FRAMEWORK AGREEMENT

(A)

Philips is active in the field of design, development, manufacture and sale of a wide range of liquid crystal display products for telephone applications, automotive applications, Smart Handheld applications and/or other applications, through its Philips Semiconductors Product Division that has worldwide activities through the Philips groups of companies.

(B)

Leadis is engaged in and has considerable experience in the business of providing Products (as hereinafter defined) and is willing to supply such Products to Philips and its Affiliates (as hereinafter defined), on mutually agreed terms and conditions.

(C)

Philips and Leadis therefore wish to establish such agreed terms and conditions which shall be applicable, unless otherwise subsequently agreed between the Parties, to all Purchase Orders (as hereinafter defined) placed by Philips or its Affiliates with Leadis or its Affiliates for the delivery of Products during the term of this Framework Agreement.

(D)

Subject to the terms and conditions of this Framework Agreement, Leadis is willing to fulfill Philips’ and its Affiliates’ Purchase Orders during the term of this Framework Agreement.

(E)

Philips and Leadis are also negotiating the terms and conditions of a (VMI) Logistics Agreement pursuant to which Leadis would supply Products to a designated warehouse (referred to as the “VMI Hub”) managed by Philips or a third-party logistics services provider. If and when the parties enter into the (VMI) Logistics Agreement, certain terms

and conditions of this Framework Agreement are intended to apply to Products supplied to Philips by Leadis under the (VMI) Logistics Agreement.

1.

General Definitions

1.1

“Affiliate” shall mean:

(a)

in relation to Philips, any legal entity in which and to the extent that activities of the worldwide Philips Mobile Display Systems are conducted, and that now and hereafter Koninklijke Philips Electronics N.V., or in which Koninklijke Philips Electronics N.V. directly or indirectly, controls or is controlled or is under the common control with (but only as long as such control exists);

(b)

in relation to Leadis, any legal entity that now or hereafter Leadis, directly or indirectly, controls or is controlled by or is under common control with (but only as long as such control exists).

1.2

“Defect” means a failure of a Product to substantially conform to Leadis’ specifications for such Product.

1.3

“Effective Date” shall mean the day and year first written above.

1.4

“Epidemic Defect” shall mean a Defect that appears in more than [ * ] percent ([ * ]%) of the Products delivered by Leadis (or a Leadis Affiliate) to Philips or Participants within any [ * ].

1.5

“Framework Agreement” shall mean the main body of this document and shall include any and all Annexes to this Framework Agreement.

1.6

“Local Agreement” shall mean a written agreement between a Participant and a Leadis Affiliate that incorporates the terms and conditions of this Framework Agreement and

pursuant to which the Participant may place Purchase Orders for the Products with the Leadis Affiliate. Unless the Parties agree otherwise, each Local Agreement will be in substantially the form attached as Annex 2 hereto.

1.7

“Participant” shall mean any Affiliate of Philips that places a Purchase Order with Leadis or a Leadis Affiliate in accordance with this Framework Agreement or any applicable Local Agreement. The Parties may also agree in writing that a company, firm or legal entity that is not a Philips Affiliate will nevertheless be deemed to be a Participant for purposes of this Framework Agreement.

1.8

“Products” means the goods sold by Leadis (or a Leadis Affiliate) to Philips or Participants under this Framework Agreement. The Products currently available for sale under this Framework Agreement (as of the Effective Date) are listed on Annex 1. Annex 1 may be updated from time to time by written agreement of the Parties.

1.9

“Purchase Order” shall mean an order to buy Products issued in accordance with this Framework Agreement by Philips or a Participant to Leadis or a Leadis Affiliate. In the event of any conflict between this Framework Agreement and a Purchase Order, this Framework Agreement will take precedence.

1.10 

“Requested Delivery Date” shall mean the date Philips or a Participant requests delivery of the Products, subject to Leadis’ leadtimes as provided in Annex 1.

1.11 

“Specifications” shall mean the functional requirements, specifications and other requirements agreed to by the Parties for Products designed specifically for Philips that are not sold to any other customer.

1.12 

The Annexes hereto shall be and form an integral part of this Framework Agreement.

2.

