Exhibit 10.10

 

Confidential Treatment Requested as to certain information contained in this
Exhibit and filed separately with the Securities and Exchange Commission.

 

MANUFACTURING AND PURCHASE AGREEMENT

 

by and between

 

ESGW INTERNATIONAL LIMITED

 

and

 

SATCON TECHNOLOGY CORPORATION

 

Dated:  December 18, 2008

 

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TABLE OF CONTENTS

 

Recitals

4

 

 

 

Article I

Definitions

4

 

 

 

Article II

Scope of Agreement

7

 

 

 

Article III

Manufacturing and Assembly of Products

8

 

 

 

Article IV

Product Prices

11

 

 

 

Article V

Purchase of Products

13

 

 

 

Article VI

Delivery and Shipment

16

 

 

 

Article VII

Warranties and Remedies

17

 

 

 

Article VIII

Additional Covenants

19

 

 

 

Article IX

Intellectual Property

20

 

 

 

Article X

Term and Termination

21

 

 

 

Article XI

Confidentiality

23

 

 

 

Article XII

Indemnification

24

 

 

 

Article XIII

General Terms

25

 

 

 

Schedule 1

Products

29

 

 

 

Schedule 2

Pricing Formula

30

 

 

 

Schedule 3

Epidemic Warranty Conditions

31

 

 

 

Schedule 4

Workmanship Standards

32

 

 

 

Exhibit A

Consignment Agreement

38

 

2

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List of Schedules and Exhibits

 

Schedules:

 

 

 

Schedule 1 — Products

 

 

 

Schedule 2 — Pricing Formula

 

 

 

Schedule 3 — Epidemic Warranty Conditions

 

 

 

Schedule 4 — Workmanship Standards

 

 

 

 

 

Exhibit:

 

 

 

Exhibit A — Consignment Agreement

 

 

3

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MANUFACTURING AND PURCHASE AGREEMENT

 

This Manufacturing and Purchase Agreement (this “Agreement”), is made and
entered into as of December 18, 2008 (the “Effective Date”), by and between ESGW
International Limited, a company registered under the laws of the British Virgin
Islands, having a principal mailing address at c/o ExcelStor Technology Limited,
Suite 1507, Greenfield Tower, Concordia Plaza, Number 1, Science Museum Road,
Tsimshatsui East, Hong Kong SAR (hereinafter referred to as “ExcelStor”), of the
one part; and Satcon Technology Corporation, a company registered under the laws
of the state of Delaware of the United States of America, having a principal
place of business at 27 Drydock Avenue, Boston, MA 02210, U.S.A. (hereinafter
referred to as “Satcon”), of the other part.  ExcelStor and Satcon are sometimes
hereinafter referred to collectively as the “Parties” or individually as a
“Party.”

 

RECITALS

 

WHEREAS, ExcelStor is in the business of contract manufacturing;

 

WHEREAS, Satcon possesses the right to certain designs, data, ideas, and
processes in connection with Products (as defined herein);

 

WHEREAS, the Parties are in possession of information regarding their respective
supply chains and would like to share such information with the other Party for
their mutual benefit; and

 

WHEREAS, Satcon desires to contract ExcelStor to manufacture Products for Satcon
and its Affiliates and ExcelStor desires to manufacture and supply such Products
for Satcon and its Affiliates pursuant to the terms and conditions of this
Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

 

ARTICLE I
DEFINITIONS

 

Certain capitalized terms used in this Agreement shall have the specific
meanings set forth below:

 

Affiliates.  The term “Affiliates” means all entities of a Party that control,
are controlled by, or are under common control with, that Party. An entity
“controls” another entity when it owns more than fifty percent of the voting
stock or other ownership interest of that entity or has the ability to direct
its management.

 

Approved Facility.  The term “Approved Facility” means the facilities of
ExcelStor Great Wall Information Products (Shenzhen) Ltd. and any additional
ExcelStor facility that is approved in writing by Satcon for the manufacturing
of Products under this Agreement.

 

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AVL.  The term “AVL” means a listing of vendors, in addition to part
descriptions and part numbers, approved by Satcon for the manufacturing of
Products.  All AVLs and the information contained therein shall be jointly owned
by both Satcon and ExcelStor, and neither shall assert the other Party’s rights
to deal with the vendors on the AVL are limited.

 

Business Day.  The term “Business Day” means any day other than Saturday, Sunday
or a day on which banks in the United States of America, P.R. China or the Hong
Kong SAR are authorized or required by law or other governmental action to
close.

 

Confidential Information.  The term “Confidential Information” means any
confidential information of a Person relating to any designs, know-how,
inventions, technical data, ideas, uses, processes, methods, formulae,
compositions, compounds, manuals, instructions specifications, research and
development activities, work in process, any information owned, licensed or used
by a Party or any scientific, engineering, manufacturing, marketing, business
plan, financial or personnel matter relating to such Person, its present or
future products, sales, suppliers, customers, employees, investors or business,
whether in oral, written, graphic or electronic form (which is marked
confidential or acknowledged as being confidential prior to disclosure).  If the
Confidential Information is disclosed orally or visually, it shall be identified
as such at the time of disclosure and confirmed in writing by the disclosing
Person within thirty (30) calendar days of disclosure.  Notwithstanding the
foregoing, confidential Information shall also include any other information in
oral, written, graphic or electronic form, which given the circumstances
surrounding such disclosure a reasonable person would considered confidential.

 

Consigned Inventory. The term “Consigned Inventory” means any parts, components,
Semi Assemblies and Products that are in the custody of ExcelStor but to which
Satcon has full titles and ownership.

 

End of Life Products. The term “End of Life Products” means any Products,
including its components and Sub Assemblies incorporated into the Products that
will no longer be available for purchase under this Agreement.

 

Engineering Change Order. The term “Engineering Change Order” means an
engineering change order submitted by Satcon to ExcelStor for the purpose of
making an engineering change to the Products under this Agreement.

 

Epidemic Warranty Conditions.  The term “Epidemic Warranty Conditions” shall
mean those conditions listed in Schedule 3 attached hereto.

 

ExcelStor Technology Rights.  The term “ExcelStor Technology Rights” means any
ExcelStor Intellectual Property Rights, ExcelStor’s manufacturing processes and
such production designs not acquired by Satcon pursuant to this Agreement and
any rights licensed to ExcelStor by any other Person (other than Satcon) to use
any Intellectual Property of such Person.

 

Forecast.  The term “Forecast” means an up to six (6) months rolling forecast
estimating the amount of the Products that anticipates purchasing per month, as
issued by Satcon once a month.

 

5

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Intellectual Property Rights.  The term “Intellectual Property Rights” means all
trademarks, service marks, trade dress, logos, copyrights, rights of authorship,
inventions, patents, rights of inventorship, moral rights, rights of publicity
and privacy, trade secrets, rights under unfair competition and unfair trade
practices laws, and all other intellectual and industrial property rights
related thereto, worldwide.

 

MW.  The abbreviation “MW” means megawatts.

 

NRE.  The term “NRE” means any non-recurring engineering, design, documentation,
supplier and part qualification, documentation, training, scheduling, and other
relevant charges incurred by ExcelStor in connection with the development,
preparation for manufacturing or modification of a part or Product to achieve
certain specifications or characteristics, as requested by Satcon from time to
time. The Parties agree and acknowledge that ExcelStor’s labor cost for factory
assembly and test overhead items such as supervision, supply chain management
and logistics, shall not be included in the NRE.

 

Person.  The term “Person” means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.

 

Product(s).  The term “Product(s)” means those certain products set forth on
Schedule 1 attached hereto, and their components and Sub Assemblies, as may be
amended by mutual agreement of the Parties from time to time, to be manufactured
by ExcelStor in accordance with a Production Design, pursuant to Purchase Orders
issued by Satcon from time to time under this Agreement.

 

Product Engineering.  The term “Product Engineering” means any research,
development and engineering conducted by ExcelStor, whether or not at the
request of Satcon, to substantially improve or modify the Production Design of
any Product.

 

Product Engineering Results.  The term “Product Engineering Results” means the
results of ExcelStor’s Product Engineering rendered in a written format,
including, without limitation, the NRE and the Production BOM for such Product.

 

Product Prices.  The term “Product Prices” means the prices of Products based on
the Production BOM, such prices as determined in accordance with the Pricing
Formula set out on Schedule 2 hereto.

 

Production BOM.  The term “Production BOM” means a Bill of Materials prepared by
ExcelStor, which lists all components necessary to manufacture a Product,
including, without limitation, the prices of each component; provided that such
Bill of Materials shall be approved by Satcon.

 

Production Design.  The term “Production Design” means product design
information provided to ExcelStor in order to allow ExcelStor to manufacture a
Product, as amended, modified, supplemented or restated from time to time in
accordance herewith, that is approved by Satcon for manufacturing.  As used
herein, Production Design includes, without limitation, product design
schematics, Specifications and Production BOM.

 

6

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Purchase Order.  The term “Purchase Order” means an order for Products or
components, which shall specify at least the following, for Products or
components:  (i) model number; (ii) quantity; (iii) Purchase Order Delivery
Date; (iv) unitary prices, and (v) other order terms and conditions mutually
agreed upon by the Parties.  Purchase Orders may additionally identify the
specific Product configuration and other matters specific to each separate sale
by Satcon or its Affiliate to a customer.  If the terms and conditions of a
Purchase Order conflict with this Agreement, this Agreement will control as to
the conflicting term(s) unless the conflicting terms have been mutually agreed
upon by the Parties.  If the terms and conditions of a Purchase Order add to
this Agreement, the applicable Purchase Order, if accepted by ExcelStor, will
control as to the additional term(s).

 

Purchase Order Delivery Date.  The term “Purchase Order Delivery Date” means the
delivery date(s) specified by Satcon in any Purchase Order.

 

Quarterly Business Review. The term “Quarterly Business Review” means the
quarterly business review meetings between Satcon and ExcelStor held within
fifteen (15) days after the beginning of each quarter during the Term.  The
venue of the Quarterly Business Review shall be agreed upon by the Parties from
time to time.

 

Satcon Technology Rights.  The term “Satcon Technology Rights” means any
(i) Satcon Intellectual Property and (ii) any rights licensed to Satcon by any
other Person to use any Intellectual Property of such Person.

 

Specifications.  The term “Specifications” means a detailed listing of the
components, functionality, features, physical specifications and performance,
security and standard compliance information, available support, ordering and
pricing procedures and/or information and acceptance criteria for each Product,
including, without limitation, the Production Design for such Product.

 

Statement of Work.  The term “Statement of Work” means a written statement from
Satcon to ExcelStor requesting ExcelStor’s Product Engineering services and
setting forth certain objectives, improvements, changes or modifications to a
Production Design or Product.

 

Sub Assemblies. The term “Sub Assemblies” means combinations of parts and labor
into a semi finished goods, which can then be combined into a final Product.

