Northrop Grumman Corporation

NORTHROP GRUMMAN CORPORATION

PURCHASE ORDER TERMS AND CONDITIONS

(PROPERTY CONTROL) (GOVERNMENT - FIXED-PRICE)

1. GENERAL

These terms and conditions apply only to special tooling and special test equipment provided by or acquired for the United States (U.S.) Government (herein "Government"). All title rights are in the Government; Buyer's is responsible for controlling use of tooling and test equipment for the Government's benefit. The acquiring purchase order(s) are fixed-price type, however the controlling prime contract may be either fixed-price or cost reimbursement type. The Government Property clauses, appropriately modified to identify the parties and include editorial changes, and incorporated herein in full text are as follows:

A. Federal Acquisition Regulations (FAR) 52.245-2 "Government Property (Fixed-Price Contracts) (JAN 1986)" (modified to take title to special tooling for the Government when the Order is issued and identified as under a cost type prime contract).

B. FAR 52.245-17 "Special Tooling (APR 1984)" the Government has title rights to tooling acquired via a fixed-price Order under a fixed-price prime contract, and to which the Government may acquire title by virtue of a progress payments clause (FAR 52.232-16) in the Order and/or the prime contract.

2. DEFINITIONS

A. BUYER means Northrop Grumman Corporation.

B. ORDER means the purchase order contract between Buyer and Seller.

C. PHYSICAL INVENTORY means sighting, describing, recording and reporting the property concerned and reconciling the property recorded and reported with the property records. Seller's Property Control System shall contain an adequate locator system or technique to permit location of any item of property within a reasonable period of time after request therefor.

D. PROPERTY means Special Tooling and Special Test Equipment, generally referred to herein as Government Property.

E. SALVAGE means Property that, because of its worn, damaged, deteriorated, or incomplete condition or specialized nature, has no reasonable prospect of sale or use as serviceable property without repairs, but has some value in excess of its scrap value. F. SCRAP means personal property that has no value except for its basic material content.

G. SELLER means the party with whom Buyer is contracting.

H. SPECIAL TOOLING (ST) means jigs, Numerical Control (N/C) Software, dies, fixtures, molds, patterns, tapes, gauges, other equipment and manufacturing aids, all components of these items, and replacement of these items, which are of such a specialized nature that without substantial modification or alteration their use is limited to the development or production of particular supplies or parts thereof or to the performance of particular services. This does not include material, Special Test Equipment, facilities (except foundations and similar improvements necessary for installing ST), general or special machine tools, or similar capital items. ST, for the purpose of this Terms and Conditions document, does not include any item acquired by Seller before the effective date of this Order, or replacement of such items, whether or not altered or adapted for use in performing this Order, or items specifically excluded by the Schedule of this Order. Also referred to as ST, tools, tooling or Government Property herein.

I. SPECIAL TEST EQUIPMENT (STE) means either single or multipurpose integrated test units engineered, designed, fabricated or modified to accomplish special purpose testing in the performance of this Order. It consists of items or assemblies of equipment including standard or general purpose items or components that are interconnected and interdependent so as to become a new functional entity for special test purposes in the development or production of particular supplies or services. This does not include material, ST, facilities (except foundations and similar improvements necessary for installing STE), or plant equipment items used for general plant testing purposes. Also referred to as STE, test equipment or Government Property herein.

3. ACQUISITION AND CONTROL OF ST/STE

A. Evidence of Satisfactory ST/STE. Invoices for items of ST and STE will not be rendered until such items have been proved. Evidence of satisfactory items will be indicated by Buyer's acceptance of a satisfactory part produced and/or tested by such ST and/or STE, except as specifically agreed elsewhere in this Order. Seller shall submit a Certified Tool List, in the format and in accordance with the instructions provided in Exhibit "A", with invoice for payment. Four copies of each Certified Tool List shall be required and shall be submitted within 30 days after tool proofing and completion of first lot of acceptable parts. Buyer reserves the right to approve ST/STE at Seller's facility. Exhibit "A" is attached hereto and by this reference made a part hereof.

