Exhibit 10.1
CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO CERTAIN PORTIONS
HEREOF DENOTED WITH “***”
MANUFACTURING SERVICES AGREEMENT
THIS AGREEMENT (the “Agreement”) is effective as of September 6, 2007 (the
“Effective Date”), by and between POWER EFFICIENCY CORPORATION, a Delaware
corporation having a principal place of business at 3960 Howard Hughes Pkwy.,
Suite 460, Las Vegas, Nevada 89169 on behalf of itself and its affiliates or
majority-owned subsidiaries (collectively “CUSTOMER”) and SANMINA-SCI
CORPORATION, a Delaware corporation having its principal place of business at
2700 North First Street, San Jose, California 95134, on behalf of itself and its
affiliates or subsidiaries (“SANMINA-SCI”). CUSTOMER and SANMINA-SCI are
sometimes referred to herein as a “Party” and the “Parties.”
1. TERM
     The initial term of this Agreement shall commence on the Effective Date and
shall continue through the first anniversary of the Effective Date unless sooner
terminated by mutual agreement or in accordance with this Agreement. Upon the
expiration of the initial term, this Agreement shall continue from year to year
until one Party terminates the Agreement by giving at least thirty (30) days’
prior written notice to the other Party. Notwithstanding the foregoing, the term
of this Agreement shall automatically extend to include the term of any purchase
order (“Order”) issued hereunder.
2. PRICING
     2.1 Pricing. During the term, CUSTOMER may purchase from SANMINA-SCI the
products specified in Exhibit A hereto, as such Exhibit may be amended from time
to time (the “Products”) at the prices set forth in Exhibit A (the “Prices”).
Prices (a) are in U.S. Dollars, (b) include SANMINA-SCI standard packaging,
(c) exclude the items set forth in Section 2.2, and (d) are based on (i) the
configuration set forth in the specifications provided to SANMINA-SCI on which
SANMINA-SCI’s quotation was based Exhibit D (the “Specifications”) and (ii) the
projected volumes, minimum run rates and other assumptions set forth in
SANMINA-SCI’s quotation and/or Exhibit A. The Prices shall remain *** subject to
***.
     2.2 Exclusions from Price. Prices specifically exclude ***.
     2.3 Other Price Adjustments:
          (a) CUSTOMER acknowledges that the Prices set forth in Exhibit A are
based on the forecasted volumes provided by CUSTOMER to SANMINA-SCI. ***.
          (b) CUSTOMER acknowledges that the Prices are based on the
Specifications and the assumptions set forth in SANMINA-SCI’s quotation and in
Exhibit A. In the event SANMINA-SCI experiences an increase in cost as a result
of changes in the Specifications, SANMINA-SCI shall be entitled to the Price
adjustment set forth in Section 6.1.
3. PAYMENT TERMS/SETOFFS/CREDIT LIMIT
     3.1 Payment Terms. Payment terms are net *** days after the date of the
invoice. On any invoice not paid by the maturity date, CUSTOMER shall pay
interest from maturity to date of payment at the rate of *** per month. Unless
otherwise stated, payment shall be made in U.S. Dollars. Notwithstanding the
preceding ***
     3.2 Setoffs. Each Party shall be entitled at all times to set-off any
amount owing from the other Party to such Party against any amount payable to
the other Party from such Party, arising out of this or any other transaction;
provided that such set-off is clearly itemized when

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CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO CERTAIN PORTIONS
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such payment is rendered. Failure of the receiving Party to object to any such
set-off within ten business days from the date of receipt of such payment shall
be deemed full and final acceptance of such set-off. For purposes hereof,
(i) the term “Party” shall include the Parties to this transaction and each
Party’s Affiliates and (ii) a Party’s “Affiliate” shall mean any entity that,
directly or through one or more intermediaries, controls, is controlled by or is
under common control by such Party, including but not limited to a Party’s
subsidiaries.
     3.3 Credit Limit. SANMINA-SCI’s Credit Department shall provide CUSTOMER
with an initial credit limit, which shall be reviewed (and, if necessary,
adjusted) from time to time. SANMINA-SCI shall have the right to reduce the
credit limit upon five (5) days’ prior written notice to CUSTOMER. In the event
CUSTOMER exceeds this credit limit or has any outstanding invoice more than
fifteen (15) days past due, SANMINA-SCI shall have the right to stop shipments
of Product to CUSTOMER until CUSTOMER makes a sufficient payment to bring its
account within the credit limit provided.
     3.4 Security Interest. CUSTOMER grants SANMINA-SCI a security interest in
the Products delivered to CUSTOMER until CUSTOMER has paid for the Products and
all Product-related charges. CUSTOMER agrees to promptly execute any documents
requested by SANMINA-SCI to perfect and protect such security interest.
4. PURCHASE ORDERS/FORECAST/RESCHEDULE
     4.1 Purchase Orders.
          (a) CUSTOMER will issue to SANMINA-SCI specific Orders for Product
covered by this Agreement. Each Order shall be in the form of a written or
electronic communication and shall contain the following information: (i) the
part number of the Product; (ii) the quantity of the Product; (iii) the delivery
date or shipping schedule; (iv) the location to which the Product is to be
shipped; and (v) transportation instructions. Each Order shall contain a number
for billing purposes, and may include other instructions and terms (provided
that such terms do not conflict with this Agreement) as may be appropriate under
the circumstances.
          (b) All Orders shall be confirmed by SANMINA-SCI within five
(5) business days of receipt. If SANMINA-SCI does not accept or reject the Order
within the five day period, the Order shall be deemed rejected by SANMINA-SCI.
In the event SANMINA-SCI is unable to meet the delivery schedule set forth in a
proposed Order, or finds the schedule or Order to be unacceptable for some other
reason, SANMINA-SCI shall notify CUSTOMER of same within three (3) business days
of receipt of such Order and the Parties shall negotiate in good faith to
resolve the disputed matter(s).
     4.2 Forecast; Minimum Buys; Excess and Obsolete Inventory.
          (a) Initial Forecast. Upon the execution of this Agreement, CUSTOMER
shall provide SANMINA-SCI with (i) an initial ninety (90) day firm Order and
(ii) a forecast for Product requirements (in monthly buckets) for an additional
nine (9) months (“Forecast”). All Orders shall be binding and may be rescheduled
only in accordance with Section 4.2(d), or cancelled upon payment of (1) the
purchase price of the Product (if the cancellation is made within 30 days of the
scheduled delivery date) or (2) the amounts set forth in Section 4.2(f) (if
cancellation is made outside of such 30-day period). SANMINA-SCI shall make
purchase commitments (including purchase commitments for Long Leadtime
Components) to its Component suppliers (“Vendors”) based upon the Order and
Forecast, and CUSTOMER shall be responsible for all such Components purchased in
support of CUSTOMER’s then-current Forecast. For all other purposes, however,
the Forecast shall be non-binding.
          (b) [INTENTALLY LEFT BLANK]

