CONFIDENTIAL TREATMENT REQUESTED
--
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN
SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

 

 
 
Long-term Polysilicon Supply Agreement

 
between

 
JVCo

 
and

 
SunPower Corporation

 
 

 1.  Introduction  2  2.  Definitions  2  3.  Obligations to sell and purchase
Polysilicon, forecasts and delivery schedule   3  4.  Price and quantity   3  5.
 Purchase Orders   4  6.  Payment.  5  7.  Delivery; Warranty; Inspection.  5
 8.  Packaging and Shipping   6  9.  Term   6  10.  Completion of Initial
Plant.   6  11.  Termination.  7  12.   Confidentiality.  7  13.  Damages
Limitation.  8  14.  Intellectual Property Indemnity.   8  15.  Taxes.   8  16.
 Force Majeure.  9  17.  Choice of Law.   10  18.  Waiver  10  19.
 Severability.   10  20.  Attorney Fees and Costs.  10  21.  Dollars.  10  22.
 Agreement Preparation.   11  23.  Assignment.   11  24.  Audit Rights  11
 EXHIBIT A    13  EXHIBIT B    14  EXHIBIT C     15

 
 
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1  
Introduction

 
_________________________, a Saudi Arabia limited liability company with its
principal place of business at ______________________________________ (“JVCo”)
and SunPower Corporation, a Delaware corporation with its principal place of
business at 3939 North First Street, San Jose, California 95134 (“SunPower”)
hereby enter into this Long-Term Polysilicon Supply Agreement (the “Agreement”)
effective as of 10 January, 2008 (the “Effective Date”).
 
WHEREAS, JVCo is in the process of erecting a manufacturing facility for
polycrystalline silicon (“Polysilicon”) in Saudi Arabia with an expected annual
production of ***MT (“Initial Plant Capacity”) from 2010 onwards;
 
WHEREAS, SunPower utilized polycrystalline silicon in its production of
Photovoltaic Solar panels; and
 
WHEREAS, SunPower has entered into an option agreement whereby SunPower subject
to certain terms and conditions has the right and / or obligation to purchase up
to 25% of the shares in JVCo from NorSun; and
 
WHEREAS, on the terms and conditions set forth herein, JVCo wishes to sell and
SunPower wishes to purchase Polysilicon on a long term basis.
 
 
NOW, THEREFORE, the parties agree as follows:

 
2  
Definitions

 
2.1  
“Annual Quantity” shall mean annual quantities of Polysilicon to be sold by JVCo
and purchased by SunPower in accordance with this Agreement, expressed as a
fraction of the initial plant output volume set forth in Exhibit B

 
2.2  
“Commercial Operation Date” shall mean the date when JVCo has made its first
commercial sale of Polysilicon produced at the Initial Plant, meeting the
technical specifications set forth in Exhibit A.

 
2.3  
 “Business Year” shall mean the period beginning on January 1st and ending on
December 31st of the same year.

 
2.4  
“Initial Plant” shall mean the first Polysilicon plant to be erected by JVCo in
Jubail Industrial City with an expected production capacity of a total of ***
metric tons (MT) per year.

 
2.5  
“Initial Plant Output” shall mean the total quantity of Polysilicon produced at
the Initial Plant during one Business Year.

 
*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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2.6  
“Polysilicon” shall mean the polycrystalline silicon, meeting the technical
specifications set forth in Exhibit A, manufactured by JVCo and sold to SunPower
hereunder.

 

 
3  
Obligations to sell and purchase Polysilicon, forecasts and delivery schedule

 
3.1  
For the period from the Commercial Operation Date through 31 December 2019, JVCo
shall be obliged to sell and SunPower shall be obliged to purchase Polysilicon
in the quantities (expressed as a fraction of the Initial Plant Output) and in
accordance with the schedule set forth in Exhibit B.  The specifications for the
Polysilicon are set forth in Exhibit A, as such specifications may be amended
from time to time by mutual written agreement of the parties.  SunPower shall
have the right to reject Polysilicon (in accordance with Sections 7.3 and 7.4
below) which does not meet such specification.  Any such rejected quantities
shall not constitute “actually delivered” pursuant to Section 3.2 (ii) below.