Scope of Framework Agreement

2.1

This Framework Agreement establishes the Parties’ agreement whereby with regard to the placing of Purchase Orders by Philips or Participants with Leadis or a Leadis Affiliate, each Purchase Order shall be deemed to have incorporated all the terms of this Framework Agreement. The Parties may agree to modify the terms of this Framework Agreement in accordance with Article 24.10.

2.2

Therefore, the Parties intend that in accordance with this Framework Agreement, Philips and Participants may from time to time issue Purchase Orders to Leadis (or a Leadis Affiliate) for the supply and delivery of Products and Leadis (or the Leadis Affiliate, as the case may be), in its sole discretion, may accept or reject each Purchase Order pursuant to Article 3.3. If Leadis (or the Leadis Affiliate) accepts the Purchase Order, Leadis hereby undertakes to supply and deliver such Products to Philips or the Participant in accordance with the Requested Delivery Date, subject to Article 5.1. Any such Purchase Order accepted by Leadis (or the Leadis Affiliate) shall establish a direct contractual relationship on the terms of this Framework Agreement (and the applicable

Local Agreement, if any), between Philips (or the Participant) on the one hand and Leadis (or the Leadis Affiliate) on the other hand.

2.3

Notwithstanding anything to the contrary in this Framework Agreement, this Framework Agreement does not constitute an obligation on the part of Philips (or any Participant) to purchase Products, or an obligation on the part of Leadis (or any Leadis Affiliate) to sell Products.

3.

Purchase Orders and Confirmation

3.1

Purchase Orders for Products may be submitted by Philips (or a Participant) to Leadis (or a Leadis Affiliate) by fax email or any other agreed transmission mechanism.

3.2

A Purchase Order issued hereunder by Philips (or a Participant) to Leadis (or a Leadis Affiliate) shall include the following information:

•

12 NC (Numeric Code) of Products;

•

Type name of the product;

•

Quantities;

•

Requested Delivery Date(s);

•

Product price (for each Product ordered)

•

signature by an authorized representative of Philips or the Participant

3.3

Leadis (or the Leadis Affiliate that receives the Purchase Order) will review and accept or reject each Purchase Order placed in accordance with this Framework Agreement within five (5) business days after receipt of the Purchase Order. No Purchase Order will be deemed accepted until Leadis (or the Leadis Affiliate) has provided Philips (or the Participant) with a written acceptance, which shall include a reference to this Framework Agreement or if necessary, state any deviations from the information provided in the Purchase Order. If such Purchase Order acceptance deviates from the Purchase Order, and Philips (or the Participant) objects to such deviations in writing within five (5) business days from the date it receives the acceptance, neither Party (nor any Participant or Leadis Affiliate) will have any obligation under such Purchase Order. In the absence of such objection, the Purchase Order is binding on both Parties (or the Participant and Leadis Affiliate, as the case may be) as provided in Leadis’ (or the Leadis Affiliate’s) Purchase Order acceptance. For the avoidance of doubt and without prejudice to Article 3.6 hereinbelow, the Parties hereby agree that to the extent Purchase Orders contain or purport to impose either Party’s (standard) terms and conditions of purchase or sale, they are of no effect and thereby not binding on either Party.

3.4

Leadis (or the Leadis Affiliate) shall supply and deliver to Philips (or the Participant) the Products, in accordance with the terms and conditions set forth in the applicable Purchase Order (except for any preprinted standard terms and conditions of purchase or sale), Leadis’ (or the Leadis Affiliate’s) Purchase Order acceptance, and this Framework Agreement and any applicable Local Agreement.

3.5

Leadis shall state on each Purchase Order acceptance as well as on any invoice which Products ordered or invoiced thereby are subject to certain (and which) export or import regulations, by indicating the Export Control Classification Number (ECCN).

3.6

No conditions other than as set forth in this Framework Agreement and any applicable Local Agreement, including any standard, general or pre-printed terms and conditions either on the front or back of any Purchase Order or Purchase Order acceptance or otherwise made available or referred to by any of the Parties, as the case may be, shall apply to the purchase and sale of Products under this Framework Agreement, and any Purchase Order pursuant thereto, unless otherwise agreed in writing signed by both Parties.

