Document:

Exhibit 10.22

 

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Smith – CPTS Development, Supply, and License Agreement

 

DEVELOPMENT, SUPPLY, AND LICENSE AGREEMENT

 

THIS AGREEMENT (“Agreement”) is dated this 30th day of September, 2010 (the “Effective Date”), by and between Smith Electric Vehicles US Corp., a Delaware Corporation (“Smith”), and Clean Power Technical Solutions Sp. z.o.o., a Polish company, (“CPTS”) (collectively the “Parties,” and each individually a “Party”), based upon the following recitals.

 

A.                                   Smith and CPTS desire to collaborate in the development, manufacturing, and sale of the Products specified in Attachment A and on the terms and conditions set forth in this Agreement;

 

B.                                     Smith desires to purchase from CPTS Products specified in Attachment A on the terms and conditions set forth in this Agreement;

 

C.                                     CPTS desires to license its technology and know-how to Smith for Smith’s use in accordance with the terms and conditions set forth in this Agreement;

 

D.                                    Smith desires to manufacture the Products specified in Attachment A on the terms and conditions set forth in this Agreement;

 

E.                                      CPTS confirms that it has entered into legally binding agreements (copies of which are made available for inspection) that allow CPTS to supply Smith with specified batteries and related products that it can sell in accordance with the terms and conditions sets forth in this Agreement and that it has entered into all necessary legally binding agreements that allow CPTS to license to Smith all intellectual property necessary for Smith to manufacture and sell batteries and related products in accordance with the terms and  conditions sets forth in this Agreement; and

 

NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, the Parties agree as follows:

 

ARTICLE 1. DEFINITIONS

 

As used in this Agreement, the following words, when capitalized, have the meanings set forth below:

 

1.1                                 “Affiliates” means any business or other entity which is directly or indirectly controlling, controlled by or under common control with the specified entity, and control means direct or indirect ownership or actual control of at least fifty percent (50%) of the voting shares or other equity interest having power to elect directors or persons performing a similar function.

 

1.2                                 “Intellectual Property” means all rights in ideas, inventions, works of authorship, know-how, technical information, trade secrets, pending patent applications, patents, copyrights, trademarks, and Confidential Information.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

1.3                                 “Background Intellectual Property” of a Party means (a) the Intellectual Property of a Party that is owned or controlled by that Party before the Effective Date of this Agreement, or (b) created by a Party outside the scope of this Agreement.

 

1.4                                 “Confidential Information” means any and all information which that Party treats as confidential, whether the information is in oral, written, graphic or electronic form; provided that (a) if the information is in  writing or other tangible form, it is clearly marked as “proprietary” or “confidential” when disclosed to the receiving Party or (b) if the information is not in tangible form, it (i) is identified as “proprietary” or “confidential” when disclosed and (ii) is identified in reasonable detail in a writing which is marked “proprietary” or “confidential” and is delivered to the receiving Party within thirty (30) days after the date of disclosure by the disclosing Party to the receiving Party. Confidential Information excludes any information, data or material which (a) the disclosing Party expressly agrees in writing is free of any non-disclosure obligations; (b) is independently developed by the receiving Party or its Affiliates without reference to the Confidential Information of the disclosing Party (as evidenced by documentation in the receiving Party’s possession); (c) is lawfully received by the receiving Party or its Affiliates, free of any non-disclosure obligations, from a third Party having the right to so furnish the applicable Confidential Information; or (d) is or becomes generally available to the public without any breach of this Agreement or unauthorized disclosure of Confidential Information by the receiving Party or any of its Affiliates.

 

1.5                                 “Field of Use” means commercial electric vehicles.

 

1.6                                 “Independently Developed Foreground Intellectual Property” means Intellectual Property resulting directly from and authored, conceived, developed, reduced to practice or otherwise created solely by a Party during the course of performing under this Agreement.

 

1.7                                 “Products” means (i) those products and accessories sold hereunder by CPTS, which are identified in Attachment A, (ii) replacement parts for the products and accessories identified in Attachment A, and (iii) all updates, new versions, concepts, and enhancements to the products identified in Attachment A, (iv) and other goods and Intellectual Property identified in Attachment A or otherwise delivered or licensed by CPTS to Smith under this Agreement or made pursuant to an amendment or supplement executed by CPTS and Smith.

 

1.8                                 “Territory” means the United States, Mexico, and Canada.

 

1.9                                 “Battery Pack” means a combination of Modules.

 

1.10                           “BMS” means currently-available printed circuit board for the management of cells, Modules, and Battery Packs.

 

1.11                           “BMS Software” means software capable of safely controlling to relevant international standards in combination with the BMS the charge, discharge, balancing, and thermal management of battery cells, Modules, and Battery Packs.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

1.12                           “Diagnostic Interface” means the provision of a user interface for the purposes of fault diagnostics and operational parameter changes.

 

1.13                           “DGBS” means future printed circuit board for the management of cells, Modules, and Battery Packs.

 

ARTICLE 2. SUPPLY OF PRODUCT

 

2.1                                 Development and Production of Prototypes. CPTS agrees to develop and produce prototypes of the Products that meet the specifications agreed on by Smith and as defined in ancillary documentation mutually agreed upon by the Parties (“Prototype Specifications”).  Such Prototype Specifications shall be dated and signed off on by both Parties and are incorporated herein by this reference. The quantity and delivery dates of prototypes of the Products shall be mutually agreed.

 

2.2                                 Battery Pack Assemblies. CPTS agrees to supply Smith with its requirements for battery pack assemblies for cells (“BPA”) at commercially competitive prices. The BPA will include the currently-available BMS and BMS Software as a component thereof and Smith will not require any additional license(s) or pay any additional royalties with respect to the BMS or BMS Software.

 

2.3                                 Battery Management System (“BMS”) with Software. Should Smith manufacture BPAs, CPTS agrees to supply Smith with its requirements for the currently-available BMS as well as BMS Software at commercially competitive prices. CPTS is developing a DGBS and software therefore that Smith can, once it is ready, either buy from CPTS at commercially competitive prices or license the rights from CPTS to manufacture and sell in the Territory as a component of BPAs.

 

2.4                                 Best Efforts. Smith shall use its best efforts to commence the manufacturing of Modules within twenty-four (24) months of the effective date of this Agreement.

 

2.5                                 Initial Supply of Products. Until such time as Smith commences manufacturing production and sales of Modules in accordance with Section 2.4 of  this Agreement in the Territory, CPTS agrees to sell and to use its best efforts to supply to Smith with Products, that meet the approval of Smith, at commercially competitive prices, and in the quantities mutually agreed upon by the parties. All sales of Products from CPTS to Smith shall be made by purchase order, which may be provided by facsimile, email, or other mutually agreed to format. All purchase orders issued pursuant to this Agreement shall be deemed to incorporate and be governed by the terms and conditions of this Agreement. Once the prices have been set, no changes to the prices will be made for one (1) year from the Effective Date of this Agreement.  After one (1) year from the Effective Date of this Agreement, the price of a given Product may be adjusted no more than once per year and only if CPTS’s cost (in United States dollars) for supplying a Product increases by more than twenty percent (20%) from the previously agreed upon price. The parties will negotiate in good faith any increase in price(s) in order to maintain commercial competitive price(s) that do not subject CPTS to losses.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

2.6                                 Royalty – Post Initial Supply of Products.  Smith shall pay to CPTS a royalty of US [***] (“Royalty”) for each 1 kWh of usable Module capacity manufactured by Smith or manufactured on behalf of Smith and sold in the Territory.  For example and without limitation, the sale of a Battery Pack with a capacity to contain [***] kWh of usable Module capacity will result in a total royalty of US  [***] Smith shall pay to CPTS accrued royalties on the 15th of each calendar month for all sales in the Territory made during the preceding calendar month whether the sales relate to a standalone product including replacement or spare items or as part of a vehicle or vehicle component.

 

2.7                                 Initial 24 Month Period.  Smith agrees to pay to CPTS [***] monthly for twenty-four (24) months commencing on the Effective Date of this Agreement (“Initial Payment”). Said Initial Payment shall be as payment for the costs associated with the technical support/engineering defined in Section 15 of this Agreement, for the development and engineering costs of prototypes as specified in Section 2.1 and for payment of Royalties specified in Section 2.6 of this Agreement which become due during the initial twenty-four (24) months commencing on the Effective Date of this Agreement.  The Initial payment shall be paid by Smith so CPTS regardless of when Smith commences manufacturing production or sales of Modules.

 

2.8                                 Delivery Terms. All Products sold to Smith shall be sold Ex Works (CPTS facility) to one ship-to location, unless agreed otherwise in writing by the Parties.  Title shall pass to the receiving Party simultaneously with passage of risk of loss to the receiving Party as specified in Incoterms 2000.

 

2.9                                 Testing and Inspection.  In regard to all Products sold by CPTS to Smith, CPTS shall use commercially reasonable efforts to inspect and test Products prior to delivery.  CPTS and Smith shall mutually develop testing protocol and such protocol shall be an appended to this Agreement.

 

2.10                           Discrepancy. In regard to all Products sold by CPTS to Smith, if, after delivery, Smith discovers any discrepancy between (i) the quantity or type of Products ordered and that received or (ii) the quantity or type of Products invoiced and that received, Smith shall use best efforts to timely give notification of the discrepancy. Appropriate adjustments shall be made in the ordinary course.

 

2.11                           Non-Conformity. In regard to all Products sold by CPTS to Smith, if the Products are non-conforming products to the specifications and requirements set forth in purchase orders Smith submits to CPTS in the manner specified in Sections 2.2 and 2.3 of this Agreement and which are accepted by CPTS. CPTS shall use commercially reasonable efforts to supply conforming Products to Smith as soon as reasonably possible and shall advise Smith of its efforts to supply conforming Products to Smith.

 

2.12                           Warrantee by CPTS of Products Sold. All Products sold by CPTS to Smith under this Agreement are warranted to be free from defects in material and workmanship under normal use for the period set forth in Attachment A.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

NO OTHER WARRANTIES, EXPRESS OR IMPLIED, ARE MADE WITH RESPECT TO THE PRODUCTS INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY.

 

2.13                           Defective Products. As used in this Agreement, the term “Defective Products” means any Products which fail to meet the warranty set forth in Attachment A within the warranty periods described in Attachment A.  “Defective Products” shall specifically exclude, without limitation, any Products (i) which have been subjected to misuse, negligence, accident, or improper maintenance, installation, or application or (ii) which have been altered without CPTS’s prior written consent.

 

2.14                           Returns of Defective Products. At CPTS’s election, Smith shall either (i) return to a location designated by CPTS, at CPTS’s cost, any allegedly Defective Products for which claims are made, with a written explanation of the claimed failures, or (ii) make the allegedly Defective Products available at Smith’s premises for inspection by CPTS’s or its designated representative(s).

 

ARTICLE 3. GRANT OF LICENSE

 

3.1                                 License. In the Field of Use in the Territory for the Term of this Agreement, CPTS hereby grants to Smith an exclusive, non-transferable right and license (without the right to grant sublicenses, except to subcontractors and/or vendors that manufacture, fabricate and/or supply components of and/or parts to Smith) to: engineer, design, develop, improve, modify, manufacture, market, sell, and use (a) Products, which include (i) the DGBS system; (ii) Modules; (iii) DGBS hardware, i.e., the control modules within Smith system; (iv) software to manage the system and current and future BMS and DBGS systems and the rights to the DBGS software; (v) diagnostic tools for BMS and DGBS; (vi) user interface for whole vehicle diagnostics; (vii) prismatic cell mechanical packaging methodology; (viii) Peltier thermal management as applied within CPTS mechanical cell Module assembly; (ix) mechanical connection methods for the cell terminals; (ix) hardware relating to the current BMS modules and future control modules for DGBS, (x) CPTS’s Intellectual Property concerning the foregoing, and (b) future improvements to, new developments to, and new generations of the Products developed by CPTS, and (c) know-how and best practices concerning the Products.

