52.232-12 Advance Payments.

As prescribed in 32.412(a), insert the following clause:

Advance Payments (May 2001)

(a) Requirements for payment. Advance payments will be made under this contract (1) upon

submission of properly certified invoices or vouchers by the Contractor, and approval by the

administering office, ________ [insert the name of the office designated under agency procedures], or

(2) under a letter of credit. The amount of the invoice or voucher submitted plus all advance

payments previously approved shall not exceed $_______. If a letter of credit is used, the Contractor

shall withdraw cash only when needed for disbursements acceptable under this contract and report

cash disbursements and balances as required by the administering office. The Contractor shall apply

terms similar to this clause to any advance payments to subcontractors.

(b) Special account. Until (1) the Contractor has liquidated all advance payments made under the

contract and related interest charges and (2) the administering office has approved in writing the

release of any funds due and payable to the Contractor, all advance payments and other payments

under this

contract shall be made by check payable to the Contractor marked for deposit only in the

Contractor’s special account with the _____ [insert the name of the financial institution]. None of the

funds in the special account shall be mingled with other funds of the Contractor. Withdrawals from

the special account may be made only by check of the Contractor countersigned by the Contracting

Officer or a Government countersigning agent designated in writing by the Contracting Officer.

(c) Use of funds. The Contractor may withdraw funds from the special account only to pay for

properly allocable, allowable, and reasonable costs for direct materials, direct labor, and indirect

costs. Other withdrawals require approval in writing by the administering office. Determinations of

whether costs are properly allocable, allowable, and reasonable shall be in accordance with

generally accepted accounting principles, subject to any applicable subparts of part 31 of the

Federal Acquisition Regulation.

(d) Repayment to the Government. At any time, the Contractor may repay all or any part of the funds

advanced by the Government. Whenever requested in writing to do so by the administering office,

the Contractor shall repay to the Government any part of unliquidated advance payments considered

by the administering office to exceed the Contractor’s current requirements or the amount specified

in paragraph (a) of this clause. If the Contractor fails to repay the amount requested by the

administering office, all or any part of the unliquidated advance payments may be withdrawn from

the special account by check signed by only the countersigning agent and applied to reduction of the

unliquidated advance payments under this contract.

(e) Maximum payment. When the sum of all unliquidated advance payments, unpaid interest

charges, and other payments exceed _____ percent of the contract price, the Government shall

withhold further payments to the Contractor. On completion or termination of the contract, the

Government shall deduct from the amount due to the Contractor all unliquidated advance payments

and all interest charges payable. If previous payments to the Contractor exceed the amount due, the

excess amount shall be paid to the Government on demand. For purposes of this paragraph, the

contract price shall be considered to be the stated contract price of $_____, less any subsequent price

reductions under the contract, plus (1) any price increases resulting from any terms of this contract
for price redetermination or escalation, and (2) any other price increases that do not, in the

aggregate, exceed $_____ [insert an amount not higher than 10 percent of the stated contract

amount inserted in this paragraph]. Any payments withheld under this paragraph shall be applied to

reduce the unliquidated advance payments. If full liquidation has been made, payments under the

contract shall resume.

(f) Interest.

(1) The Contractor shall pay interest to the Government on the daily unliquidated advance payments

at the daily rate specified in paragraph (f)(3) of this clause. Interest shall be computed at the end of

each calendar month for the actual number of days involved. For the purpose of computing the

interest charge-

(i) Advance payments shall be considered as increasing the unliquidated balance as of the date of

the advance payment check;

(ii) Repayments by Contractor check shall be considered as decreasing the unliquidated balance as

of the date on which the check is received by the Government authority designated by the

Contracting Officer; and

(iii) Liquidations by deductions from Government payments to the Contractor shall be considered as

decreasing the unliquidated balance as of the date of the check for the reduced payment.