3.7

Except as may be otherwise provided in the (VMI) Logistics Agreement, if Philips or any Participant prepares and delivers to Leadis (or a Leadis Affiliate) a forecast or other indication of its requirements and anticipated Purchase Orders, such forecast or indication shall not be binding upon either Party (or any Participant or Leadis Affiliate), but shall be given to assist Leadis and its Affiliates in anticipating such requirements with timely and adequate production activities. However, Philips is aware that Leadis does not operate its own manufacturing facility, thus even the provisioning of forecasts to Leadis and its Affiliates does not and cannot guarantee that Leadis and its Affiliates will have sufficient capacity to meet anticipated or expected requirements.

3.8

It is understood that Leadis’s and its Affiliates’ supply of Products requires leadtimes as specified per Product in Annex 1. Philips understands that Leadis and its Affiliates cannot deliver Products in advance of those leadtimes, unless otherwise agreed by the Parties in a written document signed by authorized representatives of both Parties. To the extent a Purchase Order contains a Requested Delivery Date sooner than the leadtimes listed in Annex 1, the delivery date will be automatically extended to take into account the leadtimes as provided in Annex 1, which will become the new Requested Delivery Date. Such a change in the delivery date, whether or not indicated in Leadis’s (or the Leadis Affiliate’s) Purchase Order acceptance, is not a deviation subject to Article 3.3. To the extent Annex 1 is silent regarding standard leadtimes, the standard leadtime shall be twelve (12) weeks.

4.

Delivery Terms, Prices, Discounts and Payment Terms

4.1

In this Article 4 and as provided elsewhere in this Framework Agreement, Philips and Leadis have agreed upon the delivery terms, prices, discounts and payment terms which apply as from the Effective Date of this Framework Agreement and against which Philips and Participants may order Products from Leadis and Leadis Affiliates, as well as the period of validity of such conditions, all as specified in Annex 1 hereto, which may be amended from time to time by mutual agreement between the Parties in accordance with the provisions of this Framework Agreement. Annex 1 and any amendment thereof shall be valid only when duly signed by duly authorized representatives of the Parties. The prices, discounts and other terms agreed upon will be reviewed by Parties at least once a year. Notwithstanding the foregoing, if the Parties enter into a (VMI) Logistics Agreement, the (VMI) Logistics Agreement will establish the delivery terms and payment

terms which apply to Products supplied to Philips under the (VMI) Logistics Agreement and the delivery terms and payment terms set forth in this Framework Agreement shall not apply to Products supplied to Philips under the (VMI) Logistics Agreement.

4.2

The initial price of the Products (as of the Effective Date) shall be as set forth in Annex 1. These prices may be changed only by written agreement signed by authorized representatives of both Parties. The prices applicable to a Purchase Order will be the prices in effect at the time the Purchase Order is accepted by Leadis (or a Leadis Affiliate), except that any price increase will not apply to any Purchase Order placed before the Parties agreed to the increase, unless the Parties agree otherwise in writing. If either Party requests in writing that the price of a particular Product be renegotiated, the Parties shall commence good faith negotiations to agree on the price for such Product.

4.3

In the event of unforeseen circumstances affecting either Party, the Parties will jointly review the situation and attempt to find a solution reasonably acceptable to both Parties. Leadis resolves to make a good faith effort to offer Philips and Participants prices for the Products that are competitive with the prices charged by Leadis to other customers (if any) for similar quantities of products of like kind and quality.

5.

Shipment and Delivery

5.1

Leadis shall use reasonable commercial efforts to deliver the Products on the Requested Delivery Dates and shall use its reasonable commercial efforts to accommodate any reasonable request by Philips to reschedule Requested Delivery Dates, or to amend other already agreed delivery terms, subject to Article 5.8.

5.2

Upon Philips’ or a Participant’s request, Leadis or Leadis Affiliate shall within a reasonable time provide information in writing concerning the status of any Purchase Order, shipments due and payments and such other items relating to the business flow between Leadis (and its Affiliates) and Philips (and Participants) as Philips may request. Leadis will inform Philips without undue delay when Leadis anticipates constraints on its capacity to supply Products as ordered by Philips and Participants.

5.3

The latest version of the INCOTERMS as issued by the International Chamber of Commerce, Paris, France, shall apply to the interpretation of the delivery terms mentioned in Annex 1 or elsewhere in this Framework Agreement, the applicable Local Agreement (if any) or Purchase Order. Except as may be otherwise provided in the (VMI) Logistics Agreement (if any) or otherwise agreed by the Parties, in a written document signed by authorized representatives of both Parties, the Products shall be delivered and priced Ex-Works (INCOTERMS, 2000), Leadis’s point of shipment (which, as of the Effective Date, is specified in Annex 1).