 

3.2                                 Confidentiality. Smith agrees that, before disclosing any technology or information described in this Section to any subcontractor and/or vendor for components and/or  parts for Modules, it will first require the subcontractor and/or vendor to sign a written agreement that it will abide by the confidentiality provisions of Article 12 of this Agreement and that it will only manufacture components and/or parts for Smith’s requirements for Modules.

 

3.3                                 Improvements to Modules. When manufacturing the Modules, Smith may make manufacturing changes for the purpose of improving the Modules and reducing the costs of manufacturing and/or assembling the Modules.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

3.4                                 Commercial Development. Smith agrees to use commercially reasonable efforts to develop the Modules or Products so as to make them commercially viable in the Territory under the terms of this Agreement.

 

3.5                                 Development Costs. Smith shall be responsible for all of its costs and expenses incurred in any designing, developing, and making the Modules or Products ready for production and use in accordance with Sections 3.1 and 3.2 above.

 

3.6                                 Tooling. Smith shall be responsible for all tooling costs and shall have full right to and ownership of all tooling it develops for production of Modules or Products under this Agreement.

 

3.7                                 Expansion of Territory. During the Term of Agreement, Smith shall also have the right to request additional territories. If Smith desires to expand the relationship in additional territories, (i) it will so notify CPTS in writing and name the potential additional territories, (ii) CPTS will promptly respond to inform Smith whether CPTS has any established distributors in such potential additional territories, (iii) Smith, if it determines it still desires to include such potential additional territories as part of the Territory, will submit a plan to CPTS for such potential additional territories. The Parties will negotiate in good faith to amend this Agreement or to enter into a separate agreement for Smith to manufacture and/or sell Modules in any potential additional territories as well as for any changes or additions to the Field of Use and/or Products desired by Smith, If CPTS is presented with an agreement to license the technology that is the subject of this Agreement in the Field of Use in another territory, CPTS will notify and negotiate with Smith in good faith to amend this Agreement or to enter into a separate agreement for Smith to manufacture and/or sell Modules in such additional territories.

 

3.8                                 Right to Brand. CPTS grants to Smith, under the license granted under Section 3.1, the right to brand all Products and Modules sold in the Territory under the Smith brand name and marks.  CPTS shall have the right to publicly represent that Smith has exclusive rights in the Territory to utilize CPTS’s technology.  Such representations must be approved by Smith prior to public release.  Smith shall bear the entire cost and expense of securing, registering, defending and protecting the Smith brand name and marks for the Products and/or Modules in the Territory.

 

3.9                                 Auxiliary Power Unit. CPTS acknowledges and consents to Smith developing, offering, and selling an on-board Auxiliary Power Unit to charge the batteries on the Smith all electric vehicle.

 

ARTICLE 4. INTELLECTUAL PROPERTY RIGHTS.

 

4.1                                 Independent Ownership. Each Party is and remains the owner of its Background Intellectual Property and Independently Developed Foreground Intellectual Property, and the Parties understand and agree that, except as specifically set forth in this Agreement, no license or other rights, either express or implied, are granted by either Party to the other under this Agreement with respect to any  Background Intellectual Property or any Independently Developed Foreground Intellectual Property. Each Party shall decide in its

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

sole discretion whether if protects, and shall bear all costs of protecting, its Background Intellectual Property and Independently Developed Foreground Intellectual Property.

 

4.2                                 Jointly Developed Intellectual Property.  The Parties shall work together in good faith to protect all rights to and concerning any Intellectual Property jointly developed.  Each party shall grant to the other Party a right to use the Jointly Developed Intellectual Property under the terms of this Agreement. Following termination of this Agreement for any reason, each party shall have the joint right to freely use jointly Developed Intellectual Property.

 

4.3                                 Infringement Claims.  If any third party alleges that the manufacture, sale or use of the Products or any individual component of the Products infringes upon a patent, copyright or other Intellectual Property right belonging to that third party, then each Party owning or claiming ownership to the Intellectual Property rights of the alleged infringing Products shall defend, indemnify and hold harmless the other Party and its Affiliates from such claims and any resulting damages and expenses (including reasonable attorneys’, other professionals’ and court fees). This provision will not apply to any Products or components thereof which the other Party alters, modifies or changes in any way or which is sold or used for any purpose other than their originally intended purpose.

 

4.4                                 Right to Use; Re-Design. If the Party which is responsible for indemnification under Section 4.3, or any final, non-appealable judgment of  a court of competent jurisdiction, determines that the Products or individual component of the Products (each, an “Infringing Products”) infringes on any patents, trademarks, copyrights, industrial design rights, or other proprietary rights, or by misuse or misappropriation of trade secrets, then, in addition to the obligations set forth in Section 4.3, the indemnifying Party shall, at its expense, use commercially reasonable efforts to either: (i) secure the rights to manufacture, sell and use the allegedly Infringing Products; (ii) replace or modify the Infringing Products with Products or individual components thereof that are non-infringing provided such Products are without material degradation in performance, features, functions or quality, or with a mutually agreeable amount of degradation in performance, features, functions or  quality.

 

4.5                                 Party’s Failure to Act. If the indemnifying Party identified in Section 4.3 of this Agreement does not confirm that it will assume control of the defense of any infringement claim (and provide reasonable assurance regarding its fulfillment of this obligation), the indemnified Party shall have the right to take appropriate legal action and the indemnifying Party shall promptly reimburse the indemnified Party for all reasonable costs and expenses upon presentation of reasonable supporting documentation.

 

4.6                                 Infringement of Intellectual Property. The Parties shall promptly notify each other of any actual or potential infringement or violation of any Intellectual Property by any third party known to them and any material information they may have regarding such potential infringement. CPTS shall have the first right to take such steps as CPTS may consider necessary to enforce any Intellectual Property against any infringement by a third party in the Territory and to seek any remedies available to it in respect of that infringement.  Upon the request of CPTS, Smith shall use all reasonable efforts to assist

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

and cooperate with CPTS in such litigation and CPTS shall reimburse Smith for its out-of-pocket expenses incurred in connection with such assistance. If CPTS elects not to commence litigation to enforce any Intellectual Property against any infringement of such Intellectual Property by a third party in the Territory, within thirty (30) days after becoming aware of any such infringement. CPTS shall notify Smith in writing of such election within such thirty (30) day period. After such thirty (30) day period, Smith shall then have the right, at Smith’s sole cost and expense, to commence litigation to enforce such Intellectual Property against that infringement, in the name of CPTS, if necessary, and to seek any remedies available to Smith and/or CPTS. Neither Party may agree to any settlement or voluntary disposition of any litigation relating to any infringement of Intellectual Property without the consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed.

 

4.7                                 Allocation of Costs and Monetary Recovery from the Enforcement of Intellectual Property.  In the event Smith declines participation in the legal proceedings and litigation brought by CPTS to enforce the Intellectual Property against any infringement by a third party in the Territory, CPTS shall be responsible for the costs and expenses in connection therewith, including attorneys’ fees, and shall retain the full amount of any award of damages in favor of the parties in any such litigation and any settlement in favor of the parties in any such litigation. Upon the request of CPTS, Smith shall use all reasonable efforts to assist and cooperate with CPTS in such litigation and CPTS shall reimburse Smith for its out-of-pocket expenses incurred in connection with such assistance. In the event that Smith elects its right pursuant to Section 4.5 of this Agreement to commence litigation to enforce the Intellectual Property against any infringement by a third party in the Territory, in the name of CPTS or in its own name and right, Smith shall be responsible for the costs and expenses in connection therewith, including attorneys’ fees, and shall retain the full amount of any award of damages in favor of the parties in any such litigation and any settlement in favor of the parties in any such litigation. Upon the request of Smith, CPTS shall use all reasonable efforts to assist and cooperate with Smith in such litigation and Smith shall reimburse CPTS for its out-of-pocket expenses incurred in connection with such assistance.

 

ARTICLE 5. EXCLUSIVITY- EQUITY

 

5.1                                 Exclusivity.  CPTS shall not sell the Products for direct competition with Smith within the Field of Use within the Territory for the Term of Agreement, unless the Parties upon mutual agreement extend the exclusivity period. Notwithstanding the foregoing, CPTS shall be free to sell Products to any party outside of either the Territory or Field of Use at any time. Smith’s exclusivity shall remain in effect on the condition that Smith pays the Initial Payment as defined in Section 2.7 of this Agreement and the royalty payments as defined in Section 2.6 of this Agreement.  In the event Smith fails to timely pay either the Initial Payment as proscribed in Section 2.7 of this Agreement or the royalty payments as proscribed in Section 2.6 of this Agreement, Smith’s exclusivity to the Territory and Field of Use shall immediately cease and CPTS shall have the right to terminate this Agreement as defined in Article 11 of this Agreement.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

5.2                                 Equity.  CPTS shall be entitled to 50,000 common shares of Smith stock options, The grant price of the options will be at the price set forth in Attachment C to this Agreement.  The options will vest as set forth in Attachment C.

 

5.3                                 Taxes.  Both Parties agree to cooperate with the preparation and filing of all documentation required to fulfill their respective obligations under this Agreement, This specifically includes the preparation and filing of any documentation which would reduce tax rates, including Value Added Taxes (VAT) and taxes on Royalty payments. Smith will pay any applicable sales, use or similar tax imposed in connection with the sale of Products to Smith; provided, that CPTS shall not charge or collect, and Smith shall have no liability for, taxes on any sale of Products for which Smith has provided CPTS with an appropriate direct pay permit, resale certificate or other documentation evidencing an exemption from such taxes. For all sales of Products upon which tax reimbursement to CPTS is applicable, CPTS shall separately itemize all applicable taxes on invoices submitted to Smith.

 

ARTICLE 6. RECALL

 

6.1                                 Recall Procedures.  If a recall or field corrective action caused solely by Defective Products or defective Modules or Products provided or produced by either Party is required, then Smith will promptly notify CPTS in writing of the required recall or field corrective action, with reasonable detail and with reasonable supporting documentation. The Parties shall immediately, diligently and in good faith work together to determine the cause of the defect, and shall immediately assist in preparing and implementing a recall or field corrective action to correct such defect. For Products produced and supplied by CPTS to Smith, Smith’s exclusive remedy, in the event of such a  recall or field corrective action of Defective Products is for CPTS, at its option, to either repair or replace Defective Products or refund the purchase price for Defective Products and pay the reasonable cost of: (i) preparing, printing and mailing a recall notice to inform dealers, distributors and, customers of the nature of the recall, (ii) freight for replacement parts required to repair or replace Defective Products, and (iii) reasonable labor costs and expenses for the Smith to perform in-field replacement activities, if any,  for Defective Products. Notwithstanding the foregoing, CPTS shall have no liability for recall or field corrective action for any Modules manufactured by Smith pursuant to its manufacturing license herein, except as to the proper functioning of the Modules as they relate to the DGBS, the BMS and the associated software therefore.

 

ARTICLE 7. PRODUCT LIABILITY

 

7.1                                 Losses Defined.  As used in this Article, the term “Losses,” when capitalized, means any loss, cost, damage and expense (including reasonable attorneys’, other professionals’ and court fees), arising from any death of or injury to any person, or damage to any property.

 

7.2                                 Indemnity for Losses.  Each Party shall defend, indemnify, and hold harmless the other Party and its Affiliates for Losses proximately caused by defective Products or defective Modules manufactured by that party, other than Losses which are proximately

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

caused by (i) the non-manufacturing Party’s acts or omissions, or the acts or omissions of any person which purchases, resells, uses, or operates Products or Modules, or (ii) misuse of the Products or Modules, if it cannot be readily determined whether or the extent to which the Losses were proximately caused by defective Products or defective Modules, either Party may submit the matter to binding arbitration pursuant to Article 10 of this Agreement to determine the amounts attributable to the defective Products or defective Modules, or to each Party, as the case may be.

 

ARTICLE 8. LIMITATION OF LIABILITY

 

8.1          No Recovery of Certain Damages.   IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT OR WARRANTY, ALLEGED NEGLIGENCE OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

 

ARTICLE 9. FORCE MAJEURE

 

9.1          Force Majeure Defined.    Each Party shall be temporarily excused from performing its obligations under this Agreement (other than the payment of money) for so long as such performance is prevented or delayed by any event of Force Majeure. The term “Force Majeure” shall, for purposes of this Agreement, be defined as: (i) any acts of God, terrorism, natural disasters, or wars, or (ii) any act or omission of any government authority. A Party affected by an event of Force Majeure shall promptly notify the other Party and shall use commercially reasonable efforts to overcome and mitigate such event of Force Majeure.

