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EXHIBIT 10.1
CONFIDENTIAL
***PORTIONS OF THE EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THE COMPLETE EXHIBIT, INCLUDING THE PORTIONS FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
TRANSITION AGREEMENT
This Transition Agreement ("Agreement") is made effective as of the 2nd
day of August, 2000 (the "Effective Date"), by and between Solar Turbines
Incorporated, a Delaware corporation, whose principal address is 2200 Pacific
Highway, San Diego, California 92101 ("Solar") and Capstone Turbine Corporation,
a California corporation whose principal address is, 21211 Nordhoff Street,
Chatsworth, California 91311-5844 ("Capstone").
Recitals
A. Solar and Capstone entered into an Alliance Agreement dated August 25,
1997 ("Alliance Agreement"), under which Solar has been supplying certain
primary surface recuperators ("PSRs") for Capstone's Microturbine Generator sets
and Capstone has been purchasing PSRs from Solar. The obligations under the
Alliance Agreement were to remain in effect through August 25, 2007.
B. On August 25, 1997 Solar and Capstone also entered into a License
Agreement ("License Agreement") under which Solar agreed, upon Capstone's
election, to license Solar Intellectual Property to Capstone to manufacture and
modify PSRs for incorporation into Capstone's Microturbines, all in accordance
with the terms of such License Agreement.
C. The parties now believe it is in their mutual interest (1) for Capstone to
buy out its obligations under the Alliance Agreement and for Solar to terminate
the supply of PSRs thereunder, and (2) to modify and amend the License Agreement
and have Capstone exercise its rights under such "Amended and Restated License
Agreement."
D. Capstone believes that it is reasonable and prudent for it to pay Nine
Million, One Hundred Thousand Dollars, U.S. ($9,100,000 USD) for the buyout and
termination of the Alliance Agreement, the modification and amendment of the
License Agreement, the purchase of Machine Tools, and the assistance to be
provided by Solar in transitioning its present manufacturing capabilities for
the PSRs for Capstone Microturbines to Capstone, all pursuant and subject to
this Agreement and the Amended And Restated License Agreement between the
parties of even date herewith (the "Amended and Restated License Agreement")
which define in further detail the transaction contemplated hereby (the
"Transaction").
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NOW THEREFORE, in consideration of the foregoing premises, the terms and
conditions specified herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. DEFINITIONS.
"Capstone Special Order PSR" shall mean (i) any PSR manufactured according to
Capstone's requirements and specifications, (ii) any development PSR, including
such development PSR as may be modified from time to time, and (iii) any similar
PSR capable of direct replacement for the Capstone Special Order PSR.
"Licensed Product" shall mean (i) PSRs incorporating Solar Intellectual Property
and manufactured by or on behalf of Capstone for use in Microturbines, excluding
PSRs supplied to Capstone by Solar, and (ii) any modification, improvement, or
derivation of Capstone Special Order PSRs which incorporates or is derived from
Solar Intellectual Property, manufactured by or on behalf of Capstone, excluding
PSRs supplied to Capstone by Solar.
"Machine Tools" shall mean the machine tools, equipment and supplies described
on Schedule 1.
"Microturbine" shall mean an individual turbogenerator unit generating *** or
less output power.
"Solar Technology" shall mean all information in Solar's possession on the
Effective Date, with the right to disclose to Capstone, and relating to the
manufacture and use of Capstone Special Order PSRs, including for example, but
not by way of limitation, trade secrets, all technology, know-how, training and
transfer to be provided under Paragraph 5.1 of the Amended and Restated License
Agreement, proprietary information, manufacturing drawings, blueprints,
specifications, parts and materials lists, tolerances, preferred vendor lists,
test and performance parameters, and other technical expertise necessary for the
manufacture of Capstone Special Order PSRs.
"Solar Patents" shall mean patents (i) now or in the future owned or controlled
by Solar or its subsidiaries, or (ii) under which and to the extent to which and
subject to the conditions under which Solar or its Subsidiaries may have during
the term of this Agreement, the right to grant licenses of the scope granted
herein, such patents relating to the design, manufacture, or use of PSRs and
where, in the case of both (i) and (ii) based on patent applications having an
effective filing date on or prior to one (1) month after the Effective Date.