(2) Interest charges resulting from the monthly computation shall be deducted from payments, other

than advance payments, due the Contractor. If the accrued interest exceeds the payment due, any

excess interest shall be carried forward and deducted from subsequent payments. Interest carried

forward shall not be compounded. Interest on advance payments shall cease to accrue upon

satisfactory completion or termination of the contract for the convenience of the Government. The

Contractor shall charge interest on advance payments to subcontractors in the manner described

above and credit the interest to the Government. Interest need not be charged on advance payments

to nonprofit educational or research subcontractors for experimental, developmental, or research

work.

(3) If interest is required under the contract, the Contracting Officer shall determine a daily interest

rate based on the higher of (i) the published prime rate of the financial institution (depository) in

which the special account is established or (ii) the rate established by the Secretary of the Treasury

under Pub.L.92-41 (50 U.S.C. App.1215(b)(2)). The Contracting Officer shall revise the daily interest

rate during the contract period in keeping with any changes in the cited interest rates.

(4) If the full amount of interest charged under this paragraph has not been paid by deduction or

otherwise upon completion or termination of this contract, the Contractor shall pay the remaining

interest to the Government on demand.

(g) Financial institution agreement. Before an advance payment is made under this contract, the

Contractor shall transmit to the administering office, in the form prescribed by the administering

office, an agreement in triplicate from the financial institution in which the special account is

established, clearly setting forth the special character of the account and the responsibilities of the

financial institution under the account. The Contractor shall select a financial institution that is a

member bank of the Federal Reserve System, an "insured" bank within the meaning of the Federal

Deposit Insurance Corporation Act (12 U.S.C.1811), or a credit union insured by the National Credit

Union Administration.
(h) Lien on special bank account. The Government shall have a lien upon any balance in the special

account paramount to all other liens. The Government lien shall secure the repayment of any

advance payments made under this contract and any related interest charges.

(i) Lien on property under contract.

(1) All advance payments under this contract, together with interest charges, shall be secured, when

made, by a lien in favor of the Government, paramount to all other liens, on the supplies or other

things covered by this contract and on material and other property acquired for or allocated to the

performance of this contract, except to the extent that the Government by virtue of any other terms

of this contract, or otherwise, shall have valid title to the supplies, materials, or other property as

against other creditors of the Contractor.

(2) The Contractor shall identify, by marking or segregation, all property that is subject to a lien in

favor of the Government by virtue of any terms of this contract in such a way as to indicate that it is

subject to a lien and that it has been acquired for or allocated to performing this contract. If, for any

reason, the supplies, materials, or other property are not identified by marking or segregation, the

Government shall be considered to have a lien to the extent of the Government’s interest under this

contract on any mass of property with which the supplies, materials, or other property are

commingled. The Contractor shall maintain adequate accounting control over the property on its

books and records.

(3) If, at any time during the progress of the work on the contract, it becomes necessary to deliver to

a third person any items or materials on which the Government has a lien, the Contractor shall notify

the third person of the lien and shall obtain from the third person a receipt in duplicate

acknowledging the existence of the lien. The Contractor shall provide a copy of each receipt to the

Contracting Officer.

(4) If, under the termination clause, the Contracting Officer authorizes the Contractor to sell or

retain termination inventory, the approval shall constitute a release of the Government’s lien to the

extent that-

(i) The termination inventory is sold or retained; and

(ii) The sale proceeds or retention credits are applied to reduce any outstanding advance payments.

(j) Insurance.

(1) The Contractor shall maintain with responsible insurance carriers-

(i) Insurance on plant and equipment against fire and other hazards, to the extent that similar

properties are usually insured by others operating plants and properties of similar character in the

same general locality;

(ii) Adequate insurance against liability on account of damage to persons or property; and

(iii) Adequate insurance under all applicable workers’ compensation laws.

(2) Until work under this contract has been completed and all advance payments made under the

contract have been liquidated, the Contractor shall-
(i) Maintain this insurance;

(ii) Maintain adequate insurance on any materials, parts, assemblies, subassemblies, supplies,

equipment, and other property acquired for or allocable to this contract and subject to the

Government lien under paragraph (i) of this clause; and

(iii) Furnish any evidence with respect to its insurance that the administering office may require.