 

ARTICLE 10. GOVERNING LAW, ARBITRATION AND SPECIFIC PERFORMANCE

 

10.1        Governing Law.    This Agreement shall be governed by and construed according to the laws of the State of New York, USA.

 

10.2        Informal Settlement Procedures.    The Parties shall attempt to settle any and all claims, disputes, controversies or differences arising between the Parties which arise out of or in relation to or in connection with this Agreement shall in the first instance be attempted to be settled as provided in Section 11.3, and if they are not settled by negotiation, they shall be resolved by binding arbitration upon written request of either Party.

 

10.3        Arbitration Procedures.    Any arbitration shall take place in New York City, New York, USA in accordance with the Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted by a single neutral arbitrator agreed upon by the Parties. In relation to any matters not governed by such rules, the arbitrator shall determine the rules of procedure to be followed, provided, however, that in such case, the opportunity to cross-examine any witness shall be given to both Parties upon request of either Party.

 

10.4        Entry of Judgment.    The arbitration award shall be final and binding upon both Parties, and judgment on the arbitration award may be entered in any court having

 

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jurisdiction over the Party against whom enforcement is sought or such Party’s property, and application may be made to such court for judicial acceptance of the award or an order of enforcement, as the case may be.

 

ARTICLE 11. TERM AND TERMINATION

 

11.1        Term of Agreement.   The initial term of this Agreement, commencing on the Effective Date, shall be ten (10) years subject to any early termination as provided for in this Article (“Term of Agreement”). Smith shall have the right, in its discretion, to extend the Term of Agreement for additional two (2) year terms beyond the initial ten (10) year term provided the Parties agree on the Royalty for Modules manufactured and/or sold by Smith during said term.

 

11.2        Termination.    If Smith fails to commence manufacturing production of Modules within twenty-four (24) months from the Effective Date of this Agreement, CPTS shall have the right, in its sole discretion, to claim material breach, unless the cause of such delay is  a failure of CPTS to perform under the terms of this Agreement. This Agreement may be terminated by either Party upon a material breach of the non-terminating Party, subject to Section 11.3 and the terms and conditions of this Agreement.

 

11.3        Notice of Default: Informal Discussions.    In the event of a claimed material breach by either Party, the non-breaching party shall provide to the breaching Party a written notice of default using the notice procedure set forth in Section 16.6 of this Agreement. Such notice shall clearly specify the nature of the alleged default and what actions it believes are required to correct the default. Upon receipt of said notice of default, the defaulting party shall have sixty (60) days to correct the default. If, following the sixty (60) day cure period the matter is not resolved, either Party may notify the other Party that it requests that the Parties attempt to resolve the dispute or determine the remedy for the event of default pursuant to informal dispute resolution. The notice of informal dispute resolution must provide reasonable details describing the nature of the default. Within fifteen (15) days after either Party receives a notice requesting informal dispute resolution, an authorized representative of each Party shall meet and confer for a reasonable period of time to;  (i) exchange information pertaining to the dispute or event of default, and (ii) attempt in good faith to agree upon a resolution to the dispute or a remedy for the event of default, as applicable. If the informal dispute resolution procedures or corrective action plan fail to resolve the dispute or achieve at) agreement on the remedy for the event of default within sixty (60) days after the receipt of the notice requesting informal dispute resolution, then either Party may pursue arbitration pursuant to Article 10 of this Agreement.

 

11.4        Effect of Termination.    In the event CPTS terminates this Agreement pursuant to this Section, Smith shall have no further liability to CPTS other than (i) to pay CPTS for Products ordered by Smith and subsequently delivered by CPTS; and (ii) to pay to CPTS all unpaid Initial Payments and/or royalty payments including, but not limited to, royalty payments for all Modules manufactured and/or sold by Smith following termination of this Agreement. Upon termination, the Term of Agreement shall immediately end and this Agreement shall become null and void and of no further force and effect.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

11.5        Continuation of Term of Agreement.    Notwithstanding the termination of this Agreement, at Smith’s election, the Agreement shall remain in effect for an additional period of time after the effective date of such termination as may reasonably be necessary (but  in no event longer than six (6) months from the date of termination) to allow Smith to implement an orderly transition to an alternative to the Products and Modules. During this period of time. Smith will be required to make payments to CPTS for Products and to make royalty payments to CPTS for Modules sold as specified in Section 2.6.

 

11.6        No Prejudice.    The provisions of this Article are without prejudice to any other rights or remedies either Party may have by reason of the default of the other Party.

 

ARTICLE 12. CONFIDENTIALITY

 

12.1        Scope of Use.    Each Party agrees that it shall not use or disclose any of another Party’s Confidential Information, except as authorized herein. All Confidential Information of a Party shall remain such Party’s property during and after the Term of Agreement.

 

12.2        Non-Disclosure.    Each Party (the “Receiving Party”) shall protect all Confidential Information of the other Party (the “Disclosing Party”) against disclosure to third parties in the same manner as it would protect its own similar confidential information against disclosure to others for a period from the Effective Date until two (2) years following termination of this Agreement. Notwithstanding the above, during such period, each Party may make any disclosure of any of the Disclosing Party’s Confidential Information to (i) its Affiliates, (ii) its and its Affiliates’ employees, agents, and consultants who have a need to know and (ii) any others to whom such disclosure is expressly authorized hereunder and is necessary to the Receiving Party’s fulfillment of its obligations hereunder. The Receiving Party shall appropriately notify each person to whom any such disclosure is made that such disclosure is made in confidence and shall be kept in confidence by such person. If the Receiving Party reasonably believes that disclosure of Confidential Information is required in accordance with applicable law, then prior to such disclosure (if permitted under applicable law) the Receiving Party shall (a) notify the Disclosing Party and afford the Disclosing Party an opportunity to limit the scope of the required disclosure and (b) take reasonable efforts to minimize the extent of any required disclosure and to obtain an undertaking from the recipient to maintain the confidentiality thereof.

 

ARTICLE 13. INSURANCE

 

13.1        Insurance. Each Party (or an Affiliate of a Party shall on behalf of that Party) shall obtain and maintain consistent with the provisions of this Agreement, at its sole expense, the following types of insurance coverage, to remain in force during the Term of Agreement as  follows; Commercial General Liability covering liability arising from premises, operations, independent contractors, product liability, products-completed operations, personal and advertising injury, and blanket contractual liability. Such insurance coverage shall be mutually agreed to prior to CPTS’ production of Products as provided for in Article 2.

 

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ARTICLE 14. PAYMENT

 

14.1        Reporting.   Smith, on a quarterly basis, shall provide CPTS with written sales report separately listing, by month all Products, all components, accessories and parts of Products sold by Smith and all Modules, all components, accessories and parts of Modules manufactured and/or sold by Smith separately listing, by month, (i) the number of Products sold by Smith; (ii) the number of Modules manufactured by Smith; (iii) the number of Modules sold by Smith; (iv) the number of each type of components, accessories and parts of Modules manufactured by Smith; (v) the number of each type of components, accessories and parts of Modules sold by Smith; and (vi) the number of each type of components, accessories and parts of Products sold by Smith.

 

14.2        Method of Payment.    Any payments to CPTS under this Agreement shall be made by wire transfer to such bank or account as CPTS shall specify in writing from time to time and shall be made in US Dollars.

 

14.3        Late Payments.    Any amounts not paid by Smith when due under this Agreement shall be subject to interest from the date payment is due through the date upon which CPTS has collected immediately available funds in an account designated by CPTS at a rate equal to the sum of eight percent (8%) per annum, calculated daily on the basis of a 360-day year.

 

ARTICLE 15. TECHNICAL SUPPORT

 

15.1        Integration.    Smith shall pay to CPTS a project fee, as set forth in Attachment B, for CPTS’s technical and engineering support in the integration of the Products or Modules into Smith’s vehicle platform. This project fee shall be negotiated in good faith and shall take into consideration CPTS’s commercial benefit from such development and integration in terms of royalties and other sums paid to CPTS by Smith from sales within the Territory and from sales outside of the Territory.

 

15.2        Transfer of rights under the License.    CPTS shall provide alll necessary and appropriate technical and engineering support without charge to Smith in the transference of the rights granted under the license pursuant to Article 3 of this Agreement, including the scaling of manufacturing of the Modules.

 

15.3        On-going Support.    CPTS agrees to provide technical and engineering support for the Products and/or Modules and the manufacturing of the Modules on an as  needed and on-going basis. The Parties agree to negotiate in good faith, and to enter into a consulting agreement concerning this on-going technical support.

 

ARTICLE 16. GENERAL PROVISIONS

 

16.1        No Inducement.   The Parties represent to each other and each agrees that, neither it nor any person acting on its behalf has, in contravention of any applicable law, given or

 

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offered to give or shall give or offer to give any sum of money or other material consideration to any person, directly or indirectly, as an inducement to obtain business under this Agreement or to influence the granting of licenses or other governmental permissions to enter into this Agreement or perform obligations hereunder.

 

16.2        Government Approvals; Regulatory Requirements.

 

(a)           CPTS and Smith, respectively, shall be responsible for compliance with and for the obtaining of approvals and permits as may be required under country, international, federal, state, and local laws, ordinances, regulations, and rules for the performance of their respective responsibilities and obligations under this Agreement.

 

(b)           For Products or Modules manufactured by either Party, that Party is responsible for final quality control testing, for providing adequate warnings and instructions for use of the Products and/or Modules (including proper labeling and packaging), and release of documentation for the Products and/or Modules. Each Party shall be responsible for reporting to the other Party any adverse events related to the Products and/or Modules and/or their use.

 

16.3        No Agency.    This Agreement does not constitute either Party the agent or legal representative of the other Party. Neither Party is authorized to create any obligation on behalf of the other Party.

 

16.4        Assignment.   Neither Party may assign any of its rights or obligations under this Agreement without first obtaining the written consent of the other; provided, however, that both Parties have the right to assign any of its rights or obligations hereunder to any division, or subsidiary, or Affiliate, or to any successor to its business and provided any such assignee agrees in writing to abide by the terms of this Agreement. Nothing herein shall preclude either Party from subcontracting any of its obligations under this Agreement to any other party provided any such subcontractor agrees in writing to abide by the terms of this Agreement.

 

16.5        No Implied Waiver.   The failure of either Party at any time to require performance by the other Party of any provision of this Agreement shall in no way affect the full right to require such performance at any later time.The waiver by either Party of a breach of any provision of this Agreement shall not constitute a waiver of the provision itself. The failure of either Party to exercise its rights provided under this Agreement shall not constitute a waiver of such right.

 

16.6        Notices.    Any notice under this Agreement shall be in writing (letter or facsimile) and shall be effective upon receipt or refusal or failure to accept receipt by the addressee at its address indicated below.

 

(a)           Notice sent to Smith shall be addressed as follows:

 

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Smith

Attention: Bryan Hansel, CEO 

Email: bryan.hansel@sev-us.com 

Facsimile:  +1 816.464.0510

Telephone: +1 816.464.0508

 

With copies to:

Attention: Jacques Schira, General Counsel 

Email: Jacques.schira@sev-us.com 

Facsimile:  +1 816.464.0510 

Telephone: *****

 

(b)           Notice sent to CPTS shall be addressed as follows:

 

CPTS

Attention: Konrad Makomaski, CEO 

Email: konrad.makomaski@cpts.pl

Facsimile: +48 22 853 0134 

Telephone: +48 501 110 588

 

With copies to:

Attention: James R. Menker

Email: jmenker@holleymenker.com

Facsimile: +1 202-280-1177 

Telephone: +1 904-247-2620

 

(c)           The Parties by notice given in accordance with this Section may designate other addresses to which notices shall be sent.