"Solar Intellectual Property" shall mean Solar Technology and Solar Patents.
"Capstone Patents" shall mean patents (i) now or in the future owned or
controlled by Capstone or its Subsidiaries, or (ii) under which and to the
extent to which and subject to the
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conditions under which Capstone or its subsidiaries may have during the term of
this Agreement the right to grant licenses of the scope granted herein, such
patents claiming inventions substantially based on Solar Technology and where,
in the case of both (i) and (ii) based on patent applications having an
effective filing date prior to the termination or expiration of this Agreement
"Subsidiary" shall mean any corporation, company or other entity of which more
than fifty (50%) of the outstanding shares of stock entitled to vote for the
election of directors is now or hereafter owned or controlled by either party
hereto, directly or indirectly, except that Caterpillar Inc., parent of Solar,
is included within the definition of "Subsidiary."
2. TRANSITION FEE AND PROGRESS PAYMENTS.
Capstone agrees to pay Solar a total lump sum of: Nine Million, One Hundred
Thousand Dollars ($9,100,000) (the "Transition Fee") for: (a) the Machine Tools
and Transition Assistance described in Section 2 below; (b) for the
modifications to and execution of the Amended and Restated License Agreement;
and (c) for the mutual termination and release of each party's obligations under
the Alliance Agreement as described below. Capstone agrees to pay Solar the
Transition Fee pursuant to the following payment schedule:
Milestone #1 *** to be paid upon the execution of this Agreement and the Amended
And Restated License Agreement by Capstone and Solar and in consideration for
the Machine Tools.
Milestone #2 *** upon delivery to Capstone of the Solar Technology that is in
tangible form and is related to the manufacture and use of Capstone Special
Order PSRs. The anticipated date for delivery is within *** of the Effective
Date, but may be earlier or later.
Milestone #3 *** upon delivery of *** pursuant to Section 3.3 below. Delivery is
presently scheduled to occur by December 30, 2000.
Milestone #4 *** upon delivery of *** pursuant to Section 6 below, with such
delivery being presently scheduled to occur by ***.
Milestone #5 *** upon completion of the four weeks of technical training
described in Section 5.1B) and availability of the Machine Tools located at
Solar's Turbofab Facility for delivery to Capstone.
Milestone #6 *** upon first article testing of the *** at Capstone's new
location, with such first article testing being presently scheduled to occur by
***.
Milestone #7 *** upon availability of the ***, that is, when Solar no longer
needs to use such *** machines on a full production basis in making the ***
under Capstone Purchase Order 292, as described in Section 6 below.
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Milestone #8 *** upon completion of training on the *** machines at ***, with
such training presently scheduled to occur on or before ***. This training is to
be covered by a separate agreement between Capstone and *** and paid for by
Capstone. Solar will be available for consulting.
Milestone #9 *** upon first successful article testing of the *** at Capstone's
new location, such first successful article testing presently scheduled to occur
by ***.
Capstone shall pay the amount due under Milestone #1 upon the execution of this
Agreement by wire to the Solar account to be advised by Solar. Solar will issue
invoices for each remaining Milestone setting forth the payment dates on which
the Milestone is anticipated to occur and Capstone will make payment thereon
within ten (10) days of the due date.
If Solar remains ready and willing to perform its obligations hereunder and
under the Amended and Restated License Agreement, but is unable to do so through
no fault of its own, for reasons beyond its control or because of decisions or
actions Capstone, then the Milestone payments described above shall be made to
Solar no later than the payment dates described above.
