Document:

ex10-8.htm

Exhibit 10.8

 

 

 

 

 

[Certain portions of this Exhibit have been filed separately with the Securities and Exchange Commission (the “Commission”) pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  The location of each omitted portion is indicated by a series of three astericks in brackets(“[***]”)].

Purchase Agreement

between

Vestas Blades A/S

and

Zoltek Companies Inc.

No. 01012012

 

  

Page 1 of 76

  

 

Content

 

	1	Scope of Agreement 	 	4
	2	Products	 	7
	3	Logistics 	 	7
	4	Quality, Safety and Environment	 	12
	5	Warranty and Liability for Defects 	 	14
	6	Force Majeure 	 	17
	7	General Indemnification 	 	17
	8	Confidentiality 	 	18
	9	Public and Products Liability Insurance	 	19
	10	Research and Development and Intellectual Property Rights	 	19
	11	Validity and Termination of the PA	 	22
	12	Disputes and Applicable Law	 	25
	13	Miscellaneous	 	25
	14	Signatures	 	26
	 	 	 	 
	SCHEDULE 1 DEFINITIONS	 	28
	 	 	 	 
	Appendix A Products, Prices and Lead-times	 	31
	Appendix B Technical Purchase Specifications	 	35
	Appendix D Contact Diagram	 	48
	Appendix E – Sustainability	 	49
	Appendix F Non-Disclosure Agreement	 	60
	Appendix G Quality Agreement	 	66

 

  

Page 2 of 76

  

 

This Purchase Agreement (hereinafter this “Agreement” or the “PA”) is entered into between

Vestas Blades A/S (on behalf of the Vestas Group)

Hedeager 44

DK-8200 Aarhus N

Denmark

Company reg. no. 27 98 82 10

hereinafter called “VESTAS”

and

Zoltek Companies Inc.

3101 McKelvey Rd.

St. Luis, Missouri 63044

USA

Company reg. no. 00 25 63 16

hereinafter called “SUPPLIER”.

VESTAS and SUPPLIER are also hereinafter referred to individually as a “Party” and collectively as “the Parties”.

RECITALS

A. The Vestas Group develops, manufactures, supplies and services wind turbine generators (hereinafter “WTG”).

B.  SUPPLIER is a manufacturer and/or supplier of carbon fibre materials suitable for WTG applications.

C. The Parties have since 2004 cooperated in connection with a Trade Agreement signed on 6 November 2004 and subsequently under a Second Trade Agreement signed 29 May 2007 according to which VESTAS has agreed to buy and Supplier has agreed to sell certain products. These agreements are hereinafter referred to as the “Previous Agreements”.

D. Following negotiations the Parties now wishes to enter into a multiyear partnership agreement securing capacity for PAN based carbon fibres for VESTAS’ [***] [***] [***] [***] [***] [***] [***] [***] [***] (hereinafter referred to as “Products”) for VESTAS, capacity expansion at SUPPLIER and maximizing profit for both companies as well as setting out the terms and conditions under which SUPPLIER will produce and supply and VESTAS will purchase any Product ordered after the Effective Date.

E. In order to accommodate existing and future market demands technically and commercially VESTAS expects that SUPPLIER will increase the available production capacity to support Vestas' growth as well as remain the industry leader in developing low cost carbon fiber materials to be used in VESTAS WTG’s as further set out below.

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

F. SUPPLIER on its side has agreed to establish relevant regional manufacturing capacity based on the business scenarios and economical aspects presented in order to fulfil its commitments to Vestas. SUPPLIER acknowledges and agrees that failure to follow the Vestas global production footprint might result in SUPPLIER losing its [***] [***] [***] [***] [***] generally or for relevant markets.

G. Irrespective of the preferred relationship to be initiated and enhanced between the Parties, SUPPLIER fully acknowledges that [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] on any component, materials etc. Accordingly, rights and obligations in connection with this strategic partnership must necessarily be understood and structured in view hereof and indeed incorporate relevant comforts in terms of VESTAS' freedom to operate with alternative suppliers as further described in clause 1.3 below.

H. Accordingly, by entering into this strategic Purchase Agreement, the Parties wish with effect from 1 January 2012 (the “Effective Date”) to revise some of the terms and conditions which have hitherto been the basis for the cooperation.

NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained, and other good consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.

 

	
1

	
Scope of Agreement

 

	
  

	
1.1

	
Definitions

 

Definitions applicable for this PA are set out in Schedule 1 and/or in connection with individual relevant provisions below.

 

	
  

	
1.2

	
Preferred customer relationship

 

VESTAS shall during the term of this PA be the preferred customer of SUPPLIER. This shall include that the cooperation between the SUPPLIER and VESTAS shall be given absolute top priority on all levels of cooperation, including in connection with (i) daily management, (ii) bookings on SUPPLIER’s capacity, and (iii) SUPPLIER continuously giving first priority to orders, deliveries, and where relevant to remedy work and service towards VESTAS and VESTAS’ end-customers.

SUPPLIER understands that VESTAS as of the Effective Date practically as well as contractually relies on SUPPLIER for [***] [***] of its needs for the Products and has entered into this PA based on SUPPLIER’s commitment to at all times meet such needs as further set out in clause 3 below.

 

	
  

	
1.3

	
SUPPLIER [***] [***] [***]  [***] [***]

 

The Parties confirm that SUPPLIER as of the Effective Date will be a  [***] [***] [***] to VESTAS of the Products. SUPPLIER however acknowledges and agrees that VESTAS at the Effective Date has [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]  [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Further, SUPPLIER understands that it is responsible  [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

Finally, it is stressed that VESTAS will never be obliged to take delivery of Products which does not meet agreed requirements including those set out in the Technical Purchase Specification. SUPPLIER must consequently at all times have the highest focus on maintaining world-class Product- and process quality in all its manufacturing facilities as anything else will entitle VESTAS to re-consider or even terminate SUPPLIER’s [***] [***] [***] [***] [***] [***] in accordance with clause 11.2 below.

SUPPLIER may further become a supplier to VESTAS of other products provided the Parties can agree on terms and conditions for such purchase, including the capacity commitments either Party can make in relation to such other products. It is not envisaged that such supply of other products will be [***] [***] [***] [***] [***].

 

	
  

	
1.4

	
SUPPLIER’s General Obligations

 

The SUPPLIER shall, with due care and diligence, manufacture, deliver and where relevant offer technical support with regard to the Products, their functionality, quality and performance as further set out in this PA.

 

	
  

	
1.5

	
Vestas Group Members

 

This PA is made between SUPPLIER (on behalf of itself and its Affiliates and Subsidiaries) on the one side and VESTAS on behalf of its Affiliates and Subsidiaries and all existing and future companies within the Vestas Group on the other side. Accordingly, if a company within the Vestas Group should wish to deal with the SUPPLIER or any of SUPPLIER’s Subsidiaries or Affiliate the conditions of this PA are to be valid.

 

	
  

	
1.6

	
Communication and amendments

 

All amendments, changes or adjustments to this PA including any of its schedules and appendixes shall be made in writing. Appendix D sets out the individual job functions with both Parties

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

authorised to sign such amendments, changes or adjustments. Consequently, amendments, changes and adjustments to this PA shall only be valid if made in writing and signed by persons holding the job functions set out in Appendix D however in all cases respecting VESTAS’ internal rules on delegation of authority and power to bind.

As for information requests SUPPLIER shall answer ordinary technical questions in relation to installation and service from any persons within the Vestas Group directly to the person/unit from which the question came, but always with a copy to VESTAS. Constructive changes and technical discussions in guarantee and warranty cases shall be discussed only with Vestas Wind Systems A/S, Technology R&D in Denmark.

All quality related questions in respect to process qualifications, production quality requirements, process improvements, non-confirming material dispositions and surveillance auditing related questions shall be handled in accordance with the QA (Appendix G).

 

	
  

	
1.7

	
Status of the PA

 

As of the Effective Date this PA and its Appendices shall subject to the restrictions set out below constitute the entire agreement between the Parties in relation to the subject matter hereof. Thus, this PA shall prevail over all previous correspondence and documentation, all suggested terms and conditions and documents exchanged prior to the signing of this PA, signed by both Parties or by one of them, relating to this PA and its conclusion.

With effect from the Effective Date any Previous Agreements (excluding only the NDA attached to this Agreement as Appendix F) shall cease to have effect as between the Parties with respect to Products ordered after the Effective Date and all future cooperation including development and supply of any new products shall be subject to this PA and its Appendices.

The Previous Agreements shall however continue to cover rights and liabilities with regard to products ordered prior to the Effective Date irrespective of whether such products are delivered or not prior to such date. However, with respect to determination of whether Generic Defects exists under this PA cf. clause 5.3 both products ordered under the Previous Agreements and products ordered under this PA shall be included.

For the sake of clarification, agreements and other documents agreed in relation to products ordered prior to the Effective Date shall continue in full force and effect.

 

	
  

	
1.8

	
Priority of the Documents

 

The documents forming this PA are to be taken as mutually explanatory of one another. For the purposes of interpretation the priority of the documents shall be in accordance with the following sequence:

	
  

	
1.

	
The PA including the definitions set out in Schedule 1

	
  

	
2.

	
The Appendices

	
  

	
3.

	
VESTAS’ order

	
  

	
4.

	
SUPPLIER’s order confirmation or acknowledgement

  

Page 6 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

No reference to SUPPLIER’s offers, quotations, order confirmations, invoices or the like and VESTAS’ inquiries, orders or the like, nor any of SUPPLIER’s own terms and conditions of sale and delivery and VESTAS’ general terms and conditions, shall have any validity between the Parties and shall thus involve no deviation from the provisions of the present PA, unless this is agreed upon in writing by the Parties in connection with specific Contracts.

 

	
2

	
Products

 

	
  

	
2.1

	
Products

 

This PA covers the Products stated in Appendix A and all other products delivered from SUPPLIER. For the sake of good order and notwithstanding anything else set out in this PA [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

No changes in SUPPLIER’s design, manufacturing processes, quality or content of the Products and/or Product Documentation shall be taken into effect without prior agreement between the Parties.

 

	
  

	
2.2

	
Technical Purchase Specifications and Documentation

 

Technical Purchase Specifications  (“TPS”) for relevant Products setting out general requirements as to functionality and quality will on a general level be submitted by VESTAS to SUPPLIER. However, it is an essential presumption that SUPPLIER shall afford VESTAS all SUPPLIER’s experience, technical knowledge and skill to ensure that the Products are produced and delivered according to the general requirements of this PA and TPS from VESTAS.

The TPS is attached to this PA as Appendix B and shall be updated on a continuous basis by mutual agreement.

Any documentation presented to SUPPLIER, or by SUPPLIER to VESTAS, must be checked for errors and/or discrepancies to or with other documents relative to the Products. In the event SUPPLIER discovers any error or discrepancy, SUPPLIER shall immediately inform VESTAS, who shall take all necessary action to instruct the SUPPLIER accordingly. In the event that the SUPPLIER fails to immediately inform VESTAS, SUPPLIER shall be liable for all consequences, claims, costs and the like, thereof.

 

	
3

	
Logistics

 

	 	 	 	 	 
	3.1         Prices and Price Reviews	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
3.1.1

	
Agreement on Prices

 

The Parties have agreed upon the prices stated in Appendix A.

Prices are stated [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] (Incoterms 2010), unless otherwise stated in Appendix A or in a specific Contract.

Appendix A will additionally include an individual split of included transport prices.

Prices are set out in detail in Appendix A and are based on [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

Prices for the Product shall follow Appendix A for the duration of this PA and shall not be subject to change from the principles set out in Appendix A unless (i) in consequence of continuous improvements, cf. Clause 3.1.4 below, (ii) changes or modifications accepted by VESTAS and fulfilling the requirements stated in Clause 3.1.3 below, and/or (iii) in the event of special projects agreed upon by the Parties.

 

	
3.1.2

	
Currency

 

Prices are stated in the currencies specified in Appendix A.

 

	
3.1.3

	
Changes

 

If and to the extent modifications or changes of Products as approved by VESTAS include a material improvement of performance, quality and functionality of one or more of the Products and lead to documented substantial additional costs or savings for SUPPLIER, prices can be re-negotiated, irrespective of Clause 3.1.1 and 3.1.2 always provided that such changes or modifications are not fully or partly a result of SUPPLIER’s failure to fulfil its obligations under this PA.

 

	
3.1.4

	
Continuous Improvements

 

The Parties agree to work for continuous improvement of the Products, their applications and the reduction of cost in order to have the most favourable prices and conditions. VESTAS is relying on SUPPLIER’s expertise to maximise cost effectiveness, quality and reliability of the Products supplied. SUPPLIER will commit the resources reasonably necessary to achieve continuously year-over-year total cost improvement of the Products through improved efficiency, reengineering, new product development, standardisation, application optimisation, etc. The impact of total costs improvement efforts shall be reviewed on an annual basis and shall be fully mirrored in all future prices.

SUPPLIER understands that it has been chosen [***] [***] [***] [***] [***] of the Products because of its competences regarding continuous improvements and product development. Where VESTAS has been involved in the development of new products, SUPPLIER shall as a minimum grant VESTAS a first right of refusal to exclusively buy any such new products developed and manufactured by SUPPLIER for use within the wind industry. Reference is further made to clause 10.2 below.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
3.2

	
Terms of Payment and Set-off

 

Invoices shall be paid within end of month [***] [***] [***] days from delivery of said invoices to VESTAS. Payments made by VESTAS to SUPPLIER shall not release SUPPLIER of any liability or responsibility – actual or potential - in accordance with this PA nor include a waiver by VESTAS with regard to such liability or responsibility.

Without prejudice to any other remedy, which VESTAS may have under this PA or under applicable law, VESTAS shall be entitled to deduct from any amounts otherwise falling due to SUPPLIER under this PA any amount for which SUPPLIER is liable to VESTAS, irrespective of whether such amounts originates from different purchase orders regarding the Products and/or is based on other legal circumstances.

If VESTAS fails to pay by the stipulated date, SUPPLIER shall be entitled to interest from the day on which the payment was due. The rate of interest is [***] [***] [***] [***] [***] [***] [***] [***].

If VESTAS has not paid the amount due within [***] [***] [***], and this is not caused or contributed to by an act, default or omission of SUPPLIER, [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]. SUPPLIER is at all times obligated to minimise the loss incurred in relation to this Clause.

 

	
  

	
3.3

	
Supply Capacity

 

SUPPLIER commits to at all times to have sufficient capacity to manufacture and deliver Products according to VESTAS’ non-binding long-term forecast according to Appendix C (“Supply Capacity”) and that VESTAS’ orders and the fulfilment hereof at all times shall have first priority.

SUPPLIER is obligated to confirm orders and deliver in accordance with orders received from VESTAS, which are in accordance with the Supply Capacity within (3) three days.

In case SUPPLIER is not able to confirm orders within the agreed Supply Capacity, SUPPLIER shall pay liquidated damages as set forth in Clause 3.7. as if a formal Contract had been established.

 

	
  

	
3.4

	
Orders and Order Confirmations - Contracts

 

	
3.4.1

	
Contracts

 

The Parties agree that for practical/booking reasons VESTAS’ ordering and purchase of Products shall be made by the exchange of an order issued by VESTAS and an order confirmation issued by SUPPLIER (collectively a “Contract”) and that any such Contract shall be or be deemed made incorporating the terms and conditions of this PA even without this PA being referred to or attached to such Contract.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

All orders and stipulated terms of delivery are binding for SUPPLIER provided that the order is in accordance with the terms and conditions of this PA including the Supply Capacity.  Thus, an order issued within a valid Supply Capacity will thus be considered a formal Contract, despite SUPPLIER’s failure to issue an order confirmation, and any late delivery will be subject to payment of LD’s for late delivery in accordance with clause 3.7 as if a formal Contract was entered into.

Notwithstanding anything set out above, the Parties however agree that order confirmations should always be issued, also for orders placed within a valid Supply Capacity.

Deviating terms and conditions need the explicit written approval of both Parties.

 

	
3.4.2

	
Reference to VESTAS’ Order

 

SUPPLIER shall on all relevant material (order confirmation, delivery note, invoice etc.) refer to VESTAS’ order. If the invoice received by VESTAS does not refer to an order VESTAS will without delay return the invoice to SUPPLIER.

 

	
3.4.3

	
Lead-time

 

Lead-time for Product(s) is stated in Appendix A, except when otherwise agreed upon in writing for the respective Contract or in the Supply Capacity. The Parties agree that there shall be a constant focus on reducing any applicable/agreed lead times.

 

	
  

	
3.5

	
Postponement and Cancellation of Orders

 

	
3.5.1

	
Postponement

 

SUPPLIER accepts that VESTAS can postpone orders for a period of up to six (6) months without any costs or compensation to be paid by VESTAS provided that such postponement is advised four (4) weeks prior to the agreed time of delivery.

If any orders are postponed SUPPLIER shall diligently store the postponed Products at own risk.

 

	
3.5.2

	
Cancellation

 

SUPPLIER acknowledges and accepts that VESTAS may wish to cancel any part of a Contract. The Parties will agree on the cancellation costs based on SUPPLIER’s actual cancellation costs incurred as a direct result of the request for cancellation reduced to the extent reasonable possible. Cancellation costs can, however, never exceed the Direct Documented Costs related to the production of the Product.

 

	
  

	
3.6

	
Delivery

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
Terms of delivery are [***] (Incoterms 2010) [***] [***] [***] [***] [***] [***] [***] [***] [***] unless otherwise stated in Appendix A or in the specific Contract.

	
  

	
SUPPLIER understands and acknowledges that proper delivery at the agreed time of delivery is of the essence to VESTAS. Unless otherwise agreed upon the Products shall be delivered on the date and address set out in the order. Title to the Products shall pass to VESTAS at the time of delivery.

Upon request of VESTAS, SUPPLIER is obligated to deliver in accordance with this PA to appointed sub-suppliers of VESTAS. In such case, a copy of the delivery note must be forwarded to VESTAS without delay upon request of VESTAS.

 

	
  

	
3.7

	
Delayed Delivery

 

If the Products and the Product Documentation are not delivered at the time of delivery (as defined in the Contract or if SUPPLIER has failed to issue an order confirmation for orders placed within the Supply Capacity the delivery time set out in the purchase order), and this is not due to (i) an event of Force Majeure, cf. Clause 8 below, or (ii) reasons for which VESTAS in all material aspects is responsible, VESTAS is entitled to claim liquidated damages from the date on which delivery should have taken place.

The liquidated damages shall be payable at a rate of five (5) % of the Purchase Price for the whole Contract for each commenced week of delay. The liquidated damages shall not exceed sixty (60) % of the Purchase Price of the Contract.

If only part of the quantity is delayed, the liquidated damages shall be calculated on that part of the purchase price which is attributable to such part of the Products as cannot in consequence of the delay be used as intended by VESTAS.

The liquidated damages become due at VESTAS’ written demand. VESTAS shall forfeit VESTAS’ right to liquidated damages if VESTAS has not raised a claim for such damages within six (6) months after the time when delivery should have taken place.

If delay exceeds six (6) weeks VESTAS may – without prejudice to any other rights under applicable law under this PA – place orders for the delivery of the Products from an alternative supplier. Given that smaller volumes of the Products are hard to purchase separately, VESTAS will regardless of the size of the order delayed be entitled to place such alternative order for up to 500 tonnes of the Product, SUPPLIER must reimburse all additional cost incurred by VESTAS in respect of such alternative order being placed.

In addition, if the delay in delivery exceeds twelve (12) weeks VESTAS may – without prejudice to any other rights under applicable law or under this PA - by notice in writing to SUPPLIER terminate this Agreement. 

 

In the event of delay VESTAS may also demand that SUPPLIER delivers the Products by the fastest means of delivery/transport whereupon any additional delivery charges in excess of those that would apply for the usual means of delivery shall be borne by SUPPLIER.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
3.8

	
Notice of Envisaged Delay

 

If for any reason SUPPLIER envisages a delay and/or capacity problems being unavoidable or threatening in connection with serial production, SUPPLIER shall without delay notify VESTAS in respect hereof in order to agree the right priorities. Such notice shall not relieve SUPPLIER of its responsibility to deliver (and where relevant repair) on time nor prevent VESTAS from claiming compensation for losses, liquidated damages etc. all as set out in this PA.

 

	
  

	
3.9

	
Quantity

 

	
  

	
All orders must be delivered in accordance with the quantity stated in the order. Part and excess deliveries have to be agreed upon in writing between the Parties.

 

	
  

	
3.10

	
Packing

 

SUPPLIER must pack all Products in a secure way for land and sea transport, in consideration of the nature of the goods and the method of transport, but at all times in accordance with VESTAS specification. SUPPLIER is responsible for securing that the packaging fulfils international requirements including the international standards on marking (as for example on positioning, fragile or water sensitive goods). VESTAS reserves the right to approve the packing and the corrosion protection. Country of origin and taric code must be supplied to VESTAS on all Products.

In addition to any normal packaging labels, all goods must be labelled with international handling symbols according to DIN 55402 or ISO 780.

 

	
4

	
Quality, Safety and Environment

 

	
  

	
4.1

	
Quality

 

The Parties will during Q1 2012 enter into a QA substantially in a form as attached as Appendix G. The Parties thus are yet to finally agree on the specific and obligatory quality requirements and targets to be followed and complied with at all times whereas they in principle agree on the overall procedures set out in Appendix G. By signing this PA SUPPLIER thus does not agree to specific CTQ’s or specific targets for such CTQ’s but agree only that such CTQ’s and target levels are to be defined in the Q1 workshop which will precede the final execution of the QA.

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
4.2

	
Sustainability

	 

 

SUPPLIER has been introduced to VESTAS Responsible Supplier Management initiative (“RSM” as defined in Appendix E). RSM has as its main goal to ensure a general improvement across the VESTAS supplier base on the 10 areas mentioned in Appendix E as well as in relation to general issues regarding sustainability.

SUPPLIER, by signing this Agreement, acknowledges receipt of the documents and material referenced in Appendix E hereto and further agrees to meet all requirements set out in Appendix E. Moreover SUPPLIER agrees to participate in specific improvement initiatives under RSM at VESTAS’ reasonable request and at SUPPLIER’s own cost.

If SUPPLIER fails to live up to the requirements (not identified as MAJOR RISK Issues) set out in Appendix E, SUPPLIER must correct these issues within reasonable time. The Parties will in such case discuss the possible involvement of VESTAS in relevant improvement initiatives as well as the deadlines within which improvement should be implemented. Should SUPPLIER fail to meet its obligations under this provision within such reasonable time, or should SUPPLIER be in breach of the Major Risk Issues listed in Appendix E such failure will constitute material breach and will entitle VESTAS to terminate this Agreement in accordance with Clause 13.2 below with immediate effect, i.e. the thirty (30) day remedy grace period set out in Clause 13.2 shall not apply.

For the sake of good order it is stressed that VESTAS’ right to perform audits set out in Clause 4.4 below and subsequently in the QA also includes a right for VESTAS to perform audits under RSM.

 

	
  

	
4.3

	
Audits and inspection

 

SUPPLIER shall assure full and unlimited access to audits and inspections including in accordance with the QA in appendix G. Until such time as the QA is finally agreed, the below provisions on this clause 4.3 shall apply;

Subject to SUPPLIER’s rights to keep proprietary information confidential, VESTAS’ customers, customer representatives and/or type approving/certifying authorities are, together with a representative from VESTAS, entitled to carry out quality audits of SUPPLIER within relevant areas. This entitlement is subject to that the third parties concerned are not competitors to SUPPLIER, and, to the extent required by SUPPLIER, undertakes reasonable confidentiality obligations towards SUPPLIER.

