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EXHIBIT 10.1
ENGINE DEVELOPMENT PROGRAM
AND ENGINE PURCHASE AGREEMENT
THIS ENGINE DEVELOPMENT PROGRAM AND PURCHASE AGREEMENT ("Agreement") is made as
of the 1st day of November, 1994, by and between AUTOMOBILI LAMBORGHINI S.p.A.,
a corporation ("Lamborghini"), located at 40019 Sant'Agata Bolognese (BO), Via
Modena 12, Italy, and VECTOR AEROMOTIVE CORPORATION, a corporation ("Vector"),
located at 444 Quay Street, Wilmington, California 90744 USA.
RECITALS
A. Vector manufactures and sells high performance sports cars and it
requires an engine to power its Avtech vehicle ("Avtech").
B. Lamborghini manufactures and sells high end luxury sports cars and
high performance Diablo V-12 engines ("Diablo Engine").
C. Vector desires to enter into an engine development program
("Program") with Lamborghini wherein Lamborghini will make modifications to its
Diablo Engine and to sell Modified Engines to Vector under the terms and
provisions of this Agreement.
In consideration for the mutual promises, covenants, and conditions contained
herein the parties agree as follows:
1. ENGINE DEVELOPMENT
Vector and Lamborghini agree to develop the Modified Engine for use in the
Avtech. The Joint Program will include all modification to the Diablo Engine
and components for installation into the Avtech, including, but not limited to,
the design and development of a new oil sump, inlet manifolds, bell housing,
exhaust manifold and catalysts, cooling systems, electrical system,
installation pipings, and engine mounting.
2. ENGINE DEFINITION
The definition of the engine and its components is described in Exhibit "A"
together with the overall plan attached hereto and incorporated herein by
reference.
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3. PHASES OF PROGRAM
Phase 1 Design and drawings plus the assembly of three
complete engines.
Phase 2 Installation of the engine in the Avtech.
Phase 3 Laboratory emission tests.
Phase 4 EPA and CARB homologation MY96 and OBDII
conformity.
The responsibility of Lamborghini and Vector shall be hereinafter designated in
this agreement.
4. DESIGN AND DEVELOPMENT TESTING
Vector and Lamborghini shall be responsible for performing design, development
and testing of the Modified Engine in accordance with the Schedule marked
Exhibit "B" attached hereto and incorporated herein by reference.
5. MODIFIED ENGINE DESIGN AND TESTING
Lamborghini and Vector shall design and test the Modified Engine. A schedule
containing the tasks to be performed, the dates of performance, an explanation
of the test, the cars being tested, and the responsibilities of Lamborghini and
Vector are set forth on Exhibit "C" attached hereto and incorporated herein by
reference.
6. POWERTRAIN TESTING
Lamborghini and Vector shall each have engineering responsibilities and test
responsibilities respecting the powertrain testing, which shall include EPA,
CARB, and OBD II conformity. A schedule of each test to be performed, an
explanation of the test, and the assignment of engineering responsibility is
set forth on Exhibit "D" attached hereto and incorporated herein by reference.
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7. AVTECH FMVSS SCHEDULE
Vector shall be responsible for and shall perform the FMVSS tasks according to
the schedule set forth on Exhibit "E" attached hereto and incorporated herein
by reference.
8. COOPERATION AND COORDINATION/PROGRAM MANAGER
The performance by Vector and Lamborghini of their duties shall require
extensive coordination and cooperation between Lamborghini and Vector. To
facilitate that cooperation and coordination, Vector and Lamborghini shall each
appoint a program manager to represent it concerning the Program. Initially,
the program managers appointed by the parties are as follows:
Lamborghini's Program Manager: Massimo Ceccarani
Vector's Program Manager: Colin Spooner
The parties shall each have the right to change their program manager upon
written notice to the other party.