3. MACHINE TOOLS AND TRANSITION ASSISTANCE.
The Machine Tools and Transition Assistance to be provided by Solar consists of:
3.1 Transfer of ownership of the Machine Tools. The Machine Tools are
owned by Solar free and clear of all liens and encumbrances. Most of the Machine
Tools are located at Solar's Turbofab Facility in Houston, Texas, while some are
located at the facilities of Solar suppliers who assist with the manufacture of
PSRs. Solar will dismantle the Machine Tools located at its Turbofab Facility
and package them for shipment. Solar will also pay all sales tax, if any are due
on the sale and transfer of the Machine Tools to Capstone. The Transition Fee
does not include and Capstone shall be responsible and pay for: (a)
transportation of the Machine Tools to Capstone; (b) packing of any Machine
Tools or other equipment not located at the Turbofab Facility or other Solar
plant, and (c) the installation, commissioning and/or runoff of the Machine
Tools at the Capstone location. The Machine Tools will be transferred to
Capstone AS IS and without warranty of any kind except to the extent any
manufacturers warranty remains and is assignable to Capstone. Bills of Sale in
the form set forth in Schedule 2 will be provided by Solar to Capstone at the
time of tender of delivery of the Machine Tool(s) to Capstone.
3.2 Training. The training to be provided to assist Capstone with the
transition is set forth in Paragraph 5.1 B) of the Amended and Restated License
Agreement.
3.3 Rework of PSRs. Solar shall also rework approximately *** PSRs
recuperators with the scope of such rework limited to the resizing of the inner
cylinder diameter through mechanical expansion to allow the passage of the
existing inner diameter gages, removal of both stub-ducts, welding of new stub
ducts to meet the new stub-duct parameters as outlined
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in Solar drawing 203322 and leak check after rework. If PSRs are found not
re-workable either before or after rework, they will be marked and disposition
will be Capstone's decision. They will not be replaced.
All training, know-how, Solar Technology and other transition assistance
provided by Solar under this Agreement is provided under and subject to the
provisions of the Amended and Restated Licensing Agreement and the Nondisclosure
Agreement attached thereto.
4. AMENDED AND RESTATED LICENSE AGREEMENT. The License Agreement has
been amended and modified in the form of the Amended and Restated License
Agreement and shall become effective on the Effective Date as well. The
Transition Fee is due in partial consideration for the modified terms in the
Amended and Restated License Agreement. All Solar Intellectual Property,
training and proprietary information provided by Solar or its employees under
this Agreement or as part of the Transaction shall be covered under and subject
to the terms of the Amended and Restated License Agreement and the Nondisclosure
Agreement attached thereto.
5. WARRANTIES ON PSRS. All WARRANTIES, EXPRESS OR IMPLIED, guarantees
or responsibilities Solar may have for the PSRs or work supplied by Solar to
Capstone under the Alliance Agreement, under any purchase orders or hereunder,
except Order 292 (see Section 6 below), shall be deemed TRANSFERRED AND FULLY
ASSIGNED to Capstone upon the transfer of the Machine Tools to Capstone AND
SOLAR SHALL BE AND IS HEREBY RELEASED FROM ANY LIABILITY OR OBLIGATION
THEREFORE. Solar shall however without liability or recourse, offer during the
original warranty period covering the work or PSR, free technical assistance on
warranty repairs. Such technical assistance shall be limited to matters
presently known to and readily available to Solar and freely transferable by
Solar and Solar shall not be required to engage in any independent research or
study in providing such assistance.
6. CAPSTONE PURCHASE ORDER 292. Solar shall continue under Capstone
Purchase Order Number 292 ("Order 292") with a goal of completing production of
***, by *** to a modified design as defined in a June 20, 2000 Capstone/Solar
meeting and summarized in Solar drawing 203210 rev C. Under the Order, Solar
also agreed to fabricate additional PSRs from left over materials. Solar shall
perform the Order for the consideration set forth in the Order. The amount due
Solar under Milestone #4, Section 2, is separate from and in addition to the
amount due Solar under Order 292. Solar's warranty responsibility for the PSRs
sold by Solar to Capstone under Capstone PO292 will be limited to a lump-sum
payment of *** per defective core. Thus, Solar's obligations under any and all
warranties provided by Solar under the Order 292 are limited to no more than ***
per core for any and all defect(s) or claim(s) brought under such warranties and
may be fulfilled by the payment of the lesser of such *** per core or the cost
incurred by Capstone in repairing and or replacing the warranted defect under
the terms of the "Warranty" clause in the Order. Capstone shall provide Solar an
accounting of such costs when claiming the *** per core or such lesser amount
due hereunder. Except as stated in this Section 6, SOLAR HAS NO OTHER OBLIGATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
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LIMITATION WARRANTIES OF MERCHANTABILITY OR FITNESS OF PURPOSE, WITH RESPECT TO
ANY WARRANTY OR SUCH CLAIMS. Order 292 will remain in effect according to its
terms notwithstanding the termination of the Alliance Agreement under Section 7
below.