(k) Default.

(1) If any of the following events occurs, the Government may, by written notice to the Contractor,

withhold further withdrawals from the special account and further payments on this contract:

(i) Termination of this contract for a fault of the Contractor.

(ii) A finding by the administering office that the Contractor has failed to-

(A) Observe any of the conditions of the advance payment terms;

(B) Comply with any material term of this contract;

(C) Make progress or maintain a financial condition adequate for performance of this contract;

(D) Limit inventory allocated to this contract to reasonable requirements; or

(E) Avoid delinquency in payment of taxes or of the costs of performing this contract in the ordinary

course of business.

(iii) The appointment of a trustee, receiver, or liquidator for all or a substantial part of the

Contractor’s property, or the institution of proceedings by or against the Contractor for bankruptcy,

reorganization, arrangement, or liquidation.

(iv) The service of any writ of attachment, levy of execution, or commencement of garnishment

proceedings concerning the special account.

(v) The commission of an act of bankruptcy.

(2) If any of the events described in paragraph (k)(1) of this clause continue for 30 days after the

written notice to the Contractor, the Government may take any of the following additional actions:

(i) Withdraw by checks payable to the Treasurer of the United States, signed only by the

countersigning agency, all or any part of the balance in the special account and apply the amounts to

reduce outstanding advance payments and any other claims of the Government against the

Contractor.

(ii) Charge interest, in the manner prescribed in paragraph (f) of this clause, on outstanding advance

payments during the period of any event described in paragraph (k)(1) of this clause.

(iii) Demand immediate repayment by the Contractor of the unliquidated balance of advance

payments.

(iv) Take possession of and, with or without advertisement, sell at public or private sale all or any

part of the property on which the Government has a lien under this contract and, after deducting
any expenses incident to the sale, apply the net proceeds of the sale to reduce the unliquidated

balance of advance payments or other Government claims against the Contractor.

(3) The Government may take any of the actions described in paragraphs (k)(1) and (2) of this clause

it considers appropriate at its discretion and without limiting any other rights of the Government.

(l) Prohibition against assignment. Notwithstanding any other terms of this contract, the Contractor

shall not assign this contract, any interest therein, or any claim under the contract to any party.

(m) Information and access to records. The Contractor shall furnish to the administering office (1)

monthly or at other intervals as required, signed or certified balance sheets and profit and loss

statements together with a report on the operation of the special account in the form prescribed by

the administering office; and (2) if requested, other information concerning the operation of the

Contractor’s business. The Contractor shall provide the authorized Government representatives

proper facilities for inspection of the Contractor’s books, records, and accounts.

(n) Other security. The terms of this contract are considered to provide adequate security to the

Government for advance payments; however, if the administering office considers the security

inadequate, the Contractor shall furnish additional security satisfactory to the administering office,

to the extent that the security is available.

(o) Representations. The Contractor represents the following:

(1) The balance sheet, the profit and loss statement, and any other supporting financial statements

furnished to the administering office fairly reflect the financial condition of the Contractor at the

date shown or the period covered, and there has been no subsequent materially adverse change in

the financial condition of the Contractor.

(2) No litigation or proceedings are presently pending or threatened against the Contractor, except

as shown in the financial statements.

(3) The Contractor has disclosed all contingent liabilities, except for liability resulting from the

renegotiation of defense production contracts, in the financial statements furnished to the

administering office.

(4) None of the terms in this clause conflict with the authority under which the Contractor is doing

business or with the provision of any existing indenture or agreement of the Contractor.

(5) The Contractor has the power to enter into this contract and accept advance payments, and has

taken all necessary action to authorize the acceptance under the terms of this contract.

(6) The assets of the Contractor are not subject to any lien or encumbrance of any character except

for current taxes not delinquent, and except as shown in the financial statements furnished by the

Contractor. There is no current assignment of claims under any contract affected by these advance

payment provisions.