 
3.2  
This Agreement is a “take or pay agreement” such that JVCo is required to
deliver and sell and SunPower is required to accept and pay for quantities of
Polysilicon set forth in the third column of Exhibit B at the prices set forth
in the second column of Exhibit B, subject only to i) the adjustments set forth
in this Agreement and ii) with respect to SunPower’s obligation to accept and
pay for the Polysilicon, that JVCo actually delivers such quantities at the
agreed dates (“Delivery Dates”) set forth in Exhibit B.

 
3.3  
In the event that SunPower fails to order and take delivery of its contracted
volume in a given Business Year, and such failure is not otherwise excused under
this Agreement, JVCo shall invoice SunPower for the differential at full
contract price and SunPower will pay the same within 30 days of invoice
date.  SunPower specifically acknowledges and accepts that it will be liable for
the full purchase price of volume differential between the quantity ordered and
the contracted volume.

 
3.4  
In the event that JVCo fails to deliver Polysilicon contracted by SunPower in
accordance with section 3.1 above and Exhibit B, and such failure is not
triggered by a Force Majeure event or delay in the completion of the Initial
Plant as set forth in section 10, SunPower has the right to purchase the
relevant quantity of Polysilicon from any third party provider (“Third Party
Polysilicon”) and to have JVCo reimburse SunPower for the reasonable price
difference, if any, between the price set forth in Exhibit B and the price
SunPower has paid the said third party provider.  SunPower shall use
commercially reasonable efforts to mitigate its damages in procuring Polysilicon
from any third party in such circumstances.

 

 
4  
Price and quantity

 
4.1  
The price and quantity of Polysilicon to be purchased by SunPower from JVCo are
as set forth in the second and third column of Exhibit B. All prices are FCA
JVCo, Jubail, Saudi

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                    Arabia (Incoterms 2000).  Subject only to the price
adjustments set forth in Section 4.2, these prices are fixed for the term of
this Agreement set forth in Section 9 below.

 
4.2  
On January 1 of each year beginning January 1, 2015, JVCo shall adjust prices on
the Polysilicon on an annual basis to account for changes in JVCo’s cost
structure relative to the manufacture of the Polysilicon. Such price adjustments
shall however be limited to changes relating to electricity, raw materials
(metallurgical grade silicon) and employment cost, and shall be calculated in
accordance with Exhibit C.

 

 
5  
Purchase Orders

 
5.1  
SunPower shall issue to JVCo monthly purchase orders (hereinafter referred to as
“Purchase Orders”). Except as otherwise expressly provided in this Agreement,
SunPower shall in each Business Year issue Purchase Orders for a total of the
Annual Quantity applicable to each Business Year.

 
5.2  
The quantity of Polysilicon to be delivered in each calendar month shall be
specified in the Purchase Orders.  SunPower shall issue the Purchase Orders on a
monthly basis, no later than three (3) months before the actual delivery month
starts. Together with each Purchase Order, SunPower shall also provide an
estimate of the quantity of Polysilicon to be delivered during the two
successive months after the actual delivery month, provided, however, that such
estimate shall not be binding upon SunPower or JVCo. Under no circumstances
shall the quantity of Polysilicon to be ordered each month be less than eight
percent (8%) of the Annual Quantity for that Business Year.

 
5.3  
SunPower shall ensure that the Purchase Orders, unless otherwise agreed in
writing between the parties, are issued monthly and shall, at a minimum, contain
the following information: (i) reference to this Agreement, (ii) identification
of the Polysilicon by proper name, price, and quantities, (iii) delivery
instruction and delivery place, (iv) delivery date and (v) issue date.  SunPower
shall send Purchase Orders by ordinary registered mail or comparable means
allowing tracking, and SunPower shall send a copy to SunPower on the issue date
either by e-mail or telefax.