7. TERMINATION OF THE ALLIANCE AGREEMENT. As of the Effective Date, the
rights and obligations under the Alliance Agreement will be deemed automatically
terminated without further act on the part of Solar and/or Capstone.
7.1 Solar Release. Contemporaneously with the execution of this
Agreement, Solar shall provide to Capstone, in the form attached hereto as
Appendix A, a written release (effective as of the Effective Date) of Capstone
and its affiliates for any actions, claims, lawsuits, causes of action, damages,
judgments, liabilities, costs, and expenses relating to (i) the Alliance
Agreement and any purchase orders issued thereunder (other than Capstone
Purchase Order 292, which shall continue in effect according to its terms) (ii)
Solar's participation in any or all aspects of developing and/or manufacturing
PSRs under the Alliance Agreement, (iii) the termination of the Alliance
Agreement pursuant to this Agreement, (iv) any and all actual, pending,
threatened, or anticipated administrative and/or judicial proceedings relating
to any of the provisions of subparagraphs (i) through (iv) above and all
discussions, meetings, memoranda documents and/or negotiations relating to
subparagraphs (i) through (iv) above. The release shall not excuse any of the
obligations to be performed under this Agreement and under the Amended and
Restated License Agreement.
7.2 Capstone Release. Contemporaneously with the execution of this
Agreement Capstone shall provide to Solar, in the form attached hereto as
Appendix B, a written release (effective as of the Effective Date) of Solar and
its affiliates for any actions, claims, lawsuits, causes of action, damages,
judgments, liabilities, costs, and expenses relating to (i) the Alliance
Agreement and any purchase orders issued thereunder (other than Capstone
Purchase Order 292 which shall continue in effect according to its terms), (ii)
Solar's participation in any or all aspects of developing and/or manufacturing
PSRs under the Alliance Agreement, (iii) the termination of the Alliance
Agreement pursuant to this Agreement, (iv) any and all actual, pending,
threatened, or anticipated administrative and/or judicial proceedings relating
to any of the provisions of sub-paragraphs (i) through (iv) above and all
discussions, meetings, memoranda, documents and/or negotiations relating to
subparagraphs (i) through (iv) above. The release shall not excuse any of the
obligations to be performed under this Agreement and under the Amended and
Restated License Agreement.
7.3 Notwithstanding, this Section 7, the provisions of Paragraph 13.1,
Confidential Information, of the Alliance Agreement shall survive its
termination. Said Paragraph 13.1 incorporates by reference a nondisclosure
agreement attached to the Alliance Agreement as Exhibit C (the "Prior
Nondisclosure Agreement"). Upon the Effective Date all Proprietary Information
disclosed under the Prior Nondisclosure Agreement shall be
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subject to the provisions of and covered under the Nondisclosure Agreement
described in Paragraph 8.1 below.
8. CONFIDENTIAL INFORMATION AND NOTICES.
8.1 Confidential Information. The parties hereby ratify and incorporate
by reference that certain Nondisclosure Agreement, attached to the Amended and
Restated License Agreement as Exhibit "A" (the "Nondisclosure Agreement"). The
terms and conditions of this Agreement are confidential and are subject to the
provisions of the Nondisclosure Agreement.
