**Exhibit 10.3**

 

Confidential Materials omitted and filed separatelywith the

Securities and Exchange Commission. Asterisksdenote omissions.

 

Supply Agreement

 

ThisSupply Agreement (this “Agreement”) is being entered into by and between Fisker Automotive, Inc. and****A123Systems, Inc., a Delaware corporation (“A123”) (Fisker and A123individually a “Party” and together the “Parties”).

 

Thepurpose of this Agreement is to set forth certain terms and conditions withrespect to A123’s supply, and Fisker’s purchase, of lithium ion battery packs(the “Products”) for Fisker’s vehicle programs currently designated as the Karma PHEV Program 1 (K1) and the Karma PHEVProgram 2 (K2) (each, a “Vehicle Program”).  The Parties hereby agree as follows:

 

1.             ProgramAward. Fisker will award A123 the K1 and K2 Vehicle Programs. A123  will be the exclusive supplier of batteriesfor the K1 and K2 Vehicle Programs for the life of the program contingent onmeeting Fisker’s continued engineering specifications, performance, quality,durability, total landed cost, supply chain and delivery requirements.  After Fisker has purchased the initial [**]batteries from A123 for the K1 and K2 Vehicle Program, if Fisker determines andis able to document that A123 is uncompetitive in any of the afore mentionedareas by more than [**]%, Fisker shall give A123 written notice of thedeviation.  A123 shall then have [**]days in which to close the competitive gap and retain the business.  Should this gap not be closed within the [**]days, Fisker shall have the right to re-source all or any part of the business,in Fisker’s sole discretion.

 

2.             FutureProgram Awards.  Fisker is in the process of developing athird Program, currently designated as the Nina Program.  The Nina program will be competitively bid.The parties intend that A123 shall supply batteries for the Nina Program basedon A123 meeting Fisker Automotive Inc’s. engineering specifications,performance, quality, reliability, durability, total landed cost, supply chainand delivery requirements as stated in the Product manual.  Should Fisker receive alternative, qualified,competitive bids it agrees that it shall, subject to its confidentialityobligations, provide A123 with written notice of the A123 gaps based on thequalified bids it has received. The parties will mutually agree proceedure fortreating third party confidential information. A123 shall have [**] days to match the [**] of the competitive offers.If A123 is able to match the alternative bid, then A123 will be awarded theproduction Program. If A123 is awarded the Program, should Fisker determine andbe able to document A123 to be uncompetitive in any of the afore mentionedareas by more than [**]%, Fisker shall give A123 written notice of thedeviation.  A123 shall then have [**]days in which to close the competitive gap and retain the business.  Should this gap not be closed within the [**]days, Fisker shall have the right to re-source the business.

 

3.             IntentionallyLeft Blank

 

4.             Term. This Agreement will become effective on the date of the last Party tosign this Agreement (the “Effective Date”) and will expire upon the earlier ofthe Tenth Anniversary (the “Term”), or upon the default provisions of Fisker’sGeneral Terms and Conditions.

 

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5.             ApplicableTerms and Conditions.  All Purchase Orders for Products issued toA123 during the Term will be subject to Fisker’s “General Terms and Conditionsof Purchase” attached hereto, except to the extent that such general terms andconditions have been expressly modified by this Agreement including theexceptions set forth in Exhibit A attached hereto and incorporatedby reference herein.  In case of aconflict between a term or condition in a Purchase Order, General Terms andConditions of Purchase and a term or condition in this Agreement, the term orcondition in this Agreement will control and supersede the conflicting term orcondition in the General Terms and Conditions of Purchase or Purchase Order.

 

6.             UnitPrices.  Theapplicable unit prices for the Karma PHEV Program 1 Productsare set forth in Exhibit 2 attached hereto and incorporatedherein.   The Parties will mutually agreeon the pricing for the KarmaPHEV Program 2 and Nina Program.

 

7.             Confidentiality.  Theterms of the Mutual Nondisclosure Agreement dated April 3, 2009 betweenthe Parties are hereby incorporated into this Agreement.

 

8.             Entire Agreement. This Agreement (including all exhibits,schedules and attachments hereto), the PurchaseOrders, and the General Terms and Conditions of Production constitute the entire understanding andagreement between the Parties with respect to the matters contained in thisAgreement and supersede all prior oral or written representations andagreements pertaining to the subject hereof. This Agreement (including any policies and procedures incorporated byreference) may only be modified by a written amendment executed on behalf ofboth Parties by a person of comparable authority to the signatories of thisAgreement.

 

[Signature Pages Follow]

 

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ThisAgreement has been executed on behalf of the Parties by their duly authorizedrepresentatives as follows:

 
| **FISKER  AUTOMOTIVE, INC.** |               |
|-----------------------------------|--------------------|
|                              |               |
| By:                               | /s/  Henrik Fisker |   |
|                              |               |   |
| Name:                             | Henrik  Fisker     |   |
|                              |               |   |
| Title:                            | CEO                |   |
|                              |               |   |
| Date:                             | 1/13/2010          |   |

 

**SIGNATURE PAGE TO SUPPLYAGREEMENT**

 

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ThisAgreement has been executed on behalf of the Parties by their duly authorizedrepresentatives as follows:

 
| **A123  SYSTEMS, INC.** |                |
|------------------------------|---------------------|
|                         |                |
| By:                          | /s/  David P. Vieau |   |
|                         |                |   |
| Name:                        | David  P. Vieau     |   |
|                         |                |   |
| Title:                       | President  and CEO  |   |
|                         |                |   |
| Date:                        | 1/13/2010           |   |

 

**SIGNATURE PAGE TO SUPPLYAGREEMENT**

 

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**Exhibit A**

 

**Exceptions to the General Terms and Conditions ofPurchase**

 

TheParties hereby agree to the following modifications to the General Terms andConditions of Purchase:

 

1.     Paragraph4 of the General Terms and Conditions is hereby modified in the followingmanner:

 

Notwithstandingany provision to the contrary, Seller’s liability for delayed delivery of up to[**] shall not exceed the fees paid to Seller by Buyer hereunder in the [**]prior to the applicable claim provided however, Seller shall not be liable forany damages, costs or fees that result from a delay in performing, if the delayor failure was due to any cause beyond Seller’s control.  Causes beyond Seller’s control shall include,but not be limited to, acts of God, flood, explosion, natural catastrophe,storms, fire or accident.

 

Notwithstandingany provision to the contrary, the Products shall be deemed accepted uponshipment.  Nothing in this provisionrelieves Seller of its warranty obligations under this Agreement.

 

Section 6is deleted in its entirety.

 

2.     Paragraph9 of the General Terms and Conditions is hereby deleted and replaced with thefollowing:

 

Duringthe ten-year period after Buyer completes the last purchases for production,Seller shall sell to Buyer Supplies to fulfill Buyer’s service and replacementrequirements.  All such Supplies shall besold at the prices mutually agreed upon by the Parties in the last year ofproduction and Buyer and Seller shall negotiate in good faith with regard tosuch price provided, however that in no event shall the price for such Suppliesexceed the price that Seller charges others for the same or similar Supplies atsimilar volumes.

 

3.     Paragraph10 of the General Terms and Conditions is hereby replaced with the following:

 

“(a)         Express Warranties.

 

(1)           Sellerwarrants that during the Warranty Term the Products will (A) conform to theProduct Specifications (as mutually agreed upon by the Parties), (B) bemerchantable, and (C) be free from defects in material and workmanship.

 

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(2)           Sellerfurther warrants that on delivery Buyer will receive good title to theProducts, free and clear of all liens and encumbrances and that all Products.

 

(3)           Sellerwarrants that the services shall be performed in a professional and workmanlikemanner, consistent with all industry standards.

 

(b)           WarrantyTerm. The Warranty Terms shall begin on the date of delivery of the Productto Buyer and end on the earliest to occur of: (A) [**] from the date ofdelivery of the Product to Buyer  or (B) theend of the warranty period offered by Buyer to end-users for the vehicle intowhich the Product is assembled (currently 50 months or 50,000 miles whicheveroccurs sooner).

 

(c)           WarrantyClaims; Process and Procedures

 

(1)           Seller’sliability for a breach of the warranties given herein will be determined by theParties’ analysis of a sample of parts against which claims are made that theparts are defective.  Buyer and Sellerwill work together in good faith to develop procedures and guidelines for thisprocess which will require component level serviceability, mutual agreement onany warranty cause and remedy, and development of an optimal low cost serviceand warranty process.

 

(2)           Buyerand Seller will mutually agree on a warranty claims process and a list ofserviceable pack components which Buyer will utilize in its field serviceorganization.

 

(d)           WarrantyDisclaimer.

 

EXCEPTAS OTHERWISE EXPRESSLY PROVIDED IN THIS ORDER, SELLER MAKES NO OTHER WARRANTIESABOUT THE PERFORMANCE OF THE PRODUCTS AND DISCLAIMS ALL OTHER WARRANTIES,EXPRESS OR IMPLIED, RELATING TO THE PRODUCTS, INCLUDING WITHOUT LIMITATIONANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE ORNONINFRINGEMENT.”

 

4.     Paragraph11 of the General Terms and Conditions is hereby replaced with the following:

 

(a)   Selleragrees to indemnify, defend and hold Buyer and its stockholders, directors,officers, employees, distributors, agents and customers (each, an “IndemnifiedParty”) harmless against any and all third party demands, actions, expenses(including attorneys’ fees and disbursements), losses, claims, suits,proceedings, liabilities, damages or penalties arising out of or in connectionwith infringement by the Products (including the Product’s materials or design)of any patent, trademark, copyright, trade secrets or any other proprietary rightsof any third party, except to the extent such infringement results exclusivelyfrom (a) the design specifications provided or required by Buyer, or (b) suchinfringement 

 

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resultsfrom Buyer’s design or other development activities where any applicableProduct (including third party products) in combination with Buyer’s design orother development activities would infringe, or (c) such infringementwould not have occurred but for a modification of the Products by any partyother than Seller or (d) the combination, operation or use of the Productswith any other products or services not supplied by Seller where the Productswould not by themselves be infringing.

 

(b)   Ifthe use of the Products, is enjoined or in Seller’s opinion is likely to becomethe subject of a valid claim of infringement, then Seller shall, at its soleexpense either: (i) procure for Buyer the right to continue using theProducts as authorized hereunder; (ii) replace the Products with anon-infringing version of equivalent function, performance and price; and/or (iii) modifythe Products to be non-infringing. Nothing in this Section 11(b) shall limit Seller’s indemnityobligations under this Agreement

 

5.     Paragraph14 is hereby modified by deleting Section  14(b)(i).

 

6.     Paragraph14 is hereby modified by deleting Section  14(h)(i) and 14(h)(ii).

 

7.     Section 14(k) ishereby modified by deleting the last sentence and replacing it with thefollowing. “Seller’s obligation related to Recalls shall apply only during thewarranty period for the Product.”