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          (c) MRP Process.
               (1) SANMINA-SCI shall take the Order and Forecast and generate a
Master Production Schedule (“MPS”) for a twelve-month period in accordance with
the process described in this Section. The MPS shall define the master plan on
which SANMINA-SCI shall base its procurement, internal capacity projections and
commitments. SANMINA-SCI shall use CUSTOMER’s Order to generate the first three
(3) months of the MPS and shall use CUSTOMER’s Forecast to generate the
subsequent nine (9) months of the MPS.
               (2) SANMINA-SCI shall process the MPS through industry-standard
software (the “MRP Software”) that will break down CUSTOMER’s Product
requirements into Component requirements. When no Product testing (in-circuit or
functional testing) is required by CUSTOMER, SANMINA-SCI will use commercially
reasonable efforts to schedule delivery of all Components to SANMINA-SCI eleven
working days before the Products are scheduled to ship to CUSTOMER; in the event
Product testing is required, SANMINA-SCI will use commercially reasonable
efforts to schedule delivery of all Components to SANMINA-SCI sixteen
(16) working days before the Products are scheduled to ship to CUSTOMER.
               (3) SANMINA-SCI will release (launch) purchase orders to Vendors
(including other SANMINA-SCI facilities) prior to the anticipated date that the
Components are needed at SANMINA-SCI. The date on which these orders are
launched will depend on the lead time determined between the Vendor and
SANMINA-SCI and SANMINA-SCI’s manufacturing or materials planning systems.
               (4) A list of all Components with lead times greater than ninety
days (or the Order period, if the Order period is less than ninety days) (“Long
Leadtime Components”) is set forth in Exhibit B to this Agreement and/or has
previously been provided to CUSTOMER. SANMINA-SCI shall use reasonable efforts
to update the list of Long Leadtime Components every quarter and present an
updated list of Long Leadtime Components to CUSTOMER at the time SANMINA-SCI
presents the CUSTOMER with the E&O List described in Section 4.2(e). Each
revised Long Leadtime Item list shall be deemed an amendment to Exhibit B,
whether or not it has been formally designated as such. In the event SANMINA-SCI
fails to present an updated list of Long Leadtime Components, (i) the Parties
shall continue to rely on the preceding list (as updated in writing by the
Parties) and (ii) CUSTOMER will accept responsibility for Long Leadtime
Components ordered outside the leadtimes set forth in the list provided that
SANMINA-SCI can demonstrate to CUSTOMER’S reasonable satisfaction that such
Components were ordered in accordance with the then-current Vendor leadtimes.
               (5) CUSTOMER acknowledges that SANMINA-SCI will order Components
in quantities sufficient to support CUSTOMER’s Forecast. In determining the
quantity of Components to order, SANMINA-SCI divides the Components into three
classes, “Class A,” “Class B” and “Class C.” Class A Components are comprised of
the approximately *** of Components constituting approximately *** of the
Product’s total Component cost. Class C Components are comprised of the
approximately *** of Components constituting approximately *** of the Product’s
total Component cost. Class B Components are comprised of the remaining
seventeen percent (17%) of Components constituting approximately *** of the
Product’s total Component cost. ***. A summary of SANMINA-SCI’s purchase
commitments is set forth in the table below.

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CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO CERTAIN PORTIONS
HEREOF DENOTED WITH “***”

                          Expected Percentage   Periods Worth of       Expected
Percentage   of Total Value (of   Supply to be Bought   Part Class   of Total
Parts   Gross Requirements)   with Each Order  
A
  ***   ***     * **
B
  ***   ***     * **
C
  ***   ***     * **

               (6) CUSTOMER acknowledges that SANMINA-SCI will be required to
order Components in accordance with the various minimum buy quantities, tape and
reel quantities, and multiples of packaging quantities required by the Vendor.
In addition, CUSTOMER acknowledges that there is a lag time between any CUSTOMER
cancellation and the cancellation of the Components required to support
production.
               (7) CUSTOMER acknowledges that the Vendor leadtimes can be
significant, and understands that it is possible for SANMINA-SCI to have
Components on order which would support the last week of CUSTOMER’S Forecast.
For example, assuming a Vendor leadtime of 40 weeks and a “B” Component,
SANMINA-SCI would place an order for 3 months’ worth (see table above) of such
Component approximately 40 weeks prior to the date on which the first Component
is expected to be used.
          (d) Reschedule. CUSTOMER may reschedule all or part of a scheduled
delivery (per Order or Forecast) *** per quarter (for a maximum of two quarters)
for a period not to exceed *** days in accordance with the table below. At the
end of this *** day period, CUSTOMER shall either accept delivery of rescheduled
finished units and/or pay SANMINA-SCI’s Delivered Cost (as defined in
Section 4.2(e)) associated with rescheduled units not yet built. As an
example,***.

