PURCHASE AND DISTRIBUTION AGREEMENT BETWEEN XPLORE TECHNOLOGIES CORP. AND PEGATRON CORPORATION

Exhibit 10.14

Xplore Technologies Confidential

PURCHASE AND DISTRIBUTION AGREEMENT

BETWEEN

XPLORE TECHNOLOGIES CORP.

AND

PEGATRON CORPORATION

This Purchase and Distribution Agreement (“Agreement”) is made by Xplore Technologies Corp. (“Buyer”) and Pegatron Corporation, (“Seller”) and is effective as of December 7, 2007 (Effective Date).  The terms and conditions contained in this Agreement shall govern the development, production, purchase, sale, service and distribution of the Products listed and described in Exhibit A (“Products and Pricing”).  In the event of any conflict between this Agreement and the terms and conditions of an Order, as defined below, this Agreement shall govern.  Any reference to Buyer or Seller, as the case may be, shall include Buyer’s Subsidiaries and Seller’s Subsidiaries, respectively.  “Subsidiaries” shall mean any entity of which more than fifty percent (50%) of the voting rights are owned or controlled, directly or indirectly, by Buyer or Seller, as the case may be, provided, however, that such entity shall be deemed to be a Subsidiary only for so long as such ownership or control exists. All terms shall have the meanings as set forth below or as defined in this Agreement.

DEFINITIONS:

“Build to Order” shall mean standard Products built upon receipt of an actual purchase order from Buyer.  Manufacturing build is only initiated after a purchase order is received.

“Configure to Order” shall mean Products with a flexible configuration for a broad set of commonly requested hardware and software combinations.

“Customers” shall mean Buyer’s customers, including its authorized resellers and distributors, including end customers.

“Mass Production” shall mean volume production quantities after all milestones have been successfully completed and Buyer has formally released Seller to production.

“Order Cycle Time” shall mean the time between Buyer’s receipt of a customer Order and fulfillment of the Order to an end customer.

“Product Process Order Cycle Time” shall mean the time between Seller’s receipt of the Order and the Product shipment either to Buyer or an end customer.

“Products” shall mean all items listed in Exhibit A “Products and Pricing” which may include ruggedized mobile computing devices, options, subassemblies, or components, in multiple configurations for different countries, packaged and including documentation.

“Ship to First Commit” shall mean Seller’s shipment performance against the first commitment made to Buyer.

“Planning Horizon” shall mean the time period for which Buyer furnishes Seller forecasted requirements in either daily, weekly, monthly or quarterly periods.

“Epidemic Failure” shall mean a greater than [Confidential Treatment has been requested] failure within the warranty period for the same cause in any [Confidential Treatment has been requested], provided that such failures shall not include those failures that are the result of a software defect or bug that is contained in the third party software itself but shall include defects and bugs in the software image created by Seller.

“Buyer Unique Materials” shall mean any obsolete or excess materials without a marketable value purchased to support the forecast will be considered a Buyer Unique Material, including those items defined in Section 19C referred to as Buyer Specific materials.

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“Buyer Specific Materials” shall mean product purchased within lead-time that is specific only to the Buyer’s Product.

“Confidential Information” shall mean means any non-public or proprietary information relating to a Party, whether now in existence or hereafter developed, that (a) is designated or identified as being “Confidential”, “Proprietary” or of some similar designation, or (b) a Party knows or should know is considered to be highly sensitive and confidential.  The term “Confidential Information” includes, without limitation, any non-public or proprietary information relating to a Party’s secrets, trade secrets, copyrights, trademarks, patents, patent applications, record of inventions, current and proposed business arrangements and dealings with third parties, business operations, financial information, equipment, samples, samples’ configuration, samples’ concept, procedures, purchases, accounting, bookkeeping, marketing, merchandising, selling, leasing, servicing, finances, infrastructure, business systems, business techniques or operational techniques.  The term “Confidential Information” does not include any information that is or becomes publicly known through no fault of a Party or the Party’s agents, employees or representatives.

“Buyer Deliverable” shall mean any materials solely developed by Buyer for use in the Product.

1.                                       INTENT

A.                                    Buyer intends to purchase Product from Seller.  As such, Seller agrees to cooperate with Buyer to further mutual long-term goals, by sharing Product road map and technology directions.  Seller agrees to cooperate to achieve Buyer’s program goals, which include, but are not limited to, shortening Product lead-times, increasing volume flexibility, achieving Just-in-Time delivery, direct ship logistics, meeting corporate re-engineering and supply chain objectives, achieving ongoing cost reductions and specific quality goals, and continuous quality improvement.

B.                                      This Agreement is not a requirements contract and does not obligate Buyer to purchase any minimum quantity of Product but only establishes the terms and conditions for such purchases if and when they occur.

C.                                      The Parties agree to execute all the Exhibits outlined in the Index of Exhibits of this Purchase and Distribution Agreement.

2.                                       FORECAST/LIABILITY/PURCHASE ORDER

A .                                   Buyer shall furnish Seller with a forecast of the quantity and required delivery dates of Product that Buyer anticipates purchasing under this Agreement commencing on a date in the current week as specified by Buyer in such forecast through the end of the Planning Horizon. The planning horizon will extend to a minimum of a six (6) month time period.  Such forecast may at times be communicated to Seller via a mutually agreed upon EDI protocol. This forecast shall be used only by Seller for material positioning, and not for manufacturing Product.  Product shall only be built to Orders.  The forecasted “Planning Horizon” which is the six (6) month time period for which Buyer furnishes Seller forecasted requirements in weekly, monthly and quarterly time periods.  Buyer’s forecast shall include Buyer’s part number, quantity and required ship date.  The forecast may include components, configure-to-order (CTO) modules, subassemblies, or finished build-to-order (BTO) Product.  Within two (2) business day of Seller’s receipt of Buyer’s forecast, Seller shall send to Buyer a forecast response report, such report may at times be referred to herein as “Seller’s Acceptance Report”, indicating Seller’s commitments to supply Product as requested in Buyer’s forecast. The acceptance report must be received in accordance within a mutually agreed upon format.  Seller shall use its best efforts to ensure that the quantity and delivery dates specified in its acceptance report are equal to those specified in Buyer’s forecast. Failure to respond as stated in Section 2.A shall commit Seller to Buyer’s forecast and upside as defined in Exhibit D, Flexibility Exhibit.  The acceptance report must comprehend capacity, materials, and any other limitations to supply.  The quantity set forth in Seller’s acceptance report for any particular period is referred to herein as the “Maximum Quantity”. Although Seller has no obligation to meet requested increases or decreases beyond the levels indicated in Exhibit D, Flexibility Exhibit, Seller agrees to make

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best efforts to meet increased or decreased schedules in accordance with Buyer’s forecast updates.  Seller must notify Buyer of any and all excess within five (5) business days of the caused change or Buyer bears no liability for such materials or Product.

B.                                     Buyer’s maximum liability for the volumes specified in the forecast shall be no greater than the percentage numbers as stated in the Flexibility Exhibit, except as otherwise agreed through written letters of authorization executed by the parties.

C.                                     Seller agrees to work with its material suppliers to enable Seller to either return materials to such suppliers or delay the ship date of such materials in order to minimize Buyer’s liabilities.  Any materials or units that Buyer is liable for in accordance with the Flexibility Exhibit and which Buyer pays Seller as stated above shall belong to Buyer.  At Buyer’s request, Seller shall build out the materials into completed Product.  Further, at Buyer’s request, Seller shall either store the materials or finished Product, at Seller’s facilities, or ship the materials or finished Product to Buyer or a location designated by Buyer at Buyer’s cost.

