant licenses or other rights in or pertaining to the Products to third parties in connection with such resolution or settlement without the Distributor’s consent.

ARTICLE 4

SUPPLY OF PRODUCT

4.1 Purchase Orders . To obtain Products from API, the Distributor will place its purchase orders with API. In each purchase order the Distributor will set forth information regarding the identification of the particular Product models ordered, quantities desired, shipping dates, and locations. The Distributor agrees to provide a written acceptance agreement, approved in writing by the end-user customer, which will accompany each purchase order for

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Products. Orders will not be recognized unless they are accompanied by an acceptance agreement pre-approved by the customer. A sample acceptance agreement is provided in Exhibit H.

4.2 Forecasts and Supply . API will supply the Products requested by the Distributor in its purchase orders, subject to the provisions of Article 13 regarding force majeure events. All Product(s) orders will be shipped complete, per the issued purchase order(s) unless otherwise requested by end-user customer and accompanied by a written statement agreeing payment for partially-shipped items. The Distributor will provide API an accurate monthly sales forecast in MS Excel format. [*] API will use commercially reasonable efforts to fill orders that exceed the monthly sales forecast within [*] .

4.3 Sales Requirements . In order to for the Agreement to renew automatically pursuant to Section 12.2 the Distributor must have the following sales of Products during each six month period:

For John P. Kummer Ltd:

For John P. Kummer Sarl

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For John P. Kummer GmbH:

(a) If the Distributor does not make the sales of Products for any [*] period listed in Section 4.3(a), API may terminate the [*] of this Agreement by giving notice to the Distributor and, subject to Section 12.4 , API will thereafter [*]

4.4 Six-Month Review of Sales . Representatives of API and the Distributor will meet near the close of each six month period listed in Section 4.3(a) for the purpose of reviewing the sales of Products. Such meetings will be at a time and place mutually acceptable to both parties, including meetings by conference calls. If the parties mutually agree that the sales of Products listed in Section 4.3(a) should be revised the parties will negotiate in good faith to revise Section 4.3(a). [*]

4.5 Title. Risk of Loss . Title and risk of loss to each unit of the Products will transfer to the Distributor on shipment F.O.B. from API’s facilities in Washington State. Products shipped by API to the Distributor will be free and clear of any and all liens or encumbrances.

ARTICLE 5

FINANCIAL PROVISIONS

5.1 Payment Terms . To obtain Products the Distributor will submit purchase orders to API, as described in Section 4.1. The Distributor must pay API the Transfer Price listed in Exhibit D for each Product within [*] days after Product shipment from API. The Distributor agrees to use all reasonable efforts to install Products, and obtain written acceptance, based on the pre-approved acceptance agreement (Exhibit H), within [*] working days of system arrival at the customer site. Should this not be possible, the Distributor must notify API immediately, and API and the Distributor agree to jointly use all reasonable efforts to have any open issues resolved within the [*] day period. API will electronically notify the Distributor at the time of shipment (this will be the invoice from API to the Distributor). Interest

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will be charged on amounts overdue at the rate of [*] , on the unpaid balance. Payment will be made in United States dollars by check or wire transfer to API at the address set forth at Section 16.1 or such other location in the United States as API may designate from time to time. Should the Distributor exceed the [*] payment terms on any orders, all subsequent orders from the Distributor to API will require a Letter of Credit before being accepted by API.

5.2 Shipping; Taxes . All prices are FCA. API’s facilities in Washington State. Transfer Prices for the Products are also exclusive of all sales, use, excise, and other such applicable taxes. The Distributor will pay for all such applicable excise, sales, use, and other such applicable taxes except to the extent the Distributor has supplied to API with appropriate certificates or other documents evidencing that the Distributor or the Customer is entitled to an exemption from payment of such taxes.

5.3 Audit Rights . The Distributor agrees to keep records showing the inventory, purchase orders, sales or other disposition of Products sold or otherwise disposed of under the distribution and license herein granted in sufficient detail to enable API’s auditors to determine compliance with the terms of this Agreement, and further agrees to per