 

16.7        Authority; Smith’s Organization and Good Standing.   Each Party warrants and represents that it has the right and authority to enter into this Agreement without restriction. Smith is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Smith has all requisite power and authority to carry on its business as it is contemplated for the fulfillment of its obligations in this Agreement. Smith is duly qualified to conduct business as a foreign corporation and is in good standing in every jurisdiction of the Territory where the nature of the business conducted by it makes such qualification necessary, except where the failure to so qualify or be in good standing would not prevent or materially delay the fulfillment of its obligations in this Agreement.

 

16.8        Execution and Delivery. The execution and delivery of this Agreement by the Parties have been duly and validly authorized. This Agreement has been duly executed and delivered by the Parties and, assuming the due authorization, execution and delivery of this Agreement by each Party, constitutes the legal, valid and binding obligation of each Party, enforceable against each Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors’ rights generally from time to time in effect and to

 

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general principles of equity regardless of whether considered in a proceeding in equity or  at law.

 

16.9        Further Assurances and Actions. The Parties, whether before or after the Effective Date and without further consideration, shall each do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary in order to consummate or implement expeditiously the transactions contemplated by this Agreement (including, as applicable, upon the request of the other party).

 

16.10      Third Party Beneficiaries. Except as specifically provided herein, this Agreement intended solely for the benefit of each Party hereto and their respective successors or permitted assigns and it is not intended to confer upon any person or entity other than the Parties hereto any rights or remedies hereunder.

 

16.11      No Violations; Consents. The execution and delivery of this Agreement do not, and compliance with the terms hereof will not,; (a) violate any governmental rule applicable to either Party or conflict with any material contract to which either Party is a party or by which it is otherwise bound, except for such violations or conflicts which would not materially interfere with either Party’s performance of its obligations hereunder; or (b) require any approval, authorization, consent, license, exemption, filing or registration with any person or entity, except for such approvals, authorizations, consents, licenses, exemptions, filings or registrations which have been obtained or made or which, if not obtained or made, would not materially interfere with either Party’s performance of its obligations hereunder.

 

16.12      Amendments. This Agreement supersedes all previous agreements, oral or written, between Smith and CPTS with respect to the subject matter of this Agreement. No amendment or modification to this Agreement shall be binding upon either Party unless it is in writing and is signed by both Parties.

 

16.13      Headings. The Article, Section, and/or Paragraph headings in this Agreement are used for convenience of reference only and shall not be deemed a part of this Agreement for any purpose.

 

16.14      Severability. If any provision of this Agreement shall be held to be invalid, illegal, or unenforceable under any statute, regulation, ordinance, executive order, or other rule of law, that provision shall be deemed severed to the extent necessary to comply with such statute, regulation, ordinance, order, or rule, and the Parties shall negotiate in good faith to arrive at an alternative replacement provision approximating the Parties’ original business objective. The remaining provisions of this Agreement shall remain in effect.

 

16.15      Entire Agreement. This Agreement contains all the representations and agreements between the Parties hereto and there are no other agreements or understandings, oral or in writing, regarding the matters covered by this Agreement. No

 

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terms submitted by either Party which are in addition to or inconsistent with those set forth in this Agreement shall apply to this Agreement unless agreed to in a writing signed by both Parties. The Exhibits attached to this Agreement are made a part of and incorporated in this Agreement.

 

16.16      Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile of this Agreement or an executed counterpart shall be deemed a good and valid execution and delivery of this Agreement.

 

IN WITNESS WHEREOF, Smith and CPTS have caused this Development and Supply Agreement to be executed by their duly authorized representatives as of the day and year first above written.

 

	
Smith   Electric Vehicles Us Corp.
   (“Smith”)
    	
 
    	
Clean   Power Technical Solutions Sp.z.o.o.
   (“CPTS”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Robin J.D. Mackie
    	
 
    	
By
    	
/s/ Konrad Makomaski
    
	
Name
    	
Robin J.D. Mackie
    	
 
    	
Name
    	
 
    
	
Title
    	
CTO
    	
 
    	
Title
    	
CEO
    
	
 
    	
7th October 2010
    	
 
    	
 
    
						

 

Attachment A - Products and Warrantee

 

·      “Modules”

 

·      “Battery Pack”

 

·      “BMS”

 

·      “BMS Software”

 

·      “Diagnostic Interface”

 

·      “DBGS”

 

Warrantee:  The Parties will continue to work diligently to complete the prototype Products and will work together to establish a mutually agreed to appropriate warrantee time period for the Products prior to CPTS’ production of Products as provided for in Article 2.

 

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Attachment B – Technical Support

 

Project plan and associated budget to be developed by the Parties and agreed to by Smith and CPTS.

 

Attachment C – Stock Options

 

CPTS will be issued stock options in a separate non-qualified stock option agreement which will provide an  option to purchase up to 50,000 shares of the Company’s common stock (“Contractor Options”), subject to final approval of the Company Board and the terms of said non-qualified stock option agreement. In regard to said Contractor Options, commencing on the Effective Date of this Agreement there shall be a two (2) year period wherein the options shall not be vested or exercisable by the Contractor (“Two-Year Restriction”). Following said Two-Year Restriction, the Contractor shall have full right to exercise said options at will, subject to the terms and conditions of said non-qualified stock option agreement. If during said Two-Year Restriction the Contractor voluntarily terminates this Agreement or the Company terminates this Agreement for cause, the Contractor shall forfeit all of the Contractor’s Options. The Two-Year Restriction shall cense and become void in the event of an initial public offering. The strike price for said options shall be established at the value established at the close of Smith’s financing round 2.

 

18Exhibit 10.23

 

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

DATED 6 November, 2011

 

(1) MAGNETIC SYSTEMS TECHNOLOGY LIMITED

 

and

 

(2) SMITH ELECTRIC VEHICLES EUROPE, LTD.

 

LICENSING AND MANUFACTURING AGREEMENT

 

 

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

THIS AGREEMENT is dated 6 November 2011

 

Parties

 

(1)                                  MAGNETIC SYSTEMS TECHNOLOGY LIMITED incorporated and registered in England and Wales whose registered office is at 11 Omega Court,350 Cemetery road Sheffield S11 8 FT (Supplier or Magtec as appropriate).

 

(2)                                  SMITH ELECTRIC VEHICLES EUROPE, Ltd. incorporated and registered in England and Wales whose registered office is at Birtley Road, Washington, Tyne & Wear, United Kingdom NE38 9DA (Customer or Smith).

 

(3)                                  Collectively Supplier and Smith may be referred to as “Parties” or Individually as “Party”.

 

Background

 

(A)                              The Supplier carries on the business of manufacturing and selling the Products.

 

(B)                                The Supplier and the Customer wish to ensure continuity of supply of the Products and have agreed to enter into this agreement on the terms set out below.

 

(C)                                The Supplier has developed and owns and has the right to grant licences for industrial designs, manufacturing technology, mechanical design, software design and manufacturing know-how for the Products.

 

(D)                               The Customer wishes to receive and the Supplier is willing to grant to the Customer, a licence on the terms and conditions set out in this agreement to use those industrial designs in order for the Customer to develop the capacity and ability to manufacture and use the Products as a component part of the End Products.

 

Agreed Terms

 

1.                                      Interpretation

 

1.1                                 The definitions and rules of interpretation in this clause apply in this agreement.

 

Activation: that point in time when the Product(s) are installed into an End Product and that End Product is switched on and driven under its own power.

 

Background IPR; the Copyright, the Registered Designs and the Design Rights and any other intellectual property rights subsisting in the Design Documents or any part of the Background Technical Information existing at the Commencement Date.

 

Background Technical Information: all know-how, experience, drawings, designs, manufacturing instructions, computer programs and all other technical information relating to the manufacture of the Product existing as at the Commencement Date as set out in Manufacturing Data Pack.

 

Business Day: a day other than a Saturday, Sunday or public holiday in England when banks in London are open for business.

 

Commencement Date: the date of this agreement.

 

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Copyright: all copyright, database rights and rights in the nature of copyright and database rights in any part of the world to which a Party is, or may become, entitled subsisting in the Design Documents and any documents, or other form of records, recording any part of the Background Technical Information.

 

Customer IPR: any Intellectual Property of the Customer that exists as of the Commencement Date, and any Intellectual Property that arises or is obtained or developed by, or by a contractor on behalf of, the Customer in respect of the Products in the course of or in connection with its manufacture and use as contemplated under the terms of this agreement.

 

Customer’s Premises: the address for the Customer as set out at the start of this Agreement or such other place as the Customer trades from and which the Customer shall notify to the Supplier from time to time.

 

Delivery Point: ex works Supplier.

 

Design Documents: the items short particulars of which are set out in Schedule 2.

 

Design Rights: all unregistered community design, design right and rights in the nature of design right in any part of the world, excluding the Registered Designs, to which a Party is, or may become, entitled subsisting in any design recorded or embodied in the Design Documents or any of the Background Technical Information.

 

End Products: the commercial electric vehicles to be manufactured, supplied and sold by the Customer where each such vehicle has a gross vehicle weight between 7,500 and 33,000 imperial pounds.

 

Effective Date: the date of this agreement.

 

Group: in relation to a company, that company, any subsidiary or holding company from time to time of that company, and any subsidiary from time to time of a holding company of that company.

 

Holding company and subsidiary: mean a “holding company” and “subsidiary” as defined in section 1159 of the Companies Act 2006

 

Improvement: any improvement, enhancement or modification to the Background Technical Information.

 

Initial Term: a period of ten (10) Years commencing on the Commencement Date.

 

Intellectual Property: any patents, rights to inventions, registered designs, copyright and related rights, database rights, design rights, topography rights, trade marks, service marks, trade names and domain names, trade secrets, rights in unpatented know-how, rights of confidence and any other intellectual or industrial property rights of any nature including all applications (or rights to apply) for, and renewals or extensions of such rights and all similar or equivalent rights or forms of protection which subsist or will subsist now or in the future in any part of the world.

 

Invoice: an invoice raised by the Supplier in accordance with Schedule 3 and clause 12.3 as appropriate.

 

Manufacturing Data Pack: information relating to the Products in order to provide assistance for the Customer to manufacture the Products set out in Schedule 2 or any other specification agreed in writing between the Parties from time to time.

 

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Market: commercial electric vehicles having a gross vehicle weight between 7,500 and 33,000 imperial pounds.

 

Prices: the prices for the Products set out in Schedule 3, but excluding any Expenses.

 

Option: the option granted in favour of the Seller by clause 17.

 

Option Period: the time during which the Supplier may exercise the Option, as set out in clause 17.

 

Option Shares: the 30,000 options for common shares of $12.38 (USD) each in the capital of Smith Electric Vehicles US Corp.

 

Order: an order for Products submitted by the Customer to the Supplier and accepted by the Supplier in accordance with clause 3.

 

Order Confirmation: an order confirmation document sent by the Supplier to the Customer, agreeing to fulfil the Order.

 

Order Form: an order form sent by the Customer to the Supplier, requesting the supply of Products or confirming an oral order for Products.

 

Products: the products, as identified by part number, as set out in Schedule 1 and all modifications, developments and improvements to them as amended from time to time in accordance with clause 2.3.

 

Quarterly Periods: the three-month periods commencing on 1 January, 1 April, 1 July and 1 October respectively.

 

Registered Designs: any registered designs which may be granted pursuant to any applications in respect of the Products.

 

Supplier IPR: any Intellectual Property that arises or is obtained or developed by, or by a contractor on behalf of, the Supplier in respect of the Products in the course of or in connection with its manufacture and use as contemplated under the terms of this agreement.

 

Territory: Worldwide

 

Third Party Offer: an offer by a third Party for the entire issued share capital of the Customer.

 

Unit: A Unit consists of (i) A Supplier traction motor, (ii) A Supplier gearbox, and (iii) A Supplier controller, all as defined and described with their respective part numbers in Schedule 1 of this agreement.

 

VAT: value added tax imposed in any member state of the European Union pursuant to Council Directive (EC) 2006/112 on the common system of value added tax, and national legislation implementing that Directive or any predecessor to it, or supplemental to that Directive, or any similar tax which may be substituted for or levied in addition to it or any value added, sales, turnover or similar tax imposed in any country that is not a member of the European Union.