In no event shall Buyer’s liability extend to any excess materials that Seller may have in inventory or on order which are beyond required lead times for such materials based on the forecast or which are the result of Seller’s inaccurate inventory planning.

D.                                    Buyer may purchase Products by issuing from time to time a purchase order to Seller (the purchase order may be referred to herein as the “Order”).   The Order shall set forth the quantity of Product, price of Product, ship date for the Product, ship to location, and part number(s). This Order may contain multiple configurable line items.  The Order may be sent to Seller utilizing a mutually agreed upon EDI protocol.   Manufacturing build is only initiated upon Seller receiving a Purchase Order for units or options.  Seller shall acknowledge and commit to Buyer using an “ Order Acknowledgement”, including multiple line items if designated on the original Purchase Order.  All Purchase Orders must be processed within 24 hours of receipt. Seller shall accept any Order that materially conforms to the terms of this Agreement. No additional or different provisions proposed by Seller in any acceptance, confirmation or acknowledgment shall apply unless expressly agreed to in writing by Buyer.  Buyer hereby gives notice of its objection to any additional or different terms.  Subject to any change orders that may be entered into in accordance with this Agreement, the Order represents the obligation of Buyer to buy and Seller to sell the aggregate quantity of Products specified in the Order in accordance with and subject to the terms of this Agreement and at the price or prices specified in such Order (which prices will be established in accordance with the other provisions of this Agreement).  At no time will Buyer be liable for Product built in excess of the current open orders.

E.                                      Buyer will deliver to Seller an Order based upon customer orders.  These Orders may be configure-to-order (CTO) Product, subassemblies with one or more line items.  The Order will contain, at a minimum, the following items:  (i) Buyer Purchase Order Number; (ii) Configuration/Model/Revision Level; (iii) Quantity; (iv) Address for Delivery; (v) Delivery Date; (vi) Price; (vii) Ship to Location; and (viii) Indication of ship complete or particles accepted.

F.                                      Seller will provide Buyer with a “Sales Order/Shipping Status Report”, as a basis for reconciliation of purchase order backlog between the parties.

G.                                     All Orders shall be issued, submitted or communicated, as applicable manually or by a mutually agreed upon electronic data exchange (“EDI”). It is Buyers intent to transition to electronic communications as soon as the volume of business transactions necessitates.

H.                                    Seller agrees that all Buyer sites, and subsidiaries, shall be entitled to make purchases under this Agreement.

I.                                         The ordering, billing, and shipping/distribution process for all Products to be manufactured by Seller and shipped to Buyer’s destination of choice hereunder shall be as follows:

(i)                                     Purchase Order under this Agreement shall be sent to Seller by the authorized purchasing representative of Buyer, Seller shall acknowledge and commit to Buyer using an “ Order Acknowledgement

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(ii)                                 Upon delivery of Product by Seller to Buyer’s authorized carrier at Seller’s manufacturing center, Seller shall notify Buyer of product shipment via the agreed upon method, referred to herein as the “Ship Notice”.  The Ship Notice may require multiple line items to be transmitted on a single Order. Seller agrees to automate the Ship Notice such that the Ship Notice is transmitted at the time the Product is tendered to the freight carrier. Seller shall have a process to electronically confirm (i.e. bar code process) that Product has been tendered to the freight carrier and Seller shall develop a verification process to ensure an Ship Notice transaction is not duplicated.  In the event duplicate Ship Notice transactions are sent for the same shipment, resulting in overpayments to the supplier, Buyer has the right to receive immediate reimbursement for the value of the Product overpayment.

(iii)                              Seller shall invoice Buyer via the “Invoice”.  Seller agrees to use best efforts to transact matching invoices for all individual ship notifications sent, including multiple line items. At no time shall an invoice reflect two or more ship notification transactions.  In the event an invoice does not match a ship notification, Buyer will withhold payment on that invoice until exceptions have been reconciled.

(iv)                             Buyer will pay Seller for the amounts invoiced in accordance with the terms of this Agreement.  Invoices shall reflect the prices specified in the Order.

J.                                        Buyer shall be designated as Seller’s most preferred customer.  As such, Seller will provide Buyer with all necessary support with Seller’s most experienced and talented resources.  In addition, Seller agrees to meet all of Buyer’s Product development and purchase/distribution requirements on a priority basis before any of its other customers.

3.                                       CHANGE REPORTS, COMMITS AND OTHER COMMUNICATIONS

A.                                   Changes to delivery dates may only be made by Buyer’s authorized representatives either designated in writing from time to time or in the form of an EDI 860 transaction, referred to as a Purchase Order Change /Cancellation/Redirect Request”.  Buyer may issue change requests for Product quantities and schedule dates, subject to Buyer’s liability obligations, in accordance with the Flexibility Exhibit attached as Exhibit D (“Flexibility Exhibit”).  Any such change request by Buyer shall be subject to Seller’s written confirmation, referred to as a “Purchase Order Change Acknowledgement/Request”, within one (1) business day following receipt of the change request.

4.                                       TERM OF AGREEMENT

The term of this Agreement shall be three (3) years, commencing on the date this Agreement is signed by both parties (“Effective Date”). This Agreement will be automatically renewed at the conclusion of the initial three (3) year period for successive one (1) year periods unless one of the parties indicates by written notice to the other party not less than ninety (90) days prior to the end of the term that it does not intend to renew the Agreement.  Notwithstanding the foregoing, the Agreement shall remain in full force and effect and shall be applicable to any Order(s) issued by Buyer to Seller during the term of this Agreement until any and all obligations of the parties under such Order(s) have been fulfilled.  This Agreement may be amended within the 3 years as required.

5.                                       PRICING

A.                                   The prices for the Products shall be set forth in Exhibit A and shall be fixed for the period set forth therein (the “Pricing Period”) and shall not be contingent on purchased volumes.

B.                                     Prices shall include all charges for materials such as packaging, packing, crating, storage, forwarding agent or brokerage fees, freight shipping charges, document fees, duties, and any and all sales, use, excise and similar taxes necessary to deliver materials to the appropriate

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Seller’s manufacturing center. Seller will not be responsible for the freight, insurance costs, all governmental duties/charges and other relevant expenses in connection with the shipment of Product from Seller’s manufacturing center to Buyer’s destination of choice.  Buyer shall reimburse Seller for any applicable sales, use, excise and similar taxes actually paid by Seller in completing the sales transaction to Buyer for the Product.

C.                                     Seller shall maintain a vigorous cost reduction program to ensure that pricing is competitive at all times. Seller is able and willing to drive automatic cost reductions of [Confidential Treatment has been requested] for materials managed by Seller and [Confidential Treatment has been requested] for non-materials to Buyer. In addition Buyer and Seller agree to determine the material cost impact to future component cost reductions based on forecast and order volume changes. Not withstanding the foregoing, Buyer and Seller shall each have the right to require an immediate review with the other party of the pricing of the Product because of significant changes in the marketplace and the parties agree to work together to reach a mutually acceptable price for the Product to achieve best pricing.