 

ARTICLE II
SCOPE OF AGREEMENT

 

2.1.                              Scope.  ExcelStor shall, at Satcon’s request,
(a) manufacture and supply Products, (b) provide Product Engineering services,
and (c) assist Satcon with the development and management of a common supply
chain, under which Satcon may purchase directly from the suppliers that
ExcelStor solely develops or helps Satcon develop.  ExcelStor shall disclose to
Satcon information in connection with the pricing for contract manufacturing and
supply chain services, including, but not limited to, various costs and each
component of manufacturing value add, the names and addresses of ExcelStor’s
suppliers and vendors, and information regarding best business practices at the
locations where ExcelStor and its Affiliates conduct business.

 

7

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ARTICLE III
MANUFACTURING AND ASSEMBLY OF PRODUCTS

 

3.1.                              Delivery of a Production Design.  Satcon shall
deliver a Production Design to ExcelStor and ExcelStor shall notify Satcon
within fifteen (15) Business Days of receipt of such Production Design whether
ExcelStor is capable of manufacturing a product in accordance with such
Production Design and whether ExcelStor agrees to manufacture such product. Any
rejection of a Production Design by ExcelStor shall include an explanation of
the basis for the rejection; provided that ExcelStor may not reject any version
of a Production Design for a Product set forth on Schedule 1 or which ExcelStor
has previously manufactured for Satcon unless (i) the Production Design utilizes
parts, components or subassemblies no longer available, (ii) a third party has
asserted that the Production Design conflicts with or infringes on its
intellectual property rights, or (iii) some other cause beyond the reasonable
control of ExcelStor makes the use of that Production Design commercially
impractical.

 

3.2.                              Development Phase.

 

3.2.1.                     Product Engineering.

 

(a)                                  Satcon may request the Product Engineering
services of ExcelStor by submitting to ExcelStor a Statement of Work for the
development of a new Product or the modification of a Production Design. Within
ten (10) Business Days of ExcelStor’s receipt of such Statement of Work,
ExcelStor shall provide Satcon with a statement of NRE with detailed information
on each component of the NRE for such Product Engineering services. Satcon shall
notify ExcelStor whether it agrees to the amount of the NRE and the right, title
and interest which it shall own in and to the results of such Product
Engineering set forth in the Statement of Work.

 

(b)                                 Satcon shall have the right, title and
interest in and to the tangible deliverable results of any Product Engineering
upon payment for such Product Engineering; provided, that Satcon’s rights to any
Intellectual Property Rights arising from such Product Engineering shall be in
accordance with the terms and conditions set forth in Section 9.1 hereof, and
Satcon shall not receive any Intellectual Property Rights in the ExcelStor
Technology Rights including by way of illustration and not of limitation,
ExcelStor’s manufacturing processes, background materials and intellectual
property not related to or developed for Satcon.

 

(c)                                  Should Satcon request the Product
Engineering services of ExcelStor, ExcelStor shall purchase from Satcon at
Satcon’s cost the initial two (2) sets of components for PowerGate Plus Solar PV
Inverters ranging from 30 kW to 135 kW power levels (“Final Qualification
Unit(s)”).  Upon completion of Product Engineering services relating to the
Final Qualification Units, ExcelStor shall sell to Satcon the Final
Qualification Units at the price at which ExcelStor purchased the Final
Qualification Units from Satcon, plus a ***  markup from the purchase price. 
Invoices relating to all Final Qualification Units shall be due and payable
sixty (60) days after receipt of the invoices.  Final Qualification Unit prices
are FCA

 

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  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

8

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(INCOTERMS 2000) Burlington, Ontario, Canada, or FCA (INCOTERMS 2000) Hong Kong
SAR, as the case may be.

 

3.2.2.                     Production Design.  At the conclusion of any Product
Engineering, ExcelStor shall deliver to Satcon within five (5) Business Days the
Product Engineering Results, if any. Satcon, in its reasonable discretion, may
accept or reject the Product Engineering Results, if any. Upon receipt of
authorization to create a Production Design, ExcelStor shall promptly provide
Satcon with the Production Design and Production BOM for such Product and a
datasheet for such Product, which datasheet shall include, among other things,
the Specifications, Product plans, sketches and the entire documentation
required for manufacturing such Product with the same features, capabilities and
performance.

 

3.2.3.                     Change to the Products. ExcelStor shall not make any
changes to the Products or changes to the processes, Production BOM, materials,
Production Design, tools, or locations used to manufacture, assemble, or package
the Products without Satcon’s prior written approval, which shall not be
unreasonably withheld. ExcelStor shall provide Satcon with prior written notice
of any intent to make any change covered by this Paragraph and request Satcon’s
approval.  ExcelStor shall provide Satcon with a minimum of three (3) months
notice prior to any intended change to: (i) the Production Design, content,
form, fit, or function of any Products; or (ii) the location of manufacture,
assembly, or packaging of the Products.  Satcon may request changes to the
Products by issuing an Engineering Change Order to ExcelStor from time to time.
Subject to the last sentence of this Section 3.2.3, ExcelStor shall immediately
implement the changes and all applicable Purchase Orders will be deemed amended
to incorporate the changes. ExcelStor agrees to make commercially reasonable
efforts to comply with Satcon’s requested changes. If the changes result in a
significant change to ExcelStor’s cost or in the time for performance or exposes
ExcelStor to the risk a third party will assert a violation of its intellectual
property rights, however, ExcelStor shall advise Satcon in writing with details
of the change to the cost or time or the risk of adverse claims by a  third
party, and ExcelStor shall not implement the changes until Satcon gives
ExcelStor written authorization to do so and provides adequate compensation.

 

3.2.4.                     Evaluation and Upgrades of Products.  ExcelStor shall
share suggestions for improvement of Production Designs and/or Products that
arise from time to time.

 

3.2.5.                     Certification.  ExcelStor shall obtain an initial UL
certification for the Approved Facility.  All costs arising and relating to
obtaining the initial UL certification for the Approved Facility shall be borne
by ExcelStor.  Satcon shall bear all expenses arising and related to the
Approved Facility’s UL re-certification should re-certification be necessary and
caused by a Satcon initiated change in Production Design.  With the exception of
expedited freight and handling costs relating to UL certification, which shall
be expressly borne by Excelstor, Satcon shall bear costs arising and related to
the Production Design’s UL certification.

 

3.3.                              Production Phase.

 

3.3.1.                     Manufacturing of Products.

 

9

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(a)                                  ExcelStor shall manufacture and sell to
Satcon Products ordered by Satcon pursuant to Purchase Orders submitted by
Satcon to ExcelStor in accordance with Article V hereof.  Further, ExcelStor
shall manufacture and deliver such Products to Satcon on or prior to the
Purchase Order Delivery Date in accordance with Article VI hereof.

 

(b)                                 ExcelStor shall manufacture and assemble the
Products in strict compliance with the Production Design and Specifications for
such Product at the Approved Facility.

 

(c)                                  ExcelStor agrees that all parts and
components used to manufacture the Products shall be sourced from vendors
contained in the AVL.  Parts and components from vendors not contained in the
AVL shall not be used without Satcon’s prior written approval, which shall not
be unreasonably withheld.

 

(d)                                 ExcelStor agrees that no independent
contractors or sub-contractors shall be used to manufacture the Products without
Satcon’s prior written approval.

 

(e)                                  ExcelStor shall have the right to use its
Affiliates for manufacturing the Products, subject to the Approved Facility
definition above.

 

(f)                                    ExcelStor agrees to permit Satcon to
audit its manufacturing process at the Approved Facility upon five (5) days
advance notice to ExcelStor, and shall provide such assistance which is
reasonably necessary for Satcon to evaluate the quality of the Products.  All
Satcon personnel shall comply with ExcelStor’s reasonable requirements while at
the Approved Facility.

 

3.4.                              Quality.  ExcelStor covenants that it shall
manufacture and assemble all Products from entirely new materials, free from any
counterfeit parts, materials or components, in accordance with the
Specifications and the Workmanship Standards set out in Schedule 4 attached
hereto.  If the Specifications require so, ExcelStor must use materials
certified by UL, CSA, CE or other governing agency certifications as required. 
ExcelStor further covenants to perform all manufacturing, testing and other
quality assurance procedures according to the ISO 9001:2001 Standards. 
ExcelStor shall serialize the Products and provide lot or serial number
information for all materials, components and Sub Assemblies that comprise each
particular Product.  ExcelStor shall make available to Satcon production quality
and supplier quality information upon two (2) days prior written notice. 
ExcelStor shall designate an individual as a Quality Representative to be
responsible for Satcon’s quality inquires and communications.  If deemed
necessary by both ExcelStor and Satcon, ExcelStor shall send appropriate
employees for quality trainings at Satcon’s location during normal business
hours.   ExcelStor shall bear all costs and expenses associated with said
trainings unless otherwise agreed in writing by the Parties.

 

3.5.                              Consignment of Equipment and Materials. 
Certain equipment and tooling, which is required for manufacturing the Products
will be consigned by Satcon to ExcelStor for use (the “Satcon Tooling”) at no
expense to ExcelStor.  The Satcon Tooling and all drawings, plans,
specifications, or other materials furnished by Satcon to ExcelStor relating to
Satcon Tooling shall be and remain the property of Satcon, and shall be used by
ExcelStor only for the

 

10

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purposes of effectuating ExcelStor’s performance of this Agreement.  Satcon
Tooling shall be returned to Satcon at Satcon’s expense, upon request, to a
destination specified by Satcon, in operative condition, except for normal wear
and tear.  The Parties shall execute a Consignment Agreement substantially in
the form as set forth in Exhibit A attached.

 

ARTICLE IV
PRODUCT PRICES

 

4.1.                              Payment and Pricing.

 

4.1.1.                     Product Prices.  The Product Prices shall be
determined by the Pricing Formulas as set forth on Schedule 2 attached hereto.
Product Prices are FCA (INCOTERMS 2000) Hong Kong SAR unless otherwise provided
by a Purchase Order.

 

4.1.2.                     Payment.  ExcelStor shall invoice Satcon or its
Affiliate placing the Purchase Order for all Products manufactured under this
Agreement at or after the time that such Products are placed with the forwarder
for shipment or the Purchase Order Delivery Date, whichever is later.  All
invoices shall be due and payable sixty (60) days after ExcelStor delivers the
Products to the forwarder in Hong Kong and sends the invoices.  In the event of
nonpayment pursuant to the terms herein, ExcelStor, after providing fifteen (15)
days written notice to Satcon or its applicable Affiliate, shall be entitled to
full payment of all amounts due, together with one percent (1.0%) per month
interest thereon up to a cap of twelve percent (12%) of the amounts. Although as
a matter of administrative convenience ExcelStor has agreed to accept Purchase
Orders from Satcon’s Affiliates, Satcon shall remain primarily liable for the
full amount of all Purchase Orders, including those placed by its Affiliates.

 

4.1.3.                     Currency. All payments under this Agreement shall be
made in lawful currency of the United States of America.

 

4.1.4.                     Taxes.              Satcon or its Affiliate will be
responsible for and only for any and all sales, use, VAT, or similar taxes, or
any other such assessment however designated imposed on sales of the Products
incurred after the Products are delivered by ExcelStor to the freight forwarder
in Hong Kong (FCA Hong Kong SAR).  ExcelStor shall separately state on each
applicable invoice (and not include them in the Product Prices), any export
duties or sales, use, VAT, excise or similar tax.  ExcelStor shall not charge
taxes if Satcon is exempt from such taxes and furnishes ExcelStor with a
certificate of exemption in a form reasonably acceptable to ExcelStor.