 

8.     Section 14(n) ismodified by addition the following language to the beginning of the firstsentence; “Except for a party’s breach of confidentiality or misappropriationof the other party’s intellectual property....”

 

9.     Paragraph18 is hereby modified in the following manner:

a.     Section 18(c) isdeleted.

b.     Section 18(d) is deleted and replaced with the following:

 

ThisAgreement does not affect the ownership of any existing intellectual propertyrights of either party. Each party shall retain ownership to all of itsbackground intellectual property including but not limited to any improvements,modification or enhancements to its background intellectual property regardlessof who created the improvements, modifications or enhancements.  With the exception of the items specifiedbelow, Seller shall own all intellectual property rights in the Productdeveloped under this Agreement.   Seller’sbackground intellectual property includes, without limitation, Seller’sproprietary cells and their related components, materials and chemistry,product specifications, manufacturing and development methodologies, cell andsystem level electronics, know-how and research, experimental and developmentwork, design details, and engineering information.

 

Buyershall retain ownership to all of its background intellectual property includingbut not limited to any improvements, modification or enhancements to itsbackground intellectual property regardless of who created the improvements, 

 

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modificationsor enhancements.  With regard tointellectual property rights in the product developed under this Agreement,Buyer shall own the [**].

 

10.   Thefirst two sentences of Section 20 (a) are deleted and replaced withthe following:

 

Sellershall maintain and upon request furnish to Buyer a certificate evidencing (a) generalliability insurance with liability coverage limits reasonably acceptable toBuyer and naming Buyer as an additional insured and (b) workerscompensation insurance as required by applicable law.

 

11.   Thefollowing new provision is hereby added to the General Terms and Conditions ofPurchase:

 

“Limitationof Liability”

 

(a)   Disclaimer.  EXCEPT FOR EITHER PARTY’SBREACH OF CONFIDENTIALITY OR MISAPPROPRIATION OF THE OTHER PARTY’S INTELLECTUALPROPERTY, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL,CONSEQUENTIAL, EXEMPLARY, PUNITIVE, OR OTHER INDIRECT DAMAGES, OR FOR LOSS OFPROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF THIS AGREEMENT,WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.

 

(b)   Limitation.  Except for Seller’sindemnification obligation under Section 11 or either party’s breach ofits confidentiality obligations or misappropriation of the other party’sintellectual property, each party’s aggregate liability to the other party,whether in contract, tort, or otherwise, for all claims, in the aggregate,arising out of or in connection with this Agreement, shall not exceed theamount of fees paid to Seller by Buyer hereunder in the twelve (12) monthsprior to the applicable claims, less any amounts paid for any other claims insuch twelve (12) month period.

 

12.   Thefollowing new provision is hereby added to theGeneral Terms and Conditions of Purchase:

 

Payment terms are (45 days)from date of invoice.  Seller shallinvoice Buyer on a monthly basis for the units shipped in the preceding month. 

 

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**Exhibit 2**

 

**Pricing Schedule**

**Karma PHEV Program 1**

 

**A.  [**]**

 

[**]will be paid by Fisker to A123 at PPAP, [**]% at interim, [**]% at Full. [**]has the capacity to produce [**] packs per year, plus [**]% for a maximum of[**] without additional [**] procured and deployed.

 
| **[**] Description** | ** ** | **Cost $** | ** ** |
|---------------------------|------------|-----------------|------------|
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
| [**]                      |       | [**]            |       |
|                      |       |            |       |
| **Total**                 | ** ** | **[**]**        | ** ** |

 

**B.  Prototype Pricing**

 

A-Samples:           $[**]/pack, [**]deliverables

B-Samples:           $[**]/pack, [**]deliverables

C-samples:             $[**]/pack, [**] through  start of production

 

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**C.  ProductionPricing**

 
| **Cumulative Pack  Volume during the  Term** | ** ** | **Pack Price** | ** ** | **Comments**        | ** ** | **Est. timing** |
|-------------------------------------------------------------|------------|---------------------|------------|---------------------|------------|----------------------|
| [**] units                                                  |       | [**]                |       | Ramp up cost        |       | [**]                 |
| [**] units                                                  |       | [**]                |       | Karma Prod. Volumes |       | [**]                 |
| [**] units                                                  |       | [**]                |       | Karma + Nina [**]   |       | [**]                 |
| [**] units                                                  |       | [**]                |       | Productivity        |       | [**]                 |
| [**] units                                                  |       | [**]                |       | Productivity        |       | [**]                 |

 

*Note:*

 

1.     Shipping Terms are FCAmanufacturing location

 

2.     Pricing is per the [**]cell agreed upon design solution.

 

3.     100% of the productionvolumes on the Karma Fisker and its derivatives are supplied by A123, subjectto the program award terms defined above.

 

4.     Price downs will beprovided once the cumulative volume limits have been reached to qualify for thenext step down in pricing level

 

5.     Pricing assumes thatFisker will reasonably support A123 with all the necessary qualificationapprovals for A123 to launch a [**].

 

6.     Recycling costs are notincluded in the pricing. FA and A123 will develop a mutually agreed uponrecycling procedure. In the event the Product is in breach of the productwarranty and the parties mutually agree to recycle the Product, Seller shall beresponsible for the recycling costs for that particular unit.

 

7.     Fisker will provideannual volume levels for planning and quotation purposes with quarterlyreleases and adjustments thereto. These quarterly volumes releases will beupdated monthly and the [**] week schedule of product releases will be Fisker’svolume commitment.

 

8.     Buyer shall purchase[**] units from A123 and cannot suspend performance until the initial [**]units of packs have been purchased.

 

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9.     Non returnable dunnage(in accordance with the FA quality and logistics manual) costs have beenincluded in the above listed piece prices.

 

**D. Non-Recurring Engineering**

 

The cost to engineerand validate the Karma PHEV Program 1 and Karma PHEV Program 2 pack is $[**](details to be supplied to Fisker). [**].

 

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**Exhibit 3**

**General Terms and Conditions of Purchase**

 

4

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**FISKERAUTOMOTIVE, INC.**

 

**GENERAL TERMS AND CONDITIONS**

 

**OF PURCHASE**

 

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**TABLE OF CONTENTS**

 
| 1.  | The Supplies and Parties Covered by the  Order | 1  |
|-----|------------------------------------------------|----|
| 2.  | The Terms of the Order                         | 1  |
| 3.  | Quantity; Blanket Orders; Material Releases    | 2  |
| 4.  | Shipping and Delivery                          | 3  |
| 5.  | Price and Payment                              | 5  |
| 6.  | Non-Conforming Supplies                        | 6  |
| 7.  | Buyer and Industry Standards and Policies      | 7  |
| 8.  | Changes                                        | 8  |
| 9.  | Service Parts                                  | 8  |
| 10. | Warranties                                     | 9  |
| 11. | Indemnification                                | 11 |
| 12. | Inspection and Audit                           | 12 |
| 13. | Ethical Conduct                                | 13 |
| 14. | Duration, Termination and Remedies             | 14 |
| 15. | Buyer’s Property                          | 19 |
| 16. | Seller’s Property                         | 21 |
| 17. | Tooling                                        | 22 |
| 18. | Intellectual Property                          | 23 |
| 19. | Proprietary Information                        | 24 |
| 20. | Insurance; Waiver of Liens                     | 26 |
| 21. | Excusable Delay                                | 26 |
| 22. | Buyer’s Liability                         | 28 |
| 23. | Limitation on Assignment and Subcontracting    | 28 |
| 24. | Compliance with Laws                           | 28 |
| 25. | Foreign Purchases                              | 29 |
| 26. | Buyer Financing                                | 29 |
| 27. | Miscellaneous                                  | 30 |

 

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**FISKER AUTOMOTIVE, INC.**

 

**GENERAL TERMS AND CONDITIONS OF PURCHASE**

 

1.*            **The Suppliesand Parties Covered by the Order*

 

(a)           Supplies

 

These General Terms and Conditions (“Terms”) applyto the purchase of the goods and/or services (“Supplies”) identified in apurchase order issued by Buyer to Seller which references these Terms.

 

(b)           Parties

 

Buyer and Seller are identified on the face of thepurchase order.

 

2.*            **The Termsof the Order*

 

(a)           Terms of the Order

 

The “Order” consists of the following, which aresometimes referred to collectively as the Terms of the Order: *(i) *the purchase order; *(ii) *Material Releases (as defined inSection 3(a)) issued by Buyer to Seller under the purchase order *(iii) *these Terms; *(iv) *all other documents specificallyincorporated into or otherwise made a part of the Order by Buyer; and *(v) *Buyer’s purchase policies, asrevised by Buyer and agreed to in writing by Seller from time to time. Selleris responsible for keeping current regarding the terms of Buyer’s purchasepolicies.

 

(b)           Seller’s Acceptance

 

The purchase order is an offer by Buyer to purchasethe Supplies from Seller on the Terms of the Order. The contract is formed whenSeller accepts the offer of Buyer. This occurs upon the earlier of: *(i) *Seller beginning work orperformance based on the purchase order; or *(ii) *Sellernotifying Buyer of its acceptance of the offer in writing. The Order is limitedto and conditional upon Seller’s acceptance of these Terms exclusively.

 

(c)           Seller’s Terms Rejected

 

The Order does not constitute an acceptance of anyoffer or proposal made by Seller, and Seller acknowledges that: *(i) *a request for quotation orsimilar document issued by Buyer is not an offer by Buyer; and *(ii) *any response by Seller to arequest for quotation or similar document issued by Buyer is not an offer bySeller. Any additional or different terms proposed by Seller, whether inSeller’s quotation, acknowledgement, invoice or otherwise, are unacceptable toBuyer, are expressly rejected by Buyer, and are not part of

 

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the Order. However, additional or different termsproposed by Seller shall not operate as a rejection of the Order if Sellercommences work or otherwise accepts Buyer’s offer, in which case the Ordershall be deemed accepted by Seller without any additional or different terms orvariations whatsoever. Any reference in the Order to any prior communication bySeller is solely to incorporate the description or specifications of theSupplies in such prior communication, but only to the extent that suchdescription or specifications are not directly in conflict with the descriptionand specifications in the Order. If the Order is determined to be an acceptanceof any prior offer or proposal by Seller, such acceptance shall be limited tothe Terms of the Order.

 

(d)           Entire Agreement

 

The Order is the entire agreement between theparties respecting the Supplies and when accepted, supersedes any prioragreements, negotiations or understandings of the parties respecting theSupplies, whether written or oral. No modification shall be effective unless inwriting and signed by Buyer’s and Seller’s authorized representative. The Ordermay be modified only by a writing signed by Buyer and agreed to in writing bySeller.