D.                                    Notwithstanding any other requirements in this Agreement, including section 5E below, and to the extent permitted by applicable law, Seller shall offer Buyer the lowest prices and most favorable terms net of any discounts or rebates that it affords or intends to afford to its other customers for similar product. Seller’s execution and delivery of any pricing schedule shall be its representation that the prices and other terms reflected therein (the “Subject Terms”) comply with the preceding sentence and that, except as disclosed by Seller to Buyer prior to entering into a pricing schedule, the Prices and subject terms are the lowest and most favorable offered by Seller to any of its other customers for similar Product, regardless of quantity purchased. In the event Seller discloses that the prices and subject terms are the lowest and most favorable permitted by law but are not the lowest and most favorable offered to any of its other customers, Seller shall furnish Buyer with such evidence as Buyer requests, to confirm the basis on which prices and terms more favorable than those offered to Buyer are being offered to any of Seller’s other customers.

E.                                      In order to reduce the cost of components for the production of Products, Buyer has requested in some instances that suppliers extend Buyer’s pricing to Seller solely for components used in the manufacture of Products.  In certain instances suppliers will sell to Seller at prices equal to prices charged to Buyer.  In other instances, suppliers will sell to Seller at pricing that will include an uplift to Buyer’s standard pricing.  This uplift will be included as part of the pricing offered to Seller solely to protect the confidentiality of Buyer’s pricing on such components.  This pricing shall apply only to components sold to Seller for use in Buyer’s Products and should not in any way affect pricing for any components which may be sold to Seller outside of Buyer’s program.  Furthermore, suppliers offering such pricing to Buyer have been instructed not to represent that this pricing is anything other than pricing for supplier components to be used exclusively in Products.  Suppliers have been given permission to provide Seller with any and all technical information required by Seller concerning the operation of supplier materials or their integration into Products.  All pricing offered by suppliers to Seller, as well as the terms of this program, are subject to the terms of Section 30.

F.                                      Seller shall submit to Buyer a vendor list for materials used in the Product.  In addition, Seller shall notify and provide samples to Buyer of any changes in the vendor list forty-five (45) days prior to implementing the change.

G.                                     Seller shall provide Buyer proposed pricing, (by Buyer unique part number), and a forecast of proposed future pricing by quarter per each geographic regional configuration site, no later than the fifth business day of the last month of each quarter end in accordance with Exhibit A.

H.                                    Seller shall provide all necessary resources to support the procurement activity required to acquire all materials and services to support the Product.

I.                                         Buyer sets target cost goals for each of the components included in the Product manufactured by Seller for Buyer.  From time to time Seller may provide cost reduction incentives to Buyer to approve AVL changes for mutual financial benefit.

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J.                                        All quotes for mass production product must be finalized and electronically provided to Buyer, three (3) days before the first calendar day of each month, provided Buyer has extended pricing on components as agreed upon between the parties at least one (1) week prior to the end of the previous month. The effective date of each quote is to be the first calendar day of each month. If Seller fails to provide finalized, mutually agreed upon pricing prior to this date then Buyer shall have the right to recover the difference in the current costs and the new agreed upon costs by offsetting Seller’s payables.

The quote format itself has two distinct parts, the upper part of the format contains strictly material costs, and the lower part of the quote contains strictly non-material costs.  Seller agrees to utilize commercially reasonable efforts to adhere to this quote format as a means to communicate actual Seller material and non-material costs to Buyer. If Seller fails to provide the quote as defined above, Buyer shall have the right to recover any financial impact by offsetting Seller payables.

6.                                       AGED INVENTORY

A.                                    Aged Inventory is defined as any critical component that is carried in inventory through a pricing period change. All components shall be costed at current market price.  Seller agrees that it shall comply with the terms of Section 17 and Exhibit I, ODM Requirements.

7.                                       EXCLUSIVITY AND MANUFACTURING RIGHTS

A.                                    Seller agrees that the Product listed in Exhibit A shall be manufactured by Seller solely for purchase by Buyer and distribution to Buyer and or Buyer’s customers.  Seller will preinstall the software specified by Buyer for each model of the Product at Seller’s manufacturing, distribution, and/or HUB centers. Seller will maintain control, in its Taiwan location, of the master copy of the software to be preinstalled on the Products. Seller shall also ensure adequate controls of all software in its configuration sites.

B.                                      Buyer shall own all rights to the Product hardware and software created by Seller specifically for Buyer, to the extent defined under the Product specification Exhibit. To the extent that Buyer does not own the rights to the Product hardware and software, Buyer shall have the right to manufacture or have manufactured the Products if Seller becomes unable or unwilling to support the terms of this agreement. Seller hereby grants to Buyer the right necessary for Buyer to use, produce, manufacture and/or have manufactured quantities of such Product for distribution of the Product by Buyer.  Seller shall provide to Buyer access to and use of all items that are necessary and/or useful in the manufacture of the Products for distribution by Buyer, including but not limited to, Seller’s drawings, software download images, bills of materials, processes, tools, and vendors list, to enable Buyer to manufacture and/or have manufactured Products for distribution by Buyer and create improvements to the Products.  Seller shall also provide to Buyer, at Buyer’s request and on a commercially reasonable basis, telephone and on-site personnel support as Buyer may request from Seller to assist and enable Buyer to manufacture or have manufactured and/or distribute such Products in commercial quantities. Buyer agrees to pay Seller reasonable expenses for such support.  Buyer reserves the right to manufacture internally or have manufactured at alternative sites such Products at their discretion. The parties agree that all costs for first sets of tooling shall be specified into Product Tooling Exhibit, as specifically set forth in this Agreement.    In the event of termination of this Agreement or if Seller files for bankruptcy or voluntary liquidation, Buyer shall have the right to purchase all tooling by paying the remaining tooling costs.

The IP rights of, in, and to, the work product created prior to this project shall be owned by the respective Party. Seller shall be allowed to use the IP rights created for this project provided that Seller requests approval in writing from Buyer. Buyer shall not unreasonably withhold approval of Seller’s written request.

C.                                      Except to the limited extent expressly stated in Section 19.D.2, Seller agrees that it will not produce, manufacture, or sell for itself or for any of its other customers any product that has the look and feel with regards to physical styling of the Buyer Products.  All software images created by Buyer or specifically created or developed by Seller for Buyer Products shall be used by Seller solely for Buyer Products and for no other purpose.

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D.                                     If Seller becomes unable to support the planning / procurement / manufacturing and distribution practices that are acceptable to Buyer, then Buyer reserves the right, with advance notification, to support this Product by installing a management team utilizing Seller’s facilities and resources until Seller is once again able to support the Product adequately.  Seller shall bear all costs associated with the implementation of Buyer’s management team, including, but not limited to, travel, lodging, and salary for each team member.  In addition, Seller shall bear all costs associated with Buyer’s support requested by Seller.

E.                                       Buyer shall have the right to manufacture or have manufactured the Products if Seller becomes unable or unwilling to support the terms of this agreement. Seller hereby grants to Buyer a license under trade secrets, copyrights and patents to access and use all of Seller’s drawings, bill of material, and vendors to make and have made Products and create improvements to the Products.  Seller agrees that any improvements created by Buyer shall be owned by Buyer.  Seller agrees that presentation of this Agreement by Buyer to Seller’s successors and assigns shall be sufficient for such successors and assigns to make Seller’s drawings, bills of materials, and vendor lists accessible to Buyer. Buyer may perform or have others perform any or all final assembly and regional configuration of the Products.

