What Document 1 looks like when someone signs it. Authority: Defense Production Act of 1950, Title III, as amended. No new legislation required.
WHEREAS, the Secretary of Defense has determined, pursuant to 50 U.S.C. § 4533(a)(1), that battery-grade graphite is an industrial resource essential for the national defense, and that United States industry cannot reasonably be expected to provide adequate supplies of such resource without the incentive provided by this Agreement;
WHEREAS, the United States currently imports substantially all of its battery-grade graphite from the People's Republic of China, which accounted for approximately 97 percent of global natural graphite production in the most recent reporting period, creating a supply chain vulnerability that the Department has assessed as a critical risk to defense industrial base readiness;
WHEREAS, domestic battery-grade graphite processing capacity is currently insufficient to meet the requirements of defense procurement programs including but not limited to electric vehicle propulsion systems, energy storage for forward operating bases, and advanced weapons system power supplies;
WHEREAS, the Department has identified viable domestic feedstock sources including acid mine drainage treatment operations, coal waste remediation sites, and naturally occurring graphite deposits capable of supporting commercial-scale domestic processing upon availability of adequate capital and a committed offtake customer;
WHEREAS, the Defense Production Act Title III Industrial Base Fund appropriated by Congress provides the authority and resources to execute procurement agreements designed to establish or expand domestic production of critical materials;
NOW, THEREFORE, the Department of Defense and the Contractor hereby agree as follows:
1.1 Government. The United States Department of Defense, acting through the Office of the Under Secretary of Defense for Acquisition and Sustainment, hereinafter "Government" or "DOD."
1.2 Contractor. [DOMESTIC GRAPHITE PROCESSOR], a corporation organized and existing under the laws of the United States of America, with its principal place of business at [ADDRESS], hereinafter "Contractor."
1.3 Facility. The battery-grade graphite processing facility to be constructed and operated by the Contractor at [LOCATION], United States, as described in Exhibit A, hereinafter the "Facility."
1.4 Contract Material. Battery-grade graphite meeting the specifications set forth in Exhibit B, produced at the Facility from domestically sourced feedstock as defined in Section 3.2, hereinafter "Contract Material."
1.5 Domestic Feedstock. Graphite-bearing material sourced exclusively from within the United States, including but not limited to: (a) acid mine drainage treatment precipitates from domestic coal mining operations; (b) coal mine tailings and waste streams from domestic mining operations; (c) naturally occurring graphite ore from domestic mining operations; and (d) synthetic graphite produced from domestic petroleum coke. Feedstock from any entity in which a foreign adversary, as defined in 10 U.S.C. § 4872(d), holds ten percent or more beneficial ownership interest is expressly excluded.
1.6 Contract Year. Each twelve-month period beginning on the first day of commercial production at the Facility and each anniversary thereof.
2.1 Term. This Agreement shall remain in effect for a period of ten (10) Contract Years from the date of first commercial production, unless earlier terminated pursuant to Article VIII. The Government may, at its sole option exercised no later than the end of Contract Year Eight, extend this Agreement for one additional five-year term on the pricing terms described in Article III.
2.2 Annual Minimum Purchase Obligation. The Government shall purchase from the Contractor, and the Contractor shall produce and deliver to the Government, no less than the following quantities of Contract Material in each Contract Year:
| Contract Year | Minimum Purchase (metric tonnes) | Phase |
|---|---|---|
| Year 1 | 2,500 | Ramp — 50% of rated capacity |
| Year 2 | 3,750 | Ramp — 75% of rated capacity |
| Years 3–10 | 5,000 | Full rate — 100% of rated capacity |
2.3 Government Option Quantity. The Government shall have the option, exercisable on not less than 180 days written notice, to purchase up to an additional 2,500 metric tonnes per Contract Year above the Annual Minimum Purchase Obligation at the Contract Price applicable to that year. The Contractor shall maintain capacity to fulfill such option quantities.
2.4 Delivery. Contractor shall deliver Contract Material to the designated Government delivery points, as specified in Exhibit C, in lot quantities of not less than 500 metric tonnes. Title and risk of loss shall transfer to the Government upon acceptance at the delivery point.
3.1 Base Contract Price. The Government shall pay the Contractor the following prices per metric tonne of accepted Contract Material:
| Contract Year | Price per Metric Tonne (USD) | Notes |
|---|---|---|
| Years 1–3 | $18,500 | Establishment pricing — supports capital recovery |
| Years 4–6 | $17,200 | Maturity pricing — reflects learning curve gains |
| Years 7–10 | $16,000 | Sustained operations pricing |
| Extension Years 11–15 | $15,500 | If Government exercises extension option |
3.2 Price Floor. Notwithstanding any downward adjustment provision in this Agreement, the price per metric tonne shall not fall below $14,500 for Contract Material meeting full specification. This floor is absolute and shall not be waived or modified except by written amendment signed by the Under Secretary of Defense for Acquisition and Sustainment.
3.3 Price Adjustment for Inflation. Beginning in Contract Year 4, the Contract Price for each subsequent year shall be adjusted by fifty percent of the annual change in the Producer Price Index for Industrial Chemicals and Synthetics, as published by the Bureau of Labor Statistics. Upward adjustments shall not exceed three percent per year. Downward adjustments shall not reduce the price below the floor established in Section 3.2.
3.4 Payment Terms. The Government shall pay invoices within thirty (30) days of receipt and acceptance of Contract Material. Invoices submitted for quantities within the Annual Minimum Purchase Obligation shall be paid within fifteen (15) days.