 

Year: the period of 12 calendar months from the date of this agreement and each subsequent consecutive period of 12 calendar months during the Initial Term.

 

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1.2                                 Reference to a clause, paragraph or schedule is to a clause, paragraph or schedule of or to this agreement, unless the context requires otherwise.

 

1.3                                 A reference to one gender includes a reference to the other gender.

 

1.4                                 Words in the singular include the plural and in the plural include the singular.

 

1.5                                 A reference to a person includes an incorporated or unincorporated body.

 

1.6                                 A reference to a statute or statutory provision is a reference to it as it is in force for the time being taking account of any amendment, extension, or re-enactment and includes any subordinate legislation for the time being in force made under it.

 

1.7                                 Unless the context otherwise requires, the words including and include and words of similar effect shall not be deemed to limit the general effect of the words which precede them.

 

1.8                                 The headings in this agreement are for ease of reference only and shall not affect its construction or interpretation.

 

2.                                      Sale of the Products

 

2.1                                 During the Initial Term and subject to the provisions of this agreement, the Supplier shall sell and the Customer shall buy such quantities of the Products as are specified in Schedule 3.

 

2.2                                 This agreement shall apply to all future arrangements between the Parties for the Supplier to supply and the Customer to buy the Products unless the Parties agree otherwise in writing.

 

2.3                                 With the Customer’s written consent, not to be unreasonably withheld or delayed, the Supplier may, immediately on giving written notice to the Customer elect to alter the Specification of any of the Products, provided that the alteration does not materially adversely affect the performance, quality or value of the Products.

 

3.                                      Order Process

 

3.1                                 When the Customer wishes to place any additional order for Products beyond those ordered in Schedule 3, it shall either send an Order Form to the Supplier or submit orally an order, provided that an order made orally must be confirmed by an Order Form (bearing the additional words “confirmation of oral order”) received by the Supplier within 5 Business Days from the date on which the Customer gave the oral order. Payment terms for the initial 100 Units, as set forth in Schedule A, item 1 shall be pre-paid prior to shipment. Payment terms for the second group of 400 Units, as set forth in Schedule 3, item 2 shall be paid as specified in Schedule 3, All orders shall be consistent with the rolling forecast set forth in clause 3,4. The Supplier shall accept the Order for the quantities set forth in Schedule 3 using an Order Confirmation and such Order Confirmation shall be treated as acceptance of the Customer’s Order. The Supplier shall, at its discretion, accept the Order for quantities in excess of the quantities set forth in Schedule 3 using an Order Confirmation and such Order Confirmation shall be treated as acceptance of the Customer’s Order.

 

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3.2                                 The Customer shall arrange delivery of the Products in accordance with the provisions of this agreement.

 

3.4                                 The first 100 Units manufactured by the Supplier shall be delivered as per the schedule set forth in the February 1, 2011 purchase order (PO Number 3959), attached hereto as Exhibit 1. The next 400 Units manufactured by the Supplier shall be shipped from the Supplier to the Customer at a rate of ten (10) Units per week. In the event the Customer wishes to increase the rate of deliver of the Units manufactured by the Supplier or wishes to have the Supplier manufacture more than the 400 units, the Customer shall deliver to the Supplier a proposed shipping schedule and a rolling 6 months forecast of anticipated Product need. The Supplier shall not be contractually bound to increase the rate of delivery of the Product or to manufacture additional Units (over the 400 Units set forth in Schedule 3 of this Agreement), but once the Supplier accepts the purchase order or increase in delivery product, shall be bound by the terms.

 

3.5                                 With regard to the Products manufactured by the Supplier and supplied to the Customer pursuant to this Agreement, the Supplier warrants that all such Products will conform in all material respects to the Specification of the Products (as set out in Schedule 1) and will be free of defects in: (i) workmanship and/or in design for Units manufactured by the Supplier and (ii) in design for Units manufactured by the Customer, for a period of 12 months from date of use provided always that this period shall not be greater than 18 months from the date of delivery. All other warranties or conditions (whether express or implied) as to quality, condition, description, compliance with sample or fitness for purpose (whether statutory or otherwise) other than those expressly set out in this agreement are excluded from this agreement to the fullest extent permitted by law.

 

3.6                                 If any third Party alleges that the manufacture, sale or use of the Products or any individual component of the Products infringes upon a  patent, copyright or other Intellectual Property right belonging to that third Party, then each Party owning or claiming ownership to the Intellectual Property rights of the alleged infringing Products shall defend, indemnify and hold harmless the other Party and its Affiliates from such claims and any resulting damages and expenses (including reasonable attorneys’, other professionals’ and court fees), This provision will not apply to any Products or components thereof which the other Party alters, modifies or changes in any way without the consent of the other Party or which is sold or used for any purpose other than their originally intended purpose.

 

3.7                                 Initially, Supplier will provide Smith with 5% additional Units (“Warrantee Units”) at no cost to the Customer (i.e. for each 20 orders Supplier will manufacture 1 additional unit to be held by Smith for warranty use) capped at 20 Units for Smith to hold at their manufacturing plant to be used to replace faulty Products. In the event the Initial Warrantee rate of 5% increases, Supplier agrees to proportionately increase its Warrantee Units. Likewise, in the event the initial warrantee rate of 5% decreases, Supplier may proportionately decrease its Warrantee Units. At the time the Customer commences manufacturing of the Product and the Supplier no longer is manufacturing the Product for sale to the Customer, the Supplier shall, at its option, either manufacture the Product needed to supply the Customer with

 

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warrantee Units or pay to the Customer the manufacturing costs of replacement Units during the warrantee period for those Units manufactured by Supplier. In the event the Supplier continues to manufacture Units for the Customer, beyond the 500 Units identified in Schedule 3, the warrantee Units will be maintained for the warrantee period for those Units. At the time the Supplier no longer is manufacturing Units for the Customer and the warrantee period lapses, the Customer shall purchase from the supplier all Warrantee Units remaining in the warrantee inventory at the price of[***]

 

In the event of a drive line system failure, the Customer shall have the right to use quarantined Warrantee Units to effect an immediate or timely repair, In such an event, Customer shall simultaneously notify Supplier of such event and the Parties agree to adhere to the warrantee process as set forth in Schedule 5 of this agreement. All Warrantee Units will be quarantined within the Customer’s central stores or its authorized service depots and shall be used exclusively for this purpose. At the expiry of the warranty period or termination of this Agreement all Warrantee Units are to be purchased by Customer.

 

3.8                                 The Parties shall use their respective reasonable endeavours to ensure that all complaints and claims under warranty shall be settled within ninety (90) days from the initial notification. Upon failure of a Unit, the Customer shall make a good faith determination as to the cause of the failure and shall communicate such cause determination to the Supplier. If the failure is due to misuse or abuse, the Supplier shall have no liability for replacement or any cost associated with the repair or replacement of the Unit. If the Customer requests that the Supplier repair the misused Unit, all costs associated with the repair shall be borne by the Customer and a Return Merchandise Authorization (“RMA”) must be obtained from the Supplier. Upon initial notification of defective Product, Supplier shall issue to the Customer a RMA number to be used as the reference number for the returned component(s). The defective component(s), accompanied by a defect report and assigned RMA number, must then be shipped as directed by Supplier, at Supplier’s cost. The Supplier reserves the right to inspect the defective component(s) on their return in order to determine the origin of the fault, and if the defect is found not to be covered by this warranty, Customer shall reimburse the Supplier for the cost of shipment and  any costs associated with repair (Customer must authorize). If the defect is found to be covered by this warranty, Supplier shall reimburse the Customer for the cost of the in-field diagnosis, shipping costs, and repair costs, which shall not exceed [***] which is inclusive of all labour, travel and subsistence costs incurred by the Customer. A copy of a flow chart relating to the warranty returns procedure is set out in Schedule 5.

 

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4.                                      Supplier will train smith service team and make available supplier staff to discuss service/warranty issues the cost of training to be reimbursed to supplier. Alt warranty issues are to be communicated to supplier as soon as is practicable to determine if the problem/fault is due to a warranty issue or one which can be resolved as a routine service issue or by way of minor repair without the need to use the replacement units.

 

5.                                      Delivery of the Products

 

5.1                                 Delivery of the Products shall take place at the Delivery Point.  Acceptance of any change to the Delivery Point requested by the Customer shall be at the Supplier’s sole discretion and the Customer shall be liable for any additional Expenses incurred by the Supplier as a result of such change. The Customer shall be responsible for arranging all export documents as are necessary in relation to the Products.

 

5.2                                 Delivery or performance dates in relation to the supply by the Supplier of Products are as set forth in section 3.4 and approximate only and, time is not of the essence for delivery of the Products. The Supplier may effect delivery in one or more instalments, but shall use due diligence to ship quantities consistent with the time schedule set forth in section 3.

 

5.3                                 The Customer shall, within thirty days of the delivery of the Products to Customer’s facility, give written notice of rejection to the Supplier on account of any defect by reason of which the Customer alleges that the Products delivered do not comply with the Warranty and which was apparent on reasonable inspection. In the event a Unit or component of a Unit is defective, Supplier shall make arrangements for and be responsible for shipping associated with its return and replacement.

 

5.4                                 If the Customer fails to give notice as specified in clause 5.3 then, any defect which is one which would be apparent on reasonable visual inspection (“Overt Defect”), shall be presumed to comply with the Specifications and, accordingly, the Customer shall be deemed to have accepted such Overt Defect and the Supplier shall have no liability to the Customer with respect to that Overt Defect (except in relation to liability for any latent defects).

 

5.5                                 If the Customer rejects any delivery of the Products which do not comply with the Warranty, subject to clause 3.7 the Supplier shall, within thirty days of the Supplier accepting that the Products do not comply with the Warranty notify the Customer that it shall supply replacement Products which comply with the Warranty within 30 Business Days of sending such notice, in which event the Supplier shall be deemed not to be in breach of this agreement or have any liability to the Customer for the rejected Products.

 

5.6                                 The Customer is responsible for obtaining, at its own cost, such import licences and other consents in relation to the Products as are required from time to time and, If required by the Supplier, the Customer shall make those licences and consents available to the Supplier prior to the relevant shipment. The Supplier shall provide all needed documentation required to ship, Insure, and export/import the Product to the Customer.

 

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6.                                      Title and Risk

 

6.1                                 Risk in and responsibility for the Products shall pass to the Customer once they have been delivered to the carrier appointed, at the Delivery Point, to deliver the Products and the carrier has accepted the Products for shipment.

 

6.2                                 In regard to Products manufactured by the Supplier, ownership of the Products shall pass to the Customer upon payment of the Product shipped. In regard to Products manufactured by the Customer, Customer shall have ownership of the Products. Until ownership of the Products passes to the Customer, the Customer shall insure such Products for an amount at least equal to its Price. Any proceeds of the Insurance policy paid to Smith for a loss to the Products or Prototypes shall be paid to the Supplier together with any other sums required to compensate Supplier for such loss.

 

6.3                                 For Products not paid for, the Customer shall lose its rights to possession and resale of the Products if;

 

(a)               the Customer becomes subject to any of the events in clause 18.2(b) to clausel8.2(h); or

 

(b)              this agreement terminates and the Customer does not pay all outstanding amounts under this agreement within 30 days.

 

6.4                                 In the event of an occurrence as set forth in clauses 18.2(b) to clause I8.2(i) should occur, The Customer grants to the Supplier an irrevocable licence for the Supplier, its agents and employees to enter any premises where the goods of the Customer are stored to ascertain whether any Products are stored there and to inspect, count and recover them as permitted by United States Law.

 

7.                                      Grant of Licence

 

7.1                                 In consideration of the licence granted in this clause, the Customer agrees to pay to the Supplier the Royalties and fees as set out in Clause 12 and Schedule 4 of this Agreement. The Supplier will assist the Customer in developing its facility to manufacture the Products in the Territory and hereby grants to the Customer an exclusive non-transferable worldwide licence of the Supplier’s Background IPR in relation to the manufacture and use of the Products for use solely as a component part of the End Products, for the manufacturing, assembling, use, promotion, and sale of the End Product, for the term of this agreement provided always that this Licence does not include any licence relating to the design and or manufacture of magnetising tooling or automated winding equipment and related equipment. However, the Supplier agrees to provide the Customer with information relating to the magnetising tooling and automated winding equipment and related equipment to ensure that Supplier can properly complete the entire manufacturing process of the Products. The Supplier agrees that it shall not disclose or promote that the Customer is or has used the Supplier’s Background IP.