(7) All information furnished by the Contractor to the administering office in connection with each

request for advance payments is true and correct.

(8) These representations shall be continuing and shall be considered to have been repeated by the

submission of each invoice for advance payments.

(p) Covenants. To the extent the Government considers it necessary while any advance payments
made under this contract remain outstanding, the Contractor, without the prior written consent of

the administering office, shall not-

(1) Mortgage, pledge, or otherwise encumber or allow to be encumbered, any of the assets of the

Contractor now owned or subsequently acquired, or permit any preexisting mortgages, liens, or

other encumbrances to remain on or attach to any assets of the Contractor which are allocated to

performing this contract and with respect to which the Government has a lien under this contract;

(2) Sell, assign, transfer, or otherwise dispose of accounts receivable, notes, or claims for money due

or to become due;

(3) Declare or pay any dividends, except dividends payable in stock of the corporation, or make any

other distribution on account of any shares of its capital stock, or purchase, redeem, or otherwise

acquire for value any of its stock, except as required by sinking fund or redemption arrangements

reported to the administering office incident to the establishment of these advance payment

provisions;

(4) Sell, convey, or lease all or a substantial part of its assets;

(5) Acquire for value the stock or other securities of any corporation, municipality, or governmental

authority, except direct obligations of the United States;

(6) Make any advance or loan or incur any liability as guarantor, surety, or accommodation endorser

for any party;

(7) Permit a writ of attachment or any similar process to be issued against its property without

getting a release or bonding the property within 30 days after the entry of the writ of attachment or

other process;

(8) Pay any remuneration in any form to its directors, officers, or key employees higher than rates

provided in existing agreements of which notice has been given to the administering office; accrue

excess remuneration without first obtaining an agreement subordinating it to all claims of the

Government; or employ any person at a rate of compensation over $_____ ayear;

(9) Change substantially the management, ownership, or control of the corporation;

(10) Merge or consolidate with any other firm or corporation, change the type of business, or engage

in any transaction outside the ordinary course of the Contractor’s business as presently conducted;

(11) Deposit any of its funds except in a bank or trust company insured by the Federal Deposit

Insurance Corporation or a credit union insured by the National Credit Union Administration;

(12) Create or incur indebtedness for advances, other than advances to be made under the terms of

this contract, or for borrowings;

(13) Make or covenant for capital expenditures exceeding $_____ in total;

(14) Permit its net current assets, computed in accordance with generally accepted accounting

principles, to become less than $_____; or

(15) Make any payments on account of the obligations listed below, except in the manner and to the

extent provided in this contract:
[List the pertinent obligations]

(End of clause)

Alternate I (Apr 1984). If the agency desires to waive the countersignature requirement because of

the Contractor’s financial strength, good performance record, and favorable experience concerning

cost disallowances, add the following sentence, if appropriate, to paragraph (b) of the basic clause:

However, for this contract, countersignature on behalf of the Government will not be required unless

it is determined necessary by the administering office.

Alternate II (May 2001). If used in a cost-reimbursement contract, substitute the following

paragraphs (c) and (e), and paragraphs (f)(1) and (f)(2) for paragraphs (c) and (e) and paragraphs

(f)(1) and (2) of the basic clause:

(c) Use of funds. The Contractor shall withdraw funds from the special account only to pay for

allowable costs as prescribed by the _____ clause of this contract. Payment for any other types of

expenses shall be approved in writing by the administering office.

(e) Maximum payment. When the sum of all unliquidated advance payments, unpaid interest

charges, and other payments equal the total estimated cost of $_____ (not including fixed-fee, if any)

for the work under this contract, the Government shall withhold further payments to the Contractor.