8.                                       DELIVERY

A.                                    Seller understands that time shall be of the essence in meeting Buyer’s requirements and agrees that Buyer may be irreparably damaged should Seller not meet Buyer’s specified delivery requirements.  Delivery performance shall be measured by Seller’s ability to ship pursuant to the performance metrics in Exhibit I.

B.                                      Unless otherwise set forth in the Order, title and risk of loss shall pass to Buyer upon Seller’s delivery to Buyer’s authorized carrier / or freight forwarder.

C.                                      Each week Seller will provide a report of potential material shortages for the next six (6) week period.  Seller shall notify Buyer in writing immediately if Seller has knowledge of any event that could result in any change to the agreed delivery plan.

D.                                     Seller shall be responsible for shipping Product on the date and in the quantities identified in the Order from Buyer and acknowledged by Seller, including any upsides identified in Exhibit D, or as otherwise agreed to by the parties in writing.  In the event that Product committed for delivery by Seller does not meet the original committed date, Buyer may request that such Product be shipped and delivered via a different mode of transportation at Seller’s expense. In the event that Buyer requests expedited delivery of Product at its expense, Buyer shall do so in writing.

E.                                       If Seller is unable to provide Product as specified within the forecasts and the Order, then Buyer has the right to either cancel the specified Orders or allow them to roll into the next manufacturing period, at Buyer’s discretion. Unless otherwise specified by Buyer, Seller shall be liable for any Product not delivered by the confirmed ship to first commit date prior to the stated production end date for each program as specified in the Order where such failure is solely attributable to Seller. Seller may dispose of the excess Product in accordance with Section 16.

F.                                       If Seller ships Product in advance of the ship date, Buyer may, at its option, either (i) return such Product to Seller at Seller’s risk and expense (in which case Seller, at its expense, shall redeliver such Product to Buyer on the correct ship commit date) or (ii) retain such Product and make payment on the date payment would have been due based on the correct ship date.

9.                                       PACKING, MARKING, AND SHIPPING INSTRUCTIONS

A.                                    All Product shall be prepared and packed in a commercially reasonably manner so as to secure the lowest reasonable transportation rates and meet carrier’s requirements or those set forth in the Product specification Exhibit B (“Specification”).

B.                                      Each pallet in each shipping container shall be marked to show Buyer’s Order number, part number, revision level, lot number, quantity contained therein, and appropriate country of origin

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marking.  In addition, Seller and Buyer will agree on a bar code specification which shall govern the marking on the Product, including the serial numbering scheme.  A packing list showing the Order number shall be included in each shipment.

10.                                QUALITY AND SERVICE

A.                                   Seller shall establish and/or maintain a quality improvement plan and a service and support plan acceptable to Buyer.  The Quality Agreement and Service and Support Agreement are incorporated into this Agreement as Exhibit C and Exhibit E, respectively.

B.                                     At Buyer’s request, Seller shall facilitate on-site visits and inspections by Buyer during normal business hours and upon prior notice.  Buyer’s inspections shall in no way relieve Seller of its obligation to deliver conforming Product or waive Buyer’s or Buyer’s customers’ right of inspection and acceptance at the time the Products are delivered.

C.                                      Seller agrees to provide relevant outgoing inspection, quality, and reliability data upon Buyer’s request and in accordance with the Quality Agreement.

D.                                     Seller agrees to ship Product that conforms to the formally released revision level as stated on Buyer’s Order and acknowledged by Seller.  Buyer’s revision levels will not be effective unless mutually agreed to between Buyer and Seller utilizing a completed Engineering Change Request (ECR) by written confirmation.

E.                                       Seller agrees to advise Buyer of any changes at least forty-five (45) days, (or as otherwise agreed to in writing by the parties), prior to process, materials, or sources of supply and ensure that such changes do not compromise specifications, quality, reliability, or the delivery times of Products ordered by Buyer.

F.                                       Any form of rework requested by Buyer shall be at Buyer’s expense, provided that such request is authorized in writing via a purchase order by an authorized Buyer representative. If Seller does not secure written authorization for the expense prior to the rework, then the parties agree that the rework will be at Seller’s expense. The format of the estimate of rework costs from Seller shall be agreed upon by the parties. All estimates of rework costs will include but are not limited to the following; materials, freight, labor, profit, overhead, duties and any other subject that the parties may agree upon.

11.                                INSPECTION, ACCEPTANCE, AND RETURNS

A.                                    Products purchased/distributed pursuant to this Agreement shall be subject to inspection and test by Buyer or Buyer’s Customers, as the case may be, including during the period of manufacture or development.  “Customers” as used in this Section shall mean Buyer’s customers, including its authorized resellers and distributors, and end users.  Unless otherwise specified in the Order, final inspection and acceptance of Product by Buyer or Buyer’s Customers shall be at Seller’s manufacturing, configuration, distribution, and/or HUB center or Buyer’s Customers’ location.  Buyer and/or Buyer’s Customers reserve the right to reject Product which does not conform to the specifications, drawings, samples or other descriptions specified by Buyer.  The time period covering DOA of Product will be within [Confidential Treatment has been requested] from date of receipt. All rejections of Product by Buyer or Buyer’s Customers shall be returned to a location mutually determined by the parties for processing in accordance with Section 11.B below.

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B.             Buyer and Seller agree that the following shall apply to Product returns, including but not limited to:  (i) refused shipment returns; (ii) service returns; (iii) dead on arrival (“DOA”) returns;  (iv) factory fallout.

(1) Buyer will inform its Customers that all returns of Product shall be delivered to Buyer by Buyer’s Customers.  Buyer shall screen all returned Product to determine whether the Product is new or used, and functional or nonfunctional.  Buyer will classify each returned Product unit as either (a) New/Functional; (b) New/Nonfunctional; (c) Used/Functional; or (d) Used/Nonfunctional.

(2) Following Buyer’s classification of whole unit returns, the units will be dispositioned based upon the terms outlined in Exhibit E. If Seller determines that Buyer misclassified any returned New/Functional Product as New/Nonfunctional Product, such returned Product shall be handled as a New/Functional Product provided that Buyer has verified that the Product was misclassified.  Product required to be corrected or replaced shall be subject to the same inspection and warranty provisions of this Agreement as Product originally delivered under any Order.

C.             In the event that Buyer returns new Product to Seller for correction or replacement, Seller shall repair or replace all such defective Product within five (5) days of receipt of such Product. Buyer shall obtain a “Return Material Authorization” (RMA) from Seller for all returns that Buyer ships to Seller.  Seller will issue an RMA immediately on telephone contact.  Buyer will issue a debit memo for each Product returned by Buyer based on the price of the Product in the calendar quarter that the Product is returned by Buyer.  The next Buyer Order released will be at the same cost as the debited Product. Seller agrees to provide failure analysis of rejected material within ten (10) days after receipt of reject materials.  Seller shall provide a written corrective action report addressing the steps that will be taken to eliminate the cause of the problem.  All FRU returns shall be handled in accordance with the Service Agreement.

D.             Seller represents and warrants that it will use only new materials or components to correct or replace defective Product that will be sold as new Product to Buyer.

E.              The parties agree that at the Product’s end of life Buyer shall not ship such Product to Seller for restocking purposes unless mutually agreed.