      Days Before P.O. Delivery Date   Percentage Reschedule Allowance
0 — 30
  No Change
31 — 60
  ***
61-90
  ***
> 90
  ***

     SANMINA-SCI shall use reasonable commercial efforts to accommodate any
upside schedule changes beyond the firm order periods.
          (e) Excess and Obsolete Inventory. Within a reasonable time after the
end of each calendar quarter, SANMINA-SCI shall advise CUSTOMER in writing of
any excess or obsolete Components in its inventory and their Delivered Cost (the
“E&O List”). For the purpose of this Agreement, “Delivered Cost” shall mean ***.
Within five (5) business days of receiving SANMINA-SCI’s E&O List, CUSTOMER
shall advise SANMINA-SCI of any Component on the E&O List that it believes is
not excess or obsolete. Within ten (10) business days after receiving
SANMINA-SCI’s E&O List, SANMINA-SCI and CUSTOMER shall finalize the E&O List,
and CUSTOMER shall issue to SANMINA-SCI an Order for all Components on the E&O
List. CUSTOMER shall pay SANMINA-SCI its Delivered Cost for Components on the
E&O List within fifteen (15) days of the date of invoice. In the event the
Parties cannot agree as to the Components on the E&O List, ***. For the purpose
of this Section, the phrase “obsolete Component” shall mean any Component which
is not then used to manufacture CUSTOMER’s Product (whether as a result of an
ECO or otherwise), and the term “excess Component” shall mean any Component
which is not able to be used to meet CUSTOMER’s future Orders or CUSTOMER’s
future Forecasts. CUSTOMER shall not have the right to delay payment for excess
Components by increasing or pushing out its Forecast.
          (f) Customer Component Liability. CUSTOMER acknowledges that it shall
be liable for the cost of all Components ordered in accordance with this
Section. Specifically,

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CONFIDENTIAL TREATMENT REQUESTED WITH RESPECT TO CERTAIN PORTIONS
HEREOF DENOTED WITH “***”
CUSTOMER’s Component Liability shall be equal to ***.SANMINA-SCI shall use
commercially reasonable efforts to minimize CUSTOMER’S Component Liability by
attempting to return Components to the Vendor; provided, however, that
SANMINA-SCI shall not be obligated to attempt to return to Vendor Components
which are, in the aggregate, worth less than ***.
          (g) Supplier Managed Inventory Program. CUSTOMER acknowledges that the
concept of “purchase commitments to a Vendor” (as used in Section 4.2(a) and
elsewhere in this Agreement) includes not only SANMINA-SCI purchase orders
issued to Vendors, but also forecasts (which are based on CUSTOMER’s Forecasts)
provided to Vendors in accordance with SANMINA-SCI’s Supplier Managed Inventory
Program (“SMI Program”). Under the SMI Program, SANMINA-SCI provides Vendors
with forecasts of anticipated Component requirements, and the Vendor is
obligated to supply SANMINA-SCI with all forecasted Components, but SANMINA-SCI
does not issue Vendor a purchase order until the Component is actually required
by SANMINA-SCI for production. However, under the SMI Program, SANMINA-SCI is
obligated to either consume a sufficient level of the forecasted Components or
pay the Vendor for a certain level of unused Components. For the purpose of this
Agreement, CUSTOMER’s Component Liability (pursuant to 4.2(f) above) shall
include the cost of any required Vendor payments under the SMI Program as well
as any Components actually ordered from the Vendors based on CUSTOMER’s
Forecast.
5. DELIVERY AND ACCEPTANCE
     5.1 Delivery. All Product shipments (including shipments made in accordance
with Section 7 (Warranty)) shall be DDU (Deliver Duty Unpaid), (Incoterms 2000).
SANMINA-SCI’s facility of manufacture (or repair). Title to and risk of loss or
damage to the Product shall pass to CUSTOMER upon SANMINA-SCI’s tender of the
Product to the common carrier CUSTOMER shall be the exporter and importer of
record for all shipments of Products, including any repaired or replacement
Products; SANMINA-SCI is not the importer or exporter of the Products.
SANMINA-SCI shall mark, pack, package, crate, transport, ship and store Product
to ensure (a) delivery of the Product to its ultimate destination in safe
condition, (b) compliance with all requirements of the carrier and destination
authorities, and (c) compliance with any special instructions of CUSTOMER.
SANMINA-SCI shall use reasonable efforts to deliver the Products on the
agreed-upon delivery dates and shall use commercially reasonable efforts to
notify CUSTOMER of any anticipated delays.
     5.2 Acceptance. Acceptance of the Product shall occur no later than thirty
(30) days after shipment of Product and shall be based solely on whether the
Product passes a mutually agreeable acceptance test procedure or inspection
designed to demonstrate compliance with the Specifications. Product cannot be
rejected based on criteria that were unknown to SANMINA-SCI or based on test
procedures that SANMINA-SCI has not approved or does not conduct.
Notwithstanding anything to the contrary, Product shall be deemed accepted if
not rejected within this thirty day period. If the thirtieth day of this period
shall fall on a day that is not a business day, then CUSTOMER shall have until
the next business day to reject the Product. Once a Product is accepted, all
Product returns shall be handled in accordance with Section 7 (Warranty). Prior
to returning any rejected Product, CUSTOMER shall obtain an Authorized Return
Material (“RMA”) number from SANMINA-SCI and shall specify the reason for such
rejection in all RMA’s.
6. CHANGES
     6.1 General. CUSTOMER may upon sufficient notice make changes within the
general scope of this Agreement. Such changes may include, but are not limited
to changes in (1) drawings, plans, designs, procedures, Specifications, test
specifications or bill of material (“BOM”), (2) methods of packaging and
shipment, (3) quantities of Product to be furnished, (4) delivery schedule, or
(5) Customer-Furnished Items. All changes other than changes in quantity of
Products to be furnished shall be requested pursuant to an Engineering Change
Notice