B. Use of Government Property. Government property shall be used only for performing this Order, unless otherwise provided herein or approved by Buyer, in writing.

C. Identification of ST/STE. Unless otherwise directed by Buyer, Seller will make use of Buyer's numbering system and serial numbers for all items of ST/STE acquired hereunder. Each such item shall be marked with Buyer's identification number, and as advised by Buyer, one of the following: "USA," "USN," "USAF," or "NASA." When it is impractical to mark such tools acquired hereunder, Seller shall request marking instructions from Buyer.

D. Inventory - ST/STE. All ST/STE acquired or fabricated pursuant to this Order shall be subject to physical inventory by Seller as follows:

(1) ST and STE shall be physically inventoried at least once every three years commencing with the date of this Order. (2) Immediately upon termination or completion of related production orders, Seller shall perform a physical inventory of ST and STE adequate for disposal purposes.

(3) Personnel who perform the physical inventories shall not be the same individuals who maintain the property records or have custody of the property unless the size of Seller's operation is so small as to make it impracticable for others to perform the physical inventory.

(4) Seller shall report inventory results to Buyer, in a format acceptable to Buyer. Unrecorded ST/STE (overages) and losses (shortages) shall be clearly identified and described in the inventory report. Inventory reports shall be furnished to Buyer as follows:

(a) Within 15 days after completion of the three year inventory cycle.

(b) Upon Order termination or completion as directed by Buyer.

E. Inventory - Other Government Property. Inventory of Government Property other than ST/STE in Seller's possession as a result of the performance of this Order shall be accomplished in accordance with FAR Subpart 45.5. However, the general principles expressed in Paragraph 3.D above are equally applicable to such property. Seller shall follow established inventory practices and shall establish the type and frequency of inventory subject to notification of and approval by Buyer's Property Administrator within thirty (30) days of Order award.

F. Excess Property. Seller shall report to Buyer all Government or Buyer property in excess of amounts needed to complete full performance under Buyer's Order pursuant to which such property was provided, or other contracts or Orders which authorized use of such property, as promptly as possible after identifying availability of excess property.

4. SPECIAL TOOLING (FAR 52.245-17 (APR 1984), modified)

A. Use of ST. Seller agrees to use ST only in performing this Order or as otherwise approved by Buyer, in writing.

B. Lists of Special Tooling. Seller shall prepare and submit to Buyer promptly after execution of this Order, if not previously submitted, a Preliminary Property List, in the format and in accordance with the instructions provided in Exhibit "A", listing all items of ST and the respective cost of each item, which Seller plans to manufacture or acquire for performance of work hereunder. The Preliminary Property List shall specify the nomenclature, related product part number (or service performed), tool number, and unit or group cost of the ST. This ST list shall be maintained on a current basis and periodically, as required by Buyer, Seller shall submit to Buyer a revised Certified Tool List indicating all changes therein. (See paragraph 4.C below for ST that has become obsolete.)

C. Changes in Design. Changes in the design or specifications of the end items being produced under this Order may affect the interchangeability of end item parts. In such an event, unless otherwise agreed to by Buyer, Seller shall notify Buyer of any part not interchangeable with a new or superseding part. Pending disposition instructions, such usable ST shall be retained and maintained by Seller.

D. Seller's Offer To Retain ST. Seller may indicate a desire to retain certain items of ST at the time Seller furnishes a list or notification pursuant to paragraphs 4.A, 4.B, 4.C, or 4.G. (Any list furnished in accordance with paragraphs 4.C or 4.G hereof shall be furnished on Standard Form (SF) 1432. Seller shall furnish a written offer designating those items Seller wants to retain by specifically listing the items or by listing the particular products, parts, or services for which the items were used or designed. The offer shall be made based on one of the following:

(1) An amount shall be offered for retention of the items free of any Buyer or Government interest. This amount should ordinarily not be less than the current fair value of the items, considering, among other things, the value of the items to Seller for use in future work.