 

3.*            **Quantity;Blanket Orders; Material Releases*

 

(a)           Releases

 

Unless specified differently in the Order, Sellershall deliver Supplies in strict conformance with the dates, times, quantitiesand delivery locations determined by Buyer and identified as firm orders inmaterial authorization releases, manifests, broadcasts or similar releases(“Material Releases”). Time, quantities and location are of the essence underthe Order and Seller shall provide 100% on-time delivery of the quantities andat the times specified by Buyer. Seller shall not make any commitments for rawmaterials or other inventory or manufacture any Supplies in advance of the timenecessary to meet Buyer’s firm delivery requirements. Buyer is not required topurchase Supplies exclusively from Seller unless the Order expressly statesthat it is exclusive, 100% requirements, or similar term.

 

(b)           Blanket Orders

 

If the Order does not specify a quantity, stateszero, “blanket,” “per release” or similar term, the Order is a Blanket Order.If the Order is a Blanket Order, then for consideration of $10.00 to be paid byBuyer following expiration or termination of the Order, Seller grants to Buyeran irrevocable option during the term of the Order to purchase Supplies in suchquantities specified in Material Releases that are transmitted to Seller duringthe term of the Order, provided that Buyer shall purchase no less than aminimum quantity of at least one piece or unit of each of the Supplies and amaximum of no more than 100% of Buyer’s requirements for the Supplies.

 

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(c)           Forecasts

 

Any estimates or forecasts of production volumes orlength of program are for planning and are subject to change from time to timeand shall not be binding upon Buyer or Seller.

 

(d)           EDI

 

Buyer may require Seller to participate inelectronic data interchange or similar inventory management program, atSeller’s expense, for notification of Material Releases, shipping notices andconfirmation and other information.

 

(e)           Suspension of Performance

 

Buyer may at any time, by prior written notice toSeller, suspend performance of deliveries and Seller’s other performanceobligations for such time as it deems appropriate. Upon receiving notice ofsuspension, Seller shall promptly suspend deliveries and work to the extentspecified, and properly care for and protect all work in progress andmaterials, supplies and equipment Seller has on hand for performance. UponBuyer’s request, Seller shall promptly deliver to Buyer copies of Seller’soutstanding purchase orders and subcontracts for materials, equipment and/orservices related to performance of an Order, and shall take such actionrelative to such purchase orders and subcontracts as Buyer may direct. Buyermay at any time withdraw the suspension as to all or part of the suspendeddeliveries and work by written notice specifying the effective date and scopeof withdrawal. Seller shall resume diligent performance on the specifiedeffective date of withdrawal. In the event suspension of performance occurs forlonger than 60 days, then Seller shall be entitled to recover its costs undersection 14. All claims caused by suspension shall be limited to an equitableextension of time for performance as Seller’s exclusive remedy must be pursuedpursuant to and consistent with the Section on “Changes” or they shall bedeemed waived.

 

4.*            **Shippingand Delivery*

 

(a)           Buyer’s Requirements

 

Seller shall properly pack, mark, and ship Supplies(and provide related documentation) according to the requirements specified byBuyer, the involved carriers and the country of destination. Seller shallpromptly provide Buyer with, in the form required by Law and as requested byBuyer, the identity and amount of all ingredients (and any changes in theingredients) of the Supplies. Seller’s Quality and Logistics Manual or similardocuments,, prepared in association with its designated assembly supplier,Valmet Automotive, provides some of the specific requirements of Buyer and itwill be provided separately by Buyer. Buyer may provide amendments, supplementsand replacements to and/or of the current Manual for Logistics, which shall bebinding on Seller.

 

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(b)           Delay in Delivery

 

If Seller, for any reason, does not comply withBuyer’s delivery schedule or any other requirement of a Material Release, Buyermay, in its sole discretion: *(i) *approvea revised delivery schedule; *(ii) *requireexpedited or premium shipment of any of the Supplies; or *(iii) *cover from other sources, andadjust any quantity requirement under the Order accordingly. Seller shall beliable for all excess costs and for all other direct damages incurred by Buyeras a result of Seller’s failure including: *(a) *additionaltransportation costs; *(b) *thedirect cost of any production disruption; and *(c) *thecost of obtaining Supplies from an alternate source. Buyer’s rights under thisSection may be exercised at Seller’s sole expense, at Buyer’s solediscretion, and in addition to and without prejudice to any other right orremedy available to Buyer.

 

(c)           Title and Risk of Loss

 

(i)            Except for Tooling, Buyershall take title to all Supplies upon the earlier of: *(i) *delivery and acceptance of theSupplies FCA Incoterms 2000 Seller’s plant; or *(ii) *paymentby Buyer of 100% of the purchase price of identified Supplies. Supplies shall bedeemed identified upon fabrication, unless the Supplies are part of Seller’sstandard stock and sold to persons in addition to Buyer, in which caseidentification occurs when the Supplies are marked or otherwise designated bySeller as relating to the Order.

 

(ii)           If the Supplies are Tooling,Buyer shall take title and risk of loss upon payment in full for the Tooling.Tooling includes fixtures, gauges, jigs, patterns, castings, cavity dies andmolds, with all related software, appurtenances, accessions, and accessories.

 

(iii)          Seller shall comply withSection 15 with respect to any Supplies to which Buyer has title but whichare in the custody or control of Seller or Seller’s suppliers, contractors oragents.

 

(iv)          All shipments are at therisk of Seller until receipt by Buyer. If risk of loss is assumed by Buyer, allrisk casualty insurance for replacement value must be provided by Seller forthe benefit of Buyer. The cost of any insurance shall be paid by Seller unlessotherwise expressly agreed in writing by Buyer. Under no condition will therisk of loss be that of Buyer unless such insurance is provided. Risk of lossshall not be governed by transfer of title.

 

(d)           Country of Origin

 

Seller shall promptly and reasonably furnish toBuyer all certificates of origin or domestic value-added and all otherinformation relating to the costs and places of origin of the Supplies as maybe deemed reasonably necessary by Buyer to comply fully with all

 

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customs, tariffs and other applicable Laws (asdefined in Section 24). Seller shall comply with all such Lawsand warrantsthat any such information that is supplied to Buyer is true and that all salescovered by the Order will be made at not less than fair value under theanti-dumping Laws of the countries to which the Supplies are exported

 

(e)           Hazardous Materials

 

Seller shall comply with all Laws relating to anyhazardous or restricted material that is an ingredient or part of the Supplies.Seller’s responsibility shall include appropriate government/countryregistration requirements such as REACH (“Registration, Evaluation,Authorization, and Restriction of Chemicals”) and IMDS (“International MaterialData System”). Seller shall give Buyer sufficient warning in writing (includingappropriate labels, containers, and packing, and handling, disposal andrecycling instructions, material safety data sheets and certificates ofanalysis) of any such materials.

 

5.*            **Price andPayment*

 

(a)           Price

 

The purchase price of the Supplies is set forth inthe Order. Unless otherwise stated in the Order, the purchase price: *(i) *is a firm fixed price for theduration of the Order and not subject to increase for any reason, includingincreased raw material costs, increased labor or other manufacturing costs,increased development costs, or changes in volumes or program length from thoseestimated or expected unless agreed to in writing by Buyer and Seller;*(ii) *is inclusive of all federal,state, provincial, and local taxes and any duties applicable to provision ofthe Supplies; and *(iii) *isinclusive of all storage, handling, packaging and all other expenses andcharges of Seller. All prices are FCA Incoterms 2000 Seller’s plant (place ofshipment) unless otherwise provided in the Order.

 

(b)           Invoices

 

Unless otherwise stated in the Order, invoices shallbe issued on or after shipment of Supplies to Buyer and payment shall be deemedto occur upon mailing or other rendering of payment to Seller. All paymentsshall be made in U.S. dollars unless agreed to in writing by Buyer. Sellershall, at its expense, comply with Buyer’s written instructions and policieswith respect to the form, content and method for submission of invoices, whichwill be provided to Seller by Buyer.

 

(c)           Payment Terms

 

Unless otherwise stated in the Order, payment termsare net 45 days after date of receipt of invoice by Buyer.

 

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(d)           Best Price

 

Seller warrants that the prices for the Suppliessold to Buyer are no less favorable than those that Seller currently extends toall third parties for the same or similar Supplies at similar locations undersubstantially similar Terms and in similar quantities. If Seller reduces itsprices to third parties for the same or similar Supplies at similar locationsunder substantially similar Terms during the term of the Order for theSupplies, Seller shall correspondingly reduce the prices charged to Buyer.

 

(e)           Setoff

 

In addition to any right of setoff or recoupprovided by law, Buyer shall be entitled at any time to setoff or recoupmentagainst sums payable by Buyer to Seller any amounts for which Buyer determinesin good faith Seller is liable to Buyer or its affiliates under any Order orother agreements with Seller. Buyer may do so upon prior notice to Seller.

 

(f)            Payment Not Acceptance

 

Payment for Supplies shall not constitute acceptanceof non-conforming Supplies nor limit or affect any rights or remedies of Buyer.

 

(g)           Credits

 

Credits or benefits resulting from the Order, includingtrade credits, export credits, and or the refund of duties, taxes, or fees,belong to Buyer. Seller shall provide all information and certificates(including NAFTA and other country and area certificates of origin) necessaryto permit Buyer to receive these benefits or credits.

 

6.*            **Non-ConformingSupplies*

 

(a)           Rejection

 

If defective or otherwise non-conforming Suppliesare rejected by Buyer, the quantities under the Order are automatically reducedunless Buyer otherwise notifies Seller, and Seller shall not replace reducedquantities without a new Material Release from Buyer. Following rejection,Seller shall, without prejudice to any other right or remedy of Buyer, atBuyer’s sole discretion and at Seller’s sole expense:

 

(i)            Accept return of the non-conformingSupplies to Seller for a refund of the full invoice price, plus payment oftransportation charges for such defective or otherwise non-conforming supplies;

 

(ii)           Replace the non-conformingSupplies with conforming Supplies; and/or

 

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(iii)          Correct at any time prior toshipment from Buyer’s plant the non-conforming Supplies.

 

(b)           Buyer’s Losses

 

Seller is liable for all direct damages, losses,costs, and expenses incurred by Buyer resulting from Seller’s failure todeliver conforming and non-defective Supplies or to comply with the shippingand delivery or other requirements of Buyer, even if Seller has cured thefailure. This includes but is not limited to compensating Buyer for:

 

(i)            Any amounts charged byBuyer’s vehicle assembly supplier to Buyer;

 

(ii)           All costs of containment,sorting, repair, replacement, cure, cover, or any other reasonable anddocumented costs incurred by Buyer, determined in such manner and in suchamount as reasonably determined by Buyer;

 

(iii)          All costs of any recallcampaign, corrective service action, or other voluntary or involuntary actionin which Buyer participates in connection with inclusion of Supplies in goodssold by Buyer.

 

(c)           Corrective Action

 

Promptly upon learning of defective ornon-conforming Supplies, Seller shall develop, document and implementcorrective actions in accordance with all applicable quality control policiesand standards in the Supplier Quality and Logistics Manual as provided by Buyerto Seller. Seller shall immediately notify Buyer in writing when Seller becomesaware of any ingredient, component, design or other defect in the Supplies thatis or may become harmful to persons or property.