8.2 Notices. All notices, requests, demands and elections under this
Agreement shall be in writing and shall be deemed to have been duly given (i)
when delivered by hand, (ii) one (1) day after being given to an express courier
with a reliable system for tracking delivery, (iii) when sent by confirmed
facsimile with a copy sent by another means specified herein, or (iv) three (3)
days after the date of mailing by certified or registered mail, return receipt
requested, postage prepaid, and addressed as follows:
If to Capstone:
Capstone Turbine Corporation
21211 Nordhoff Street
Chatsworth, California 91311-5844
Attn: Ake Almgren
President and Chief Executive Officer
With a copy to:
Capstone Turbine Corporation
21211 Nordhoff Street
Chatsworth, California 91311-5844
Attn: Jeff Watts
Chief Financial Officer
If to Solar:
Solar Turbines Incorporated
2200 Pacific Highway
San Diego, California 92101
Attention: Director, Recuperator Business
Solar or Capstone may, from time to time, change its address or its designee for
notification purposes by giving the other party prior written notice of the new
address or the new designee and the date upon which the change shall be
effective.
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9.0 DEFAULT AND DISPUTE RESOLUTION.
9.1 Default. If either party materially breaches this Agreement or if
Capstone fails to make any payment of Transition Fees under this Agreement, upon
written notice to the defaulting party specifying such breach, the defaulting
party shall have thirty (30) days after such notice to remedy such breach or to
implement a program, reasonably satisfactory to the party not in default, to
correct such breach. If such a breach or failure to pay remains uncured after
thirty (30) days either party may initiate the dispute resolution proceedings
provided for in Paragraph 9.2 and 9.3. If Capstone disputes an invoice and
refuses to pay any disputed (invoiced and unpaid) Transition Fees into an escrow
account after written notice from Solar, with a sixty (60) day opportunity to
cure, Solar may on notice to Capstone terminate this Agreement and the Amended
and Restated License Agreement. So long as Capstone pays all of the undisputed
fees and places the disputed amounts in an escrow account which authorizes the
release of such amounts in accordance with any award or resolution under
Paragraph 9.2 and 9.3 Solar may not terminate this Agreement or the Amended and
Restated License Agreement for failure to pay such amount. Such a termination by
Solar will be in addition to any other rights or remedies Solar may have in
equity or at law.
9.2 Dispute Resolution. If a dispute arises under the terms or
performance of this Agreement, unless by mutual consent the parties agree
otherwise, the parties shall resolve such dispute as follows:
A) the parties' respective Program Managers shall have ten days to attempt
resolution; if the Program Managers are unable to resolve the dispute
themselves;
B) each Program Manager shall present a written statement of the dispute
and a proposed resolution for consideration at a meeting of a senior
executive officer from each company the meeting to be held within fifteen
days from the expiration of the ten day period contemplated in the
preceding sub-paragraph;
C) if the senior executive officers cannot resolve the dispute within ten
days from the meeting date specified in the preceding sub-paragraph, the
parties agree to submit such dispute to arbitration before a neutral three
member board of arbitrators under the provisions of Paragraph 9.3.
9.3 Arbitration. Subject to the provisions of Paragraph 9.3 of this
Agreement, any claim or dispute arising hereunder that has not been resolved by
the parties shall be determined by arbitration in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association in San
Diego, California; provided that no demand for arbitration shall be instituted
after the date after which legal proceedings on the same claim would have been
barred by the applicable statute of limitations. The party requesting
arbitration shall appoint one independent neutral arbitrator in writing and the
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responding party shall appoint one independent neutral arbitrator in writing
within fifteen (15) days thereafter. The two arbitrators so selected shall then
appoint a third arbitrator within fifteen (15) days thereafter. The award
rendered in such arbitration may provide for equitable remedies, an accounting
and/or reimbursement for attorneys', accountants' or consultants' fees, as the
arbitrators shall see fit. Such award shall be final, and judgment on it may be
entered in or enforced by any court, state, federal or foreign, having
jurisdiction there-over. Any party may apply to an appropriate court of law for
a preliminary injunction, attachment or other similar remedy available to it in
aid of the arbitration proceeding provided for herein. In the arbitration each
party shall be entitled to demand production of documents and other items from
any other party hereto, in accordance with the terms of Rule 34 of the Federal
Rules of Civil Procedure. Any disputes concerning such demand shall be
determined by the arbitrator(s), and any such determination shall be binding on
the parties.