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(“ECN”) and finalized in an Engineering Change Order (“ECO”). If any such change
causes either an increase or decrease in SANMINA-SCI’s cost or the time required
for performance of any part of the work under this Agreement (whether changed or
not changed by any ECO) the Prices and/or delivery schedules shall be adjusted
in a manner which would adequately compensate the Parties for such change.
     6.2 ECN’s. SANMINA-SCI will respond to one ECN request per month without a
non-recurring administrative fee; responses to additional ECN’s will incur an
administrative fee of $1,000.00 each. Within five (5) business days after an ECN
is received, SANMINA-SCI shall advise CUSTOMER in writing (a) of any change in
Prices or delivery schedules resulting from the ECN and (b) the Delivered Cost
of any Finished Product, Work-in-Process or Component rendered excess or
obsolete as a result of the ECN (collectively the “ECN Charge”). Unless
otherwise stated, ECN Charges are valid thirty (30) days from the date of the
ECN Charge.
     6.3 ECO’s. In the event CUSTOMER desires to proceed with the change after
receiving the ECN Charge pursuant to Section 6.2, CUSTOMER shall advise
SANMINA-SCI in writing. In the event CUSTOMER does not desire to proceed with
the Change after receiving the ECN Charge, it shall so notify SANMINA-SCI. In
the event SANMINA-SCI does not receive written confirmation of CUSTOMER’s desire
to proceed with the change within thirty days after SANMINA-SCI provides
CUSTOMER with the ECN Charge, the ECN shall be deemed cancelled.
7. WARRANTY
     7.1 SANMINA-SCI Warranty. SANMINA-SCI warrants that, for a period of one
year from the date of manufacture of the Product, the Product will be free from
defects in workmanship. Products shall be considered free from defects in
workmanship if they are manufactured in accordance with the latest version of
IPC-A-600 or IPC-A-610 and successfully complete any mutually agreed product
acceptance test. SANMINA-SCI shall, at its option and at its expense (and as
CUSTOMER’s sole and exclusive remedy for breach of any warranty), repair,
replace or issue a credit for Product found defective during the warranty
period. In addition, SANMINA-SCI will pass on to CUSTOMER all Vendor’s (and
manufacturers’) Component warranties to the extent that they are transferable,
but will not independently warrant any Components. All warranty obligations will
cease upon the earlier of the expiration of the warranty period set forth above
or the return (at CUSTOMER’s request) of any test equipment or test fixtures.
ALL CLAIMS FOR BREACH OF WARRANTY MUST BE RECEIVED BY SANMINA-SCI NO LATER THAN
NINETY (90) DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD.
     7.2 RMA Procedure. CUSTOMER shall obtain a RMA number from SANMINA-SCI
prior to return shipment. All returns shall state the specific reason for such
return, and will be processed in accordance with SANMINA-SCI’s RMA Procedure, a
copy of which is available from SANMINA-SCI upon request. SANMINA-SCI shall pay
all transportation costs for valid returns of the Products to SANMINA-SCI and
for the shipment of the repaired or replacement Products to CUSTOMER, and shall
bear all risk of loss or damage to such Products while in transit; CUSTOMER
shall pay these charges plus a handling charge per unit to be provided to
CUSTOMER in advance for invalid or “no defect found” returns. Any repaired or
replaced Product shall be warranted as set forth in this Section for a period
equal to the greater of (i) the balance of the applicable warranty period
relating to such Product or (ii) sixty (60) days after it is received by
CUSTOMER.
     7.3 Exclusions From Warranty. This warranty does not include Products that
have defects or failures resulting from (a) CUSTOMER’s design of Products
including, but not limited to, design functionality failures, specification
inadequacies, failures relating to the functioning of Products in the manner for
the intended purpose or in the specific CUSTOMER’s environment; (b) accident,
disaster, neglect, abuse, misuse, improper handling, testing, storage or
installation including improper handling in accordance with static sensitive
electronic device handling requirements; (c) alterations, modifications or
repairs by CUSTOMER or third parties or (d)

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defective CUSTOMER-provided test equipment or test software. CUSTOMER bears all
design responsibility for the Product. Where Sanmina-SCI agrees to act or acts
as importer or exporter of record for Customer, Sanmina-SCI is doing so for
Customer’s convenience and Customer hereby holds harmless and indemnifies
Sanmina-SCI for any and all loss incurred by Sanmina-SCI resulting from
Sanmina-SCI’s role as importer or exporter of record, including liability for
RoHS, WEEE, and/or other applicable environmental law compliance/noncompliance.
     7.4 Remedy. THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE THE REPAIR,
REPLACEMENT OR CREDIT FOR DEFECTIVE PARTS AS STATED ABOVE. THIS WARRANTY IS THE
SOLE WARRANTY GIVEN BY SANMINA-SCI AND IS IN LIEU OF ANY OTHER WARRANTIES EITHER
EXPRESS OR IMPLIED. SANMINA-SCI DOES NOT MAKE ANY WARRANTIES REGARDING
MERCHANTIBILITY, NONINFRINGEMENT, COMPLIANCE WITH ROHS AND WEEE (OR SIMILAR
LEGISLATION), OR FITNESS FOR A PARTICULAR PURPOSE, AND SPECIFICALLY DISCLAIMS
ANY SUCH WARRANTY, EXPRESS OR IMPLIED.
8. CUSTOMER FURNISHED EQUIPMENT AND COMPONENTS
     8.1 Customer-Furnished Items. CUSTOMER shall provide SANMINA-SCI with the
Product design and related specifications, applicable regulatory requirements,
equipment, tooling, Components or documentation set forth in Exhibit C
(collectively the “Customer-Furnished Items”). CUSTOMER hereby represents and
warrants that the Customer-Furnished Items are or will be fit for their intended
purposes, meet all applicable regulatory requirements, and will be delivered to
SANMINA-SCI in a timely manner. Documentation (including BOM’s, drawings and
artwork) shall be current and complete. CUSTOMER shall be responsible for
schedule delay, reasonable inventory carrying charges and allocated equipment
down time charges associated with the incompleteness, late delivery or
non-delivery of the Customer-Furnished Items.
     8.2 Care of Customer-Furnished Items. All Customer-Furnished Items shall
remain the property of CUSTOMER. SANMINA-SCI shall clearly identify all
Customer-Furnished Items by an appropriate tag and shall utilize such
Customer-Furnished Items solely in connection with the manufacture of CUSTOMER’s
Product. SANMINA-SCI shall not make or allow modifications to be made to the
Customer-Furnished Items without CUSTOMER’s prior written consent. SANMINA-SCI
shall be responsible for reasonable diligence and care in the use and protection
of any Customer-Furnished Items and routine maintenance of any
Customer-Furnished equipment, but shall not be responsible for repairs or
replacements (including servicing and calibration to the equipment) unless such
failure was caused by SANMINA-SCI’s negligence or willful misconduct. Provided
that CUSTOMER is current in its payments to SANMINA-SCI, all Customer-Furnished
Items shall be returned to CUSTOMER at CUSTOMER’s expense upon request.
SANMINA-SCI’s production and warranty obligations which require the utilization
of the returned Customer-Furnished Items will cease upon SANMINA-SCI’s
fulfillment of CUSTOMER’S request.
     8.3 Customer-Furnished Components. Customer-furnished Components shall be
handled in accordance with SANMINA-SCI’s procedures regarding Customer-Furnished
Material, copies of which are available upon request.
9. INDEMNIFICATION AND LIMITATION OF LIABILITY
     9.1 SANMINA-SCI’s Indemnification. SANMINA-SCI shall indemnify, defend, and
hold CUSTOMER and CUSTOMER’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the
“Customer-Indemnified Parties”) harmless from all third party demands, claims,
actions, causes of action, proceedings, suits, assessments, losses, damages,
liabilities, settlements, judgments, fines, penalties, interest, costs and
expenses (including fees and disbursements of counsel) of every kind (each a
“Claim,” and, collectively “Claims”) (i) based upon personal injury or death or
injury to property (other than damage to the Product itself, which is handled in
accordance with Section 7/Warranty) to the extent any of the