 

7.*            **Buyer andIndustry Standards and Policies*

 

(a)           Quality Standards

 

Seller and Supplies shall conform to all qualitycontrol and other standards and inspection systems as established or directedby Buyer in the Supplier Quality and Logistics Manual Buyer may provideamendments, supplements, and replacements to and/or of the current SupplierQuality and Logistics Manual, which shall be binding on Seller.

 

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8.*            **Changes*

 

(a)           Buyer’s Changes

 

Buyer reserves the right to change the design,specifications, engineering level, materials, packaging, testing requirements,shipping date, or time or place of delivery, of the Supplies. Seller shallpromptly make any such change as directed by Buyer, provided that the partiesagree upon the feasibility and cost impact of such changes per section 8(c).

 

(b)           Seller’s Changes

 

Seller shall not make any change to the Suppliesexcept at Buyer’s written instruction or with Buyer’s written approval. IfSeller learns of a possible change to the Supplies that may reduce costs, improvequality, or otherwise be beneficial to Buyer, Seller shall promptly informBuyer of the possible change in writing. Seller shall maintain a process ofcontinuous improvement in the Supplies. Seller certifies the location(s) fromwhich it will ship the Supplies as specified in the Order. If Seller at anytime intends to change such location(s), Seller must notify Buyer in writingprior to the change so that the effect of such change can be evaluated as toquality, transportation costs and time, packaging methods, and other factors.

 

(c)           Impact on Changes

 

Seller shall, at the earliest of ten working days ofreceipt of a request for change from Buyer or the receipt of a purchase orderchange, notify Buyer in writing if a change directed or approved by Buyer willaffect cost or timing and provide substantiation of its claim. Buyer and Sellerwill negotiate in good faith and agree on an equitable price adjustment (up ordown), a change in shipping or delivery terms, required tooling investment, orother appropriate adjustment prior to implementation of any change. If anadjustment is not agreed upon, Seller shall make the change and the claim shallbe subject to the dispute resolution provisions of these Terms.

 

9.*            **ServiceParts*

 

(a)           Period and Prices

 

During the ten-year period after Buyer completespurchases for production, Seller shall sell to Buyer Supplies to fulfillBuyer’s service and replacement requirements. All such Supplies shall be soldat the prices specified in the Order plus actual cost differentials forpackaging. During the tenth year of such period, Buyer and Seller shallnegotiate in good faith with regard to Seller’s continued manufacture ofservice and replacement Supplies. Seller shall store and maintain all Toolingand other resources necessary for the production of service and replacementSupplies. If the Supplies are no longer required

 

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for Buyer’s vehicle production, then the price ofthe Supplies for service requirements will be no greater than the last pricestated in the order plus or minus: *(i) *anychanges in the cost of materials since the Order was terminated or productionceased; *(ii) *a volumeadjustment reflecting the actual increase in the cost per unit of producingfewer units; *(iii) *a set-upcharge reflecting the actual cost of preparation for the production run; and *(iv) *any additional costs actuallyincurred for special packaging. The foregoing must be documented to Buyer’sreasonable satisfaction, including, but not limited to, set-up detail, machineproductivity, scrap allowance, labor inefficiencies and excess raw materialrequirements. Seller shall mark the Supplies shipped for service requirements,“Made in (country of origin)”.

 

(b)           Components

 

If the Supplies are systems or modules, Seller shallsell each component or part for service or replacement purposes at a price thatdoes not, in the aggregate, exceed the system or module price specified in theOrder, less assembly costs, plus any actual cost differential for packaging.

 

10.*         **Warranties*

 

(a)           Express Warranties

 

In addition to any other express and impliedwarranties provided by law or otherwise, Seller warrants to Buyer that theSupplies shall:

 

(i)            Be new and conform to Orderin all respects;

 

(ii)           Conform to all specifications,drawings, samples and other descriptions furnished by Buyer or otherwise partof the Order;

 

(iii)          Be free from all defects indesign (to the extent designed by or for Seller), workmanship and materials(with the exception of materials or components consigned by Buyer) during thewarranty period and be of highest quality and workmanship;

 

(iv)          Be selected, designed (tothe extent designed by Seller), manufactured and assembled by Seller based uponBuyer’s stated use and be fit and sufficient for the purposes intended byBuyer;

 

(v)           Conform to all applicableLaws (as defined in Section 24) in countries where the Supplies (or goodsinto which the Supplies are incorporated) are to be sold (and Buyer shallprovide a list of such countries to Seller upon written request), includingwithout limitation, in the case of Supplies used in connection with themanufacture of motor vehicles, the National Traffic and

 

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Motor Vehicle Safety Act,United States motor vehicle safety standards and European Union Directive2000/53/EC;

 

(vi)          Not infringe, misappropriate orviolate the Intellectual Property Rights (as defined in Section 18) ofthird parties;

 

(vii)         Properly function and be suitable foruse within the systems, the vehicles and the products in which they are to beassembled; and

 

(viii)        Conform to ISO 9001 and TS 16949 andother quality standards of Buyer.

 

(b)           Service Warranties

 

For all services included in Supplies, Sellerfurther warrants that its services shall be performed in a professional andworkmanlike manner, consistent with all standards and specificationsestablished by Buyer and otherwise consistent with industry standards.

 

(c)           Title

 

Seller warrants that title to all of the Suppliesshall be vested in Buyer free and clear of any and all liens and encumbrancesof any nature.

 

(d)           Warranty of Continued Performance

 

All warranties of Seller extend to futureperformance of the Supplies and are not modified, waived or discharged bydelivery, inspection, tests, acceptance and payment. Buyer’s approval of anydesign, drawing, material, process or specifications shall not relieve Sellerof these warranties. Seller waives any right to notice of Seller’s breach.

 

(e)           Warranty Period

 

The warranty period is the longest of: *(i) *five years from the date Buyeraccepts the Supplies; *(ii) *thewarranty period provided by applicable law; or *(iii) *thewarranty period offered by Buyer to end-users for the vehicles and productsinto which the Supplies are assembled ( 50 months or 50,000 miles).

 

(f)            Cumulative

 

All warranties and remedies provided by the Orderare cumulative and in addition to those provided by law and shall survivetesting and inspection of the Supplies by Buyer.

 

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11.*          Indemnification*

 

(a)           Indemnity

 

Seller shall indemnify, defend and hold harmlessBuyer, and its affiliates, directors, officers, shareholders, employees,customers, dealers and users of the Supplies sold by Buyer (or the products inwhich they are incorporated) and all of their respective agents, successors andassigns (including, as those terms are defined in Section 26, the CreditProviders, the Secured Party and their representatives), and each of theirshareholders, directors, officers, employers and agents, on demand,(collectively “Indemnified Parties”) from and against any and all costs, fees,penalties, damages (direct, incidental, consequential and otherwise),reasonable attorneys’ fees and all other liabilities and obligations whatsoever(“Losses”), which, in whole or in part, arises from or relates to any actual oralleged:

 

(i)            Defect or non-conformity to Buyersspecifications in the Supplies;

 

(ii)           Noncompliance by Seller with any ofits representations, warranties or obligations under the Order;

 

(iii)          Negligence or fault of Seller inconnection with the design (if designed by or for Seller) or manufacture of theSupplies.

 

(iv)          Any recall campaign, correctiveservice action, or other voluntary or involuntary action in which Buyerparticipates with respect to the Supplies or vehicles or products into whichthe Supplies are incorporated;

 

(v)           Any spill, discharge or emission ofhazardous wastes or substances which relates, in whole or in part, to theSupplies;

 

(vi)          Infringement (including claims ofdirect or contributory infringement or inducement to infringe),misappropriation or violation of any Intellectual Property Right relating toSupplies provided by Seller, even if they are made to Buyer’s specifications;

 

(vii)         Damages to the property of or personalinjuries to Buyer, their respective agents, or any other person or entity tothe extent arising from or in connection with Seller’s work on the premises orSeller’s use of Buyer’s property; and

 

(viii)        Challenge to Buyer’s sole right, titleand interest in the Tooling (as defined below), or right to possession of theTooling, brought or asserted by

 

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any third party, including toolmakers,subcontractors, and lending institutions, if Seller received payment for suchtooling.

 

(ix)          Changes to the Supplies which have notbeen approved by Buyer in writing whether or not the Supplies otherwise complywith the specifications and other obligations under the Order.

 

(b)           Buyer’s Participation

 

If Seller is obligated to indemnify under thisSection, Buyer may at its option participate in or control the defense of anythird party claim with its own counsel, at Buyer’s expense. Seller’s obligationto indemnify shall not be lessened or compromised in anyway, even if Buyer isalleged or is found to have contributed in part to the events giving rise tothe Losses.

 

12.*          Inspection and Audit*

 

(a)           Inspection of Facility

 

Buyer, its third party designees or representativesof the Secured Party or DOE (as defined in Section 26) may enter Seller’sand its subcontractors’ facilities during Seller’s normal business hours, uponreasonable notice to inspect the facility, Supplies, materials, and any of Buyer’sproperty related to the Order. Seller shall provide, without additional charge,all approvals and reasonable facilities and assistance for any such inspection.Buyer’s inspection does not constitute acceptance of any work-in-process orfinished goods and does not relieve Seller of any of its responsibilities orwarranties.

 

(b)           Audit

 

Upon reasonable notice to Seller, either Buyer (or athird party designee of Buyer) or representatives of the Secured Party or DOEmay audit Seller’s or its subcontractor’s production facility, Supplies and anyother Buyer property (including all pertinent documents, data and otherinformation) related to the Order at the facility for the purpose of verifyingSeller’s costs and its compliance with its obligations under the Order. Sellershall provide, without additional charge, all reasonable facilities andassistance.

 

(c)           Financial Review

 

Upon reasonable notice to Seller, either Buyer (or athird party designated by Buyer) or representatives of the Secured Party or DOEmay review the financial condition of Seller and its contractors andaffiliates. Seller will fully cooperate in such review and shall promptlyprovide copies of or access to requested documents , including withoutlimitation financial records and statements, forecasts, business plans, bankingcontacts and loan documents, and shall make its financial managers availablefor discussions with

 

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Buyer or representatives of the Secured Party orDOE, as applicable, during reasonable business hours. The inspecting partyshall keep confidential any nonpublic information about Seller obtained in afinancial review and use such information only for purposes of the review,except as needed to enforce the Order.

 

(d)           Buyer’s Discretion

 

Buyer’s right to conduct any inspection, audit orreview under this Section or otherwise is at its sole discretion. Buyerhas no obligation to Seller to conduct any inspection, audit or review. Buyer’sdecisions as to whether, how and when to conduct any inspection, audit orreview does not modify or relieve Seller of any obligations under the Order,does not give rise to any liability of Buyer to Seller and is without prejudiceto any rights or remedies available to Buyer.