An audit can be carried out as a system audit or a Product audit, or as a combination of these. Audits can be done without notification.

If, as a result of an audit or inspection it is found that any already delivered Products do not conform to the requirements, the Parties shall assess whether such non-conformities may actually or potentially cause generic defects. If this is the case VESTAS may demand that the procedure and remedial steps as described in Clause 5.4 below shall be undertaken regardless of whether a defect has in fact manifested itself in actual errors or defects in the individual delivered Products.

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
4.4

	
Traceability

 

The Parties agree that despite the fact that the QA has not yet been signed, the provisions on traceability as set out therein (Appendix G) shall apply to this PA.

 

	
  

	
4.5

	
Documentation

 

All documentation as stated in the TPS shall be maintained for fifteen (15) years in a way where it is retrievable and protected for damage such as water, fire and dust. Information stored on electronic media shall be evaluated for readability in planned sequences in order to assure the above requirements. Documentation shall be delivered to VESTAS in the required media without any delay.

 

	
  

	
4.6

	
Certification

 

SUPPLIER shall ensure that all Products and their documentation are sufficient to be approved and certified by Det Norske Veritas, Germanischer Lloyd or another certifying body/classification society as specified in the Technical Purchase Specification. If not specified otherwise the certification shall be executed in accordance with IEC WT 01.

 

	
5

	
Warranty and Liability for Defects

 

SUPPLIER shall treat all claims from the Vestas Group as though they were raised by VESTAS.

 

	
  

	
5.1

	
Scope of Warranty

 

For the period set forth below in clause 5.2 and any potential extension thereof, SUPPLIER guarantees and warrants (i) that the Products are free from defects in design, materials, workmanship and (ii) the that Products at the time of delivery comply with the requirements, description and quality stated in this PA including the Technical Purchase Specifications set forth in Appendix B, iii) that SUPPLIER conveys good title to the Products, and such Products shall be delivered free from any lawful security interest, lien or encumbrance.

SUPLIER is not liable for defects arising out of materials provided by or a design solely stipulated or solely specified by VESTAS.

SUPPLIER is not liable for defects arising from overload conditions, faulty installations and/or modifications made without SUPPLIER’S approval.

 

  

Page 14 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

SUPPLIER is not liable for defects arising from composite material or other materials used in producing the Blades or the manufacturing process employed by VESTAS.

SUPPLIER is not liable for defects arising from the design or the manufacture of the Blades.

 

	
  

	
5.2

	
Warranty Period

 

The warranty shall endure for a period of five (5) years from the date of delivery of the Products.

 

	
  

	
5.3

	
Transfer of Warranty

 

SUPPLIER confirms that in case VESTAS no longer conducts business, all rights under this warranty can be transferred/assigned to VESTAS’ end-costumers.

 

	
  

	
5.4

	
Agreed Action/Response to Defects

 

SUPPLIER shall provide full and immediate assistance including by providing all necessary personal and technical resources, in order to identify the cause of any matter, which in VESTAS' reasonable opinion may constitute a defect i.e. that the Product is later found out or discovered by either Party to have not lived up to the warranty set out in clause 5.1.

 

In case it is subsequently proven that no defect of any type is found in the Products inspected, VESTAS shall pay SUPPLIER its reasonable Direct Documented Costs incurred to provide such assistance.

 

Immediately after becoming aware of the existence or risk of a defect, SUPPLIER shall notify VESTAS and visa versa. Promptly and within five (5) working days after the date of such notice, SUPPLIER shall provide VESTAS with a preliminary report regarding the nature and extent of such defect or the risk thereof including general proposal(s) for actions.

The remedial action shall be designed so as to ensure that the defective Products meet the requirements set out in this PA. The scope of the remedial action shall be agreed upon.

After the remedial action is approved by VESTAS, the Parties shall promptly implement the remedial action in all relevant Products, which remedial steps shall be undertaken regardless of whether the defect has in fact manifested itself in actual errors or defects in the individual delivered Products.

 

A final report regarding mentioned subjects, including a time schedule indicating a proposal for necessary improvements relating to all future delivery of Products to Vestas shall be provided by SUPPLIER to VESTAS as soon as possible and no later than ten (10) weeks following the date of the abovementioned notice.

In connection with such actions, the Parties shall cooperate to ensure the most cost-efficient implementation and to minimize the involved costs. Any direct costs incurred by VESTAS, SUPPLIER or third parties in connection with such remedial actions shall be borne by SUPPLIER.

  

Page 15 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
5.5

	
Notice of Defects

 

	
  

	
VESTAS shall give SUPPLIER notice of defective Products as soon as possible after (i) the defect has been detected and (ii) reasonable and relevant measures and analyses have been conducted by or on behalf of VESTAS in order to ascertain and describe the defect.

 

	
  

	
SUPPLIER is aware that VESTAS will not upon delivery perform any testing or control measures regarding delivered Products.

 

	
  

	
5.6

	
Root Cause Analyses of any Defect

 

Whether in relation to individual defects or Generic Defects, VESTAS shall be invited to, involved in and approve, any root cause analyses in connection with any defects.

Accordingly, in connection with any defects, the Parties shall - upon VESTAS request - gather a joint team the highest and first priority of which shall be without delay (i) to agree on immediate corrective action for the Product in the production process/service/operation (ii) analyse the root cause (iii) design, verify and agree on preventive actions for ongoing production and deliveries and (iv) design, verify and agree on permanent corrective action for Products in production process/service/operation.

Both Parties shall be entitled to hire an independent expert for further assessment of the cause of the defects, always subject to final arbitration proceedings, cf. clause 14 of this PA. Both Parties shall be obliged at own costs to fully cooperate and participate in connection with such potential independent investigations.

 

	
  

	
5.7

	
Remedial Action of Defects

 

If a Defect is discovered prior to incorporation of the Products into Blades SUPPLIER shall be obliged – at its own cost and expense to:

 

	
  

	
a)

	
Deliver a replacement Product in a volume equal to the defective Products

 

	
  

	
b)

	
Cover all transportation cost for delivery of such replacement Product

 

	
  

	
c)

	
Pay compensation for any production stoppage if the defect in terms of quantity is so substantial seen in conjunction also with the delivery time for replacement products as to cause a production stop.

 

	
  

	
If a Defect is discovered after incorporation of the Products into Blades SUPPLIER shall be obliged – at its own cost and expense to:

 

	
  

	
a)

	
Deliver a replacement Product in a volume equal to the defective Products

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
b)

	
Cover all transportation cost for delivery of such replacement Product including where relevant transportation of a new Blade in replacement of such Blade where the Defect Products is incorporated as well as any cost related to replacement of the Blade, including for example crane cost.

 

	
  

	
c)

	
Cover any other Direct Documented Cost incurred

 

	
  

	
The Parties agree that defects discovered after incorporation of the Products into Blades can only be remedied by a full replacement of the relevant Blade/Blades in question.

 

	
6

	
Force Majeure

 

	
  

	
6.1

	
Definition and Consequences

 

Neither Party can be held responsible for non-fulfilment of the Agreement, provided this Party proves that this is caused by force majeure, including labour conflict involving other than ZOLTEK’ employees unless the involvement is due to national labour conflicts, fire, export and import prohibitions, unanticipated production stops caused by acts of God, currency restrictions or other obstructions beyond its control, which it could not reasonably have avoided or limited.

 

	
  

	
6.2

	
Notice

 

The Party who does not fulfil the Agreement because of force majeure is obligated without delay to inform in writing the other Party of the obstruction(s) and the implication of this for the fulfilment/performance of the Agreement. This Party is furthermore obligated loyally to co-operate in the limitation of the consequences in a force majeure situation.

 

	
  

	
6.3

	
Cancellation

 

In case the force majeure situation is not expected to be brought to a termination within six (6) months, the other Party is entitled to cancel this Agreement by written notice.

 

	
7

	
General Indemnification

 

	
  

	
7.1

	
Indemnification

 

Subject to limitations set out herein, either party (“Breaching Party”) shall indemnify and hold harmless the other party (“Other Party”) against and from (i) any breach, non-observance or non-

 

  

Page 17 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

performance by Breaching Party, its servants or agents of the provisions of this PA, and (ii) any claim, demand, proceeding, damage, cost, charge or expense due to or resulting from any negligence or breach of duty on the part of the Breaching Party, its servants or agents caused by or arising out of or in connection with the execution of this PA and/or underlying Contracts.

 

	
  

	
7.2

	
Indirect loss

 

Save as elsewhere stated in this PA, there shall be no liability for either Party towards the other Party for loss of production, loss of profit, loss of use, loss of contracts or for any consequential, financial or indirect loss whatsoever.

 

	
  

	
7.3

	
Limitation of liability

 

No exclusion or limitation of liability as set out in this PA (including in this clause 7), shall apply in the event of wilful misconduct, fraudulence or gross negligence.

No exclusion or limitation of liability as set out in this PA shall apply or have any validity in the event of any death or personal injury that is the result of the negligence of either Party or of someone for which such Party is responsible or in the event of third party claims in accordance with clause 9.2.

 

	
8

	
Confidentiality

 

	
  

	
8.1

	
Confidentiality

 

During the duration of this PA and after the termination of this PA both Parties must treat all technical documents and commercial information, which have been received from the other Party in accordance with this PA, in confidentiality. The Party who receives confidential information, is not permitted to copy the information, or disclose information to a third party or otherwise make use of the information apart from that necessary to fulfil this PA and/or agreements with VESTAS’ end-customers, or to have work carried out by SUPPLIER’s sub-suppliers after prior written approval by VESTAS. References are made to the enclosed Non-Disclosure Agreement, and/or other agreements referred to in this PA, if any, which agreements shall continue to have full effect.

 

	
  

	
8.2

	
Third Party

 

The contents of this present PA are confidential and must not be passed on to a third party during the validity of this PA or after the termination of this without mutual, written consent. This also applies to suppliers who are not affected by the PA, to the press and others.

 

  

Page 18 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
9

	
Public and Products Liability Insurance

 

	
  

	
9.1

	
Insurance

 

SUPPLIER shall maintain and keep in force adequate business and products liability insurance covering the Products and performances delivered to VESTAS.

The insurance is to be valid as long as the business co-operation continues and for a period of five (5) years hereafter. As proof of this VESTAS is entitled to demand an insurance certificate issued on name Coverage of injuries on persons or damages to property should be valid worldwide incl. USA and Canada at minimum USD 4,000,000 per injury/damage with an aggregate amount per year of no more that USD 10,000,000 and with deductibles not higher than USD 200,000. The insurance shall contain a provision stating that the insurance cannot be terminated without giving VESTAS a thirty (30) day notice containing an offer to continue coverage in respect of supplies to VESTAS either on the same terms and conditions as applicable for SUPPLIER or on terms and conditions otherwise agreed upon between VESTAS and SUPPLIER’s insurance company

Furthermore, the insurance should be expanded to cover the responsibility for damages on or losses concerning objects (incl. objects belonging to VESTAS), that SUPPLIER’s Products or performances are:

	
  

	
a)

	
made part of, mixed with or incorporated in, joint with, used for packing of or in any other way connected with,

	
  

	
b)

	
worked up with or used for working up of,

	
  

	
c)

	
used for production or working up of or any kind of handling of.

SUPPLIER’s liability is not limited to the sum insured.

 

	
  

	
9.2

	
Product Liability Claims

 

	
  

	
SUPPLIER shall assume full responsibility and liability for any product liability claims. SUPPLIER shall thus indemnify VESTAS and hold it harmless from and against all liability to third party for personal injury, property damage and other losses caused by defects in the Products delivered by SUPPLIER under this PA.

 

	
10

	
Research and Development and Intellectual Property Rights

 

	
  

	
10.1

	
Research and Development (R&D) obligations

 

The SUPPLIER acknowledges that it is a requirement of VESTAS that the SUPPLIER will participate in joint R&D projects to increase the value of the Product for VESTAS or to optimize VESTAS’ processes.

 

  

Page 19 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

The Parties agree to work for continuous improvement of the Product and/or jointly work on R&D projects relating to the Product, handling of the Product and application processes at VESTAS. The Parties will commit the resources necessary to implement the agreed projects.

Each Party can propose potential cost improvement projects and it is the Parties’ goal that such projects will be agreed each calendar year for the term of this PA. An agreed project is a project accepted by both Parties with a signed off business case. The business cases will be used to prioritize the agreed projects.

An agreed project is deemed completed when VESTAS’ releases an engineering change order for continuous production and SUPPLIER confirms its ability to support an agreed implementation schedule for such change.

Failure on the part of SUPPLIER to participate and support R&D projects will entitle VESTAS to terminate the PA in accordance with clause 11.2  in full or in part, [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

 

	
  

	
10.2

	
Intellectual Property Rights (IPR)

 

Any and all IPR furnished by either party to this PA (Owner) to the other party (Recipient) may not be used for pur­poses other than performance of this PA without specific written ap­proval of Owner. As between the Parties, Owner shall retain any IPR in and to the above-mentioned information furnished by Owner. Owner is the owner of this information and no ownership of any kind passes to Recipient by this PA. For the sake of clarity it is emphasized that VESTAS shall have full copyright to Technical Purchase Specifications, irrespective of SUPPLIER’s expected participation and responsibilities in the preparation and content hereof.

SUPPLIER will not use trademarks or trade names owned or used by the Vestas Group or pictures of installed WTG as reference in sales brochures, press releases, or any other material used for general promotion purposes, unless such material is reviewed and explicitly approved in writing by VESTAS prior to such use.

 

	
  

	
10.3

	
Product Development

 

As also further set out above the Parties foresee and mutually expect to be involved in relevant new product developments and Product upgrades. In this respect it is agreed that any future upgrade of existing Products will be effected under development programmes established under an individual Product Development Agreement (“PDA”).

 

With regard to R&D projects being successfully developed in cooperation between the Parties under an individual PDA it follows from the PDA that once a Release For Production certificate has been issued, confirming the successful development of a specific product and the release of such product for serial production, the individual PDA shall be considered as terminated with respect to such individual product.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Irrespective hereof, the Parties agree that with respect to such mutually developed products, the provisions of the PDA relating to the division, protection, ownership and enforcement of intellectual property rights, agreed exclusivity, confidentiality undertakings and provisions relating to potential license rights granted to VESTAS (and/or any other entity within the Vestas Group) shall survive the termination of the PDA and thus continue in full force in connection with subsequent cooperation under this PA.

In this connection the Parties agree that any new IPR and/or Know-how relating to the processing of carbon fibres resulting directly from the collaboration between VESTAS and SUPPLIER shall be/remain the sole and exclusive property of the inventor of said IRP and Know-how. The other Party shall be granted a perpetual, non-assignable, world-wide, royalty free license with no power to grant sub-licenses except within each Party’s respective Group to utilize said IPR within its field of business. SUPPLIER however understands that VESTAS will not grant SUPPLIER a license to use its fully owned IPR and/or Know-how for SUPPLIER’s use in supplying direct or indirect competitors of VESTAS.

If the IPR is determined to be collaborative property, in other words a co-invention with co-inventors from both VESTAS and SUPPLIER, then the IPR shall be jointly owned in equal and undivided shares with each owner granting the other Party a perpetual, non-assignable, world-wide, royalty free license with no power to grant sub-licenses except within each Party’s respective Group to utilize said IPR .

New IPR is considered co-invented or co-developed when a Party cannot document that the other Party’s contribution to New IPR was insignificant. When assessing whether a Party's contribution was insignificant all contributions in written form can be considered significant, including emails, memoranda and minutes of meetings. If a Party’s contribution to New IPR was insignificant, such New IPR shall be considered as solely developed by the Party that created the New IPR. The Parties agree that New IPR and/or know how related to the Vestas Shimoda processes such shall be deemed to be solely invented by VESTAS who shall consequently be the exclusive owner thereof. VESTAS agrees to reasonably consider any request made by SUPPLIER for the licensing of such New IPR and/or Know-how to SUPPLIER.

For the avoidance of doubt, this clause shall not apply to any IPR developed by SUPPLIER independently of this collaboration.

 

	
  

	
10.4

	
Third Party Claims

 

SUPPLIER warrants that it owns all right, title and interest in, to and under all IPR concerning the Products and/or possesses valid, transferable, irrevocable, perpetual and world-wide licenses to relevant IPR owned by third parties entitling SUPPLIER and VESTAS to exploit such third party IPR in the Products, the production process or otherwise without limitation.

If a third party asserts a claim against VESTAS based on alleged infringement of an Intellectual Property Right by the Products, SUPPLIER shall indemnify VESTAS and hold VESTAS harmless from and against any liability in claims or costs awarded in any infringement suit or action against VESTAS and SUPPLIER shall be liable for any damage suffered by VESTAS due to the infringement.

  

Page 21 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
11

	
Validity and Termination of the PA

 

	
  

	
11.1

	
Term

 

Unless otherwise provided, this PA shall be valid until the earlier of (a) termination by either Party pursuant to Clause 11.2 below (b) by way of mutual agreement in writing, or (c) termination by either Party with sixty (60) months written notice.

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

By means of example this means that if

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] 

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***];

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

([***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***])

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

For the sake of good order it is stressed that for the volumes that either Party is continuously obliged to buy or deliver during any termination period the agreed prices set out herein shall continue to apply. It is however envisaged that the Parties will agree to re-negotiate the terms of this Agreement should either Party decide to invoke its right to terminate the obligation to buy or deliver [***] [***] [***] [***] [***].

 

	
  

	
11.2

	
Termination

 

This PA can only be terminated as a result of a material breach of a material term of this PA which has not been remedied within thirty (30) days of receipt of notice from the other Party of such breach.

In addition to, and without prejudice to the generality of the rule immediately above, VESTAS may terminate the PA (i) if SUPPLIER suspends payment and/or a trustee or receiver is appointed by a court for all or a substantial portion of the assets of the Supplier, OR (ii) if SUPPLIER is wound up, files a voluntary petition in bankruptcy, is adjusted as bankruptcy and/or a court assumes jurisdiction of the assets of the SUPPLIER or its Affiliates under any relevant insolvency, OR (iii) a Change of Control situation occurs in accordance with  clause 11.3 below OR (iv) in the event SUPPLIER does not comply with the QA, including but not limited to SUPPLIER not meeting the Quality Performance Targets as set out in the QA when finally agreed, OR (v) in the event SUPPLIER does not participate and/or support R&D projects as detailed in section 10.1.

 

	
  

	
11.3

	
Change of Control

 

Both Parties have stressed the importance of full and proper performance of this PA despite any Change of Control of either Party occurring during the term of this PA. The Parties have therefore agreed as follows;

 

A Party shall promptly report to the other Party any Change of Control in writing.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Either Party shall on the sale of all or substantially all of its assets ensure that all rights and obligations hereunder are assigned in full to the buyer of any such assets, provided however that the ordinary rules on a creditor’s acceptance of a new debtor shall still apply. I.e. the buyer of all or substantially all assets belonging to a Party shall have an unconditional obligation but not a right to step into this PA.

If SUPPLIER experiences a Change a Control by a direct or indirect substantial competitor of VESTAS and such Change of Control may in the sole, reasonable opinion of VESTAS be detrimental to the existing and future business of VESTAS, VESTAS may then at its own option (i) terminate this PA immediately in full or in part or (ii) alternatively by giving twelve (12) months' written notice thereof at any time following such Change of Control irrespective of clause 11.1 and 11.2 above. If the latter option is chosen by VESTAS, supply and purchase of Products shall continue as agreed herein with the sole exception that VESTAS may at any time terminate this PA by giving a twelve (12) months written notice.

 

	
  

	
11.4

	
Consequences of Termination and Cancellation

 

The Parties are obligated to fulfil all orders, which have been placed before the termination becomes effective at the end of the termination period. Should the PA be terminated, all IPR, documents, test equipment, subsidiary material and the like, which belong to the Vestas Group, must promptly be returned to VESTAS.

Termination of the PA shall not have any effect on the obligations of SUPPLIER under existing Contracts or in relation to Clause 8 regarding confidentiality, Clause 9 regarding public and product liability, Clause 12 regarding disputes and applicable law or SUPPLIER’s obligations, including, but not limited to warranties and related covenants with regard to already delivered Products.  It is expressly understood that such obligations shall survive the termination of this PA.

If termination or cancellation is initiated by VESTAS due to SUPPLIER’s failure to comply with the obligations and responsibilities set out in this PA and/or underlying Contracts, SUPPLIER shall indemnify and hold harmless VESTAS against and from any claim, demand, proceeding, damage, cost, charge or expense due to or resulting from any negligence or breach of duty on the part of SUPPLIER, his servants or agents caused by or arising out of or in connection with the execution of this PA and/or underlying Contracts.

 

	
  

	
11.5

	
Agreement Review

 

The Parties will as a minimum meet every three (3) years after the Effective Date to discuss and agree on amending any terms and conditions of this Agreement which may during such period have become obsolete or otherwise due for revision. The Parties are not as such obliged to make any changes to the Agreement but agree to dedicate high level resources to discuss if changes are needed.

  

Page 24 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
12

	
Disputes and Applicable Law

 

	
  

	
12.1

	
Disputes

 

All disputes arising in connection with this Agreement shall be finally settled under the Rules of Arbitration of the Danish Institute of Arbitration (Copenhagen Arbitration) in Copenhagen, Denmark by one or more arbitrators appointed in accordance with the said rules, supplemented as necessary by the procedural rules of Danish Law.

Irrespective hereof VESTAS shall not be prevented from giving third party notice to SUPPLIER if VESTAS is taken to court by a customer.

 

	
  

	
12.2

	
Applicable Law

 

This Agreement shall be construed and governed in accordance with Danish law; however, the United Nations Convention on Contracts for the International Sale of Goods from 11 April 1980 (CISG) shall not apply to this Agreement.

 

	
13

	
Miscellaneous

 

	
  

	
13.1

	
Headings

 

The headings in this PA are inserted for convenience of reference only and shall not affect the interpretation of this PA.

 

	
  

	
13.2

	
Assignment

 

This PA and/or any VESTAS’ order or any claim relating to or resulting from such documents cannot be assigned, sold, transferred or pledged by SUPPLIER in any way without prior written consent from VESTAS in each and every instance.

 

	
  

	
13.3

	
Replacement Terms

 

In case this PA or any part thereof is declared invalid or unenforceable by any legitimated authority, the remainder of the PA shall continue on unchanged terms and conditions, and the Parties shall agree on replacement terms, which to the extent possible shall express the initial intention of the Parties.

  

Page 25 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
13.4

	
Annual Report

 

Once a year, SUPPLIER shall submit its annual report including financial figures to VESTAS. The report must be endorsed.

 

	
  

	
13.5

	
No Waiver

 

A Party's failure to enforce any of the provisions of this PA or any rights with respect thereto or failure to exercise any election provided for herein shall in no way be considered a waiver of such provisions, rights or elections or in any way to affect the validity of this PA. A Party's waiver or failure to enforce any of said provisions, rights or elections in any one instance shall not preclude or prejudice such Party from later enforcing or exercising the same or any other provisions, rights or elections which it may have under this PA in other instances.

 

	
  

	
13.6

	
Correspondence

 

All correspondence between the Parties concerning this PA must be in English.

 

	
14

	
Signatures

 

	
  

	
14.1

	
Validation

 

This PA is not valid unless signed by two persons from both Parties.

 

	
  

	
14.2

	
Signature

 

This PA is hereby accepted and comes into force immediately with respect to delivery of Products which takes place after 1 January 2012.