 

4.1.5.                     NRE.                     The Parties shall mutually
agree in writing reasonable NRE charges incurred by ExcelStor.  Satcon will
reimburse ExcelStor for such charges within sixty (60) day after the invoice
date.

 

4.2.                              Price Adjustments.

 

4.2.1.                     Once they are determined in according with the
Pricing Formula, the Product Prices shall not be increased for at least twelve
(12) months, unless the Parties agree upon in writing price adjustments at the
Quarterly Business Review.  The Parties shall not agree upon a price increase
that takes effect sooner than twelve (12) months after the date the then-

 

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current price was set unless it is caused by (i) extraordinary circumstances
beyond the control of ExcelStor, such as market driven allocation and
obsolescence, (ii) Satcon’s failure to meet the Minimum Annual Purchase Volume
(as defined in Paragraph 4.2.3 herein), or (iii) unachievable pricing
assumptions.

 

4.2.2.                     ExcelStor shall provide Satcon with an updated
Production BOM with costs for each material, component and Sub Assemblies for
each Product in an electronic format at least quarterly or in exceptional
circumstances, within five (5) days after any request by Satcon.

 

4.2.3.                     Minimum Annual Purchase Volume. The Parties agree and
acknowledge that the Pricing Formula are prepared based upon a minimum volume of
Products and Sub Assemblies purchased by Satcon is ***  in the calendar year of
2009, *** in the calendar year of 2010 and *** in the calendar year of 2011
respectively (the “Minimum Annual Purchase Volume”).  If, through no fault of
ExcelStor (e.g. ExcelStor rejects Satcon’s Purchase Orders without
justification), Satcon purchases significantly (15% or higher) less than the
Minimum Annual Purchase Volume in any particular twelve (12) months, the Product
Prices shall be equitably increased by an amount reflecting ExcelStor’s verified
additional costs to manufacture the lower volume of Products actually purchased
by Satcon.  If Satcon purchases significantly (15% or higher) more than the
Minimum Annual Purchase Volume in any particular twelve (12) months, the Product
Prices shall be equitably decreased by an amount reflecting ExcelStor’s verified
saved costs to manufacture the larger volume of Products actually purchased by
Satcon.  In the event that Sub Assemblies are purchased under this Agreement,
the portion of the Minimum Annual Purchase Volume those Sub Assemblies represent
will be determined by dividing the purchase price of those Sub Assemblies by a
price per watt mutually agreed upon in writing to calculate an MW figure for
those Sub Assemblies.

 

4.2.4.                     During the Term, the Parties shall meet within
fifteen (15) days after the beginning of each quarter to review, among other
things, the Product Prices (the “Quarterly Business Review”).  At the Quarterly
Business Review, subject to the Parties’ agreement, price adjustments shall be
made for:

 

(i) extraordinary circumstances beyond the control of ExcelStor, such as market
driven allocation and obsolescence, or unachievable pricing assumptions;

 

(ii) the Minimum Annual Purchase Volume scheme as provided in Paragraph 4.2.3
herein;

 

(iii) the foreign exchange rate between RMB and USD has fluctuated by more than
5% in the preceding twelve (12) months, using an initial baseline exchange rate
of 6.85 RMB / USD as of the Effective Date; and/or

 

(iv) the Cost Reduction Program as provided in Paragraph 4.2.5 herein.

 

4.2.5.                     Cost Reduction Program

 

--------------------------------------------------------------------------------

  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

12

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(i) The Parties’ goal is to achieve a minimum cost reduction of *** per year
during the Term after the Product are fully transitioned to ExcelStor’s local
supply base.  The Parties shall formally developed a cost reduction plans to
explore and effect cost reductions in each aspect of the manufacture and supply
of the Products including, but not limited to, supply chain, local sourcing,
labor efficiency, design improvements, freight, packaging, logistics, quality
and business processes (“Cost Reduction Program”).

 

(ii) For any Products which are in the first six (6) months of their volume
manufacturing, Satcon will receive the full benefit of any Cost Reduction
Program initiated by any Party.

 

(iii) For any Products which are beyond the first six (6) months of their volume
manufacturing, (a) if Satcon initiates a Cost Reduction Program, Satcon will
receive ***  benefit of a Cost Reduction Program immediately after the existing
inventory of the relevant Products is exhausted and any of ExcelStor’s
additional costs incurred by the Cost Reduction Program are recovered; and
(b) if ExcelStor initiates a Cost Reduction Program, ExcelStor shall receive ***
of the benefit of a Cost Reduction Program in the first two (2) full quarters
following Satcon’s approval of the relevant Engineering Change Order.  After the
first two (2) full quarters, Satcon will receive *** benefit of the Cost
Reduction Program.

 

(iv) Any adjustments to the Product Prices under this Paragraph 4.2.5 shall not
be effective unless they are agreed upon by the Parties in writing at the
Quarterly Business Review.  The new Product Prices shall include without
limitation the applicable and corresponding cost reductions in material
overhead, direct labor and profit.

 

ARTICLE V
PURCHASE OF PRODUCTS

 

5.1.                              Purchase Order.  Subject to the terms and
conditions of this Agreement, ExcelStor agrees to offer for sale to Satcon
during the Term of this Agreement, those Products specified in each Purchase
Order submitted by Satcon to ExcelStor.  Purchase Orders must be placed either
be in writing (fax or registered mail) or electronically via a system generated
format.  No verbal communication or simple, plain text email will be accepted as
a binding Purchase Order.

 

5.1.1.                     Purchase Order Confirmation.  ExcelStor shall
promptly notify Satcon in writing (a “Purchase Order Confirmation”) but in any
event within three (3) Business Days of receipt of a Purchase Order, whether it
accepts or rejects such Purchase Order.  Any rejection of a Purchase Order by
ExcelStor shall include an explanation of the basis for the rejection.  If, for
any reason, ExcelStor fails to deliver a Purchase Order Confirmation to Satcon
within the timeframe specified above, ExcelStor shall be deemed to automatically
accept such Purchase Order.

 

5.1.2.                     Rejection of a Purchase Order.  A Purchase Order may
only be rejected if:

 

--------------------------------------------------------------------------------

  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

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(a)                                  The Purchase Order, as defined herein, does
not contain all required information;

 

(b)                                 The Product set forth in the Purchase Order
does not comply with the terms and conditions hereof;

 

(c)                                  Any Product Prices, fees, costs or expenses
not contested by Satcon in good faith are due and payable by Satcon to ExcelStor
and such Product Prices, fees, costs or expenses exceeds Satcon’s credit limit
as established by ExcelStor and published to Satcon, if any or have remained
outstanding for more than 60 days;

 

(d)                                 The Purchase Order contains terms that
conflict with or add to the terms of this Agreement that are not mutually agreed
upon;

 

(e)                                  The Product set forth in the Purchase Order
has a Production Design or Specifications different from previously provided
Product;

 

(f)                                    The Production Design requires the use of
parts, components or sub assemblies that are no longer in production or
otherwise available;

 

(g)                                 A third party has asserted that the
Production Design conflicts with or infringes on its intellectual property
rights; or

 

(h)                                 Some other cause beyond the reasonable
control of ExcelStor makes the use of that Production Design specified in the
Purchase Order commercially impractical.

 

5.2.                              Forecasts.

 

5.2.1.                     Once every month, Satcon will provide ExcelStor with
a six month rolling Forecast of Products to be purchased.  All six (6) months
will be in monthly quantities.  Additionally, Satcon will also provide ExcelStor
with market and macroeconomic trends for up to an additional six (6) months
solely intended to assist ExcelStor in planning its capacity levels.

 

5.2.2.                     Subject to Paragraph 5.2.3 herein, the Forecasts
submitted by Satcon to ExcelStor are non-binding and solely intended to assist
ExcelStor in ensuring that it has the ability to meet the Purchase Orders
quantities that may be submitted by Satcon.

 

5.2.3.                     Committed Forecast. Satcon commits to place Purchase
Orders for a minimum volume of the Products in a Forecast as determined by the
formula as follows (“Committed Forecast”): one hundred percent (100%) of the
forecasted purchase volume for the first two (2) months in the Forecast;
seventy-five percent (75%) of the forecasted purchase volume for the second two
(2) months in the Forecast; and fifty percent (50%) of the forecasted purchase
volume for the last two (2) months in the Forecast.

 

5.2.4.                     Unless ExcelStor notifies Satcon in writing within
five (5) calendar days after receipt of a Forecast that it will not be able to
supply the quantity of Products specified in a

 

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Forecast, ExcelStor shall use its best efforts to provide the quantity of
Products specified in such Forecast upon receipt of corresponding Purchase
Orders from Satcon.

 

5.3.                              Unfulfilled Committed Forecasts and
Cancellation of Purchase Orders.

 

5.3.1.                     Material Inventory Management. ExcelStor shall
purchase parts to manufacture the Products according to the quantity and
delivery schedules set forth in the Forecasts and the Purchase Orders during the
term of this Agreement. Only with Satcon’s prior written consent, ExcelStor may
purchase parts in excess of Purchase Order requirements, such as long lead time
components or components which can be purchased in volume at a lower price
(“Long Lead Time Materials”). All parts will be consumed on a first-in,
first-out basis (i.e. the oldest parts will be completed first and applied to
fulfill the quantity requested in the next scheduled delivery of the Products).
Fluctuations upward in the Forecasts will be applied to offset fluctuations
downward in the Forecasts.

 

5.3.2.                     Cancelled Purchase Orders.  In the event that Satcon
cancels a Purchase Order, Satcon’s sole liability will be for the actual costs
of parts, work-in-progress, and finished goods that ExcelStor has ordered or
completed to support the cancelled Purchase Order to the extent that ExcelStor
complies with the material inventory management as described in Paragraph 5.3.1
herein, provided: i) ExcelStor’s work or order was reasonably necessary to
support the cancelled Purchase Order or the order for the Long Lead Time
Materials was approved by Satcon in writing; and ii) ExcelStor uses best efforts
to mitigate Satcon’s liability including but not limited to attempting to cancel
or return its orders for a refund, and using the parts, work-in-progress and
finished goods in question for other products.

 

5.3.3.                     Unfulfilled Committed Forecasts and Excess
Inventory.  On a quarterly basis ExcelStor shall provide Satcon a list of any
material that is excess inventory because Satcon failed to fulfill a Committed
Forecast, and the most recent Forecast does not show such excess material
inventory will be used in the next six (6) months.  ExcelStor shall also provide
Satcon evidence and history of materials purchased for purposes of fulfilling a
Committed Forecast at the request of Satcon.  Satcon shall, at its own option,
either (a) reimburse ExcelStor for ExcelStor’s carrying costs in the amount of
one percent (1%) per month of the verified cost of the excess materials
inventory not projected to be used in the next six (6) months under the current
Forecast, or (b) purchase from ExcelStor the excess materials inventory not
projected to be used in the next six (6) months under the current Forecast, at
ExcelStor’s cost, to the extent that ExcelStor complies with the material
inventory management as described in Paragraph 5.3.1 and Paragraph 5.2.3 herein,
provided: i) ExcelStor’s order was reasonably necessary to support the
unfulfilled Committed Forecast; and ii) ExcelStor uses best efforts to mitigate
Satcon’s liability including but not limited to attempting to cancel or return
its orders for a refund, and using the material or work-in-progress in question
for other products.  If any material remains excess inventory because Satcon
failed to fulfill Committed Forecasts for more than twelve (12) months, and
ExcelStor complied with the material inventory management as described in
Paragraph 5.3.1 and Paragraph 5.2.3 herein and clauses i) and ii) of the
preceding sentence, then Satcon shall, at ExcelStor’s request, immediately
purchase from ExcelStor such excess materials inventory at ExcelStor’s cost.