 
5.4  
A Purchase Order shall be binding for JVCo only after it is received and its
conditions have been confirmed by JVCo.  JVCo shall send confirmation of a
Purchase Order by e-mail, or alternatively telefax, and registered letter. If
JVCo fails to object to the Purchase Order within 15 days after SunPower’s issue
date, then such Purchase Order shall be deemed accepted by JVCo. Notwithstanding
the foregoing, JVCo shall not reject the quantity in a Purchase Order as long as
such quantity is not more than 10% of the Annual Quantity.

 
5.5  
In the event of a discrepancy between the terms and conditions of this Agreement
and an individual Purchase Order, the terms and conditions of this Agreement
shall prevail unless the parties in writing agree otherwise.

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6  
Payment.

 
6.1  
Payment terms are net 30 days from the date of each undisputed invoice.  Finance
charges of ***% per month (***% per annum) may be assessed on payment past due
from the payment due date to the date payment is received.

 
6.2  
If SunPower fails to pay invoices when due or finance charges when assessed,
JVCo may delay future shipments.

 
7  
Delivery; Warranty; Inspection.

 
7.1  
Title and risk of loss with respect to all Polysilicon shall pass to SunPower at
Jubail harbor, Saudi Arabia, in accordance with the FCA, (Incoterms 2000) rules.

 
7.2  
If Polysilicon is not delivered within six (6) weeks following the requested
delivery date, JVCo will pay SunPower liquidated damages  at a rate of ***
percent (***%) of the gross purchase price applicable to such shipment per week
thereafter, up to a maximum of *** percent (***%).The foregoing liquidated
damages address late delivery shipments only and are independent of JVCo’s
liability (if any), and SunPower’s corresponding ability to recover damages, for
JVCo’s failure to deliver its commitments pursuant to this Agreement (including
pursuant to Section 3.4).

 
7.3  
JVCo warrants that the Polysilicon will be free from defects and conform to the
specifications set forth in Exhibit A, provided that JVCo is notified of any
defects or non-conformity within thirty (30) days after the relevant Polysilicon
has arrived at the SunPower Delivery Point, however no later than three (3)
months after delivery in accordance with Section 8, and that the defect or
non-conformity is shown to be due to JVCo’s faulty design, workmanship, material
or packaging. An inspection of the appearance of each Polysilicon delivery
package shall be made by SunPower within 30 days after arrival of Polysilicon at
the SunPower Delivery Point. In the event of any warranty claims, SunPower shall
notify JVCo whereupon JVCo shall have the right to undertake its own
inspection.  If JVCo has not received a written notification within the time
limits set forth in this section 7.3, the Polysilicon shall be regarded as
accepted. For the purpose of this section 7.3, the “SunPower Delivery Point”
shall be identified no later than thirty days prior to the first scheduled
delivery date, and SunPower may modify such location with at least 30 days prior
written notice to JVCo.

 
7.4  
In the event that the Polysilicon does not meet the Exhibit A specifications,
SunPower shall have the right to reject such defective Polysilicon and return
them to JVCo. JVCo shall examine and judge the returned Polysilicon within
thirty (30) days after receipt.  JVCo shall bear any and all costs and expenses
incurred by SunPower related to the return of the defective Polysilicon and
shall provide such remedies as set forth in Section 7.2 and (if applicable)
Section 3.4.

 
*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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8  
Packaging and Shipping

 
8.1  
JVCo shall bear all costs associated with packaging or storing the Polysilicon
until delivery to SunPower pursuant to the delivery terms specified in Section
7.1. All Polysilicon shall be packaged, marked, and otherwise prepared in
accordance with good commercial practices to reduce the risk of damage and to be
packaged in the smallest commercially acceptable form in order to enable
SunPower to obtain the lowest shipping rates possible (based on volume metric
dimensions) and in accordance with all applicable federal, state and local
packaging and transportation laws and regulations. An itemized packing list
shall accompany each shipment.

 
8.2  
JVCo shall establish reasonable control routines in order to ensure punctual
delivery of the Polysilicon at the agreed time and without any defects or
non-conformities.

