Amended and Restated Global Manufacturing Services Agreement

1.

SCOPE OF AGREEMENT

1.1

Jabil General Obligations . This Agreement specifies the terms and conditions under which Jabil agrees to provide Manufacturing Services and Products described in this Agreement, based on the Product Requirements provided by Verigy. Without limiting any specific obligation specified in this Agreement, Jabil will:

1.1.1

Maintain one or more manufacturing processes and production lines, purchase or procure Tools, and source Components, provide VI and other materials as needed to fulfill Jabil’s obligations to manufacture the Products in accordance with the Product Requirements. The number and location of manufacturing processes and production lines will be mutually agreed upon by the Parties subject to Jabil’s assessment of the commercial viability of Jabil’s business plans.

1.1.2

Manufacture, test, pack, ship and provide all manufactured Products in accordance with the terms of this Agreement.

1.1.3

Apply its Commercially Reasonable Efforts to continuously reduce its manufacturing costs and provide to Verigy information and access to production cost information subject to terms set forth in Article 8 below.

1.1.4

Develop and maintain quality control standards consistent with those standards described in Article 16 below.

1.1.5

Obtain all necessary approvals and certifications to enable Jabil to manufacture the Products under this Agreement and make all necessary safety standard changes as required hereunder.

1.1.6

On Verigy’s request, provide all Technical Assistance, for a fee to be agreed upon by both Parties pursuant to this Agreement.

1.1.7

Provide the warranty and support services as described in Articles 11 and 13 below.

1.1.8

Put in place a customer-focused overall account management team consisting of the Jabil Business Unit Director, Business Unit Managers and Business Unit Coordinators. This team will be 100% dedicated to the Verigy business relationship and whose performance rating will be based upon the ongoing success of Verigy’s business within Jabil.

1.2

Verigy General Obligations . Without limiting any specific obligation required under this Agreement, Verigy will provide to Jabil Product Requirements consisting of, but not necessarily limited to:

•

Product numbers;

•

Bill of Material (“BOM”);

•

Verigy Approved Vendor List (“AVL”);

•

EPROM software and code;

•

Board placement data (Gerber files);

•

Raw Printed Circuit Boards (“PCB”) information required to procure raw PCB;

•

Schematic drawings, if test required;

•

Assembly drawings;

•

Packaging requirements, workmanship and quality specifications;

•

General Technical Specifications;

•

Buy/Sell Component List;

•

Consigned Component List; and

•

Shipping instructions.

1.3

Term of Agreement . This Agreement commenced as of the Original Effective Date and will remain in effect until the termination or expiration of the last to terminate or expire of the Business Agreements. .

1.4

Eligible Buyers. This Agreement enables all Verigy Business Units and Eligible Buyers to purchase the Products from Jabil under the terms set forth below. All Products supplied to Eligible Buyers will be subject to the terms and conditions of this Agreement. Verigy will designate any Eligible Buyers. If Jabil reasonably determines that an Eligible Buyer (Other than Verigy Ltd) presents an unreasonable credit risk to Jabil and gives Verigy written notice of that determination, Jabil shall thereafter not be obligated to accept Blanket Purchase Orders, Orders, and Releases from that Eligible Buyer unless and until such Eligible Buyer’s credit worthiness materially improves so that it is no longer an unreasonable credit risk to Jabil or the Eligible Buyer agrees to alternate payment terms acceptable to Jabil or take such action as to reduce the credit risk to Jabil. Verigy agrees to assist Jabil in obtaining reasonable financial information for Verigy Eligible Buyer (other than Verigy Ltd) in order for Jabil to reasonably determine the credit risk of any Verigy Eligible Buyer (other than Verigy Ltd) requesting to purchase Products. Jabil agrees to provide Verigy with copies of all evidence relating to any determination by Jabil that an Eligible Buyer presents an unreasonable credit risk to Jabil, promptly upon Verigy’s written request.

1.5

Services . The Parties may agree to services to be provided by Jabil from time to time. Such services, and such other terms and conditions applicable to the particular services arrangement, will be covered by a Business Agreement. .

2.

DEFINITIONS

2.1

“ Acceptable Quality Level ” means the maximum number of Non-Conforming Products allowed by Verigy in each Lot manufactured by Jabil.

2.2

“ Accepted Orders ” means orders for which Jabil has acknowledged receipt of purchase order and has committed to a firm Delivery Date.

2.3

“ Approved Vendor List” or “AVL ” refers to the confidential list of Verigy approved vendors who are qualified Component Suppliers authorized by Verigy for use in the manufacture of Products.

2.4

“ Bill of Material” or “BOM ” means the list of all VI, Components, Verigy Part Numbers, quantity per assembly, and Jabil’s part number where applicable, that is used to assemble each Product.

2.5

“ Blanket Purchase Order ” means a written or electronic purchase order issued to Jabil by Verigy or an Eligible Buyer containing estimated unit quantity; unit price; shipping destination and instructions; revision; period end date; and other instructions or requirements pertinent to the Products, for the purpose of providing a mechanism for Jabil to issue an invoice upon receipt of a Release from Verigy or a third party on Verigy’s behalf under an SMI or other finished goods inventory management program.

2.6

“ Buy/Sell Component ” means a Component that Verigy desires to sell to Jabil for use in the manufacturing of the Products. There are four categories of Buy/Sell components:

2.6.1

Permanent Buy/Sell: Component Parts that Verigy will sell to Jabil on an ongoing basis.

2.6.2

Seeding Buy/Sell: A one-time transition sale of Component parts that Verigy sells to Jabil for the support of new Product that is scheduled to be manufactured by Jabil.

2.6.3

Shortage Pull: Component parts that Verigy sells to Jabil in the event that Jabil has a shortage scenario, or Verigy has additional inventory available to sell to Jabil.

2.6.4

Transfer: A one-time transition sale of Component parts that Verigy sells to Jabil to transfer manufacturing of a Product from a third party to Jabil.

2.7

“ Claim ” means any demand, or any civil, criminal, administrative, or investigative claim, action, or proceeding (including arbitration) asserted, commenced or threatened against a Party.

2.8

“ Commercially Reasonable Efforts ” means those efforts that would be deemed in good faith and in accordance with commonly accepted commercially reasonable practice after having taken into account all relevant commercial considerations.

2.9

“ Component Lead Time ” means the stated period of time between Jabil’s purchase of Components from its Component Suppliers to the delivery date of such Components to Jabil.

2.10

“ Component Supplier ” means qualified suppliers of Components authorized by Verigy for use in the Manufacturing Services relative to Products.

2.11

“ Component ” means the piece parts, subassemblies, software, OEM components and products, and all other materials procured by Jabil or provided by Verigy to be incorporated by Jabil into Products supplied under this Agreement.

2.12

“ Confidential Information ” has the meaning set forth in the Confidential Disclosure Agreement.

2.13

“ Confidential Disclosure Agreement ” means the confidential disclosure agreement between the parties dated; November 28, 2008

2.14

“ Consigned Components ” refers to those Components provided to Jabil for assembly into Products where Verigy retains all ownership interest and obligations in those Consigned Components.

2.15

“ Consigned Test Fixtures ” means electrical test equipment tooling, including software applications or programs, provided to Jabil from Verigy for the purpose of testing completed printed circuit board assemblies or systems manufactured by Jabil, where Verigy retains all ownership interest and obligations in those Consigned Test Fixtures.

2.16

“ Contract Year ” is a one (1) year period commencing from the Original Effective Date, and each additional twelve (12) month period thereafter during the Term of this Agreement.

2.17

“ Deliverables ” refers to Products, Developments, Test Software, manufacturing and design documentation, and other work provided by Jabil to Verigy as required hereunder.

2.18

“ Delivery Date ” means the date specified in the Order or Release for delivery of the Products.

2.19

“ Developments ” means any (i) new inventions, discoveries, technologies, or materials (whether or not patentable), developed in connection with Jabil’s performance under this Agreement relating to a Product’s Requirements or design, or (ii) any customizations, enhancements, modifications, and corrections of, and any addition to or derivative work of any Deliverable developed in connection with Jabil’s performance under this Agreement but (iii) not any manufacturing processes developed solely by Jabil in connection with the Product unless they are Unique Technical Manufacturing Information.

2.20

“ Eligible Buyer ” means Verigy and any Verigy Business Unit or Verigy Subsidiary and any Verigy joint venture or third party that is designated by Verigy and set forth in Exhibit G which may be amended from time to time.

2.21

“ Encumbrance ” means any encumbrance, lien, charge, hypothecation, pledge, mortgage, title retention agreement, security interest of any nature, adverse claim, exception, right of set-off, any matter capable of registration against title, option, right of pre-emption, privilege or any contract to create any of the foregoing.

2.22

“ Engineering Change Order ”, also referred to as an “ECO”, is the written notification provided to Jabil by Verigy to implement a Manufacturing or Engineering Change, as further described in Section 17.2 below.

2.23

“ Engineering Changes ” means any electrical, mechanical or chemical changes to the Products proposed by Verigy or Jabil that would affect, but not be limited to, Product performance, reliability, safety, environmental compatibility, serviceability, appearance, dimensions, tolerances, or composition.

2.24

“ ESD ” means Electrostatic Discharge.

2.25

“ Excess Components ” means Components on-hand at Jabil in excess of the levels agreed to by the Parties.

2.26

“ Forecast ” means Verigy’s rolling estimate of its purchase requirements over a twelve (12) month period as further described in Section 5.5 below, or such other period designated by the Parties.

2.27

“ GIC ” means global integration centre.

2.28

“ Governmental Authority ” means any federal, state, county, municipal, district or local government or government body, or any public administrative or regulatory agency, political subdivision, commission, board or body, or representative of any of the foregoing, foreign or domestic, of, or established by any such government or government body that has authority in respect to a particular matter.

2.29

“ HLA ” means high level assembly.

2.30

“ Impact Proposal ” means the evaluation of the effect of Verigy’s or Jabil’s proposed Engineering and Manufacturing Changes on, but not limited to, the price, performance, reliability, manufacturing capacity, lead and delivery times, appearance, VI and Components of or related to the Products.

2.31

“ Intellectual Property” means all copyrights, patents or patent applications, mask registered designs or registered design applications, Marks (registered or not), Mask Works, inventions, trade secrets, proprietary technical information (including but not limited to specifications, designs, plans, computer programs in source and object code, flowcharts, diagrams, drawings and other information), and manufacturing processes and other similar proprietary information.

2.32

“ Jabil Business Unit Director ” means that Jabil employee designated in Exhibit A to this Agreement responsible for the overall coordination of this Agreement, including monitoring performance, coordinating reviews, arbitrating conflicts and generally overseeing the relationship between Jabil and Verigy.

2.33

“ Jabil Business Unit Managers ” means those Jabil managers who oversee and coordinate manufacturing and support of Verigy Products at a specific Jabil site or facility.

2.34

“ Life-time Buy ” or “LTB” means the process for purchasing discontinued Components or Products (i.e., those no longer available from Jabil, a Component Supplier or any other distribution channel) to span Product Life or Support Life requirements, as applicable, for that Component or Product as described in Section 14.1 and 15.6 below.

2.35

“ Losses ” means all losses, liabilities, damages, liens, and claims, and all related costs, expenses, and other charges suffered or incurred as a result of or in connection with a Claim, including reasonable attorneys’ fees and disbursements, costs of investigation, litigation, settlement, and judgment, and any taxes, interest and penalties with respect to any of the foregoing.