9.4 California Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as if made in California for
performance entirely within the State of California.
9.5 Jurisdiction. For any matter or claim to be considered by a court
under this Agreement the parties consent to the exclusive jurisdiction of the
courts of the United States of America and the State of California and any
subdivision thereof. Any injunctions, order or judgments entered, issued, or
granted from any courts having jurisdiction hereunder shall be enforceable
within the State of California and in any state or country wherein lie the
offices and/or assets of the party against whom the said injunction, order or
judgment is entered.
10. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS.
10.1 Solar Representations. Solar hereby represents and warrants to
Capstone that:
(i) it has the full power and authority to execute, deliver any
obligations under this Agreement and the Amended and Restated License Agreement
and to carry out the transactions contemplated thereby;
(ii) it has duly authorized, executed and delivered this Agreement
and the Amended and Restated License Agreement and this Agreement and the
Amended and Restated License Agreement constitute its legal, valid and binding
obligation, enforceable against it in accordance with the terms thereof;
(iii) no authorization, consent, approval or order of or notice to
or registration, qualification, declaration or filing with, any governmental
authority is required for its execution, delivery and/or performance of this
Agreement, or the Amended and Restated License Agreement;
(iv) the execution, delivery and performance by it of this Agreement
and the Amended and Restated License Agreement, and the compliance by it with
the terms and provisions hereof do not conflict with or result in a breach or
violation or constitute a default under (a) any of the terms, conditions or
provisions of its articles of incorporation and by-
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laws and/or any joint development or other agreements or documents between and
among it and any parties now or previously involved in the development and/or
operation of the Turbofab Facility or any successor thereto (b) any applicable
law, rule, regulation, order, writ, injunction, judgment or decree of any court
or governmental agency or authority, or (c) any loan agreement, indenture,
mortgage, contract or other agreement or instrument to which it is a party or by
which it or any of its properties is bound (including, without limitation, those
relating to the Turbofab Facility); nor will any such action result in the
imposition of any lien, mortgage or other encumbrance upon any of its
properties; and
10.2 Capstone Representations. Capstone hereby represents and warrants to
Solar that:
(i) it has full power and authority to execute, deliver and perform
its obligations under this Agreement and the Amended and Restated License
Agreement and to carry out the transactions contemplated thereby;
(ii) it has duly authorized, executed and delivered this Agreement
and the Amended and Restated License Agreement and this Agreement and the
Amended and Restated License Agreement constitute its legal, valid and binding
obligation, enforceable against it in accordance with the terms thereof;
(iii) no authorization, consent, approval or order of, or notice to
or registration, qualification, declaration or filing with, any governmental
authority is required for its execution, delivery and performance of this
Agreement or the Amended and Restated License Agreement; and
(iv) the execution, delivery and performance by it of this Agreement
and the Amended and Restated License Agreement, and the compliance by it with
the terms and provisions thereof, do not conflict with or result in a breach or
violation of or constitute a default under any of the terms, conditions or
provisions of (a) its articles of incorporation, or (b) any applicable law,
rule, regulation order, writ, injunction, judgment or decree of any court or
governmental agency or authority, or (c) any loan agreement, indenture,
mortgage, contract or other material agreement or instrument to which it is a
party or by which it or any of its properties is bound; nor will any such action
result in the imposition of any lien, mortgage or other encumbrance upon any of
its properties.
10.3 Waiver of Incidental and Consequential Damages. Neither party shall
be liable to the other for any lost profits, lost revenues, losses or indirect,
incidental, consequential, special or exemplary damages arising out of entry
into or performance or lack of performance under this Agreement.