 
8.3  
A shipment notice shall be submitted from JVCo to SunPower by telefax or other
means of communications, at the latest on the shipment date, including:

 
a) Purchase Order No.
b) Brief description of Polysilicon
c) Invoice amount
d) Number of packages
e) Gross weight (total) kilos
f) Packing list describing in detail the content of each package

8.4  
A delivery certificate shall be issued by JVCo to SunPower for each shipment of
Polysilicon.

 

 
9  
Term

 
9.1  
The term of this Agreement shall be from the Effective Date through December 31,
2019 (the “Term”). The Agreement may not be terminated prior to the scheduled
expiration of the Term except as expressly set forth in Section 11 and 16.

 

 
10  
Completion of Initial Plant.

 
10.1  
SunPower acknowledges that JVCo must erect and complete the Initial Plant in
order to produce the Polysilicon to be supplied under this Agreement.  The
estimated Commercial Operation Date for the Initial Plant is January 1, 2010
with an estimated annual production capacity of *** metric tons (MT).  The
Parties estimate that the Initial Plant will achieve full commercial production
of ***MT per year by 1 January 2011.  Except

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
 
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                    pursuant to section 3.4 above, JVCo shall have no liability
to SunPower for any delay or failure to achieve the estimated production
capacities by such dates, including shortfalls in delivery of Polysilicon
resulting therefrom.

 
10.2  
If the Commercial Operation Date of the Initial Plant is delayed for more than
one year SunPower shall have the right, at its sole discretion, to extend the
Term set forth in Section 9 commensurately with the period of delay.

 

 
11  
Termination.

 
11.1  
A party may, in its sole discretion, terminate this Agreement only upon the
event of a material breach by the other party of its obligations under this
Agreement, provided that (i) the non-breaching party submits a written notice of
such breach to the breaching party, and (ii) the breaching party fails to cure
such breach within sixty (60) days of receipt of the written notice of
breach.  If the breaching Party rectifies any such breach within the said
period, then the breach shall be deemed cured with respect to this section 11
and the non-breaching shall not be entitled to terminate this Agreement.

 
11.2  
All outstanding payment obligations as well as Sections 7, 10 and 12 through 24
of this Agreement shall survive any termination of this Agreement.

 

 
12  
Confidentiality.

 
12.1  
Definition.  ”Confidential Information” means any information disclosed (whether
prior to the Effective Date, on the Effective Date or after the Effective Date)
by a Party (the “Disclosing Party”) to another Party (the “Receiving Party”),
either directly or indirectly, in writing, orally or by drawings or observation
of tangible objects such as documents, prototypes, samples, products and
facilities, including, but not limited to, trade secrets, know-how and other
intellectual property or information relating to the Disclosing Party’s
business, operations, products, technology, together with any and all analyses,
or other documents prepared by the Disclosing Party or any of its
Representatives that contain or otherwise reflect any of the foregoing
information.  “Representatives” of any Party means such Party’s directors,
officers, employees, reinsurers, agents and advisors (including, without
limitation, attorneys, accountants, consultants, bankers, financial advisors or
lending institutions).

 
12.2  
Confidential Information and Exclusions.  Notwithstanding Section ‎12.1 above,
Confidential Information shall exclude information that: (i) was independently
developed by the Receiving Party without using any of the Disclosing Party’s
Confidential Information; (ii) becomes known to the Receiving Party, without
restriction, from a source other than the Disclosing Party that had a right to
disclose it; (iii) was in the public domain at the time it was disclosed or
becomes in the public domain through no act or omission of the Receiving Party;
or (iv) was rightfully known to the Receiving Party, without restriction, at the
time of disclosure.

 
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12.3  
Confidentiality Obligation.  The Receiving Party shall treat as confidential all
of the Disclosing Party’s Confidential Information and shall not use such
Confidential Information except as expressly permitted under this
Agreement.  Without limiting the foregoing, the Receiving Party shall use at
least the same degree of care that it uses to prevent the disclosure of its own
confidential information of like importance, but in no event with less than
reasonable care, to prevent the disclosure of the Disclosing Party’s
Confidential Information, subject to Section ‎12.4 below.