9. DELIVERY OF VEHICLES
To enable Lamborghini to perform its duties under this Agreement, Vector agrees
to deliver to Lamborghini the following vehicles on or before the dates set
forth beside each vehicle:
Vehicle Date of Delivery
------- ----------------
EPA1 August 20, 1994
EPA2 January 1, 1995
EPA3 February 10, 1995
10. TERM OF PROGRAM
The Program shall commence upon execution of this Agreement by Lamborghini and
shall be completed on or before ten (10) months thereafter.
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11. COST AND PAYMENT OF ENGINE DEVELOPMENT AND
CERTIFICATION
In consideration for the work to be performed by Lamborghini in connection with
the Program, including certification, and all labor and materials, directly or
indirectly related to the Program, Vector shall pay to Lamborghini the sum of
[*$_____] payable in twelve (12) monthly installments of [*$______] each, with
the first payment upon execution of this agreement by Lamborghini and Vector.
12. TOOLING
Lamborghini shall produce tooling for machinery which shall be used for the
manufacture of the Modified Engine. In consideration for the tooling, Vector
shall pay to Lamborghini the agreed cost of tooling, i.e. [*$_______] additional
cost for casting tooling will be incurred subsequent to approval after 50
units. Costs to be reviewed prior to setting down the casting tooling. Payment
shall be made thirty (30) days after the completion of the tooling.
13. PURCHASE OF MODIFIED ENGINES
Upon successful development of the Modified Engine suitable for installation
and operation in the Avtech, Vector agrees to purchase a minimum of Modified
Engines on the following schedule:
June 1, 1995 through September 30, 1995 12 Pre-production
Modified Engines.
Oct. 1, 1995 through September 30, 1996 48 Modified Engines.
Oct. 1, 1996 through September 30, 1997 144 Modified Engines.
Vector will place its order for the Modified Engines with its standard purchase
order form.
14. ADDITIONAL QUANTITY OF ENGINES
Vector shall have the right to purchase from Lamborghini additional Modified
Engines prior to September 30, 1997 according to the terms and conditions of
this Agreement.
*Confidential treatment is sought under Rule 24b-2.
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15. PURCHASE PRICE OF MODIFIED ENGINES
15.1 The purchase price of each Modified Engine shall be *$ excluding
warranty, product liability, obsolete materials and direct transportation, and
each purchase order by Vector must be for a minimum of 50 Modified Engines per
year. In case Avtech falls below 50 units per year, Lamborghini has the right
to renegotiate the price with the view of increasing the price to offset the
lower volume.
15.2 All prices are Automobili Lamborghini ex-factory Sant'Agata and will be
set at an exchange rate of LIT 1650/$. Exchange differences will be invoiced by
Lamborghini every three months. Packing not included. The price will be
reviewed annually to reflect increases in cost. Vector will pay any agreed
excess costs for the initial twelve pre-production engines.
15.3 Prices for all Modified Engines are exclusive of all federal, state, and
local excise, sales, use and similar taxes. Consequently, in addition to the
price specified, the amount of any present or future excise, sales, use,
personal property or similar taxes applicable to the sales or use of the
Modified Engines shall be paid by the Buyer and shall be additional items on
the invoices.
15.4 Vector shall pay all required import duties, licenses, fees and taxes in
addition to the prices stated herein.
15.5 Vector and Lamborghini will examine their individual product liability
insurer costs with the objective of reducing these costs by amalgamating
product liability insurance on the Lamborghini engine with that on the Vector
car. The finalized cost of the Lamborghini engine insurance will be charged to
Vector plus a 10% admin. charge.
16. INVOICE TERMS
16.1 Payment to Lamborghini for the first 50 engines shall be by way of
telegraphic transfer when engines are ready for shipment. Thereafter payment
shall be by irrevocable letter of credit cashable upon presentation of bill of
lading. Letter of credit drawn up initially for 25% of ordered value increasing
to 75% six months prior to engine scheduled ship date, and increasing to 100%
two months prior to engine scheduled ship date.
16.2 All payments are to be made in full, on or before the due date, in U.S.
dollars to Lamborghini at its address as shown on the face of this Agreement.