Upon completion or termination of the contract, the Government shall deduct from the amount due

to the Contractor all unliquidated advance payments and interest charges payable. The Contractor

shall pay any deficiency to the Government upon demand. For purposes of this paragraph, the

estimated cost shall be considered to be the stated estimated cost, less any subsequent reductions of

the estimated cost, plus any increases in the estimated costs that do not, in the aggregate, exceed

$_____ [Insert an amount not higher than 10 percent of the stated estimated cost inserted in this

paragraph]. The estimated cost shall include, without limitation, any reimbursable cost (as estimated

by the Contracting Officer) incident to a termination for the convenience of the Government. Any

payments withheld under this paragraph shall be applied to reduce the unliquidated advance

payments. If full liquidation has been made, payments under the contract shall resume.

(f) Interest. (1) The Contractor shall pay interest to the Government on the daily unliquidated

advance payments at the daily rate specified in paragraph (f)(3) of this clause. Interest shall be

computed at the end of each calendar month for the actual number of days involved. For the purpose

of computing the interest charge, the following shall be observed:

(i) Advance payments shall be considered as increasing the unliquidated balance as of the date of

the advance payment check.

(ii) Repayments by Contractor check shall be considered as decreasing the unliquidated balance as

of the date on which the check is received by the Government authority designated by the

Contracting Officer.

(iii) Liquidations by deductions from payments to the Contractor shall be considered as decreasing

the unliquidated balance as of the dates on which the Contractor presents to the Contracting Officer

full and accurate data for the preparation of each voucher. Credits resulting from these deductions

shall be made upon the approval of the reimbursement vouchers by the Disbursing Officer, based

upon the Contracting Officer’s certification of the applicable dates.
(2) Interest charges resulting from the monthly computation shall be deducted from any payments

on account of the fixed-fee due to the Contractor. If the accrued interest exceeds the payment due,

any excess interest shall be carried forward and deducted from subsequent payments of the contract

price or fixed-fee. Interest carried forward shall not be compounded. Interest on advance payments

shall cease to accrue upon (i) satisfactory completion or (ii) termination of the contract for the

convenience of the Government. The Contractor shall charge interest on advance payments to

subcontractors in the manner described above and credit the interest to the Government. Interest

need not be charged on advance payments to nonprofit educational or research subcontractors for

experimental, developmental, or research work.

Alternate III (Apr 1984). If the agency considers a more rapid liquidation appropriate, add the

following sentence as the first sentence of paragraph (e) of the basic clause with the appropriate

percentage specified:

To liquidate the principal amount of any advance payment made to the Contractor, there shall be

deductions of _____ percent from all payments made by the Government under the contracts

involved.

Alternate IV (Apr 1984). If the agency provides advance payments under the contract at no interest

to the prime contractor, add the following sentences as the beginning sentences of paragraph (f) of

the clause:

No interest shall be charged to the prime Contractor for advance payments except for interest

charged during a period of default. The terms of this paragraph concerning interest charges for

advance payments shall not apply to the prime Contractor.

Alternate V (May 2001). If the requirement for a special account is eliminated in accordance with

32.409-3(e) or (g), insert the clause set forth below instead of the basic clause.

If this Alternate is used in combination with Alternate II, disregard the instructions concerning

paragraph (c), Use of funds, in Alternate II; substitute paragraph (e), Maximum payment, in

Alternate II for paragraph (d) below; and substitute paragraph (f), Interest, in Alternate II for

paragraph (e) below and change the reference to paragraph (f)(3) in the first sentence of paragraph

(f) of Alternate II to (e)(3).

If this Alternate is used in combination with Alternate III, insert the additional sentence set forth in

Alternate III as the first sentence of paragraph (d) of this Alternate.

If this Alternate is used in combination with Alternate IV, insert the additional sentences set forth in

Alternate IV as the beginning sentences of paragraph (e) of this Alternate.

Advance Payments Without Special Account (May 2001)

(a) Requirements for payment. Advance payments will be made under this contract (1) upon

submission of properly certified invoices or vouchers by the contractor, and approval by the

administering office, _______ [insert the name of the office designated under agency procedures], or

(2) under a letter of credit. The amount of the invoice or voucher submitted plus all advance

payments previously approved shall not exceed $_____. If a letter of credit is used, the Contractor

shall withdraw cash only when needed for disbursements acceptable under this contract and report

cash disbursements and balances as required by the administering office. The Contractor shall apply

terms similar to this clause to any advance payments to subcontractors.