 

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5.3.4.                     Obsolete Inventory.  Satcon shall reimburse
ExcelStor, at ExcelStor’s verified costs, those parts purchased by ExcelStor for
purposes of fulfilling a Committed Forecast or Purchase Order which are at the
material’s end of life cycle and unfit for incorporation into Products or any
other products for other customers (“Obsolete Inventory”).  Satcon reimbursement
of Obsolete Inventory shall be due and payable sixty (60) days after receipt of
notice that materials have become Obsolete Inventory, provided that ExcelStor
can provide Satcon evidence and history of the initial purchase of the Obsolete
Inventory.

 

ARTICLE VI
DELIVERY AND SHIPMENT

 

6.1.                              Production Lead Times.  ExcelStor’s delivery
commitments and pricing under this Agreement are based upon ExcelStor’s ability
to supply Products to Satcon within lead times as agreed to by the Parties. 
Production Lead times shall be initially set at two (2) weeks and to be reviewed
and adjusted, if necessary, by the Parties on a quarterly basis.  Lead times
shall only be valid if the amount of Products purchased by Satcon, as evidenced
in the Purchase Order, are within fifteen percent (15%) of the applicable
Forecast.  If Satcon submits a Purchase Order for an amount of Products greater
than fifteen percent (15%) of the applicable Forecast, ExcelStor shall use best
efforts to commit to Satcon’s requested lead times.

 

6.2.                              Delivery.  ExcelStor represents and warrants
that it shall deliver the Products to Satcon’s freight forwarder in the Hong
Kong SAR on or within three (3) calendar days prior to the applicable Purchase
Order Delivery Date unless otherwise agreed upon in writing by the Parties. If
ExcelStor is unable to deliver such Products on or within (3) calendar days
prior to such Purchase Order Delivery Date, ExcelStor shall immediately notify
Satcon in writing of the reason for the delay or premature delivery and the date
by which such Products will be or was delivered, as the case may be.

 

6.3.                              Late or Premature Delivery.  If ExcelStor
fails to deliver Products by the applicable Purchase Order Delivery Date in any
Purchase Order, ExcelStor shall use its best efforts to deliver the delayed
Products so that the delayed Products are delivered as soon as practicable. If
ExcelStor is unable deliver the delayed Products within fourteen (14) days of
the applicable Purchase Order Delivery Date, ExcelStor shall be liable to Satcon
for liquidated damages in the amount of ***  per month up to a cap of *** of the
Product Prices of the delayed Products, plus expedited delivery charges that
will include any air freight expenses.  Thereafter, Satcon may also immediately
cancel, without liability, all Purchase Orders or portions of Purchase Orders
for Products delayed more than thirty (30) days.  For Products delayed more than
thirty (30) days that Satcon continues to require ExcelStor to provide,
ExcelStor shall use best efforts to expedite delayed Products and shall pay all
expediting costs.  If ExcelStor delivers Products prior to seven (7) calendar
days from the applicable Purchase Order Delivery Date, ExcelStor shall reimburse
Satcon for all verified storage, rescheduling, and related out-of-pocket
expenses incurred by Satcon as a result of the ExcelStor’s premature delivery.

 

--------------------------------------------------------------------------------

  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

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6.4.                              Reschedule Delivery.  Satcon may, without
liability to ExcelStor, reschedule delivery of all or any part of an Purchase
Order no later than five (5) days prior to the original Purchase Order Delivery
Date, as long as the rescheduled delivery date is not extended by more than
thirty (30) days from the original Purchase Order Delivery Date.

 

6.5.                              Delivery Performance Guarantees with Satcon’s
customers.  In the event that Satcon agrees to provide delivery performance
guarantees to its customers, Satcon will advise ExcelStor of the agreement and
the Parties will negotiate to whether ExcelStor will agree to share the
potential exposures and the associated costs.

 

6.6.                              Packing; Packaging.  All Products ordered by
Satcon shall be packed for shipment and storage in a manner designated by Satcon
no later than in the Purchase Order for the Product. ExcelStor shall apply
notices, in a form previously approved in writing by Satcon, to any Products
that it manufactures or has manufactured on behalf of Satcon and all packaging
materials relating thereto.

 

All Products shall be shipped including a packing list (the “Packing List”),
complying with international standards for such documents.  The Packing List
shall be delivered inside an external easy-access pouch, safely attached to the
shipping box.  Every shipment shall be packaged according to international
standards and generally accepted methods and practices used in the electronics
industry.

 

6.7.                              Certificates of Origin.  Upon Satcon’s
request, ExcelStor shall, at its own cost, provide Satcon with certificates of
origin with each shipment of the Products.

 

6.8.                              Passing of Title and Risk of Loss.  Title and
risk of loss to the Products shall pass to Satcon at the time that such Products
are placed with the freight forwarder in the Hong Kong SAR for shipment.

 

ARTICLE VII

 

WARRANTIES AND REMEDIES

 

7.1.                              Warranties.

 

7.1.1.                     Satcon represents and warrants that: (i) Satcon has
no knowledge of and that there are no unresolved claims, demands, or pending
litigation alleging that the Products infringe, or misappropriate any
Intellectual Property Rights of any third party, (ii) Satcon has obtained all
necessary rights under any Intellectual Property Rights of third parties
necessary (A) to permit ExcelStor to manufacture Products pursuant to the
Production Design and (B) for the sale, use, or other distribution of the
Products supplied to Satcon under this Agreement, and (iii) the Products
delivered under this Agreement do not infringe or misappropriate any
Intellectual Property Rights of any third party.

 

7.1.2.                     Unless a different period is mutually agreed upon by
the Parties, for a period of sixteen (16) months from the respective delivery
date of each Product, ExcelStor expressly warrants that all Products are free
from defects in materials and workmanship, are

 

17

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appropriately labeled and packaged, and conform to the Specifications requested
by Satcon.  The Product Engineering Results provided by ExcelStor shall be free
of design defects.  All warranties survive any inspection, acceptance, payment,
or resale by Satcon.

 

7.1.3.                     Satcon represents and warrants that the Production
Design complies with all applicable laws, regulations and ordinances of any
government, agency or public authority having jurisdiction over the manufacture
and delivery of Products in the country where the Approved Facility is located
and where the Products will be sold or used.

 

7.1.4.                     ExcelStor warrants that the Products provided under
this Agreement are wholly new and contain new components and parts throughout.
ExcelStor further warrants that it has good and warrantable title to the
Products, free and clear of any liens, encumbrances, or other restrictions on
use or distribution.

 

7.1.5.                     ExcelStor agrees that its representations and
warranties are reaffirmed with each shipment or delivery of Products.

 

7.1.6.                     ExcelStor shall pass through all warranties provided
by any of the suppliers, vendors and manufacturers of parts, components and Sub
Assemblies that it purchases to manufacture the Products.  ExcelStor shall use
reasonable commercial efforts to negotiate at least a five (5) year
transferrable warranties on critical components, such as transformers and
reactors contained within the Products. Where Satcon incurs labor and material
costs to repair or replace any defective materials, components and Sub
Assemblies, ExcelStor shall assist Satcon in recovering such costs from the
vendors, suppliers or manufacturers under the applicable warranties, if any.

 

7.2.                              Remedies.

 

7.2.1.                     If ExcelStor delivers Products that fail to comply
with the warranties in this Agreement, or which experience an Epidemic Warranty
Condition (“Affected Products”), whether or not apparent upon inspection,
ExcelStor shall promptly and at its sole expense, at Satcon’s option: (i) repair
or replace the Affected Products and (ii) pay to Satcon all costs of repairing
or replacing Products that incorporate or are otherwise impacted by the Affected
Products, including but not limited to actual materials costs and labor charges
on an hourly basis.  The hourly labor rates referred to in clause (ii) of the
preceding sentence shall be mutually agreed upon at the first quarterly business
meeting between the Parties, and the costs referred to in such clause (ii) for a
given Product shall not exceed the cost of that Product.  ExcelStor agrees that
the foregoing remedies are in addition to any other remedies provided elsewhere
in this Agreement and remedies available under law or equity. the exclusive
remedies to which it will be entitled.

 

7.2.2.                     In addition to the other rights and remedies provided
in this Agreement, if at any time one or more of the Products experiences an
Epidemic Warranty Condition, Satcon shall have the right to immediately suspend
all Purchase Orders and/or Forecasts, and ExcelStor, at its sole expense, shall
take immediate remedial action for affected and potentially affected Products,
according to a corrective action plan approved by Satcon.  If within a
reasonable time mutually agreed upon by the Parties, ExcelStor has not remedied
the Epidemic Warranty

 

18

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Condition, Satcon may reschedule or cancel all Purchase Orders and/or Forecasts
for the affected Products without liability of any kind, including but not
limited to liability for raw materials, inventory, work-in-process, or finished
goods ExcelStor may have on-hand for the Purchase Orders or the Forecast.

 

ARTICLE VIII
ADDITIONAL COVENANTS

 

8.1.                              Most Favored Customer.

 

8.1.1.                     ExcelStor agrees to treat Satcon at least as well as
its most favored customers.  ExcelStor agrees that the prices, warranties,
benefits and other material terms being provided hereunder and to be provided
hereafter are and shall be equivalent to or better than the terms being offered
by ExcelStor to its current and future customers; provided, however, ExcelStor
may offer other customers volume discounts in accordance with the volume
discounts offered to Satcon.  This obligation requires ExcelStor to provide
Satcon with at least pari passu treatment with other customers (i) as to
quantity of Products made available to Satcon in a shortage situation and
(ii) as to the Purchase Order Delivery Dates for Purchase Orders.

 

8.1.2.                     If ExcelStor enters into an agreement with any other
customer under circumstances substantially similar (as described above) to that
of Satcon and if ExcelStor provides such other customer with more favorable
terms, then this Agreement shall be deemed appropriately amended to provide such
terms to Satcon.  ExcelStor shall promptly provide notice thereof to Satcon and
shall provide to Satcon refund or credits, if any, in an amount equal to the
difference between the lower prices charged to other customer and the amount
paid by Satcon from the date the lower prices went into effect with the other
customers.