	
Lem,

	  	  	
St. Louis

	  

	/s/ Ole Preben Borup Jakobsen	 	/s/ Zsolt Rumy
	
Name Ole Preben Borup Jakobsen

Position President

 

	  	
Name Zsolt Rumy

Position Chairman and CEO

	
Vestas Blades A/S

	  	
Zoltek Companies Inc.

  

Page 26 of 76

  

 

	  

Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	/s/ Lars Naur	 	/s/ Philip L. Shell
	
Name Lars Naur

Position VP Sourcing & Procurement

 

	  	
Name Philip L. Shell

Position VP Marketing & Sales

	
Vestas Blades A/S

	  	
Zoltek Companies Inc.

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

SCHEDULE 1 DEFINITIONS

ACN means Acrylonitrile CAS 107-13-l; UN l093, which is the mail raw material used in the production of carbon fiber. Synonyms include AN, cyanoethylene, propenenitrile, VCN, vinyl cyanide, carbacryl, fumigain, and ventox.

Affiliate means any legal entity/Person controlling, being controlled by or under common control with either VESTAS or SUPPLIER respectively. As used in this definition, “controlling” means (i) with respect to a Person that is a company or corporation, the ownership, directly or indirectly through one or more intermediaries, of more than 50% of the voting rights attributable to the shares of capital stock of that company or corporation and more than 50% of all capital stock of that company or corporation; and (ii) with respect to a Person that is not a company or corporation, the ownership, directly or indirectly, of more than 50% of the equity capital of that Person and the power to direct or cause the direction of the management and policies of the Person.

Agreement means this Purchase Agreement including all Schedules, Appendixes and Exhibits.

Blade means a blade installed on the rotor of a WTG.

Change of Control means the acquisition by any person or group with a beneficial ownership or power to vote of more than fifty (50) percent of the outstanding capital stock of SUPPLIER or an Affiliate of SUPPLIER or the acquisition by any person or group of substantially all the assets of SUPPLIER.

CISG means the United Nations convention on Contracts for the International Sale of Goods dated April 1980 as updated from time to time.

[***] [***] shall be defined in accordance with Appendix A.

Contract means unless otherwise set out in clause 3 of the Agreement an order and an order confirmation for a specific purchase of Products.

[***] means  [***] [***] [***] in accordance with Incoterms 2010.

[***] means [***] [***] [***] in accordance with Incoterms 2010.

[***] [***] [***]  [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

ECB means the European Central Bank

Effective Date shall mean the date set out in Recital H.

EURIBOR means the European Interbank Offered Rate.

Force Majeure shall be defined in clause 8 of the Agreement.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

IEC WT 01 means the International Electrotechnical Commission System for Conformity Testing and Certification of Wind Turbines in effect at any time during the term of this PA.

 

IPR or Intellectual Property Rights include, but are not limited to include, ownership rights, patents, copyrights, rights of use or distribution, design rights, rights to technical documentation including the Manufacturing Documentation, descriptions, drawings and rights to confidential Information and know-how.

Major Risk shall have the meaning assigned to it in Appendix E.

MSDS means Material Safety Data Sheets.

NDA means the Non-Disclosure Agreement attached as Appendix F to this Agreement.

PA means this Purchase Agreement including all Schedules, Appendixes and Exhibits.

PAN means polyacrylonitrile.

Party means VESTAS or SUPPLIER respectively, jointly referred to as the Parties.

Previous Agreements means the Trade Agreement signed 6 November 2004 and the Second Trade Agreement signed 29 May 2007.

Product Development Agreement (PDA) means an agreement which in future may be entered into by the Parties in relation to specific development projects as further set out in clause 10.2 of the Agreement.

Products shall have the meaning ascribed to this term in Recital D.

Purchase Price means the total price for a specific order exclusive of VAT.

Product Documentation includes, without limitation such specifications, documents, drawings and manuals to be supplied together with the Product.

Products are defined as the products manufactured and delivered by SUPPLIER and listed in Appendix A meaning both new products and components for repair (the Products). Appendix A will be continuously updated by mutual agreement and new products will hence be considered as part of this PA.

“Quality Agreement” (“QA”) means the Quality Agreement to be entered into by the Parties during Q1 2012 substantially in the form set out as Appendix G.

"Quality Performance Targets" means the quality targets set out in the QA.

Responsible Supplier Management Initiative (RSM) shall have the meaning assigned to this term in clause 4 and in Appendix E.

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Subsidiary means a company, where Vestas Wind Systems A/S or VESTAS on the Vestas-side or SUPPLIER on its side is holding more than 50% of the voting shares of such company or of one that such respective company is in a position to control.

SUPPLIER means Zoltek Companies Inc. including all Affiliates and Subsidiaries.

Supply Capacity means the supply commitment by SUPPLIER at all times to have sufficient capacity to manufacture Products as agreed according to Appendix C.

Transferred Know-how is defined as all knowledge, drawings, documents, part lists, prototypes, software specifications and skills no matter form or media to be transferred by VESTAS to SUPPLIER enabling SUPPLIER to manufacture the Products.

Transferred Technology is defined as all machinery and tools to be delivered by VESTAS to SUPPLIER enabling SUPPLIER to manufacture the Products.

Technical Purchase Specification or TPS means the final and detailed product specifications –attached as Appendix B to this Agreement as updated from time to time.

VESTAS means Vestas Blades A/S and all other companies within the Vestas Group.

Vestas Group includes Vestas Wind Systems A/S, its Subsidiaries and Affiliates and their subsidiaries and affiliates in existence at any time.

WTG means Wind Turbine Generators.

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Appendix A Products, Prices and Lead-times

 

Products

 

Vestas item number 096497, delivered according to the TPS in Appendix B as updated from time to time.

 

Prices

 

It’s agreed to follow the prizing model as described in the table below

	  	
Price concepts

	  
	  	  	  	  	  	  	  	  	  
	  	
[***] [***] [***] (incoterms 2010)  [***] [***] [***] [***] [***] [***]

	  	  
	  	  	  	  	  	  	  	  	  

 

	
  

	
[***] [***]

 

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
Agreed [***] prices:

	  	
[***] [***]

	
Year

	
EUR/kg

	
USD/kg

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***] [***] [***]

	
[***]

	
[***]

 

	
  

	
[***] [***]

 

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
a.

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
·

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
a.

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

 

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	
  

	
b.

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
c.

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

	
  

	
d.

	
[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

Table 1 Calculation of [***] [***] [***] [***] [***] [***] [***] [***]

	  	  	
[***]

	
[***] [***] [***] [***] [***]

	
[***] [***] [***] [***]

	
Start of calculation interval

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***][***][***][***][***][***]

	
[***]

	  	  	  	  	  	  	  
	
[***] [***] [***] [***] [***] [***]

	
[***] [***] [***] [***]

	
Report Date

	
Low (USD)

	
High (USD)

	
Average (USD)

	
Average (EUR)

	
USD

	
EUR

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
           [***]

	
           [***]

 

Table 2 [***] [***] [***] [***] [***] [***] [***] [***]

	
[***] [***] [***]

	
[***] [***] [***] [***] [***]

	
[***] [***] [***]

	
[***] [***]

	
[***] [***]

	
From

	
To

	
USD/MT

	
EUR/MT

	
USD

	
EUR

	
USD

	
EUR

	
USD

	
EUR

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

 

Other price concepts

 

[***] (incoterms 2010) price reductions

 

If VESTAS in partly or in fully wishes to change the delivery terms from [***] (incoterms 2010) to [***] (incoterms 2010) from SUPPLIERS [***] stock, then the following figures will be deducted from the [***] (incoterms 2010) [***] [***]

Table 3 Deduction in [***] (incoterms 2010) conversion price to go to [***] (incoterms 2010) [***] [***]

 

	
Destination and transport cost

	 	
transport costs

	
Transport load in kg per truck

	
Cost per kg to be deducted from the [***] (incoterms 2010) [***] [***]

	Hungary to Spain:  Euros [***]	 
EUR

	 
[***]

	[***]	[***]

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

	 
Hungary to Lem:  Euros [***]

	 	 
[***]

	 
[***]

	 
[***]

	Hungary to Germany:  Euros  [***]	 
EUR

	 
[***]

	 
[***]

	 
[***]

	Hungary to Italy:  Euros  [***]	 	 
[***]

	 
[***]

	 
[***]

	  
	
Mexico to China:  $[***]

	
USD

	
[***]

	
[***]

	
[***]

	
Mexico to Colorado:  approx.  $[***]

	
[***]

	
[***]

	
[***]

	
Abilene to Colorado:  $[***]

	
[***]

	
[***]

	
[***]

 

Duties

 

Even though the SUPPLIER is delivering [***] (incoterms 2010) he has the obligation to always secure the lowest possible [***] (incoterms 2010) costs for VESTAS in the deliveries.

 

Transport

 

Cost for Transport is included as part of the [***] [***] and as such in the [***] [***] (Incoterms 2010) price, see also clause 3.1.1 of the PA. SUPPLIER is obligated at any given time to disclose their costs for transport for all VESTAS’ appointed places of delivery.

To minimize carbon footprint and minimize SUPPLIER’s cost of transport it is agreed to base continued deliveries on a principle of filling up the trucks/containers, thus minimizing the delivery costs.  Below table specifies the minimum order, multiple and maximum quantities per purchase order:

	
From

	
To

	
Minimum

Order Quantity

	
Multiple

Order Quantity

	
Maximum

Order Quantity

	
Hun

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Hun

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Hun

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Hun

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Abl

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Mex

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

	
Mex

	
[***]

	
[***] [***]

	
[***] [***]

	
[***] [***]

 

SUPPLIER understands and accepts that VESTAS in special cases can have specific need for lower order sizes and hereby deviate from the principle of filling up trucks/containers. A non-exhaustive list of examples could be start-up or restart of VESTAS’ production factories, sampling batches, changes in warehouse organizing etc. The timeline for a special case period is not to exceed four (4) months. The Parties will split the extra cost per kg. delivered carbon resulting from smaller order sizes.

 

Lead-times

 

SUPPLIER will deliver supplies to VESTAS out of the agreed Safety Stocks set out in Appendix C after a “First-in-first-out” (FIFO) principle.

Lead times has been agreed to follow the formula: Order confirmation time + transport time

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Table 4 Leadtime scheme:  Maximum Time to Deliver*

	
From: location of Safety Stock

	
To: Vestas sites

	
Order confirmation time (in weekdays)

	
Delivery time (in working days)

	
Total delivery time to factory (in week days

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]  [***]  [***]

	
[***]

	
[***]

	
[***]

	  	  	  	  	  

 

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

Appendix B Technical Purchase Specifications

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Purchase Agreement between Vestas Wind Systems A/S and Zoltek Companies Inc.

	

 

 

 

	 	 	 	 	 
	 	 	 	
*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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*** Appendix B, which consists of ten pages, has been omitted in its entirety and filed separately with the Commission.  Confidential treatment has been requested with respect to Appendix B..

 

	 
	 	 	 	 	 

  

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Appendix C Supply Capacity

 

Introduction – [***] [***] [***]

 

SUPPLIER’s  [***] [***] [***] [***] [***] [***] to VESTAS in this Agreement means that VESTAS will [***] [***] [***] [***] [***] [***] [***] [***] [***] subject to the exceptions set out in the PA including but not limited to clauses 1.3, 3.7 and 11.1.

SUPPLIER’s [***] [***] [***] [***] [***] does not oblige VESTAS to buy any Products from SUPPLIER [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] (subject to the above mentioned exceptions).

 

General SUPPLIER Warranties re. Capacity

 

Given SUPPLIER’s  [***] [***] [***] [***] [***] [***] to VESTAS, VESTAS will need strong and firm commitments from SUPPLIER ensuring that SUPPLIER will at all times and without delay be able to meet VESTAS demands for Products.

SUPPLIER thus warrants that it at all times has and will continue to have enough capacity to manufacture and deliver Products to VESTAS according to the Supply Capacity as further defined below. This includes an obligation to not enter into binding commitments towards other customers which may in any way endanger SUPPLIER’s deliveries to VESTAS.

Should SUPPLIER fail to live up to its commitments and warranties set out herein, VESTAS may, without any prejudice to any other rights available to VESTAS under the PA, this Appendix C and/or applicable law chose to terminate the PA in part or in full, including by terminating SUPPLIER’s  [***] [***] [***] [***] [***] [***] in full or in part.

Any delay in delivery, including any failure by SUPPLIER to deliver such quantities as are ordered by VESTAS in accordance with a valid Supply Capacity but not confirmed by SUPPLIER cf. below and section 3.4.1of the PA and will be dealt with under clause 3.7 of the PA.

 

Forecasting and supply commitment (0-12 months)

 

VESTAS will on a monthly basis release a new non-binding 12-month rolling forecast illustrating VESTAS’ forecasted Product needs to the SUPPLIER. The forecast will by VESTAS be split into regional areas (US, Europe and China) and shown on factory level. The newest Vestas released 12-month non-binding rolling forecast will be referred to as the Supply Capacity.

Limitations on SUPPLIER’s obligation to manufacture and deliver Products to VESTAS according to the Supply Capacity:

	
o

	
Within a one to twenty-six (1-26) week horizon on the Supply Capacity the SUPPLIER is obligated to meet any upward fluctuations in the Supply Capacity not exceeding the Supply Capacity + five percent (5 %).

	
o

	
Within a twenty-seven to fifty-two (27-52) week horizon on the Supply Capacity the SUPPLIER is obligated to meet any upward fluctuations in the Supply Capacity not exceeding the Supply Capacity + fifteen percent (15 %).

SUPPLIER further commits to using its best possible endeavours to at all times manufacture and deliver Products also in quantities exceeding the Supply Capacity and it’s limitations as set out in the above.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Nothing set out herein changes that fact that VESTAS at all times shall be obliged only to order in accordance with its actual demand. Downward fluctuation may thus happen as long as VESTAS meets its obligation to source [***] [***] [***] [***] [***] for Products from SUPPLIER subject to the exceptions set out in the PA including but not limited to clauses 1.3, 3.7 and 11.1.

 

Any orders issued by VESTAS within a valid Supply Capacity will be binding on SUPPLIER cf. also clause 3.3 according to which SUPPLIER has an unconditional obligation to confirm orders placed within such Supply Capacity. Thus, an order issued within a valid Supply Capacity will thus be considered a formal Contract, despite SUPPLIER’s failure to issue an order confirmation, and any late delivery will be subject to payment of LD’s for late delivery in accordance with clause 3.7 as if a formal Contract was entered into.

Notwithstanding anything set out above, the Parties however agree that order confirmations should always be issued, also for orders placed within a valid Supply Capacity.

[***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***][***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

In case VESTAS is planning to make significant changes to [***] [***] [***] whereby this is increased by more than  [***] [***] [***] [***] VESTAS must notify SUPPLIER thereof.

Upon receipt of such notice SUPPLIER has one-and-a-half (11⁄2) years to secure SUPPLIER’s ability to honour VESTAS’ changes in Supply Capacity following such change in [***] [***]. The SUPPLIER is also obligated to meet the demands for [***] [***] [***] [***] [***] [***] as described in section 1.3 of the PA and the [***] [***] [***] [***] in this appendix C.

Any failure by SUPPLIER to meet VESTAS current or future [***] [***] demand as set forth herein shall without any prejudice to any other rights available to VESTAS under the PA, this Appendix C and/or applicable law entitle VESTAS to terminate the PA in part or in full, including by terminating SUPPLIER’s  [***] [***] [***] [***] [***] [***] in full or in part.

 

	 	 	 	 	 
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[***] [***] [***] [***]

SUPPLIER is at any time obligated to hold a safety stock of Products at a minimum inventory level of [***] [***] [***] [***] of VESTAS most recent Supply Capacity (“Safety Stock”).

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

The Safety Stocks must be exclusively reserved for VESTAS and may not be used for any other purpose by the SUPPLIER. SUPPLIER must on a monthly basis account for the stock levels [***] [***] [***] [***]. The information must on a monthly basis be communicated in writing to the responsible Category Manager at VESTAS (see appendix D). The Safety Stock(s) must be clearly marked as VESTAS committed stocks and SUPPLIER accepts that this can and will be subject to announced as well as unannounced inspection by VESTAS.

The Safety Stocks must be organized by SUPPLIER after the “First-in-first-out” (FIFO) principle. Any Products withdrawn from the Safety Stocks for delivery to VESTAS must be immediately re-stocked.

The SUPPIER is obligated to [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]. The new Safety Stock must be located [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]. The SUPPLIER has one (11⁄2) year from the day of VESTAS giving [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***].

Any failure by SUPPLIER to establish and maintain the above [***] Safety Stocks shall without any prejudice to any other rights available to VESTAS under the PA, this Appendix C and/or applicable law entitle VESTAS to terminate the PA in part or in full, including by terminating SUPPLIER’s [***] [***] [***] [***] [***] [***] in full or in part.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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Appendix D Contact Diagram

	
Area

	
VESTAS

	
SUPPLIER

	
Strategic

	
Nikolaj Cederquist

D +45 9730 4866

M +45 4116 2738

niced@vestas.com

	
Philip Schell

 

 

 

	
R&D

	
Dr. Ian Stewart

D +441983201467

M +44 7918630839

iaste@vestas.com

	
Dr. Attila Lazar

+36 33 53 6022

alazar@zoltek.hu

	
Quality

	
Tanya Sørensen

D +45 9730 3523

M +45 2514 6155

tasor@vestas.com

 

	
Istvan Kinter

+ 36 33 53 6146

	  	  	  

 

  

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Appendix E – Sustainability

The requirements in this Appendix are based on the ten principles from the UN Global Compact, of which VESTAS is a signatory.

The requirements set out below are incorporated into this Agreement in order to make VESTAS’ commitment to respecting and promoting the international standards set forth in e.g. international human rights, labour and anti-corruption conventions and promoted through global multilateral initiatives such as the United Nations Global Compact, an integrated part of VESTAS’ purchasing policies.

 

1. RSM

 

Definition of RSM:

VESTAS is committed to adhering to national legislation and universally recognized standards which includes respect for health and safety, the environment, human rights, labour rights and anti-corruption and anti-bribery. Through a combination of requirements, advice and guidance in the above fields VESTAS seeks to influence and increase awareness of these standards among our supplier’s. We call this initiative ‘Responsible Supplier Management’.

The ‘Responsible Supplier Management’ initiative is about integrating health, safety, environmental and human rights and anti-corruption considerations into purchasing decisions with the aim of ensuring that not only VESTAS' production, but the whole product and the preparation thereof, is sustainable in the broadest sense. This means that when selecting and approving new or existing suppliers VESTAS will take reasonable steps that enables us to become aware of, prevent, address and develop suppliers that are facing challenges implementing our requirements.

The VESTAS Responsible Supplier Management approach is to work with suppliers to remediate any violation to the requirements set forth below and endeavour to limit exit to circumstances when a supplier is unwilling to remediate or does not have the capability to remediate.

 

2. Compliance with Laws

 

Supplementary to the provisions set out in the PA on applicable laws SUPPLIER must comply with relevant international conventions and all applicable national and/or local laws and regulations related to the RSM, including but not limited to those related to human rights and labour, immigration, health and safety and the environment in the jurisdictions where SUPPLIER produces such Products as are delivered to VESTAS as well as in the country(ies) from which they are sold.

 

3. Health and Safety

 

Health and Safety are key within VESTAS and SUPPLIER is expected to give issues regarding health and safety the highest priority.

 

  

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SUPPLIER must provide workers with a safe and healthy work environment and, where applicable, safe and healthy residential facilities. SUPPLIER must take proactive measures to prevent workplace hazards.

 

4. Environment, Materials and Chemicals

 

SUPPLIER is obligated to ensure that materials and chemicals used in Products or services delivered to VESTAS at any point in time fulfil the requirements stated in the Chemical and Material Blacklist set out in the attached Exhibit 1 to this Appendix E. The Chemical and Material Blacklist list chemicals that are either prohibited or restricted.

Chemicals and materials prohibited by applicable law or set out in the Chemical and Material Blacklist must not be present in Products or services sold to VESTAS.

Chemicals and materials that are restricted in the Chemical and Material Blacklist can only be present in products or services sold to Vestas to the extent phase out plans are in place.

The continuous updated Chemical and Material Blacklist can be found on “http://www.vestas.com/en/about-vestas/sustainability/suppliers.aspx”.

Chemicals supplied to VESTAS must be delivered with Material Safety Data Sheets (MSDS) in local language. Updates of MSDS must be sent to VESTAS.

SUPPLIER must identify and manage chemicals and other materials posing a hazard to workers and the community if released into the environment and must ensure safe handling, movement, storage, recycling or reuse, and disposal of such materials. SUPPLIER shall work to prevent accidental releases of hazardous materials and adverse environmental impacts on the local community.

SUPPLIER must monitor wastewater and solid waste generated from operations, processes and sanitation facilities and control and treat such substances in accordance with applicable law and in an environment friendly way, prior to discharge or disposal.

SUPPLIER is expected to categorize, monitor, control and treat air emissions, as required by applicable law, prior to discharge.

SUPPLIER must promote the development of an environmentally responsible behaviour.

 

5. Child Labour and Voluntary Labour

 

All labour must be voluntary. Child labour and forced, bonded, or involuntary prison labour must be abolished.

 

6. Hiring and Employment Practices

 

SUPPLIER must implement hiring practices that accurately verify that the relevant workers have the legal right to work in the country in question as well as meet applicable age requirements prior to employment. All terms and conditions of employment including, but not limited to, hiring, pay, 

 

  

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promotion, termination, and retirement must be based on an individual’s ability and willingness to do the job.

 

7. Freedom of Association and Collective Bargaining

 

SUPPLIER must respect the right of workers to choose whether to lawfully and peacefully form or join trade unions of their choosing and to bargain collectively in accordance with applicable law or practice of the country in which SUPPLIER operates.

 

8. Anti-Corruption and anti-Bribery

 

SUPPLIER shall not, and shall ensure that its employees, directors, agents or anyone acting on its behalf shall not, offer, promise or request or accept any undue advantage, whether directly or indirectly to or from (i) a public official, (ii) a political candidate, party or party official or (iii) any private sector employee (including a person who directs or works for a private sector enterprise in any capacity), in order to influence public official action, or to obtain, retain or direct business or to secure any other improper advantage in the conduct of business.

SUPPLIER shall comply with any anti-corruption laws in the country in which it carries out business or provides goods or services to VESTAS, including but not limited to compliance with the US Foreign Corrupt Practices and the English anti-corruption legislation wherever these are applicable.

SUPPLIER confirms that it has on the Effective Date of the PA or will have within reasonable time of the Effective Date of the PA implemented an effective program to counter bribery that includes code of ethics, policies and procedures, training, guidance and oversight.

 

9. Gifts and Entertainment

 

SUPPLIER shall not offer, directly or indirectly, gifts to VESTAS employees or representatives or anyone closely related to such persons except for promotional items of minimal value. Any gifts provided by SUPPLIER to VESTAS employees or representatives or anyone closely related to such persons shall always be provided in full compliance with VESTAS’ Gifts and Entertainment Policy as set out in the Vestas Code of Conduct which can be found on “www.vestas.com/en/about-vestas/sustainability/code-of-conduct”.

Hospitality such as social events, meals or entertainment may be offered if there is a clear business reason, but the costs must be kept within reasonable limits. Any travel and accommodation and other expenses linked to a hospitality event for the individuals representing VESTAS will ordinarily be paid by VESTAS and only by SUPPLIER if in full compliance with VESTAS’ Gifts and Entertainment Policy as set out in the VESTAS Code of Conduct.