12.                                WARRANTY

A.                                    Seller warrants that title to all Products delivered to Buyer and Buyer’s customers under this Agreement shall be free and clear of all liens, encumbrances, security interests or other claims and that for a period of [Confidential Treatment has been requested], as identified for the applicable Product in Exhibit B and Exhibit E, beginning on the date the Order is shipped, in accordance with the Order, that all Products shall be free from defects in material, workmanship, and design and that they shall function for their intended purpose.  Seller further warrants that all Products shall conform to applicable specifications, drawings, samples, and descriptions referred to in this Agreement.  The warranty for replaced or repaired Product will be the same as the original Product, or as required by law.

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The warranties in this Section will not apply to any Product (i) ha s been improperly installed or altered by Buyer, (ii) has been subjected to misuse, abuse, negligence or accident, (iii) has been used in a manner contrary to agreed Specifications (iv) whose component is supplied by Buyer, (v) whose defect is caused by 1) Buyer’s design(s), 2)  modifications to the Products not by Seller or 3) Buyer’s combination with other product(s) not supplied by Seller.

B.                                      Notwithstanding the provisions of Sections 10.B or 11.A of this Agreement, Seller agrees that in case of Epidemic Failure, as defined below, Seller shall provide correction or replacement, which may include design, component, or subassembly changes, within ten (10) days of Seller’s issuance of the failure analysis report provided to Buyer as required by this Section 12.B.  Epidemic Failure shall mean a greater than [Confidential Treatment has been requested] failure within the warranty period for the same cause in any [Confidential Treatment has been requested], provided that such failures shall not include those failures that are the result of a software defect or bug that is contained in the third party software itself but shall include defects and bugs in the software image created by Seller.  In the event such Epidemic Failure is solely attributable to Seller, Seller shall bear all risk and costs for such correction, replacement, or changes including but not limited to labor, material, inspection, and shipping to and from Buyer’s facilities or designated location, provided that Seller may use its best reasonable judgment in determining the appropriate method of correction or replacement with approval by Buyer.  If Buyer incurs any such costs, it may either recover them directly from Seller or set-off via a debit note any amounts due to Seller.  Seller agrees to provide failure analysis of rejected material within ten (10) days after receipt of reject materials.  Seller will also provide a written 8D corrective action report addressing the steps that will be taken to eliminate the root cause of the problem.

C.                                     Seller agrees that in the event of an Epidemic Failure solely attributable to Seller, Seller shall bear all expenses necessary to refurbish or replace all Products affected by the root causes identified as being Seller’s fault.  Seller shall have the option of designating whether the defective Product shall be refurbished or replaced.  The direct expenses to be borne by the Seller shall include, but are not limited to the following:

a)               [Confidential Treatment has been requested]

b)              [Confidential Treatment has been requested]

c)               [Confidential Treatment has been requested]

d)              [Confidential Treatment has been requested]

e)               [Confidential Treatment has been requested]

f)                 [Confidential Treatment has been requested]

g)              [Confidential Treatment has been requested]

D.                                     Seller represents and warrants that the materials and components used in the Product shall be new, including those materials and components obtained from its vendors and subcontractors.

13.                                IN WARRANTY AND OUT OF WARRANTY SERVICE AND SUPPORT

A.                                    In warranty and out of warranty service and support shall be as provided for in Exhibit E.

14.                                PAYMENT AND SET-OFF

A.                                    Payment terms shall be OA [Confidential Treatment has been requested] from date of invoice, provided that Products have been confirmed as having been delivered by Seller to Buyer’s authorized carrier at Seller’s configuration centers.  Payment of invoices shall not constitute final acceptance of the Product.  Payment shall be made by Automated Clearing House (ACH) to the U.S. bank account designated by Seller.

B.                                      Buyer retains the right to immediately setoff rejections of Product or discrepancies on invoices against current or future invoices for all RMAs, and any other circumstances that Buyer deems appropriate.

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C.                                    Buyer will pay Seller for the amounts invoiced in accordance with the terms of this Agreement.  Invoices shall reflect the prices specified in the Orders. Unless otherwise specified in Exhibit A or agreed to in writing by the parties, payment shall be in U.S. dollars unless prohibited by regional legal code.

D.                                   [Confidential Treatment has been requested.]

15.                                CHANGES

A.                                  Buyer may from time to time change the specifications for the Products and Products’ FRUs, and Seller agrees to make best efforts to comply.  Buyer shall be responsible for the costs of implementing the engineering changes requested by Buyer.  If changes result in a change in Seller’s costs or in the time for performance, an adjustment will be made subject to mutual written agreement of the parties.  Any adjustment must be in writing and must be requested within ten (10) days of receipt by Seller of the notice of change.

B.                                    No changes shall be made by Seller in the form, fit, function or compatibility of Products purchased hereunder without Buyer’s prior written approval.  In the event of a request for change (regardless of who initiates such request), Seller shall issue an “Engineering Change Request” form, and Buyer shall respond within five (5) business days.  If changes are necessary to correct design defects, Seller shall bear risk of correction.  If Buyer incurs any costs for such corrections, it may either recover them directly from Seller or set-off via a credit note any amounts due to Seller.  Seller shall be liable for any and all loss or damage incurred to Buyer if an ECN is implemented without Buyer’s prior written approval.

C.                                    Upon request by Buyer, and in accordance with the Service and Support Agreement, and Quality Agreement, Seller will provide test procedures and test results to Buyer’s Product Engineer indicating that there will be no adverse consequences resulting from the Engineering Change Request.

16.                                OBSOLETE AND EXCESS MATERIALS

A.                                  From time to time Buyer may, at its option, in accordance with Exhibit D, request Seller to change manufacturing schedules to support the changing market requirements.  As a result of these requested changes from Buyer, Seller may have materials on hand or on order that either cannot be rescheduled for delivery at a later date, or that cannot be returned to the component supplier for restocking. This impact of the schedule changes could become obsolete or excess to the program requirements.  Seller agrees to inform Buyer in writing each week of any potential obsolete or excess materials based upon the Forecast received. Buyer will advise Seller in writing of the proper disposition of such materials based on the information provided by Seller.  Seller also agrees to comply with the terms of Section 16, as they apply to obsolescence of materials.  Buyer bears no liability if written notification is not received within five (5) business days of the change.

B.                                    Seller agrees, as stated in Section 2(C) to work with its suppliers to return all materials or delay shipments in order to minimize Buyer’s liabilities.  Buyer shall only be liable for materials that were purchased inside lead-time and which are necessary to support Buyer’s Orders and the forecast.   After Seller has exhausted all efforts to limit Buyer’s liability, Buyer may, at its option, request Seller to dispose of the excess or obsolete materials at Buyer’s cost. The process / procedures to be utilized for disposition of this material shall be mutually agreed upon by the parties, with the appropriate level of authorization from Buyer and Seller.

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C.                                    Seller shall be prohibited from selling any Buyer Specific Materials, as set forth in Section 19C, to any third party unless approved in writing by Buyer.

D.                                   The parties intend that Seller shall reduce liability for obsolete materials by implementing the supply chain reengineering processes and ODM initiatives as defined in Exhibit I.  Therefore Buyer shall only be responsible for Buyer Unique Materials. Any obsolete or excess materials without a marketable value purchased to support the forecast will be considered a Buyer Unique Material, including those items defined in Section 19C referred to as Buyer Specific materials.  Buyer shall provide commercially reasonable assistance to Seller in order to implement the requirements of Exhibit I.  Notwithstanding the foregoing, the parties agree that certain obsolescence may be created by certain unique program requirements, including without limitation, engineering changes, program cancellations, or quantity decreases over and above the flex model in Exhibit D.  In such instances, the parties shall agree on the appropriate amount of reimbursement pursuant to the procedures described in Section 16A and 16B above.