 

13.*          Ethical Conduct*

 

(a)           Work Environment

 

Seller warrants that no child, prison, forced orinvoluntary labor shall be used by Seller or its subcontractors in theprovision of Supplies. Seller and its subcontractors shall maintain a workplace free from physical abuse and any practice in violation of local law.Seller and its subcontractors shall provide a healthy, safe work environment,wages and benefits as required by law, freedom of association and reasonableworking conditions.

 

(b)           Business Practices

 

Seller shall not: *(i) *giveor offer to give any gift or benefit to Buyer’s employees; *(ii) *solicit or accept anyinformation, data, services, equipment or commitment from Buyer’s employeesunless it is: *(a) *requiredunder a contract between Buyer and Seller, *(b) *madepursuant to a written disclosure agreement between Buyer and Seller, or *(c) *specifically authorized inwriting by Buyer’s management; *(iii) *solicitor accept favoritism from Buyer’s employees; *(iv) *enterinto any outside business relationship with Buyer’s employees or othersuppliers without full disclosure to and prior approval of Buyer’s management;or *(v) *provide to or acceptfrom other suppliers any information regarding Buyer or its business. For thepurposes of this Section: “employee” includes members of the employee’simmediate family and household, plus any other person who is attempting tobenefit from his or her relationship to the employee; “Seller” includes allemployees and agents of Seller; “gift or benefit” includes money, goods,services, discounts, favors and the like in any form but excluding items with avalue of $25.00 or less; “supplier” includes prospective, current and pastsuppliers; and “favoritism” means partiality in promoting the interest ofSeller over that of other suppliers. Any breach by Seller of its obligationsunder this Section shall constitute a material default by Seller of everycontract and Order with Buyer and may further result in Seller’s debarment fromdoing

 

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business with Buyer. Seller shall also comply withall ethics, fair business practices, non-discrimination and non-harassmentpolicies of Buyer.

 

14.*          Duration, Termination and Remedies*

 

(a)           Duration

 

The Order shall be effective on the date specifiedin the Order, or if no date is specified, when accepted. Unless otherwisespecifically provided in the Order:

 

(i)            The Order shall terminate on thedate specified in the Order; or, if no date is specified, one year from theeffective date. The termination date is not extended by an amendment orrevision to an Order which does not expressly modify the termination date.

 

(ii)           The Order will automatically renewfor successive one-year periods after the initial term unless Seller provideswritten notice at least 90 days prior to the end of the current term of itsdesire that the Order not be renewed.

 

(b)           Termination by Buyer

 

In addition to any other rights of Buyer to cancelor terminate the Order, Buyer may terminate the Order in whole or in part bywritten notice (a “Termination Notice”), as follows:

 

(i)            For convenience, 60 days followingdelivery of the Termination Notice or upon such other date specified by Buyerin writing; and

 

(ii)           For Default, effective upon deliveryof the Termination Notice or upon such other date specified by Buyer inwriting. Seller shall be in “Default” if it: *(i) *breachesany warranty or other Term of the Order; *(ii) *repudiates,breaches or threatens to breach any of the terms of the Order; *(iii) *fails to deliver, or threatensnot to deliver, Supplies in connection with the Order; *(iv) *fails to make progress or tomeet reasonable quality requirements so as to endanger timely and properperformance of the Order; *(v) *Sellermakes an assignment for the benefit of creditors, or proceedings in bankruptcyor insolvency are instituted by or against Seller; *(vi) *Seller requests accommodations from Buyer,financial or otherwise, in order to meet its obligations under the Order; or *(vii) *at any time in Buyer’s solejudgment Seller’s financial or other condition or progress on the Order shallbe such as to endanger timely performance. Termination by Buyer shall notrelieve Seller of any liability under the Order except as provided in theseTerms.

 

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(c)           Suspension or Termination by Seller

 

Seller may terminate or suspend performance under anOrder only for non-payment of the purchase price for Supplies which are 30 ormore days past due and material in amount, and then only if: *(i) *Seller first provides Buyer writtennotice specifying the amounts past due and Seller’s intent to terminate orsuspend performance under the Order if the past due amount is not paid; and *(ii) *Buyer, within 30 days of suchnotice, does not either: *(a) *paythe past due amounts, or (*b)* notifySeller that the amount claimed to be unpaid is disputed by Buyer. Seller shallterminate or suspend under this Section by delivering a termination noticeto Buyer. Seller may not suspend performance or terminate the Order for anyreason except as permitted under this Section.

 

(d)           Seller’s Obligations Following Termination

 

Following delivery of a notice of termination,Seller shall, unless otherwise directed by Buyer and subject to its obligationto provide Transition Support as provided in Section (h) below;

 

(i)            Terminate promptly all performanceunder the Order and transfer title and deliver to Buyer all finished Suppliescompleted prior to receipt of the Notice of Termination;

 

(ii)           Transfer title and deliver to Buyerall work in process, and the parts and materials which Seller produced oracquired in accordance with an Order and which Seller cannot use in producinggoods for itself or for others to the extent such use is permitted;

 

(iii)          Verify/settle all claims bysubcontractors for actual costs that are rendered unrecoverable by suchtermination and provided the recovery of materials in Seller’s possession isensured; and

 

(iv)          Take actions reasonably necessary toprotect property in Seller’s possession in which Buyer has an interest untildisposal instruction from Buyer has been received.

 

(v)           Seller shall continue performance ofan Order to the extent not terminated and shall be liable to Buyer for anyexcess costs for alternative products or services and other direct damages. Asan alternative remedy, and in lieu of termination for default, Buyer, at itssole discretion, may elect: *(i) *toextend the delivery schedule; and/or *(ii) *towaive other deficiencies in Seller’s performance; in which case an equitablereduction in an Order price shall be established by Buyer to compensate Buyerfor its damages. If Seller for any reason anticipates difficulty in complyingwith a required delivery date, or in meeting any of the other requirements ofan Order, Seller shall promptly notify

 

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Buyer in writing of thepotential default, the cause thereof, and the estimated length of theanticipated default. Buyer is under no obligation to waive any default.

 

(e)           Buyer’s Obligations Following Termination

 

Subject to Section (g)(ii), Buyer shall pay toSeller in connection with termination only the following amounts, withoutduplication, in complete and final satisfaction of any liabilities relating tothe Order:

 

(i)            The purchase price for allconforming Supplies received by Buyer prior to Notice of Termination ordelivered following Notice of Termination pursuant to Sections (d)(i) or(h) or at the written direction of Buyer;

 

(ii)           Any amounts owed for TransitionSupport pursuant to Section (h)(iii); and

 

(iii)          If terminated for any reason otherthan Default by Seller, Seller’s reasonable actual cost of: *(i) *merchantable and useable work-in-process and the parts and materials transferred to Buyer under Section (d)(ii) above(but not to exceed the Order price of the Supplies had the work beencompleted); *(ii) *settlingclaims under Section (d)(iii); and (c) carrying out its obligationunder Section (d)(iv).

 

(f)            Buyer’s Obligations Following Expiration

 

If the Order expires, Buyer shall pay to Seller, incomplete and final satisfaction of any liabilities relating to the Order, onlythe purchase price for all conforming Supplies received by Buyer prior toexpiration and all quantities listed as firm releases not otherwise purchasedby Buyer, and, if applicable, any amounts owed for Transition Support pursuantto Section (h)(iii).

 

(g)           Limitations on Buyer’s Obligations FollowingTermination or Expiration

 

(i)            Buyer’s obligations under Section (e) areconditioned upon Seller’s furnishing to Buyer, within 60 days after the date oftermination (or such shorter period as may be required by its customer), atermination claim, which will consist exclusively of the items of Buyer’sobligation to Seller that are expressly permitted by this Section. Buyer mayaudit Seller’s records before or after payment to verify amounts requested inSeller’s termination claim.

 

(ii)           Buyer has no obligation under Section (e) tomake any payment for Supplies, work-in-process, parts or raw materialsinventory: *(i) *in

 

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excess of those authorizedor required under any firm Material Release; *(ii) *thatare damaged or destroyed or that are not merchantable or useable; *(iii) *that are in Seller’s standardstock or that are readily marketable; or *(iv) *thatcan be returned to Seller’s suppliers or subcontractors for credit.

 

(iii)          Buyer has no obligation for and willnot be required to pay Seller, directly or on account of claims by Seller’ssubcontractors, for loss of anticipated profit, failure to realize anticipatedproduction volumes, revenues or savings, unabsorbed overhead, interest onclaims, product development and engineering costs, Tooling, facilities andequipment rearrangement costs or rental, unamortized capital or depreciationcosts, or general administrative burden charges from termination or expirationof the Order, except as otherwise expressly agreed in a separate Order issuedby Buyer.

 

(h)           Transition of Supplies Following Termination orExpiration

 

Following expiration or termination of the Order byeither party for any reason (including termination by Seller) andnotwithstanding any claimed or actual breach of any obligation by Buyer, Sellershall cooperate in the transition of supply to a successor supplier, includingthe following, which will collectively be referred to as “Transition Support”:

 

(i)            Seller shall continue production anddelivery of all Supplies as ordered by Buyer, at the prices and other termsstated in the Order, without premium or other condition, during the entire periodreasonably needed by Buyer to complete the transition to the alternatesupplier(s), so that Seller’s action or inaction causes no interruption inBuyer’s ability to obtain Supplies as needed;

 

(ii)           At no cost to Buyer, Seller willpromptly provide all requested information and documentation regarding andaccess to Seller’s manufacturing process, including on-site inspections,bill-of-material data, tooling and process detail and samples of Supplies andcomponents; and

 

(iii)          Subject to Seller’s actual capacityconstraints, Seller shall provide special overtime production, storage and/ormanagement of extra inventory of Supplies, extraordinary packaging andtransportation and other special services as expressly requested by Buyer inwriting. If the transition occurs for reasons other than Seller’s terminationfor Default, Buyer shall, at the end of the transition period, pay thereasonable, actual cost of the assistance under this Section 14(h)(iii),provided that Seller has advised Buyer prior to incurring such amounts of itsestimate of such costs. If the parties disagree on the cost of TransitionSupport, Buyer shall pay the agreed portion to Seller without prejudice toSeller’s right to seek to recover any disputed amounts.

 

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(i)            Termination and Change of Control

 

Buyer may terminate an Order or Release, in whole orin part, upon reasonable written notice to Seller, if control of Sellerchanges. A change of control includes: *(i) *thesale, lease or exchange of a substantial portion of Seller’s assets used forthe production of the Supplies; *(ii) *thesale or exchange of a controlling interest in the shares or other ownershipinterests of Seller; or *(iii) *theexecution of a voting or other agreement of control. Seller shall provide Buyerwith written notices of a proposed and actual change of control at least tendays prior to the date the change of control is scheduled to occur and withinten days after the change of control has become effective. Buyer will have 30days from the date the second notice from Seller is received within which tonotify Seller if it decides to terminate the Order and the effective date ofthe termination, which will be no sooner than 30 days after the date thewritten notice of termination is sent.