(b) Use of funds. The Contractor may use advance payment funds only to pay for properly allocable,
allowable, and reasonable costs for direct materials, direct labor, and indirect costs. Determinations

of whether costs are properly allocable, allowable, and reasonable shall be in accordance with

generally accepted accounting principles, subject to any applicable subparts of part 31 of the

Federal Acquisition Regulation.

(c) Repayment to the Government. At any time, the Contractor may repay all or any part of the funds

advanced by the Government. Whenever requested in writing to do so by the administering office,

the Contractor shall repay to the Government any part of unliquidated advance payments considered

by the administering office to exceed the Contractor's current requirements or the amount specified

in paragraph (a) of this clause.

(d) Maximum payment. When the sum of all unliquidated advance payments, unpaid interest

charges, and other payments exceed ___ percent of the contract price, the Government shall

withhold further payments to the Contractor. On completion or termination of the contract, the

Government shall deduct from the amount due to the Contractor all unliquidated advance payments

and all interest charges payable. If previous payments to the Contractor exceed the amount due, the

excess amount shall be paid to the Government on demand. For purposes of this paragraph, the

contract price shall be considered to be the stated contract price of $___, less any subsequent price

reductions under the contract, plus (1) any price increases resulting from any terms of this contract

for price redetermination or escalation, and (2) any other price increases that do not, in the

aggregate, exceed $____ [insert an amount not higher than 10 percent of the stated contract amount

inserted in this paragraph]. Any payments withheld under this paragraph shall be applied to reduce

the unliquidated advance payments. If full liquidation has been made, payments under the contract

shall resume.

(e)Interest. (1) The Contractor shall pay interest to the Government on the daily unliquidated

advance payments at the daily rate in paragraph (e)(3) of this clause. Interest shall be computed at

the end of each calendar month for the actual number of days involved. For the purpose of

computing the interest charge-

(i) Advance payments shall be considered as increasing the unliquidated balance as of the date of

the advance payment check;

(ii) Repayments by Contractor check shall be considered as decreasing the unliquidated balance as

of the date on which the check is received by the Government authority designated by the

Contracting Officer; and

(iii) Liquidations by deductions from Government payments to the Contractor shall be considered as

decreasing the unliquidated balance as of the date of the check for the reduced payment.

(2) Interest charges resulting from the monthly computation shall be deducted from payments, other

than advance payments, due the Contractor. If the accrued interest exceeds the payment due, any

excess interest shall be carried forward and deducted from subsequent payments. Interest carried

forward shall not be compounded. Interest on advance payments shall cease to accrue upon

satisfactory completion or termination of the contract for the convenience of the Government. The

Contractor shall charge interest on advance payments to subcontractors in the manner described

above and credit the interest to the Government. Interest need not be charged on advance payments

to nonprofit educational or research subcontractors, for experimental, developmental, or research

work.

(3) If interest is required under the contract, the Contracting Officer shall determine a daily interest

rate based on the rate established by the Secretary of the Treasury under Pub.L.92-41 (50 U.S.C.
App., 1215(b)(2)). The Contracting Officer shall revise the daily interest rate during the contract

period in keeping with any changes in the cited interest rate.

(4) If the full amount of interest charged under this paragraph has not been paid by deduction or

otherwise upon completion or termination of this contract, the Contractor shall pay the remaining

interest to the Government on demand.

(f)Lien on property under contract. (1) All advance payments under this contract, together with

interest charges, shall be secured, when made, by a lien in favor of the Government, paramount to

all other liens, on the supplies or other things covered by this contract and on all material and other

property acquired for or allocated to the performance of this contract, except to the extent that the

Government by virtue of any other terms of this contract, or otherwise, shall have valid title to the

supplies, materials, or other property as against other creditors of the Contractor.