 
12.4  
Legal Disclosure.  Notwithstanding anything herein to the contrary, a Receiving
Party has the right to disclose Confidential Information without the prior
written consent of the Disclosing Party: (i) as required by any court or other
governmental authority, or by any stock exchange the shares of any Party are
listed on; (ii) as otherwise required by law, or (iii) as advisable or required
in connection with any government or regulatory filings, including without
limitation, filings with any regulating authorities covering the relevant
financial markets.  If a Receiving Party believes that it will be compelled by a
court or other authority to disclose Confidential Information of the Disclosing
Party, it shall give the Disclosing Party prompt written notice so that the
Disclosing Party may take steps to oppose such disclosure.

 
12.5  
Remedies.  If a Receiving Party breaches any of its obligations under this
Section ‎12, the Disclosing Party shall be entitled to seek equitable relief to
protect its interest therein, including injunctive relief, as well as money
damages.

 

 
13  
Damages Limitation.

 
13.1  
NEITHER PARTY SHALL BE LIABLE FOR ANY, SPECIAL, PUNITIVE, CONSEQUENTIAL OR
INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT.

 

 
14  
Intellectual Property Indemnity.

 
14.1  
JVCo shall indemnify, defend, save and hold harmless and pay any award of
damages assessed against SunPower in any suit or cause of action alleging that
the use of the Polysilicon infringes any patent or other intellectual property
right of any third party.

 

 
15  
Taxes.

 
15.1  
Any tax or other government charge now or in the future levied upon the
production or sale of the Polysilicon in Saudi Arabia in accordance with this
Agreement, shall be paid by JVCo.

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16  
Force Majeure.

 
16.1  
Neither party shall be responsible for any delay in or failure to carry out his
duties under the Agreement if such a delay or failure results from a reason of
Force Majeure.

 
16.2  
If the party will be delayed in completing its obligations by Force Majeure
there shall be granted such an extension of time as may be reasonably required
to allow such party to perform so long as the party is using reasonable efforts
to resolve the circumstances constituting a Force Majeure.  If the delay in
performance continues beyond 30 days, the parties shall meet monthly to discuss
the event of Force Majeure and progress by the party claiming Force Majeure in
its resolution of such circumstances and resumption of performance.

 
16.3  
“Force Majeure” means any event or circumstance which wholly or partly prevents
or delays the performance of any material obligation arising under this
Agreement, but only if and to the extent (i) such event is not within the
reasonable control, directly or indirectly, of the Party seeking to have its
performance obligation(s) excused thereby, (ii) the Party seeking to have its
performance obligation(s) excused thereby has taken all reasonable precautions
and measures in order to prevent or avoid such event or mitigate the effect of
such event on such Party’s ability to perform its obligations under this
Agreement and which by the exercise of due diligence such Party could not
reasonably have been expected to avoid and which by the exercise of due
diligence it has been unable to overcome, and (iii) such event is not the direct
or indirect result of the negligence or the failure of, or caused by, the Party
seeking to have its performance obligations excused thereby.  The following
events could be considered as Force Majeure: war, riot, disputes between
national labor market organizations directly involving the party claiming Force
Majeure, fire, earthquake, extreme and unusual weather, acts of God, or any
other causes designated Force Majeure by a court of law or arbitrator appointed
in accordance with Section 17.2 below.

 
16.4  
Delay or failure of the performance of a party's sub-supplier, subcontractor or
lender, or the failure to obtain financing, government permits or license, shall
not create a reason of Force Majeure, unless such reason occurs as a result of
one of the events listed in Section 16.3 above.

 
16.5  
In the event of Force Majeure the party invoking a Force Majeure event shall
notify the other party in writing thereof within seven (7) days from the
incident in question. In such notice, the party shall inform, if possible, of
the time when performance in accordance with this Agreement will be resumed.

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17  
Choice of Law.

 
17.1  
The Agreement is made in, and shall be governed and controlled in all respects
by the laws of the England.

 
17.2  
Any conflicts arising under this Agreement shall be resolved by arbitration
under the rules of the International Chamber of Commerce (ICC). The arbitration
shall be conducted in English and shall take place in London, England.

