The judgment of Second Instance Court of IP Court

Subject:The judgment of Second Instance Court of IP Court for the litigation filed against LOTES Co. Ltd. (LOTES) regarding the breach of the license agreement

Contents:

1.Cause of occurrence:

1.1.The previous patent litigation between HON HAI and LOTES was reached a settlement in 2006, and settlement agreement and licensing agreement were being signed for some specific CPU Socket, D-sub and DIMM products under certain patents; except settlement fees, LOTES was required to pay royalties on a regular basis to HON HAI regarding the abovementioned products;

1.2.HON HAI became aware that there was shortfall of LOTES royalty payment and thus filed the litigation to IP Court against LOTES subsequently.

1.3.The First Instance Court of IP Court ruled that LOTES shall pay NTD4,581,521 to HON HAI. Both parties appealed. The Second Instance Court of IP Court ruled that since LOTES previously admitted the shortage of royalty fees and agreed to pay the unreported amount, LOTES shall honor its payment obligations and is not allowed to withdraw such consent deliberately and therefore affirmed the IP Court's decision ordering LOTES to compensate HON HAI at the amount of NTD4,581,521.

2.Any other matters that need to be specified:

2.1.LOTES shall submit correct royalty report and make payment accordingly per the license agreement;

2.2.LOTES' breach of its royalty payment obligations has caused damages to HON HAI's interests, and the products involved that are not reported and paid are not licensed. ;

2.3 HON HAI will take necessary actions to secure its legitimate rights and interests.