2.36

“ Lot ” means a batch of the Products manufactured under the same work order number at Jabil’s facility.

2.37

“ Manufacturing Assembly Lead-time ” means the minimum period of time between the Order or Release date and the Delivery Date.

2.38

“ Manufacturing Changes ” means any re-design changes, AVL changes, changes to Component Suppliers or geographical relocations of manufacturing from one facility to another, or outsourcing of the manufacturing of sub-processes.

2.39

“ Manufacturing Services ” means the services performed by Jabil hereunder including but not limited to designing, developing, manufacturing, testing, configuring, assembling, packaging, shipping and managing inventory for the Products, as well as any additional services provided by Jabil to Verigy under this Agreement.

2.40

“ Marks ” means the trademarks, service marks, trademark and service mark applications, trade dress, trade names, logos, insignia, symbols, designs or other marks identifying a Party or its products.

2.41

“ Mask Work ” means the pattern used to transfer design and technical information from the Product Requirements onto a Product or Component.

2.42

“ New Product Introduction Support ” means, for each Verigy Business Unit, the interaction between Verigy and Jabil to facilitate the introduction of new or existing Products into Jabil’s manufacturing process.

2.43

“ New Product Introduction ”, also referred to as “NPI”, means, for each Verigy Business Unit, the process to introduce a new or existing Product into Jabil’s manufacturing process.

2.44

“ Non-Conforming Products ” means any Product that does not conform to the Product Requirements and/or General Technical Specifications stated in this Agreement.

2.45

“ NRE ” means non-recurring engineering expenses, including expenses for design engineering services, testing, Tools and such other expenses as agreed to by the Parties.

2.46

“ Obsolete Components ” means Components on-hand or on order at Jabil made obsolete by discontinuance by a Component Supplier, Engineering Change Orders, deletion from Verigy’s BOM or Customer Price List (“CPL”), or obsolescence by Jabil under Article 14 below

2.47

“ Order ” means a written or electronic purchase order (including any attachments thereto) issued to Jabil by an Eligible Buyer containing unit quantity; unit price; shipping destination and instructions; Delivery Date; and other instructions or requirements pertinent to the Products or Manufacturing Services.

2.48

“ Package or Packaging ” refers to the material used in the protection of Products and Components while at Jabil’s facility and in transit as specified by Verigy.

2.49

“ Personnel ” means any and all personnel engaged by either Party to perform the Party’s obligations under this Agreement, including employees, independent contractors, agents and authorized representatives of the Party, its Affiliates and approved subcontractors.

2.50

“ Pre-Existing Intellectual Property ” means any Intellectual Property owned, conceived or developed by or for either Party prior to the Original Effective Date of this Agreement or independently developed by or for a Party outside the scope of this Agreement during the Term.

2.51

“ Product Life ” has the meaning set forth in Section 13.1.

2.52

“ Product Requirement ” means any requirement provided by Verigy to Jabil for the development of Products or the provision of Manufacturing Services, including all manufacturing information, technical data and manuals, design information, drawings, documentation, packaging requirements, testing requirements, Specifications, or any other criteria written and provided to Jabil by Verigy.

2.53

“ Product(s) ” means those assemblies, sub-assemblies, systems, and other products manufactured by Jabil in accordance with this Agreement. Product also includes VI and Prototypes.

2.54

“ Prototype ” means the pre-production unit of a Product manufactured in accordance with the Product Requirements with full test verification.

2.55

“ Prudent Procurement Practices ” means those practices that would be deemed commercially reasonable in connection with purchasing Components to meet Verigy’s Forecasts and Orders and to support variations in demand for such Forecasts and Orders, as more specifically set forth in Section 10.1.

2.56

“ Quarter ” means a quarter within each Contract Year, and unless stated otherwise in this Agreement, commencing on the first day of November, February, May, and August of the Contract Year.

2.57

“ R&D ” means research and development.

2.58

“ Release ” generally refers to electronically transmitted authorization or instructions to execute against a Blanket Purchase Order.

2.59

“ Scrap ” is defined as any Product or Component, which fails more than three (3) repairs by Jabil, or is deemed not usable and saleable pursuant to Articles 11, 12 or 13 and subject to disposition.

2.60

“ SMI ”, also known as “Supplier Managed Inventory”, means a program initiated between Jabil and a Verigy Business Unit for ownership of a mutually agreed level of finished goods inventory at a Verigy specified or agreed to location and the processes established to support Verigy’s and Jabil’s requirements.

2.61

“ Specifications ” means the General Technical Specifications listed in international standards IEC 61340, ANSI ESD 20:20 and IPC-A-610C and Exhibit B and Exhibit C , along with any other specifications as may be mutually agreed.

2.62

“ Subsidiary ” means an entity controlled by or under common control with a Party to this Agreement, provided that such control continues to exist. For purposes of this definition, “control” means the possession, directly or indirectly or as trustee or executor, of the possessor to direct or cause the direction of the affairs or management of an entity, whether through ownership of voting securities, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, or securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

2.63

“ Supplier Performance Expectations ” means those quality standards and metrics that Jabil must meet as further described in Section 16.2.

2.64

“ Support Life ” means the period of time for which Jabil has support responsibility as described in Section 13.1.

2.65

“ Technical Assistance ” refers to any technical design support given to produce a product for Verigy, including but not limited to, design feedback to Verigy for improved manufacturability, potential reductions in cost, improved testability and improved assembly yield.

2.66

“ Technical Manufacturing Information ” means the manufacturing information, process and technology used by Jabil or third parties under its control to design, develop, test or manufacture the Products including, but not limited to: (i) specifications, software, Test Software, schematics, drawings, designs, Mask Works, Topography or other materials pertinent to the most current revision level of manufacturing of the Products; (ii) copies of all inspection, manufacturing, test and quality control procedures and any other work processes; (iii) jig, fixture and tooling designs; (iv) Jabil general knowledge and information relating to the Products; and (v) support documentation.

2.67

“ Term ” means Initial Term of this Agreement set forth in Section 1.3 above plus any additional Renewal Periods added to such Initial Term.

2.68

“ Termination Inventory ” means Components on order, Component inventory on hand, work-in-process, and finished Product inventory at the discontinuance or termination of this Agreement or upon receipt of an Engineering Change Order from Verigy, or at the complete or partial termination or cancellation of an Order or of a Product.

2.69

“ Test Software ” means any programs or code developed by Jabil or Jabil’s subcontractor to perform test verification for Prototypes, Components or finished Products.

2.70

“ Tools ” means equipment, jigs and fixtures that may be used by Jabil in the manufacture of Products.

2.71

“ Topography ” means the three-dimensional pattern, fixed or encoded, formed by the metallic, insulating and semiconductor material contained in a Product or Component.

2.72

“ TQRDCEb ” means Verigy’s supplier performance expectations in the areas of technology, quality, responsiveness, delivery, cost, environment and business management.

2.73

“ Turnkey Components ” means a Component that Jabil procures directly from the Component Supplier or the appropriate distributor.

2.74

“ Unique Components ” means those Components used only with respect to Products manufactured under this Agreement (i.e., custom by form, fit or function).

2.75

“ Verigy Business Unit Manager ” means that Verigy employee designated by Verigy who will oversee the relationship between Jabil and that individual Verigy Business Unit. The Verigy Business Unit Manager could be a Verigy procurement specialist or commodities, procurement or materials manager. The Verigy Business Unit Manager’s role will include conducting performance and quality reviews, receiving and reviewing required reports, plans and notices, implementing changes in the scope of any services or project, and resolving any conflicts or disputes on a Business Unit level.

2.76

“ Verigy Business Unit ” refers to any of Verigy’s business units, divisions, groups, or business sectors including; and, any successor or renamed division, groups, or business units of Verigy comprising the business lines currently carried on by a Verigy Business Unit.

2.77

“ Verigy Global Alliance Manager ” means that Verigy employee designated in Exhibit A to this Agreement responsible for the overall coordination of this Agreement, including monitoring performance, coordinating reviews, arbitrating conflicts and generally overseeing the relationship between Jabil and Verigy.

2.78

“ Verigy Part Number ” refers to the unique, Verigy or Verigy-assigned reference number for a particular assembly, VI or Component.

2.79

“ Verigy Pass-Through Pricing ” refers to pricing of any Component procured through the use of existing Verigy purchase agreements with Component Suppliers at such prices as quoted by the Component Suppliers.

2.80

“Verigy Property” will mean all property, including all Product and Consignment Component inventories, Verigy equipment, Product Requirements, Tools, Consigned Test Fixtures, test equipment, software (including Test Software) and documentation, and support maintenance or design documentation, furnished to Jabil by Verigy or paid for by Verigy in connection with this Agreement for Jabil’s use in performing its obligations hereunder.

2.81

“Vertical Integration” means those assemblies for which Verigy has assigned Jabil for procurement and assembly of Components based on an AVL and/or Product Requirements. Vertical Integration assemblies can be supplied directly to Verigy as a Product or can be supplied to integration center for further integration into a higher level Product

2.82

“Zero Demand Components” means Components for Products that have no current customer demand but which remain on Verigy’s Customer Price List (“CPL”).

3.

PROTOTYPES

3.1

Prototype Services . Jabil will design and develop Prototypes and Test Software for each Product and will perform the additional services set forth below.

3.1.1

Jabil will deliver the Prototypes to Verigy or the Eligible Buyer at Verigy’s direction within five (5) business days after receipt of all applicable and mutually agreed to Product Requirements and materials. The number of Prototypes of each Product will be mutually agreed upon by the Parties as stated in the Order.

3.1.2

Jabil will utilize the Test Software to test the Prototypes to verify that they comply with the applicable and agreed to Product Requirements, and document the tests conducted and the results obtained.

3.1.3

Verigy will provide Jabil written notice of any defects in the Prototypes within thirty (30) days after receipt.

3.1.4

In the event a defect in the Prototype is noted, Jabil will use all available resources to the extent commercially reasonable to remedy the problems, re-test the Prototype and resubmit the Prototype for review.

3.1.5

If Jabil is unable to deliver a Prototype that meets the applicable and agreed to Product Requirements within thirty (30) days, subject to available engineering samples, Jabil will refund to Verigy all payments made to Jabil in connection with the design and development of the returned Prototype.

3.1.6

Parties agree to follow the process set forth in Exhibit M relating to the procurement, management, price variation and liability of Components to support New Product Introductions.

3.2

Return of Prototypes . Any returned Prototypes may be returned at the option of Verigy using the return processes set forth in Sections 12.3 and 12.4 below or as otherwise agreed by the Parties.

4.

INTELLECTUAL PROPERTY

4.1

Pre-Existing Intellectual Property . Each Party will maintain all right, title and interest in Pre-Existing Intellectual Property, subject only to any licenses that may be granted by the owning Party.

4.2

Developed Intellectual Property . Except as otherwise provided in Sections 4.3 and 4.4 below (including, without limitation, Product Requirements, Deliverables and Developments) ownership of Intellectual Property conceived or developed under this Agreement will be owned by the Party or Parties whose employees, agents or contractors conceive, author or otherwise create such Intellectual Property.

4.3

Verigy Rights .