10.4 Disclaimer. ALL MACHINE TOOLS TRANSFERRED AND RE-WORK OF PSRs (SEE
PARAGRAPH 3.3) UNDER THIS AGREEMENT ARE TRANSFERRED AND PERFORMED "AS IS" AND
SOLAR DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL EXPRESS OR IMPLIED
WARRANTIES WITH RESPECT TO THE TRANSFERRED MACHINE TOOLS AND RE-WORK, INCLUDING
WITHOUT LIMITATION ANY WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR
TRADE PRACTICE. NOTHING IN THIS
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AGREEMENT SHALL BE DEEMED TO CONSTITUTE A REPRESENTATION OR WARRANTY BY SOLAR OF
THE ABILITY OF CAPSTONE TO MANUFACTURE OR SELL PRODUCTS OR PSRs.
10.5 Indemnity. Capstone agrees to defend, indemnify and hold Solar, its
directors, officers, and employees harmless against all liabilities, demands,
damages, expenses, or losses arising out of the manufacture, design, use, or
sale of any Licensed Product, Machine Tools or PSRs by Capstone, or its
affiliates, subsidiaries or transferees or use by Capstone or its affiliates,
subsidiaries or transferees of any Solar Intellectual Property, Machine Tools or
PSRs or out of any manufacture, design, use, sale, or other disposition by
Capstone, its affiliates, subsidiaries or transferees of product incorporating
such Licensed Product or Solar Intellectual Property, Machine Tools or PSRs,
except for claims that are due to Solar's gross negligence or intentional
misconduct, provided that Solar (i) gives Capstone prompt notice of such claim
or action; (ii) cooperates with Capstone, at Capstone's expense, in the defense
of such claim or action; and (iii) gives Capstone the right to control the
defense and settlement of any such claim or action as long as such settlement
does not adversely affect Solar.
10.6 NOTWITHSTANDING ANY PROVISION CONTAINED IN THIS AGREEMENT OR IN THE
AMENDED AND RESTATED LICENSE AGREEMENT TO THE CONTRARY, SOLAR DOES NOT GUARANTEE
ANY RESULTS WHATSOEVER, WHETHER WITH REGARD TO CAPSTONE'S CAPACITY TO
MANUFACTURE OR MAKE PSRs, ANY INCREASE IN OR EQUAL TO SOLAR'S PRODUCTION RATES
OR INCREASE THE PRODUCTION CAPACITY OF PSRs OR WITH REGARD TO A DECREASE IN PER
UNIT PRICES OF PSRs. EACH PARTY TO THIS AGREEMENT REPRESENTS THAT IT IS AN
INDEPENDENT, EXPERIENCED AND SOPHISTICATED BUSINESS ENTITY. EACH PARTY CONDUCTS
ITS OWN INVESTIGATIONS AND OBTAINS ITS OWN INFORMATION ABOUT BUSINESS
TRANSACTIONS. EACH PARTY RELIES WHOLLY ON IT OWN COUNSEL IN MAKING BUSINESS
DECISIONS AND ASSUMES ALL RISKS WITH REGARD TO WHETHER INDIVIDUAL INVESTMENTS
ACHIEVE CERTAIN RESULTS. SOLAR HAS ADVISED CAPSTONE OF THE RISKS OF TRANSFER
CONTEMPLATED BY THIS AGREEMENT AND THE AMENDED AND RESTATED LICENSE AGREEMENT
WITHIN THE TIME FRAMES REQUESTED BY CAPSTONE. SOLAR ASSUMES NO RESPONSIBILITY
REGARDING THE ABILITY OR LIKELIHOOD THAT CAPSTONE WILL BE ABLE TO ASSIMILATE,
USE AND BE SUCCESSFUL WITH MACHINE TOOLS, SOLAR INTELLECTUAL PROPERTY AND ALL
OTHER INFORMATION OR KNOW-HOW TRANSFERRED IN THEIR ATTEMPTS TO MANUFACTURE
AND/OR PRODUCE PSRs FOR CAPSTONE MICROTURBINES. EXCEPT AS SPECIFICALLY PROVIDED
FOR ELSEWHERE HEREUNDER, THERE IS NO GUARANTEE AS TO ACCURACY, SUFFICIENCY, OR
COMPLETENESS OF THE SOLAR INTELLECTUAL PROPERTY OR SUCH INFORMATION, EXCEPT IN
THE CASE THAT SOLAR'S CONDUCT IN PROVIDING INACCURATE, INSUFFICIENT OR
INCOMPLETE INFORMATION IS INTENTIONAL OR GROSSLY NEGLIGENT. SOLAR'S GOAL IS TO,
WITHIN THE SPECIFIC PERFORMANCE OBLIGATIONS OF THIS AGREEMENT AND THE AMENDED
AND RESTATED LICENSE
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AGREEMENT, TRANSFER TO CAPSTONE ITS MANUFACTURING CAPABILITY, AS OF THE
EFFECTIVE DATE, FOR CAPSTONE SPECIAL ORDER PSRs FOR CAPSTONE MICROTURBINES IN
ACCORDANCE THEREWITH.
