5. Tripath Direct Sales Activity 5.1 Tripath may in its sole discretion, immediately upon written notice to Distributor, make direct sales to certain accounts in the Territory ("Direct Sales Accounts"), including accounts to which Distributor has made sales. 6. Pricing, credits, and allowances 6.1 Prices for Products will be as set forth in the then effective distributor price list ("Distributor Price List") which will be furnished to Distributor from time to time. Any suggested resale prices shown in the Distributor Price List are to be considered as guidelines only. 6.2 The Distributor Price List may be changed without prior notice, and will be effective as of the effective date indicated. The amount and timing of such change will be exclusively at Tripath's discretion. 6.3 Orders for Products received and acknowledged by Tripath prior to a change in the Price List but shipped after the effective date of such change will be invoiced as follows: (a) in the case of a price decrease, the existing order backlog will be invoiced at the lower price, and (b) in the case of a price increase, the existing order backlog due for delivery within one month of the effective date of such change will be invoiced at the lower price. Outstanding written quotations will be held good for the same two-month period. 6.4 Distributor's inventory of any Product will be price protected for reductions in the price of such Product as follows: the lesser of Distributor's (a) entire inventory of the Product, or (b) previous one month's shipments of the Product from Tripath. 7. Purchase Orders and Payment 7.1 Distributor will maintain sufficient inventory of Products (but not less than one month's inventory without Tripath's approval) to provide prompt delivery to Distributor's customers, in furtherance of Distributor's undertaking in Subsection 2.2. -2- Distributor Agreement