 

 
18  
Waiver.

 
18.1  
Either party’s failure to exercise a right or remedy or such party’s acceptance
of a partial or delinquent payment shall not operate as a waiver of any of such
party’s rights or the other party’s obligations under the Agreement and shall
not constitute a waiver of such party’s right to declare an immediate or a
subsequent default.

 

 
19  
Severability.

 
19.1  
If one or more of the provisions of this Agreement shall be found, by a court
with jurisdiction, to be illegal, invalid or unenforceable, it shall not affect
the legality, validity or enforceability of any of the remaining provisions of
this Agreement.  The parties agree to attempt to substitute for any illegal,
invalid or unenforceable provision a legal, valid or enforceable provision that
achieves to the greatest extent possible the economic objectives of the illegal,
invalid or unenforceable provision.

 

 
20  
Attorney Fees and Costs.

 
20.1  
The parties shall bear their own expenses incurred in connection with the
negotiation and execution of this Agreement.  In the event that a dispute leads
to litigation or arbitration, the prevailing party shall be entitled to
reasonable costs and fees incurred, including attorneys’ fees.

 
 
 
21  
Dollars.

 
21.1  
All references to monetary amounts shall be in U.S. Dollars.

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22  
Agreement Preparation.

 
22.1  
This Agreement shall be considered for all purposes as prepared through the
joint efforts of the parties and shall not be construed against one party or the
other as a result of the manner in which this Agreement was negotiated,
prepared, drafted or executed.

 

 
23  
Assignment.

 
23.1  
Neither party may assign its rights or obligations under this Agreement without
the consent of the other party

 
24  
Audit Rights.

 
24.1  
JVCo agrees its books and records (including without limitation all quality
assurance records) and its factories and plants, or such parts thereof that may
be relevant for any Polysilicon quality control or technical specification
compliance test, shall at all reasonable times be subject to inspection and
audit by SunPower or its third party representatives.

 

 

 
SUNPOWER CORPORATION:
 
 
 
By:  /s/ THOMAS WERNER
 
Print Name: Thomas Werner
 
Title:  Chief Executive Officer
 
Date:  Jan. 10, 2008
 
[_____________]*
 
 
 
By:                                                                      
 
Print Name:__________________________
 
Title:_______________________________
 
Date:

 
 
*  To be completed upon formation of JVCo (see following page)

 

 
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The undersigned, in our capacity as Parties to the JV Agreement (JVA) entered
into on this date, hereby approve this Long Term Polysilicon Supply Agreement
(Agreement) and confirm that we will use our full power as parties to the JVA
and future shareholders of the JVCo to ensure that this Agreement is ratified
and signed by the JVCo immediately after execution and formal registration of
the JVCo constitutional documents, in accordance with Section 13.2.6 of the JVA
.
 

 
Chemical Development Company
 
Swicorp JOUSSOUR Company
 
By:  /s/ WALID S. AL SHOAIBI
By:  /s/ FAYSAL HAMZA
Name:  Walid S. Al Shoaibi
Name:  Faysal Hamza
Title:  Chairman
Title:  Executive Director
         
NorSun AS
 
 
 
By:/s/ JON HINDAR
 
Name:Jon Hindar
 
Title:CEO
   

 
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EXHIBIT A

 
 
POLYSILICON SPECIFICATIONS

 
Exhibit to detail the poly specs:

 
PRODUCT CODE:  ________________________

1.  
Description

2.  
Bulk & Surface Impurity Specifications

3.  
Size Specification

4.  
Certification

5.  
Packaging and labelling

 
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EXHIBIT B

 

 
PRICES, PAYMENT, and DELIVERY VOLUME

 

 

Year
Price
Volume
[expressed as a fraction of the Initial Plant Output]
Expected volumes MT (2)
[assuming full production of *** MT per year]
2010
$***/kg
***
***
2011
$***/kg
***
***
2012
$***/kg
***
***
2013
$***/kg
***
***
2014
$***/kg
***
***
2015
$***/kg (1)
***
***
2016
$***/kg (1)
***
***
2017
$***/kg (1)
***
***
2018
$***/kg (1)
***
***
2019
$***/kg (1)
***
***