 

8.2.                              Interference with Employees.  Neither any
Party nor any of its Affiliates shall during the Term and for a period of twelve
(12) months thereafter, without the prior written approval of another Party,
directly or indirectly, for itself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement for personal services with any employee or former
employee of such other Party or any of its Affiliates.  Each Party shall provide
the other with a list of its affiliates to which this covenant shall apply. 
Notwithstanding the previous sentence, a general solicitation not specifically
targeted at the other Party’s employees shall not be a breach of this Paragraph.

 

8.3.                              Exclusivity and
Non-compete.                                   During the Term and for a period
of  two (2) years thereafter, unless otherwise expressly provided for herein,
neither ExcelStor nor any of its Affiliates may directly or indirectly engage,
in any business which involves the product categories and related services
described in the Paragraph immediately below (the “Restricted Business”),
including without limitation design, development, utilizing, manufacturing,
marketing, sales or distribution of any products within the scope of the
Restricted Business.

 

Restricted Business: Photovoltaic Inverters greater than or equal to 30
kilowatts and all other Products which ExcelStor manufactures for and supplies
to Satcon under this Agreement from time to time.

 

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8.4.                              Compliance with Laws.  Each Product shall be
manufactured in accordance with all applicable laws, regulations and ordinances
of any government, agency or public authority having jurisdiction over the
manufacture and delivery of Products in the country where the Approved Facility
is located.  The Production Designs supplied by Satcon shall comply with all
applicable laws, regulations and ordinances of any government, agency or public
authority having jurisdiction over the Products.  ExcelStor shall provide, upon
request, photocopies of all documents evincing ExcelStor’s compliance with this
Paragraph 8.4, including, but not limited to the building ownership
certificate(s) of the Approved Facility and the updated business license
reflecting ExcelStor’s legal capacity to manufacture Products.

 

8.5.                              End of Life Products. Before ExcelStor stops
offering any Products for sale to or for Satcon for any reason (“End of Life
Products”), ExcelStor shall give Satcon a minimum of twelve (12) months prior
written notice (“End of Life Period”).  During the End of Life Period, Satcon
will a) provide ExcelStor with a forecast of anticipated demand for the End of
Life Products during the End of Life Period; and/or b) may continue to place
Purchase Orders for the End of Life Products, with deliveries not to exceed the
End of Life Period.  ExcelStor shall make reasonable efforts to make available
spare parts for a period of twelve (12) months after notice of discontinuance of
an End of Life Product.  At the expiration of the twelve (12) month period,
Satcon shall pay ExcelStor full price for the End of Life Products and either
(i) request ExcelStor to retain possession of those End of Life Products for
which ExcelStory shall be paid an additional amount equal to one percent (1%) of
the price per month as a storage fee or (ii) direct ExcelStor to deliver the End
of Life Products to Satcon’s freight forwarder in Hong Kong SAR.

 

ARTICLE IX
INTELLECTUAL PROPERTY

 

9.1.                              Intellectual Property Rights.

 

9.1.1.                     Without prejudice to its rights under applicable law,
each Party agrees and acknowledges that as among the Parties, the other Party is
the owner of all right, title and interest in and to their own Intellectual
Property Rights as of the Effective Date and that no Party shall obtain any
ownership interest in any of the other Party’s Intellectual Property Rights, or
any license of such rights, except, with respect to ExcelStor, the right to
manufacture Products pursuant to this Agreement, the right to disclose
information to suppliers and vendors for the purpose of purchasing parts
components, sub assemblies and spares.

 

9.1.2.                     If at any time during the Term any Party is aware
that any infringement of or act of unfair competition with respect to any of the
Satcon Technology Rights or ExcelStor Technology Rights is occurring or legal
action has been taken, then it shall promptly (i) notify the other Party,
(ii) identify (if known) the infringer and any other person responsible,
(iii) to the extent known, the infringement or acts of unfair competition
complained of and (iv) furnish the information which alerted it to such
infringement or acts.

 

9.1.3.                     License of Satcon Technology Rights and ExcelStor
Intellectual Property Rights.

 

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(a)                                  Satcon hereby grants to ExcelStor (and each
Affiliate that operates an Approved Facility) in respect of each Product
manufactured by ExcelStor for Satcon a non-exclusive, worldwide license of the
Satcon Technology Rights to the extent, and for the period of time, required for
ExcelStor to perform its obligations under this Agreement, including the
manufacturing of Products and their repair and replacement.

 

(b)                                 ExcelStor hereby grants a perpetual,
non-exclusive, worldwide license of the ExcelStor Intellectual Property Rights
to Satcon in respect of each Product manufactured by ExcelStor for Satcon to the
extent required by Satcon to sell, service and repair (but not refurbish or
manufacture) the Products.

 

(c)                                  ExcelStor hereby grants a perpetual,
non-exclusive, worldwide license of the ExcelStor Intellectual Property Rights
to the users of the Products to the extent required to use, service, repair (but
not refurbish or manufacture) and resell the Products.

 

9.1.4.                     Product Ownership.

 

(a)                                  Each Party acknowledges and agrees that any
Intellectual Property Rights owned by any Party prior to the Effective Date,
including, without limitation, Intellectual Property Rights related to any
Product that was developed prior to the Effective Date, is the sole and
exclusive Intellectual Property Right of each respective Party and the other
Party will not, at any time, deliberately act in a manner so as to infringe on
such Intellectual Property Rights.

 

(b)                                 ExcelStor hereby acknowledges and agrees
that Satcon shall exclusively own all right, title and interest in and to any
Product Engineering or Intellectual Property Rights arising from Product
Engineering, whether or not such Product Engineering was initiated at the
request of Satcon through a Statement of Work.

 

(c)                                  ExcelStor shall have the rights to sell
Products to parties other than Satcon under the provisions of Paragraph 10.5.

 

ARTICLE X
TERM AND TERMINATION

 

10.1.                        Term.  This Agreement shall commence on the
Effective Date and shall continue for three (3) years unless earlier terminated
pursuant to Paragraph 10.3 (the “Term”).  The Term shall also include any
renewal term pursuant to Paragraph 10.2 hereof.

 

10.2.                        Renewal Term.  The Parties may mutually agree to
renew this Agreement for additional two-year terms prior to the lapse of the
initial Term, and thereafter, prior to the lapse of the then-current two-year
renewal term.

 

10.3.                        Termination.

 

10.3.1.               This Agreement will terminate in the event of any of the
following:

 

(a)                                  Upon one hundred eighty (180) calendar days
after ExcelStor or Satcon, in its sole discretion, gives the other Party written
notice;

 

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(b)                                 Immediately upon the written agreement of
the Parties to terminate this Agreement;

 

(c)                                  Within 60 days upon Satcon’s written notice
in the event of an Epidemic Warranty Condition in which ExcelStor does not make
commercially reasonable efforts to remedy and contain the Condition.

 

(d)                                 If Satcon or ExcelStor is in material or
persistent breach of any provisions of this Agreement and such breach, if
capable of remedy, has not been remedied within forty-five (45) days after
receipt by the other Party of notice of such breach; or

 

(e)                                  Any proceeding shall be instituted by or
against any Party seeking to adjudicate it a bankrupt or an insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it)
that is being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of ninety (90) days or any of
the actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or any Party shall take any corporate action to authorize
any of the actions set forth above in this subsection.

 

10.4.                        Effect of Termination.  Upon earlier expiration or
termination of this Agreement (i) ExcelStor shall no longer be authorized to
utilize any Satcon license previously utilized in connection with this Agreement
except in connection with ExcelStors obligation to provide end of life support
under Paragraph 8.5 and under Paragraph 10.5 described below and , (ii) each
Party shall return to the other Party all copies of the Confidential Information
previously disclosed by the other Party and no Party nor its Affiliates shall
thereafter retain copies, transcriptions or summaries of any portion of the
foregoing, (iii) ExcelStor shall deliver and return to Satcon all Consigned
Inventory and (iv) the Parties shall remain liable for each of their respective
liabilities hereunder that accrued prior to the date of termination and for
obligations hereunder that survive termination.

 

10.5.                        ExcelStor’s Right to Sell Products in the Event of
Satcon’s Breach.  Without limiting ExcelStor’s remedies for breach under
applicable law, ExcelStor shall have the right to sell Products, parts,
components, and Sub Assemblies then in its possession or on order if Satcon
fails to cure a breach under this Agreement and ExcelStor terminates this
Agreement under 10.3.1(d).  Satcon hereby grants ExcelStor a non-exclusive,
worldwide license to make, have made, use, distribute, sell, offer to sell, have
sold, supply and otherwise commercialize the Products, parts, components, and
Sub Assemblies that are then in ExcelStor inventory or on order in the event
that ExcelStor terminates this Agreement for Satcon’s breach pursuant to
Paragraph 10.3.1(d).

 

10.6.                        Saton’s Right to Set Off in the Event of
ExcelStor’s Breach.  Without limiting Satcon’s remedies for breach under
applicable law, if Satcon terminates the Agreement pursuant

 

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to either Paragraph 10.3.1(c) or Paragraph 10.3.1(d) herein and such termination
is held to be legitimate in an arbitration conducted pursuant to Paragraph 13.13
herein, Satcon may set off any obligations, payments, claims and liabilities due
from Excelstor and/or its Affiliates to Satcon and/or its Affiliates under this
Agreement against all and any amounts due from Satcon and/or its Affiliates to
ExcelStor under this Agreement.

 

ARTICLE XI
CONFIDENTIALITY

 

11.1.                        Disclosure of Confidential Information.  Each Party
may disclose to the other Party, from time to time during the Term, Confidential
Information pursuant to the terms of this Agreement.  All such Confidential
Information disclosed to the receiving Party during the Term is and shall remain
the disclosing Party’s sole property and the disclosing Party shall retain all
Intellectual Property Rights thereto.

 

11.2.                        Confidentiality.

 

11.2.1.               Each Party shall (i) treat any other Party’s Confidential
Information as confidential and shall not directly or indirectly, use, divulge,
publish or otherwise disclose or allow to be disclosed any aspect of such other
Party’s Confidential Information, except with such other Party’s prior written
consent and as specifically permitted by this Agreement and (ii) refrain from
any action or conduct which could reasonably be expected to compromise the
confidentiality or proprietary nature of such other Party’s Confidential
Information.  Upon the written request of a Party, the other Party shall
immediately return to the requesting Party all originals and/or copies of any
Confidential Information in the possession of such other Party.

 

11.2.2.               The Parties shall take all appropriate reasonable measures
to prevent the unauthorized disclosure of the other Party’s Confidential
Information exercising at least such care as it takes in respect of its own
Confidential Information, but in no event less than due care.

 

11.3.                        Information Not Deemed Confidential Information. 
The obligations and restrictions set forth in this Article XI shall not apply to
any Confidential Information that falls within any of the exceptions set forth
below, so long as a Party produces credible written evidence that the alleged
Confidential Information:

 

(a)                                  is or has become part of the public domain
without breach of this Agreement by the Party claiming this exception;

 

(b)                                 was independently developed by or for a
Party completely apart from the disclosures hereunder;

 

(c)                                  was received from a third party who
lawfully acquires such information without restriction, and without breach of
this Agreement the Party claiming this exception;

 

(d)                                 was required to be disclosed by any
securities exchange or regulatory or governmental body to which that party is
subject or submits, wherever situated,

 

23

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(only to the extent so required) whether or not the requirement for information
has the force of law;

 

(e)                                  was disclosed only to its professional
advisers, auditors or bankers, contractors and Affiliates necessary for the
performance of this Agreement;

 

(f)                                    was in a Party’s possession prior to the
disclosure by the other Party; and/or

 

(g)                                 is released pursuant to a binding court
order or government regulation, provided that the Party delivers a copy of such
order or action to the other Party and cooperates with the other Party if it
elects to contest such disclosure.