 

7.2                                 Within 60 days of the Commencement Date, the Supplier shall make available to the Customer (i) such of its Background Technical Information, Background IPR, and, Know-How as is needed and reasonably necessary, for the manufacture of the 

 

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Products by the Customer in the Territory and (ii) Supplier’s instructions as set forth in Schedule 2. In the intervening 60 days, the Supplier agrees to assist the Customer in regard to: (i) on-site (Supplier’s facility) training, (iii) manufacturing process review, and (iii) development of an implementation plan for Customer manufacturing.

 

7.3                                 The Supplier hereby consents to the Customer branding the Products manufactured by the Customer in the Territory. Supplier agrees not to publically promote or disclose that the Smith branded Product is, in whole or in part, a Supplier component or derivative of the Supplier’s Background IP.

 

7.4                                 The Background Technical Information supplied by the Supplier pursuant to clause 7.2 shall be used by the Customer only for the purpose of the manufacture and use of the Products and shall be subject to the provisions of clause 10.

 

7.5                                 In addition to the supply of the Background Technical Information the Supplier shall provide the Customer with such technical advice and assistance in connection with the manufacture of the Products as the Parties consider reasonably necessary provided that the Customer shall reimburse the Supplier at a rate of [***] per hour in respect of each Supplier employee with over 5 years of engineering experience and [***] per hour for Supplier employees with 5 years or less of engineering experience (such rates to be reviewed and agreed annually by the Parties) together with all expenses incurred by the Supplier in connection therewith.

 

8.                                      Quality Control

 

8.1                                 The Customer shall, in exercising its rights under clause 6 of this agreement, comply with the specifications, standards and directions relating to the Product as notified in writing by the Supplier from time to time and with all applicable laws, regulations and codes of practice.

 

8.2                                 Each Party shall promptly provide the other Party with copies of all communications, relating to the Background IPR or the Products, with any regulatory, industry or other authority.

 

9.                                      Improvements

 

9.1                                 If either Party makes, devises, discovers, or otherwise acquires rights in any Improvement, such Party shall, to the extent that it is not prohibited by law, promptly notify the other Party in writing, giving details of the Improvement and shall, if the other Party so requests, provide such further information as reasonably required to be able to effectively evaluate the Improvement. 

 

9.2                                 Information provided under clause 9.1 shall be subject to the provisions of clause 10.

 

9.3                                 To the extent that any Customer IPR is created by the Customer in respect to Improvements in relation to the Products it shall vest in and be owned absolutely by the Customer and the Customer shall grant to the Supplier a non-exclusive, royalty-free, non-transferable, worldwide right and licence to exploit such Customer IPR in connection with the production, manufacture, distribution, marketing, selling,

 

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advertising and promotion of the Products for non-competing purposes, i.e. outside of the Market. The Supplier shall not have any right to use or market such improvements using the Smith brand or to promote or advertise such Improvements are associated with the Customer. For purposes of clarity, Improvements do not include systems, components, or IP that are not a Product, as defined in Schedule 1, but that may affect or enhance the Product.

 

9.4                                 To the extent that any Supplier  IPR arises or is obtained in respect of Improvements in relation to the Products it shall vest in and be owned absolutely by the Supplier and the Supplier shall grant to the Customer an exclusive, non-transferable worldwide right and licence to exploit such Supplier IPR in connection with the production, manufacture, distribution, marketing, selling, advertising and promotion of the Products.

 

10.                               Confidentiality

 

10.1                           The Parties shall each keep secret and confidential:

 

(a)               the terms of this agreement; and

 

(b)              the Background Technical Information; and

 

(c)               any information (whether or not technical) of a confidential nature communicated to it by the other, either preparatory to, or as a result of, this agreement,

 

and shall not use the same for any purpose except for the purpose of exercising or performing its rights and obligations under this agreement and shall not disclose the same to any person other than any of its officers, employees, or subcontractors, as defined in Section 10, directly or indirectly concerned in the manufacture, use of the Products or its professional advisors, provided that prior to disclosure to any such officer, employee or professional advisor it informs such person of the confidential nature of the information and is responsible for such person’s compliance with the confidentiality obligations set out in this clause 10 and, if necessary, shall promptly enforce such obligations either on its own motion or at the request of the other party.

 

10.2                           The provisions of clause 10.1 shall not apply to such know-how and information that:

 

(a)               was known, or available on a non-confidential basis, to a Party before it was disclosed to it by the other party;

 

(b)              is or becomes generally available to the public (otherwise than through a breach of this clause 10);

 

(c)               the Parties agree in writing is not confidential or may be disclosed;

 

(d)              a Party is required to disclose by law, court order or any governmental or regulatory authority provided that, to the extent it is legally permitted to do so, it gives the other Party as much notice of such disclosure as possible and takes into account the reasonable requests of the other party in relation to the content of such disclosure; or

 

(e)               was developed independently by the Customer or the Supplier.

 

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10.3                           The provisions of this clause 10 shall remain in force notwithstanding the expiry or earlier termination of this agreement.

 

11.                               Sub-licensing and Subcontracting

 

11.1                           Neither Party shall grant sub-licences under this agreement, except as set out in Clause 11.2 below.

 

11.2                           The Customer shall be entitled to subcontract the manufacture of the Products, if the manufacturing of the Product occurs within the United States of America, Malaysia, or the European Union, and shall have the right to manufacture in any other location with the written consent of the Supplier, which shall not be unreasonably withheld; provided always that the Customer will not subcontract without the prior written approval of the Supplier, which will not be unreasonably with held, the manufacture of the MB.800.016.00 traction motor as defined in Schedule 1. If the manufacturing of the Product is to occur outside of those territories referenced above, the Customer shall be entitled to subcontract the manufacture of the Products only upon written approval of the Supplier, which shall not be unreasonably with held, The customer agrees to keep the Supplier informed of subcontractors being used by the Customer in the production of the Product, and to require the execution of a confidentiality/non-disclosure, non-use agreement with all subcontractors manufacturing the Product or any part thereof.

 

12.                               Prices, Royalties and Payment

 

12.1                           The Customer shall pay the Supplier for the Products supplied by the Supplier in accordance with the provisions of this clause Schedule 3 of this Agreement.

 

12.2                           The Customer shall pay to the Supplier royalties of the End Products calculated in accordance with Schedule 4 upon the Activation of the Unit by the Customer or the Customer’s subcontractors or agents (as appropriate) and paid in accordance with the provisions of clause 12.3. For purposes of clarity, in the event the vehicle’s performance failure is un-related to the design of the Product, Royalties for that Unit will be due and payable.

 

12.3                           Royalties payable under this agreement shall be paid within 30 days of the end of each successive Quarterly Period, and shall be paid in pounds sterling.

 

12.4                           Royalties and any other sums payable under this agreement shall be paid in pounds sterling to the credit of a bank account to be designated in writing by the Supplier.

 

12.5                           In regard to the first five hundred (500) Units, as set forth in Schedule 3, Supplier shall secure a tax treaty exemption for Products sold to the Customer. In the event such tax treaty exemption is not obtainable, all amounts of money referred to in this agreement shall be interpreted as being amounts exclusive of value added tax, any similar sales tax or any tax that replaces such sales taxes. Any such tax payable in relation to any such amounts shall be paid in addition to those amounts. If the Customer is required under any applicable law to withhold or deduct any amount from the payments due to the Supplier, the Customer shall increase the sum it pays to the Supplier by the amount necessary to leave the Supplier with an amount equal to the sum it would have received if no such withholdings or deductions had been made.

 

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12.6                           If at any time during the Initial Term the pounds sterling ceases to be legal tender in England, Royalties shall be paid in Euros. All amounts due to the Supplier under this agreement shall become due immediately if this agreement is terminated despite any other provision.

 

12.7                           The time for payment shall be of the essence and no payment shall be deemed to have been made until the Supplier has received payment in cleared funds.

 

12.8                           If the Customer does not make payment on or before the date on which it is due, Interest shall be payable on the overdue amount at the rate which is 2% per annum above the Bank of England base lending rate from time to time. Interest shall be payable at this rate both before and after any judgment is made against the Customer until the date on which payment in cleared funds is received in full, including all accrued interest.

 

12.9                           The Customer shall make all payments due under this agreement without any deduction by way of set-off, counterclaim, discount or otherwise unless the Customer has a valid court order from a court in England and Wales requiring an amount equal to or more than such deduction to be paid to the Supplier by the Customer, or unless such rights relied on cannot be excluded by the law of England and Wales or the insolvency laws of the jurisdiction in which the Customer is resident.

 

13.                               Royalty Audits

 

13.1                           At the same time as payment of royalties falls due, the Customer shall submit or cause to be submitted to the Supplier a statement in writing recording the calculation of such royalties payable, and in particular:

 

(a)               the Quarterly Period for which the royalties were calculated;

 

(b)              the number of End Products for which Royalties are due, as defined in section 12.2, during the Quarterly Period;

 

(c)               the amount of royalties due  and payable; and

 

(d)              any other particulars the Supplier may reasonably require.

 

13.2                           The Customer shall keep proper records and books of account showing the number of Products manufactured, Such records and books shall be and be open during normal business hours to inspection and audit by the Supplier (or its authorised representative), who shall be entitled to take copies of or extracts from the same. If such inspection or audit should reveal a discrepancy in the royalties paid from those payable under this agreement, the Customer or Supplier shall immediately make up the shortfall and reimburse the Customer or Supplier in respect of any professional charges incurred for such audit or inspection. Such right of inspection of the Supplier shall remain in effect for a period of two years after the termination of this agreement.

 

13.3                           The provisions of this clause 12 shall remain in effect notwithstanding termination or expiry of this agreement until the settlement of all subsisting claims by the Supplier.

 

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14.                               Protection of the Background IPR and Background Technical Information

 

14.1                           The Customer and the Supplier shall immediately notify the other Party in writing giving full particulars if any of the following matters come to its attention:

 

(a)               any actual, suspected or threatened Infringement of any of the Background IPR;

 

(b)              any actual, suspected or threatened unauthorised disclosure, misappropriation or misuse of the Background Technical Information;

 

(c)               any claim made or threatened that exploitation of any of the Background IPR or the Background Technical Information Infringes the rights of any third Party;

 

(d)              any person applies for, or is granted, a registered design by reason of which that person may be, or has been, granted, rights which conflict with any of the rights granted to the Customer or Supplier under this agreement;

 

(e)               any application is made for a licence of right under any Design Right; or

 

(f)                 any other form of attack, charge or claim to which the Background IPR or Background Technical information may be subject.

 

14.2                           In respect of any of the matters listed in clause 14.1:

 

(a)               the affected Party shall, in its absolute discretion, decide what action if any to take, if any;

 

(b)              the affected Party shall have exclusive control over, and conduct of, all claims and proceedings;

 

(c)               the unaffected Party shall not make any admissions other than to the Supplier and shall provide the Supplier with all assistance that it may reasonably require in the conduct of any claims or proceedings; and

 

(d)              the affected Party shall bear the cost of any proceedings and shall be entitled to retain all sums recovered in any action for its own account.

 

14.3                           The provisions of sections 101, 101A and 234 of the Copyright, Designs and Patents Act 1988, lock up and section 24(F) of the Registered Designs Act 1949 (or equivalent legislation in any jurisdiction), are expressly excluded. In the event the Supplier fails to protect the Customer’s full rights and redress under these provisions, the Customer, at its cost, upon written notification to the Supplier, shall have the rights as provided in the foregoing provisions of this clause. Likewise, In the event the Supplier fails to protect the Customer’s full rights and redress in the United States of America or elsewhere (where the foregoing provisions in this clause are inapplicable), the Customer, at its cost, upon written notification to the Supplier, shall have the right to prosecute and defend its rights. However, Customer, at its cost, shall take all actions contemplated by these provisions on behalf of the Customer upon Customer’s request to fully assure Smith having full rights and redress under these provisions.