 
(1) Subject to price adjustments in accordance with section 4.2

 
(2) In accordance with the Joint Venture Agreement between the initial
shareholders of the JVCo, SunPower have been granted a right to purchase *** of
the Initial Plant Output. The metric tons volume set forth in column four of the
table above is based on the assumption that the Initial Plant Output will be ***
MT per year. This is however only a production target in the sense that if the
Initial Output is more or less than *** MT, SunPower’s right to purchase and
JVCo’s obligation to sell Polysilicon under this Agreement shall still be *** of
all polysilicon produced at the Initial Plant during the relevant year.
 
*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
 

 
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EXHIBIT C

 

Electricity, raw materials and the labour expense adjustments

The assumed base production cost of polysilicon in year 2010 is $*** per kg is
consisting of the following cost components (in USD per kg produced
polysilicon):
                              
 

 Electricity component   $  ***  Raw materials component  $  ***  Labour expense
component  $  ***  Other elements  $  ***  Baseline transfer price  $*** (fully
loaded)

 
In accordance with Section 4.5 of this Agreement, JVCo shall adjust the price
for Polysilicon on an annual basis starting 1 January 2015. Such adjustments
shall account for annual changes in JVCo’s cost structure relative to the
manufacture of the polysilicon, however limited to cost for electricity, raw
materials and labour. The adjusted price (“Adjusted Price”) shall be made
effective every year on 1 January, starting 1 January 2015. On 1 January 2015
the Adjusted Price shall account for changes in the said cost elements from 1
January 2011 through 31 December 2014. The Adjusted Price shall be calculated as
follows.
                     

 New contract price =  Other elements ( = $*** )    + adjusted electricity
component    + adjusted raw materials component    + adjusted labour expense
component

 
Electricity component:  The base electrical cost is $ *** per kWh (***US dollar
cent per kilowatt-hour).  The electricity usage per produced kg of Polysilicon
is baselined to *** kWh, giving an electricity cost of $*** per kg produced
Polysilicon.

The electricity adjustment is computed as follows (NEC means New Electricity
Cost measured in $/kWh for the coming year in question):

Adjusted electricity component = $*** + (NEC - ***) $/kWh * *** kWh

Raw Materials component:  The baseline raw materials cost per kg produced
polysilicon is $*** per kg produced material. The three largest items
(comprising ca ***%) of the $*** are:

                                                                                     
 

 Aluminum powder   ***MT at $*** per kg =  $*** per year  Dimethoxymethane  
 ***MT at $*** per kg =  $*** per year  Sodium  ***MT at $*** per kg =  $*** per
year  Sum     $*** per year  Cost per kg Si at ***MTY    $*** per kg produced Si

   

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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When for a given upcoming year JVCo makes a similar calculation, the cost per kg
produced Polysilicon will go up or down depending on the actual raw materials
price contracts is has negotiated and agreed in writing. The actual cost for
JVCo for these three raw materials calculated per kg produced Polysilicon
(***MTY), denoted ACTUALads for “actual cost per kg produced Polysilicon,
aluminum, dimethoxymethane and sodium” below, makes up the raw materials
component. It is calculated as follows:

Adjusted raw materials component = $*** – $*** +  ACTUALads

Labour expense component:  The Base Employment Cost (base year = 2010) is
estimated at *** $/kg produced polysilicon.  Subject to changes in the Consumer
Price Index for Saudi Arabia as published by the World Bank Group (eg
http://devdata.worldbank.org/),  JVCo shall change the labour expense component
of Polysilicon as follows:

Year
Adjusted labour expense component
2010
$***
2011
$*** * (1+CPI2010)
2012
$*** * (1+CPI2010) * (1+CPI2011)
20(N), N = 13 to
last year of contract
$*** * (1+CPI2010) * (1+CPI2011) * … (1+CPI20(N-1))

*** CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
 
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