E.                                     The parties shall collaboratively reach agreement on the timing and remaining volumes available for EOL of the Product. The Product EOL shall be documented and included in the forecast communicated to Seller. Seller shall provide commitment for the Product EOL forecast based on the forecast process described in Section Two (2).

17.                                ODM REQUIREMENTS AND METRICS

The parties agree that Seller shall implement ODM requirement pursuant to the milestones and implementation dates set forth in Exhibit I.

18.                             ALTERNATIVE DISPUTE RESOLUTION

The parties agree that disputes shall be resolved pursuant to the Dispute Resolution Procedures set forth in Exhibit G.

19.                                TERMINATION FOR CAUSE

A.                                  Seller may terminate this Agreement and/or any Order issued hereunder at any time by written notice in the event that Buyer:

1.                                       Fails to comply with any material provision of this Agreement or any Order issued hereunder, and, in the case of a breach which is capable of remedy, fails to remedy same within thirty (30) days of notification of said breach, or

2.                                       Becomes insolvent or makes an assignment for the benefit of creditors, or a receiver or similar officer is appointed to take charge of all or a part of Buyer’s assets and such condition is not cured within thirty (30) days.

B.                                      Buyer may terminate this Agreement and/or any Order issued hereunder at any time by written notice in the event Seller:

1.                                       Fails to comply with any material provision of this Agreement or any Order issued hereunder, and in the case of a breach which is capable of remedy, fails to remedy same within thirty(30) days of notification of said breach, or

2.                                       Becomes insolvent or makes an assignment for the benefit of creditors, or a receiver or similar officer is appointed to take charge of all or a part of Seller’s assets and such condition is not cured within thirty (30) days, or

3.                                       Seller shall not assign or attempts to assign, or subcontracts or attempts to subcontract, any or all of its rights or obligations under this Agreement or any Orders issued hereunder to a third party without Buyer’s prior written approval.

C.                                      Upon termination by Seller of the Agreement and/or any Order issued under 19A above, Buyer’s entire liability shall be to purchase all materials, including Buyer Specific Materials and

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finished goods that have been purchased within lead time by Seller to fulfill Buyer’s Order(s) in accordance with the Flexibility Agreement.

D.                                     Upon termination by Buyer of the Agreement and/or any Order issued under 19B above:

1.                                       Buyer shall have the option to purchase any materials, work in progress or finished goods, which Seller may have purchased or processed for the fulfillment of any Order, at Seller’s cost plus a reasonable amount for any value already added by Seller; and

2.                                       Seller shall not use any of the Buyer Specific Materials in any other product or resell any of the Buyer Specific Materials.  Other than the Buyer Specific Materials, Seller may use, resell or otherwise dispose of all other materials as it deems appropriate; and

3.                                       Buyer shall have no liability beyond payment for any balance due for Products delivered by Seller before notice of termination.

20.                                TERMINATION FOR CONVENIENCE

A.                                   Either party (“Terminating Party”) may terminate this Agreement at any time for any reason upon giving a three (3) months written notice of termination to the other party ( “Terminated Party” ).  Upon receipt of such notice, the Terminated Party shall immediately cease to incur expenses pursuant to this Agreement that has been terminated unless otherwise directed in the termination notice.  T he Terminated Party shall also take all reasonable steps to mitigate the cost to the Terminating Party for terminating this Agreement and/or any Order.  Within thirty (30) days from the date of notice, Seller shall notify Buyer of costs incurred up to the date of termination.  In no event shall such cost exceed the unpaid balance, per the Flexibility Agreement.

B.                                     In addition to the foregoing, in the event that this Agreement is terminated by Buyer pursuant to this Section, Buyer’s entire liability shall be to purchase all finished goods, work in progress, and materials, including Buyer Specific Materials that have been purchased within lead time by Seller to fulfill Buyer’s Order(s), in accordance with the Flexibility Agreement, provided that Seller shall also take all reasonable steps to mitigate the cost to Buyer for terminating this Agreement and/or any Order.

21.                                LIMITATION OF LIABILITY

EXCEPT FOR A BREACH OF SECTION 21, 25 OR 29 OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL (INCLUDING, WITHOUT LIMITATION, LOST PROFITS, UNLIQUIDATED INVENTORY, ETC.), INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

BUYER’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED].

SELLER’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED].

EXCEPT AS SPECIFICALLY SET FORTH IN THE PURCHASE AND DISTRIBUTION AGREEMENT FOR THE PRODUCTS, NEITHER PARTY SHALL HAVE LIABILITY FOR EXPENSE INCURRED BY THE OTHER PARTY , INCLUDING WITHOUT LIMITATION EXPENSES ARISING FROM THE DEVELOPMENT, MANUFACTURING OR DISTRIBUTION OF THE PRODUCT .

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22.                                FORCE MAJEURE

A.                                   Neither party shall be liable for its failure to perform any of its obligations hereunder during any period in which performance is delayed by fire, flood, war, embargo, riot, labor strike, or the intervention of any government authority (“Force Majeure”), provided that the party suffering such delay immediately notifies the other party of the delay.  If, however, the Party’s performance is delayed for reasons set forth above for a cumulative period of fourteen (14) calendar days or more, the other Party, notwithstanding any other provision of this Agreement to the contrary, may terminate this Agreement and/or any Order issued hereunder by notice to Seller.  In the event of such termination, Buyer’s sole liability hereunder will be for the payment to Seller of any balance due and owing for conforming Product delivered by Seller prior to Seller’s notification of delay to Buyer.  In the event the parties do not terminate this Agreement and/or Order due to a Force Majeure, the time for performance or cure will be extended for a period equal to the duration of the Force Majeure.

23.                                NOTICES

Any notice given under this Agreement shall be in writing and will be effective when delivered personally or deposited in the mail, postage prepaid and addressed to the parties at their respective addresses set forth below, or at any new address subsequently designated in writing by either party to the other:

24.                                COMPLIANCE WITH LAWS

A.                                   All Product supplied and work performed under this Agreement shall comply with the applicable laws and regulations in the regions specified in Exhibit B.  In particular, Seller agrees that its performance under this Agreement shall comply with all laws governing its relationship with its employees, agents or subcontractors and with the chlorofluorocarbon labeling requirements of the U.S. Clean Air Act of 1990, and the RoHS requirements for Product shipping into Europe.  Upon request, Seller agrees to certify compliance with such applicable laws and regulations.

B.                                     The parties agree that amendments to this Agreement may be required to satisfy local or national legal requirements.

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25.                                PATENT, COPYRIGHT AND TRADEMARK INDEMNITY

A.                                   Except for any claims which may arise from Buyer Deliverables, Seller shall defend, at its expense, any claim against Buyer alleging that Products furnished under this Agreement infringe any patent, copyright, trade secret, trademark, or other intellectual property right and shall pay all costs, including attorney’s fees, expenses and damages, provided Seller is notified in writing of such claim and permitted to defend and compromise such claim.  “Buyer Deliverables” shall mean materials solely developed by Buyer and all third party titles licensed to Buyer for the Products.