The following hospitality, expenses, gifts or other favours may never be offered by the SUPPLIER:

	
  

	
·

	
Anything that would be illegal;

	
  

	
·

	
Gifts or entertainment involving parties engaged in a tender or competitive bidding process;

	
  

	
·

	
Any gift of cash or a cash equivalent;

	
  

	
·

	
Any gift or entertainment that is offered for something in return;

 

  

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·

	
Any entertainment that is potentially offensive, sexually oriented, discriminatory or otherwise conflicts with VESTAS’ values and which might harm VESTAS’ reputation

 

Further, SUPPLIER will not offer or give any gift or political contribution to or entertain any public official on behalf of VESTAS without the prior written approval of VESTAS.

 

10. Standards towards SUPPLIERS own suppliers

 

SUPPLIER shall promote the implementation of the above principles or substantially similar principles towards SUPPLIER’s sub-tier suppliers.

Major Risk Issues shall be defined as deviations to the above principles which result in severe impact to individual rights, life, safety and/or VESTAS’ reputation including but not limited to:

 

	
  

	
·

	
Systematic health and safety risk leading to fatality or disability

	
  

	
·

	
Prohibited chemicals and materials are present in Products or services delivered to VESTAS

	
  

	
·

	
Actual accident(s) or a high risk of environmental accident that affects human safety, local community or the environment to a noticeable extent

	
  

	
·

	
Waste is not managed and there is a risk of polluting the surroundings and the recipient environment

	
  

	
·

	
Employees performing involuntary work

	
  

	
·

	
Employees below the age of 15 (or higher local minimum age)

	
  

	
·

	
Systematic physical abuse in the company

	
  

	
·

	
SUPPLIER’s breach of clauses 8 or 9 in this Appendix.

  

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Exhibit 1 to Appendix E – Chemical and Material Blacklist

	
Chemical and Material Blacklist

 

Vestas System Instruction

	
 Document number:

 INS <01.12.01>

	
Writer:

<MEMOG>

	
Valid from:

2008-09-01

	
Rev.:<02>

Chemical and Material Blacklist

Limitations of the use of certain chemical compounds at Vestas Wind Systems A/S

(Chemical and Material Blacklist)

Purpose:

The purpose of this document is to avoid the use of substances, which cannot be legally applied at Vestas Wind Systems A/S or to avoid the use of undesirable substances that are constituents of the company's products. Furthermore, it is meant to ensure that undesirable substances will not be applied unless they have been thoroughly considered.

Responsibility:

Any person who introduces a new product to Vestas Wind Systems A/S is responsible for examining if the product contains one or several of the chemical compounds on the Chemical and Material Blacklist.

The inventory is divided in two:

	
1.

	
List of chemical compounds, which are not to be used at Vestas Wind Systems A/S.

	
2.

	
List of chemical compounds, which are only to be used to a limited extent at Vestas Wind Systems A/S.

  

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1.

	
Chemical compounds, which are not to be used at Vestas Wind Systems A/S

Below list shows which chemical compounds are

	
-

	
banned according to national or international legislation

	
-

	
decided as not wanted by the management at Vestas Wind Systems A/S

New products containing one or several of the chemical compounds from below list must not be applied at Vestas Wind Systems A/S.

If one of the listed chemical compounds is used in the production, a plan for termination of use of the product must be prepared. The plan must contain a date of the final termination.

The prohibition applies to any calculated use of the chemical compounds on the list. However, the prohibition does not apply in cases where the chemical compounds occur as impurities in an applied product, i.e. undesirable occurrence in very small amounts.

Any person who introduces a new product at Vestas Wind Systems A/S is responsible for checking if the product contains one or several of the chemical compounds represented on the list.

	
Group

	
Substance

	
CAS-no.

	
Toxicity classification

	
Examples of use

	
Remarks1/ reference

	
Poly-chlorinated biphenyl

Polychlorinated triphenyl

	
PCB

PCT

	
1336-36-3

12642-23-8

	
Xn; N

	
Condensator, transformer, substances in paint, sealing and plastic.

	
B/3/4/5

	 	 
Chloroform

	 
67-66-3

	 
Xn; Xi; Carc3

	 
Solvent

	 
B/3

	 	 
Tetrachloromethane

	 
56-23-5

	 
T; Carc3; N

	 
Solvent

	 
B/3/6

	 	 
1,1,1-trichloroethane

	 
71-55-6

	 
Xn; N

	 
Solvent

	 
B/3/16

	 	 
1,1,2-trichloroethane

	 
79-00-5

	 
Xn

	 
Solvent

	 
B/3

	 
Chlorinated compounds

	 
1,1,1,2-tetrachloroethane

	 
630-20-6

	 	 
Solvent

	 
B/3

	 	 
1,1,2,2-tetrachloroethane

	 
79-34-5

	 
Tx; N

	 
Solvent

	 
B/3

	 	 
Pentachloroethane

	 
76-01-7

	 
Carc3; T; N

	 
Solvent

	 
B/3

	 	 
1,1-dichloroethylene

	 
75-35-4

	 
Fx; Xn

	 
Solvent

	 
B/3

	 	 
Hexachlorethan

	 
67-72-1

	 
Xn; N

	 
Solvent for removal of impurities from molten metals, recovering metals from ores or smelting products, and improving the quality of various metals and alloys

	 
B/3

 

 

1 B- Use banned

 

  

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Alkanes, C10-C13, chloro

(short-chain chlorinated paraffins)

(SCCPs) for processing of metals

	 
85535-84-8

	 
Xn; N

	 
Processing of metals i.e. lubricants and additives

	 
B/3

	 	 
Monomethyl-tetrachlorodiphenylmethan

	 
76253-60-6

	 
N

	 
Dielectric fluid in capacitors, transformers and hydraulic fuel.

	 
B/3

	 	 
Monomethyl-dichloro-diphenyl methane

	 
Unknown

	 
N

	 
Dielectric fluid in capacitors, transformers and hydraulic fuel.

	 
B/3

	 	 
Monomethyl-dibromo-diphenyl

Methane (DBBT)

	 
99688-47-8

	 
Xn; N

	 
Dielectric fluid in capacitors, transformers and hydraulic fuel.

	 
B/3

	 	 
Mirex

	 
2385-85-5

	 
Carc

	 
Flame retardant material

	 
B/4/5

	
Organic compounds

	
Benzene in products with concentrations above 0.1 weight percent

	
71-43-2

	
F; Carc1; Mut2; T; Xn; Xi

	
Ingredient in fuel, paint, solvents, lubricants

	
B/3

	
Nonylphenol

Nonylphenol ethoxylate

The ban does not apply to epoxy in fibreglass production

	
25154-52-3

9016-45-9

	 	
Processing of metals and fibreglass production.

Soap and lotion.

	
B/3

	
2,4,6-tri-tertbutylphenol

	
732-26-3

	 	
Additive to fuel and oil products

	
B/5

	 	 
Trichlorofluormethane (CFC-11)

	 
75-69-4

	 	 
Coolant, freon

	 
B/6

	 	 
Dichlorodifluormethane (CFC-12)

	 
75-71-8

	 	 
Coolant, freon

	 
B/6

	 	 
Trichlorotrifluorethane (CFC-113)

	 
76-13-1

	 	 
Coolant, freon

	 
B/6

	Ozone depleting 	 
Dichlorotetrafluoroethane (CFC-114)

	 
76-14-2

	 	 
Coolant, freon

	 
B/6

	
substances

	 
Chloropentafluoroethane (CFC-115)

	 
76-15-3

	 	 
Coolant, freon

	 
B/6

	 	 
Bromochlorodifluoromethane (halon-1211)

	 
353-59-3

	 	 
Flame retardant material

	 
B/6

	 	 
Trifluorobromomethane (halon-1301)

	 
75-63-8

	 	 
Flame retardant material

	 
B/6

	 
I.e. CFC, Halons,

HBFC, HCFC, etc.)	 
Dibromotetrafluoroethane (halon-2402)

	 
124-73-2

	 	 
Flame retardant material

	 
B/6

	
HCFC’s

	 
Hydrobromofluorocarbon (HBFC)

	 
Several Options

	 	 	 
B/6

  

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Bromochloromethane

	 
74-97-5

	 	 
Flame retardant material

	 
B/6

	 	 
Methyl bromide

	 
74-83-9

	 	 
Flame retardant material

	 
B/6

	 	 
Chlorodifluoromethane (HCFC-22)

	 
75-45-6

	 	 
Coolant

	 
B/6

	 	 
Dichlorotrifluoroethane (HCFC-123)

	 
306-83-2

	 	 
Coolant

	 
B/6

	 	 
Dichlorofluoroethane (HCFC-141)

	 
1717-00-6

	 
N

	 
Coolant

	 
B/6

	 	 
Chlorodifluoroethane (HCFC-142b)

	 
75-68-3

	 	 
Coolant

	 
B/6

	
Polybrominated biphenyls

	
Polybrominated biphenyls (PBB)

	
59536-65-1

	 	
Flame retardant chemical used in plastics

	
B/3/5

	
Diphenyl ether,

polybromo

derivative

	
Diphenyl ether, Penta-

bromo derivative

and

octabromo derivative

	
32534-81-9

 

32536-52-0

	
Xn, N

 

T

	
Fire retardant in plastics, rubber, and electrical goods.

	
B/3/5

	
Asbestos fibres

	
Asbestos

	
12001-28-4

12001-29-5

12172-73-5

132207-32-0

1332-21-4

77536-66-4

77536-67-5

77536-68-6

 

	
Carc1;T

	
Brakes, insulating material, cement

	
B/3/5

	
Heavy metals

	
Lead – The ban does not apply to electrical equipment for the wind turbine and anti corrosive paint

	
Several options

	  	
Brake lining, plastic tubes, lubricant, electric and electronic components

	
FB/B/1

 

	
Mercury compounds

 

 

	
Several options

	  	
Compounds for preventing fouling by micro-organisms, plants or animals of

submerged appliances and

equipment

	
B/3

	
Arsenic compounds

 

	
Several options

	  	
Compounds for preventing fouling by micro-organisms, plants or animals of

submerged appliances and

equipment

	
B/3

	
Cadmium compounds -

	 	  	 	 

 

  

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	 	The ban does not apply to electrical contacts in any sector of 
use, on account of the reliability

required of the apparatus on which

they are installed

	Several options	 	Color to finished plastic products and paints	B/3
	 	 
Chrome VI in cement and cement-containing

preparations in concentrations above 0.0002% of the total dry weight of the cement.

	 
Several options

	 	 
Cement and cement-containing preparations

	 
B/3

	
Organostannic compounds

	
Organostannic compounds

	
Several options

	  	
Compounds for preventing fouling by micro-organisms, plants or animals of

submerged appliances and

equipment

	
B/3

Table 1: Chemical compounds, which are not to be used at Vestas Wind Systems A/S

 

	
2.

	
Chemical compounds, which are only to be used to a limited extent at Vestas Wind Systems A/S

This list contains chemical compounds, which:

	
-

	
are expected to become banned within the near future

The use of products that contain one or several of the chemical compounds on the below list must be controlled at Vestas Wind Systems A/S. Furthermore, more gentle alternatives regarding safety and environment should be searched for when it is considered technically and financially justifiable.

Before use of a product containing one or several of the chemical compounds on the list, it must be evaluated if it is possible to use an alternative, which is gentler. This evaluation should be conducted in corporation with the BU QSE department and approved by the BU President.

The evaluation shall include:

	
-

	
Name of responsible person at Vestas Wind Systems A/S

	
-

	
Chemical compound

	
-

	
Description of the product that contains the chemical

	
  

	
-

	
Concentration of the chemical

	
  

	
-

	
Estimated quantity per year

	
  

	
-

	
Where is the product used (Dept., BU)

 

  

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-

	
What is the product used for

 

	
-

	
Name of the supplier/manufacture (one evaluation per. Supplier/manufacture)

	
-

	
The reason for the chemical to be in the product

	
-

	
Description of the actions taken to substitute the chemical

 

The approved evaluation is to be sent to Group HSE.

Any person who introduces a new product at Vestas Wind Systems A/S is responsible for examining if the product contains one or several of the chemical compounds on the list and if this is the case, the person must initiate an assessment of the possibility of substituting the product with a gentler alternative.

	
Group

	
Substance

	
CAS-no.

	
Toxicity classification

	
Examples of use

	
Remark2/ reference

	
Metalline lead and chemical lead compounds

	
Lead – the group only contains electrical equipment for the wind turbine and anti corrosive paint

	
Several options

	  	
Electronic equipment, anti corrosive  paint

	
FB/B/1

 

	
Electric and electronic components

	
Polybrominated biphenyl (PBB)

	
Several options

	  	
Flame retardant

	
FB/2

	
Polybrominated diphenyl ether (PBDE)

	
Several options

	  	
Flame retardant

	
FB/2

	
Cadmium

	
Several options

	  	
Several options

	
FB/2

	
Hexavalent

chromium

	
Several options

	  	
Several options

	
FB/2

	
Chemical compounds labelled mutagenic, carcinogenic, toxic or toxic to reproduction

	  	
Several options

	  	  	  

Table 2: Chemical compounds for which the use must be limited at Vestas Wind Systems A/S.

2 FB = Future ban.

 

  

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References:

	
1.

	
Miljø- og Energiministeriets bek. nr. 1082 af 13. september 2007 om forbud mod import og salg af produkter, der indeholder bly. (The Danish Ministry of Environment and Energy’s regulation no. 1082 of 13 September 2007 on banned import and sale of plumbiferous products.)

	
2.

	
EUROPA-PARLAMENTETS OG RÅDETS DIREKTIV 2002/95/EF af 27. januar 2003 om begrænsning af anvendelsen af visse farlige stoffer i elektrisk og elektronisk udstyr. (The European Parliament and Council’s regulation 2002/95/EF of 27 January 2003 on limitation of the use of certain harmful substances in electric and electronic equipment.)

	
3.

	
Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC

	
4.

	
STOCKHOLM CONVENTION ON PERSISTENT ORGANIC POLLUTANTS (POPs)

	
5.

	
ROTTERDAM CONVENTION, PIC CIRCULAR XXV – June 2007

	
6.

	
The Montreal Protocol on Substances that Deplete the Ozone Layer

 

  

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Appendix F Non-Disclosure Agreement

 

NON-DISCLOSURE AGREEMENT

This non-disclosure agreement (the “Agreement”) is made by and between

Vestas Wind Systems A/S, Hedeager 44, DK-8200 Aarhus N, Denmark, reg. no. 10403782 and Vestas Blades A/S Hedeager 44, DK-8200 Aarhus N, Denmark reg. no. 27988210 (“Vestas”)

and

Zoltek Companies Inc., 3101 McKelvey Rd. St. Luis, Missouri 63044, USA reg. no. 00256316,  (“Zoltek”)

(hereinafter jointly referred to as the "Parties" and individually as a "Party")

 

WHEREAS

	
A.

	
Vestas is part of a group of companies engaged in the business of developing, manufacturing, supplying and servicing wind turbine generators worldwide.

	
B.

	
Zoltek is engaged in the business of manufacturing and delivering Carbon Fiber materials to the Wind Turbine Generator (“WTG”) Industry.

	
C.

	
The Parties intend to enter into a cooperation where Vestas will purchase and Zoltek deliver Products/products under a purchase agreement entered into or to be entered into between the parties”  (the “Project”).

NOW, THEREFORE the Parties hereto agree as follows:

 

	
1

	
SCOPE AND PURPOSE

 

	
1.1

	
This Agreement sets forth the rights and obligations of the Parties with respect to use, handling and protection of Confidential Information disclosed by the Parties and/or their Affiliates in connection with the Project (as defined above). For the purpose of this Agreement “Affiliate” shall mean any company which directly or indirectly (through one or more subsidiaries) (i) controls a Party; (ii) is controlled by a Party; or (iii) is controlled by the same parent company as a Party (with “control” meaning ownership of more than fifty percent (50%) of the voting stock).

 

	
1.2

	
The obligations with respect to Confidential Information placed upon the recipient Party in this Agreement shall apply to any and all Confidential Information disclosed to the recipient Party in connection with the Project, irrespective of whether such disclosure is made by or on behalf of the other Party or by or on behalf of the other Party’s Affiliates.

 

	
1.3

	
This Agreement does not transfer any interest, title or ownership in any intellectual property nor does it grant any license to any such intellectual property.

 

	
2

	
CONFIDENTIAL INFORMATION

 

  

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2.1

	
For the purpose of this Agreement “Confidential Information” shall mean any and all technical and commercial information, know-how, sensitive business and financial information, and any other information or data, including but not limited to concepts, descriptions, drawings, samples, computer software and source code, disclosed orally, visually or in writing (including electronic transfer and by any media) irrespective of whether or not the information is related to the Project, unless it is evident, due to the nature of the information, that it should not be considered sensitive.

 

	
2.2

	
Furthermore, the commercial and technical details of the relationship between the Parties as well as the contents of this Agreement shall be deemed Confidential Information.

 

	
3

	
CONFIDENTIALITY, NON-USE AND NON-EXPLOITATION

 

	
3.1

	
The recipient Party will not use or exploit Confidential Information for any pur­pose other than the Project and will keep such Confidential Information strictly confidential and not disclose it to any natural or legal person, unless the recipient Party is specifically authorized to do so by the provisions set out herein below or has received prior written approval from the disclosing Party.

 

	
3.2

	
The recipient Party shall be entitled to disclose Confidential Information to:

 

	
  

	
a)

	
those employees, directors and officers of the recipient Party and its Affiliates, who need to know in connection with the Project and have been instructed that Confidential Information must be kept confidential;

	
  

	
b)

	
consultants hired by the recipient Party or its Affiliates and working as part of the team involved in the Project, provided that such consultants (i) need to know in connection with the Project; (ii) have been instructed that Confidential Information must be kept confidential; and (iii) are bound by confidentiality obligations substantially similar to those set out in this Agreement; and

	
  

	
c)

	
external lawyers who, under the laws of the country in which they are formally registered, are subject to confidentiality obligations and required to have a third party liability insurance covering any breach of their confidentiality obligations.

 

	
3.3

	
Notwithstanding anything to the contrary in this Agreement Zoltek agrees not to disclose Confidential Information to any third party, including any Affiliates of Zoltek, that is a wind turbine manufacturer or otherwise competing directly or indirectly with Vestas or one or more of Vestas’ Affiliates.

 

	
3.4

	
Each Party shall (i) establish and maintain effective security measures to safeguard Confidential Information from access or use not authorized by this Agreement; (ii) retain any confidential information stamps or markings on such Confidential Information; and (iii) immediately notify the other Party of any suspected or actual unauthorized use or disclosure of Confidential Information.

 

	
4

	
EXCEPTIONS

 

	
4.1

	
The restrictions on use and disclosure of Confidential Information set forth in this Agreement are not applicable to any part of the Confidential Informa­tion which:

 

	
  

	
a)

	
prior to the date of disclosure was generally available to the public or subsequently becomes generally available to the public through no wrongful act on the part of the recipient Party or anyone for whom the recipient Party is responsible;

	
  

	
b)

	
prior to the date of disclosure was in the recipient Party’s pos­se­ssion (as evidenced by written records) or subse­quently has been indepen­dently developed by employees who have not had access to Confidential Informa­tion; or

 

  

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c)

	
is disclosed to the recipient Party by a third party who is lawfully in possession thereof and has a lawful right to make disclosure to the general public.

 

	
4.2

	
The restrictions on disclosure of Confidential Information set forth in this Agreement are not applicable to any part of the Confidential Informa­tion which is required to be disclosed pursuant to legislation or by order of a competent court or governmental authority, provided that the recipient Party (i) without undue delay after becoming aware of such requirement notifies the disclosing Party thereof, thus permitting the disclosing Party to seek protective order or take other appropriate legal action; (ii) only discloses that portion of the Confidential Information that is legally required to be disclosed; and (iii) exercises reasonable efforts to obtain assurance that Confidential Information, which is disclosed, receives confidential treatment.

 

	
5

	
RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION

 

	
5.1

	
Within thirty (30) days following a written request from the disclosing Party all Confidential Information (including all copies and other reproductions thereof) shall be returned to the disclosing Party or destroyed (with written confirmation of such destruction). The disclosing Party shall be entitled to make such a request at any time during the term of this Agreement, unless this would be contrary to other agreements between the Parties and/or the purpose for which the Confidential Information has been disclosed. Whether to return or destroy the Confidential Information shall be at the recipient Party’s discretion, however any tools, product samples, models, prototypes and similar items belonging to the disclosing Party shall always be returned.

 

	
5.2

	
Notwithstanding a request for return or destruction, the recipient Party shall be entitled to keep (i) any copies of the Confidential Information which the recipient Party is required by law to retain; and (ii) any electronic copies made as part of the recipient Party’s backup or archival practices.

 

	
5.3

	
If the recipient Party exercises its right to keep any copies of Confidential Information in accordance with Clause 5.2 above, any and all obligations with respect to such Confidential Information placed upon the recipient Party in this Agreement shall remain in force until the return or destruction of the Confidential Information or the expiry of this Agreement in accordance with Clause 10.1, whichever date is the latest.

 

	
6

	
NO WARRANTY

 

	
6.1

	
All Confidential Information is provided “as is” and this Agreement does not grant any warranty, guarantee, or representation with respect to any exchanged information, or its accuracy, adequacy or suitability for any particular purpose. Each Party disclaims and excludes any and all liability for damages resulting from the other Party's reliance on or use of the information provided hereunder.

 

	
7

	
EXPORT CONTROL

 

	
7.1

	
Each Party agrees to comply with all applicable export control laws and regulations. Without limiting the foregoing, and in addition to the other limitations on disclosure set out herein, each Party agrees that any transfer or disclosure of received information which requires an export license will not be made without the authority of such an export license.

 

	
8

	
BREACH

 

	
8.1

	
If the recipient Party breaches its obligations in respect of confidentiality, non-use and non-exploitation the recipient Party shall pay to the disclosing Party the sum of EUR 150,000 as liquidated damages for each

 

  

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individual breach. The disclosing Party shall be entitled to recover damages exceeding the liquidated damages in accordance with applicable law.

 

	
8.2

	
If the recipient Party breaches any of its other obligations under this Agreement the disclosing Party shall be entitled to recover damages in accordance with applicable law.

 

	
8.3

	
In addition to the remedies set out in Clauses 8.1 and 8.2 above, the disclosing Party shall be entitled to exercise any and all other rights and remedies available in case of breach, including but not limited to seeking injunctive relief.

 

	
8.4

	
The recipient Party shall be responsible and liable for disclosure and use of Confidential Information by any natural or legal person to whom the recipient Party has disclosed such Confidential Information in the same way as for its own disclosure and use. Furthermore, if a Party (the “Involving Party”) involves any third parties, including any of its Affiliates, in the Project and Confidential Information in this connection is disclosed directly to such third parties by the other Party or its Affiliates, the Involving Party shall be responsible and liable for disclosure and use of such Confidential Information by such third parties in the same way as for its own disclosure and use.

 

	
9

	
CONTACT

 

	
9.1

	
Each Party may designate in writing one or more individuals within its or­ganiz­ation as the primary contact person(s) for receiving Confidential Information.

 

	
10

	
TERM AND TERMINATION

 

	
10.1

	
This Agreement shall come into force on 01-01-2012 and shall remain in force for a period of five (5) years from the last disclosure of Confidential Information in connection with the Project.

 

	
11

	
APPLICABLE LAW AND ARBITRATION

 

	
11.1

	
This Agreement shall be governed by and construed exclusively in accordance with Danish law.