4.3.1

Product Requirements, Developments and Deliverables Verigy owns all right, title and interest, including all Intellectual Property, in and to the Product Requirements, Developments and the Deliverables. To the extent that any Deliverable or Development is not the property of Verigy by operation of law, Jabil hereby irrevocably assigns transfers and conveys to Verigy, without further consideration, all of its right, title and interest (including all Intellectual Property Rights) in and to the Developments and Deliverables. In addition Jabil will execute any necessary documents and will take such other actions and otherwise assist Verigy, at Verigy’s expense, as reasonably requested, to perfect Verigy’s ownership of the Deliverables and Developments. Jabil shall ensure that all of its Personnel involved with the creation of Deliverables and Developments execute an assignment in favor of Jabil assigning any and all rights, including without limitation, any Intellectual Property Rights, that they may have in any Deliverable or Development. For the avoidance of doubt, nothing in the foregoing shall operate to transfer from Jabil to Verigy any Jabil Pre-Existing Intellectual Property or any Intellectual Property not newly created by or on behalf of Jabil during performance under this Agreement, except in accordance with the licenses granted in this Agreement.

4.3.2

Limited license to Product Requirement and Developments . Verigy hereby grants to Jabil a worldwide, non-exclusive, non-assignable, non-transferrable, royalty-free license during the Term to use the Product Requirements and Developments for the sole purpose of providing Manufacturing Services to Verigy under this Agreement, including for purposes of designing, developing, testing, and manufacturing the Deliverables.

4.3.3

Confidential Information. The Product Requirements, the Deliverables and the Developments are the Confidential Information of Verigy and Jabil will maintain the confidentiality of that information in accordance with Article 19 below.

4.3.4

Disclosure of Developments. During the Term plus any period of support that may survive termination or expiration of this Agreement, Jabil agrees to inform Verigy promptly of any Developments.

4.4

Jabil Rights .

4.4.1

Jabil Intellectual Property . Jabil owns all right, title and interest in and to Jabil’s Intellectual Property related to Jabil’s manufacturing process of the Products that Jabil develops solely on its own, without assistance or input from Verigy, including Jabil’s Technical Manufacturing Information for the Products. The Technical Manufacturing Information is the Confidential Information of Jabil and Verigy agrees to maintain the confidentiality of Jabil’s Technical Manufacturing Information in accordance with Article 19 below.

4.4.2

Jabil Product Intellectual Property . As of the Restatement Effective Date, Jabil has not incorporated any Jabil Intellectual Property into any Products or processes used to manufacture the Products. Jabil shall not incorporate any Jabil Intellectual Property into any Products without Verigy’s prior written approval. To the extent any of Jabil’s Pre-Existing Intellectual Property is incorporated by or on behalf of Jabil within or used by or on behalf of Jabil in connection with any Product (“Jabil Product Intellectual Property”), Jabil hereby grants to Verigy, for use with the Product, a non-exclusive, royalty-free, fully paid up, worldwide, transferable, perpetual, license to the Jabil Product Intellectual Property to make, have made, sell, offer for sale, import, use, reproduce, modify, adapt, display, distribute, and make other versions of, the Product and disclose such Intellectual Property including the right to sublicense third parties (including but not limited to , system integrators, value added resellers, distributors and other resellers) only insofar as is required for Verigy to use, sell, test, improve, support and distribute the Products provided as part of the Manufacturing Services performed by Jabil pursuant to this Agreement and to manufacture and support discontinued Products as set forth in Article 14 below.

4.4.3

Unique Technical Manufacturing Information . Subject to Section 4.4.4, Jabil hereby grants to Verigy an non-exclusive, royalty-free, fully paid up, worldwide, perpetual, irrevocable license of all Technical Manufacturing Information unique to the Products and developed under this Agreement (“Unique Technical Manufacturing Information”) to use the Unique Technical Manufacturing Information for Verigy’s internal use and the use by a third party supplier or manufacturer in the event Jabil ceases to supply the products or provide the services so that Verigy may further develop, improve, test and support such Products, subject to Verigy’s payment of any third party license fees that Jabil is required to pay to its licensors in respect of any third party Intellectual Property Rights in the Unique Technical Manufacturing Information.

4.4.4

Any Unique Technical Manufacturing Information will be used by Jabil solely for the design, development, testing and manufacturing of such Products.

4.5

Trademark Usage . Nothing in this Agreement gives either Party a right to use the other Party’s Marks or implies the grant of any license from one Party to the other to use any Marks. Notwithstanding the foregoing, Verigy grants to Jabil the non-exclusive, non-transferable, non-assignable, royalty-free limited worldwide license during the Term to reproduce any designated Verigy Marks on Products in accordance with the following:

4.5.1

All reproductions of Verigy Marks must be approved in writing by Verigy and must be in accordance with Verigy’s then current Corporate Identity Trademark booklet, a copy of which is included in Exhibit C ;

4.5.2

Jabil may not combine the Verigy Marks with, or create a composite mark using the Verigy Marks with, a trademark of Jabil or any third party;

4.5.3

No other rights or licenses, except that expressed in Section 4.5 are granted to Jabil in and to the Verigy Marks, whether expressly, by implication, by estoppel, or otherwise;

4.5.4

As between Verigy and Jabil, the Verigy Marks are and shall remain the sole and exclusive property of Verigy and Jabil shall not acquire any right, title or interest in or to the Verigy Marks as a result of this Agreement (other than the limited license expressly granted in this Section 4.5) and all use of the Verigy Marks by Jabil and all goodwill generated thereby shall inure to the benefit of Verigy.

4.6

Jabil Marks . Jabil agrees and warrants that it will not use any Jabil or third party Mark (excluding authorized Verigy Marks) on any Product, Packaging materials or documentation without Verigy’s authorization.

4.7

Duty to Remove Marks . Jabil will remove from all Products, VI and Components rejected, returned or not purchased, Verigy’s Marks .

5.

PRODUCT PURCHASES

5.1

Purchase and Sale of Products . Eligible Buyers may purchase and Jabil will sell Products pursuant to the terms and conditions of this Agreement. Jabil will not sell Products pursuant to this Agreement to any other third party without the prior written approval of Verigy. Jabil will refer non-Verigy buyers, who may desire to purchase Products under this Agreement, to the appropriate Verigy Business Unit Manager.

5.2

Non-Exclusive . Nothing in this Agreement will be deemed to restrict Verigy, or any Eligible Buyer’s right to manufacture Products internally or through third parties, purchase Products from other sources or enter into a similar agreement with any third party.

5.3

Order and Forecast Processes . The Parties will follow the processes set forth below with respect to the issuance of Orders, Releases, Blanket Purchase Orders and Forecasts.

5.3.1

Verigy will provide Jabil Purchase orders for complete systems, upgrades, component material or services through an electronic data interface out of the Verigy Oracle MRP system.

5.3.2

In addition Verigy will provide Jabil a monthly rolling Forecast (12 month time horizon) for system shipments (“Shipment Plan”) out of the GIC and product requirements for higher level assemblies or parts out of other Jabil manufacturing sites.

5.3.3

Jabil will participate and be integrated in the monthly and quarterly Verigy revenue, material and capacity planning process.

5.3.4

The expectation is that based on this information Jabil will establish and execute in their MRP systems on all mfg. sites involved the necessary material and capacity planning activities to support the Verigy forecast/shipment plan including a defined range of upside and downside opportunities.

5.3.5

The parties in good faith will negotiate, document and mutually agree to further details (including data formats, electronic data interfaces, process flow and contact matrix, etc.).

5.4

Order Acknowledgment . Unless otherwise indicated, purchase of Products will be initiated by issuance of an Order by Eligible Buyers to Jabil. If a Blanket Purchase Order is used, the Eligible Buyer will issue periodic Releases to Jabil. Such Releases against a Blanket Purchase Order will constitute a firm Order. Jabil will notify the Eligible Buyer electronically within one (1) business day if it utilizes EDI, or if in writing, within two (2) business days of receipt of the Order or Release, and inform the Eligible Buyer of the reason, if Jabil is unable to meet delivery date or any other requested Order requirements. The absence of written notice constitutes acceptance of the Order or Release and commitment to the terms of the Order or Release. The Parties agree to use the process set forth in this Section 5.4 to acknowledge changes to Orders or Releases.

5.5

Forecasts and Blanket Purchase Orders . Eligible Buyers will provide Jabil with a twelve (12) month rolling Forecast segmented into monthly or weekly buckets, part of which may be in the form of a Blanket Purchase Order. Jabil will notify the Eligible Buyer within five (5) business days of receipt of the Forecast or Blanket Purchase Order if Jabil is unable to meet the forecasted requirements. The absence of written notice constitutes Jabil’s acceptance of the Forecast or Blanket Purchase Order and commitment to the terms of the Forecast or Blanket Purchase Order. The Parties agree to use the process set forth in this Section 5.5 to acknowledge changes to Forecasts or Blanket Purchase Orders.

5.6

Commitment to Orders, Releases, Forecasts and Blanket Purchase Orders . Except as expressly provided below, Releases, Forecasts and Blanket Purchase Orders supplied to Jabil from Eligible Buyers are provided as an accommodation for planning purposes and as authorization for Jabil to purchase Components to meet the quantities stated using

Prudent Procurement Practices. Forecasts and Blanket Purchase Orders do not create a commitment on the part of the Eligible Buyer to purchase any Products, inventory or work in progress. Releases and Orders are binding commitments on the part of the Eligible Buyer to purchase Products, inventory and work in progress in accordance with Section 10.11 below. All Orders, Releases, Forecasts and Blanket Purchase Orders will be considered Confidential Information of Verigy pursuant to Article 19.

5.7

Manufacturing Assembly Lead Time . The Parties will agree to the Manufacturing Assembly Lead-time for each Product, which in no event will exceed four (4) weeks in accordance material and capacity planning process in section 7.1.Jabil must give Verigy at least 30 days advance notice to approve or reject any proposed increase in Manufacturing Assembly Lead-time.

5.8

Duty to Fulfill Orders and Releases . Jabil agrees to fulfill all accepted Orders and Releases in accordance with the terms of this Agreement prior to the termination or cancellation of this Agreement, even if the Delivery Dates of Products under such Orders or Releases occur after the date of expiration or termination.

5.9

Order and Release Allocation . If for any reason Jabil is unable to meet an accepted Order or Release, Jabil will notify Verigy’s Global Alliance Manager and each affected Verigy Business Unit Manager of such failure within two (2) business days of Jabil’s discovery of the problem. Jabil will also provide a corrective action plan with a timetable describing the problem. Verigy’s Global Alliance Manager and Business Unit Managers may, in their discretion, determine an Order or Release allocation prioritization plan or take such other steps they deem necessary. Any such steps will not be deemed a waiver of any breach on the part of Jabil.

5.10

Emergency Orders . If an Eligible Buyer deems it necessary, it may order Products by EDI or facsimile on an emergency basis (“Emergency Order”) subject to the availability of such Products in Jabil’s inventory. Jabil will use its Commercially Reasonable Efforts to ship the Emergency Order to the stipulated destinations within twenty-four (24) hours after the receipt. The Eligible Buyer will pay any reasonable additional expenses related to such Emergency Orders.

5.11

Documentation . Jabil shall utilize Commercially Reasonable Efforts to ensure that unique manufacturing assembly instructions created by Jabil for Verigy’s Products will be completely and accurately maintained and kept up to date in a reasonable period of time.