 

(j)            Duty to Deliver

 

Seller’s continued holding of the Supplies, Buyer’sProperty or Seller’s Property (as defined herein), after demand has been madeby Buyer for delivery, will substantially impair their value, and Buyer shallbe entitled to a court order for possession without bond. Seller shall continueto sell Supplies under an Order during any dispute with Buyer provided Buyercontinues to pay Seller amounts owed in excess of any right of offset.

 

(k)           Recall

 

In the event of any safety, maintenance orimprovement program, general recall or similar action (“Recall”) involving theSupplies which Buyer has determined do not meet requirements of the Order,whether initiated by Buyer, Seller, or any governmental agency or body, bothBuyer and Seller shall use reasonable commercial efforts to reduce costs inconnection with such Recall. If it shall be alleged or determined that failureof Supplies supplied by Seller to conform to Seller’s warranty is a proximatecause of any Recall, Seller shall defend, indemnify and hold harmless Buyer,its affiliates, subsidiaries, directors, officers, employees, agents and otherrepresentatives from and against all expenses and costs of such Recall. AllRecalls shall be at the discretion of Buyer after consultation with Seller,except as ordered by a government agency or body. Seller’s obligations relatedto Recalls shall continue to apply after the expiration of Seller’s expresswarranties.

 

(l)            Cumulative and Additional Remedies

 

Buyer’s remedies under this Section and theapplicable law shall be cumulative and additional to any other or furtherremedies provided under the Order or by statute, law or equity, including, butnot limited to, the recovery of direct damages and the entry of injunctiverelief, but Buyer shall be entitled to only one full recovery of all of itsdamages and enforcement of all its rights.

 

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(m)          Restrictions on Waiver

 

A delay by Buyer in notification of a breach ormaking a claim shall not constitute a waiver of a breach or remedy. No waiverof a breach of any provision of the Order by Buyer shall constitute a waiver ofany other breach, or of the breached provision itself. No claim or right ofBuyer arising under, or related to, the Order can be discharged in whole or inpart by a waiver or renunciation unless supported by additional considerationand in writing signed by Buyer.

 

(n)           Seller’s Remedy

 

Money damages, as limited by the Order, are Seller’sexclusive remedy for breach of contract or other claim or theory. Seller maynot allege breach of contract or other theory of recovery for such moneydamages without providing a written notice of breach, documentation supportingthe claim, and a reasonable time for Buyer to cure any breach and otherwiseresolve the claims.

 

(o)           Remedial Work

 

If repair, sorting, inspection, or similaractivities (“Remedial Work”) is necessary for any rejected Supplies, then Buyermay elect either to perform the Remedial Work itself or to have a third partyperform it. In either case, the reasonable cost of such Remedial Work shall beeither: *(i) *offset againstthe amounts otherwise due Seller for such rejected Supplies; or *(ii) *charged separately to Seller.Buyer may require that the Remedial Work be performed on the premises of Buyeror its Customer by Seller, in which case Buyer or its Customer shall provideSeller with reasonable access to its premises and otherwise assist Seller withsuch arrangements as are necessary to perform the Remedial Work. In performingRemedial Work or replacing rejected Supplies, Seller is responsible forsegregating and sorting any applicable Supplies providing for transportation ofthe Supplies, supervising the segregation and removal of the Supplies, andother incidental activities, all at its sole cost. Remedial Work by Sellerrequires the prior written permission of Buyer and/or Buyer’s Customer.

 

(p)           Rights of the Secured Party and DOE

 

The Secured Party and DOEmay exercise any of the Buyer’s rights under this Section 14 and, subjectto the provisions of Section 26, such exercise shall not result in theassumption of any of Buyer’s obligations hereunder.

 

15.*          Buyer’s Property*

 

(a)           Buyer’s Property Defined

 

Buyer’s Property means any tangible or intangibleproperty to which Buyer has title. Buyer’s Property includes:

 

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(i)            As provided in Section 4(c),Supplies, together with materials and components incorporated or to beincorporated in the Supplies;

 

(ii)           All property which isfurnished by Buyer, either directly or indirectly to Seller to perform theOrder;

 

(iii)          Intellectual Property Rightsand Proprietary Information of Buyer, as specified in Sections 18 and 19;

 

(iv)          Tooling (as defined herein)and other property (including, by way of example, returnable packaging) forwhich Buyer has paid, and

 

(v)           Any modifications, repairs,refurbishments, and replacements of Buyer’s Property defined above.

 

(b)                   Obligations ofSeller

 

With respect to Buyer’s Property in the custody orcontrol of Seller or Seller’s suppliers, subcontractors or agents, Buyer’sProperty shall, at Seller’s cost and risk:

 

(i)            Be used only for theproduction of Supplies for Buyer.

 

(ii)           Be kept: *(i) *in good working condition house,maintain, repair and replace it, except for normal wear and tear; *(ii) *fully insured for the benefit ofBuyer; and *(iii) *be keptsegregated from all other assets and labeled as being the property of Buyer.

 

(iii)          Bailment; Seller shall haveonly temporary possession as a bailee at will. Seller shall assure that Buyer’sProperty is not released, relocated or delivered to any third party without theexpress written permission of Buyer. Seller shall promptly notify Buyer of thelocation of Buyer’s Property if located at any place other than Seller’sfacility.

 

(iv)          Buyer, DOE and the SecuredParty shall have the right to enter Seller’s premises to inspect Buyer’sProperty and all records of Seller and other third parties regarding Buyer’sProperty. Only Buyer (or Buyer’s affiliates) and the Secured Party has anyright, title or interest in Buyer’s Property, except for Seller’s limitedright, subject to Buyer’s sole discretion, to use Buyer’s Property in theprovision of Supplies. Seller shall neither create nor allow to exist any lienson Buyer’s Property, and Seller shall immediately sign any documents reasonablyrequired by Buyer to perfect all rights granted or confirmed by these Terms.Seller grants to Buyer, DOE and the Secured Party a limited and irrevocablepower of attorney, coupled with an interest, to execute and record on Seller’sbehalf any documents with respect to Buyer’s Property that Buyer, DOE or the

 

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Secured Party determines arereasonably necessary to reflect Buyer’s or the Secured Party’s interest inBuyer’s Property.

 

(v)           Return; Unless instructed byBuyer to the contrary, immediately upon Buyer’s request or upon any bankruptcyor insolvency filing, and without payment of any kind, Seller shall returnBuyer’s Property, and shall comply with Buyer’s instructions relating to itsreturn, including but not limited to the method and location for its return.Seller is responsible for labor and other costs incidental to the return ofBuyer’s Property. Seller shall cooperate with Buyer and shall provide Buyerwith access to all facilities at which Buyer’s Property is located. Sellerexpressly waives any right to additional notice or process relating to Buyer’sexercise of its rights under this Section. Seller waives, to the extentpermitted by law: *(i) *anylien or other rights that Seller might otherwise have on any of Buyer’sProperty, including but not limited to molder’s and builder’s liens; and *(ii) *any objection to Buyer’srepossession and removal of Buyer’s Property for any or no reason, includingbankruptcy or insolvency proceedings.

 

16.*         **Seller’sProperty*

 

(a)                   Definition

 

“Seller’s Property” means all Tooling and otheritems that are not Buyer’s Property and that are necessary for the productionof Supplies are Seller’s Property.

 

(b)                   Maintenance

 

Seller, at its expense, shall furnish, keep in goodworking condition capable of producing Supplies meeting all applicablespecifications, and replace when necessary, all Seller’s Property. Seller shallinsure Seller’s Property with full fire and extended coverage insurance for itsreplacement value. If Seller uses Seller’s Property to produce goods orservices similar to Supplies for other customers, including aftermarketcustomers, such goods or services will not incorporate any of Buyer’s logos,trademarks, trade names or part numbers. Seller shall not disclose or imply inits marketing efforts that such goods or services are equivalent to thosepurchased by Buyer.

 

(c)                   Option toPurchase

 

Seller grants to Buyer an irrevocable option to takepossession of and title to Seller’s Property that is specific for theproduction of Supplies under the Order upon payment to Seller of its net bookvalue less any amounts that Buyer has previously paid to Seller for the cost ofsuch items. This option does not apply if Seller’s Property is used to producegoods that are the standard stock of Seller or if a substantial quantity oflike goods is being sold by Seller to other than Buyer.

 

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17.*         **Tooling*

 

(a)                   Definition andAcquisition

 

Tooling means all Tooling, jigs, fixtures and otherpersonal property other than capital equipment used in the manufacture ofSupplies. Unless otherwise provided in this order, property of everydescription including all tools, equipment, material, drawings, manufacturingaids and replacements of the foregoing furnished by Buyer, either directly orindirectly, or as acquired or manufactured by Seller for use in the performanceof this order, for which Seller has been reimbursed by Buyer (“SpecialTooling”), will be: *(i) *theproperty of Buyer; and *(ii) *plainlymarked or otherwise adequately identified by Seller as the property of Buyer.Seller shall not purchase any Tooling for the account of Buyer or charge Buyerfor any tooling except as authorized in an Order.

 

(b)                   Payment &Terms

 

If Buyer has agreed to compensate Seller for Toolingin an Order:

 

(i)            The price for Tooling in theOrder will be adjusted to credit Buyer in the amount, if any, by which theprice exceeds Seller’s actual cost as verified by Buyer. If Seller does notprovide access and documentation necessary for Buyer’s verification, Buyer maydetermine in its reasonable discretion an appropriate adjustment. Seller shallretain all cost records for a period of two years after receiving final paymentfor Tooling. Seller shall provide to Buyer, as requested, access to Seller’spremises and all documentation relating to the Tooling prior and subsequent topayment, to inspect work performed, and to verify charges submitted by Selleragainst the Order.

 

(ii)           Seller shall be entitled toreceive payment only after it is completed unless otherwise provided in theOrder. Tooling is not complete until Seller, at its own expense, hassuccessfully completed all required testing (including completion of the PPAPprocess) and has submitted all necessary documentation required by the Order.

 

(iii)          Payment terms for Toolingshall be specified in the Order.

 

(c)                   Warranty

 

If Seller is responsible for fabricating oracquiring Tooling, Seller warrants that such Tooling shall: *(i) *comply with any specificationsprovided by Buyer; and *(ii) *becapable of producing Supplies that satisfy the Order, including meeting anyvolume requirements or estimates provided to Seller during the life of theproduct as well as satisfying the requirements for Service Parts. Time is ofthe essence for Seller’s acquisition or fabrication of Tooling. Seller shallprovide Tooling progress reports on Buyer’s request

 

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and shall promptly notify Buyer in writing if itbelieves that the Tooling might not be completed by the completion datespecified on the Order.

 

(d)                   Third PartyTool Makers

 

If all or part of the fabrication, modification,repair or refurbishment of Tooling will be subcontracted to a third-partytoolmaker, Seller will: *(i) *giveBuyer advance written notice of the identity of the toolmaker and the locationof the Tooling;*(ii) *informthe toolmaker in writing that it is a bailee-at-will, through Seller, ofTooling owned by Buyer; and *(iii) *besolely responsible for payments to the toolmaker. Buyer has no obligation toSeller or subcontractor other than payment to Seller of the Order price. If asubcontractor brings an action against Seller for payment of the Tooling,Seller will not join Buyer in the action.