Notwithstanding foregoing, the Seller shall not be liable for any claim arising out of (I) the modification of the Product not by Seller; (II) the use of the Product in combination with other hardware or software not made by the Seller ; (III)  component(s) or part(s) provided by Buyer.

Except for any claims which may arise from Seller Deliverables, Buyer shall defend, at its expense, any claim against Seller alleging that Buyer Deliverables furnished under this Agreement or any claim arising out of (I) the modification of the Product or any unauthorized combination by Buyer; (II)  component(s) or part(s) provided by Buyer infringing on any patent, copyright, trade secret, trademark, or other intellectual property right and shall pay all costs, including attorney’s fees, expenses and damages, provided Buyer is notified in writing of such claim and permitted to defend and compromise such claim.  “Seller Deliverables” shall mean materials used by Seller or solely developed by Seller for use in Buyer’s Product.

B.                                     If, subject to the foregoing, during the term of this agreement, an injunction or exclusion order issues that precludes Buyer’s use, sale, manufacture or importation of any Product (or, if Buyer reasonably believes such an injunction or exclusion order is likely, with the exception of Buyer Deliverables) Seller shall, at its expense, and at Buyer’s request, use commercially reasonable efforts to obtain for Buyer the rights necessary to permit Buyer to use make, have made, sell and import such Product.  In the event that Seller cannot obtain such rights for Buyer, Seller shall repurchase all such Products from Buyer at the purchase price.

C.                                     Seller warrants that there are no claims of infringement with respect to the Product.

D.                                    Seller shall be authorized to use Buyer logo and trademark only to the extent necessary to meet the required specification for the Product(s). No other rights with respect to Buyer’s trademarks, trade names or brand names are conferred, either expressly or by implication, upon Seller.

26.                                CAPACITY

A.                                   As specified in this Agreement, Buyer will provide Seller with six (6) month forecasts of Buyer’s quantity requirements.  Seller will commit to be able to meet all of Buyer’s forecasts by putting in place plans for capacity, materials supply, mother boards, chassis, manufacturing centers and software download capability.  In addition, upon four (4) months prior notice by Buyer, Seller will have the capability to increase manufacturing capacity by 100% of Buyer’s forecasts in order to meet Buyer’s increased quantity requirements.  Seller agrees to review forecasts provided by Buyer and advise Buyer if Seller anticipates that it will be unable to achieve the requested volumes.  Buyer volume forecasts will be provided to Seller in accordance with Exhibit A.  Seller may from time to time request Buyer to review Buyer’s forecast and advise of any changes.

B.                                     Seller commits to Buyer that Seller shall have enough capacity and sufficient materials allocated to the appropriate manufacturing centers to be able to meet the forecast and provisions of the Flexibility Exhibit, if required by Orders. From time to time, as reasonably necessary due to critical material shortages, Buyer may provide Seller with a reasonable amount of assistance to procure such materials.

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27.                                GRATUITIES

Each party represents that it has not offered nor given and will not offer nor give any employee, agent, or representative of the other party any gratuity with a view toward securing any business from the other party or influencing such person with respect to the business between the parties.

28.                                INSURANCE AND STATUTORY OBLIGATIONS

A.                                   If any party ’s work under this Agreement requires access by such party to any of the other party ’s premises or the premises of the other party ’s customers or subcontractor, or locations where the other party conducts business, or with material or equipment furnished by the party , such party shall take all necessary precautions to prevent the occurrence of any injury to persons or property during the progress of such work and, except to the extent that such injury is due solely and directly to the other party ’s acts or negligence. Such party shall indemnify the other party against all loss which may result in any way from any act or negligence of such party , its employees, servants, agents or subcontractors.

B.                                     Seller agrees to observe commercially reasonable loss prevention practices to prevent accidental loss or damage to inventory, whether in the form of raw material, WIP, or finished goods, that Seller has in its possession for the purpose of fulfilling Buyer’s Orders.

29.                                INDEMNIFICATION

Except for any claims which may arise from Buyer Deliverables, Seller agrees to protect, defend, indemnify and save Buyer harmless from all sums, costs and expense which Buyer may incur or be obliged to pay as a result of any and all loss, expense, damage, liability, claims, demands, either at law or in equity, of every nature whatsoever in favor of any person, including both Seller’s and Buyer’s employees, resulting from any personal injury or death resulting from the use of any product sold to Buyer by Seller hereunder, irrespective of whether Buyer or any other party is found to have been negligent or strictly liable in connection with such personal injury or death.

The foregoing liabilities and indemnification do not include any loss, damage, liability when the Product (i) have been improperly installed or altered, (ii) have been subjected to misuse, abuse, (iii) component is designated or supplied by Buyer (iv) whose defect is caused by Buyer’s Deliverables (v) unauthorized modifications to the Products or (vi) combination with other product(s) not supplied by the Seller.

Subject to the foregoing, the Buyer agrees to indemnify and hold Seller harmless against all expense, losses, costs, damages and liabilities including reasonable attorney’s fees arising out of or in connection with (1) Buyer’s unauthorized use, modification or combination; (2) the defect of the Product caused by Buyer’s Deliverable or materials or components supplied by Buyer .

30.                                CONFIDENTIAL INFORMATION

A.                                   Each party recognizes that it may have previously entered or will in the future enter into various agreements with the other party which obligates it to maintain as confidential certain information disclosed to it by the other party. To the extent that such information or any further confidential information, which might include but is not limited to business plans, forecasts, capacity, pricing, inventory levels, trade secrets, product specifications, manufacturing processes, etc., (collectively referred to hereinafter as “Information”) is disclosed in furtherance of this Agreement or any Order issued hereunder, such Information shall be so disclosed pursuant to the minimum terms and conditions listed below; provided, however, the minimum terms and conditions listed below shall in no way relieve the parties from any obligation or modify such obligations previously agreed to in other agreements. Both parties agree that this Agreement and its terms and conditions shall be confidential.

B.                                     Maintain confidentiality for the term of Agreement. Upon termination return information or destroy it.

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C.                                     Each party shall protect the other party’s Information to the same extent that it protects it own confidential and proprietary information and shall take all reasonable precautions to prevent unauthorized disclosure to third parties.

D.                                    The parties acknowledge that the unauthorized disclosure of such Information will cause irreparable harm. Accordingly, the parties agree that the injured party shall have the right to seek immediate injunctive relief enjoining such unauthorized disclosure. In the event an unauthorized disclosure occurs, the breaching party shall conduct an immediate investigation to determine the source of such disclosure, including the individuals responsible. All individuals found responsible for such disclosure shall be promptly reprimanded and potentially terminated. Within ten (10) days notice that such breach of confidentiality has occurred, the breaching party shall provide a detailed report specifying the cause of the unauthorized disclosure and the remedial measures that will be implemented to prevent such disclosures in the future.

In addition to the foregoing, the breaching party shall pay for liquidated damages in the event of any unauthorized disclosure of information inoculation of this section as follows:

Unauthorized disclosure of information Liquidated Damages

The parties agree that non-breaching party shall have the right to offset such liquidated damages against any amounts owed to the breaching party. The rights set forth under this section 30 shall not otherwise limit Non-breaching Party’s rights under this Agreement or law or equity.

Seller agrees that it shall promptly implement all measures necessary to satisfy compliance standards identified by Buyer, including but not limited to those related to confidentiality.