6.

DELIVERY AND ACCEPTANCE

6.1

Delivery. The Parties agree to use the shipping and logistics processes referenced in attached Exhibit K . Unless otherwise agreed by the Parties, all Product shipments will be FCA (Incoterms 2000), Jabil’s shipping dock. If Verigy agrees to pay Jabil for applicable freight charges as part of the Product purchase price, shipment will be DDU (Incoterms 2000) to the “Ship-To” address specified by Verigy in the Order.

6.2

Title and Risk of Loss .

6.2.1

Non-SMI Products . Except as otherwise provided below, title to and risk of loss for a Product will pass to Verigy as follows: (i) at Jabil’s shipping dock upon Jabil’s tender of the Product to the Verigy-specified carrier for FCA Product shipments, or (ii) at the “Ship-To” address specified by Verigy in the Order upon delivery of the Product for DDU Product shipments.

6.2.2

SMI Products . For any Product included within an SMI Program (as provided in a Business Unit Addendum), title to such Product shall remain with Jabil during the time the Product is held at a Jabil or third-party warehouse and title to and risk of loss for such Product shall pass to Verigy when the Product is pulled from the Jabil or third-party warehouse and transferred to the Verigy-specified carrier.

6.3

Acceptance . Acceptance of the Product will occur upon Verigy’s receipt of the Products. Notwithstanding the foregoing, Verigy reserves the right to conduct testing to determine whether the Product complies with the Product Requirements. In the event that the Product does not pass the acceptance test procedures or inspection procedures, such Product will be deemed a Non-Conforming Product and Verigy will have all available remedies with respect to Non-Conforming Products as set forth in this Agreement.

6.4

In the event a Product is rejected, Jabil will promptly take corrective action to cure any defect that led to rejection for which Jabil is responsible under the terms of this Agreement. If the Product again fails the acceptance test or inspection procedure, Jabil and Verigy will work together to determine the root cause analysis in accordance with Section 16.4. Once the root cause analysis is completed, the Parties will mutually agree on the appropriate course of action (i.e., repair, replace or refund) and the costs associated therewith.

6.5

Early Shipment and Over Shipment . Jabil will not deliver Products more than three (3) days in advance of the Delivery date specified in the Order or Release, nor will Jabil deliver more Products than the quantity specified in the Order or Release. In the event of early or over shipment, Verigy may, at its sole discretion, either return or retain the Products delivered earlier or in greater quantity than specified in the Order or Release. If the Products are returned, the return will be in accordance with Sections 12.3 and 12.4. If Verigy elects to retain the Products, Verigy will not issue payment for the early and additional Products until such time that payment would have been due if Orders or Releases had been properly fulfilled. Lot sizes and minimum shipment quantities will be agreed to by the Parties.

6.6

Rejected Products . Prior to returning any rejected Product, Verigy will obtain a Return Material Authorization (“RMA”) number from Jabil, and will return such Product in accordance with Sections 12.3 and 12.4.

7.

FLEXIBILITY GUIDELINES

7.1

Jabil will participate and be integrated in the monthly and quarterly Verigy revenue, material and capacity planning process. As a result a demand range with maximum, expected and minimum demand will be mutually agreed. The expectation is that based on this Agreement Jabil will establish and execute in its MRP systems on all manufacturing sites involved in the necessary material and capacity planning activities to support the Verigy Forecast/shipment plan including a defined range of upside and downside opportunities.

7.2

Capacity Flexibility Guidelines . Jabil agrees to use Commercially Reasonable Efforts to meet variations in Product demand outside of the agreed demand range. Variations in Product demand could affect one or more Verigy Business Unit(s) or individual Products. In order to support variations in Verigy’s Product demand, the Jabil Business Unit Manager or Director will co-ordinate activities across Jabil’s manufacturing sites to ensure that optimal flexibility is achieved.

Prior to implementing actions, the Parties will agree on allocation of associated costs, timing, targeted variations in demand and such other terms as mutually agreed to by the Parties.

7.3

Material Flexibility Guidelines . In order to support variations in Verigy’s Product demand, Jabil will use its Commercially Reasonable Efforts to utilize global materials organization and tools to increase or decrease Component inventories where possible.

7.4

Increases in Demand . Verigy may increase Orders, Releases or Forecasts. Jabil’s acceptance of increased Orders, Releases or Forecasts will be subject to the availability of manufacturing resources and Components and resolution of any issues thereto pursuant to Section 7.2.

7.5

Reduction in Demand . Verigy may cancel or decrease an Order or Release, revise a Forecast or revise or withdraw Blanket Purchase Order in whole or in part upon written notice to Jabil. Upon receipt of such written notice, Verigy and Jabil will meet the next business day to review the affected Order, Blanket Purchase Order, Release or Forecast. After such review, Jabil will immediately cease or reduce production and all work in progress related to the affected Order, Blanket Purchase Order, Release or Forecast. Jabil will also, within one (1) business day, re-generate its material requirements plan and initiate the process of contacting its Component Suppliers to notify them of the changes in demand. Jabil will contact all Component Suppliers within three (3) business days. Jabil will apply Prudent Procurement Practices to cancel, re-schedule or reduce the supply of Components to align with the cancelled or reduced Order or Release or revised Forecast or revised or withdrawn Blanket Purchase Order.

7.6

Verigy’s Liability for Cancelled or Changed Orders and Releases . Verigy’s liability for cancelled or changed Orders and Releases will be mutually agreed to by the Parties.

8.

COST MANAGEMENT

8.1

Cost Management Methodology . The Parties agree to meet on an executive level as required where each Party will share overall financial objectives of its organization and the impact on the on-going relationship between the Parties. Jabil agrees to employ an Open Book Pricing approach to cost management and pricing of Products and Manufacturing Services to achieve Sustainable and Competitive Pricing for the Products and Manufacturing Services provided to Verigy under this Agreement. As used in this Article 8, the phrase “Sustainable and Competitive Pricing” means stable pricing over time for the Products and Manufacturing Services provided to Verigy under this Agreement that is favorable against that which could be reasonably attained from other contract manufacturers for comparable volumes of substantially similar products and comparable manufacturing services. As used in this Article 8, the term “Open Book Pricing” means providing detailed costing information to each Verigy Business Unit which includes; Costed BOM, Value Add directly related to the sourcing and manufacturing of the product and an explanation of all adders on material or value add (as already practiced today). Also, upon request, Jabil will provide detailed overviews of Jabil’s financial costing models to appropriate Verigy representatives.

8.2

Total Cost of Ownership . Verigy and Jabil agree to pursue continuous cost reduction initiatives to ensure that sustainable and competitive pricing is achieved and maintained. These initiatives include supply chain redesign, review of available Component Supplier agreements to ensure best pricing and terms, improved logistics solutions, manufacturing processes and test efficiency/elimination improvements, and Product redesign. Both Parties are targeting 10% total cost reduction on released and active products per year for the first three (3) years of a new Product life is the common objective. Jabil will demonstrate cost reduction improvements and report such results to Verigy on a quarterly basis as part of a rolling cost management process with a twelve (12) to eighteen (18) month outlook for each Product.

8.3

Cost Reduction Sharing . Jabil agrees to share equally with Verigy any cost savings achieved as a result of manufacturing process improvements and to pass through such savings to Verigy. Product prices will be amended in accordance with Section 9.2 below.

8.4

Most Favored Purchaser Warranty for Components . If Jabil offers a better price or pricing formula to any other customer for Components, based on similar volumes and under similar circumstances and conditions, Jabil agrees to immediately offer such price or pricing formula to Verigy. Product prices will be amended in accordance with Section 9.2 below. Jabil agrees to fulfill its obligations in this Section in good faith in accordance with Jabil’s standard pricing models and forecasting tools. Verigy reserves the right, at Verigy’s expense and upon two (2) business days prior notice, to conduct an audit of Jabil’s books and records to ensure compliance with this Section, provided that such audit does not violate any existing confidential customer terms or non-disclosure agreements. Verigy agrees to maintain the confidentiality of any information contained in agreements between Jabil and Jabil’s Component Suppliers that is disclosed during the course of the audit in accordance with Article 19 below.

8.5

Purchasing Components from Verigy Contracts . Jabil may procure Components through use of existing Verigy purchase agreements with Component Suppliers. Under such circumstances, the Components may be procured by a Verigy authorized representative and then transferred or resold to Jabil pursuant to the consignment or Buy/Sell procedure described below in Section 10.10. Alternatively, Verigy will seek authorization for Jabil to purchase the Components directly from the Component Supplier under the terms of that Verigy purchase agreement. In such case, any such purchase must be at the price quoted by the Component Supplier, refer to and use the specific Verigy Part Numbers involved and must be used exclusively for Jabil performance under this Agreement. Verigy will use Commercially Reasonable Efforts to secure supplier terms and conditions consistent with those necessary to support the requirements of this Agreement including but not limited to SMI Programs, Flexibility agreements and excess and obsolescence liabilities. Jabil shall identify to Verigy the impact of any inconsistency between the terms and conditions of this Agreement and Verigy’s negotiated terms and conditions with its suppliers. If the impact identified has a material affect on cost or performance, Verigy shall either use Commercially Reasonable Efforts to negotiate such terms and conditions or reach an appropriate and reasonable solution with Jabil. If a Verigy Component Supplier causes a constraint on flexibility which Jabil cannot resolve itself, using Commercially Reasonable Efforts, then Jabil will notify Verigy. The Parties will work together to achieve a solution with respect to such constraint.

9.

PRICES AND PAYMENT TERMS

9.1

Pricing Management Process . Verigy will submit to Jabil a formal request for quotation for new Product pricing or for revised pricing for existing Products as part of the standard setting process. Jabil will issue a quotation to Verigy within such period of time as mutually agreed to by the Parties. The quotation will set forth the proposed price and any other reasonably requested information for each Product, including a fully costed BOM and fully detailed Manufacturing Assembly Lead-times for each Product quoted. To indicate Verigy’s acceptance of the pricing and quotation, Verigy will issue written notice thereof to Jabil. All quotations will be considered Confidential Information of Verigy pursuant to Article 19 below.

9.2

Standard Setting . Material cost standards will be established by the mutual agreement of the Parties on a semi-annual basis, including identification of all VI and consigned parts and is subject to review and approval by Verigy. Jabil and Verigy agree to review and implement adjustments to Product prices periodically as agreed to by the Parties. Product prices will remain stable from one standard setting period to the next, unless otherwise agreed to by the Parties. Each Party reserves the right to approach the other Party to discuss Product price changes during the standard setting period, including those based on increases, decreases or any other changes to Orders, Blanket Purchase Orders, Releases or Forecasts.

9.3

Product Pricing . Specific Product prices shall be mutually agreed upon by Jabil and Verigy. Prices will be subject to any available prompt payment discounts that Jabil may, at its discretion, offer to its customers.

9.4

Payment Terms . Eligible Buyers shall pay all undisputed charges properly invoiced by Jabil within the later of forty-five (45) days from Verigy’s receipt of the invoice or the first or third Wednesday of the month that occurs after that date. Verigy will also run a special payment cycle on the last day of the month (excluding Verigy Fiscal Quarter end) to pay all due invoices. Payment will be made in U.S. dollars unless otherwise agreed by the Parties. No payment will be due with respect to any Product until the Product has been accepted in accordance with Section 6.3. In addition, Verigy may deduct from such payment any monies owed by Jabil under any other obligation to Verigy; provided, however, that Jabil will issue separate payment for such obligations upon request where monies are owed Verigy for sixty (60) days or more.