 

	
11.2

	
Any dispute arising out of or in connection with this Agreement, including any disputes regarding the existence, validity or termination thereof, shall be finally settled by arbitration arranged by The Danish Institute of Arbitration in accordance with the rules of arbitration procedure adopted by The Danish Institute of Arbitration and in force at the time when such proceedings are commenced. The place of arbitration shall be Copenhagen, Denmark. The language of the arbitration shall be English, unless otherwise agreed between the Parties. All aspects of the arbitration shall be treated as Confidential Information subject to the terms of this Agreement.

 

	
11.3

	
This arbitration clause shall not prevent a Party from seeking injunctive relief or any other interim relief from a court of competent jurisdiction.

 

	
12

	
MISCELLANEOUS

 

	
12.1

	
This Agreement contains the entire understanding between the Par­ties, super­seding all prior communications, agreements and under­standings between the Parties with respect to the subject matter of this Agreement.

 

  

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12.2

	
Delay or failure of a Party to take any action under this Agreement shall not in any way affect, limit or waive the right of that Party thereafter to enforce and demand strict compliance with each and every condition hereof, unless a waiver is made expressly and in writing.

 

	
12.3

	
No change, modification, alteration or addition to any provision of this A­gree­ment shall be binding unless in writing and signed by an au­thorized representa­tive of each Party.

 

	
12.4

	
Unless otherwise agreed, any notice given under this Agreement must be in writing and (i) delivered personally to the addressee; (ii) transmitted by recognized courier service; or (iii) transmitted by postage prepaid registered or certified mail (airmail if international), return receipt. Notice shall be deemed given upon delivery at the address of the relevant Party.

 

	
12.5

	
If any provision of this Agreement is held illegal, invalid or unenforceable in whole or in part in any jurisdiction, this shall not affect the validity or enforceability in that jurisdiction of any other provision of this Agreement or the validity or enforceability of that provision or any other provision in any other jurisdiction. The Parties shall in good faith negotiate replacement provisions which in a legal, valid and enforceable way to the nearest extent reflect the original intent of the Parties.

 

  

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IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by their duly authorized representatives3

	
Lem,

	  	  	  	  

 

	
Name Ole Preben Borup Jakobsen

Position President

 

	  	
Name Zsolt Rumy

Position Chairman and CEO

	
Vestas Blades A/S

	  	
Zoltek Companies Inc.

	
Name Lars Naur

Position VP Sourcing & Procurement

 

	  	
Name Philip L. Shell

Position VP Marketing & Sales

	
Vestas Blades A/S

	  	
Zoltek Companies Inc.

  

3 All companies that are parties to the Agreement must be added as signatories.

  

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Appendix G Quality Agreement

 

This Quality Agreement (hereinafter the "QA") is made and entered into as part of the PA between VESTAS and SUPPLIER

RECITALS

	
A.

	
VESTAS requires an experienced manufacturer that will ensure delivery of high quality products and related services achieved with the Six Sigma Methodology as necessary for the Vestas Group to meet the quality requirements and targets of its customers.

	
B.

	
The QA is a strategic part of the Vestas Group’s sourcing process and sets out quality requirements, targets, processes, methods and tools which must be applied throughout the cooperation between a supplier and VESTAS, including during the qualification, re-qualification of a potential supplier as a supplier to VESTAS and the continuous improvement of products delivered from a supplier.

	
C.

	
Accordingly, by entering into this QA, the Parties wish for the terms and conditions set out below to constitute the basis for their cooperation in achieving and keeping the agreed quality targets and continuously improving the quality of the Product(s) delivered to VESTAS.

SCOPE

This QA shall have precedence of any existing quality agreement, quality specification or similar document between the Parties (including any quality provisions in any other existing agreement between the Parties, e.g. a Purchase Agreement).

Definitions applicable for this QA are set out in Appendix 1 and/or in the individual relevant provisions of this QA.

 

	
1

	
General requirements

 

	
1.1

	
Systems and Standards

 

SUPPLIER must as a minimum be certified according to the latest edition of ISO 9001 or an equivalent system accepted by VESTAS. Compliance to the certification requirement must be demonstrated by a copy to VESTAS of the current certification and VESTAS’ access to SUPPLIERS latest ISO 9001 report or equivalent report as accepted by VESTAS.

 

  

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SUPPLIER must have carried out implementation of an Environmental Health & Safety system. The Environmental Health & Safety system must be certified according to ISO14001, OHSAS 18001 or an equivalent system accepted by VESTAS.

 

	
2

	
Vestas Supplier Management Program

 

	
2.1

	
Vestas Supply Chain Quality System

 

It is the responsibility of SUPPLIER to implement and comply with this QA, including the obligations, and targets, set out in Chapter 2 (Vestas Supplier Management Program). SUPPLIER must at all times upon request from VESTAS demonstrate compliance with the Vestas Supplier Management Program:

 

	
2.2

	
Vestas Tools and Processes

 

The following Vestas Tools and Processes constitute an integrated part of Vestas Supplier Management Program, and SUPPLIER must as part of the Vestas Supplier Management Program comply with the requirements and obligations set out herein:

	
  

	
·

	
SA (Self Assessment)

	
  

	
·

	
PA (Pre-Assessment)

	
  

	
·

	
WS (Work Shop)

	
  

	
·

	
PPAP

	
  

	
·

	
CTQ Identification and monitoring

	
  

	
·

	
ECM Process

The stages of application of the Vestas Tools and Processes are set out in section 0 below.

 

	
2.3

	
Obligations

 

Record Retention

SUPPLIER shall have a written procedure for the documentation and retention of quality data of the Product(s) and processes related to Product(s) supplied to VESTAS. The record retention period shall be a minimum of twenty (20) years unless otherwise specified by VESTAS. Records shall include, but are not limited to, product and process quality or inspections, test plans and results, material specifications and certificates of conformity. VESTAS will specifically approve the level, content and quality of the recorded quality data. Specific requirements as to component record and other additional requirements 

 

  

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on traceability may be specified in VESTAS purchase orders or the Applicable Specification. It is the responsibility of SUPPLIER to determine the appropriate storage means to meet the retention requirement and allow for timely retrieval of records.

On request from VESTAS, SUPPLIER shall share and exchange quality data records of the Product(s) and related processes.

 

Documents, Data and Reports

SUPPLIER shall throughout its cooperation with VESTAS, including during the stages of application of the Vestas Processes as described in Chapter 2.C below, provide to VESTAS copies of the documents, data and reports as required under the relevant Vestas Processes and any additional quality related documentation which in VESTAS' opinion is relevant for the assessment of SUPPLIER's production processes and/or the quality of the Product(s).

 

Traceability

SUPPLIER will at the request of VESTAS be obliged to ensure traceability on the Product(s). VESTAS will determine the traceability level required. The traceability level will be set out in the TPS The necessary bar code format to be used for the Product(s) will be determined by VESTAS in the TPS.

 

Inspection and Test Witness Requirements

VESTAS may, choose to inspect SUPPLIER’s facilities during processing, production, assembly, testing or at final inspection. Unless in the situations mentioned below, VESTAS shall give SUPPLIER a prior written notice in reasonable time before an inspection is carried out. VESTAS may carry out an inspection of SUPPLIER's facilities without prior notice if such inspection is initiated as a consequence of (i) requirement from a VESTAS customer; (ii) requirements from a public authority; or (iii) VESTAS’ suspicion of material defects or defaults in the Product(s) or SUPPLIER’s production facilities.  Additional Product specific inspections and test witness requirements may be identified in the Applicable Specifications.

 

Continuous Improvement

 

Resources and Capabilities

SUPPLIER shall commit the necessary resources and capabilities in order to achieve the Quality Performance Targets set out in section 2.4 within each relevant year. SUPPLIER acknowledges that the final goal is to reach and maintain a Sigma levels as specified in 

 

  

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appendix 2 of this QA agreement and will continuously commit the necessary resources and capabilities in order to reach this goal.

 

Performance Dialog Meetings

In order to support the continuous improvement of the Product(s), VESTAS and SUPPLIER shall meet to discuss the performance of the Product(s) and any improvement hereof. Both VESTAS and SUPPLIER shall ensure that the relevant people with the right competences participate in such meetings.

 

	
2.4

	
TARGETS

 

Quality Targets

 

SUPPLIER is required to support and improve the quality of the relevant processes and the Product(s). The SUPPLIER and VESTAS will work together on continuously improve the quality of the Products delivered

SUPPLIER acknowledges that it is a requirement of VESTAS that the Quality Performance Targets set out in Appendix 2 are achieved. The targets in Appendix 2 are the overall targets set by VESTAS. Furthermore the SUPPLIER acknowledges that the Quality Performance Targets are the level that the SUPPLIER must obtain for to hold the conversion cost prices (specified in appendix B) fixed through the period.

CTQs - and the measuring criteria in relation to CTQs - used in measuring whether SUPPLIER is achieving the Quality Performance Targets will be determined by VESTAS. If the above mentioned Quality Performance Targets at any relevant point in time are not achieved, SUPPLIER must submit to VESTAS a detailed road map on how to achieve the Quality Performance Targets within a time frame and implement any containment actions agreed with VESTAS. It is an essential precondition for achieving the Quality Performance Targets that SUPPLIER, with the assistance from VESTAS, on a continuous basis improves its production processes, procedures etc. by committing the necessary resources to carry out and implement such improvement. The Parties will agree on regular meetings between the parties necessary to (as a minimum) archive the Quality Performance targets.

Achieving the Quality Performance Targets does not relieve SUPPLIER of its obligations, including warranty obligations, under a Purchase Agreement with VESTAS.

 

  

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Continued failure on the part of SUPPLIER to meet the Quality Performance Targets will entitle VESTAS to terminate the PA in accordance with clause 11.2  in full or in part, including by revoking SUPPLIER’s [***] [***] [***] [***] [***] [***] of the Products.

 

The Parties agree that they will finish a review process of the current CTQ’s before end of the 2nd half year 2012. Current CTQ’s can be removed and new CTQ can be inserted if deemed appropriate by the Parties. The Parties will allocate the resources necessary to meet the deadline. If the Parties can’t find an agreement in the review process then the current CTQ’s will remain valid.

 

	
2.5

	
 PROCESSES, TOOLS AND METHODS

 

Supplier Approval Process

In order to qualify as a supplier to VESTAS of the Product(s), SUPPLIER must participate in - and complete to VESTAS' satisfaction - the Supplier Approval Process. The Supplier Approval Process must furthermore be followed and completed by SUPPLIER whenever a significant change takes place in SUPPLIERS production of the Product. The evaluation and decision on whether it’s a significant change or not relies with Vestas. Examples could be start of a new production SUPPLIER production plant, a new production line and/or new processes in SUPPLIERS production.

Overview:

	
Applicable Tools and Processes

	
SA

	
PA

	
WS

During the Supplier Approval Process the Self Assessment, Pre-Assessment and Work Shop will be carried out in close cooperation between SUPPLIER and VESTAS. The Supplier Approval Process may at VESTAS' discretion be applied one or more times in relation to each Product(s) and any variations hereof.

 

SA (Self Assessment)

The Self Assessment consists of a questionnaire provided by VESTAS regarding SUPPLIER’s quality systems, tools and processes which has to be filled in by SUPPLIER and delivered to VESTAS within the time frame specified by VESTAS.

 

	 	 	 	 	 
	 	 	 	*** Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.	 
	 	 	 	 	 

 

  

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PA (Pre-Assessment)

The Pre-Assessment consists of the same questionnaire as used under the Self Assessment which will be filled in by VESTAS and SUPPLIER together during a visit at SUPPLIER’s production facility(-ies).

 

 

WS (Work Shop)

The Work Shop consists of a comprehensive questionnaire regarding SUPPLIER’s quality systems, tools and processes which will be completed during a work shop between VESTAS and SUPPLIER at SUPPLIER’s production facility.

 

CTQ Identification

During the Work Shop or at a separate meeting(s) product CTQs will be defined by VESTAS and included in the Applicable Specification. VESTAS and SUPPLIER will work together to identify the process related CTQs based upon:

 

	
  

	
·

	
Process FMEA (Failure Mode & Effect Analysis) from SUPPLIER

	
  

	
·

	
SUPPLIER's process knowledge

	
  

	
·

	
Control Plan from SUPPLIER

	
  

	
·

	
Historical data and NCRs / CIM cases

The CTQ identification process will take place in connection with the Supplier Approval Process but additional CTQs may be defined at any later stage.

 

Production Part Approval Process (PPAP)

SUPPLIER must continuously be qualified for specific processes and parts. PPAP documentation has to be established whenever requested by VESTAS. Through the PPAP, SUPPLIER must demonstrate the ability to repeatedly provide quality parts in accordance with the requirements and expectations of VESTAS.

The content of the PPAP will be specified by VESTAS. Some of the key elements of a PPAP are the following:

	
  

	
·

	
PSW

	
  

	
·

	
Process Flow Chart

 

  

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·

	
P-FMEA

	
  

	
·

	
D-FMEA

	
  

	
·

	
Control Plan

	
  

	
·

	
Test Report (Dimensional, Material, and Performance)

	
  

	
·

	
Initial Process Capability Studies (CTQs)

	
  

	
·

	
Fit to Function Test (internal VESTAS)

	
  

	
·

	
MSA

However, the exact content of the PPAP will be determined by VESTAS.

 

Once a PPAP, including the PSW, has been approved by VESTAS, SUPPLIER is approved for serial delivery in relation to the specific process and parts. PPAP approval does not relieve SUPPLIER of the full liability of the Product(s) delivered to VESTAS and the responsibility, on subsequent orders, to assure that the manufacturing processes qualified during PPAP remain in control and the Product(s) or service supplied meets all requirements in the Applicable Specification.

 

Continuous Improvement and Problem Solving Processes

After SOP, SUPPLIER must work for a continuous improvement of the Product(s) delivered to VESTAS (see also Clause “continuous improvements “above). VESTAS can assist with a list and introduction of applicable tools upon request of the SUPPLIER.

CTQ Process

SUPPLIER shall measure, document, control and analyze all the product and process CTQs identified by VESTAS and such which may have been identified in connection with the Supplier Approval Process or at a later stage. SUPPLIER  shall collect the data and send them to VESTAS in a frequency and format determined by VESTAS. Although the data will be analyzed and monitored by VESTAS, SUPPLIER shall complete its own analysis and react as necessary to the data using appropriate statistical tools with Statistical Process Control (SPC) being the most important tool. VESTAS is entitled to request SUPPLIER to execute improvement projects based on the analysis. The sigma level of CTQs must be at or above the targets set out in Appendix 2 or other target levels agreed upon between VESTAS and SUPPLIER. If they are below the targets, the appropriate actions as agreed to by VESTAS must be initiated by SUPPLIER.

 

  

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ECM Process (Internal Vestas Process)

Any changes or modifications (whether such changes or modifications are made by VESTAS, SUPPLIER or a Sub-Tier Supplier) in (i) design of the Product(s), (ii) manufacturing processes directly or indirectly related or connected to the Product(s), (iii) sub-tier suppliers (i.e. any changes in relation to the supply chain related to the Product(s)), (iv) quality of the Product(s), (v) content of the Product(s), and/or (vi) any such changes mentioned in (i)-(v) above in components or materials of the Product(s), are handled through a VESTAS internal Engineering Change Management Process (“ECM”) and shall not be taken into effect prior to written agreement between the Parties. Such agreement shall be coordinated between SUPPLIER and VESTAS. Any change or modification covered by the ECM Process may in VESTAS’ sole discretion require conduction of PPAP.

VESTAS’ acceptance of changes or modifications as set out above does not change the fact that SUPPLIER towards VESTAS is solely liable for defects in the Product(s), including defects arising after and/or as a consequence of the implementation of such changes/modification.

 

To the extent the Parties have entered into an agreement regarding ECM prior to this agreement on this QA, the terms and conditions related to ECM in such prior agreement shall prevail.

 

	
3

	
Miscellaneous

 

	
3.1

	
Communication

The VESTAS Category Management Team is the primary commercial, quality and technical contact at VESTAS. SUPPLIER must identify and notify the VESTAS Category Management Team of its designated point of contact(s). VESTAS will provide SUPPLIER with a list of the members of the VESTAS Category Management Team.

 

	
3.2

	
Validity and Expiry

This QA shall remain in force until terminated by one or both of the Parties. However, this QA cannot be terminated as long as the Parties are delivering and purchasing Products unless such termination takes place by mutual agreement between the Parties.

  

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Appendix 1 - Definitions

Applicable Specification means any drawing, TPS, data sheets, etc., issued or approved by VESTAS and applicable for the Product(s)

Category Manager means a manager of a Vestas product category team with a core team consisting of members from procurement, quality and technology

Control Plan means a written description of the system for controlling production parts and processes

Cpk is the capability index based on Rbar (average range of a series of subgroups)

CTQ (Critical to Quality) means a feature whose variation has the greatest impact on the fit, performance, or service life of the Product(s)

D-FMEA – (Design Failure Mode and Effects Analysis) means a process for analysing a product's functionality associated with the design

ECM-Process (Engineering Change Management) means an internal Vestas system to handle change requests, externally usually triggered by a SCR (Supplier Change Request)

FMEA – (Failure Mode and Effects Analysis) means an analytic process for identifying potential problems in the design or manufacture of a product. The FMEA examines all the potential failure modes, the potential effects of failure and the causes for failure. An FMEA determines a risk number to prioritize design or process activities for correction or mitigation. FMEAs can be made for processes and products

Initial Process Capability Studies are part of the PPAP process and are used to demonstrate compliance with the Quality Performance Targets

KPI (Key Performance Indicators) are indicators to help the organisation to measure performance and achieve its goals

 

  

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MSA (Measurement System Analysis) means an analysis the aim of which is to ensure an effective use of any measurement system and an understanding of the sources of variation in the system

NCR (Non-Conformity Report) means a Vestas non-conformance report initiated during processing through a Vestas factory or location used by manufacturing or other functions to document non-conformances to specification, bills of material, or other documents

	
PA means

	
a) in the context of assessments “Pre-Assessment”

	
  

	
   b) in the context of procurement “Purchase Agreement”

PPAP (Production Part Approval Process) means a determination of characteristics of a representative sample and the production process of a given component or item with the belonging documentation

Ppk is the capability index based on the overall standard deviation

Process Flow Chart means a schematic representation of the process flow

Product(s) means materials, components, services and tooling to be delivered from SUPPLIER

PSW (Part Submission Warrant) means a signed document used in the PPAP process in which the Parties confirm that inspections and tests on production parts and processes show conformance to VESTAS requirements and approval for serial delivery will be given by VESTAS

Quality Performance Targets means the targets set out in Appendix 2

specifications, engineering instructions, etc.)

Sigma Level is the capability index used in Vestas. The sigma level is equal to Zbench and is calculated using the mean and the standard deviation based on Rbar (Cpk based) and the total standard deviation (Ppk based)

Six Sigma Methodology is a systematic approach to process improvement using appropriate statistical tools

 

  

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SOP (Start of serial production) means the start of serial production of the Product(s) at SUPPLIER

Stage Gate Model is a Vestas internal Project Management Tool

Supplier Approval Process means the process comprised by Clause 0

Test Reports are part of the PPAP documentation and demonstrates compliance with a set of requirements

TPS (Technical Purchase Specification) means a specification in which requirements for the Product are described

Vestas Tools and Processes means specific Vestas tailored tools and processes which have to be applied in order to being qualified as a Vestas supplier. Those tools and processes build on but go beyond Quality Management Systems like the ISO 9001

WTG means wind turbine generator

Page 76 of 76ex10-1.htm

Exhibit 10.1

 

ANNEX A

 

LITHIA MOTORS, INC.

 

2013 AMENDED AND RESTATED

STOCK INCENTIVE PLAN

 

ARTICLE I

PURPOSE OF THE PLAN

 

The purposes of this 2013 Amended and Restated Stock Incentive Plan (the “Plan”) are to attract, retain and provide incentive compensation to selected employees, directors and others who contribute to the long-term financial success of LITHIA MOTORS, INC., an Oregon corporation, and to more closely align their interests with those of the Company and its shareholders. This Plan amends and restates in its entirety the Amended and Restated 2003 Stock Incentive Plan.

 

ARTICLE II

DEFINITIONS

 

As used herein, the following definitions will apply:

 

	
  

	
(a)

	
“Acquired Company” means any corporation or other entity that becomes a majority owned subsidiary of the Company, after the Effective Date, by merger, consolidation, stock acquisition, acquisition of all or substantially all of its assets or otherwise.

 

	
  

	
(b)

	
“Authorized Shares” means the number of shares of Common Stock authorized for issuance pursuant to Section 3.1 of this Plan.

 

	
  

	
(c)

	
“Available Shares” means the number of shares of Common Stock available under this Plan at any time for future issuance under Stock Options, Stock-Settled SARs, Performance Share Awards, Restricted Share Awards or Restricted Stock Unit Awards, as provided in Section 3.2 of this Plan.

 

	
  

	
(d)

	
“Award” means a Stock Option, a SAR, a Performance Share Award, a Restricted Share Award or a Restricted Stock Unit Award pursuant to this Plan. An Award shall, for all purposes, be deemed to have been made on the later of (i) the date when the Company completes all corporate action necessary to authorize the Award or such later date as specified in such corporate action or (ii) when the maximum number of shares covered by the Award can be determined (excluding from such determination the effects of any vesting provisions including Performance Goals and excluding provisions adjusting the number of shares pursuant to Article XIII of this Plan) regardless of the date on which the written agreement evidencing the Award is prepared or executed by the Company or the Recipient.

 

  

 

  

 

	
  

	
(e)

	
“Award Period” means the period of time for which a 162(m) Performance-Based Award is made.

 

	
  

	
(f)

	
“Board of Directors” means the Board of Directors of the Company.

 

	
  

	
(g)

	
“Business Unit” means any division or other unit of the Company.

 

	
  

	
(h)

	
“Cash-Settled SAR” means the right to receive cash in an amount equal to the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the Fair Market Value of a share of Common Stock on the date of grant multiplied by the number of shares covered by the right awarded under Article VII of this Plan.

 

	
  

	
(i)

	
“Code” means the Internal Revenue Code of 1986, as amended.

 

	
  

	
(j)

	
“Committee” means the compensation committee of the Board of Directors or the Board of Directors if no such committee is then in existence.

 

	
  

	
(k)

	
“Common Stock” means the Class A Common Stock of the Company (or the shares of common stock into which the Class A Common Stock is reclassified or converted).

 

	
  

	
(l)

	
“Company” means Lithia Motors, Inc. and, unless the context requires otherwise, any successor or assignee of the Company by merger, consolidation, acquisition of all or substantially all of the assets of the Company or otherwise.

 

	
  

	
(m)

	
“Corporate Transaction” means (i) the adoption of a plan of dissolution or liquidation with respect to the Company, (ii) the consummation of any plan of exchange, merger or consolidation with one or more corporations in which the Company is not the surviving entity (other than a merger of the Company into a wholly-owned Subsidiary of the Company or a reincorporation of the Company in a different jurisdiction), or in which the security holders of the Company prior to such transaction do not receive in the transaction (or hold after consummation of the transaction) securities with voting rights with respect to the election of directors equal to 50% or more of the votes of all classes of securities of the surviving corporation or (iii) the consummation of a sale of all of substantially all of the assets of the Company following a shareholder vote on such sale. Notwithstanding the foregoing to the contrary, for purposes of Restricted Stock Unit Awards, a “Corporate Transaction” also must be a ‘change in the ownership,’ (ii) ‘a change in the effective control,’ or (ii) ‘a change in the ownership of a substantial portion of the assets’ (as those terms are defined in Section Treas. Reg. 1.409A-3(i)(5)) of the Company.