*Confidential treatment is sought under Rule 24 b-2.
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17. SHIPMENT
17.1 Purchase Orders
17.1.1 Shipment of Modified Engines shall be made only against written purchase
orders issued by Vector.
17.1.2 The delivery date for Modified Engines to be shipped under this
Agreement shall be specified by Vector in the written purchase order
transmitted to Lamborghini. Each purchase order shall specify the exact number
of Modified Engines to be delivered and shall specify a delivery date which
shall be at least ten (10) months after the date of receipt by Lamborghini of
such purchase order and which delivery date shall not be beyond the date
specified in Paragraph 14 of this Agreement.
17.2 Modification of Delivery Date
17.2.1 Vector shall have the right upon prior written notice six months in
advance to Lamborghini to reschedule a delivery date specified in any purchase
order issued pursuant to Section 17.1 of this Agreement, but such rescheduling
shall be permitted only plus or minus 20% of schedule. And two months in
advance plus or minus 5% of schedule. Any changes of schedule outside these
parameters will attract a penalty charge which will be calculated on the basis
of unrecoverable agreed costs incurred by Lamborghini.
17.2.2 Anything else in this Paragraph 17.2 to the contrary notwithstanding,
the Buyer shall not have the right to schedule or reschedule delivery to a date
beyond December 31, 1997.
17.3 Cancellation of Purchase Order
17.3.1 Prior to shipment, Vector shall have the right to cancel a purchase
order issued pursuant to Paragraph 17.1 of this Agreement in its entirety upon
written notice to Lamborghini accompanied by the payment to Lamborghini of a
cancellation charge calculated as the cost to Lamborghini of stock purchased
and value of WIP related to the purchase order canceled.
17.3.2 Vector and Lamborghini will examine ways by which Lamborghini will
receive financial assurances (e.g. bank guarantee) from Vector to cover
Lamborghini's exposure in the event of cancellation by Vector of the contract
for reasons beyond the control of Vector. The result of this examination will
be implemented at the end of the initial 15 months of the program.
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18. CONTINGENCY
Neither party will be liable if performance is delayed or prevented by reasons
beyond reasonable control including, but not limited to, acts of God, delays
caused by the other party, judicial action, accidents, acts of governmental
authority, acts of a public enemy, earthquake, fire, floods, epidemics, storm,
quarantine restrictions, strikes, or other labor difficulties including work
stoppages caused by jurisdictional and similar disputes, delays of carriers or
suppliers, insurrection or riots, acts of sabotage, governmental priorities,
freight or transportation embargoes, unusually severe weather, accidents or
explosions, war, rebellion, major equipment breakdowns, volunteer or mandatory
compliance with any governmental act, regulation or request, inability to
obtain or retain approval of federal, state, or local authority required for
the construction or shipment of the Modified Engine or for delays of
subcontractors or suppliers due to such reasons, acts of omissions or of other
causes beyond the other party's control or without the fault or negligence of
the other party.
19. TERMINATION
19.1 Termination for convenience
Vector may upon prior written notice to Lamborghini terminate this Agreement at
any time and for any reason. In the event of any such termination, Vector's
liability for such termination shall be cancellation charges calculated at the
cost to Lamborghini to stock purchased and value of WIP related to this
Agreement.
19.2 Termination for Default
Each party may terminate this Agreement for reason of default on the part of
the other party and if Vector terminates this agreement due to the default of
Lamborghini, Vector shall not be liable for cancellation charge. A party may
terminate this Agreement pursuant to this Section 19.2 only if it shall have
given the other party at least ninety (90) days prior written notice as to such
default and only if such default shall not have been remedied by the other
party within such ninety (90) day period and such additional time, if any, is
reasonably necessary to cure such default.