5.4

Leadis (and its Affiliates) may deliver the Products up to [ * ] business days, but no more than [ * ] business days, prior to the Requested Delivery Date. If such delivery is made more than [ * ] business days prior to the Requested Delivery Date, Philips and Participants shall not be liable for any costs caused by or related to production,

installation, assembly, commissioning or any other work related to such Products prior to delivery, except as expressly agreed to by Philips or a Participant.

5.5

Leadis shall pack, mark and ship the Products in accordance with industry practices, subject to any reasonable and specific packaging and marking requirements provided to Leadis by Philips in writing at least five (5) business days before the Requested Delivery Date.

5.6

Leadis shall include one (1) copy of the packing slip with each delivery or shipment to Philips or a Participant, and this packing slip shall contain the following information at a minimum:

•

Reference to Purchase Order;

•

Description of Product;

•

Numbers of containers, sizes and quantities;

•

Authorizing Personnel.

5.7

Except in the case of a notified excusable delay as referred to in Article 8 hereinbelow, should Leadis fail to deliver Products within [ * ] business days of a Requested Delivery Date, Philips (or the Participant that placed the Purchase Order) shall have the exclusive remedy of:

(i)

the right to request Leadis (or the Leadis Affiliate) to re-schedule the delivery (at Leadis’s or the Leadis Affiliate’s cost) of the affected Products by another transportation mode (namely from sea freight to airfreight, or from airfreight to courier), and

(ii)

the right to cancel the relevant Purchase Order (or a part thereof); and

(iii) 

the right to have Supplier pay or reimburse the actual costs incurred by Philips in arranging expedited freight and reasonable emergency measures resulting from such failure. The Parties agree to determine in good faith the actual amount of such costs (which will not exceed [ * ] percent ([ * ]%) of the purchase price of the Products in question) to be borne by Leadis.

5.8

Philips (or the Participant that placed the Purchase Order) may postpone up to [ * ] percent ([ * ]%) of the units specified in a Purchase Order for up to [ * ] days if Leadis (or the Leadis Affiliate that received the Purchase Order) receives Philips’ (or the Participant’s) written notice of postponement at least [ * ] days prior to the Requested Delivery Date indicated in the Purchase Order. Philips (or the Participant that placed the Purchase Order) may postpone up to [ * ] percent ([ * ]%) of the units specified in a Purchase Order for up to [ * ] days if Leadis (or the Leadis Affiliate that received the Purchase Order) receives Philips’ (or the Participant’s) written notice of postponement

between (and including) [ * ] and [ * ] days prior to the Requested Delivery Date indicated in the Purchase Order. Philips and Participants are not subject to any limitations regarding postponement of Purchase Orders if Leadis (or the Leadis Affiliates that received the Purchase Order) receives Philips’ (or the Participant’s) notice of postponement more than [ * ] days prior to the shipment date indicated in the Purchase Order. Philips and Participants may not postpone Requested Delivery Date for any Purchase Order, or any portion of a Purchase Order, for more than [ * ].

5.9

In all cases, Philips (or the Participant that placed the Purchase Order) will be subject to a cancellation fee equal to [ * ] percent ([ * ]%) of the total amount of the Purchase Order if Leadis (or the Leadis Affiliates that received the Purchase Order) receives Philips’ (or the Participant’s) notice of cancellation [ * ] or fewer days prior to the Requested Delivery Date indicated in the Purchase Order. Philips (or the Participant that placed the Purchase Order) will be subject to a cancellation fee equal to [ * ] percent ([ * ]%) of the total order amount if Leadis (or the Leadis Affiliates that received the Purchase Order) receives Philips’ (or the Participant’s) notice of cancellation on any day between (and including) [ * ] days and [ * ] days prior to the Requested Delivery Date indicated in the Purchase Order. Philips (or the Participant that placed the Purchase Order) is not subject to a cancellation fee if Leadis (or the Leadis Affiliates that received the Purchase Order) receives Philips’ (or the Participant’s) notice of cancellation more than [ * ] days prior to the Requested Delivery Date indicated in the Purchase Order.