 

	
  

	
(n)

	
“Disabled” means having a mental or physical impairment that has lasted or is expected to last for a continuous period of 12 months or more and, in the Committee’s sole discretion, renders a Recipient unable to perform the duties that were assigned to the Recipient during the 12 month period prior to such determination. Notwithstanding the foregoing to the contrary, for purposes of Restricted Stock Unit Awards, “Disabled” shall be determined in accordance with the requirements of Code Section 409A.  The Committee’s determination of the existence of an individual’s disability will be effective when communicated in writing to the Recipient and will be conclusive on all of the parties.

 

  

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(o)

	
“Employee” means any person employed by the Company or a Subsidiary of the Company.

 

	
  

	
(p)

	
“Exercise Price” means the price per share at which shares of Common Stock may be purchased upon exercise of a Stock Option.

 

	
  

	
(q)

	
“Incentive Stock Option” means an ‘incentive stock option’ as defined in Section 422 of the Code.

 

	
  

	
(r)

	
“Fair Market Value” with respect to shares of Common Stock for a specified date means:

 

1)           If the Common Stock is traded on a national securities exchange, the “Fair Market Value” of a share of Common Stock will be the closing price of the Common Stock for such date, or if no transactions occurred on such date, on the last date on which trades occurred;

 

2)           If the Common Stock is not traded on a national securities exchange but bid and asked prices are regularly quoted on the OTC Bulletin Board Service, by the National Quotation Bureau or any other comparable service, the “Fair Market Value” of a share of Common Stock will be the average between the highest bid and lowest asked prices of the Common Stock as reported by such service at the close of trading for such date or, if such date was not a business day, on the preceding business day; or

 

3)           If there is no public trading of the Common Stock within the terms of subparagraphs 1 or 2 of this subsection, the “Fair Market Value” of a share of Common Stock will be as determined by the Committee in good faith.

 

	
  

	
(s)

	
“Non-statutory Stock Option” means a Stock Option other than an Incentive Stock Option.

 

	
  

	
(t)

	
“Option Agreement” means the written agreement between the Company and a Recipient that evidences a Stock Option awarded pursuant to this Plan. Each Option Agreement shall be subject to the terms and conditions of this Plan.

 

	
  

	
(u)

	
“Performance Goals” means any performance criteria applied to the Company, any Subsidiary, any Business Unit or any individual or group of individuals for any performance period in each case as specified by the Committee in the agreement evidencing an Award.  Performance Goals may include but are not limited to 162(m) Performance Goals.  The Committee shall determine whether or the extent to which any Performance Goal is achieved.

 

  

- 3 -

  

 

	
  

	
(v)

	
“Performance Share Award” means an Award of shares or an Award of the right to receive shares of Common Stock pursuant to Article IX of this Plan subject to the terms of a Share Vesting Agreement in which the vesting or issuance of shares is based, either in whole or in part, on the achievement of certain Performance Goals or 162(m) Performance Goals.

 

	
  

	
(w)

	
“Recipient” means any individual who is awarded a Stock Option, a SAR, a Performance Share Award, a Restricted Share Award or a Restricted Stock Unit Award pursuant to this Plan.

 

	
  

	
(x)

	
“Restricted Share Award” means an Award of shares of Common Stock pursuant to Article X of this Plan, regardless of whether the Recipient receives the shares covered by such Award solely for services or for a combination of services and cash payment or other consideration to the Company, pursuant to a Share Vesting Agreement.

 

	
  

	
(y)

	
“Restricted Stock Unit Award” means an Award of a right granted to receive Common Stock at the end of a specified vesting or deferral period pursuant to Article XI of this Plan, which right may be conditioned on the satisfaction of certain requirements (including the satisfaction of certain Performance Goals or 162(m) Performance Goals).

 

	
  

	
(z)

	
“SAR” means a Stock-Settled SAR or Cash-Settled SAR.

 

	
  

	
(aa)

	
“SAR Agreement” means the written agreement between the Company and a Recipient that evidences a SAR pursuant to this Plan. Each SAR Agreement shall be subject to the terms and conditions of this Plan.

 

	
  

	
(bb)

	
“Securities Act” means the Securities Act of 1933, as amended.

 

	
  

	
(cc)

	
“Service” means the continued employment of an Employee, service as director of the Company, service as a director of a Subsidiary or the regular provision of services to the Company or a Subsidiary under an independent contractor arrangement. If a recipient ceases to provide Service with the Company or a Subsidiary in one capacity but continues to provide Service in another capacity or contemporaneously begins to provide Service in another capacity, the recipient shall, for purposes of this Plan, be deemed to have continued in Service without interruption.

 

	
  

	
(dd)

	
“Share Vesting Agreement” means the written agreement between the Company and a Recipient that evidences either a Performance Share Award or a Restricted Share Award made pursuant to this Plan. Each Share Vesting Agreement shall be subject to the terms and conditions of this Plan.

 

	
  

	
(ee)

	
“Stock Option” means a Stock Option awarded pursuant to Article VI of this Plan.

 

	
  

	
(ff)

	
“Stock-Settled SAR” means the right to acquire shares of Common Stock in an amount equal to the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the Fair Market Value of a share of Common Stock on the date of grant multiplied by the number of shares covered by the right awarded under Article VII of this Plan.

 

  

- 4 -

  

 

	
  

	
(gg)

	
“Subsidiary” means any corporation or other entity owned or controlled by the Company in an unbroken chain of corporations or other entities in which each of the corporations or other entities other than last corporation or other entity owns 50 percent or more of the total combined voting power of all classes of equity ownership interests in the other corporations or other entities in such chain.

 

	
  

	
(hh)

	
“Tax Withholding” means all amounts determined by the Company to be required to satisfy applicable federal, state and local tax withholding requirements (including but not limited to payroll taxes) upon the exercise of a Stock Option or SAR, the disqualifying disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option, the vesting or payment of shares under a Performance Share Award or Restricted Share Award or the vesting or payment of a Restricted Share Unit Award, a Recipient making an election under Code Section 83(b) with respect to a Performance Share Award or Restricted Share Award or as otherwise may be required under applicable tax laws.

 

	
  

	
(ii)

	
“162(m) Performance-Based Award” means an Award intended to qualify as qualified performance-based compensation under Section 162(m) of the Code and the regulations thereunder.

 

	
  

	
(jj)

	
“162(m) Performance Goals” means written objectives that must be met by the Company, any Subsidiary or any Business Unit during the Award Period as a condition to payment being made under a 162(m) Performance-Based Award and shall be based on one or more targeted levels of performance with respect to one or more of the following objective measures with respect to the Company, any Subsidiary or any Business Unit, and may be relative to any designated comparison group of companies:  (i) revenue, (ii) net margin, (iii) operating income, (iv) operating cash flow, (v) net income before interest, taxes, depreciation and amortization, (vi) net income before interest and taxes, (vii) net income before income taxes, (viii) net income, (ix) new or used vehicle unit or revenue growth rate (based on same-store growth rate), (x) fixed department revenue growth rate (based on same-store revenue growth rate), (xi) sales or service satisfaction scores (percent of same stores equaling or exceeding specified manufacturers’ criteria), (xii) sales responsibility performance (percent of same stores at or above market sales rate thresholds set by specified manufacturers), (xiii) financing and insurance revenue or revenue per vehicle, (xiv) service, body and parts revenue or revenue per vehicle, (xv) basic or diluted net income per share, (xvi) basic or diluted net income per share from continuing operations, (xvii) basic or diluted net income per share minus per share dividends and other shareholder distributions, (xviii) basic or diluted net income per share from continuing operations minus per share dividends and other shareholder distributions, (xix) basic or diluted net income per share from continuing operations as adjusted to eliminate the effects of asset impairment, gains and losses on the sale of real estate or stores, equity investments and related taxes or (xx) any of the foregoing before the effect of acquisitions, divestitures, accounting or tax changes, and restructuring and special charges (determined according to criteria established by the Committee).

 

  

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ARTICLE III

STOCK SUBJECT TO THE PLAN

 

3.1           Aggregate Number of Authorized Shares. Subject to adjustment in accordance with Section 10.1, the total number of shares of Common Stock authorized for issuance under all Awards pursuant to this Plan is 3,800,000 shares.

 

3.2           Number of Available Shares. At any point in time, the number of Available Shares shall be the number of Authorized Shares at such time minus each of the following:

 

	
  

	
(a)

	
the number of shares of Common Stock issued prior to such time upon the exercise of Stock Options and Stock-Settled SARs that were awarded pursuant to this Plan;

 

	
  

	
(b)

	
the number of shares of Common Stock issued prior to such time under Restricted Stock Unit Awards, Restricted Share Awards and Performance Share Awards to the extent the shares are not subject to any forfeiture or repurchase provisions pursuant to the terms of a Share Vesting Agreement;

 

	
  

	
(c)

	
the number of shares covered by outstanding Stock Options and Stock-Settled SARs that were awarded pursuant to this Plan to the extent that such Stock Options and Stock-Settled SARs have not been exercised at such time;

 

	
  

	
(d)

	
the number of shares of Common Stock covered by outstanding Restricted Stock Unit Awards made pursuant to this Plan prior to such time; and

 

	
  

	
(e)

	
the number of shares of Common Stock covered by Performance Share Awards and Restricted Share Awards made pursuant to this Plan prior to such time to the extent the shares have not been issued or have been issued and are subject to forfeiture or repurchase provisions pursuant to the terms of a Share Vesting Agreement.

 

As a result of the foregoing, if a Stock Option, Stock-Settled SAR, Restricted Stock Unit or Performance Share Award expires, terminates or is cancelled for any reason without having been exercised and/or settled in full, the shares of Common Stock covered by such Stock Option, Stock-Settled SAR, Restricted Stock Unit or Performance Share Award that were not acquired through the exercise or settlement of such Award will again become Available Shares. Upon the exercise in full of a Stock-Settled SAR, all shares covered by that Award other than the shares actually issued upon such exercise, will again become Available Shares. Similarly, upon the settlement of a vested Restricted Stock Unit Award or Performance Share Award, all shares covered by that Award other than the shares actually issued in settlement thereof will again become Available Shares. If shares of Common Stock issued under a Performance Share Award or Restricted Share Award are forfeited to or repurchased by the Company, or if a Performance Share Award is terminated without the issuance of shares thereunder, pursuant to the terms of a Share Vesting Agreement, those shares will again become Available Shares. If shares of Common Stock covered by an Award are surrendered by a Recipient to satisfy any Tax Withholding obligations of such Award, those shares will again become Available Shares.  Neither the grant nor the exercise of Cash-Settled SARs shall reduce the number of shares available for grant under the Plan.

 

  

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3.3           Reservation of Shares. Available Shares shall consist of authorized but unissued shares of Common Stock of the Company. By appropriate resolution of the Board of Directors, the Company at all times will reserve for issuance shares of Common Stock equal to the sum of (i) the number of shares covered by outstanding Awards to the extent that shares have not been issued under such Awards at such time and (ii) the number of Available Shares. By action of the Board of Directors, the Company may repurchase issued and outstanding shares for purposes of providing Available Shares under this Plan but the Company is not required to make such repurchases and any such repurchases shall not affect the calculation of the number of Authorized Shares or Available Shares.

 

3.4           Annual Limits on Number of Shares to Any One Person and to Non-Management Directors.

 

	
  

	
(a)

	
No person may receive in any calendar year Awards pursuant to this Plan which provide for the issuance, in the aggregate, of more than 200,000 shares; and

 

	
  

	
(b)

	
No non-management director may receive in any calendar year Awards pursuant to this Plan which provide for the issuance, in the aggregate, of more than 10,000 shares;

 

provided, however, the foregoing limitations (a) and (b) shall not apply to Awards of Stock Options in substitution for outstanding stock options of an Acquired Company that are cancelled in connection with the acquisition of such Acquired Company.

 

ARTICLE IV

COMMENCEMENT AND DURATION OF THE PLAN

 

4.1           Effective Date of the Plan. This Plan was effective as of the date on which it was first adopted by the Board of Directors.

 

4.2           Duration of the Plan. This Plan will continue in effect until all Authorized Shares have been issued and all forfeiture and repurchase restrictions on the Authorized Shares have lapsed.  The Board of Directors may suspend or terminate this Plan at any time. Termination of the Plan will not terminate or otherwise affect any outstanding Stock Option, SAR, Performance Share Award, Restricted Share Award, Restricted Stock Unit Award, Option Agreement, SAR Agreement or Share Vesting Agreement.

 

  

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ARTICLE V

ADMINISTRATION OF THE PLAN

 

The Plan shall be administered by the Committee. The Board of Directors shall appoint the members of the Committee, which shall consist of at least two directors from the Board of Directors. The appointment to the Committee of one or more directors who are not “outside directors” as such term is defined in Treasury Regulation §1.162-27(e)(3), one or more directors who are not “non-employee directors” as such term is defined in Rule 16b-3 issued by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, (“Rule 16b-3”) or one or more directors who fail to meet the requirements for service on a compensation committee as set forth in the listing standards of the exchange or market on which the Common Stock primarily trades shall not invalidate any of the actions of the Committee. Any member of the Committee who is not an outside director is referred to in this paragraph as an “Abstaining Director” with respect to any action by the Committee for which Code Section 162(m) requires the approval of a committee consisting solely of outside directors. Any member of the Committee who is not a non-employee director is referred to in this paragraph as an “Abstaining Director” with respect to any action by the Committee for which Rule 16b-3 requires the approval of a committee consisting solely of non-employee directors. Any member of the Committee who fails to meet the requirements of the listing standards of the exchange or market on which the Common Stock primarily trades is referred to in this paragraph as an “Abstaining Director” with respect to any action by the Committee that requires the approval of a committee consisting solely of directors meeting those requirements. An Abstaining Director shall be deemed to have abstained from such action (notwithstanding any statement to the contrary which may be contained in minutes of a meeting of the Committee) and the assent of any such director shall be ignored for purposes of determining whether or not any such actions were approved by the Committee. If the Committee proposes to take an action by unanimous consent in lieu of a meeting, an Abstaining Director shall be deemed to not be a member of the Committee for the purpose of such consent with respect to any actions for which such member is deemed to be an Abstaining Director. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.

 

If no Committee is appointed, the Board of Directors will have all the powers, duties and responsibilities of the Committee as set forth in this Plan. In addition, the Board of Directors may abolish a Committee and assume the duties and responsibilities of the Committee at any time by resolution duly adopted by the Board of Directors.

 

The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to (a) select the Employees, directors and other persons to whom Awards may from time to time be granted hereunder; (b) determine the type or types of Award to be granted to each Recipient hereunder; (c) determine the number of shares of Common Stock to be covered by or relating to each Award granted hereunder; (d) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (e) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares or other property or canceled or suspended, consistent with the terms of the Plan; (f) determine whether, to what extent, and under what circumstances payment of cash, shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant, consistent with the terms of the Plan; (g) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (h) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (i) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan and (j) extend any exercise period or accelerate any vesting period for any Award. The Committee may, in its sole and absolute discretion, and subject to the provisions of the Plan, from time to time delegate any or all of its authority to administer the Plan to any other persons or committee as it deems necessary or appropriate for the proper administration of the Plan, except that no such delegation shall be made in the case of any 162(m) Performance-Based Award. The decisions of the Committee shall be final, conclusive and binding with respect to the interpretation and administration of the Plan and any grant made under it. The Committee shall make, in its sole discretion, all determinations arising in the administration, construction or interpretation of the Plan and Awards under the Plan, including the right to construe disputed or doubtful Plan or Award terms and provisions, and any such determination shall be conclusive and binding on all persons, except as otherwise provided by law.

 

  

- 8 -

  

 

Except as may disqualify the applicability of Code Section 162(m), the Committee shall be authorized to make adjustments in Performance Goals criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements, changes in applicable laws, regulations or accounting principles or otherwise. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event that the Company shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of or combination with another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate.

 

ARTICLE VI

STOCK OPTION TERMS AND CONDITIONS

 

Stock Options may be awarded pursuant to this Plan in accordance with the following terms and conditions.

 

6.1           Requirement for a Written Option Agreement. Each Stock Option will be evidenced by a written Option Agreement. The Committee, from time to time, will determine the form of Option Agreement to be used for purposes of evidencing Stock Options awarded pursuant to this Plan. Except as provided in Section 13.2, the terms of the Option Agreement evidencing a Stock Option must be consistent with this Plan, including but not limited to this Article VI. Any inconsistencies between any Option Agreement and this Plan will be resolved in accordance with the terms and conditions specified in this Plan. Except as expressly required by this Article VI, the terms and conditions of each Stock Option do not need to be identical.

 

6.2           Who may be Awarded a Stock Option. A Stock Option may be awarded to any Employee, any director of the Company or of any Subsidiary and any other individual who, in the judgment of the Committee, has performed or will perform, in whatever capacity, services important to the management, operation and development of the business of the Company or any of its Subsidiaries; provided that Incentive Stock Options may only be granted to Employees. The Committee, in its sole discretion, shall determine when and to whom Stock Options are awarded pursuant to this Plan. In addition, substitute Stock Options may be awarded pursuant to Section 13.2 to persons who were employees, directors, or independent contractors or former employees, directors or independent contractors of an Acquired Company.

 

  

- 9 -

  

 

6.3           Number of Shares Covered by a Stock Option. The Committee, in its sole discretion, shall determine the number of shares of Common Stock covered by each Stock Option awarded pursuant to this Plan and, for a Stock Option granted after February 22, 2013, whether it is an Incentive Stock Option or a Non-statutory Stock Option. The number of shares covered by each Stock Option and whether it is an Incentive Stock Option or a Non-statutory Stock Option shall be specified in the Option Agreement.

 

6.4           Vesting Under a Stock Option. The Committee, in its sole discretion, shall determine whether a Stock Option is immediately exercisable as to all of the shares of Common Stock covered by such option or whether it is exercisable only in accordance with a time-based vesting schedule, Performance Goals or a combination of the foregoing, all as determined by the Committee. Any such vesting terms and conditions shall be specified in the Option Agreement. Notwithstanding any term to the contrary in any Option Agreement, a Stock Option that is awarded to a person who, at the time of the Award, was an executive officer of the Company will not become exercisable until after six months from the date of such Award unless the Award was approved either by (i) a committee of non-employee directors within the requirements of Rule 16b-3 or (ii) the full Board of Directors.

 

6.5           Exercise Price of a Stock Option. The Exercise Price for each Stock Option will be at least 100% of the Fair Market Value of a share of Common Stock as of the date on which the Stock Option was awarded. However, if it is subsequently determined that the Exercise Price as stated in the Option Agreement evidencing a Stock Option is less than 100% of the Fair Market Value of a share of Common Stock as of the date on which an option was awarded, such fact will not invalidate the Stock Option.

 

6.6           Duration of a Stock Option—Generally. The Committee, in its sole discretion, will determine the term of each Stock Option provided that such term will not exceed 10 years from the date on which such option was awarded. The term of each Stock Option shall be set forth in the Option Agreement. The Recipient shall have no further right to exercise a Stock Option following the expiration of such term.

 

6.7           The Effect of Termination of the Recipient’s Service with the Company on the Term of a Stock Option. If a Recipient’s Service with the Company terminates for any reason other than as a result of the Recipient dying or becoming Disabled (as provided for in Section 6.9 and Section 6.10, respectively), all Stock Options that have been awarded to such Recipient shall terminate to the extent that they are not exercised within 30 days following the date the Recipient ceased to be in Service with the Company, unless provided otherwise in the Option Agreement. The foregoing provision will not extend the time within which a Stock Option may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date the Recipient’s Service with the Company terminated.

 

  

- 10 -

  

 

6.8           The Effect of a Leave of Absence on a Stock Option. Unless otherwise provided in the Option Agreement evidencing a Stock Option, a Recipient’s Service shall not be deemed to have terminated if the Recipient is on sick leave, family leave, military leave or any other leave of absence that is approved by the Committee. The Committee, in its sole discretion, may determine whether a Stock Option shall continue to vest during any sick leave, family leave, military leave or other approved leave of absence.

 

6.9           The Effect of the Death of a Recipient on the Term of a Stock Option. If a Recipient’s Service with the Company terminates as a result of the Recipient’s death, all Stock Options that have been awarded to such Recipient will terminate to the extent that they are not previously exercised within 12 months following the date of the Recipient’s death. The foregoing provision will not extend the time within which a Stock Option may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date of the Recipient’s death.

 

6.10         The Effect of the Disability of a Recipient on the Term of a Stock Option. If a Recipient’s Service with the Company terminates as a result of the Recipient becoming Disabled, all Stock Options that have been awarded to such Recipient shall terminate to the extent that they are not exercised within 12 months following the date of the Recipient becoming Disabled. The foregoing provision will not extend the time within which a Stock Option may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date the Recipient became Disabled.

 

6.11         Additional Requirements Relating to Incentive Stock Options.  Notwithstanding any other provisions in this Plan, Incentive Stock Options shall be subject to the following additional terms and conditions:

 

	
  

	
(a)

	
Limitation on Amount of Grants.  If the aggregate fair market value of shares, determined as of the date the option is granted, for which Incentive Stock Options granted under this Plan (and any other stock incentive plan of the Company or its parent or subsidiary corporations, as defined in subsections 424(e) and 424(f) of the Code) are exercisable for the first time by an employee during any calendar year exceeds $100,000, the portion of the option or options not exceeding $100,000, to the extent of whole shares, will be treated as an Incentive Stock Option and the remaining portion of the option or options will be treated as a Non-statutory Stock Option.  The preceding sentence will be applied by taking options into account in the order in which they were granted.  If, under the $100,000 limitation, a portion of an option is treated as an Incentive Stock Option and the remaining portion of the option is treated as a Non-statutory Stock Option, unless the optionee designates otherwise at the time of exercise, the optionee’s exercise of all or a portion of the option will be treated as the exercise of the Incentive Stock Option portion of the option to the full extent permitted under the $100,000 limitation.  If an optionee exercises an option that is treated as in part an Incentive Stock Option and in part a Non-statutory Stock Option, the Company will designate the portion of the stock acquired pursuant to the exercise of the Incentive Stock Option portion as Incentive Stock Option stock by issuing a separate certificate for that portion of the stock and identifying the certificate as Incentive Stock Option stock in its stock records.

 

  

- 11 -

  

 

	
  

	
(b)

	
Limitations on Grants to 10 percent Shareholders.  An Incentive Stock Option may be granted under this Plan to an Employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary (as defined in subsections 424(e) and 424(f) of the Code) only if the option price is at least 110 percent of the Fair Market Value of the Common Stock subject to the option on the date it is granted and the option by its terms is not exercisable after the expiration of five years from the date it is granted.

 

	
  

	
(c)

	
Nontransferability.  Except as provided below and notwithstanding any provision in this Plan, each Incentive Stock Option granted under this Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, and during the optionee’s lifetime, shall be exercisable only by the optionee.  A stock option may be transferred by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death.

 

	
  

	
(d)

	
Limitation on Time of Grant.  No Incentive Stock Option shall be granted on or after the tenth anniversary of the last action by the Board of Directors adopting the Plan or approving an increase in the number of shares available for issuance under the Plan, which action was subsequently approved within 12 months by the shareholders of the Company.

 

	
  

	
(e)

	
Early Dispositions.  If, within two years after an Incentive Stock Option is granted or within 12 months after an Incentive Stock Option is exercised, the optionee sells or otherwise disposes of Common Stock acquired on exercise of the Option, the optionee shall within 30 days of the sale or disposition notify the Company in writing of (i) the date of the sale or disposition, (ii) the amount realized on the sale or disposition and (iii) the nature of the disposition (e.g., sale, gift, etc.).

 

ARTICLE VII

SARS TERMS AND CONDITIONS

 

Stock-Settled SARs and Cash-Settled SARs may be awarded pursuant to this Plan in accordance with the following terms and conditions.