 

(e)                   Bailment toSubcontractors

 

If Seller intends to subcontract all or part of themanufacture of the Supplies to a third- party subcontractor and to deliverTooling to the subcontractor’s premises, Seller shall: *(i) *provide Buyer with prior writtennotice of the identity of the subcontractor and the location of the Tooling; *(ii) *obtain the written permission ofBuyer in advance of Seller’s delivery; *(iii) *informthe subcontractor in writing that it is a bailee-at-will, through Seller, ofTooling owned by Buyer; and *(iv) *besolely responsible for payments to the subcontractor.

 

18.*         **IntellectualProperty*

 

(a)                   Warranty ofNon-Infringement

 

Seller warrants that the Supplies and the saleand/or use thereof (before or after incorporation into products duringmanufacture) do not and will not infringe, misappropriate or violate anyIntellectual Property Rights. “Intellectual Property Right” means all rightsarising under U.S. or foreign law relating to patent, trademark, copyright,moral rights, industrial design right, Proprietary Information (as defined inSection 19) and trade secrets or other intellectual property rights.

 

(b)                   Restriction onUse of Buyer’s Intellectual Property

 

Seller shall not manufacture or provide, or offer tomanufacture or provide, any goods or services that are based in whole or inpart upon inventions, confidential or Proprietary Information (as defined inSection 19) of Buyer or Intellectual Property Rights of Buyer, whether forits own purposes (other than to satisfy its obligations under Order), or anyother third parties, without Buyer’s prior written consent.

 

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(c)                   License toBuyer

 

Seller grants to Buyer, its subsidiaries andaffiliates, and their respective successors and assigns, and Buyer herebyaccepts, a non-exclusive, irrevocable, royalty-free, fully paid up worldwidelicense, including the right to sublicense to others under: *(i) *any Intellectual Property Rightsowned or controlled by Seller or its affiliates, and relating to the Supplies,to make, have made, repair, reconstruct, rebuild, relocate, use, sell andimport the Supplies; and *(ii) *anyworks of authorship fixed in any tangible medium of expression (includingdrawings, prints, manuals and specifications) furnished by Seller in the courseof Seller’s activity under Order, to reproduce, distribute and display suchworks and to prepare derivative works based thereon, subject to the otherprovisions of Order (all items in clauses *(i) *and*(ii) *above, collectively,“Seller’s Intellectual Property”, and such license in respect thereof, the“License”). Seller acknowledges and understands that the License shall beeffective from the first date of delivery of the Supplies under Order andextend for so long as Buyer has contractual obligations to any customer. Thelicense is subject to 11 USC §365(n) and other Law, as an executoryagreement under which Buyer has license rights to Seller’s IntellectualProperty, and is supplementary to any other rights of Buyer under the Order andany other agreement with Seller.

 

(d)                   Ownership

 

Any developments or work product that are created byor on behalf of Seller in the performance of an Order, whether or not they maybe protected by patent, copyright or otherwise, shall be work for hire and bethe exclusive property of Buyer, and to the extent any such developments orwork product do not qualify as work for hire, Seller assigns all rights in suchdevelopments or work product to Buyer and shall execute such further documentsas may be necessary to record or otherwise enforce Buyer’s rights thereinincluding patent, copyright, trademark or other intellectual property rights,and all related expenses shall be paid by Buyer. Seller hereby appoints Buyeras its attorney-in-fact to execute assignments of, and register all rights to,such developments and work product. Seller acknowledges that Buyer has asubstantial interest in ensuring that the developments and work product areassigned to Buyer and that revocation of the appointment of attorney-in-factwould be inequitable.

 

(e)                   SubcontractorObligations

 

Seller shall ensure that the terms of its contractswith its subcontractors and employees are consistent with the terms of thisSection.

 

19.*         **ProprietaryInformation*

 

(a)                   Buyer’sInformation

 

Any information or knowledge clearly marked to beconfidential which Buyer may have disclosed or may hereafter disclose to Sellerin connection with the Order (including but not limited to the terms of theOrder) and any and all services to be rendered and/or work

 

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to be performed pursuant to the Order is and shallbe deemed confidential and proprietary information (collectively, “ProprietaryInformation”) of Buyer. Seller shall not, without authorization in writing fromBuyer, use (except as necessary to the performance of the Order), communicateor disclose the confidential and proprietary information of Buyer or use suchinformation for any purpose other than to perform its obligations under theOrder. Seller shall safeguard the confidential and proprietary information ofBuyer by using reasonable efforts, and in any event no less effort than Selleruses in the protection of its own proprietary information of a similar nature,to prevent its disclosure to third parties. Seller shall cause its employees,“contractors”, officers, directors, agents and representatives to be bound byand comply with the foregoing restrictions regarding the use or disclosure ofsuch confidential and proprietary information. Seller shall not assert anyclaims with respect to any technical information which Seller shall havedisclosed or may hereafter disclose to Buyer in connection with the Supplies.

 

(b)                   Limitations onBuyer’s Information

 

The restrictions and obligations of Section 19(a) donot apply to information that: *(i) *isalready publicly known at the time of its disclosure by Buyer; *(ii) *after disclosure by Buyerbecomes publicly known through no fault of Seller; or *(iii) *Seller can establish by writtendocumentation was properly in its possession prior to disclosure by Buyer orwas independently developed by Seller without use of or reference to Buyer’sinformation. Notwithstanding anything to the contrary in these Terms, anyconfidentiality or non-disclosure agreement between the parties that predatesthe Order will remain in effect except as expressly modified by the Order, andto the extent of a conflict between the express terms of such an agreement andthis Section, the terms of that agreement will control.

 

(c)                   Ownership

 

All documents containing proprietary informationrelating to the Supplies produced or acquired by Seller under an Order shallbelong to Buyer and Seller shall execute documents confirming ownership toBuyer. All drawings, know-how, and confidential information supplied to Sellerby Buyer and all rights therein will remain the property of Buyer and shall bekept confidential by Seller.

 

(d)                   Return

 

Seller shall, within five business days of Buyer’srequest or the expiration or termination of Order, return all confidential andproprietary information (including all copies, notes and/or extracts thereof).

 

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20.*         **Insurance;Waiver of Liens*

 

(a)                   Insurance

 

Seller shall furnish an insurance carrier’scertificate showing that Seller has adequate insurance coverage in thefollowing minimum amounts: workmen’s compensation – statutory limits forjurisdictions in which work is to be performed; employer’s liability - $1,000,000;general liability including premises, operations, independent contractors, andcontractual liability $10,000,000 single limit; owned and non-owned automotiveliability – bodily injury $5,000,000 per person and $10,000,000 per occurrence;professional liability if professional services are included in Suppliers -$5,000,000; and broad form property damage on premises and in transit -$5,000,000; and products and completed operations - $10,000,000. Seller waivessubrogation against Buyer. All policies must provide primary non-contributorycoverage. Deductibles and co-insurance obligations of Seller shall be limitedto 1% of the amount of the coverages and shall be paid by Seller. All policiesshall be issued by an insurer with an AM Best rating of A- or better licensedto do business in the state, province, and country where Buyer shall use andsell the Supplies. Liability coverage shall include products, completedoperations and (if available) recall. Buyer, each Credit Provider and theSecured Party shall be named as an additional insured under the policies andthe acts of Seller contrary to policy provisions shall not be attributable toBuyer, any Credit Provider or the Secured Party. Seller shall furnish to Buyera Certificate of Insurance completed by its insurance carrier(s) certifyingthat the required insurance coverages are in effect and will not be voided,canceled or materially changes until 30 days after prior written notice hasbeen delivered to Buyer and the Secured Party. The certificate must set forththe amount of each coverage, number of policy, date of expiration and buyers asan additional insured. If Seller is a self-insurer of works compensationliability, Seller shall furnish Buyer a certificate of the Department of Labor,or similarly government authority of the jurisdiction in which any labor is tobe performed approving the self-insurance. The purchase of such insurancecoverage or the furnishing of a certificate shall not be a satisfaction ofSeller’s liability hereunder, or in any way modify Seller’s obligation toindemnify Buyer.

 

(b)                   Waiver of Lien

 

Seller hereby waives all mechanics’ liens and claimsand agrees that non shall be filed or maintained against Buyer’s premises orSupplies on account of any Supplies and shall cause all its subcontractors,material men and suppliers (and subcontractors of such parties) to providesimilar waivers and agreements in form satisfactory to Buyer.

 

21.*         **ExcusableDelay*

 

(a)                   ExcusedPerformance

 

Any delay or failure of either party to perform itsobligations will be excused for up to 30 days if and to the extent that theparty is unable to perform due to an event or occurrence beyond its reasonablecontrol and without its fault or negligence, such as: acts of God;restrictions, prohibitions, priorities or allocations imposed or actions takenby a governmental authority; embargoes; fires; explosions; natural disasters;riots; wars;

 

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sabotage; or court injunction or order (collectively“Excusable Delay”). However, in no event will Seller’s performance be excusedby: *(i) *the change in costor availability of materials, components or services based on marketconditions, supplier actions, labor disruptions or contract disputes; *(ii) *Seller’s financial distress; or *(iii) *any labor strike or other labordisruption applicable to Seller or to any of its subcontractors or suppliers.At the end of the 30 days, Buyer may terminate the Order as a termination forconvenience.

 

(b)                   Notice

 

Seller shall immediately give written notice toBuyer of any event or occurrence that threatens to delay or actually delaysSeller’s performance under the Order. Such notice shall include all relevantinformation with respect to such threat, including the possible duration andimpact of a delay. In addition, Seller shall notify Buyer in writing: *(i) *at least 60 days prior to theexpiration of any labor contract or collective agreement; and *(ii) *as soon as Seller becomes awareof any actual or threatened labor strike or other labor disruption; in eachcase as may be applicable to Seller or to any of its subcontractors orsuppliers that are engaged in manufacturing or providing goods or services toSeller in connection with Seller’s obligations under the Order.

 

(c)                   Mitigation

 

Seller, at its expense, shall use its best effortsto mitigate any adverse effects or costs to Buyer due to any actual orpotential delay, including:*(i) *theimplementation of a production contingency plan; and *(ii) *upon Buyer’s express written authorization,increasing Seller’s inventory of Supplies to a level sufficient to sustaindeliveries during such delay. Seller shall notify Buyer immediately of anyactual or potential labor dispute that delaying or threatening to delay timelyperformance of the Order, and will include all relevant information to Buyer.Seller shall notify Buyer in writing six months in advance of the expiration ofany labor contract. Prior to the expiration of any labor contract of Seller,Seller shall establish, at its expense, a 40-working day inventory of Suppliesin a neutral warehouse site at least 50 miles from Seller’s manufacturinglocations. Such supply of Supplies shall be in place at least ten working daysprior to the expiration of any labor contract.

