To : John Alexander, Jr.

From : Elisabeth Uri, Phd.

Re : Asian Production Base

Date : February 21, 1995

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Your Memorandum regarding the proposed Asian production base could not have been better timed to coincide with the Marketing Divisionís vision of the strategic sales direction of UT. As you have noted, there is no region of the world which begins to compare in potential with that of East Asia. These economies will be the engines of the future world market and UT needs to be there. Perky is absolutely right in his assessment of the importance of this region to our companyís future and Marketing is behind this effort 100%.

Over the past week I have discretely contacted our principal customers in the Asia-Pacific region and, although none of them have indicated any interest in putting money into a venture in Japan at this time, they all are strongly enthusiastic about the idea of our having an Asian production base. They say that they are tired of staying up all night to maintain contact with us and look forward to the time when we can service them in their time zone.

With respect to our Marketing in Asia, I simply do not see how we could provide Yasuda with any exclusive right in either Japan or Asia generally. Some of our principal Japanese OEM customers (especially in the medical diagnostic equipment production field) would never wish to deal with Yasuda as an intermediary. On the other hand, from the market intelligence data I have been able to obtain, I believe that Yasuda might be able to give us access to the medium and smaller size semiconductor customers in Japan (which we have never been able to access directly) through their close relationship with Yasuda Electric. It would take us decades and megabucks to obtain anywhere near equivalent access on our own.

I think we should be really careful with Yasuda in other Asian and world markets. At the Northern Hemisphere Precision Machine Tools Marketing Alliance seminar in Prague last month, one of the speakers commented at dinner that Yasuda was known to ìfloodî patents in Japan on their competitors technology and that they use those registrations to dominate Asian markets. We should be careful about giving them anything exclusive since given their strong technological capacity and resources they could easily ignore distribution of our products and dominate (with their substitute ìnon-infringingî products) any market in which we cannot enforce our proprietary rights. I would not let them have anything exclusive outside Japan unless we got something very useful in return.

With respect to the MIPIT technology, I donít see how we could give them any kind of license for production or sales of these products. It is just too valuable to us and fundamental to our future. Even though I understand that Operations believes that we need certain technical manufacturing expertise of Yasuda to commercialize the MIPIT technology during the next two years, I just cannot see letting Yasuda into this market over the long term. I really would not wish to see Yasudaís MIPIT products in the United States or European markets in competition with UT products (especially when we invented the concept!).

In summary, I think we should move ahead to establish the Asian production base with Yasuda, that we should basically give them no exclusive distribution rights in any market other than the Japanese non-OEM wholesale market, and that we should carefully guard our markets for the MIPIT technology.

Liz