 

ARTICLE XII
INDEMNIFICATION

 

12.1.                        Indemnification Obligation.

 

(a)                                  Each Party shall fully defend, indemnify,
and hold harmless the other Party, their Affiliates, and their officers,
directors, employees, contractors, agents, attorneys, and insurers (“Indemnified
Parties”) against any and all claims, damages, costs, expenses (including,
without limitation, court costs and attorneys’ fees), suits, losses, or
liabilities (“Claims”) of third parties for any death, injury, or tangible
property damage caused by or arising from negligent acts or omissions of the
indemnifying Party, its Affiliates, and their officers, directors, employees,
contractors, subcontractors, representatives, or agents (“Indemnifying Parties”)
arising from or connected with the performance of this Agreement. The
Indemnifying Parties shall reimburse the Indemnified Parties for all losses,
costs, and expenses the Indemnified Parties incur as a result of such Claims,
including court costs and attorneys’ fees. To receive the foregoing indemnities,
the Party seeking indemnification must promptly notify the other in writing of a
Claim and provide reasonable cooperation and full authority to defend or settle
the Claim. No party will have any obligation to indemnify the other under any
settlement made without its written consent.

 

(b)                                 Satcon shall fully defend, indemnify, and
hold harmless ExcelStor, its Affiliates, and its and their officers, directors,
employees, contractors, agents, attorneys, and insurers against any and all
Claims of third parties for any death, injury, or tangible property damage
caused by or arising from all Specifications, Production Design and requirements
established by Satcon for the Products.

 

(c)                                  ExcelStor shall fully defend, indemnify,
and hold harmless Satcon, its Affiliates, and its and their officers, directors,
employees, contractors, agents, attorneys, and insurers against any and all
Claims of third parties for any death, injury, or tangible property damage
caused by or arising from Product Engineering provided by Exceltor and
manufacturing and workmanship defects attributable to ExcelStor.

 

12.2.                        Insurance. ExcelStor shall maintain in full force
and effect policies of (i) worker’s compensation or employers’ liability
insurance as required by national or local law within statutory limits,
(ii) general liability insurance (with broad form general liability

 

24

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endorsement naming Satcon as “additional insured” that provides products
liability, a vendor’s endorsement and insured contract coverage) with a limit of
two and one-half million US dollars (US$2,500,000) per occurrence, and
(iii) property insurance, with reputable and financially secure insurance
carriers in an amount which is customarily carried by companies manufacturing
electronic equipment with the same volume as ExcelStor.  The applicable
insurance policy will be endorsed to provide that the insurance company will
endeavor to provide at least thirty (30) days prior notice of cancellation to
Satcon.  Upon request by Satcon, ExcelStor will provide to Satcon copies of said
policies of insurance.

 

12.3.                        Limitation of Liability.  NOTWITHSTANDING ANYTHING
IN THIS AGREEMENT TO THE CONTRARY, NO PARTY SHALL BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER FORESEEABLE OR
NOT, THAT ARE IN ANY WAY RELATED TO THIS AGREEMENT.  FURTHER, THE MAXIMUM
LIABILITY OF EXCELSTOR UNDER THIS AGREEMENT FOR ANY REASON SHALL NOT EXCEED FIVE
MILLION US DOLLARS (US$5,000,000) IN THE AGGREGATE, AND THE MAXIMUM LIABILITY OF
EXCELSTOR FOR ANY PARTICULAR PRODUCT SHALL NOT EXCEED THE PURCHASE PRICE FOR
THAT PRODUCT.

 

ARTICLE XIII
GENERAL TERMS

 

13.1.                        Relationship of Parties.  Notwithstanding anything
herein to the contrary, the relationship between Satcon and ExcelStor is that of
independent contractors.  No Party is the agent or legal representative of the
other Party and no Party has the right or authority to bind the other Party in
any manner.  This Agreement creates no relationship as partners or a joint
venture, and creates no pooling arrangement.

 

13.2.                        Assignment; Transfer.  No Party may assign or
transfer its rights and obligations under this Agreement without the prior
written consent of the other Party, except that Satcon may assign and transfer
its rights and obligations in entirety to an entity wholly owned by Satcon to be
incorporated after the Effective Date upon submitting a written notice to the
other Party.

 

13.3.                        Governing Law.  The laws of the state of New York
disregarding its conflict of laws provisions, exclusively govern this Agreement,
all transactions and conduct related to this Agreement, and all disputes and
causes of action between the Parties (in contract, warranty, tort, strict
liability, by statute, regulation, or otherwise). The Parties specifically
disclaim application of the United Nations Convention on Contracts for the
International Sale of Goods.

 

13.4.                        Counterparts.  This Agreement may be executed in
several counterparts that together shall be originals and constitute one and the
same instrument.

 

13.5.                        Waiver; Remedies Cumulative.  The failure of any
Party to enforce any of its rights hereunder or at law shall not be deemed a
waiver or a continuing waiver of any of its rights or remedies against another
Party, unless such waiver is in writing and signed by the Party to be charged. 
All rights and remedies conferred herein shall be cumulative and in addition to
all of the rights and remedies available to each Party at law, equity or
otherwise.

 

25

--------------------------------------------------------------------------------

 

13.6.                        Severability.  If any provision of this Agreement,
or part thereof, is declared by a court of competent jurisdiction to be invalid,
void or unenforceable, each and every other provision, or part thereof, shall
nevertheless continue in full force and effect.

 

13.7.                        Attorney’s Fees.  In the event a dispute arises
regarding this Agreement, the prevailing Party shall be entitled to its
reasonable attorney’s fees and expenses incurred in addition to any other relief
to which it is entitled.

 

13.8.                        Notice.  All notices, requests or other
communications under this Agreement shall be in writing, and shall be sent to
the designated representatives of the Parties at the addresses set forth below,
and shall be deemed to have been duly given on the date of service if sent by
facsimile (provided a hard copy is sent in one of the manners specified herein),
or on the fourth (4th) day following service if sent by air courier service with
written confirmation of delivery, or ten (10) calendar days after mailing if
sent by first class, registered or certified mail, return receipt requested. 
Each Party is required to notify the other Party in the above manner of any
change of address.

 

If to Satcon:

 

27 Drydock Avenue, Boston, MA 02210, USA

Facsimile: +1 617 8972401

Attention: Steve Rhoades, President and CEO

 

 

 

If to ExcelStor:

 

Suite 1507, Greenfield Tower, Concordia Plaza, No. 1 Science Museum Road,
Kowloon, Hong Kong

Facsimile: +852 2620 6816 Attention: Y.C. Yu, VP of Manufacturing Services
Business Unit

 

Any notice given under this Agreement outside business hours in the place to
which it is addressed shall be deemed not to have been given until the start of
the next period of business hours in such place.

 

13.9.                        Further Assurances.  The Parties agree to execute
such additional documents and perform such acts as are reasonably necessary to
effectuate the intent of this Agreement.

 

13.10.                  Entire Agreement.  This Agreement constitutes the entire
agreement between the Parties regarding the subject matter hereof, and
supersedes all prior or contemporaneous understandings or agreements regarding
the subject matter hereof, whether oral or written.  This Agreement shall be
modified or amended only by a written instrument executed by both Satcon and
ExcelStor.

 

13.11.                  Authority.  The parties executing this Agreement on
behalf of Satcon and ExcelStor represent and warrant that they have the
authority from their respective governing bodies to enter into this Agreement
and to bind their respective companies to all the terms and conditions of this
Agreement.

 

13.12.                  Captions.  The captions of the Articles and Paragraphs
in this Agreement are for convenience only and shall not be used to interpret
the provisions of this Agreement.

 

26

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13.13.                  Arbitration.  In the case of any disputes,
controversies, claims or differences which may arise among the Parties, out of
or in relation to or in connection with this Agreement, or for the breach
thereof, the Parties agree to good faith negotiation or mediation of any such
dispute.  In the event such dispute is not resolved, such dispute shall be
referred to and settled by arbitration (without being submitted to any court),
except as otherwise expressly provided herein.  The arbitration shall take place
in New York, in accordance with the rules of procedure of the American
Arbitration Association applying the substantive laws of the State of New York. 
The award rendered shall be final and binding upon the Parties hereto, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof.  In the event of arbitration, the panel shall consist of three
(3) arbitrators, one (1) of whom shall be chosen by Satcon, one (1) of whom
shall be chosen by ExcelStor, and one (1) of whom shall be chosen by the two
(2) arbitrators chosen by Satcon and ExcelStor.

 

[Signature page follows.]

 

27

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IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed
this Agreement on the dates set forth below to be effective as of the date first
set forth above.

 

 

 

SATCON TECHNOLOGY CORPORATION

 

 

 

 

 

 

 

 

By:

      /s/ Charles S. Rhoades

 

 

 

Name: Charles S. Rhoades

 

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

 

 

ESGW INTERNATIONAL LIMITED

 

 

 

 

 

 

 

 

By:

    /s/ Eddie Lui

 

 

 

Name: Eddie Lui

 

 

 

Title: President and Chief Executive Officer

 

--------------------------------------------------------------------------------

 

SCHEDULE 1

 

Products

 

The initial Products to be manufactured by ExcelStor include:

 

·                  Satcon PowerGate Plus Solar PV Inverters in these
configurations:

 

·                  30 kW 208/240/480 V changeable

·                  50 kW 208/240/480 V changeable

·                  75 kW 208/240/480 V changeable

·                  100 kW 208/240V changeable

·                  100kW 400V

·                  100kW 480V

·                  135 kW 208/240V changeable

·                  135kW 480V

·                  150kW 400V

·                  225kW 208V

·                  225kW 480V

·                  250 kW 208/240V changeable

·                  250kW 400V

·                  250kW 480V

·                  375kW 480V

·                  500kW 480V

·                  500kW External Transformer/200VAC

·                  500kW External Transformer/265VAC

 

·                  All accessories included with such PowerGate Plus Solar PV
Inverters including combiner boxes, zone monitoring, software monitoring and
weather monitoring packages.

 

·                  All Sub Assemblies included in these Products for shipment to
Satcon for either on-going service requirements or for final assembly and test
at another Satcon facility.

 

--------------------------------------------------------------------------------

 

SCHEDULE 2

 

PRICING FORMULA

 

Definitions

 

1)              Material Cost ($) = sum of the actual material-only costs
incurred by ExcelStor for producing the Products

 

2)              Material Overhead (%) = Packaging, local transportation
insurance, inbound freight and scrap costs incurred on materials, expressed as a
% of Material Cost

 

3)              Direct Labor ($) = Standard assembly and test hours/unit *
Standard hourly factory rate, which will include standard pay, an estimate of
overtime pay and applicable benefits and social insurance

 

4)              Overhead ($) = sum of actual indirect costs incurred by
ExcelStor for producing the Products.  Examples include indirect supervision,
supply chain management, logistics, direct utilities, direct travel and
manufacturing supplies.  These costs should be broken into two distinct cost
pools:

 

i.                  Initial overhead costs shall be amortized in Product Prices
over 2-3 years based on projected volumes in either units or Megawatts, and then
disappear;

 

ii.               On-going overhead costs shall be allocated to individual
Products based on projected volumes in either units or Megawatts.