 

7.1           Requirement for a Written SAR Agreement. Each SAR will be evidenced by a written SAR Agreement. The Committee, from time to time, will determine the form of Stock-Settled SAR Agreement to be used for purposes of evidencing Stock-Settled SARs awarded pursuant to this Plan and form of Cash-Settled SAR Agreement to be used for purposes of evidencing Cash-Settled SARs awarded pursuant to this Plan. Except as provided in Section 13.2, the terms of the SAR Agreements must be consistent with this Plan, including but not limited to this Article VII. Any inconsistencies between any SAR Agreement and this Plan will be resolved in accordance with the terms and conditions specified in this Plan. Except as expressly required by this Article VII, the terms and conditions of each SAR do not need to be identical.

 

  

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7.2           Who may be Awarded a SAR. A SAR may be awarded to any Employee, any director of the Company or of a Subsidiary and any other individual who, in the judgment of the Committee, has performed or will perform, in whatever capacity, services important to the management, operation and development of the business of the Company or any of Subsidiaries. The Committee, in its sole discretion, shall determine when and to whom SARs are awarded pursuant to this Plan. In addition, substitute SARs may be awarded pursuant to Section 13.2 to persons who were employees, directors, or independent contractors or former employees, directors or independent contractors of an Acquired Company.

 

7.3           Number of Shares Covered by a SAR. The Committee, in its sole discretion, shall determine the number of shares of Common Stock covered by each SAR awarded pursuant to this Plan and whether the SAR is a Stock-Settled SAR or a Cash-Settled SAR. The number of shares covered by each Stock-Settled SAR shall be specified in the Stock-Settled SAR Agreement.

 

7.4           Vesting Under a SAR. The Committee, in its sole discretion, shall determine whether a SAR is immediately exercisable as to all of the shares of Common Stock covered by the SAR or whether it is exercisable only in accordance with a time-based vesting schedule, Performance Goals or a combination of the foregoing, all as determined by the Committee. Any such vesting terms and conditions shall be specified in the SAR Agreement. Notwithstanding any term to the contrary in any SAR Agreement, a SAR that is awarded to a person who, at the time of the Award, was an executive officer of the Company will not become exercisable until after six (6) months from the date of such Award unless the Award was approved either by (i) a committee of non-employee directors within the requirements of Rule 16b-3 or (ii) the full Board of Directors.

 

7.5           Effect of Exercise of a SAR. Exercise of a Stock-Settled SAR results in the Recipient receiving net shares of Common Stock with an aggregate Fair Market Value as of the date of such exercise equal to (i) the difference between the Fair Market Value of a share of Common Stock as of the exercise date minus the Fair Market Value of a share of Common Stock on the date of grant, multiplied by (ii) the number of shares covered by the Stock-Settled SAR as to which it is being exercised, rounded down to the nearest whole number.  Exercise of a Cash-Settled SAR results in the Recipient receiving cash in an amount equal to (i) the difference between the Fair Market Value of a share of Common Stock as of the exercise date minus the Fair Market Value of a share of Common Stock on the date of grant, multiplied by (ii) the number of shares covered by the SAR as to which it is being exercised.  A SAR may be exercised as to all of the shares covered by it or may be exercised only in part.

 

7.6           Duration of a SAR—Generally. The Committee, in its sole discretion, will determine the term of each SAR provided that such term will not exceed 10 years from the date on which such SAR was awarded. The term of each SAR shall be set forth in the SAR Agreement. The Recipient shall have no further right to exercise a SAR following the expiration of such term.

 

  

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7.7           The Effect of Termination of the Recipient’s Service with the Company on the Term of a SAR. If a Recipient’s Service with the Company terminates for any reason other than as a result of the Recipient dying or becoming Disabled (as provided for in Section 7.9 and Section 7.10, respectively), all SARs that have been awarded to such Recipient shall terminate to the extent that they are not exercised within 30 days following the date the Recipient ceased to be in Service with the Company, unless provided otherwise in the SAR Agreement. The foregoing provision will not extend the time within which a SAR may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date the Recipient’s Service with the Company terminated.

 

7.8           The Effect of a Leave of Absence on a Stock-Settled SAR. Unless otherwise provided in the SAR Agreement, a Recipient’s Service shall not be deemed to have terminated if the Recipient is on sick leave, family leave, military leave or any other leave of absence that is approved by the Committee. The Committee, in its sole discretion, may determine whether a SAR shall continue to vest during any sick leave, family leave, military leave or other approved leave of absence.

 

7.9           The Effect of the Death of a Recipient on the Term of a SAR. If a Recipient’s Service with the Company terminates as a result of the Recipient’s death, all SARs that have been awarded to such Recipient will terminate to the extent that they are not previously exercised within 12 months following the date of the Recipient’s death. The foregoing provision will not extend the time within which a SAR may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date the Recipient’s death.

 

7.10         The Effect of the Disability of a Recipient on the Term of a SAR. If a Recipient’s Service with the Company terminates as a result of the Recipient becoming Disabled, all SARs that have been awarded to such Recipient shall terminate to the extent that they are not exercised within 12 months following the date of the Recipient becoming Disabled. The foregoing provision will not extend the time within which a SAR may be exercised beyond the expiration of the term of such option and no additional vesting shall occur after the date the Recipient became Disabled.

 

ARTICLE VIII

EXERCISE OF STOCK OPTIONS AND SARS

 

8.1           Notice of Exercise. A Stock Option or a SAR may be exercised only by delivery to the Company of written notice directed to the President of the Company (or such other person as the Company may designate) at the principal business office of the Company. The notice will specify (i) the number of shares of Common Stock as to which the Stock Option or SAR is being exercised, (ii) the method of payment of the Exercise Price of a Stock Option, (iii) the method of payment of the Tax Withholding if required, and (iv), unless a registration under the Securities Act is in effect with respect to the Plan at the time of such exercise, the notice of exercise shall contain such representations as the Company determines to be necessary or appropriate in order for the sale of any shares of Common Stock being purchased pursuant to such exercise to qualify for exemptions from registration under the Securities Act and other applicable state securities laws. If the date of expiration or termination of a Stock Option or SAR falls on a day on which the principal business office of the Company is not open for business, the notice of exercise must be delivered to the Company no later than the last business day prior to such expiration or termination date in order for the notice of exercise to be timely.

 

  

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8.2           Payment of Exercise Price. No shares of Common Stock will be issued upon the exercise of any Stock Option unless and until payment or adequate provision for payment of the Exercise Price of such shares has been made in accordance with this subsection. The Committee, in its sole discretion, may provide in any Option Agreement for the payment of the Exercise Price in cash (including by check), by delivery of a full-recourse promissory note, by the delivery of shares of Common Stock or other securities issued by the Company in accordance with Section 14.7, by the application of shares that could be received upon exercise of the Stock Option in accordance with Section 14.7, or by any combination of the foregoing. In the absence of such terms in the Option Agreement, the Exercise Price shall be paid in cash (including by check). The Committee, in its sole discretion, may permit a Recipient to elect to pay the Exercise Price by authorizing a duly registered and licensed broker-dealer to sell the shares of Common Stock to be issued upon such exercise (or, at least, a sufficient portion thereof) and instructing such broker-dealer to immediately remit to the Company a sufficient portion of the proceeds from such sale to pay the entire Exercise Price.

 

8.3           Payment of Tax Withholding Amounts. Upon the exercise of any Stock Option or SAR (including any Non-statutory Stock Option or SAR transferred by the Recipient pursuant to Section 14.5), either with the delivery of the notice of exercise or upon notification of the amount due, each Recipient must pay to the Company or make adequate provision for the payment of all Tax Withholding, if any. The Option Agreement or SAR Agreement may provide for, or the Committee, in its sole discretion, may allow, the Recipient to pay the Tax Withholding (i) in cash (including by check), (ii) by the Company withholding such amount from cash payable upon exercise of a Cash-Settled SAR or other amounts payable by the Company to the Recipient, including salary, (iii) by delivery of shares of Common Stock or other securities of the Company in accordance with Section 14.7, (iv) by the application of shares that could be received upon exercise of the Stock Option or Stock-Settled SAR in accordance with Section 14.7 but only up to the minimum statutorily required tax withholding amounts, or (v) any combination of the foregoing. In the absence of such terms in the Option Agreement or SAR Agreement, the Tax Withholding shall be paid in cash (including by check) or the Committee may authorize payment or provision for the Tax Withholding by any other means permitted by this Section 8.3.

 

By receiving and upon exercise of a Stock Option or a SAR, the Recipient shall be deemed to have consented to the Company withholding the amount of any Tax Withholding from any amounts payable by the Company to the Recipient. The Committee, in its sole discretion, may permit a Recipient to elect to pay the Tax Withholding by authorizing a duly registered and licensed broker-dealer to sell the shares to be issued upon such exercise (or, at least, a sufficient portion thereof) and instructing such broker-dealer to immediately remit to the Company a sufficient portion of the proceeds from such sale to pay the Tax Withholding. No shares will be issued upon an exercise of a Stock Option or a SAR, and no cash payment will be made upon exercise of a Cash-Settled SAR, unless and until payment or adequate provision for payment of the Tax Withholding has been made. If, either as a result of the exercise of a Stock Option or a SAR or the subsequent disqualifying disposition of shares acquired through such exercise, the Company determines that additional Tax Withholding was or has become required beyond any amount paid or provided for by the Recipient, the Recipient will pay such additional amount to the Company immediately upon demand by the Company. If the Recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the Recipient, including salary.

 

  

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8.4           Issuance of Shares. Notwithstanding the good faith compliance by the Recipient with all of the terms and conditions of an Option or Stock-Settled SAR Agreement and with this Article VIII, the Recipient will not become a shareholder and will have no rights as a shareholder with respect to the shares covered by such Stock Option or Stock-Settled SAR until the issuance of shares pursuant to the exercise of such Stock Option or Stock-Settled SAR is recorded on the stock transfer record of the Company. The Company will not unreasonably delay the issuance of a stock certificate and shall exercise reasonable efforts to cause such stock certificate to be issued to the Recipient as soon as is practicable after the compliance by the Recipient with all of the terms and conditions of the Option Agreement or Stock-Settled SAR and with this Article VIII. In addition, when the payment of the Exercise Price is permitted under Sections 8.2 or 8.3 to be remitted to the Company by a broker-dealer in connection with the sale of some or all of the shares covered by the Stock Option, the Recipient shall be considered a shareholder and to own the shares being purchased by such exercise upon the Company receiving both the Recipient’s notice of exercise and the broker-dealer’s agreement to remit to the Company the Exercise Price in a form satisfactory to the Company in its sole discretion.

 

ARTICLE IX

PERFORMANCE SHARE AWARDS

 

Performance Share Awards may be made pursuant to this Plan in accordance with the following terms and conditions.

 

9.1           Requirement for a Written Share Vesting Agreement. Each Performance Share Award will be evidenced by a Share Vesting Agreement. The Committee will determine from time to time the form of Share Vesting Agreement to be used to evidence Performance Share Awards made pursuant to this Plan. Except as provided in Section 13.2, the terms of each Share Vesting Agreement must be consistent with this Plan. Any inconsistencies between any Share Vesting Agreement and this Plan will be resolved in accordance with the terms and conditions specified in this Plan. Except as otherwise required by this Article IX, the terms and conditions of each Performance Share Award do not need to be identical.

 

9.2           Who May Receive a Performance Share Award. A Performance Share Award may be made to any Employee, any director of the Company or of a Subsidiary and any other individual who, in the judgment of the Committee, has performed or will perform, in whatever capacity, services important to the management, operation and development of the business of the Company or any of Subsidiaries. The Committee, in its sole discretion, shall determine when and to whom Performance Share Awards are awarded pursuant to this Plan. In addition, substitute Performance Share Awards may be awarded pursuant to Section 13.2 to persons who were employees, directors, or independent contractors or former employees, directors or independent contractors of an Acquired Company.

 

  

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9.3           Number of Shares Covered by a Performance Share Award. The Committee, in its sole discretion, shall determine the number of shares of Common Stock covered by each Performance Share Award made pursuant to this Plan, which may include a range of shares to be issued based on achievement of Performance Goals. The Share Vesting Agreement shall specify the number of shares (or the range of the number of shares) of Common Stock covered by such Performance Share Award.

 

9.4           What the Recipient Must Deliver to Receive a Performance Share Award. The Committee, in its sole discretion, will determine whether the Recipient, in order to receive the Performance Share Award, must make a payment, either in cash (including by check), by delivery of a promissory note or by delivery of other securities of the Company (including options to purchase securities of the Company), to the Company of all or some portion of the Fair Market Value of the shares of Common Stock covered by the Performance Share Award. To the extent that the sum of any cash payment, any promissory note and any other securities received by the Company from the Recipient in connection with a Performance Share Award is less than the Fair Market Value of the shares of Common Stock covered by such Performance Share Award determined as of the date of such Award, the shares of Common Stock covered by the Performance Share Award shall be deemed to have been issued by the Company for services rendered by the Recipient.

 

9.5           Vesting Under a Performance Share Award. The Committee, in its sole discretion, shall determine the Performance Goals and other terms and conditions, if any, upon which shares covered by any Performance Share Award shall vest. The Share Vesting Agreement evidencing a Performance Share Award shall specify the Performance Goals, and other vesting terms and conditions. Unvested shares covered by a Performance Share Award and rights under a Performance Share Award may not be transferred by the Recipient under any condition without the prior written consent of the Committee, which consent may be withheld in its sole discretion.

 

9.6           Right to Repurchase and Forfeiture of Unvested Shares upon Certain Conditions. The Share Vesting Agreement shall specify the events upon the occurrence of which (i) the Recipient’s unvested shares shall be forfeited to the Company or (ii) the Company shall have the right to repurchase from the Recipient any or all of the Recipient’s unvested shares and the period during which the Company must exercise this right following the occurrence of the event. The Share Vesting Agreement shall also specify the “Repurchase Price Per Share” that the Company shall pay to the Recipient upon exercise of any right to repurchase unvested shares and the terms of such payment. If not otherwise specified in the Share Vesting Agreement, any right to repurchase must be exercised within forty-five (45) days after the Company receives from the Recipient written notice of the occurrence of the event, the repurchase price shall be $0.001 per share and the repurchase price shall be payable to the Recipient in cash (including by check) within ten (10) days after the date on which the right to repurchase the shares is exercised. Any right of the Company to repurchase unvested shares may be assigned by the Company in its sole discretion without notice to, or the prior consent of, the Recipient. Every Share Vesting Agreement evidencing a Performance Share Award shall contain or shall be deemed to contain a blank stock power pursuant to which the Recipient authorizes the Company or its transfer agent to transfer ownership of unvested shares from the Recipient to the Company or its assigns upon the forfeiture of shares or the right to repurchase being exercised.

 

  

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9.7           Payment of Tax Withholding Amounts. Upon the vesting of shares or the right to receive shares under a Performance Share Award (including any Performance Share Award transferred by the Recipient pursuant to Section 14.5) or upon the Recipient making a valid election under Code Section 83(b), each Recipient must pay to the Company or make adequate provision for the payment of all Tax Withholding, if any. The Share Vesting Agreement may provide for, or the Committee, in its sole discretion, may allow the Recipient to pay the Tax Withholding (i) in cash (including by check), (ii) by the Company withholding such amount from other amounts payable by the Company to the Recipient, including salary, (iii) by delivery of shares of Common Stock or other securities of the Company in accordance with Section 14.7, (iv) by the application of vested shares under the Performance Share Award in accordance with Section 14.7 but only up to the minimum statutorily required tax withholding amounts, or (v) any combination of the foregoing. In the absence of such terms in the Share Vesting Agreement, the Tax Withholding shall be paid in cash (including by check) or the Committee may authorize payment or provision for the Tax Withholding by any other means permitted by this Section 9.7.

 

By receiving a Performance Share Award, the Recipient shall be deemed to have consented to the Company withholding the amount of any Tax Withholding from any amounts payable by the Company to the Recipient. The Committee, in its sole discretion, may permit a Recipient to elect to pay the Tax Withholding by authorizing a duly registered and licensed broker-dealer to sell the shares to be issued (or, at least, a sufficient portion thereof) and instructing such broker-dealer to immediately remit to the Company a sufficient portion of the proceeds from such sale to pay the Tax Withholding. No shares will be delivered in response to a request to deliver vested shares unless and until payment or adequate provision for payment of the Tax Withholding has been made. If the Company later determines that additional Tax Withholding was or has become required beyond any amount paid or provided for by the Recipient, the Recipient will pay such additional amount to the Company immediately upon demand by the Company. If the Recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the Recipient, including salary.

 

9.8           Rights as a Shareholder, Legends on Certificates, Escrow of Unvested Shares and Delivery of Vested Shares Covered by a Performance Share Award.  With respect to Performance Stock Awards in which shares are issued at the time of the grant of the Award, as soon as is practicable after the Performance Stock Award is awarded by the Company, the Company will issue one or more stock certificates in the name of the Recipient or make a book-entry evidencing for the shares covered by a Performance Share Award. For such time as and to the extent that the shares covered by a Performance Share Award remain unvested, the Company may place a restrictive legend on any stock certificate evidencing such shares, may give stop transfer instructions to the Company’s transfer agent and may place the stock certificates in escrow with the Company or an agent of the Company. Upon the vesting of shares covered by a Performance Share Award, the Recipient by notice, in such form as the Company may reasonably request, directed to the President of the Company (or such other person as the Company may designate) at the principal business office of the Company request that a stock certificate covering such vested shares be issued in the name of the Recipient and delivered in accordance with such instructions as the Recipient may reasonably request.

 

  

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ARTICLE X

RESTRICTED SHARE AWARDS

 

Restricted Share Awards may be made pursuant to this Plan in accordance with the following terms and conditions.

 

10.1          Requirement for a Written Share Vesting Agreement. Each Restricted Share Award will be evidenced by a Share Vesting Agreement. The Committee will determine from time to time the form of Share Vesting Agreement to be used to evidence Restricted Share Awards made pursuant to this Plan. Except as provided in Section 13.2, the terms of each Share Vesting Agreement must be consistent with this Plan. Any inconsistencies between any Share Vesting Agreement and this Plan will be resolved in accordance with the terms and conditions specified in this Plan. Except as otherwise required by this Article X, the terms and conditions of each Restricted Share Award do not need to be identical.

 

10.2          Who May Receive a Restricted Share Award. A Restricted Share Award may be made to any Employee, any director of the Company or of a Subsidiary and any other individual who, in the judgment of the Committee, has performed or will perform, in whatever capacity, services important to the management, operation and development of the business of the Company or any of Subsidiaries. The Committee, in its sole discretion, shall determine when and to whom Restricted Share Awards are awarded pursuant to this Plan. In addition, substitute Restricted Share Awards may be awarded pursuant to Section 13.2 to persons who were employees, directors, or independent contractors or former employees, directors or independent contractors of an Acquired Company.

 

10.3          Number of Shares Covered by a Restricted Share Award. The Committee, in its sole discretion, shall determine the number of shares of Common Stock covered by each Restricted Share Award made pursuant to this Plan. The Share Vesting Agreement shall specify the number of shares of Common Stock covered by such Restricted Share Award.

 

10.4          What the Recipient Must Deliver to Receive a Restricted Share Award. The Committee, in its sole discretion, will determine whether the Recipient, in order to receive the Restricted Share Award, must make a payment, either in cash (including by check), by delivery of a promissory note or by delivery of other securities of the Company (including options to purchase securities of the Company), to the Company of all or some portion of the Fair Market Value of the shares of Common Stock covered by the Restricted Share Award. To the extent that the sum of any cash payment, any promissory note and any other securities received by the Company from the Recipient in connection with a Restricted Share Award is less than the Fair Market Value of the shares of Common Stock covered by such Restricted Share Award determined as of the date of such Award, the shares of Common Stock covered by the Restricted Share Award shall be deemed to have been issued by the Company for services rendered by the Recipient.

 

10.5          Vesting Under a Restricted Share Award. The Committee, in its sole discretion, shall determine the terms and conditions upon which shares covered by any Restricted Share Award shall vest. The Share Vesting Agreement shall specify the vesting schedule, if any. Unvested shares covered by a Restricted Share Award may not be transferred by the Recipient under any condition without the prior written consent of the Committee, which consent may be withheld in its sole discretion.

 

  

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10.6          Right to Repurchase and Forfeiture of Unvested Shares upon Certain Conditions. The Share Vesting Agreement may specify the events upon the occurrence of which (i) the Recipient’s unvested shares shall be forfeited to the Company or (ii) the Company shall have the right to repurchase from the Recipient any or all of the Recipient’s unvested shares and the period during which the Company must exercise this right following the occurrence of the event. The Share Vesting Agreement may also specify the “Repurchase Price Per Share” that the Company shall pay to the Recipient upon exercise of its right to repurchase unvested shares and the terms of such payment. If not otherwise specified in the Share Vesting Agreement, the right to repurchase must be exercised within forty-five (45) days after the Company receives from the Recipient written notice of the occurrence of the event, the repurchase price shall be $0.001 per share and the repurchase price shall be payable to the Recipient in cash (including by check) within ten (10) days after the date on which the right to repurchase the shares is exercised. Any right of the Company to repurchase unvested shares may be assigned by the Company in its sole discretion without notice to, or the prior consent of, the Recipient. Every Share Vesting Agreement evidencing a Restricted Share Award shall contain or shall be deemed to contain a blank stock power pursuant to which the Recipient authorizes the Company or its transfer agent to transfer ownership of unvested shares from the Recipient to the Company or its assigns upon the forfeiture of shares or the right to repurchase being exercised.

 

10.7          Payment of Tax Withholding Amounts. Upon the vesting of shares under a Restricted Share Award (including any Restricted Share Award transferred by the Recipient pursuant to Section 14.5) or upon the Recipient making a valid election under Code Section 83(b), each Recipient must pay to the Company or make adequate provision for the payment of all Tax Withholding, if any. The Share Vesting Agreement may provide for, or the Committee, in its sole discretion, may allow the Recipient to pay the Tax Withholding (i) in cash (including by check), (ii) by the Company withholding such amount from other amounts payable by the Company to the Recipient, including salary, (iii) by delivery of shares of Common Stock or other securities of the Company in accordance with Section 14.7, (iv) by the application of vested shares under the Restricted Share Award in accordance with Section 14.7 but only up to the minimum statutorily required tax withholding amounts, or (v) any combination of the foregoing. In the absence of such terms in the Share Vesting Agreement, the Tax Withholding shall be paid in cash (including by check) or the Committee may authorize payment or provision for the Tax Withholding by any other means permitted by this Section 10.7.

 

By receiving a Restricted Share Award, the Recipient shall be deemed to have consented to the Company withholding the amount of any Tax Withholding from any amounts payable by the Company to the Recipient. The Committee, in its sole discretion, may permit a Recipient to elect to pay the Tax Withholding by authorizing a duly registered and licensed broker-dealer to sell the shares to be issued upon such exercise (or, at least, a sufficient portion thereof) and instructing such broker-dealer to immediately remit to the Company a sufficient portion of the proceeds from such sale to pay the Tax Withholding. No shares will be delivered in response to a request to deliver vested shares unless and until payment or adequate provision for payment of the Tax Withholding has been made. If the Company later determines that additional Tax Withholding was or has become required beyond any amount paid or provided for by the Recipient, the Recipient will pay such additional amount to the Company immediately upon demand by the Company. If the Recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the Recipient, including salary.