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foregoing is proximately caused either by the negligent or willful acts or
omissions of SANMINA-SCI or its officers, employees, subcontractors or agents
and/or (ii) arising from or relating to any actual or alleged infringement or
misappropriation of any patent, trademark, mask work, copyright, trade secret or
any actual or alleged violation of any other intellectual property rights
arising from or in connection with SANMINA-SCI’s manufacturing processes.
     9.2 CUSTOMER’s Indemnification. CUSTOMER shall indemnify, defend, and hold
SANMINA-SCI and SANMINA-SCI’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the
“SANMINA-SCI-Indemnified Parties”) harmless from all third party Claims
(i) based upon personal injury or death or injury to property to the extent any
of the foregoing is proximately caused either by a design defect in the Product,
by the negligent or willful acts or omissions of CUSTOMER or its officers,
employees, subcontractors or agents and/or (ii) arising from or relating to any
actual or alleged infringement or misappropriation of any patent, trademark,
mask work, copyright, trade secret or any actual or alleged violation of any
other intellectual property rights arising from or in connection with the
Products, except to the extent that such infringement exists as a result of use
by CUSTOMER of SANMINA-SCI’s manufacturing processes.
     9.3 Procedure. A Party entitled to indemnification pursuant to this Section
(the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) in
writing of any Claims covered by this indemnity. Promptly after receipt of such
notice, the Indemnitor shall assume the defense of such Claim with counsel
reasonably satisfactory to the Indemnitee. If the Indemnitor fails, within a
reasonable time after receipt of such notice, to assume the defense with counsel
reasonably satisfactory to the Indemnitee or, if in the reasonable judgment of
the Indemnitee, a direct or indirect conflict of interest exists between the
Parties with respect to the Claim, the Indemnitee shall have the right to
undertake the defense, compromise and settlement of such Claim for the account
and at the expense of the Indemnitor. Notwithstanding the foregoing, if the
Indemnitee in its sole judgment so elects, the Indemnitee may also participate
in the defense of such action by employing counsel at its expense, without
waiving the Indemnitor’s obligation to indemnify and defend. The Indemnitor
shall not compromise any Claim (or portions thereof) or consent to the entry of
any judgment without an unconditional release of all liability of the Indemnitee
as to each claimant or plaintiff.
     9.4 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SPECIAL
DAMAGES, OR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS,
EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
FOR THE PURPOSE OF THIS SECTION, BOTH LOST PROFITS AND DAMAGES RESULTING FROM
VALUE ADDED TO THE PRODUCT BY CUSTOMER SHALL BE CONSIDERED CONSEQUENTIAL
DAMAGES. IN NO EVENT SHALL SANMINA-SCI’S LIABILITY FOR A PRODUCT (WHETHER
ASSERTED AS A TORT CLAIM OR CONTRACT CLAIM) EXCEED THE AMOUNTS PAID TO
SANMINA-SCI FOR SUCH PRODUCTHEREUNDER. IN NO EVENT WILL SANMINA-SCI BE LIABLE
FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCT BY CUSTOMER. IN ADDITION, OTHER
THAN WITH RESPECT TO SANMINA-SCI’S INDEMNIFICATION AS SET FORTH IN SECTION 9.1
(FOR WHICH THERE SHALL BE NO LIMIT), IN NO EVENT SHALL SANMINA-SCI’S LIABILITY
FOR ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED $2,000,000.
THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY. Notwithstanding the foregoing, the caps set forth herein
shall not apply to limit (i) CUSTOMER’s obligation for termination payments in
accordance with Section 10, (ii) a Party’s obligation to indemnify the other
Party against any third party Claim for personal injury or property damage, or
(iii) actual damages required to be paid to any third party as a result of any
infringement claim. THE LIMITATION SET FORTH IN THIS SECTION SHALL APPLY WHERE
THE DAMAGES ARISE OUT OF OR RELATE TO THIS AGREEMENT.