(2) Retention for a limited period of time and under terms as may be agreed to by the Government, Buyer, and Seller. This temporary retention is subject to final disposition pursuant to paragraph 4.H below.

E. Property Control Records. Seller shall maintain adequate property control records of all ST in accordance with its normal industrial practice and in compliance with paragraph 3.C hereof. The records shall be made available for Buyer or Government inspection at all reasonable times. Seller shall identify all ST subject to this Condition with an appropriate stamp, tag, or other mark in accordance with paragraph 3.C. hereof.

F. Maintenance. Seller shall take all reasonable steps necessary to maintain the identity and existing condition of usable ST from the date such items are no longer needed by Seller until final disposition under paragraph 4.H below. These maintenance requirements do not apply to ST designated by Buyer for disposal as scrap or identified as of no further interest to Buyer or the Government under subparagraph 4.H.(4) below. Seller is not required to keep unneeded items of ST in place.

G. Final list of Special Tooling. When all or a substantial part of the work under this Order is completed or terminated, Seller shall, when requested by Buyer, furnish Buyer a final list of ST on Form SF 1432 with the same information as required for the initial list under paragraph 4.B above. The final list shall include all items not previously reported under paragraph 4.B. Buyer may delay any such request until completion of this Order together with completion of other orders and subcontracts authorizing the use of the ST under paragraph 4.A above. ST that has become obsolete as a result of changes in design or specification need not be reported except as provided for in paragraph 4.C above.

H. Disposition Instructions. Buyer shall provide Seller disposition instructions for ST identified in a list or notice properly submitted under paragraphs 4.C or 4.G above. Buyer may direct disposition by any of the methods listed in subparagraphs (1) through (4) below, or a combination of such methods.

(1) Buyer shall give Seller a list specifying the products, parts, or services for which the Government may require ST and request Seller to transfer title (to the extent not previously transferred under any other clause of this Order) and deliver to the Government all usable items of ST that were designed for or used in the production or performance of such products, parts, or services and that were on hand when such production or performance ceased.

(2) Buyer may accept or reject any offer made by Seller, under paragraph 4.D above, to retain items of ST or may request further negotiation of the offer. Seller agrees to negotiate in good faith. The net proceeds from Buyer's acceptance of Seller's retention offer shall either be deducted from amounts due Seller under this Order or shall be otherwise paid to Buyer or the Government as directed by Buyer.

(3) Buyer may direct Seller to sell, or dispose of as scrap, for the account of Buyer or the Government, any ST reported by Seller under this Condition. The net proceeds of all sales shall either be deducted from amounts due Seller under this Order or shall be otherwise paid to Buyer or the Government as directed by Buyer. To the extent Seller incurs any costs occasioned by compliance with such directions, for which it is not otherwise compensated, the Order price shall be equitably adjusted in accordance with the "Changes" provision of this Order. (4) Buyer may furnish Seller with a statement disclaiming further Buyer or Government interest or rights in any of the ST listed.

I. Storage or Shipment. Seller shall promptly transfer to the Government title to ST specified by Buyer and arrange for either shipment or storage of such ST in accordance with the final disposition instructions in subparagraph 4.H.(l) above. ST to be shipped shall be properly packaged, packed, and marked in accordance with directions of Buyer. Tooling to be stored shall be stored pursuant to a storage agreement between Buyer and Seller or the Government and Seller, as directed by Buyer. Tooling shipped or stored shall be accompanied by operation sheets or other appropriate data necessary to show the manufacturing operations or processes for which the items were used or designed. To the extent Seller incurs costs for authorized storage or shipment under this paragraph and is not otherwise compensated, the Order price shall be equitably adjusted in accordance with the "Changes" provision of this Order.

J. Subcontract Provisions. In order to perform this Order, Seller may place subcontracts (including purchase orders) involving the use of ST. If the full cost of ST is charged to those subcontracts, Seller agrees to include in the subcontracts appropriate provisions to obtain Buyer and Government rights comparable to the rights of Buyer and the Government under this Condition. Seller agrees to exercise such rights for the benefit of the Government as directed by Buyer.