20. ACCEPTANCE TESTS AND TECHNICAL ASSISTANCE
20.1 If any of the Modified Engines delivered to Vector hereunder shall, upon
delivery, fail to successfully meet the specifications, if any, specified in
writing by Vector and agreed to by Lamborghini in connection with this
Agreement, then in such event, the Seller, after prompt written or telegraphic
facsimile notice of such failure from the Buyer, shall, either:
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20.1.1 Provide field service and/or technical personnel necessary to correct
the defect within thirty (30) working days from the day following the date of
the receipt by Lamborghini of the notice of such failure, or
20.1.2 Rectify the defective Modified Engine in order to correct the defect.
20.1.3 Have defective engine returned to Lamborghini at the discretion of
Lamborghini.
20.1.4 Lamborghini shall make available training sessions for Vector's service
staff at Vector's cost.
20.2 Lamborghini shall bear the cost and expenses of all repairs made pursuant
to this Paragraph 20.1. However, if upon examination of the Modified Engine,
Lamborghini shall determine that the malfunction, defect or damage was a result
of the action or failure, in whole or in part, of Vector or its personnel or
agents, then in such event all costs and expenses incurred by Lamborghini shall
be promptly paid by Vector. If Vector disagrees with the findings of
Lamborghini, an arbitrator will be mutually appointed and will decide fault and
responsibility.
20.3 In the acceptance of Modified Engines delivered hereunder, Lamborghini
will perform the then-current versions of its acceptance tests on all Modified
Engines delivered under this Agreement. Vector may request notification by
Lamborghini one week in advance of each such test and may have a reasonable
number of representatives present, at its own expense, to observe performance.
21. PRODUCT DOCUMENTATION
Lamborghini shall provide Vector one set of reproducible maintenance
documentation excluding only proprietary manufacturing drawings or process
specifications. This documentation shall be used solely for the purposes of
preparing and updating Vector's maintenance documentation. Lamborghini shall
send Vector updated reproducible copies of documentation affected by
Lamborghini engineering changes to the equipment.
22. STANDARD PRODUCT WARRANTY
Each Modified Engine shall be covered by Lamborghini's standard warranty of one
year. And Lamborghini's current warranty rates will apply to all warranty work
carried out by Vector.
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23. ENGINEERING CHANGES
Lamborghini shall notify Vector of any engineering changes affecting the form,
fit, or function of Modified Engines to be furnished to Vector hereunder and
shall forward such changes to the Buyer. Any such changes shall be approved or
rejected by Vector in writing to Lamborghini within thirty (30) days from the
date of such notification. If such changes are not rejected in writing within
such thirty-day period, the Buyer shall be deemed to have accepted all such
changes.
23.1 Lamborghini reserves the right to make changes in design and improvements
in the Modified engine without any obligation to install these changes in any
of its Modified Engines theretofore manufactured.
24. REPLACEMENT PARTS
24.1 Lamborghini agrees to supply critical replacement parts for all Modified
Engines delivered hereunder. Prices for such replacement parts shall be those
prices in effect at the time such replacement parts are ordered. Prices will be
ex-factory Sant'Agata, Italy. In particular, Vector will hold in stock a basic
engine.
24.2 Lists
Lamborghini shall provide Vector with a list of recommended replacement parts
when requested by Vector in writing.
24.3 Delivery of replacement parts
24.3.1 Lamborghini shall deliver replacement parts within sixty (60) days from
the receipt of an order for such parts.
24.3.2 Lamborghini shall use its best efforts to ship replacement parts within
seventy-two (72) hours (exclusive of Saturdays, Sundays and holidays) of the
receipt of an emergency order for such parts for the Modified Engines, provided
that Vector has agreed to maintain and has maintained an adequate level of
replacement parts based on levels mutually agreed upon.