Any disputes regarding outstanding receivables will be escalated in accordance with the dispute resolution procedure for payment issues set forth in Section 31.13. Jabil will provide Verigy with a monthly report of all outstanding receivables as specified in Exhibit H .

9.5

Additional Charges and Expenses . Jabil will separately list on its invoices the following charges and expenses, unless Verigy or an Eligible Buyer has paid for such charges or expenses directly or has provided Jabil with proper evidence of its exemption from such charge: (i) freight (outbound), export licensing of the Product, or payment of broker’s fees, duties, tariffs, or other similar charges; (ii) taxes or charges (other than those based on Jabil’s net income or any other taxes or charges not directly related to the manufacture, sale, shipment, storage, “value add” or use of Products to an Eligible Buyer) imposed by any taxing authority upon the manufacture, sale, shipment, storage, “value add” or use of the Product that Jabil is obligated to pay or collect; (iii) cost of compliance with any environmental legislation relating to the return or disposal of Products at the end of Product Life if Jabil is required to comply with such environmental legislation; and, (iv) agreed to set-up, tooling, or non-recurring engineering activities.

9.6

Changed Prices . If, during the Term, changed prices or price formulas are put in effect by mutual agreement of Verigy and Jabil, such prices or price formulas may apply to all open Orders or Releases issued by Verigy and accepted by Jabil in accordance with Section 5.4 that exist at the time of the Original Effective Date of such prices or price formulas and all new accepted Orders or Releases after the Original Effective Date of such prices or price formulas.

9.7

Disputed Invoices . If a Jabil invoice does not meet the invoicing requirements of this Agreement, or if an Eligible Buyer in good faith disputes any invoiced charges, the Eligible Buyer will notify Jabil of the disputed items in writing on or before the payment due date and may withhold payment of the disputed charges pending resolution of the dispute.

9.8

Reservation of Rights . Any payments made by an Eligible Buyer under the Agreement, and any acceptance of Products or Deliverables, will be without prejudice to an Eligible Buyer’s right to subsequently claim or determine that it has overpaid Jabil or to require Jabil to remedy any deficiencies in Jabil’s performance as provided in this Agreement.

10.

COMPONENT PROCUREMENT

10.1

Prudent Procurement Practices . Jabil will purchase Components to support Verigy’s Forecasts and Orders and react to support the variations in demand for such Forecasts and Orders to deliver Products to Verigy in accordance with specified Delivery Dates. Prudent Procurement Practices include, but are not limited to, the following:

10.1.1

Following Jabil’s ABC classification as set forth in Section 10.2 below;

10.1.2

Utilizing minimum order quantities as defined by Component Suppliers and economic order quantities as approved by Verigy;

10.1.3

Ordering and buying Components as required to meet Manufacturing Assembly Lead-times, taking into account Component Lead Times and Jabil’s internal manufacturing lead times;

10.1.4

Utilizing SMI management programs where possible and prudent;

10.1.5

Negotiating most favored customer terms and conditions with Component Suppliers; and

10.1.6

Exercising return and cancellation privileges as allowed by agreements with Component Suppliers.

10.2

Jabil ABC Classification.

10.2.1

ABC classification is a group of items, typically all Components within the Verigy work cell, in decreasing order of US dollar volume. Dollar volume is calculated based on the price at which the inventory is valued (current standard cost) multiplied by the projected requirement for a given period.

10.2.2

The first group of Components classified as “A” represents 80% of the total projected dollar volume. The next group of Components, classified as “B”, represents the next 15% of the dollar volume. The last group of “C” Components represents the last 5% of the dollar volume, but can be approximately 80% of the number of items.

10.2.3

The ABC classification is conducted based on the principle that effort and money can be more efficiently utilized by applying more control to the high-dollar-volume class items than to the low-dollar-volume class items. At Jabil,

material requirement planning generates planned orders for “A” items with weekly order cover periods, “B” items with bi-weekly order cover periods, and “C” items with monthly order cover periods. This will allow a good balance of resources and effort spent in managing the inventory levels and financial investment.

10.3

Approved Vendor Lists . Jabil agrees to buy all Components from suppliers on the AVL. Use of “brokers” for Components will require specific approval by Verigy, which approval will not be unreasonably withheld, prior to use by Jabil. In the event that Jabil is unable to procure a Component(s) as a result of the AVL restrictions set forth herein, Verigy and Jabil agree to negotiate changes to the AVL. Jabil will use standard purchasing practices, including long lead-time Component management, minimum and multiple supplier order quantities and SMI programs in order to meet Verigy Forecasts.

10.4

Usage Requirements . All Components or other materials or parts ordered by Jabil under Verigy’s contracts with Verigy’s Component Suppliers for any Products based on Forecasts are to be used only to provide Manufacturing Services or Product Support to Verigy. Any other use of such Components or materials must have Verigy’s prior written consent. Jabil will have the right to disposition all other Components or materials as it sees fit, provided however, that Jabil ensures there is no impact to Jabil’s ability to fulfill Verigy’s Orders, Releases, Blanket Purchase Orders or Forecasts.

10.5

Component Shortages . Jabil agrees to provide appropriate technical and commercial support to ensure supply of all Components or families of Components (affecting Products) that may be in limited supply. In the event of a probable or potential Component shortage or availability problem, Jabil will immediately escalate the situation to the affected Eligible Buyer(s). The Parties will agree on appropriate action and allocation of associated costs. Jabil will use Prudent Procurement Practices and manage Component supplies to meet agreed flexibility requirements. Where additional flexibility is required, Jabil will use Commercially Reasonable Efforts to procure Components. In addition, the Parties may mutually agree to operate with a price part variance dollar limit on a single or multiple Component basis to procure Components in shortage of supply. For general market allocation issues that arise for Components, the Parties will follow the process set forth in Exhibit L.

10.6

Purchasing Components from Verigy Contracts . Jabil may procure Components through use of existing Verigy purchase agreements with Component Suppliers. Under such circumstances, the Components may be procured by a Verigy authorized representative and then transferred or resold to Jabil pursuant to the consignment or Buy/Sell procedure described below. Alternatively, Verigy (or a Verigy Business Unit Manager for contracts negotiated between the supplier and that particular Verigy Business Unit) may seek authorization for Jabil to purchase the Components directly from the Component Supplier under the terms of that Verigy purchase agreement to obtain Verigy Pass-Through Pricing. In such case, any such purchase must be at the price quoted by the Component Supplier, refer to and use the specific Verigy Part Numbers involved and must be used exclusively for Jabil’s performance under this Agreement.

10.7

Component Forecasts from Jabil to Suppliers . Jabil will provide to Verigy-approved AVL Component suppliers on a monthly basis a rolling twelve (12) month forecast of all Turnkey Component requirements. Jabil will update the forecast least monthly for all planned orders in accordance with a mutually agreeable forecast implementation plan documented in Exhibit I . A copy of the forecast will be provided to Verigy upon request.

10.8

Component Forecasts from Jabil to Verigy . Upon request from Verigy, Jabil will provide to Verigy on a monthly basis a rolling twelve (12) month forecast of all Buy/Sell Component requirements in accordance with a mutually agreeable Component forecast implementation plan described in Exhibit I . In turn, Verigy will provide a written acknowledgment of all Buy/Sell Components needed within five (5) days.

10.9

Use of Verigy Part Number . For the purposes of VI and Component forecasts, Orders, Releases, and materials or inventory management reporting, Jabil will utilize Verigy Component part numbers, pre-fixed by the letter “V”.

10.10

Purchase of Verigy Component Inventory (Buy/Sell) . For the purposes of ongoing manufacturing, short-term requirements and the manufacturing of new Products, Jabil recognizes that Component material may need to be acquired from Verigy inventories. Jabil and Verigy agree to the following terms and conditions for the following categories of Buy/Sell Components:

10.10.1

Permanent Buy/Sell: Jabil will provide Verigy a Forecast for these Components as defined in Section 10.8 above. Verigy will determine the list and the standard cost of the Components to be transferred to Jabil. If needed, Verigy may elect to request in writing that a Permanent Buy/Sell Component or a batch of a Permanent Buy/Sell Component shipment should be stored separately or used to manufacture a specific Order or a Product.

10.10.2

Shortage Pull: Jabil will submit a list of Components to be acquired from Verigy’s inventory. Verigy must respond to Jabil’s request within 24 hours with details as to availability and date of delivery to Verigy. Verigy will utilize Jabil’s standard cost when accounting for the transfer of ownership of these components to Jabil.

10.10.3

Seeding Buy/Sell: Verigy and Jabil will agree in writing to the terms and conditions that will govern the transfer of Component inventory to Jabil for the purpose of the manufacture of a new Product. Verigy will determine the standard cost of the material to be transferred to Jabil. Such terms and conditions are set forth in Exhibit M .

10.10.4

Transfer: Verigy and Jabil will agree in writing to the terms and conditions that will govern the transfer of Component inventory to Jabil for the purposes of transferring the manufacture of a Product from a third party to Jabil. Such terms and conditions, including the purchase price for the Components, will be documented in an Interim Inventory Transfer Agreement in the format mutually agreed to by the Parties.

10.11

Verigy Responsibility . Subject to the limitations contained in Sections 5.6, 7.6 and 10.1 above and Article 15 below, Verigy assumes ultimate financial responsibility for work in progress, Product inventory, Components purchased by Jabil to meet accepted Orders and Releases, provided that Jabil has followed Prudent Procurement Practices, and all additional Components required to meet any Verigy Business Unit’s flexibility requirements as set forth in Article 7.

10.12

Purchase Terms . Jabil will purchase the Buy/Sell Components in accordance with Verigy’s standard purchase terms and conditions.

10.13

Consigned Components . Verigy reserves the right to supply through consignment, at its discretion, any Components to Jabil related to the production of Product. Verigy will retain all rights, title, interest, and obligation (including but not limited to, warranty related issues) in the Components furnished to Jabil as consigned inventory unless and until such time as Jabil purchases the Components from Verigy in accordance with Section 10.10 above. Jabil shall bear the risk of loss or damage to any consigned Components while the consigned Components are in Jabil’s custody or control. Consigned Component levels will be mutually agreed upon by the Parties. Verigy’s liability for inventory management charges for Consigned Components will be as mutually agreed to by the Parties.

10.14

Return of Consigned Components . Jabil will return, at Verigy’s costs, all consigned Components upon written request from Verigy. If Jabil fails to identify and return any Components within a timeline agreed upon by the Parties, Jabil will be obligated to buy the Consigned Components from Verigy at Verigy’s purchase price. The Consigned Components will be returned to Verigy in accordance with the written instructions provided by the Eligible Buyer.

10.15

Component Price Auditing . Verigy reserves the right, at Verigy expense, to conduct an annual audit of Component pricing quoted to Verigy for products supplied based on the use of Verigy’s AVL.

11.