6.

Type Approval, Quality Performance and Inspection; Acceptance

6.1

Without prejudice to any inspection arrangement specified or referred to elsewhere in this Framework Agreement, any applicable Local Agreement or Purchase Order, it is agreed that each first sample Product to be delivered pursuant to this Framework Agreement, any applicable Local Agreement or Purchase Order may be checked by or for Philips or the Participant that ordered the Product for the purpose of type approval. The provisions of this Article 6.1 apply only if Leadis is delivering Products manufactured exclusively for Philips. Such exclusivity must be explicitly indicated on Annex 1.

6.2

Products to be supplied by Leadis (or a Leadis Affiliate) to Philips (or a Participant) pursuant to this Framework Agreement (or a Local Agreement) shall be checked and tested by Leadis, the Leadis Affiliate or by Leadis’s subcontractors or suppliers using industry standard practices. Leadis shall keep records of these results for at least two (2) years after delivery of the Products in question and shall provide copies of these records to Philips upon Philips’ request. Any copies of these records provided to Philips will be considered confidential information of Leadis pursuant to Article 20.

6.3

Philips (or the Participant that ordered the Products) shall have the right to inspect the Products upon delivery. Payment, inspection or type approval of any Products by Philips or the Participant shall not relieve Leadis of any of its obligations under this Framework Agreement, any applicable Local Agreement or Purchase Order, nor shall any such payment, inspection or type approval constitute acceptance or approval of any Products or constitute or operate as a waiver of any defect, nonconformity or any rights or remedies available under this Framework Agreement, any applicable Local Agreement,

any Purchase Order or at law. Notwithstanding the foregoing, Philips or the Participant that ordered the Products will be deemed to have finally accepted the Products upon delivery unless Philips or the Participant sends to Leadis, within five (5) days of the date of delivery, a written notice of rejection or nonconformity.

7.

Invoicing and Payment Terms

7.1

Leadis’s (or its Affiliate’s) invoice may first be issued upon shipment of the Products in accordance with this Framework Agreement, any applicable Local Agreement and the relevant Purchase Order. Subject to acceptance of the Products by Philips or the Participant that ordered the Products, payment shall be made (upon a properly submitted invoice) at the [ * ] following the date of delivery (e.g., if the Products are shipped in April, payment will be due by [ * ]) or, commencing July 1, 2005, at the [ * ] following the date of delivery. Invoices shall be submitted in duplicate, and shall contain the following information:

•

Reference to this Framework Agreement and any applicable Local Agreement;

•

Reference to the Purchase Order;

•

Description of Products and unit price; and

•

Total amount (including any applicable taxes, shipping and handling charges, and other expenses) payable to Leadis. or the Leadis Affiliate.

7.2

All payments will be made to Leadis International Limited (or, in the case of Products sold pursuant to a Local Agreement, the Leadis Affiliate that is a party to such Local Agreement) in U.S. dollars, free of any currency controls or other restrictions. Payment shall be made by wire transfer to Leadis’s bank accounts using write transfer instructions provided by Leadis. All amounts not paid when due will accrue interest from the due date until paid at the lower of [ * ] percent ([ * ]%) per month or the highest rate permissible by applicable law. Philips and Participants shall have no right to set off any amounts owed by Leadis or Leadis Affiliates to Philips or Participants against amounts owed by Philips or Participants to Leadis or Leadis Affiliates. Leadis acknowledges and agrees that any debt of Philips or a Participant to Leadis or Leadis Affiliates may be paid on behalf of Philips or the Participant by any third party designated by Philips or the Participant, if such payment is specifically described as such. Leadis will treat such payment as if it were made by Philips or the Participant itself and Philips’ or the Participant’s debt to Leadis will automatically be satisfied and discharged for the amount paid by such third party.

7.3

All prices listed in Annex 1 and as provided on any accepted Purchase Order are exclusive of all taxes and duties and do not include shipping and handling costs and insurance costs. Leadis and its Affiliates are not responsible for any such costs or charges. Any taxes or duties which Leadis or any of its Affiliates is obligated under applicable law to collect on sale of the Products will be stated separately on the invoice and will be paid to Leadis or its Affiliate by Philips or the Participant that purchased the Products.