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10. TERMINATION
     10.1 Termination for Cause. Subject to Section 10.4, either Party may
terminate this Agreement or an Order hereunder for default if the other Party
materially breaches this Agreement; provided, however, no termination right
shall accrue until thirty (30) days after the defaulting Party is notified in
writing of the material breach and has failed to cure or give adequate
assurances of performance within the thirty (30) day period after notice of
material breach. Notwithstanding the foregoing, there shall be no cure period
for payment-related breaches.
     10.2 Termination For Convenience. Subject to Section 10.4, CUSTOMER may
terminate this Agreement hereunder for any reason upon thirty (30) days’ prior
written notice and may terminate any Order hereunder for any reason upon thirty
(30) days’ (before scheduled shipment) prior written notice. Subject to
Section 10.4, SANMINA-SCI may terminate this Agreement for any reason upon
ninety (90) days’ notice.
     10.3 Termination by Operation of Law. Subject to Section 10.4, this
Agreement shall immediately and automatically terminate should either Party
(a) become insolvent; (b) enter into or file a petition, arraignment or
proceeding seeking an order for relief under the bankruptcy laws of its
respective jurisdiction; (c) enter into a receivership of any of its assets or
(d) enter into a dissolution or liquidation of its assets or an assignment for
the benefit of its creditors.
     10.4 Consequences of Termination.
          a. Termination for Reasons other than SANMINA-SCI’s Breach. In the
event this Agreement or an Order hereunder is terminated for any reason other
than a breach by SANMINA-SCI (including but not limited to a force majeure or
termination for convenience), CUSTOMER shall pay SANMINA-SCI, termination
charges equal to (1) the contract price for all finished Product existing at the
time of termination; (2) SANMINA-SCI’s cost (including labor, Components and a
fifteen percent mark-up on Components and labor) for all work in process; and
(3) CUSTOMER’S Component Liability pursuant to Section 4.2(f).
          b. Termination Resulting From SANMINA-SCI’S Breach. In the event
CUSTOMER terminates this Agreement or any Order hereunder as a result of a
breach by SANMINA-SCI, CUSTOMER shall pay SANMINA-SCI, termination charges equal
to (1) the contract price for all finished Product existing at the time of
termination (2) SANMINA-SCI’s cost (including labor, Components) for all work in
process; and (3) CUSTOMER’S Component Liability pursuant to Section 4.2(f);
provided, however, that for the purposes of this subsection only, CUSTOMER’s
Component Liability shall be calculated based on the quoted cost of Components
as stated on the BOM rather than the Delivered Cost (e.g., exclusive of any
markup).
11. QUALITY
     11.1 Specifications. Product shall be manufactured by SANMINA-SCI in
accordance with the Specifications, as modified via written ECO’s in accordance
with this Agreement. Neither Party shall make any change to the Specifications,
to any Components described therein, or to the Products (including, without
limitation, changes in form, fit, function, design, appearance or place of
manufacture of the Products or changes which would affect the reliability of any
of the Products) unless such change is made in accordance with Section 6.1.
Notwithstanding the foregoing, SANMINA-SCI shall be permitted to make changes in
its manufacturing process at any time, so long as such changes do not affect the
form, fit or function of the Products.
     11.2 Content of Specifications. The Specifications shall include, but shall
not be limited to (i) detailed electrical, mechanical, performance and
appearance specifications for each model of Product, (ii) the BOM; (iii) tooling
specifications, along with a detailed description of the operation thereof,
(iv) art work drawings, (v) Component specifications, (vi) Vendor cross
references, as specified in Exhibit D, attached hereto.

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     11.3 Components. SANMINA-SCI shall use in its production of Products such
Components of a type, quality, and grade specified by CUSTOMER to the extent
CUSTOMER chooses to so specify, and shall purchase Components only from Vendors
appearing on CUSTOMER’s approved vendor list (“AVL”); provided, however, that in
the event SANMINA-SCI cannot purchase a Component from a Vendor on CUSTOMER’S
AVL for any reason, SANMINA-SCI shall be able to purchase such Component from an
alternate Vendor, subject to CUSTOMER’s prior written approval, which approval
shall not be unreasonably withheld or delayed. SANMINA-SCI shall use
commercially reasonable efforts to manage all Vendors, but shall not be
responsible for any Component (including the failure of any Component to comply
with the Specifications).
     11.4 Quality Specifications. SANMINA-SCI shall comply with the quality
specifications agreed to with CUSTOMER as well as those set forth in its Quality
Manual, incorporated by reference herein, a copy of which is available from
SANMINA-SCI upon request.
     11.5 Inspection of Facility. Upon reasonable advance written notice and,
upon SANMINA-SCI’s request the execution of an appropriate nondisclosure
agreement, CUSTOMER may inspect the Products and Components held by SANMINA-SCI
for CUSTOMER at SANMINA-SCI’s facilities during SANMINA-SCI’s regular business
hours, provided that such inspection does not unduly affect SANMINA-SCI’S
operations. CUSTOMER and its representatives shall observe all security and
handling measures of SANMINA-SCI while on SANMINA-SCI’s premises. CUSTOMER and
its representatives acknowledge that their presence on SANMINA-SCI’s property is
at their sole risk.
12. FORCE MAJEURE
     12.1 Force Majeure Event. For purposes of this Agreement, a “Force Majeure
Event” shall mean (i) the occurrence of unforeseen circumstances beyond a
Party’s control and without such Party’s negligence or intentional misconduct,
including, but not limited to, any such act by any governmental authority, act
of war, natural disaster, strike, boycott, embargo, shortage, riot, lockout,
labor dispute, civil commotion and (ii) the failure of a Vendor to timely
deliver a Component to SANMINA-SCI (unless the Vendor’s failure to timely
deliver directly results from SANMINA-SCI’s failure to order the Component).
     12.2 Notice of Force Majeure Event. Neither Party shall be responsible for
any failure to perform due to a Force Majeure Event provided that such Party
gives notice to the other Party of the Force Majeure Event as soon as reasonably
practicable, but not later than five (5) days after the date on which such Party
knew or should reasonably have known of the commencement of the Force Majeure
Event, specifying the nature and particulars thereof and the expected duration
thereof; provided, however, that the failure of a Party to give notice of a
Force Majeure Event shall not prevent such Party from relying on this Section
except to the extent that the other Party has been prejudiced thereby
     12.3 Termination of Force Majeure Event. The Party claiming a Force Majeure
Event shall use reasonable efforts to mitigate the effect of any such Force
Majeure Event and to cooperate to develop and implement a plan of remedial and
reasonable alternative measure to remove the Force Majeure Event; provided,
however, that neither Party shall be required under this provision to settle any
strike or other labor dispute on terms it considers to be unfavorable to it.
Upon the cessation of the Force Majeure Event, the Party affected thereby shall
immediately notify the other Party of such fact, and use its best efforts to
resume normal performance of its obligations under the Agreement as soon as
possible.