 

  

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10.8           Rights as a Shareholder, Legends on Certificates, Escrow of Unvested Shares and Delivery of Vested Shares Covered by a Restricted Share Award. As soon as is practicable after a Restricted Stock Award is awarded by the Company, the Company will issue one or more stock certificates in the name of the Recipient for the shares covered by a Restricted Share Award or make book-entry evidencing the issuance of uncertificated shares. For such time as and to the extent that the shares covered by a Restricted Share Award remain unvested, the Company may place a restrictive legend on any stock certificate evidencing such shares, may give stop transfer instructions to the Company’s transfer agent and may place the stock certificates in escrow with the Company or an agent of the Company. Upon the vesting of shares covered by a Restricted Share Award, the Recipient by notice, in such form as the Company may reasonably request, directed to the President of the Company (or such other person as the Company may designate) at the principal business office of the Company request that a stock certificate covering any vested shares evidenced by stock certificates be issued in the name of the Recipient and delivered in accordance with such instructions as the Recipient may reasonably request.

 

ARTICLE XI

RESTRICTED STOCK UNIT AWARDS

 

Restricted Stock Unit Awards may be made pursuant to this Plan in accordance with the following terms and conditions.

 

11.1          Restricted Stock Units. Restricted Stock Units are designated in shares of Common Stock.

 

11.2          Restricted Stock Unit Agreement. Each Restricted Stock Unit Award under the Plan shall be evidenced by a Restricted Stock Unit Agreement between the recipient and the Company. Such Restricted Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms of the applicable Restricted Stock Unit Agreement that are not inconsistent with the Plan. Any inconsistencies between any Restricted Stock Unit Agreement and this Plan will be resolved in accordance with the terms and conditions specified in this Plan. Except as otherwise required by this Article XI, the terms and conditions of each Restricted Stock Unit Award do not need to be identical.

 

11.3          Who May Receive a Restricted Stock Unit Award. A Restricted Stock Unit Award may be made to any Employee, any director of the Company or of a Subsidiary and any other individual who, in the judgment of the Committee, has performed or will perform, in whatever capacity, services important to the management, operation and development of the business of the Company or any of Subsidiaries. The Committee, in its sole discretion, shall determine when and to whom Restricted Stock Unit Awards are awarded pursuant to this Plan. In addition, substitute Restricted Stock Unit Awards may be awarded pursuant to Section 13.2 to persons who were employees, directors, or independent contractors or former employees, directors or independent contractors of an Acquired Company.

 

  

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11.4          Number of Shares Covered by a Restricted Stock Unit Award. The Committee, in its sole discretion, shall determine the number of shares of Common Stock covered by each Restricted Stock Unit Award made pursuant to this Plan. The Restricted Stock Unit Agreement shall specify the number Restricted Stock Units covered by such Restricted Stock Unit Award.

 

11.5          Payment for Awards. No cash consideration shall be required of any Recipient of a Restricted Stock Unit Award.

 

11.6          Vesting Under a Restricted Stock Unit Award. The Committee, in its sole discretion, shall determine the terms and conditions upon which shares covered by any Restricted Stock Unit Award shall vest. The Restricted Stock Unit Agreement shall specify the vesting schedule. Unvested Restricted Stock Units covered by a Restricted Stock Unit Award may not be transferred by the Recipient under any condition. Vesting may be based on service or on performance, or on any combination of service and performance.

 

11.7          No Voting Rights. Shares underlying an Award of Restricted Stock Units shall have no voting rights with respect to such Restricted Stock Units.

 

11.8          Form and Time of Settlement of Restricted Stock Unit Awards. Settlement of vested Restricted Stock Units shall be made in the form of shares of Common Stock. Vested Restricted Stock Units generally shall be fully settled as soon as practicable after they become vested, but not later than the later of (i) two and one half months after the end of the Company’s fiscal year during in which all vesting conditions applicable to the Restricted Stock Units have been satisfied or have lapsed or (ii) March 15 following the calendar year in which all vesting conditions applicable to the Restricted Stock Units have been satisfied or have lapsed. Until an Award of Restricted Stock Units is settled, the number of such Restricted Stock Units shall be subject to adjustment pursuant to Article XIII.

 

11.9          Creditors’ Rights. A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Restricted Stock Unit Agreement.

 

11.10        Payment of Tax Withholding Amounts. Upon the vesting of shares under a Restricted Stock Unit Award (including any Restricted Stock Unit Award transferred by the Recipient pursuant to Section 14.5), each Recipient must pay to the Company or make adequate provision for the payment of all Tax Withholding, if any. By receiving a Restricted Stock Unit Award, the Recipient shall be deemed to have consented to the Company withholding the amount of any Tax Withholding from any amounts payable by the Company to the Recipient under such Restricted Stock Unit Award. The Committee may condition the delivery of any shares or other benefits under the Restricted Stock Unit Award on satisfaction of the applicable Tax Withholding obligations. If permitted by the Committee (in its sole discretion), such Tax Withholding obligations may be satisfied (i) through cash payment by the Recipient; (ii) through the surrender of shares of Stock which the Recipient already owns; (iii) through the surrender of shares of Stock to which the Recipient is otherwise entitled under the Plan, which will be sold on behalf of the Recipient to satisfy the applicable withholding tax, provided, however, that such shares under the preceding clause (ii) and this clause (iii) may be used to satisfy not more than the Company’s statutory Tax Withholding obligation (based on minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to such supplemental taxable income) or (iv) by such other method as specified by the Committee.

 

  

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ARTICLE XII

162(M) PERFORMANCE-BASED AWARDS

 

The Committee may grant 162(m) Performance-Based Awards.  Notwithstanding any provision in the Plan,162(m) Performance-Based Awards shall comply with the provisions of this Article XII.

 

12.1         Award Period.  The Committee shall determine the applicable Award Period.  The Committee shall also establish the number of shares to be earned under a Performance-Based Award if the 162(m) Performance Goals are met or exceeded, including the fixing of a maximum number of shares (subject to Section 3.4).

 

12.2         Performance Goals and Payment.  The Committee shall establish in writing one or more 162(m) Performance Goals.  The Committee may establish other restrictions to payment under a 162(m) Performance-Based Award, such as a continued employment requirement, in addition to satisfaction of the 162(m) Performance Goals.

 

12.3         Computation of Payment.  During or after an Award Period, the performance of the Company, Subsidiary or Business Unit, as applicable, during the Award Period shall be measured against the 162(m) Performance Goals.  If the 162(m) Performance Goals are not met, no shares shall be earned under the 162(m) Performance-Based Award.  If the 162(m) Performance Goals are met or exceeded, the Committee shall certify that fact in writing and certify the number of shares earned under the terms of the 162(m) Performance-Based Award.

 

ARTICLE XIII

CHANGES IN CAPITAL STRUCTURE, ACQUISITIONS AND CORPORATE TRANSACTIONS

 

13.1         Effect of Changes in Capital Structure of the Company on the Number of Shares and Exercise Price. If the outstanding shares of Common Stock are hereafter increased, decreased, changed into or exchanged for a different number or kind of shares of Common Stock or for other securities of the Company or of another corporation, by reason of any reorganization, merger, consolidation, reclassification, stock split-up, combination of shares of Common Stock, or dividend payable in shares of Common Stock or other securities of the Company, the Committee will make such adjustment as it deems appropriate in the number and kind of Authorized Shares. In addition, the Committee will make such adjustment in the number and kind of shares of Common Stock or other securities covered by outstanding Stock Options and outstanding Stock-Settled SARs and Restricted Stock Units as well as make an adjustment in the Exercise Price of each outstanding Stock Option and Stock-Settled SAR as the Committee deems appropriate. The vesting terms of all Stock Option Agreements, Stock-Settled SAR Agreements, Restricted Stock Unit Agreements and Share Vesting Agreements may also be adjusted as the Committee deems appropriate. Any determination by the Committee as to what adjustments may be made, and the extent thereof, will be final, binding on all parties and conclusive.

 

  

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13.2         Issuance of Substitute Awards in Connection with an Acquisition by the Company. In the event of the acquisition of an Acquired Company by the Company or any Subsidiary, Awards (in any form) may be awarded by the Company in substitution for any outstanding unexercised stock options and any unvested share grants or unvested stock unit grants of the Acquired Company. Such substitute Awards may deviate from the terms otherwise required by Article VI, Article VII, Article VIII, Article IX, Article X and Article XI of this Plan to the extent that the Committee, in its sole discretion upon the advice of its advisors, determines that such non-conforming terms are required under applicable tax law, accounting principles or contractual requirements or are otherwise appropriate.

 

13.3         Effect of the Occurrence of a Corporate Transaction on Continuing Rights. In the event of the occurrence of any Corporate Transaction, all outstanding Stock Options and SARs that were awarded pursuant to this Plan shall terminate effective as of the effective date of such transaction, unless and only to the extent that the terms and conditions of the transaction expressly provide either (i) for the assumption of this Plan and the continuation of such Stock Options and SARs or (ii) the issuance of substitute similar Awards under a plan of the acquiring or surviving entity in such transaction. Each Recipient shall be provided written notice of the expected occurrence of any Corporate Transaction at least 15 days prior to the effective date and shall be permitted to tender a notice of exercise of any Stock Option or SAR in which exercise is conditioned upon the transaction actually occurring and, notwithstanding any provision of Article VIII or term of any Option Agreement, shall not be required to tender payment of the Exercise Price or amounts that the Company may be required to withhold for tax purposes until after the occurrence of the transaction.  The terms and conditions of the transaction may provide for the assumption of this Plan with respect to outstanding Performance Share Awards, Restricted Share Awards and Restricted Stock Unit Awards that have not fully vested and the assignment to and assumption by the surviving corporation of the rights and obligations of the Company under each outstanding Share Vesting Agreement. The Option Agreements, SAR Agreements, Share Vesting Agreements and Restricted Stock Unit Agreements that evidence Awards made under this Plan may, in the sole discretion of the Committee, provide for the acceleration of vesting, either in whole or in part, under the Award. In addition, the Committee shall have the power to accelerate the vesting of any Stock Option, Stock-Settled SAR, Performance Share Award, Restricted Share Award or Restricted Stock Unit Award in its sole discretion at the time of a Corporate Transaction or conditioned upon the occurrence of an expected Corporate Transaction.

 

ARTICLE XIV

OTHER TERMS APPLICABLE TO ALL AWARDS

 

14.1         Underwriters’ Lock-up. Each written agreement evidencing an Award will specify that the Recipient, by accepting the Award agrees that whenever the Company undertakes a firmly underwritten public offering of its securities, the Recipient will, if requested to do so by the managing underwriter in such offering, enter into an agreement not to sell or dispose of any securities of the Company owned or controlled by the Recipient provided that such restriction will not extend beyond 12 months from the effective date of the registration statement filed in connection with such offering and provided that all of the then directors and executive officers of the Company are also requested to and do enter into a similarly restrictive agreement with the managing underwriter.

 

  

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14.2          No Rights to Continued Service. Nothing in this Plan nor in any written agreement evidencing an Award will confer upon any Recipient any right to continued employment with the Company or to limit or affect in any way the right of the Company, in its sole discretion, to (a) terminate the employment of such Recipient at any time, with or without cause, (b) change the duties of such Recipient, or (c) increase or decrease the compensation of the Recipient at any time, subject, in each instance to the terms of any written employment agreement between the Company and such Recipient. Unless the written agreement evidencing an Award expressly provides otherwise, vesting under such agreement shall be conditioned upon:

 

1)           for Employees of the Company, the continued employment of the Recipient;

 

2)           for independent contractors, the Recipient continuing to provide services to the Company on substantially the same terms and conditions as such services were provided at the time of the Award; or

 

3)           for directors who are not Employees, the Recipient continuing to serve as a director of the Company or a Subsidiary.

 

Nothing in this Plan shall be construed as creating a contractual or implied right or covenant by the Company to continue such employment, service as an independent contractor or service as a director.

 

14.3          Who May Exercise Rights with Respect to Awards. During a Recipient’s lifetime, all rights with respect to an Award may only be exercised by the Recipient (including a legally appointed guardian or representative for the Recipient).

 

14.4          Beneficiary Designations. Any Recipient of an Award (except Incentive Stock Options) may, during his or her lifetime, designate a person or persons who may exercise the rights of that Recipient as to any Award made to such Recipient after the Recipient’s death. Any such designation shall be effective only if given in writing in a form and manner acceptable to the Committee and shall supersede and revoke all prior designations. In the absence of an effective designation, any vested benefits with respect to Awards under this Plan that remain unpaid at the time of Recipient’s death shall be paid to the Recipient’s estate and, subjected to the terms of this Plan and the applicable written agreement evidencing such Award, any unexercised rights of the Recipient with respect to an Award may be exercised by the administrator or executor of the Recipient’s estate.

 

  

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14.5          Limited Transferability of Awards. Unless the written agreement evidencing an Award expressly states that the Award is transferable as provided in this Section 14.5, no Award granted under this Plan nor any interest therein may be sold, assigned, conveyed, gifted, pledge or otherwise transferred in any manner other than by will or the laws of descent and distribution after the death of the Recipient. The foregoing prohibition on transferability is not intended to and shall not prohibit (i) the transfer of an Award to a trust in which the Recipient is considered the sole beneficial owner under both Code Section 671 and applicable state law, (ii) a pledge of shares to be received upon exercise of a Stock Option as security for a loan that is used to pay the Exercise Price or the (iii) transfer of shares covered by an Award after those shares are issued to the Recipient upon exercise of a Stock Option or Stock-Settled SAR or the delivery of the shares to the Recipient upon vesting of a Performance Share Award, a Restricted Share Award or a Restricted Stock Unit Award provided, in each instance, that all other applicable restrictions on transfer of such shares (whether imposed by law, the listing requirements of an exchange on which shares of Common Stock are traded, the terms of this Plan, the written agreement evidencing the Award or any share retention policy or share ownership guidelines of the Company that are applicable to the Recipient) have lapsed. Notwithstanding the foregoing, the Committee may make an Award (other than an Incentive Stock Option) of or amend the terms of an outstanding Non-statutory Stock Option, SAR, Performance Share Award, Restricted Share Award or Restricted Stock Unit Award to permit the transfer or assignment of an Award by means of a gift or court approved domestic relations order provided that the transferees are limited to (x) any combination of the Recipient, the Recipient’s spouse or former spouse, or the Recipient’s children, (y) is made to a trust established for the exclusive benefit of one or more of the persons identified in clause (x) in which the beneficiaries are prohibited from transferring or assigning their interests except for transfers to other persons identified in clause (x), or (z) a partnership, limited liability company or other entity in which all equity ownership interests are owned by persons identified in clause (x) and in which such equity ownership interests cannot be transferred or assigned except for transfers to other persons identified in clause (x). Any transfer of an Award permitted by this Section 14.5 shall be conditioned upon the Recipient and the transferee of such Award executing and delivering to the Company a form of Transfer and Assumption as the Committee may request.  Any subsequent transfers of transferred Awards shall be prohibited except by will or by the laws of descent and distribution.  Following any transfer, Awards shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, including any vesting or forfeiture provisions based on the continued employment or service by the original Recipient.  The events of termination of employment or service set forth in the applicable award agreement shall continue to be applied with respect to the original Recipient, and all references to employment, termination of employment, Disability or death of the Recipient shall continue to be applied with respect to the original Recipient.

 

Notwithstanding any transfer of an Award, the Recipient shall remain liable to the Company for any income tax withholding amounts that the Company is required to withhold at the time the Award vests or is exercised or the shares subject to the Award are sold by the transferee. The Committee shall have sole discretion in determining whether or not an Award is transferable within the limitations set forth in this Section 14.5 and may exercise that discretion with respect to certain Awards or certain Recipients without being bound to exercise that discretion in the same manner with respect to other similar Awards or other Recipients. Any purported assignment, transfer or encumbrance that does not comply with the requirements of this Section 14.5 shall be void and unenforceable against the Company.

 

  

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14.6          Repurchase of Awards. With the consent of the Recipient and upon approval of the Committee, the Company may from time-to-time repurchase Awards by payment in cash in an amount equal to the net Fair Market Value of the vested shares covered by the Award less any Exercise Price. Although the Committee is authorized by this Plan to make such repurchases, Awards shall not be made with the expectation that they will be repurchased for cash and no Recipient shall have the right to cause the Company to repurchase any Award without the consent of the Committee, which consent can be withheld by the Committee in its sole discretion.

 

14.7          Payment of Exercise Price or Tax Withholding with Other Securities. To the extent permitted in Section 8.2, the Exercise Price and, to the extent permitted by Section 8.3, Section 9.7 and Section 10.7, above, the Tax Withholding may be paid by the surrender of shares of Common Stock or other securities of the Company. Payment shall be made by either (i) delivering to the Company the certificates or instruments representing such shares of Common Stock or other securities, duly endorsed for transfer, or (ii) delivering to the Company an attestation in such form as the Company may deem appropriate with respect to the Recipient’s ownership of the shares of Common Stock or other securities of the Company. For purposes of this Section 14.7, shares of Common Stock shall be valued at their Fair Market Value as of the date of exercise with respect to the exercise of a Stock Option or SAR or as of the day on which a Performance Share Award, Restricted Share Award or Restricted Stock Unit Award vests or is paid.  In addition to the foregoing, to the extent permitted by Section 8.3, Section 9.7 and Section 10.7, above, the Tax Withholding may be paid by the application of shares which could be received upon exercise of a Stock Option or Stock-Settled SAR or the application of shares which would otherwise be vesting under a Performance Share Award, Restricted Share Award or Restricted Stock Unit Award, provided, however, that this net withholding of shares shall only be permitted up to minimum legally required tax withholding amount required under federal, state and local income and payroll taxes and Tax Withholding in excess of the minimum legally required tax withholding amount may only be satisfied in the manner previously provided in this Section 14.7. This net withholding of shares shall be accomplished by crediting toward the Recipient’s Tax Withholding obligation either (i) the difference between the Fair Market Value of a share of Common Stock and the Exercise Price of the Stock Option or SAR or (ii) the Fair Market Value of a share of Common Stock with respect to a Performance Share Award, Restricted Share Award or Restricted Stock Unit Award, in each instance rounded down to the nearest whole share. Any such net withholding of shares shall be considered an exercise of the Stock Option or Stock-Settled SAR to the extent that shares are so applied.

 

14.8          Suspension or Termination of Awards for Misconduct of the Recipient. If at any time (including after receipt of a notice of exercise or a request for delivery of vested shares) the Committee reasonably believes that a Recipient has committed an act of misconduct as described in this Section 14.8, the Committee may suspend the Recipient’s right to exercise any Stock Option or SAR or to receive delivery of vested shares under a Performance Share Award, Restricted Stock Award or Restricted Stock Unit Award pending a determination of whether an act of misconduct has been committed by such Recipient. For purposes of this Section 14.8, acts of misconduct shall mean (i) an act of embezzlement, fraud, dishonesty, breach of fiduciary duty, violation of securities laws involving the Company, any of its Subsidiaries or any entity or person with whom the Company or any of its Subsidiaries does business, (ii) nonpayment of any obligation to the Company or any Subsidiary, misappropriation or wrongful disclosure of any trade secret of the Company or any Subsidiary, (iii) engaging in any conduct constituting unfair competition or inducing any entity or person with whom the Company or any of its Subsidiaries does business to discontinue or materially reduce such business with the Company or its Subsidiaries and (iv) any similar conduct that materially and adversely impacts or reflects on the Company. A Recipient accused of engaging in any such misconduct shall be provided the opportunity to explain the Recipient’s conduct in writing. Any determination by the Committee as to whether or not a Recipient did engage in misconduct within the meaning of this Section 14.8 shall be final, conclusive and binding on the all interested parties. If the Committee determines that the Recipient did not engage in misconduct, the Company shall immediately give effect to any notice of exercise or request for delivery of vested shares received prior to or during any period of suspension. The Company shall not have any liability to the Recipient for any loss which the Recipient may have sustained as a result of any delay in delivering shares as a result of any suspension.

 

  

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14.9          Compliance with Legal Requirements. No shares of Common Stock will be issued with respect to any Performance Share Award, Restricted Stock Award or Restricted Stock Unit Award or upon the exercise of any Stock Option or Stock-Settled SAR unless the exercise and issuance of the shares of Common Stock will comply with (i) all relevant provisions of law, including, without limitation, the Securities Act, the Securities Exchange Act of 1934, all applicable state securities laws and the Code, each as amended and including the respective rules and regulations promulgated under each of the foregoing, (ii) any registration under the Securities Act in effect with respect to the Plan, and (iii) the requirements of any stock exchange or market upon which the Common Stock may then be listed. Compliance with such provisions shall be subject to the approval of legal counsel for the Company. The Company will not be liable to any Recipient or any other person for any delay in issuing or failure to issue shares of Common Stock where such delay or failure is due to the inability of the Company to obtain all permits, exemptions or approvals from regulatory authorities which are deemed necessary by the Company’s legal counsel. The Board may require any action or agreement by a Recipient as may be necessary, from time to time, to comply with the federal and state securities laws. The Company will not be obliged to prepare, file or maintain a registration under the Securities Act with respect to the Plan or to take any actions with respect to any state securities laws.

 

ARTICLE XV

AMENDMENT OF PLAN AND AWARDS

 

15.1          Amendment of Plan.  The Board of Directors may at any time modify or amend the Plan in any respect, except that shareholder shall be required to increase the number of shares reserved for the Plan.  Amendments to this Plan will be deemed approved by the shareholders if approved by a majority of the votes cast at a duly held meeting of the Company’s shareholders at which a quorum is present in person or by proxy.  Awards may be made pursuant to material amendments this Plan prior to such shareholder approval provided that such Awards are conditioned upon such approval and state by their terms that they will be null and void if shareholder approval is not obtained.

 

  

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15.2          Amendment of Award.  The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall (a) materially impair the rights of any Recipient without his or her consent, (b) except for adjustments made pursuant to Section 12.1 or in connection with substitute Awards, reduce the exercise price of outstanding Options or SARs or cancel or amend outstanding Options or SARs for the purpose of repricing, replacing or regranting such Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs or cancel or amend outstanding Options or SARs with an exercise price that is greater than the Fair Market Value of a share of Common Stock for the purpose of exchanging such Options or SARs for cash or any other Awards without shareholder approval or (c) cause any Award intended to be exempt from Code Section 409A to become subject to Code Section 409A. Notwithstanding the foregoing, the Committee may amend the terms of any Award heretofore granted, prospectively or retroactively, in order to cure any potential defects under Code Section 409A, in a manner deemed appropriate by the Committee in it sole discretion, without the consent of the Recipient.

 

Neither the Board, the Committee nor the Company make any representations that any Awards granted under this Plan shall be exempt from Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to the Plan or Awards granted thereunder. Moreover, for purposes of applying the provisions of Code Section 409A to this Plan, each separately identified amount to which a Recipient is entitled under this Plan shall be treated as a separate payment.

 

Further, notwithstanding the foregoing, no amendment of the Plan shall apply to amounts that were earned and vested (within the meaning of Code Section 409A) under the Plan prior to 2005, unless the amendment specifically provides that it applies to such amounts. The purpose of this restriction is to prevent a Plan amendment from resulting in an inadvertent “material modification” to amounts that are grandfathered benefits.

 

Amended and approved:

 

	
  

	
·

	
By the Board of Directors of the Company on February 17, 2005 and by shareholders on May 5, 2005;

 

	
  

	
·

	
By the Board of Directors May 1, 2009;

 

	
  

	
·

	
By the Board of Directors and shareholders on April 28, 2010;

 

	
  

	
·

	
By the Board of Directors April 27, 2011; and

 

	
  

	
·

	
By the Board of Directors on February 22, 2013 and by the shareholders on ________, 2013.

 

 

 

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