 

5)              Profit (%) = Burden rate applied to total cost for the estimate
of ExcelStor’s profit

 

Pricing Formula — Assemblies and Sub-Assemblies

 

1)              Total Cost = Material Cost + Direct Labor + Overhead + (Material
Overhead %) * Material Cost

 

2)              Purchase Order Price ($) = Total Cost + (Total Cost * Profit %)

 

Pricing Formula — parts

 

1)              If parts are purchased directly from common suppliers, then
Purchase Order Price ($) = Material Cost ($)

 

2)              If parts are purchased directly from Excelstor, then Purchase
Order Price ($) = Material Cost + (Material Cost * Insurance and Freight %)

 

Pricing Appendix

 

Actual %s and examples will be in an appendix.  Specific variables will include:

 

1)              Material Overhead % initially set at ***  markup from Material
Cost

 

2)              Direct Labor standard hourly rate initially set at ***

 

3)              One-time and on-going Overhead cost pools initially set at a ***
multiple of Direct Labor for 2009

 

4)              Profit % initially set at *** markup from Total Cost

 

--------------------------------------------------------------------------------

 ***  Represents text omitted pursuant to a request for confidential treatment. 
The omitted material has been filed separately with the Securities and Exchange
Commission.

 

30

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SCHEDULE 3

 

EPIDEMIC WARRANTY CONDITIONS

 

An Epidemic Warranty Condition of Products exists when a failure of Products to
comply with the warranty in Paragraph 7.1.2 causes a significant percentage of
Products to fail in Satcon’s application and more Products have the potential to
fail due to the same defect.  The aforementioned percentage measures the actual
failures of Products within some population of Products that share a common
production characteristic or event related to the defect such as time of
manufacture (same lot, batch or version), or that contain an identical suspect
element or have undergone a unique suspect process that could have produced the
defect (“Population”).  A calculation resulting in a failure rate of over ten
percent (10%) in the Population of Products (where the Population is contains 50
or more units) that are under warranty as provided in this Agreement, or the
failure of five (5) units (where the Population contains fewer than 50 units)
that are under warranty as provided in this Agreement, is deemed Epidemic.

 

In the event of such Epidemic Conditions, ExcelStor agrees to expedite the
replacement or repair of all Product in the Population, immediately remedy the
root cause of the defect and pay all reasonable costs associated with any
remedial action.  Reasonable costs will include, but are not limited to, the
cost to repair or replace the Products, expedited air freight and shipping
charges, and direct costs incurred by Satcon or Satcon’s agents to remove and
replace the non-conforming products.

 

In addition to other remedies provided in any other provision of this Agreement,
if Satcon notifies ExcelStor that any Product shows evidence of an Epidemic
Warranty Condition and ExcelStor confirms the existence of such Epidemic
Warranty Condition, ExcelStor shall use reasonable commercial efforts to prepare
and propose a corrective action plan (“CAP”) with respect to such Product within
five (5) days of said confirmation, addressing implementation and procedure
milestones for remedying such Epidemic Warranty Condition(s). Satcon shall make
available in a timely manner samples of the Products evidencing an Epidemic
Warranty Condition.

 

Epidemic failure excludes: Product failures directly due to action(s) that voids
the Product warranty under this Agreement, non-conformities expressly approved
by Satcon, and failures occurring in the Population outside of the warranty
period in this Agreement.

 

31

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SCHEDULE 4

 

WORKMANSHIP STANDARDS

 

1.               QUALITY

 

1.1.           Testing

 

ExcelStor will ensure all Products are tested in accordance with the
requirements set forth in the Quality Schedule attached as provided to ExcelStor
by Satcon (the “Quality Schedule”).

 

1.2.           Specifications and Quality Schedule

 

All Products shall be manufactured in accordance with and conform to the
Specifications.  ExcelStor agrees that all Products will conform to the
Specifications current at the time of manufacture.  Unless otherwise specified,
changes to the Specifications shall apply to all Products manufactured after the
effective date of the changes in the Specifications.  ExcelStor shall maintain
the capability of producing prior versions of a Product and shall deliver such
prior version if requested by Satcon; subject, however to the availability of
parts, components and subassemblies and the other limitations on ExcelStor’s
obligation to accept purchase orders set out in the Agreement to which this
schedule is attached.  ExcelStor agrees to comply with the Quality Schedule
which sets out additional quality requirements, as set forth below.

 

Quality Schedule

 

Accuracy & Completeness:

 

All reports, data, protocols, and processes required by this agreement and
communicated from the Supplier to Satcon must be accurate and complete, based on
best efforts of both Parties.

 

Target Failure Rate:

 

Target Failure
Rate

 

2009

 

2010

 

2011

 

30

 

***

 

***

 

***

 

50

 

***

 

***

 

***

 

75

 

***

 

***

 

***

 

100

 

***

 

***

 

***

 

135

 

***

 

***

 

***

 

150

 

***

 

***

 

***

 

250

 

***

 

***

 

***

 

500

 

***

 

***

 

***

 

1000

 

***

 

***

 

***

 

 

 

 

Target failure rate is listed as above.  Failure rates must consistently be
below the targeted

 

--------------------------------------------------------------------------------

  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

32

--------------------------------------------------------------------------------

 

 

 

value total on a per-month basis. This rate is defined on a month-to-month
failure-to-number of units shipped rate.

 

 

 

 

 

For example, if 100 Inverters of Supplier’s units are shipped from one type in a
given month, each time one of those units fails it will count against the
monthly failure rate. Shipped date is Supplier to Satcon. The failures of
monthly population (monthly population: Number of one model of Inverters shipped
from Supplier to Satcon per month) will be cumulatively counted in relation to
monthly population during the warranty period. At any point within the warranty
period, monthly failure rate must be less than or equal to ***  in 2009, *** in
2010, and *** in 2011.

 

 

 

QA & QC Process Documentation:

 

Supplier will provide documentation on quality assurance and quality control
processes (control plans & process failure mode effect analysis) from initial
start up of product to product end-of-life upon Satcon’s request.

 

 

 

Quality Assurance Manuals:

 

Supplier will share a Quality Assurance Manual (ISO 9001:2008 compliance) that
documents the overall quality-management system upon Satcon’s request and
proactively notify Satcon of any changes within 30 days.

 

 

 

Supplier Quality System Compliance:

 

Suppliers will meet quality and any associated standards (UL-1741 & IPC 610
class 3) outlined in the Satcon’s agreement or contract. Supplier agrees to
quality audits as per schedule that may extend to supply chain processes,
testing processes, evaluations, etc.

 

 

 

Quality Reviews:

 

Quality reviews will be conducted between Satcon and the Supplier.

 

 

 

 

 

The goal of the meeting is to ensure that the test plan will be adequate, and
the objective of the meeting is to review data (metrics) and establish the
success of the product through the testing processes. Data must be provided in
Microsoft application (Word, Excel or Access) or other format as agreed between
Satcon and Supplier.

 

 

 

 

 

Daily Quality Assurance Performance Data:

 

 

 

 

 

List of items below but not limited to additional requirements:

 

 

Daily inspection data enter onto intranet or Satcon portal. (if applicable)

 

 

Escalation process for critical issue per quality alert and deviation.

 

 

Scrap and rework reports (where applicable).

 

 

 

 

 

Weekly Quality Assurance Performance Data:

 

· List of items below but not limited to additional requirements:

All inspection data (pareto, SPC control charts, sampling plan).

 

--------------------------------------------------------------------------------

  ***  Represents text omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the Securities
and Exchange Commission.

 

33

--------------------------------------------------------------------------------

 

 

 

Trend charts - improvement over time / analysis to goal

Bar graphs / pie charts / histograms

Pareto charts - analysis of issues based on priority

Paynter charts - analysis of actions over time

Quality alerts and deviation issued or log.

SCAR (supplier corrective action request) issued or log.

Work instructions update.

Weekly report on quality, reliability, health and safety (Hits and Misses).

Open issue list.

Weekly quality meeting.

 

Monthly Quality Assurance Performance Data:

 

· List of items below but not limited to additional requirements:

Layer audit metrics.

Customer quality metrics (including warranty).

Internal quality metrics.

Supplier quality metrics.

Test yield metrics.

Calibration metrics (including all equipments used for factory acceptance test).

Health and safety metrics.

Corrective action (PPSR/8D) log.

Corrective action/preventive action metrics (% on track).

Document control metrics.

Supplier reliability data.

Process capability metrics.

Monthly quality reporting meeting.

 

Quarterly Quality Assurance Performance Review

 

Review of item or items listed below.

· List of items below but not limited to additional requirements:

·                            Quality Open Issue List

·                            Quality strategy

·                            Quality Objectives

·                            Trend analysis

·                            Correlation and regression analysis

·                            Reliability analysis

·                            Capability analysis

·                            Quality metrics

·                            Quality roadmaps

 

34

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On-site visits by Satcon staff to evaluate supplier’s quality management system
will occur prior to first production orders for each product and at least once
per year thereafter. These site evaluations may be waived at Satcon’s
discretion.

 

 

 

Process and/or Product Changes:

 

Process and/or product changes must be approved by Satcon prior to
implementation. The Supplier will notify Satcon of production process changes
and/or material changes to the components or design within the products supplied
to Satcon. This includes but is not limited to temperature process changes,
connection technology changes (solder, connectors, etc.), core component
changes, and software changes.

 

 

 

Closed-Loop Corrective-Action System:

 

Supplier will provide documentation of procedures to determine the cause of
nonconformances and implementing appropriate actions to prevent recurrence. The
corrective-action system shall include provisions for supplier nonconformances,
internal nonconformances, internal audit system nonconformances, and customer
returns or corrective-action requests. Corrective action reports shall follow a
standard format agreed upon by both the Supplier and Satcon. Corrective actions
shall be reviewed with Satcon for effectiveness.

 

 

 

Reliability

 

 

 

 

 

Design Verification Test Plan:

 

Where applicable, suppliers must inform Satcon and Satcon will provide a
detailed test plan encompassing all of the relevant test and analyses that will
be conducted from the design stage through the entitled state.

 

 

 

Qualification Test Results and Proof of Functionality:

 

Supplier will show and provide Satcon documentation of all test results leading
to the qualification of new and enhanced products.  This shall include the
listed items below.  In addition, where applicable, this may include design
verification, field performance/reliability, mature tests for life-cycle, and
user testing.