 

15.                               LIABILITY, INDEMNITY AND INSURANCE

 

15.1                           The Customer shall indemnify the Supplier and keep the Supplier indemnified from and against all liabilities, costs, expenses, damages or losses (each a Claim)

 

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suffered or incurred by the Supplier arising out of or in connection with the Customer’s exercise of its rights granted under this agreement, any breach by the Customer including any product liability claim relating to Product manufactured, supplied or put into use by the Customer or any of its customers.

 

15.2                           The Supplier shall indemnify the Customer and keep the Customer indemnified from and against all liabilities, costs, expenses, damages or losses (each a Claim) suffered or incurred by the Customer arising out of or in connection with the Supplier’s exercise of its rights granted under this agreement, any intellectual property right or patent infringement claim by a third party concerning the Products, including any product liability claim relating to Product manufactured, supplied or put into use by the Supplier or its customers.

 

15.3                           The Parties shall, at their expense, carry product liability and comprehensive general liability insurance coverage of $5 million (USD) increasing annually in accordance with the UK Retail Prices Index in order to meet any liability in clauses 15.1 and 15.2 above. The Parties shall use their respective reasonable endeavours to ensure that such insurance policies names the other Party as co-insured and remain in effect throughout the duration of this agreement and for a period of 3 years after termination or expiry of the agreement, and shall supply the other Party with a copy of such policy on request.

 

15.4                           Nothing in this agreement shall have the effect of excluding or limiting any liability for death or personal injury caused by negligence or for fraud.

 

16.                               Additional Parties obligations

 

16.1                           The Customer shall:

 

(a)               Promote the Products as being used only for the purpose for which they were intended;

 

(b)              obtain at its own expense all licences, permits and consents necessary for the provision of the Products;

 

(c)               only make use of the Supplier’s Background IPR for the purposes authorised in this agreement; and

 

(d)              obtain any government approval required for this Agreement in the country of the Customer before the Effective Date, and shall provide copies of such approval.

 

16.2                           The Parties shall comply with all regulations and practices in force or use to safeguard the Party’s rights in the Background IPR.

 

16.3                           The Customer shall not, directly or indirectly assist any other person to do, or omit to do, anything to diminish the rights of the Supplier in the Background IPR:

 

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16.4         The Parties acknowledge and agree that the exercise of the licence granted to the Customer under this agreement is subject to all applicable laws, enactments, regulations and other similar instruments in the United States of America, and the Customer understands and agrees that it shall, at all times, be solely liable and responsible for such due observance and performance.

 

17.          Grant of Options

 

17.1         The Customer hereby grants to the Supplier an option to acquire the Option Shares on the terms set out in this agreement.

 

17.2         Supplier will be issued stock options in a separate stock option or incentive plan (Stock Option Agreement) which will provide 30,000 stock options in the Company as further defined in said Stock Option Agreement. In regard to said Options, upon the closing of the Company’s initial public offering of common stock pursuant to a registration statement filed with the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), the Supplier shall have 24 hours to either; (i) forego the options in their entirety, at which time they shall be null and void (“Void Options”) or (ii) accept said option, which shall be automatically vested and shall be subject to said Stock Option Agreement (“Accept Options”). The Customer shall notify the Supplier of the time of the closing of the public offering by email at the following email address: m.jenkins@magtec.co.uk. Supplier shall provide the Customer with its choice at the following email address: bryan.hansel@smithelectric.com. The exercise price for the Supplier’s Options shall be $12.38 (USD). Supplier agrees to execute the Stock Option Agreement contemporaneously with execution of this agreement.

 

18.          Duration and Termination

 

18.1         This agreement shall commence on the Commencement Date and, subject to the provisions of this clause 18, shall continue until the expiry of the Initial Term, At the expiry of the Initial Term this agreement will continue thereafter until terminated on 12 months written notice by either Party or otherwise by reason of breach set out in 18.2 below,

 

18.2         Either Party may terminate this agreement by giving written notice to the other Party if any of the following events occurs:

 

(a)     the other Party commits a breach of this agreement which (in the case of a breach capable of remedy) has not been remedied within 30 days of the receipt by the other of a notice specifying the breach and requiring its remedy; or

 

(b)     a winding-up order or bankruptcy order is made against the other Party; or

 

(c)     the other Party passes a resolution or makes a determination for it to be wound up (without 3 declaration of solvency/except for the purposes of amalgamation or reconstruction, the terms of which have been previously approved in writing by the other Party); or

 

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(d)     the other Party has appointed to it an administrator or an administrative receiver; or

 

(e)     an Incumbrancer takes possession, or a receiver, manager or administrative receiver is appointed, of the whole or any part of the other Party’s assets;

 

(f)      the other Party ceases or suspends payment of any of its debts, or is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986; or

 

(g)     any arrangement, compromise or composition in satisfaction of its debts is proposed or entered into; or

 

(h)     the other Party ceases to carry on business; or

 

(i)      any event analogous to those described in clause 18.2(b) to clause 18.2(h) occurs in relation to the other Party in any jurisdiction in which that other Party is incorporated, resident or carries on business.

 

(j)      In the event of an occurrence as set forth in clauses 18.2(b) to clause 18.2(h) should occur, the Supplier shall be entitled (at its option) to cancel any Orders which have not yet been delivered.

 

18.3         On termination of this agreement for any reason and subject as otherwise provided in this agreement to any rights or obligations that have accrued before termination, neither Party shall have any further obligation to the other under this agreement.

 

19.          Effect of Termination

 

19.1         On expiry or termination of this agreement for any reason and subject to any express provisions set out elsewhere in this agreement:

 

(a)     all outstanding sums payable by the Customer to the Supplier shall immediately become due and payable;

 

(b)     all rights and licences granted pursuant to this agreement shall cease;

 

(c)     the Customer and Supplier shall cease the exploitation of the other Party’s Background IPR, the Background Technical Information;

 

(d)     the Customer shall co-operate with the Supplier in cancelling any registrations of this licence and shall execute such documents and do all acts and things as may be necessary to effect such cancellation; and

 

(e)     the Party having a license to use (Using Party) the other Party’s Background Information (Owning Party) shall return promptly to the owning Party at the Using Party’s expense all records and copies of the Owning Party’s Background Technical Information and technical and promotional material in its possession relating to the Products, and of any information (whether or not technical) of a confidential nature communicated to it by the Owning Party, either preparatory to, or as a result of, this agreement, to the extent such material remains confidential.

 

19.2         On expiry or termination of this agreement for any reason other than termination by the Supplier under any right provided by clause 19.1 the Customer shall have the right to dispose of all stocks of Products in its possession and all Products in the course of manufacture at the date of termination, provided that any royalty payable

 

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under the provisions of clause 11 (as if such stocks were supplied at the date of termination) is paid to the Supplier within 90 days after termination.

 

19.3         The expiry or termination of this agreement for any reason shall not affect any provision of this agreement which is expressed to survive or operate in the event of expiry or termination and shall be without prejudice to the provisions of this clause 19 and to any rights of either Party which may have accrued by, at or up to, the date of such expiry or termination.

 

20.          Hiring of Employees

 

The Customer and the Seller hereby agree that they will not during the term and for a period of two years following termination of this agreement hire any employee or encourage or induce any employee to leave the employ of either Party whether such person is to be employed by that Party or by any other third Party.

 

21.          Inadequacy of Damages

 

Without prejudice to any other rights or remedies that the either Party may have, the Parties acknowledge and agree that damages alone would not be an adequate remedy for any breach of the terms of this agreement by either Party. Accordingly, either Party shall be entitled, without proof of special damages, to the remedies of injunction, specific performance or other equitable relief for any threatened or actual breach of the terms of this agreement.

 

22.          Force Majeure

 

22.1         Neither Party shall be liable to the other, or be deemed to be in breach of this agreement, by reason of any delay in performing, or failure to perform, any of its obligations under this agreement if the delay or failure was beyond that Party’s reasonable control (including without limitation fire, flood, explosion, epidemic, riot, civil commotion, any strike, lockout or other industrial action, act of God, war, warlike hostilities or threat of war, terrorist activities, accidental or malicious damage and any prohibition or restriction by any government or other legal authority which affects this agreement and which is not in force on the date of this agreement).

 

22.2         A Party claiming to be unable to perform its obligations under this agreement (either on time or at all) in any of the circumstances set out in clause 22.1 shall notify the other Party of the nature and extent of the circumstances in question as soon as practicable.

 

22.3         This clause 22 shall cease to apply when such circumstances have ceased to have effect on the performance of this agreement and the Party affected shall give notice to the other Party that the circumstances have ceased.

 

22.4         If any circumstance relied on by either Party for the purposes of this clause 22 continues for more than 30 days, the other Party shall be entitled to terminate this agreement by giving one month’s notice.

 

23.          Entire Agreement

 

23.1         This agreement constitutes the entire agreement between the Parties in connection with its subject matter and supersedes any previous agreement,  warranty,

 

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statement, representation, understanding or undertaking (in each case whether written or oral) given or made before the date of this agreement by or on behalf of the Parties and relating to its subject matter.

 

23.2         Neither Party has relied on any statement, representation, agreement, understanding or promise made by the other except as expressly set out in this agreement.

 

24.          Waiver of Rights Based on Misrepresentation

 

24.1         Each Party unconditionally waives any rights it may have to claim damages against the other on the basis of any oral or written statement made by the other or by its legal advisers (whether made carelessly or not) that is not set out or referred to in this agreement (or for breach of any warranty given by the other not so set out or referred to), unless such statement or warranty was made or given fraudulently.

 

24.2         Each Party unconditionally waives any rights it may have to seek to rescind this agreement on the basis of any statement made by the other (whether made carelessly or not), unless such statement was made fraudulently.

 

25.          Limitation of Liability

 

25.1         Neither Party shall be liable to the other Party for:

 

(a)     any indirect, special or consequential loss or damage; or

 

(b)     loss of data or other equipment or property; or

 

(c)     economic loss or damage; or

 

(d)     incurring of liability for loss or damage of any nature whatsoever suffered by third parties (including in each case incidental and punitive damages); or

 

(e)     any loss of actual or anticipated profit, interest, revenue, anticipated savings or business or damage to goodwill, 

 

even if the other Party is advised in advance of the possibility of any such losses or damages.

 

25.2         The Supplier shall not be liable for any losses arising from the Customer’s subsequent use or misuse of the Products including (without limitation);

 

(a)     Normal wear and tear, so long as such wear and tear does not result in the Product failing to perform under ordinary use;

 

(b)     wilful damage;

 

(c)     the Customer’s negligence, or that of its agents or employees, or any failure to follow the Supplier’s instructions as to use of the Products;

 

(d)     abnormal working conditions beyond those referred to in the Specification; and

 

(e)     any alteration or repair of the Products by any manufacturing process or otherwise not done using standard servicing or manufacturing standards or with the consent of the Supplier, save for any latent defect which means that the

 

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Product did not comply with the Specification when manufactured by the Supplier.

 

25.3         The Customer acknowledges and agrees that the Prices reflect the limitations of liability contained in this agreement

 

26.          Assignment

 

This Agreement may not be assigned by either Party without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed, except that either Party may assign this Agreement to a wholly owned subsidiary or to a successor in connection with a merger, consolidation or sale of all or substantially all of such Party’s business related to this Agreement, provided that such successor agrees in writing to assume and be bound by all the provisions of this Agreement.

 

27.          Disputes

 

27.1         Subject as may be provided elsewhere in this agreement, all disputes, differences or questions arising in relation to this agreement shall be referred in the first instance to the managing director of the Supplier and the CEO of the Customer, who shall meet together and attempt to settle the dispute between themselves (acting in good faith) within one calendar month.

 

27.2         If the managing director and the CEO fail to resolve the matter within one calendar month, then either Party may refer the dispute to an appropriate court or tribunal, or may (at its discretion) opt for mediation (in which case such an election shall bind the other Party until a conclusion is made or the mediator rejects the case).