WARRANTIES

11.1

Product Warranty . Jabil warrants that all Products will:

11.1.1

Be new or newly manufactured, include new Components, processed and assembled by Jabil unless otherwise specified or required by Verigy or agreed to in writing by the Parties;

11.1.2

Be manufactured, processed and assembled by Jabil, and be free from defects in workmanship in accordance with Product Requirements, Specifications and as also specified in the Verigy Acceptability, as listed in international standards IEC 61340, ANSI ESD 20:20 and IPC-A-610C and Exhibit B and Exhibit C ;

11.1.3

Conform strictly to the Product Requirements (including those Specifications listed in international standards IEC 61340, ANSI ESD 20:20 and IPC-A-610C and Exhibit B and Exhibit C );

11.1.4

Be shipped in conformance with the applicable Specifications or Product Requirements;

11.1.5

Be manufactured in accordance with the applicable Specifications. The “Specifications” for each Product or revision thereof, shall include but are not limited to bill of materials, designs, schematics, assembly drawings, process documentation, test specifications, current revision number, and Approved Vendor List. The Specifications as provided by Verigy and included in Jabil’s production document management system and maintained in accordance with the terms of this Agreement are incorporated herein by reference as in international standards IEC 61340, ANSI ESD 20:20 and IPC-A-610C and Exhibit B and Exhibit C ; Jabil shall have a reasonable opportunity to review and approve any amendments and/or modifications to Exhibit B or Exhibit C .

11.1.6

Be free and clear of all Encumbrances and other claims to title or ownership.

11.2

Section 11.1 applies to a Product repaired or re-manufactured under this warranty.

11.3

Components Warranty . Jabil will pass on to Verigy all Component Suppliers’ warranties to the extent that they are transferable. Jabil agrees to use Commercially Reasonable Efforts to ensure that all Components used in the Product are procured from suppliers on Verigy’s AVL, unless otherwise agreed to by the Parties in writing.

11.4

Warranty Report . Verigy will provide Jabil with quality data relating to Product field failures and warranty returns from Verigy’s customers. The report will include historical and forward-looking data where available.

11.5

No Impediment . Each Party warrants that, at the time of execution of this Agreement, it is not aware of nor has it received notice of any pending or threatened legal action or proceeding by or against it that may have a material adverse effect on its ability to fulfill its obligations under this Agreement.

11.6

Survival of Warranties . Product warranties will survive any inspection, delivery, acceptance or payment by Verigy and be in effect for an twenty-four (24) month period, or such other term as agreed to by the Parties, following the date of invoice of the Product to an Eligible Buyer (the “Warranty Period”). Should there be a breach of any of the warranties specified during the Warranty Period, Jabil will, at its option and its expense, repair, replace, or if repair or replacement is not possible, issue a credit for Product found defective during the Warranty Period. Product warranties will survive any obsolescence

or other Jabil cessation of the manufacture or support of such Product for the remainder of the original Warranty Period, assuming appropriate test equipment, test documentation, Verigy controlled allocated materials, Verigy controlled unique materials, and end of life materials and resources are available to Jabil. This warranty is extended to, and may only be enforced by Verigy.

11.7

DISCLAIMER . THE REMEDIES SET FORTH IN THIS AGREEMENT (AND ANY OTHER MANUFACTURING-RELATED AGREEMENTS ENTERED INTO BETWEEN THE PARTIES) SHALL CONSTITUTE VERIGY’S AND ELIGIBLE BUYERS EXCLUSIVE REMEDIES FOR BREACH OF THE WARRANTIES MADE BY JABIL HEREIN. THE WARRANTIES SET FORTH IN THIS AGREEMENT (AND ANY OTHER MANUFACTURING-RELATED AGREEMENTS ENTERED INTO BETWEEN THE PARTIES) ARE IN LIEU OF, AND JABIL EXPRESSLY DISCLAIMS, AND VERIGY EXPRESSLY WAIVES, ALL OTHER WARRANTIES OF ANY KIND WHATSOEVER WHETHER EXPRESS, IMPLIED, STATUTORY, ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING ANY WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. NO ORAL OR WRITTEN STATEMENT OR REPRESENTATION BY JABIL, ITS AGENTS OR EMPLOYEES SHALL CONSTITUTE OR CREATE A WARRANTY OR EXPAND THE SCOPE OF ANY WARRANTY HEREUNDER.

11.8

Warranty Exclusions . Jabil’s warranty shall not apply to the extent that a defect results from:

11.8.1

Use, testing or operation of the Products materially outside of the Specifications;

11.8.2

accident, misuse, neglect, or loss or damage after title has passed to Verigy or an Eligible Buyer; or

11.8.3

improper or unauthorized repair or modification (excluding onsite repairs performed by Verigy or its third party authorized agent);

11.8.4

the Product Requirements, unless the defect results from Jabil’s implementation of the Product Requirements; provided however, that if the Product Requirements specify the process by which Jabil is required to implement the Product Requirements, and the defect results from Jabil’s compliance with that process, the warranties set forth in Section 11.1 shall not apply.

12.

RETURN OF NON-CONFORMING PRODUCTS

12.1

Non-Conforming Product. In the event that Verigy receives a Non-Conforming Product or a Lot of Products which has a tested sample containing Non-Conforming Products in excess of an Acceptable Quality Level as agreed to for that particular Product, Verigy may, at its option: (i) return the Non-Conforming Products to Jabil for repair or replacement in accordance with Section 12.4 below, or (ii) repair the Non-Conforming Products at Jabil’s expense in accordance with Section 12.5 below.

12.2

Repair Period. Jabil will return the replacement or repaired Products as soon as possible but in no event later than twenty (20) business days after receipt of the Non-Conforming Product and required documentation from Verigy or within three (3) business days if repaired by Jabil at Verigy’s site.

12.3

Return Material Authorization . Prior to returning any rejected Product, Verigy will make a written request for a Return Material Authorization (“RMA”) number from Jabil, and will return such Product in accordance with the provisions of this Article or other provisions if mutually agreed to by the Parties in writing and made a part of this Agreement .

12.4

Repair/Replacement Process . The Product repair and replacement process is provided in Exhibit E . Transportation charges, transfer of title and risk of loss for returned Products will be as set forth in Exhibit E .

12.5

On-Site Repair Process . Jabil will be responsible for repairing Non-Conforming Products where the failure to conform to the Product Requirements and/or Specifications is the result of a breach by Jabil of its warranty obligations set forth in Article 11. Verigy may engage a third party to repair such Non-Conforming Products upon Jabil’s prior written consent, which consent shall not be unreasonably withheld or delayed. In such event, Verigy and Jabil will work together to qualify the third party. Qualification includes the selection process, technical capability assessment and cost model review. Assuming the process set forth in this Section 12.5 is followed, Verigy’s use of a third party to repair Non-Conforming Products will not constitute unauthorized repair as that term is used in Section 11.8.3 or modification to a Product as that term is used in Section 26.4(iii). Both Parties will work together in good faith to determine whether Verigy or Jabil will contract with the third party that will be repairing Non-Conforming Products and manage the relationship with the third party. If Verigy contracts directly with the third party, Jabil will reimburse Verigy for all expenses incurred by Verigy for the third party to repair Non-Conforming Products. Jabil reserves the right to audit such third party repairs and charges. If Jabil contracts directly with the third party, Jabil will be responsible for the costs of the third party to repair Non-Conforming Products. If Verigy wishes Jabil to undertake repair or replacement of Products that are Non-Conforming due to reasons other than a breach by Jabil of its warranty obligations hereunder, the Parties will mutually agree on an allocation of costs for the repair and/or replacement process prior to Jabil performing such work.

12.6

Line-Down Condition . Jabil will replace all Non-Conforming Products as specified above except in those instances where Non-Conforming Product results in a line-down condition for Verigy. In the case of a “line down condition” where an entire Product line cannot ship due to a problem solely caused by Jabil, Jabil will provide required resources and escalation as needed to accelerate replacement or repair. The Verigy Global Alliance Manager and Jabil Business Unit Director will agree upon the accelerated delivery

methods and time period. Any accelerated replacement, repair and delivery will be at Jabil’s expense. Ultimate responsibility for accelerated replacement, repair and delivery will be borne by the responsible Party as determined by the Parties based on a root cause analysis.

12.7

Repairs Due to Component Failures. In the event that Verigy receives a Non-Conforming Product and the Parties determine that the defects results from a Component, Jabil will pass on to Verigy all available warranty remedies pursuant to Section 11.3. In addition, Jabil will negotiate with Component Suppliers, at Verigy’s discretion and with Verigy present or on Verigy’s behalf, for additional remedies outside of the Component warranty pursuant to Section 11.3. Jabil shall not enter into any settlement with respect to Component failures that affects Verigy’s rights or interests without Verigy’s prior written approval, which shall not be unreasonably withheld. In the event that such negotiations do not resolve the matter to Verigy’s satisfaction, and the available warranty remedies under Section 11.3 do not cover the full cost of Component repair or replacement, Jabil will provide Verigy with prior written notice regarding any additional costs required to repair or replace the affected Products. In the event that cost details are not readily available and Verigy requires immediate repair or replacement of the affected Products, Verigy will authorize Jabil to proceed with repair or replacement of the affected Products on a not to exceed basis. Verigy will assume liability for additional costs actually incurred by Jabil to repair or replace the affected Products, provided that Verigy has given Jabil written approval before such costs were incurred.

13.

PRODUCT SUPPORT

13.1

Product Life and Support Life . The “Product Life” is the period beginning on the date of the first shipment of Product from Jabil, including NPI activities, and continuing to the date when the Product is deleted from the Verigy corporate price list. The “Support Life” is the ten (10) year period beginning on the date the Product is deleted from the Verigy corporate price list.

13.2

Jabil Technical Support Obligation . During the Product Life and Support Life, Jabil will maintain technical expertise on Products consistent with services provided immediately upon the Original Effective Date, including, but not limited to: trained personnel with sufficient training to be able to repair the Products; Jabil single point of support contact for Verigy; Tools and equipment needed for the repair of Product; and ready access to historical and most current manufacturing documents. Fees for Jabil technical support will be listed in the Business Unit Addenda or otherwise agreed to by the Verigy Global Alliance Manager and the Jabil Business Unit Director. Jabil’s technical support obligations set forth in this Section 13.2 will apply only during the Term of this Agreement, unless otherwise agreed by the Parties in writing.

13.3

Product Support Documentation . Jabil will use Commercially Reasonable Efforts to review Verigy documentation for accuracy and provide feedback to Verigy. Jabil will use Commercially Reasonable Efforts to ensure completeness and accuracy of all documentation provided by Verigy, and notify the appropriate Verigy Business Unit when and if, any errors are found. Verigy is responsible for the accuracy and completeness of Verigy documentation provided to Jabil for review.

14.

OBSOLESCENCE AND MANUFACTURING RIGHTS

14.1

Lifetime Buy Rights . Jabil acknowledges its obligation to manufacture, supply and support the Products without interruption. If, however, during the Term of this Agreement and after the first year of shipment of such products, Jabil seeks to discontinue the manufacture, supply or support of any Product (a “Discontinued Product”), Jabil will give notice to Verigy no less than nine (9)months in advance of the last date the Discontinued Product can be ordered. After receipt of notice of discontinuance, Verigy may, at its option:

14.1.1

Continue to place Orders for the remaining nine (9) month period prior to discontinuance;

14.1.2

At the end of the nine (9) month period, issue one final Order to Jabil for such quantity of the Discontinued Product as Verigy deems necessary for its future requirements to be manufactured by Jabil in one batch with scheduled deliveries over a mutually agreed period; and

14.1.3

Manufacture the Discontinued Product under the manufacturing rights granted in Section 25.3 below, without payment to Jabil of any royalties or other charges.