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     12.4 Limitations. Notwithstanding that a Force Majeure Event otherwise
exists, the provisions of this Section shall not excuse (i) any obligation of
either Party, including the obligation to pay money in a timely manner for
Product actually delivered or other liabilities actually incurred, that arose
before the occurrence of the Force Majeure Event causing the suspension of
performance; or (ii) any late delivery of Product, equipment, materials,
supplies, tools, or other items caused solely by negligent acts or omissions on
the part of such Party.
     12.5 Termination for Convenience. In the event a Party fails to perform any
of its obligations for reasons defined in this Section 12 for a cumulative
period of ninety (90) days or more from the date of such Party’s notification to
the other Party then the other Party at its option may extend the corresponding
delivery period for the length of the delay, or terminate this Agreement for
Convenience in accordance with Section 10.2.
13. CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES
13.1 Definitions. For the purpose of this Agreement,
          (a) “Confidential Information” means information (in any form or
media) regarding a Party’s customers, prospective customers (including lists of
customers and prospective customers), methods of operation, engineering methods
and processes (include any information which may be obtained by a Party by
reverse engineering, decompiling or examining any software or hardware provided
by the other Party under this Agreement), programs and databases, patents and
designs, billing rates, billing procedures, products, Components, ordering
patterns, vendors and suppliers, business methods, finances, management, or any
other business information relating to such Party (whether constituting a trade
secret or proprietary or otherwise) which has value to such Party and is treated
by such Party as being confidential; provided, however, that Confidential
Information does not include information that (i) is known to the other Party
prior to receipt from the Disclosing Party hereunder, which knowledge shall be
evidenced by written records, (ii) is independently developed other than through
the business relationship established hereby, as evidenced by written records,
(iii) is or becomes in the public domain through no breach of this Agreement, or
(iv) is received from a third party without breach of any obligation of
confidentiality; and provided further, that Confidential Information does not
include any information provided by CUSTOMER to SANMINA-SCI regarding the
manufacturing process.
          (b) “Person” shall mean and include any individual, partnership,
association, corporation, trust, unincorporated organization, limited liability
company or any other business entity or enterprise.
          (c) “Representative” shall mean a Party’s employees, agents, or
representatives, including, without limitation, financial advisors, lawyers,
accountants, experts, and consultants.
     13.2 Nondisclosure Covenants.
          (a) In connection with this Agreement, each Party (the “Disclosing
Party”) may furnish to the other Party (the “Receiving Party”) or its
Representatives certain Confidential Information. For a period of three
(3) years from the date of the last disclosure under this Agreement, the
Receiving Party (a) shall maintain as confidential all Confidential Information
disclosed to it by the Disclosing Party, (b) shall not, directly or indirectly,
disclose any such Confidential Information to any Person other than (i) those
Representatives of the Receiving Party whose duties justify the need to know
such Confidential Information and then only after each Representative has agreed
to be bound by this Confidentiality Agreement and clearly understands his or her
obligation to protect the confidentiality of such Confidential Information and
to restrict the use of such Confidential Information or (ii) if SANMINA-SCI is
the Receiving Party, a third party Vendor for the purpose of obtaining price
quotations and (c) shall treat such Confidential Information

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with the same degree of care as it treats its own Confidential Information (but
in no case with less than a reasonable degree of care).
          (b) The disclosure of any Confidential Information is solely for the
purpose of enabling each Party to perform under this Agreement, and the
Receiving Party shall not use any Confidential Information disclosed by the
Disclosing Party for any other purpose.
          (c) Except as otherwise set forth in this Agreement, all Confidential
Information supplied by the Disclosing Party shall remain the property of the
Disclosing Party, and will be promptly returned by the Receiving Party upon
receipt of written request therefore.
          (d) If the Receiving Party or its Representative is requested or
becomes legally compelled to disclose any of the Confidential Information, it
will provide the Disclosing Party with prompt written notice. If a protective
order or other remedy is not obtained, then only that part of the Confidential
Information that is legally required to be furnished will be furnished, and
reasonable efforts will be made to obtain reliable assurances of
confidentiality.
     13.3 Non-Solicitation of Employees. During the term of this Agreement and
for a period of two (2) years thereafter, neither Party shall directly or
indirectly solicit, recruit or hire (or attempt to solicit, recruit or hire) any
of the other Party’s employees; provided, however, that this shall not prohibit
a Party from (a) advertising for open positions provided that such
advertisements are not targeted solely at the employees of the other Party;
(b) or employing any individual who initiates contact with such Party on his or
her own initiative, whether in response to an advertisement or otherwise.
     13.4 Injunctive Relief Authorized. Any material breach of this Section by a
Party or its Representatives may cause irreparable injury and the non-breaching
Party may be entitled to equitable relief, including injunctive relief and
specific performance, in the event of a breach. The above will not be construed
to limit the remedies available to a Party. In addition, the prevailing Party
will be entitled to be reimbursed for all of its reasonable attorneys’ fees and
expenses at all levels of proceedings and for investigations, from the
non-prevailing Party.
     13.5 No Publicity. Each Party agrees not to publicize or disclose the
existence or terms of this Agreement to any third Party without the prior
consent of the other Party except as required by law (in which case, the Party
seeking to disclose the information shall give reasonable notice to the other
Party of its intent to make such a disclosure). Neither Party shall make any
press release or similar public statement without the prior consent of the other
Party.
14. INSURANCE
     SANMINA-SCI agrees to maintain during the term of this Agreement
(a) workers’ compensation insurance as prescribed by the law of the state in
which SANMINA-SCI’s services are performed; (b) employer’s liability insurance
with limits of at least $500,000 per occurrence; (c) commercial automobile
liability insurance if the use of motor vehicles is required, with limits of at
least $1,000,000 for bodily injury and property damage for each occurrence;
(d) commercial general liability insurance, including blanket contractual
liability and broad form property damage, with limits of at least $1,000,000
combined single limit for personal injury and property damage for each
occurrence; and (e) commercial general liability insurance endorsed to include
products liability and completed operations coverage in the amount of $1,000,000
for each occurrence. SANMINA-SCI shall furnish to CUSTOMER certificates or
evidence of the foregoing insurance indicating the amount and nature of such
coverage and the expiration date of each policy. Each Party agrees that it, its
insurer(s) and anyone claiming by, through, under or in its behalf shall have no
claim, right of action or right of subrogation against the other Party and the
other Party’s affiliates, directors, officers, employees and customers based on
any loss or liability insured against under the insurance required by this
Agreement.