 

Testing Strategy

 

 

 

 

 

 

 

 

 

Testing or Inspection

 

Frequency

 

Responsible

UL Qualification

 

Certification testing

 

Initial submission

 

Satcon

CSA Qualification

 

Certification testing

 

Initial submission

 

Satcon

CE Qualification

 

Certification testing

 

Initial submission

 

Satcon

 

CM Qualification Testing

 

 

 

 

 

 

 

First Article Full Testing

 

Qualification testing each rating (30/50/75/100/135)

 

1st Unit per rating

 

Satcon/CM

 

 

Satcon general inspection

 

 

 

Satcon/CM

 

 

Product Assembly Integrity

 

Thermal Power Image Test

 

Satcon/CM

 

35

--------------------------------------------------------------------------------

 

Sampling Plan Full Testing

 

Qualification testing each rating (30/50/75/100/135)

 

Sampling plan per MIL Standard

 

Satcon/CM

 

 

Satcon general inspection

 

 

 

Satcon/CM

 

 

Product Assembly Integrity

 

Thermal Power Image Test

 

Satcon/CM

 

 

 

 

 

 

 

Sampling Plan Production Testing

 

Qualification testing each rating (30/50/75/100/135)

 

Sampling plan per MIL Standard

 

Satcon/CM

 

 

Satcon general inspection

 

 

 

Satcon/CM

 

 

Product Assembly Integrity

 

Thermal Power Image Test

 

Satcon/CM

 

Production Processes & Test Protocols:

 

Supplier will show documentation of appropriately rigorous test protocols to
qualify production units and processes. The documentation shall include all
listed items below. Supplier will establish how tests ensure a repeatable
process to assemble and ship a reliably designed product.

 

CM Production Testing

 

General Inspection

 

 

 

 

 

 

 

 

Visual Inspection

 

Every Unit

 

CM

 

 

Component and Assembly Inspection

 

Every Unit

 

CM

 

 

Wiring Inspection

 

Every Unit

 

CM

 

 

 

 

 

 

 

Product Assembly Integrity

 

Thermal Power Image Test

 

Every Unit

 

CM

 

 

 

 

 

 

 

Insulation Test

 

 

 

Every Unit

 

CM

 

 

 

 

 

 

 

Logic Test

 

 

 

 

 

 

 

 

Logic Power Supply Test

 

Every Unit

 

CM

 

 

Control Board Setup

 

Every Unit

 

CM

 

 

Gate Test

 

Every Unit

 

CM

 

 

Digital Input/Output Signals

 

Every Unit

 

CM

 

 

Fan Control Test

 

Every Unit

 

CM

 

 

Charging Circuit Test

 

Every Unit

 

CM

 

 

 

 

 

 

 

Functional Test

 

 

 

 

 

 

 

 

Test Setup

 

Every Unit

 

CM

 

 

Command Signals Check

 

Every Unit

 

CM

 

 

Feedback Signal Calibration

 

Every Unit

 

CM

 

 

Analog Faults Test

 

Every Unit

 

CM

 

 

Customer Signals Test

 

Every Unit

 

CM

 

 

HMI Test

 

Every Unit

 

CM

 

36

--------------------------------------------------------------------------------

 

Full Voltage/Power Test

 

 

 

 

 

 

 

 

Trip level Setting

 

Every Unit

 

CM

 

 

Heat Run and Efficiency Test (if applicable)

 

Every Unit

 

CM

 

 

Reactive Power Control

 

Every Unit

 

CM

 

 

Maximum Power Point Tracking Test (if applicable)

 

Every Unit

 

CM

 

 

Voltage and Frequency Calibration Test

 

Every Unit

 

CM

 

 

Remote Control Test

 

Every Unit

 

CM

 

 

Modbus Communication Test

 

Every Unit

 

CM

 

 

Modbus Access Setting

 

Every Unit

 

CM

 

 

Ground Fault Detector Test

 

Every Unit

 

CM

 

 

KW Hour Test

 

Every Unit

 

CM

 

Life Testing:

 

Where applicable, supplier will establish accelerated life tests that provide
long term reliability assurance of the product and share these protocols and
results with Satcon. Evidence of the test’s correlation to accelerated real
world conditions must be presented and accepted by Satcon.

 

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EXHIBIT A

 

Consignment Agreement

 

This Consignment Agreement (this “Consignment Agreement”), is made and entered
into as of December 18, 2008 (the “Effective Date”), by and between ESGW
International Limited, a company registered under the laws of the British Virgin
Islands, having a principal mailing address at c/o ExcelStor Technology Limited,
Suite 1507, Greenfield Tower, Concordia Plaza, Number 1, Science Museum Road,
Tsimshatsui East, Hong Kong Special Administrative Region (hereinafter referred
to as “Consignee”), and Satcon Technology Corporation, a company registered
under the laws of the state of Delaware of the United States of America, having
a principal place of business at 27 Drydock Avenue, Boston, MA 02210, U.S.A.
(hereinafter referred to as “Consignor”) (each Consignor and Consignee a “Party”
and collectively, the “Parties”).

 

1.              Consignment.  Consignor shall furnish on consignment in the
custody of the Consignee, certain equipment, tooling, and other materials to be
used for manufacturing Products (as defined in Manufacturing and Purchase
Agreement between the Parties, dated December 18, 2008 (the “Manufacturing
Agreement”) as listed in Exhibit 1 attached, which may be amended by the Parties
in writing from time to time (the “Consigned Equipment”).  The Consigned
Equipment will be shipped to Consignee at its facility or its Affiliate’s
facility in Shenzhen, P.R. China (the “Facility”) in operative status and at no
other locations unless and until Consignor agrees otherwise in writing. 
Consignee shall use the Consigned Equipment only for the purposes of
manufacturing Products and providing other services for Consignor under the
Manufacturing Agreement. A duly authorized representative of Consignor shall
have access at all reasonable times, and with one (1) days prior notice, to the
Facility to inspect the status and/or use of the Consigned Equipment.

 

2.              Ownership.  Consignor shall at all times retain ownership and
title of the Consigned Equipment.  Consignee shall give Consignor an immediate
notice in the event that any of the Consigned Equipment is levied upon or is
about to become liable or is threatened with seizure, and Consignee shall
indemnify Consignor against all loss and damages caused by such action.

 

3.              Risk of Loss. Consignee shall bear all risks of loss, including,
but not limited to, theft, destruction or damage from fire or other natural
causes, of the Consigned Equipment while it is in its possession.  Consignee
shall maintain insurance with respect to the Consigned Equipment against all
risks of loss, in an amount equal to the full replacement cost of the Consigned
Equipment in Consignee’s possession, and shall cause Consignor to be named as an
additional insured under such insurance policies as Consignor’s interest may
appear.  At Consignor’s request, Consignee shall furnish to Consignor
certificates of insurance reflecting the foregoing coverage.

 

4.              Charges and Expenses.  Consignee does not need to pay any
charges to Consignor for using the Consigned Equipment in accordance with the
terms and conditions provided herein.  Consignee shall be responsible for all
expenses of storing, handling and using the Consigned Equipment once it arrives
at the Facility.

 

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5.              Duration of Agreement and Termination.                  This
Consignment Agreement shall take effect on the date hereof and terminates upon
the termination or expiration of the Manufacturing Agreement.  Upon termination
of this Consignment Agreement, Consignee shall immediately return to Consignor
all Consigned Equipment in operative status at Consignee’s expense.  During the
term of this Consignment Agreement, Consignor may recall any or all of the
Consigned Equipment upon ten (10) days written notice to Consignee.

 

6.              No Liability. Consignor shall not be responsible or liable for
any loss, damage or injury to the property or the body of Consignee, its
Affiliates (as defined in the Manufacturing Agreement), or their agents,
employees, suppliers, or anyone directly or indirectly employed by Consignee in
connection with using any of the Consigned Equipment. Consignee is encouraged to
obtain appropriate insurance against such risk of loss.

 

7.              Maintenance, Operation and Upgrade.  Consignee shall not remove,
alter, disfigure or cover up any numbering, lettering, or insignia displayed
upon the Consigned Equipment, and shall see that the Consigned Equipment is not
subjected to careless, unusually or needlessly rough usage; and Consignee shall
at its own expense maintain the Consigned Equipment and its appurtenances in
good repair and operative condition, and return it in such condition to
Consignor, ordinary wear and tear resulting from proper use thereof alone
expected. Consignee shall be responsible for, at its own cost, all necessary
upgrades of the Consigned Equipment.

 

8.              Repairs. Consignee shall be responsible for the expense of all
repairs, including labor, material, parts and other items while the Consigned
Equipment is in the possession of Consignee.

 

9.              Operator. Unless otherwise mutually agreed in writing, Consignee
shall supply and pay all operators on the Consigned Equipment during the term of
this Consignment Agreement. All operators shall be competent.

 

10.       Separation. Consignee shall keep the Consigned Equipment reasonably
segregated from Consignee’s own tooling, equipment and other materials, shall
keep the Consigned Equipment identifiable as having been consigned to Consignee
pursuant to the provisions of this Consignment Agreement, and shall maintain
accurate records of all uses of the Consigned Equipment.

 

11.       DISCLAIMER OF WARRANTIES. CONSIGNOR, BEING NEITHER THE MANUFACTURER,
NOR A SUPPLIER, NOR A DEALER IN THE CONSIGNED EQUIPMENT, MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
THE CONDITION OF THE CONSIGNED EQUIPMENT, ITS MERCHANTABILITY, ITS DESIGN, ITS
CAPACITY, ITS PERFORMANCE, ITS MATERIAL, ITS WORKMANSHIP, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, OR THAT IT WILL MEET THE REQUIREMENTS OF ANY LAWS, RULES,
SPECIFICATIONS, OR CONTRACTS WHICH PROVIDE FOR SPECIFIC APPARATUS OR SPECIAL
METHODS. CONSIGNOR FURTHER DISCLAIMS ANY LIABILITY WHATSOEVER FOR LOSS, DAMAGE,
OR INJURY TO CONSIGNEE OR THIRD PARTIES AS A RESULT OF ANY DEFECTS, LATENT OR
OTHERWISE, IN THE CONSIGNED EQUIPMENT. CONSIGNOR SHALL NOT BE LIABLE IN ANY

 

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EVENT TO CONSIGNEE FOR ANY LOSS, DELAY, OR DAMAGE OF ANY KIND OR CHARACTER
RESULTING FROM DEFECTS IN, OR INEFFICIENCY OF, THE CONSIGNED EQUIPMENT HEREBY OR
ACCIDENTAL BREAKAGE THEREOF.

 

12.       Indemnity. Consignee shall indemnify Consignor against, and hold
Consignor harmless from, any and all liability for injury, disability and death
of workmen and other persons caused by the operation, use, control, handling, or
transportation of the Consigned Equipment during the term of this Consignment
Agreement.  Consignee shall indemnify Consignor, and hold Consignor harmless
from all loss and damage to the Consigned Equipment while it is in the
possession of Consignee.

 

IN WITNESS WHEREOF, Consignor and Consignee have executed this Consignment
Agreement as a sealed instrument as of the date first written above.

 

 

Consignee:

ESGW International Limited

 

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

 

Consignor:

Satcon Technology Corporation

 

 

 

 

 

By:

 

 

 

 

 

 

Title:

 

 

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Exhibit 1 to Consignment Agreement

 

Consigned Equipment

 

41

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