25. PATENT INDEMNITY AND PATENT RIGHTS
Lamborghini shall defend any suit or proceeding brought against Vector insofar
as such suit or proceeding is based on a claim that any Modified Engine or
replacement part manufactured and supplied by Lamborghini to Vector hereunder
constitutes direct infringement of any duly issued United States patent,
provided that Lamborghini is promptly informed and furnished a copy of each
communication, notice or other action relating to the alleged infringement
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and is given authority, information and assistance (at Lamborghini's expense)
necessary to defend or settle said suit or proceeding. Lamborghini shall not
be obligated to defend or be liable for costs and/or damages if the
infringement arises out of compliance with Vector's specifications or designs,
or form a combination with, an addition to, or a modification of the Modified
Engine after delivery by Lamborghini.
25.1 The seller shall not be liable for any collateral, incidental or
consequential damages arising out of patent infringement. If infringement is
alleged prior to completion of delivery of any Modified Engine, Lamborghini
may, without being in breach of this Agreement, decline to make further
deliveries of such Modified Engine.
25.2 The foregoing states the sole and exclusive liability of Lamborghini for
patent infringement and is in lieu of all warranties, express or implied, in
regard thereto.
26. CONTINUITY OF SUPPLY
26.1 Lamborghini shall use its best efforts to maintain under conditions
providing adequate protection against fire and other hazards, a complete and
current duplicate set of "Requisite Documentation" which term as used herein
shall include all documentation, drawings, specifications, bills of material,
parts lists, manufacture and assembly routines, instructions and all other
requisite information in sufficient detail to permit an experienced
manufacturer of items similar to Modified Engine and replacement parts sold
hereunder to manufacture and assemble the Modified Engine and replacement parts
to be supplied by Lamborghini under this agreement.
26.2 It is understood and agreed, without limiting in any respect Lamborghini's
obligations to furnish Modified Engines and replacement parts in accordance
with this agreement, that in the event Vector is not in default of any
provision of this Agreement and Lamborghini shall fail to supply the required
Modified Engines and replacement parts within one hundred and twenty (120) days
of written notice of default from the Buyer, Lamborghini shall, upon Vector's
written request either (a) make such arrangements as it deems necessary to
ensure the continuity of the supply of Modified Engines and replacement parts
to Vector at a price not greater than the price set forth in this Agreement, or
(b) licenses Vector or Vector's designee to manufacture and assemble the
Modified Engines and replacement parts; provided, however, that the terms of
any such license to Vector or Vector's designee shall be that Vector or such
designee shall have the right to manufacture and assemble the Modified Engines
and replacement parts solely for Vector and only for such time as Lamborghini
or Lamborghini's designee is unable to deliver such Modified Engines and
replacement parts
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under the terms of this Agreement. Any such licenses shall provide that Vector
shall pay to Lamborghini, as compensation therefore, the sum of $1,000 for all
Modified Engines and replacement parts so manufactured and assembled. Vector or
its designee shall not manufacture or assemble any Modified Engines or
replacement parts for any person or entity other than Vector and shall so
manufacture and assemble only to the extent to supply the number of Modified
Engines and replacement parts which were to be supplied pursuant to this
Agreement.
26.3 Vector agrees not to disclose to any other persons any of the proprietary
and confidential information disclosed to it by Lamborghini, and will safeguard
any such proprietary and confidential information received to the same extent
that it safeguards its own proprietary information. Vector agrees to
disseminate any confidential and proprietary information of Lamborghini within
its own company only to the extent necessary for the contemplated purpose of
this Agreement. Vector will defend, and hold harmless Lamborghini for this
unauthorized use or disclosure of Lamborghini's confidential and proprietary
information. Notwithstanding the above provisions, Vector shall not be liable
for disclosure of the proprietary and the confidential information of
Lamborghini: (a) After the information becomes public knowledge, or (b) If
Vector receives the information from another source who is not bound to protect
the information through a confidentiality agreement. In all cases, the
Requisite Documentation delivered by Lamborghini to Vector shall remain the
sole and exclusive property of Lamborghini.
27. PACKING
The Modified Engines and replacement parts shall be packed in the manner in
which Lamborghini normally ships such engines and replacement parts for itself
and other customers. Any additional handling or preparation for shipment
specified by Vector shall be at Vector's expense and subject to acceptance to
Lamborghini.