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15. MISCELLANEOUS
     15.1 Integration Clause. This Agreement (including the Exhibits and
Schedules to this Agreement) constitutes the entire agreement of the parties,
superseding all previous Agreements covering the subject matter. This Agreement
shall not be changed or modified except by written agreement, specifically
amending, modifying and changing this Agreement, signed by SANMINA-SCI and an
authorized representative of the CUSTOMER.
     15.2 Order of Precedence. All quotations, Orders, acknowledgments and
invoices issued pursuant to this Agreement are issued for convenience of the
Parties only and shall be subject to the provisions of this Agreement and the
Exhibits hereto. When interpreting this Agreement, precedence shall be given to
the respective parts in the following descending order: (a) this Agreement;
(b) Schedules and Exhibits to this Agreement; and (c) if Orders are used to
release product, those portions of the Order that are not pre-printed and which
are accepted by SANMINA-SCI. The Parties acknowledge that (y) the preprinted
provisions on the reverse side of any such quotation, Order, acknowledgment or
invoice and (z) all terms other than the specific terms set forth in
Section 4.1(a)(i)-(iv) shall be deemed deleted and of no effect whatsoever. No
modification to this Agreement, the Exhibits or any Order shall be valid without
the prior written consent of the Purchase Agreement Coordinators of SANMINA-SCI
and CUSTOMER.
     15.3 Assignment. Neither this Agreement nor any rights or obligations
hereunder shall be transferred or assigned by either Party without the written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed. This Agreement may be assigned in whole or in part by either Party to
any Affiliate of such Party provided that such Party remains secondarily liable
under this Agreement.
     15.4 Notices. Wherever one Party is required or permitted or required to
give written notice to the other under this Agreement, such notice will be given
by hand, by certified U.S. mail, return receipt requested, by overnight courier,
or by fax and addressed as follows:

     
If to CUSTOMER:
  with a copy to:
 
   
POWER EFFICIENCY CORPORATION
3960 Howard Hughes Pkwy., Suite 460
Las Vegas, NV 89169
Tel (702) 697-0377 ext. 102
Fax (702) 697-0379
ATTN: CEO
  Ellenoff Grossman & Schole LLP
370 Lexington Avenue
New York, NY 10017-6503
Tel (212) 370-1300
Fax (212) 370-7889
ATTN: Adam S. Mimeles
 
   
If to SANMINA-SCI:
  with a copy to:
 
   
SANMINA-SCI Corporation
2700 N. First Street
San Jose, California 95134
Att’n: EVP, Sales
Phone: (408) 964-3600
Fax: (408) 964-3888
  SANMINA-SCI Corporation
2700 N. First Street
San Jose, California 95134
Att’n: Vice President & Corporate Counsel
Phone: (408) 964-3600
Fax: (408) 964-3636

All such notices shall be effective upon receipt. Either Party may designate a
different notice address from time to time upon giving ten (10) days’ prior
written notice thereof to the other Party.
     15.5 Disputes/Choice of Law/Attorneys Fees. The Parties shall attempt to
resolve any disputes between them arising out of this Agreement through good
faith negotiations. In the event the Parties cannot resolve a dispute, the
Parties acknowledge and agree that the state courts of

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Santa Clara County, California and the federal courts located in the Northern
District of the State of California shall have exclusive jurisdiction and venue
to adjudicate any and all disputes arising out of or in connection with this
Agreement. The Parties consent to the exercise by such courts of personal
jurisdiction over them and each Party waives any objection it might otherwise
have to venue, personal jurisdiction, inconvenience of forum, and any similar or
related doctrine. This Agreement shall be construed in accordance with the
substantive laws of the State of California (excluding its conflicts of laws
principles). The provisions of the United Nations Conventions on Contracts for
the International Sale of Goods shall not apply to this Agreement. The
prevailing Party shall be entitled to recover its costs and reasonable attorneys
fees from the non-prevailing Party in any action brought to enforce this
Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date, by their officers, duly authorized.

                  SANMINA-SCI CORPORATION           CUSTOMER                  
By:   /s/ Ken Haney       By:   /s/ Steven Strasser                      
Signature           Signature                   Ken Haney       Steven Strasser
          Typed Name       Typed Name                   Senior Vice President of
Sales       Chief Executive Officer           Title       Title                
  September 7, 2007       September 6, 2007           Date       Date

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INDEX
1. TERM
2. PRICING
3. PAYMENT TERMS
4. PURCHASE ORDERS/FORECAST/RESCHEDULE
5. DELIVERY AND ACCEPTANCE
6. CHANGES
7. WARRANTY
8. CUSTOMER FURNISHED EQUIPMENT AND COMPONENTS
9. INDEMNIFICATION AND LIMITATION OF LIABILITY
10. TERMINATION
11. QUALITY
12. FORCE MAJEURE
13. CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES
14. INSURANCE
15. MISCELLANEOUS
EXHIBITS
A. PRICES
B. LONG LEAD-TIME COMPONENTS
C. CUSTOMER FURNISHED EQUIPMENT, COMPONENTS AND DOCUMENTATION
D. SPECIFICATIONS

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EXHIBIT A
PRICING
***
***

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Exhibit B
LONG LEAD-TIME COMPONENTS
****

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EXHIBIT C
CUSTOMER FURNISHED EQUIPMENT, COMPONENTS AND DOCUMENTATION
***

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EXHIBIT D
SPECIFICATIONS
***

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