 

27.3         Any reference to mediation shall be made in accordance with the procedures of the Centre for Effective Dispute Resolution (CEDR). The mediation shall be conducted by a single mediator appointed by the Parties or, if the Parties are unable to agree on the identity of the mediator within fourteen (14) days after the date of the request that the dispute be resolved by mediation, or if the person appointed is unable or unwilling to act, the mediator shall be appointed by CEDR on the application of either Party. The mediation shall be conducted in English at the offices of CEDR in London, Mediation is without prejudice to the rights of the Parties to the injunctive relief or to the rights of the Parties in any future proceedings.

 

28.          Cumulative Remedies

 

Each right or remedy of the Parties under this agreement is without prejudice to any other right or remedy of the Parties, whether or not such rights or remedies are set out in this agreement.

 

29.          No Partnership or Agency

 

Nothing in this agreement shall create, or be deemed to create, a partnership, joint venture or legal relationship of any kind between the Parties that would impose liability upon one Party for the acts or failure to act of the other Party, or authorise either Party to act as agent for the other. Save where expressly stated in this agreement, neither Party shall have the authority to make representations, act in the name or on behalf of or otherwise bind the other.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

30.          Costs

 

Except as otherwise provided in this agreement, each Party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and implementation of this agreement.

 

31.          Severance

 

The invalidity, illegality or unenforceability of any provision of this agreement, or a provision in any other agreement which is identical to one in this agreement, shall not affect the other provisions and the agreement shall be given effect as if the invalid, illegal or unenforceable provision had been deleted, unless the provision so affected is so fundamental to the agreement that one or more of the essential elements of the contract is removed and replaced with a provision with a similar economic effect to that intended by the Parties if this can be achieved by another clause.

 

32.          Counterparts

 

32.1         This agreement may be executed in any number of counterparts and by the Parties on separate counterparts, but shall not be effective until each Party has executed at least one counterpart.

 

32.2         Each counterpart, when executed, shall be an original, but all counterparts shall together constitute one and the same instrument.

 

33.          Further Assurance

 

Either Party shall, at the request and cost of the other, use all reasonable endeavours to do or procure the doing of all such further acts, and execute or procure the execution (as a deed or otherwise) of all such documents, as may from time to time be necessary to give full effect to this agreement and to vest in the requesting Party the full benefit of the assets, rights and benefits to be transferred to the requesting Party under this agreement.

 

34.          Amendment and Waiver

 

34.1         No variation of this agreement shall be effective unless it is made in writing, refers specifically to this agreement and is signed by both of the Parties.

 

34.2         No waiver of any term, provision or condition of this agreement shall be effective, except where it is clearly made in writing and signed by the waiving Party. No waiver of any particular breach of this agreement shall be held to be a waiver of any other or subsequent breach.

 

34.3         No omission or delay on the part of any Party in exercising any right, power or privilege under this agreement shall operate as a waiver by it or of any right to exercise it in future or of any other of its rights under this agreement.

 

34.4         The rights and remedies arising under, or in connection with, this agreement are cumulative and,  except where otherwise expressly provided in this agreement, do not exclude rights and remedies provided by law or otherwise.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

35.          Third Party Rights

 

No person who is not Party to this agreement shall have any right to enforce any term of this agreement.

 

36.          Notices

 

36.1         Any notice or other communication to be given under this agreement shall be in writing and may be delivered by hand or sent by pre-paid post (by airmail post if to an address outside the country of posting) or fax to the relevant Party at that Party’s registered office or last-known trading address and marked for the attention of the directors.

 

36.2         Any notice or document shall be deemed served:

 

(a)     if delivered by hand, at the time of delivery unless delivered after 5.00 pm in which case they shall be given on the next day (other than Saturday or Sunday) on which the banks are ordinarily open for business in the City of London (Working Day); and

 

(b)     if posted, two Working Days after posting (five Working Days if sent by airmail post).

 

36.3         Notices under this agreement shall not be validly served by e-mail.

 

37.          Survival of Obligations

 

Any of the provisions of this agreement that are expressed to take effect in whole or in part on or after termination, or are capable of having effect after termination, shall remain in full force and effect despite termination.

 

38.          Governing Law and Jurisdiction

 

38.1         This agreement shall be governed by and construed in all respects in accordance with English law. The International rules for the interpretation of trade terms prepared by the International Chamber of Commerce (Incoterms) shall apply but where they conflict with this agreement, this agreement shall prevail.

 

38.2         Subject to clause 26 and clause 37.3, the Parties submit to the exclusive jurisdiction of the courts of England and Wales and agree that, in respect of proceedings in England and Wales and in any other jurisdiction, process may be served on either of them in the manner specified for notices in clause 35.

 

38.3         Nothing in this clause 37 shall limit the right of the Supplier to take proceedings against the Customer in any other court of competent jurisdiction, nor shall the taking of proceedings in any one or more jurisdiction preclude the Supplier from taking proceedings in any other jurisdiction, whether concurrently or not, to the extent permitted by the law of such other jurisdiction.

 

38.4         It is the Customer’s obligation to acquaint itself and to comply with all applicable requirements and restrictions imposed by law or by governmental and other authorities or corporations relating to the possession, use, import, export, or resale of the Products. It is the Customer’s obligation to ensure that no Products are exported or imported in violation of the laws of any jurisdiction into or through  which the Products are transported during the course of reaching the Customer’s

 

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warehouse. Where necessary, the Customer shall inform the Supplier at a reasonable time before delivery of any documents which it is necessary for the Supplier to provide in order to allow export of the Products in compliance with the laws of any relevant jurisdiction. The Supplier shall fully cooperate in supplying all needed documentation for shipping and importing/exporting.

 

38.5         The rights set out in this clause 37 are in addition to any other manner of service  permitted by law at the time when service is made.

 

38.          Other

 

38.1         Press Releases. No Party shall originate any publicity, news release or other public announcement, written or oral, whether relating to this Agreement or any arrangement between the Parties, without the prior written consent of the other Party, except to the extent such publicity, news release or other public announcement is required by law. Neither Party shall use the name of the other for advertising or promotional claims without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.

 

38.2         The Supplier agrees that in the event that it receives an offer to sell a controlling interest in its shares or the majority of its business from a competitor of the Customer that it will give the Customer an option to purchase the shares or the business at a price equal to that offered by any such competitor provided always that it is after any pre-emption rights that Rolls Royce Plc may have.

 

This agreement has been entered into on the date stated at the beginning of it.

 

Signed for and on behalf of MAGNETIC SYSTEMS TEHCNOLOGY LIMITED

 

 

	
Signature
    	
/s/   Marcus Jenkins
    	
 
    
	
 
    	
 
    	
 
    
	
Name
    	
Marcus   Jenkins
    	
 
    
	
 
    	
 
    
	
Director/authorised   signatory
    	
 
    

 

 

Signed for an on behalf of SMITH ELECTRIC VEHICLES EUROPE, Ltd.

 

 

	
Signature
    	
/s/   Bryan Hansel
    	
 
    
	
 
    	
 
    	
 
    
	
Name   
    	
Bryan   Hansel
    	
 
    
	
 
    	
 
    
	
Director/authorised   signatory
    	
 
    

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Schedule 1     Products and Specifications

 

The products are:

 

·                  A Supplier MB.800.016.00 traction motor comprising of a motor utilising an interior permanent magnet rotor employing surface mounted rare earth magnets and a water cooled stator with three phase concentrated type windings.

 

·                  A Supplier MA.524.032.00 gearbox - a single stage fixed ratio gearbox.

 

·                  A Supplier XB.851.028.00 controller comprising of a water cooled 3-phase inverter, pre-charge and isolating relays, auxiliary inverters and DCDC converters.

 

·                  The Motor, gearbox and Power controller comprised in the part numbers above (“System”) will be equivalent in form fit and function to the equipment supplied to Smith and under an earlier Smith PO “2/19/2010-268”.

 

The Specifications for the Products are as set forth in the attached SMITH Drive High Level Specification Ver 03.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Schedule 2     Manufacturing Data Pack

 

The Manufacturing data pack will contain the following information:

 

MA.524.032.00 motor gearbox:

 

Bill of Materials.

Engineering drawings of all manufactured parts.

Purchase specifications or all purchased components.

Process flow diagram showing all stages of manufacture.

Test specifications at each stage of manufacture including pass/fail criteria.

 

Engineering drawings of tooling components specific to the manufacture of the motor gearbox.

 

Manufacturing instructions for each stage of manufacturing process.

 

XB.851.028.00 Controller 

 

Bill of materials

Engineering drawings of all manufactured parts. 

Purchase specifications for all purchased components.

In the case of the printed circuit assemblies (PCA) this will include the manufacturing data pack for each PCA which will include:

 

Component BoM

PCA Gerber files

Pick and place files

 

Process flow diagram showing all stages of manufacture.

Test specifications at each stage of manufacture including pass/fail criteria.

 

Software

 

Image files of the installed software for the XB.851.026.00 controller 

PC based controller re-programming tool 

PC based parameter programming tool

 

Within 15 days of the Commencement Date of this Agreement, Supplier agrees to provide Customer access of the current Product BOM and supplier base of the Products, Smith agrees to not contact Supplier’s supply chain without first securing Supplier’s consent.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Schedule 3     Prices 

 

Product Pricing and delivery schedule

 

1.                                      For the first [***] Products supplied by the Supplier [***] each as per the Suppliers quotation “Q846 Proposal 20101107 1559pdf” (Exhibit 1). These Products will be supplied at a rate of [***] per week on the basis set out in the quotation referenced to in clause 3.4 of this agreement.

 

2.                                      The Customer and the Supplier agree to the following per Unit transfer price for the [***] Units to be manufactured by the Supplier and delivered to the Customer:

 

·                  First [***] Units -[***]

·                  Second [***] Units - [***]

 

The Customer agrees to the following payment schedule, at the per Unit transfer price noted above, for the [***] Units to be manufactured by the Supplier and delivered to the Customer:

 

·      A total of [***] upon completion of [***] Units ([***] Units per week), payable in weekly increments based on the number of Units shipped.

 

·      A total of [***] upon completion of second [***] Units ([***] Units per week), payable in weekly increments based on the number of Units shipped.

 

3.                                      In the event there is a material change ([***] or greater) in material component costs, the per Product price will adjusted by the material change and the payment schedule above will correspondently be adjusted for outstanding payments.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Schedule 4     Royalties and Fees

 

1.                                      The Customer will pay a Royalty to the Supplier on each End Product, for which Royalties are due, as defined in section 12.2 at the following rates:

 

	
1.1
    	
Products
    	
[***]
    	
[***]
    	
per   Product;
    
	
1.2
    	
Products
    	
[***]
    	
[***]
    	
per   Product;
    
	
1.3
    	
Products
    	
[***]
    	
[***]
    	
per   Product;
    
	
1.4
    	
Products
    	
[***]
    	
[***]
    	
per   Product; and
    
	
1.5
    	
Products
    	
[***]   plus
    	
[***]
    	
per   Product.
    

 

2.                                      The above Royalty payments are based upon the UK Consumer Pricing Index (CPI) as at 1st January 2011. The Royalty payments will be increased on 1st January of each year of this agreement to take into account any increase in the CPI over the preceding 12 months.

 

3.                                      In the event the Supplier Accepts Options, as set forth in clause 17 of this agreement, the Royalties in 1.1 and 1.2 of this Schedule 4 shall be reduced to [***] per Product (plus indexation as appropriate). For the avoidance of doubt this reduction shall not be applied on a retrospective basis. In the event the Supplier Voids Options, as set forth in clause 17 of this agreement, the Royalties in 1.1 and 1.2 of this Schedule 4 shall remain unchanged.

 

4.                                      The Customer agrees to pay the sum of [***] to the Supplier in consideration for the license granted by the Supplier to the Customer under clause 7.1 of this agreement. It is agreed that the payment schedule for this license fee will be as follows:

 

	
·
    	
[***]
    	
-   upon signing of this agreement; and
    
	
·
    	
[***]
    	
-   5 weeks after the signing of this agreement.
    
	
·
    	
[***]
    	
-   10 weeks after the signing of this agreement.
    

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

Schedule 5 - Warrantee Process

 

See attached, Warranty Process Flow.

 

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***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

[***]

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