28. LIMITATION OF LIABILITY
In no event will Lamborghini or its suppliers or subcontractors of any tier be
liable to Vector, in contract or in tort, for any special, incidental, or
consequential damages, including but not limited to loss of use, loss of
revenue, loss of use of revenue, loss of anticipated profits, costs of capital,
and claims of customers. The provisions of this Paragraph will apply,
notwithstanding any other provisions of this contract or of any other contract.
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29. MODIFICATION IN EQUIPMENT DELIVERED
If Vector reconstructs or makes changes in any Modified Engines or replacement
parts delivered to it hereunder, Lamborghini will not be liable for warranty
claims which may arise.
30. INSURANCE PROVIDED BY VECTOR
Vector will provide and maintain insurance (including Transit Insurance, with
ocean marine coverage if necessary) or the equivalent thereof, providing
protection against physical loss or damage during transit to and subsequently
upon arrival at Vector's site to all Modified Engines and replacement parts
furnished hereunder, and Lamborghini will be covered as additional insured.
Such insurance will be for the full limits of the value of the Modified Engines
and replacement parts then at risk, and any deductible amounts will be for the
account of Vector.
31. MISCELLANEOUS
31.1 There are no representations or agreements between the parties hereto,
other than contained in this Agreement. All negotiations are merged into this
Agreement and this Agreement constitutes the entire understanding of the
parties and cannot be modified, except by a writing signed by the parties.
31.2 It is expressly agreed that the validity performance and construction of
this Agreement will be governed by the internal laws of the State of Florida.
Any controversy or claim arising out of or relating to this Agreement, or any
breach thereof, shall be settled by arbitration in accordance with the rules
then obtaining of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
31.3 This Agreement is not assignable by the Buyer without the prior written
consent of the Seller. Any attempt of the Buyer to affect such an assignment
without such consent shall be void.
31.4 If any provision of this Agreement is or becomes, at any time or for any
reason, unenforceable or invalid, no other provision of this Agreement shall be
affected thereby, and the remaining provisions of this Agreement shall continue
with the same effects as if such unenforceable or invalid provisions shall not
have been inserted in this Agreement.
31.5 No Waiver by a party of its rights to enforce any provisions hereof after
any default on the part of the other party shall be deemed a waiver of such
party's right to enforce each and all of the provisions hereof upon any further
or other
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default on the party of the other party. The acceptance of payment hereunder
shall not be, or be construed to be, a waiver of any breach of any term,
covenant or condition of this Agreement.
31.6 Any notice (tender or delivery) to be given hereunder by either party to
the other may be effected by personal delivery in writing or by registered or
certified mail, postage prepaid, return receipt requested. Mailed notices shall
be addressed by written notice in accordance with this paragraph.
To Seller: Massimo Ceccarani
Gianfranco Venturelli
Automobili Lamborghini S.p.A.
40019 Sant'Agata Bolognese (BO)
Via Modena 12, Italy
To Buyer: Tim Enright, Chief Operating Officer
Colin Spooner, Project Engineer
Vector Aeromotive Corporation
7601 Centurion Parkway South
Jacksonville, FL 32256
31.7 This Agreement sets forth the entire agreement of the parties with respect
to its subject matter as of its date and supersedes all prior and
contemporaneous negotiations.
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31.8 The headings and captions contained in this Agreement shall not be
considered to be a part hereof for purposes of interpreting or applying this
Agreement, but are for convenience only.
LAMBORGHINI:
Automobili Lamborghini S.p.A.
a corporation
By: Gianfranco Venturelli
-------------------------------------
Gianfranco Venturelli
Title:
-----------------------------------
General Manager & Director
VECTOR:
Vector Aeromotive Corporation
a Nevada Corporation
By: Sultaman G. Lubis
--------------------------------------
Sultaman G. Lubis
Title:
-----------------------------------
Chief Financial Officer & Treasurer
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