5. SPECIAL TEST EQUIPMENT (FAR 52.245-18 (APR 1984), modified)

A. Notice of Intent to Acquire STE. Seller may either acquire or fabricate STE at Buyer's expense when the STE is not otherwise itemized in this Order and the prior approval of Buyer has been obtained. Seller shall provide Buyer with a written notice, at least forty-five days in advance, of Seller's intention to acquire or fabricate STE. As a minimum, the notice shall include an estimated aggregate cost of all items and components of STE the individual cost of which is less than $5,000, and the following information on each item or component of STE costing $5,000 or more:

(1) The end use application and function of each proposed special test unit, identifying special characteristics and the reasons for the classification of the test unit as STE.

(2) A complete description identifying the items to be acquired or fabricated by Seller.

(3) The estimated cost of the STE or component.

(4) A statement that intra-plant screening of Seller, Buyer and Government-owned STE and components has been accomplished and that none are available for use in performing this Order.

B. Buyer- or Government-Furnished STE. Buyer or the Government may furnish any STE or components rather than approve their acquisition or fabrication by Seller. Such Buyer/Government-furnished items shall be subject to the Government Property clause, except that the Buyer/Government shall not be obligated to deliver such items any sooner than Seller could have acquired or fabricated them after expiration of the forty-five days notice period in paragraph 4.A above. However, unless Buyer or the Government notifies Seller of its decision to furnish the items within the forty-five day notice period, Seller may proceed to acquire or fabricate the equipment or components subject to any other applicable provisions of this Order.

C. Subcontract Provision. Seller shall, insert provisions that conform substantially to the language of this Condition, including this paragraph 5.C, in any subcontract order which provides that STE or components may be acquired or fabricated for the Government. Seller shall furnish the names of such subcontractors to Buyer, in writing. D. Changes. If an engineering change requires either acquisition or fabrication of new or substantial modification of existing STE, Seller shall comply with paragraph 5.A above. In so complying, Seller shall identify the Change Order or Supplement which requires the proposed acquisition, fabrication, or modification.

E. General. STE and components thereof approved by Buyer as of the date of this Order are listed in this Order. If this Order provides that Seller will acquire other STE and components thereof, the exact nature of which is currently being determined and which are unknown as of the date of this Order, Seller shall not acquire any such items unless such acquisitions have been authorized pursuant to Paragraphs 4.A or 4.B above. Buyer shall amend this Order to reflect the acquisition of any such authorized items, provided, however, that such amendment shall not be grounds for any adjustment of Order price or delivery schedules unless this Order includes an adjustment Condition expressly for that purpose.

F. Equitable Adjustment. If Buyer furnishes or causes to be furnished, any STE or components thereof under Paragraph 4.B above, any affected provisions of this Order shall be equitably adjusted in accordance with the "Changes" provision hereof.

6. GOVERNMENT PROPERTY (FAR 52.245-2 (DEC 1989), modified)

A. Government-Furnished Property.

(1) Buyer shall deliver or cause to be delivered to Seller, for use in connection with and under the terms of this Order, the Government-Furnished Property described in this Order, if any, together with any related data and information that Seller may request and is reasonably required for the intended use of the Government-Furnished Property.

(2) The delivery or performance dates for this Order are based upon the expectation that Government- Furnished Property suitable for use (except for Government-Furnished Property furnished "as-is") will be delivered to Seller at the times stated in the Order or, if not so stated, in sufficient time to enable Seller to meet the Order delivery or performance dates.

(3) If Government-Furnished Property is received by Seller in a condition not suitable for the intended use, Seller shall, upon receipt of such Government-Furnished Property, notify Buyer, detailing the facts, and, as directed by Buyer and at Buyers expense, either repair, modify, return, or otherwise dispose of the Government-Furnished Property. After completing the directed action and upon written request of Seller, Buyer shall make an equitable adjustment as provided in paragraph 6.H below.