E                                      This provision shall not apply to information (1) known to the receiving party at the time of receipt from the other party, (2) generally known or available to the public through no act or failure to act by the receiving party, (3) furnished to third parties by the disclosing party without restriction on disclosure, (4) furnished to the receiving party by a third party as a matter of right and without restriction on disclosure, or required by operation of law or court order, or (6) disclosed for audit or accounting purposes.

F.                                   Immediately upon termination of this Agreement or at the request of the other party, each of the parties shall promptly return all materials in its possession containing Information of the other Party.

31.                                COUNTRY OF ORIGIN

A                                      For each Product purchased under this Agreement, Seller shall furnish Buyer with the applicable country of origin (manufacture), by quantity and part number (Buyer’s and Seller’s) if necessary.  All Product shipped by Seller will comply with all applicable country of origin requirements of the destination country of the Product.

B.                                     Seller agrees to provide the necessary export documents and to facilitate export of Product.  Seller further agrees to assist Buyer’s import of Product as reasonably requested by Buyer.

32.                                PROPERTY FURNISHED BY BUYER

A.                                    The parties anticipate that, from time to time, Buyer shall sell to Seller certain material to be used in manufacturing Product (the “Buyer Furnished Material”). Seller agrees that each item of

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Buyer Furnished Material shall be used solely for the purpose of manufacturing Product ordered by Buyer under this Agreement.

B.                                     Seller shall issue a Purchase Order for the purchase price of the material sold by Buyer to Seller.

C.                                  Any drawings, specifications, or other materials furnished by Buyer or purchased by Seller for Buyer for use by Seller in its performance under this Agreement or any Order issued hereunder shall be identified and shall remain the property of Buyer and shall be used by Seller only in its performance hereunder.  Such property shall be delivered, upon request, to destination specified by Buyer in good condition, except for normal wear and tear.

D.                                    Any consigned Buyer Furnished Material will be physically isolated and segregated from all other materials. Seller will ensure through normal cycle counting and other procedures that on-hand physical quantities are accurately reflected in the perpetual inventory system and balances reported to Buyer on a monthly basis or more frequently, as business conditions require.

E.                                      Buyer reserves the right to immediately debit Seller for the cost of Microsoft Products, including the cost of the royalty, if any Microsoft Certificates of Authenticity (COAs) can not be accounted for either through perpetual inventory records or shipments made to Buyer’s customers.  Seller agrees to record all COAs shipped with the Product and be able to provide such information to Buyer upon twenty-four (24) hours notice for all shipments.  Such COA tracking process shall be incorporated in Seller’s manufacturing verification system (MVS) and Product verification system (PVS) process.

33.                                SOFTWARE HANDLING

A.                                   Seller agrees to comply with the terms of the Installation Agreement set forth in Exhibit F.

34.                                AUDIT RIGHTS

A.                                   Buyer shall have the right to have third party auditor to audit Seller to ensure that services in support of the Product are being adequately performed,  that adequate controls and security measures are being maintained, and Seller billings to Buyer are accurate. Buyer shall provide five (5) business days prior notice.

B.                                     With the exception of audits for Seller billings to Buyer, Buyer may , subject to Seller’s prior approval, conduct audits at its discretion and expense, no more than twice per Product program and no later than six (6) months following the later of the last shipment of Product or the last invoice received by Buyer for such program.  In connection with the foregoing, Seller will provide to Buyer, their third party auditors that Buyer designates in writing, access to (i) any part of any facility in which Seller or its subcontractors is providing any of the services in support of the Product, (ii) data and records relating to support of the Product; and (iii) individuals who are familiar with Seller support of the Product and any other supporting information which relates to the audited transaction.

C.                                     Buyer agrees that it shall comply with all applicable legal requirements in its use of information obtained pursuant to such audit.  However, Seller shall not be required to provide information pursuant to an audit when it may cause the breach of its confidential obligations to a third party or is otherwise prohibited by law.

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D.                                    All confidential information disclosed to Buyer’s third party auditors shall be subjected to the items of Section 30 and Buyer shall cause all third party auditors to execute a non-disclosure agreement, reasonably determined by the parties.

E.                                      Failure to comply with the provisions set forth in this Section 35 shall constitute a material breach of this Agreement.

35.                                QUARTERLY BUSINESS REVIEW

A.                                   The parties agree that they will hold a Quarterly Business Review.  These meetings shall be used by the Buyer to set expectations and provide feedback on performance. Seller will use the Quarterly Business Review to understand performance expectations, and their performance to the expectations, share information regarding Company activities, and the Company’s strategic direction. In conjunction with this effort, Buyer has established a rating system to be used to evaluate Seller on its performance in the preceding quarter.

B.                                     Seller’s performance will be evaluated on the following elements: Quality & Reliability, Responsiveness, Cost / Delivery Performance, and Customer Service.  In addition Seller’s progress on supply chain reengineering and ODM shall be assessed. Other performance areas may be added or current performance metrics modified as agreed in writing by the Parties.

C.                                     Failure to demonstrate continued improvements in the Quarterly Business Review ratings shall constitute a material breach of this agreement.

36.                                GENERAL

A.                                   Seller understands that Buyer is engaged in a corporate re-engineering and ODM effort and agrees that it will use commercially reasonable efforts to adjust its business and design processes for order placement, product manufacturing, product delivery mechanisms and processes, quality plan definition and goals, and service mechanisms, in order to meet Buyer’s re-engineering goals as communicated to Seller by Buyer from time to time.

B .                                     If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, such provision shall be enforced to the fullest extent permitted by applicable law and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

C .                                     No action, except those regarding claims by third parties, or claims with respect to patents, copyrights, trademarks or trade names or the unauthorized disclosure of Confidential Information, regardless of form, arising out of this Agreement may be brought by either party more than two (2) years after the cause of action has arisen, or, in the case of non-payment, more than two (2) years from the date the payment was due.

D .                                    Any waiver of any kind by a party of a breach of this Agreement must be in writing, shall be effective only to the extent set forth in such writing and shall not operate or be construed as a waiver of any subsequent breach.  Any delay or omission in exercising any right, power or remedy pursuant to a breach or default by a party shall not impair any right, power or remedy which either party may have with respect to a future breach or default.

E .                                      Seller hereby gives assurance to Buyer that it shall not export, re-export or otherwise disclose, directly or indirectly, technical data received from Buyer or the direct product of such technical data to any person or destination when such export, re-export or disclosure is prohibited by the laws of the United States or regulations of a Department of the United States.

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F                                         This Agreement is considered to be Confidential.  The Parties will keep the terms and existence of this Agreement confidential.  Either Party will not publicly disclose or issue any statement or press release that references this Agreement or the other Party without the other Parties prior written approval.

G.                                     Reporting requirements associated with this agreement will be summarized in Exhibit K, “Reporting Requirements”.  The summary identifies the report content, report frequency, responsibility, and due date.

H.                                    The entire Agreement between the parties is incorporated in this Agreement and Appendices attached hereto, and it supersedes all prior discussions and agreements between the parties relating to the subject matter hereof.  The parties, upon mutual agreement, may from time to time amend or modify this Agreement.  This Agreement can be modified only by a written amendment duly signed by persons authorized to sign agreements on behalf of both parties, and shall not be supplemented or modified by any course of dealing or trade usage.  Variance from or addition to the terms and conditions of this Agreement in any Order, or other written notification from Seller will be of no effect.

I.                                         THE CONSTRUCTION, V