14.2

Verigy’s Right To Tools and/or Documents. If Jabil seeks to discontinue the supply or support of a Product under Section 14.1, or Verigy terminates a Business Agreement for Cause and the provisions of Section 25.3 apply, Jabil will provide to Verigy the items specified below. In addition, Jabil will release to Verigy any documentation created by Jabil specifically for the manufacturing of the Product within ten (10) business days of Verigy’s written request, Verigy will keep all such documentation confidential in accordance with the terms Article 19 (Confidential Information). If Jabil refuses to cooperate with its obligations under this Article 14, Verigy may charge Jabil for all reasonable costs to procure or prepare the documentation. Upon request, Verigy will provide Jabil with supporting documentation for such costs. Verigy’s right to Tools and documents under this Section 14.2 are subject to Verigy fulfilling all of its outstanding obligations with respect to the Discontinued Product as set forth in this Agreement.

14.2.1

Jabil will furnish to Verigy, provided that Verigy pays the associated shipping cost, all Verigy owned Tools within a mutually agreed upon timeline after Jabil has received Verigy’s written notification to Jabil of Verigy’s exercise of its rights under this Section 14.2. If the Verigy owned Tools are not delivered within this time period, Jabil will permit Verigy to enter upon Jabil’s premises, upon forty-eight (48) hours prior notice, to take possession of, assemble and collect such Tools or render them unusable, or Verigy may require Jabil to assemble such Tools and make them available at a place

Verigy designates in writing to allow Verigy to take possession or dispose of such Tools. Jabil will also furnish to Verigy the names and addresses for sources for such Verigy owned Tools. Tools will be returned to Verigy in the same condition as supplied, unless expenses incurred by Jabil for upgrades are recovered through NRE.

14.2.2

To the extent not proscribed by non-disclosure agreements between Jabil and its vendors, Jabil will furnish to Verigy within seven (7) days after Verigy’s written request, the names and addresses of Jabil’s sources for Components or materials not manufactured by Jabil, including the appropriate part numbers for commercially available equivalents of electronic parts. Jabil will use all reasonable efforts to assist Verigy in procuring the right to purchase all such components or materials directly from Jabil’s vendors.

14.2.3

Jabil will furnish to Verigy without charge all Verigy documentation including parts catalogues, schematics, material lists, Engineering or Manufacturing Changes, Engineering Change Orders, and other servicing documentation deemed necessary by Verigy to service and support the Discontinued Product.

14.2.4

To the extent permitted, Jabil will assign to Verigy any license rights it may have with third parties for software, documentation, or any Intellectual Property used in the manufacture of the Discontinued Product solely for the limited purpose of having the Discontinued Product manufactured by another supplier.

15.

INVENTORY MANAGEMENT

15.1

Inventory Reporting . Jabil agrees to provide to Verigy a monthly consolidated listing of all material inventories utilizing the reporting requirements guidelines set forth in Exhibit H . Verigy reserves the right, at Verigy’s expense, upon two (2) business days prior notice, to conduct an audit of Jabil’s books and records solely for the purpose of confirming the accuracy of the reports described in Exhibit H .

15.2

Management of Allocated Components . Except for Components supplied by Verigy or for which Verigy takes specific responsibility, Jabil will be responsible for managing Component allocations in the supply chain; provided, however, that the Verigy Global Alliance Manager retains the right to designate where within Jabil’s sites the allocated Components are to be directed after consultation with the appropriate regional Jabil Business Unit Managers regarding any potential impact. As part of this obligation, Jabil will direct the specified quantity of Components to the designated Jabil work cell in support of the prioritized Verigy Product. Jabil agrees to deliver such Components on the requested Delivery Date, provided that there is sufficient time in which to move the Components, and at the appropriate quality level.

15.3

Excess Components Inventory. Verigy’s financial responsibility for Excess Components will be mutually agreed by both parties.

15.4

Obsolete Component Inventory . Obsolete Components will be communicated to the Verigy Global Alliance Manager or as appropriate to the Business Unit Managers as part of the monthly Obsolete Component reporting or as soon as possible after forecasted demand is removed. Jabil will exercise Commercially Reasonable Efforts to provide such report to Verigy by the last business day of the first full week of each month. As part of the quarterly E&O process for obsolete inventory, Verigy has the option of: (i) purchasing the Obsolete Components from Jabil, at Jabil’s current quoted price plus an agreed percentage to cover cost of acquisition and having the Obsolete Components returned to Verigy, or a location indicated by Verigy; (ii) authorizing Jabil to sell Obsolete Components internally or externally and Verigy, upon review and agreement, pays the difference between the Jabil current quoted price plus an agreed percentage and the selling price; or (iii) scrapping and disposing of the Obsolete Components at Jabil’s current quoted price plus an agree percentage to cover cost of acquisition. Upon Verigy’s receipt of Jabil’s Obsolete Component report, Verigy will advise Jabil in writing within thirty (30) days which option Verigy has selected to disposition the Obsolete Components. In the event that Verigy has failed to notify Jabil within such thirty (30) day period, the issue will be escalated to the Verigy Global Alliance Manager for resolution within ten (10) days. The Parties agree to work together in good faith to complete the disposition of Obsolete Components within thirty (30) days after Jabil’s receipt of written notice from Verigy.

15.5

Component Discontinuances . If either Jabil or Verigy receives notice from a Component Supplier or the other Party that a Component will be discontinued, the Party receiving such notice will notify the other Party in writing within two (2) business days and will work with that Party to identify a form, fit and function replacement in a reasonable period of time, and to notify the other Party by submitting in writing a list of alternatives. The Verigy Global Alliance Manager or, as appropriate, the Verigy Business Unit Managers and Jabil will develop an appropriate action plan, including all sample requirements, product qualifications, updates to the AVL, and schedule changes necessary to reach a mutually agreeable resolution of the discontinuance and the Parties shall use Commercially Reasonable Efforts to find an alternate source of supply. Additionally, upon Verigy’s request, Jabil will disclose the agreements in place regarding discontinuance notification for all Turnkey Component Suppliers. Jabil will make all Commercially Reasonable Efforts to ensure all such suppliers are obligated to provide a minimum of six (6) months notification of any potential discontinuance to Jabil.

15.6

Component Lifetime Buys . In the event that Verigy cannot identify a form, fit and function replacement, or does not approve a replacement identified by Jabil, Verigy or Jabil may purchase the LTB inventory and manage the consumption of such inventory under a consignment or Buy/Sell model such that the LTB inventory is available to Jabil for use in manufacturing Products. Verigy will pay any costs associated with the storage or handling of such consigned LTB inventory to Jabil, and Jabil will determine the most appropriate allocation of such inventory among its manufacturing locations. The Verigy

Global Alliance Manager and the Jabil Business Unit Director, or Verigy and Jabil Business Unit Managers as appropriate, agree to negotiate in good faith the terms of the allocation of such LTB inventory, including associated costs, in accordance with the LTB Component allocation requirements set forth below.

15.6.1

When Jabil commences manufacturing of Products, Verigy will provide a list of all LTB Components that are included in all instruments or assemblies being transferred. The list will be separated according to LTB Components that will actually be used to build assemblies at a Jabil manufacturing location, and LTB Components that will be used on assemblies that are already completed assemblies when they are transferred. Jabil will determine the required distribution of the LTB inventories across the Jabil’s Product manufacturing sites, and Verigy will ship the inventory accordingly.

15.7

Supplier Managed Inventory. Where requested by Verigy, Jabil and Verigy will jointly review and agree upon a mutually acceptable SMI program. Any such SMI program will be agreed to by the Parties. Elements of the SMI program will include but not be limited to:

15.7.1

Jabil ownership of a mutually agreed level of finished goods inventory at a Jabil or third party logistics provider location with transfer of ownership to Verigy when material is actually required by Verigy;

15.7.2

Processes established to support Verigy’s and Jabil’s requirements, including inventory reporting, assurance of supply, aging of finished goods inventory, etc.; and

15.7.3

Invoices will be generated and paid in accordance with Section 9.4 at transfer of ownership.

15.7.4

Verigy expects Jabil to establish SMI agreements with sub suppliers where commercially reasonable and for Verigy to benefit from Jabil corporate agreements in place with the sub suppliers. Verigy shall assist Jabil to work with Verigy suppliers to establish such SMI agreements.

15.8

Inventory Transfer Agreement . Where requested by Verigy and agreed to by Jabil, Jabil and Verigy will jointly implement an Inventory Transfer Agreement for Consigned Components. Any such Inventory Transfer Agreement will be mutually agreed to by the Parties. Elements of the Inventory Transfer Agreement will include but not be limited to:

15.8.1

Minimum Consigned Component inventory levels to be maintained by Jabil;

15.8.2

Shipment of Consigned Components;

15.8.3

Inspection and acceptance; and

15.8.4

Materials management.

15.9

Inventory Re-evaluation . The process for inventory re-evaluation will be as mutually agreed to by the Parties.

16.

QUALITY

16.1

Reference Standards . Jabil agrees to meet the Specifications, including the general technical specifications and reference standards set forth in international standards IEC 61340, ANSI ESD 20:20 and IPC-A-610C and Exhibit B and Exhibit C to this Agreement. Specific test requirements and quantitative yield figures will be agreed to by the Parties.

16.2

Supplier Performance Expectations . Verigy and Jabil agree to work together to develop and achieve the supplier performance expectations for each Product manufactured. The Parties will meet on at least an annual basis to review the progress made on the supplier performance expectations. During the performance review meetings, Jabil agrees to discuss and document any productivity improvement accomplishments and future plans relating thereto. In addition, both Parties will review Jabil’s internal process yields and Verigy’s incoming quality data on a monthly basis as part of the Management Operations Review (MOR) process. For both the MOR and TQRDCE processes, Jabil is expected to maintain a minimum overall score of three (3.0) on a scale of zero to four (0-4) with no individual attribute score below two (2.0). Jabil agrees to establish and implement corrective action plans as necessary to correct any deficient MOR or TQRDCE score (overall score below 3.0 or any individual attribute score below 2.0) not later than three (3) months from the date that Verigy communicates the deficient score to Jabil.

16.3

Process Quality Problems . Jabil agrees to establish and implement corrective action plans as necessary to correct any quality issues that are identified as a result of the following processes:

16.3.1

FTPR – The First Time Pass Rate (FTPR) will be established as mutually agreed by the Parties based upon Jabil’s predictive yield model for NPI and historical data for transferred Products. In the absence of a Jabil predictive yield model and historical data, the FTPR will be as mutually agreed by the Parties.

16.3.2

Jabil’s internal process – Yield measurements across all associated manufacturing steps. If the issue has the potential to affect Verigy’s FTPR, Jabil will immediately inform Verigy. Jabil will target to inspect existing inventories, remove defective boards and rework them within one (1) business day. In addition, Jabil will provide Verigy with a plan within one (1) business day to determine the root cause. Jabil will provide updates on at least a weekly basis until the root cause is identified. Once a corrective action for the root cause is established, this will be communicated to Verigy within one (1) business day.

16.3.3

Expected yield process – If the FTPR is below the predicted rate, Jabil will immediately use its corrective action process to correct the problem and to restore the FTPR to the agreed upon rate.