(4) If Government-Furnished Property is not delivered to Seller by the required time, Buyer shall, upon Seller's timely written request, make a determination of the delay, if any, caused Seller and shall make an equitable adjustment in accordance with paragraph 6.H below.

B. Changes in Government-Furnished Property.

(1) Buyer may, by written notice, (i) decrease the Government-Furnished Property provided or to be provided under this Order, or (ii) substitute other property for the Government-Furnished Property to be provided by Buyer, or to be acquired by Seller for the Government, under this Order. Seller shall promptly take such action as Buyer may direct regarding removal, shipment, or disposal of Government-Furnished Property covered by such notice.

(2) Upon Seller's written request, Buyer shall make an equitable adjustment to the Order in accordance with paragraph 6.H below, if Buyer has agreed in the Order to make Government-Furnished Property available for performing this Order and there is any: (i) decrease or substitution in this Government-Furnished Property pursuant to subparagraph 6.B.(1) above; or (ii) withdrawal of authority to use this Government- Furnished Property, if provided under any other Order or lease.

C. Title in Government Property.

(1) The Government shall retain title to all Property.

(2) All Government-Furnished Property and all Property acquired by Seller, title to which vests in the Government under this paragraph (collectively referred to as "Government Property"), are subject to the provisions of this Condition. Title to Government Property shall not be affected by its incorporation into or attachment to any property not owned by the Government, nor shall Government Property become a fixture or lose its identity as personal property by being attached to any real property.

(3) Title to each item of STE, and ST (other than ST subject to a special tooling clause [NOTE: this parenthetical statement pertaining to ST is inoperative when the Order is identified as an Order under a cost reimbursement type prime contract]) acquired by Seller for the Government under this Order shall pass to and vest in the Government when its use in performing this Order commences or when the Government has paid for it, whichever is earlier, whether or not title previously vested in the Government.

D. Use of Government Property. Government property shall be used only for performing this Order, unless otherwise provided in this Order or approved by Buyer, in writing.

E. Property Administration.

(1) Seller shall be responsible and accountable for all Government Property provided under this Order and shall comply with FAR Subpart 45.5, as in effect on the date of this Order.

(2) Seller shall establish and maintain a program for use, maintenance, repair, protection, and preservation of Government Property in accordance with sound industrial practice and the applicable provisions of FAR Subpart 45.5.

F. Access. Buyer, the Government and all their designees shall have access at all reasonable times to the premises in which any Government Property is located for the purpose of inspecting the Government Property.

G. Risk of Loss. Unless otherwise provided in this Order, Seller assumes the risk of, and shall be responsible for, any loss or destruction of, or damage to, Government Property, including ST/STE, upon its delivery to Seller or upon passage of title to the Government under paragraph 6.C above. Seller shall remain responsible for risk of loss unless and until Seller is notified in writing that the Contracting Officer cognizant of the prime contract has provided written consent to relief from such risk. However, Seller is not responsible for reasonable wear and tear to Government Property or for Government Property properly consumed in performing this Order. Seller shall repair, renovate, and take other action with respect to damaged Government Property as Buyer directs, at Seller's expense.

H. Equitable adjustment. When this Condition specifies an equitable adjustment, it shall be made to any affected Order provision in accordance with the procedures of the "Changes" clause. When appropriate, Buyer may initiate an equitable adjustment in favor of Buyer. The right to an equitable adjustment shall be Seller's exclusive remedy. Buyer or the Government shall not be liable to suit for breach of contract for:

(1) Any delay in delivery of Government-Furnished Property;

(2) Delivery of Government-Furnished Property in a condition not suitable for its intended use; (3) A decrease in or substitution of Government-Furnished Property; or

(4) Failure to repair or replace Government Property for which Buyer or the Government is responsible.