(2) The Contractor shall identify, by marking or segregation, all property that is subject to a lien in

favor of the Government by virtue of any terms of this contract in such a way as to indicate that it is

subject to a lien and that it has been acquired for or allocated to performing this contract. If, for any

reason, the supplies, materials, or other property are not identified by marking or segregation, the

Government shall be considered to have a lien to the extent of the Government's interest under this

contract on any mass of property with which the supplies, materials, or other property are

commingled. The Contractor shall maintain adequate accounting control over the property on its

books and records.

(3) If, at any time during the progress of the work on the contract, it becomes necessary to deliver to

a third person any items or materials on which the Government has a lien, the Contractor shall notify

the third person of the lien and shall obtain from the third person a receipt in duplicate

acknowledging the existence of the lien. The Contractor shall provide a copy of each receipt to the

Contracting Officer.

(4) If, under the termination clause, the Contracting Officer authorizes the contractor to sell or

retain termination inventory, the approval shall constitute a release of the Government's lien to the

extent that-

(i) The termination inventory is sold or retained; and

(ii) The sale proceeds or retention credits are applied to reduce any outstanding advance payments.

(g)Insurance. (1) The Contractor shall maintain with responsible insurance carriers-

(i) Insurance on plant and equipment against fire and other hazards, to the extent that similar

properties are usually insured by others operating plants and properties of similar character in the

same general locality;

(ii) Adequate insurance against liability on account of damage to persons or property; and

(iii) Adequate insurance under all applicable workers' compensation laws.

(2) Until work under this contract has been completed and all advance payments made under the

contract have been liquidated, the Contractor shall-

(i) Maintain this insurance;

(ii) Maintain adequate insurance on any materials, parts, assemblies, subassemblies, supplies,
equipment, and other property acquired for or allocable to this contract and subject to the

Government lien under paragraph (f) of this clause; and

(iii) Furnish any evidence with respect to its insurance that the administering office may require.

(h) Default. (1)If any of the following events occur, the Government may, by written notice to the

Contractor, withhold further payments on this contract:

(i) Termination of this contract for a fault of the Contractor.

(ii) A finding by the administering office that the Contractor has failed to-

(A) Observe any of the conditions of the advance payment terms;

(B) Comply with any material term of this contract;

(C) Make progress or maintain a financial condition adequate for performance of this contract;

(D) Limit inventory allocated to this contract to reasonable requirements; or

(E) Avoid delinquency in payment of taxes or of the costs of performing this contract in the ordinary

course of business.

(iii) The appointment of a trustee, receiver, or liquidator for all or a substantial part of the

Contractor's property, or the institution of proceedings by or against the Contractor for bankruptcy,

reorganization, arrangement, or liquidation.

(iv) The commission of an act of bankruptcy.

(2) If any of the events described in paragraph (h)(1) of this clause continue for 30 days after the

written notice to the Contractor, the Government may take any of the following additional actions:

(i) Charge interest, in the manner prescribed in paragraph (e) of this clause, on outstanding advance

payments during the period of any event described in paragraph (h)(1) of this clause.

(ii) Demand immediate repayment by the Contractor of the unliquidated balance of advance

payments.

(iii) Take possession of and, with or without advertisement, sell at public or private sale all or any

part of the property on which the Government has a lien under this contract and, after deducting

any expenses incident to the sale, apply the net proceeds of the sale to reduce the unliquidated

balance of advance payments or other Government claims against the Contractor.

(3) The Government may take any of the actions described in paragraphs (h)(1) and (h)(2) of this

clause it considers appropriate at its discretion and without limiting any other rights of the

Government.

(i) Prohibition against assignment. Notwithstanding any other terms of this contract, the Contractor

shall not assign this contract, any interest therein, or any claim under the contract to any party.

(j) Information and access to records. The Contractor shall furnish to the administering office (1)

monthly or at other intervals as required, signed or certified balance sheets and profit and loss

statements, and, (2)if requested, other information concerning the operation of the contractor's

business. The Contractor shall provide the authorized Government representatives proper facilities
for inspection of the Contractor's books, records, and accounts.