16.3.4

Verigy’s incoming quality process – In the absence of a predictive yield model, if the FTPR is below the agreed rate, Jabil will immediately use its corrective action process to correct the problem and to restore the FTPR to the agreed upon rate.

16.3.5

Verigy’s customer returns process – Jabil will use Commercially Reasonable Efforts to inspect existing inventories based on information provided by Verigy, remove defective boards and rework them within a target of one to three (1 - 3) business days. In addition, Jabil will provide Verigy with a plan to determine the root cause within one (1) business day. Once a corrective action for the root cause is established, this will be communicated to Verigy within one (1) business day.

16.4

Product Quality Problems . Jabil will notify Verigy within one (1) business day after identifying any significant quality issues relating to the Products, or Components that will affect Verigy’s mutually agreed FTPR goals. Jabil will also inspect existing inventories and remove defective Products and Components within one (1) business day. Upon Verigy’s receipt of notification from Jabil, Verigy and Jabil will work together to determine the root cause analysis of any quality problems. For quality problems that are attributable to Verigy, Jabil will assist Verigy in establishing and implementing a corrective action plan relating to Jabil’s manufacturing process or Components. For quality problems that are attributable to Jabil, Jabil will establish and implement a corrective action plan to remedy such problems. A copy of the corrective action plan will be provided to Verigy. Jabil will provide Verigy with weekly updates, and notify Verigy after the correction plan has been fully implement and the problem has been resolved. After Verigy has verified that the corrective action plan has been fully implemented and the problem has been resolved, Verigy will notify Jabil that the corrective action plan has been closed.

16.5

Records . Jabil will maintain all records relating to corrective action plans for a minimum of three (3) years after Verigy notifies Jabil that such corrective action plan has been closed.

16.6

Contacts . Verigy and Jabil will each identify contacts in their respective organizations that will be responsible for quality issues that may arise during the Term of the Agreement. These contacts will act as the focal points to identify quality issues, resolve problems and escalate issues relating to quality as necessary.

16.7

Escalation . Jabil will respond to all Verigy inquiries related to quality within the time periods agreed to by Jabil and Verigy. Each response will include a summary of the problem, detailed description of the root cause, the actions proposed to resolve the problem and the proposed resolution date. In the event that Jabil fails to respond within such agreed upon time period, or Verigy determines that additional resources are necessary to resolve a problem, Verigy and Jabil will follow the escalation path agreed to by the Parties.

16.8

Process Improvement . Jabil agrees to provide Verigy with Quarterly information on process improvements. Jabil will maintain an acceptable documented quality system (e.g., ISO 9002 certified quality program or equivalent) at each authorized Jabil site specified in Exhibit F to manufacture Products and any additional quality requirements agreed by Jabil and Verigy. Jabil’s quality program will include monitoring the manufacturing processes, statistical process control, corrective action analysis of returned Product and repairs, define failure modes, improving materials and procurement processes, component traceability for critical Components or VI, and implementation of corrective actions. Component traceability is the ability to trace any given production batch to the Component lot or lots used in a given batch of Products.

16.9

Reporting Requirements . The Parties will mutually agree on those reports required using the Reporting Requirements Guideline in Exhibit H. Verigy Business Unit Managers may make appropriate modifications for their particular Verigy Business Unit. Any reports provided to Verigy pursuant to this Section will be subject to the provisions of the Confidential Disclosure Agreement in effect between the Parties.

16.10

ESD Audits . Jabil agrees that Verigy may, at least once per year, enter into its manufacturing facility to conduct ESD audits. If the audit is of a dedicated Verigy work cell area, Verigy will provide twenty-four (24) hours prior written notice. If the audit is of common manufacturing process areas, Verigy will provide five (5) days prior written notice. Such audits will use the ESD standard which is part of IEC 61340, ANSI ESD 20:20 and supplemented by Exhibit D , as the basis for these reviews. Deficiencies identified in the ESD audit relating to conditions existing as of the Original Effective Date will be waived for a mutually agreed period of time to allow resolution through corrective action plans. Such audits will be conducted in accordance with Section 16.11 below. Jabil further agrees to conduct audits as required by the Verigy standard noted, at all locations which manufacture Product or store materials for Verigy and make such reports available to Verigy upon Verigy’s written request.

16.11

Inspection . Verigy will have the right to inspect and audit, at Verigy’s expense, Jabil plant, purchasing processes, manufacturing processes, quality program and supporting documentation. This will include reports, quality test data, training documents, and certificates of conformance and related third party audit results (excluding audits by Jabil’s other customers or audits conducted by third parties on behalf of Jabil’s other customers) for the Products. The inspection or audit may take place at any time during the Term of this Agreement, provided such audit is in accordance with Jabil’s security procedure, occurs during normal business hours, and does not unduly interfere with Jabil’s operations. All efforts will be made to minimize the frequency of audits by Verigy or a Verigy authorized audit firm. In the case of an identified quality issue, Verigy will have the right to inspect within forty-eight hours (48 hr.) written notice to Jabil’s facility and to review applicable documentation and processes. Normal written notification for audits

will be one (1) week minimum prior to arrival. Jabil will provide, at no charge to Verigy, access to such facilities and services as are reasonably required by Verigy in performing such inspection. All information gathered by Verigy during such audits will be subject to the confidentiality obligations under Article 19.

16.12

General Specification for the Environment . In the event that Jabil (i) procures Components or other materials from suppliers that are not on Verigy’s AVL or (ii) procures Components or materials that have not otherwise been previously qualified by Verigy, unless otherwise specified or required by Verigy, Jabil will comply in all material respects with Exhibit J. In the event of a conflict between Exhibit J and applicable law, Jabil will, to the extent of such conflict, comply with applicable law.

17.

PROCESS CHANGE NOTIFICATION

17.1

Jabil Proposed Changes . No Engineering or Manufacturing Changes may be made to, or incorporated into, Products or Components without the prior written approval of the Verigy Global Alliance Manager and/or the responsible Verigy Business Unit Manager. Jabil will provide Verigy advance notice of any proposed material Engineering or Manufacturing Changes and provide evaluation samples and other appropriate information as specified by a Business Unit Manager. Such information may include possible effects on price, performance, reliability, manufacturing capacity, lead and delivery times, or appearance, and any Obsolete Components (an “Impact Proposal”). Verigy will accept or reject the Impact Proposal within five (5) business days after receipt thereof. Written approval of the Impact Proposal must be received by Jabil from the Verigy Global Alliance Manager and the affected Verigy Business Unit Managers prior to any implementation of the Engineering or Manufacturing Change. Any effect on price or other terms resulting from Engineering or Manufacturing Changes will be mutually agreed to by the Parties in writing in the Impact Proposal.

17.2

Verigy Proposed Changes . Jabil acknowledges that Verigy may need to change the Product or processes during the Term. These changes will be communicated through an ECO request. Jabil is only to take action when given change instructions in writing from Verigy. After receipt of the ECO, Jabil will provide to Verigy within two (2) business days an acknowledgement of the ECO and promptly thereafter provide an Impact Proposal describing any delivery impact, an implementation date, potential scrap or material exposure and the impact on the cost of the Product due to ECO changes. Verigy will accept or reject the Impact Proposal within five (5) business days after receipt thereof. If the Impact Proposal is acceptable, Verigy will notify the Jabil Business Unit Director and provide specific instructions to Jabil on ECO implementations, including effective dates.

17.3

Verigy Financial Responsibility . If Verigy accepts the Impact Proposal, Verigy will assume liability for any material made obsolete due to an ECO implementation in accordance with Section 15.4 of this Agreement. In addition, Verigy will be responsible for increased labor or material charges and any reasonable rework or expedite charges for labor, materials and test resulting from an ECO or accepted Impact Proposal. Notwithstanding the above, Jabil will be responsible for expenses caused by failure to implement an acknowledged CO or accepted Impact Proposal per the warranty provisions specified in Article 11.

17.4

Change Monitoring and Tracking . Upon implementation of a Verigy approved change to a Product under this Article, Jabil will provide the appropriate Verigy Business Unit Managers with the first (1st) serial number, first shipping date, Order number and quantity of Product to be included in that first shipment of Product incorporating the change. Residual inventories of pre-existing finished goods inventory or work in progress for the affected Products will be disposed of as mutually agreed to by the Parties.

17.5

Emergency Change Request . Jabil agrees to acknowledge all written emergency change requests within one (1) business day, such acknowledgments to include at a minimum, a date on which Jabil will respond to Verigy with the conditions (including but not limited to price and delivery impact) for implementing the proposed changes. An emergency will be defined as a severe situation, including Product safety, Product quality or a line shut down. Upon both Parties’ agreement on the price, delivery, or any other conditions impacted by the emergency change request, Verigy will issue an Engineering Change Order to Jabil reflecting these new terms and conditions.

18.

VERIGY PROPERTY

18.1

Title to Verigy Property . Jabil hereby acknowledges that Verigy will at all times retain all right, title and interest in Verigy Property furnished to Jabil. Verigy Property will be provided to Jabil as bailed property under the terms of this Section.

18.2

Verigy Property . All Verigy Property must be:

•

Clearly marked as Verigy Property;

•

Remain personal property, and not become a fixture to real property;

•

Subject to inspection by Verigy at any time in accordance with Sections 16.11 and 18.7;

•

Used only in filling Orders from Eligible Buyers;

•

Kept free of Encumbrances; and

•

Kept separate or identifiable from other materials, Tools or property of Jabil or held by Jabil; and not be modified in any manner by Jabil without prior written permission from Verigy.

18.3

Financing Statements . Jabil hereby grants Verigy its power of attorney to file UCC-1 financing statements (or similar notices in accordance with the laws of the jurisdiction in which the Verigy Property is located) describing the Verigy Property and the proceeds thereof, wherever Verigy deems appropriate to provide notice to other parties that the

Verigy Property is not property of Jabil. Any filing under the UCC or similar law shall be presented to Jabil by Verigy for approval prior to filing, which approval shall not be unreasonably withheld or delayed and shall only cover the Verigy Property held at Jabil’s site. Nothing contained herein shall be deemed to create any security interest in any property owned by Jabil. Notwithstanding the foregoing, should this Agreement or the transactions under this Agreement be deemed for any reason to pass title to the Verigy Property to Jabil, Jabil agrees that Verigy will be deemed to hold, and Jabil hereby grants to Verigy, a purchase money security interest in the Verigy Property and the proceeds thereof, to secure all of its obligations to Verigy, including its obligation to return Verigy Property and Jabil’s other obligations under this Agreement.

18.4

Notice to Secured Creditors . Within thirty (30) business days after execution of this Agreement, Jabil will deliver written notice to existing secured creditors in form and substance satisfactory to Verigy to the effect that Verigy Property located at Jabil sites is the property of Verigy. Jabil will deliver a copy of the notice to Verigy concurrently with its delivery of such notice and will promptly provide Verigy with copies of any replies and related correspondence that it receives from such secured creditors. In connection with any future agreement by Jabil to pledge any of its assets or properties, Jabil will secure and concurrently deliver to Verigy such secured creditor’s written acknowledgment that Verigy Property will remain the property of Verigy in form and substance satisfactory to Verigy.

18.5

Maintenance and Calibration . Jabil will put in place a system to ensure that Verigy Property consisting of test equipment provided to Jabil is calibrated before use. Calibration