I. Final Accounting and Disposition of Government Property. Upon completing this Order, or at such earlier dates as may be fixed by Buyer, Seller shall submit, in a form acceptable to Buyer, inventory schedules covering all items of Government Property (including any resulting scrap) not consumed in performing this Order or delivered to the Government. Seller shall prepare for shipment, deliver "F.O.B. Origin", or dispose of the Government Property as may be directed or authorized by Buyer. The net proceeds of any such disposal shall be credited to the Order price or shall be paid to Buyer or the Government as Buyer directs.

J. Abandonment and Restoration of Seller's Premises. Unless otherwise provided herein, Buyer or the Government:

(1) May abandon any Government Property in place, at which time all obligations of Buyer or the Government regarding such abandoned property shall cease; and

(2) Has no obligation to restore or rehabilitate Seller's premises under any circumstances (e.g., abandonment, disposition upon completion of need, or upon Order completion). However, if the Government-Furnished Property (listed in the Order) is withdrawn or is unsuitable for the intended use, or if other Government Property is substituted, then the equitable adjustment under paragraph 6.H above may properly include restoration or rehabilitation costs.

K. Communications. All communications under these Terms and Conditions shall be in writing.

L. Overseas Orders. If this Order is to be performed outside the United States of America, its territories, or possessions, the words "Government" and "Government-furnished" (wherever they appear in this Condition) shall be construed as "United States Government" and "United States Government-furnished," respectively.

7. PROPERTY CONTROL SYSTEM APPROVAL.

Seller shall establish written procedures, implement and maintain a Property Control System which are fully compliant with all provisions of FAR Subpart 45.5 and herein. In the event of any conflict between these requirements and FAR Subpart 45.5, the FAR provisions shall control. Seller may then initiate written request for Buyer's approval of Seller's Property Control System which includes submittal of documents noted in Paragraph C below. Seller's approved Property Control System shall be maintained by Seller in strict accordance with the procedures approved by Buyer. Buyer reserves the right to conduct periodic surveillance or otherwise review Seller's approved Property Control System to assure compliance with the requirements of these Terms.

A. Buyer will evaluate Seller's Property Control System, identify any necessary changes thereto, or approve Seller's procedures and the implementation thereof. Buyer will notify Seller of Buyer's assessment of Seller's Property Control System in writing.

B. Buyer's approval or acceptance of Seller's Property Control System applies only to the specific Seller name and address identified in Buyer's written approval acceptance notification to Seller.

C. If Seller has a "Government Approved" Property Control System, Buyer may, with appropriate Government agreement, accept such approval in lieu of conducting a survey of Seller's implemented Property Control System. However, Seller's Property Control procedures shall be subject to Buyer's review and approval.

D. One copy of each of the following must be submitted to Buyer.

(1) Seller's current Property Control procedures.

(2) Sample of Seller's property record location document.

(3) Sample of Seller's property maintenance record document.

(4) Executed Buyer form "Property Control Requirements Certification of Receipt and Agreement".

(5) Document granting Government approval of Seller's Property Control System, if available.

(6) Other Property Control documentation, as Buyer may request.

8. PROPERTY CONTROL SYSTEM DISAPPROVAL AND REINSTATEMENT

A. Buyer reserves the right to withdraw Buyer's approval of Seller's Property Control System at any time. Buyer will notify Seller in writing of such disapproval, the reasons therefore, and corrective action required. Problems identified will be promptly addressed by Seller in writing within thirty (30) days. Failure to resolve problems may result in disapproval of Seller's Property Control System and may result in actions up to and including termination for default as provided in the applicable Condition(s) in this Order.

B. Seller is required to notify Buyer in writing of relocation or name change as soon as such conditions are known. Seller's name change or relocation subsequent to Buyer's approval of Seller's Property Control System shall:

(1) Immediately invalidate Buyer's prior approval/acceptance of Seller's Property Control System. If name change only, Seller's Property Control System may continue in effect for thirty (30) days unless otherwise notified in writing by Buyer.

(2) Require Seller's resubmittal of the documents identified in paragraph 7.C to Buyer for review immediately after Seller's name change or relocation.

C. Seller must obtain Buyer's prior written authorization to transfer ST or STE to Seller's new location.