 

(d)                   Buyer’s Rights

 

During any delay or failure to perform by Seller,Buyer may at its option and at Seller’s expense: *(i) *purchase Supplies from other sources and reduce itsschedules to Seller by such quantities, without liability to Seller; *(ii) *require Seller to deliver toBuyer at Buyer’s expense all finished goods, work in process and parts andmaterials produced or acquired for work under the Order; or *(iii) *have Seller provide Suppliesfrom other sources in quantities and at a time requested by Buyer and at theprice set forth in the Order. In addition, Seller at its expense shall take allnecessary actions to ensure the

 

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supply of Supplies to Buyer for a period of at least40 days during any anticipated labor disruption or resulting from theexpiration of Seller’s labor contracts.

 

22.*         **Buyer’sLiability*

 

(a)                   Limitation ofLiability

 

Buyer’s sole liability and Seller’s exclusiveremedies under the Order (including its termination, expiration orcancellation) is to pay for the Supplies in accordance with Section 4(c) andto pay the specific termination related amounts described in Sections 14(e) and14(h).

 

(b)                   ExcludedLiabilities

 

In no event shall either party be liable foranticipated profits, interest, penalties or incidental, consequential,punitive, multiple, or exemplary damages or liabilities in connection withOrder, whether for breach of contract, late payment, property damage, personalinjury, illness, or death or otherwise.

 

23.*         **Limitationon Assignment and Subcontracting*

 

(a)                   LimitedAssignment

 

The Order is issued to Seller, in reliance upon itspersonal performance of the obligations. Without prior written consent of Buyerwhich shall not be unreasonably withheld, Seller may not: *(i) *assign the Order or delegate theperformance of its duties hereunder; or *(ii) *assignany accounts receivable from Buyer to third parties.

 

(b)                   Liability forSeller’s Subcontractors

 

Seller shall ensure that the terms of its contractswith its sub-suppliers and subcontractors provide Buyer with all of the rightsspecified in the Order.

 

(c)                   Retention ofSeller’s Liability

 

Any subcontracting, assignment or delegation doesnot relieve Seller of any responsibility under the Order.

 

24.*         **Compliancewith Laws*

 

Seller shall comply with all applicable laws, rules,regulations, ordinances or other requirements of any national, state,provincial, local, multi-national or international body (collectively “Laws”)relating to the manufacture, sale, delivery and use of the Supplies. Uponrequest, Seller will submit to Buyer evidence of such compliance.

 

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25.*         **ForeignPurchases*

 

The following applies to all transactions involvingSupplies to be imported into the country in which Seller’s place of finaldelivery is located:

 

(a)                   Buyer’sImportation Rights

 

Buyer shall not be a party to the importation of theSupplies, the transaction(s) represented by an Order will be consummatedsubsequent to importation, and Seller will neither cause nor permit Buyer’sname to be shown as “Importer of Record” on any customs declaration.

 

(b)                   Customs Forms

 

Upon request and where applicable, Seller shallprovide Buyer and/or its designee all properly executed customs forms requiredby law for export and import of the Supplies. Upon request, Seller shallfurnish promptly all documents required for customs drawback purposes, properlycompleted in accordance with government regulations applicable thereto. Unlessotherwise stated in the Order, all customs drawback will be credited to Buyer.

 

(c)                   OtherCertificates

 

Upon request, Seller shall furnish promptly to Buyercertificates of local value added and certificates of origin in accordance withapplicable government regulations.

 

(d)                   Duties andDrawback Rights

 

The price for goods includes, and Buyer shall own,all related export and import customs duties and import drawback rights, ifany, including rights developed by substitution and rights that may be acquiredfrom Seller’s supplier(s) that Seller can transfer to Buyer. Buyer shallinclude such provisions in all its subcontracts.

 

26.*         **BuyerFinancing*

 

(a)                   SecurityInterest

 

Buyer intends to assign ascollateral, and grant a security interest in, all of Buyer’s rights under theOrder and all Buyer’s Property to (i) the United States Department ofEnergy (“DOE”) and the Federal Financing Bank (“FFB”), acting pursuant to theAdvanced Technology Vehicles Manufacturing Incentive Program (“ATVM”)administered by DOE, or (ii) a collateral agent or common securityrepresentative (who has been so designated by DOE with notice of suchdesignation having been provided to Seller by, or on behalf of, DOE) acting forDOE, FFB, and certain other credit providers (DOE or, if a designation hasoccurred pursuant to clause (ii) above, such collateral agent

 

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or common security representative, the “SecuredParty”) to secure certain loans and other credit extensions to be made fromtime to time by DOE, FFB or certain other lenders (DOE, FFB and such otherlenders, collectively, the “Credit Providers”) to Buyer. This collateralassignment shall not in any way affect Buyer’s duty to Seller to performBuyer’s obligations under the Order. Seller acknowledges and consents to thiscollateral assignment and agrees to execute such additional consents andwaivers as the Secured Party (or its representative) may reasonably request inorder to evidence and perfect the Secured Party’s lien. Seller also agrees tonotify the Secured Party prior to exercising any right it might have to suspendor terminate this Order because of acts of Buyer and provide the Secured Partya reasonable period to cure [(such period to be in any event a period of notless than 60 days after the Secured Party receives notice of Seller’s intendedsuspension or termination)] the non-performance permitting the Seller tosuspend or terminate the Order. Seller agrees to accept performance or cure bya Credit Provider, the Secured Party (or their representatives) as performanceor cure by Buyer and satisfaction by Buyer of its obligations under the Order.Notwithstanding any such cure, neither the Credit Providers, the Secured Partyor their representatives will be deemed to have assumed any of Buyer’sobligations under the Order unless such person expressly agrees in writing withthe Seller to do so. Seller acknowledges that the Secured Party is a thirdparty beneficiary of Seller’s obligations under the Order and shall permit DOEor the Secured Party (or their representatives) to exercise the same inspectionrights and access to Buyer’s Property as are available to Buyer under Section 15(b) aswell as to exercise all of the other rights of Buyer under the Order. DOE andthe Secured Party (or their representatives) and Buyer shall each be entitledto exercise all rights of Buyer under the Order unless the Secured Partynotifies Seller that such rights may only be exercised by DOE, the SecuredParty and their representatives. Should the Secured Party (or itsrepresentative) exercise its right to foreclose upon its security interest inthe Order, it may transfer all of Buyer’s rights and obligations under theOrder and any of Buyer’s Property to any third party.

 

(b)                   Notices toSecured Party

 

Seller shall deliver anynotices required to be given to the Secured Party pursuant to Section 26(a) andSection 28 to: Advance Technology Vehicles Manufacturing Loan Program,United States Department of Energy, 1000 Independence Avenue, SW, Washington,DC 20585, Attention: Director ATVM Program, or such other address as theSecured Party may advise Seller from time to time.

 

27.*         **Miscellaneous*

 

(a)                   Jurisdictionand Applicable Law

 

The Order shall be interpreted and enforced inaccordance with the laws of the State of California and of the United States ofAmerica, exclusive of the choice of law rules thereof. The state courts ofCalifornia in Orange County, California or the federal courts

 

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in the district including Orange County shall haveexclusive jurisdiction and venue over any lawsuit arising out of or related tothe Goods or Order. The United Nations Convention on the International Sale ofGoods shall not apply.

 

(b)                   Waiver

 

Either party’s failure to insist on the performanceby the other party of any term or failure to exercise any right or remedyreserved in the Order, or either party’s waiver of any breach or defaulthereunder by the other party shall not, thereafter, waive any other terms,conditions, rights, remedies, breaches or defaults, whether of the same or asimilar type or not.

 

(c)                   Severability

 

If any provision of the Order, or portion of anyprovision, is declared or found to be unenforceable, the balance of the Orderor such provision shall be interpreted and enforced to the greatest extentpossible as if the unenforceable provision or portion had never been a parthereof. In particular, if any interest rate provided for herein is higher thanthat permitted by applicable law it shall automatically be amended to thehighest legal rate.

 

(d)                   Survival

 

The obligations of Seller to Buyer survivetermination of the Order, except as otherwise provided in the Order.

 

(e)                   Interpretation

 

No provision may be construed against Buyer as thedrafting party. Section headings are for convenience or reference only,and do not affect the meaning of the Order.

 

(f)                    No Publicity

 

Seller shall not advertise, publish or disclose toany third party (other than to Seller’s professional advisors on a confidentialand need-to-know basis) in any manner the fact that Seller has contracted tofurnish Buyer the Supplies covered by the Order or any terms of the Order(including prices), or use any trademarks or trade names of Buyer in any pressrelease, advertising or promotional materials, without first obtaining Buyer’swritten consent.

 

(g)                   Relationship ofParties

 

Seller and Buyer are independent contracting partiesand nothing in the Order shall make either party the employee, agent or legalrepresentative of the other for any purpose. The Order does not grant eitherparty any authority to assume or to create any obligation on

 

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behalf of or in the name of the other. Seller shallbe solely responsible for all employment and income taxes, insurance premiums,charges and other expenses it incurs in connection with its performance of theOrder, except as expressly provided in a written agreement signed by Buyer. Allemployees and agents of Seller or its respective contractors are employees oragents solely of Seller or such contractors, and not of Buyer, and are notentitled to employee benefits or other rights accorded to Buyer’s employees.Buyer is not responsible for any obligation with respect to employees or agentsof Seller or its subcontractors.

 

(h)                   Conflict ofInterest

 

Seller represents and warrants that its performanceof the Order will not in any way conflict with any continuing interests orobligations of Seller or its employees or contractors. Seller further warrantsthat while the Order is in effect, Seller and those of its employees andcontractors participating in the performance of the Order will refrain from anyactivities which could reasonably be expected to present a conflict of interestwith respect to Seller’s relationship with Buyer or its performance of theOrder.

 

28.*         **DisputeResolution*

 

(a)                   NegotiationProcess

 

(i)            Before the filing of anyclaim in any court, a party will serve on the other party to the Terms (a) writtennotice of the claim, specifying the exact amount claimed and the provision ofthe Terms or other authority for the claim; and (b) a copy of all supportingdocuments.

 

(ii)           Within 10 business daysafter service, the responding party will serve on the serving party (a) awritten response, setting out its position and specifying the Terms or otherprovisions relied on; and (b) a copy of all supporting documents.

 

(iii)          Within 5 business days afterservice of the response, the parties will meet to discuss resolution of theclaim. Each party may bring up to three people to this negotiation, at leastone of whom is a corporate officer who is not involved in the performance ofthis Agreement. The written claim notice and response and the documentsproduced, but not the subsequent discussion, are admissible in any subsequentproceeding.

 

(iv)          Copies of all notices andother documentation to be delivered to any party shall also be provided to theSecured Party in the manner provided in

 

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Section 26(b) and the Secured Party shallbe allowed to have a representative participate in any discussions ornegotiations related to the claim.

 

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