3.5 Take-or-Pay. In any Contract Year in which the Government fails to purchase the Annual Minimum Purchase Obligation quantity, the Government shall pay the Contractor a take-or-pay fee equal to sixty percent of the Contract Price for the unacquired quantity. This provision reflects the Government's recognition that the Contractor's facility economics depend on the committed volume and that idle capacity has a real cost that the Government's commitment was intended to prevent.
4.1 Domestic Feedstock Requirement. One hundred percent of the feedstock used to produce Contract Material shall qualify as Domestic Feedstock as defined in Section 1.5. The Contractor shall maintain and provide to the Government, upon request, complete documentation of feedstock sourcing including beneficial ownership certifications for all feedstock suppliers.
4.2 Beneficial Ownership Certification. The Contractor shall, prior to execution of this Agreement and annually thereafter, certify under penalty of law that no entity in which a foreign adversary holds ten percent or more beneficial ownership interest has any direct or indirect interest in: (a) the Contractor; (b) any feedstock supplier; (c) any processing subcontractor; or (d) any entity holding intellectual property licensed for use in the production of Contract Material.
4.3 Change in Ownership Notification. The Contractor shall notify the Government within five (5) business days of any change in beneficial ownership of the Contractor or any feedstock supplier that could affect compliance with Section 4.2. Failure to notify shall constitute a material breach of this Agreement.
4.4 Processing Location. All processing of Contract Material from raw feedstock to finished specification shall occur within the United States at the Facility or at a facility expressly approved in writing by the Government. No processing step shall be performed outside the United States.
5.1 Specifications. Contract Material shall conform to the specifications set forth in Exhibit B, which establishes minimum requirements for: (a) carbon content (≥99.95% by weight for anode-grade material); (b) particle size distribution; (c) surface area; (d) moisture content; (e) heavy metals content; and (f) electrochemical performance in standardized half-cell testing.
5.2 Inspection and Acceptance. The Government shall have the right to inspect Contract Material at the Facility prior to shipment and at the delivery point upon receipt. Material failing to meet specification shall be rejected and replaced by the Contractor within ninety (90) days at no additional cost to the Government.
5.3 Quality Management System. The Contractor shall maintain a quality management system conforming to ISO 9001:2015 or equivalent standard approved by the Government throughout the term of this Agreement.
6.1 Regulatory Facilitation. The Government shall designate a senior interagency coordinator, not below the level of Deputy Assistant Secretary, to facilitate the Contractor's interactions with federal regulatory agencies including EPA, DOE, and relevant state environmental agencies. This coordination function shall not constitute Government assumption of the Contractor's regulatory obligations but shall ensure that permitting timelines do not unreasonably impede facility construction and operation.
6.2 National Defense Stockpile Coordination. The Government shall coordinate with the Defense Logistics Agency Strategic Materials to ensure that Contract Material acquired under this Agreement is eligible for deposit in the National Defense Stockpile to the extent consistent with stockpile management objectives. Stockpile deposits shall count toward the Government's Annual Minimum Purchase Obligation.
6.3 Information Sharing. The Government shall provide to the Contractor, to the extent permitted by law and consistent with national security, relevant information regarding government demand forecasts for battery-grade graphite through the term of this Agreement to support the Contractor's production planning.
7.1 Minimum Capital Investment. The Contractor shall invest no less than $180,000,000 in the construction and commissioning of the Facility. Documentation of capital expenditures shall be provided to the Government annually.
7.2 Employment. The Contractor shall employ no fewer than 85 full-time equivalent employees at the Facility during full-rate operations, of whom no fewer than 60 shall be citizens or lawful permanent residents of the United States.
7.3 Annual Reporting. The Contractor shall provide to the Government, within 90 days of each Contract Year end, a report including: (a) production volumes and feedstock sourcing documentation; (b) employment levels and workforce composition; (c) capital expenditure summary; (d) beneficial ownership certification update; and (e) any material changes to the Facility or production process.
8.1 Termination for Convenience. The Government may terminate this Agreement for convenience upon 365 days written notice. In the event of termination for convenience, the Government shall pay the Contractor a termination settlement equal to: (a) all allowable costs incurred through the termination date; (b) a pro-rata share of unamortized facility investment calculated on a straight-line basis over the original ten-year term; and (c) lost profits on the remaining contract quantity at the applicable Contract Price, discounted at the ten-year Treasury rate as of the termination notice date.
8.2 Termination for Cause. The Government may terminate this Agreement for cause upon written notice specifying the breach, if the Contractor fails to cure such breach within 60 days of notice. Grounds for termination for cause include: (a) material failure to meet specification; (b) failure to maintain domestic sourcing requirements; (c) undisclosed change in beneficial ownership; or (d) material misrepresentation in any certification required by this Agreement.
8.3 Termination Settlement — Government Commitment. The parties acknowledge that the Contractor has made and will make substantial capital investments in reliance on this Agreement. The termination settlement provisions of Section 8.1 are designed to reflect the Government's recognition of this reliance and to ensure that termination for convenience does not retroactively negate the economic case for the Contractor's investment. This acknowledgment is integral to the consideration for which this Agreement was negotiated.
9.1 Entire Agreement. This Agreement, together with all Exhibits, constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior negotiations, representations, and agreements.
9.2 Amendments. This Agreement may be amended only by written instrument signed by the Under Secretary of Defense for Acquisition and Sustainment and an authorized officer of the Contractor.
9.3 Governing Law. This Agreement shall be governed by federal law. Disputes shall be resolved pursuant to the Contract Disputes Act of 1978, 41 U.S.C. § 7101 et seq.
9.4 Severability. If any provision of this Agreement is determined to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.
9.5 Authority. Each party represents that the person executing this Agreement on its behalf has full authority to do so and to bind the party to the obligations set forth herein.