(k) Other security. The terms of this contract are considered to provide adequate security to the

Government for advance payments; however, if the administering office considers the security

inadequate, the Contractor shall furnish additional security satisfactory to the administering office,

to the extent that the security is available.

(l) Representations. The Contractor represents the following:

(1) The balance sheet, the profit and loss statement, and any other supporting financial statements

furnished to the administering office fairly reflect the financial condition of the Contractor at the

date shown or the period covered, and there has been no subsequent materially adverse change in

the financial condition of the Contractor.

(2) No litigation or proceedings are presently pending or threatened against the Contractor, except

as shown in the financial statements.

(3) The Contractor has disclosed all contingent liabilities, except for liability resulting from the

renegotiation of defense production contracts, in the financial statements furnished to the

administering office.

(4) None of the terms in this clause conflict with the authority under which the Contractor is doing

business or with the provision of any existing indenture or agreement of the Contractor.

(5) The Contractor has the power to enter into this contract and accept advance payments, and has

taken all necessary action to authorize the acceptance under the terms of this contract.

(6) The assets of the Contractor are not subject to any lien or encumbrance of any character except

for current taxes not delinquent, and except as shown in the financial statements furnished by the

Contractor. There is no current assignment of claims under any contract affected by these advance

payment provisions.

(7) All information furnished by the Contractor to the administering office in connection with each

request for advance payments is true and correct.

(8) These representations shall be continuing and shall be considered to have been repeated by the

submission of each invoice for advance payments.

(m) Covenants. To the extent the Government considers it necessary while any advance payments

made under this contract remain outstanding, the Contractor, without the prior written consent of

the administering office, shall not-

(1) Mortgage, pledge, or otherwise encumber or allow to be encumbered, any of the assets of the

Contractor now owned or subsequently acquired, or permit any preexisting mortgages, liens, or

other encumbrances to remain on or attach to any assets of the Contractor which are allocated to

performing this contract and with respect to which the Government has a lien under this contract;

(2) Sell, assign, transfer, or otherwise dispose of accounts receivable, notes, or claims for money due

or to become due;

(3) Declare or pay any dividends, except dividends payable in stock of the corporation, or make any

other distribution on account of any shares of its capital stock, or purchase, redeem, or otherwise

acquire for value any of its stock, except as required by sinking fund or redemption arrangements
reported to the administering office incident to the establishment of these advance payment

provisions;

(4) Sell, convey, or lease all or a substantial part of its assets;

(5) Acquire for value the stock or other securities of any corporation, municipality, or Governmental

authority, except direct obligations of the United States;

(6) Make any advance or loan or incur any liability as guarantor, surety, or accommodation endorser

for any party;

(7) Permit a writ of attachment or any similar process to be issued against its property without

getting a release or bonding the property within 30 days after the entry of the writ of attachment or

other process;

(8) Pay any remuneration in any form to its directors, officers, or key employees higher than rates

provided in existing agreements of which notice has been given to the administering office, accrue

excess remuneration without first obtaining an agreement subordinating it to all claims of the

Government, or employ any person at a rate of compensation over $______ ayear;

(9) Change substantially the management, ownership, or control of the corporation;

(10) Merge or consolidate with any other firm or corporation, change the type of business, or engage

in any transaction outside the ordinary course of the Contractor’s business as presently conducted;

(11) Deposit any of its funds except in a bank or trust company insured by the Federal Deposit

Insurance Corporation or a credit union insured by the National Credit Union Administration;

(12) Create or incur indebtedness for advances, other than advances to be made under the terms of

this contract, or for borrowings;

(13) Make or covenant for capital expenditures exceeding $______ in total;

(14) Permit its net current assets, computed in accordance with generally accepted accounting

principles, to become less than $______; or

(15) Make any payments on account of the obligations listed below, except in the manner and to the

extent provided in this contract:

[List the pertinent obligations]

Parent topic: 52.232 [Reserved]