10.7 Survival. This Section 10.0 shall survive any expiration or
termination of this Agreement.
11.0 MISCELLANEOUS.
11.1 Severable Provisions. If any provision of this Agreement is held
illegal, invalid or unenforceable under present or future state or federal laws,
or rules and regulations promulgated thereunder, effective during the term
hereof, such provision shall be fully severable, and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid, or unenforceable provision, there shall be
automatically as part of this Agreement a provision similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
11.2 Assignment. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of Capstone and Solar and neither party
shall assign this Agreement or any part thereof without the prior written
consent of the other party, which consent may be withheld for any reason except
that it may be assigned by Capstone to a purchaser of substantially all the
assets of Capstone, provided such purchaser is not actively engaged in the
business of manufacturing or selling recuperators, or manufacturing or selling
individual gas turbines of *** or greater output power.
11.3 No License. Nothing herein shall be construed as a grant of a license
or conveyance of any rights under any discoveries, inventions, patents, trade
secrets, copyrights, industrial property rights or know-how belonging to any
Party hereto. Any such rights are granted under and subject to the Amended and
Restated License Agreement.
11.4 Independent Contractors. This Agreement shall not constitute, create,
give effect to or otherwise imply a teaming, joint venture, or other formal
business relationship. Further, nothing herein shall be construed as providing
for the sharing of profits or losses arising out of the efforts of the Parties.
No Party shall be liable to the other for any of the costs, expenses, risks, or
liabilities arising out of the other Party's efforts in connection with this
Agreement.
11.5 Entire Agreement. This Agreement and those documents specifically
referenced herein and constitute the entire agreement between the parties with
respect to the
12
<PAGE> 13
subject matter hereof, supersedes all prior oral or written agreements regarding
the subject matter hereof, and cannot be changed except by a writing signed by
both parties.
11.6 Independent Research. Nothing in this Agreement shall (a) impose any
restriction on either party from carrying out independent research and
development activities in any field, (b) in relation to the results of any such
independent research and development activities of one party, give rise to any
ownership right or claim by the other party; nor (c) restrict either party in
the exploitation in any manner of the results of its independent research and
development activities.
11.7 No Sharing of Liabilities. Nothing herein shall be construed as
providing for the sharing of profits or losses arising out of the efforts of the
parties. No party shall be liable to the other for any of the costs, expenses,
risks, or liabilities arising out of the other party's efforts in connection
with this Agreement.
11.8 Employee Solicitation. For a period of three years from the date of
this Agreement, Solar and Capstone agree not to solicit for employment purposes,
any employee of the other party who has had access to that other party's
Proprietary Information utilized in implementing this Agreement.
11.9 Headings. The section headings used in this Agreement are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
11.10 Force Majeure. Neither party to this Agreement shall be liable for
any default or delay in the performance of its obligations under this Agreement
(except for the duty to pay) if and to the extent such default or delay is
caused, directly or indirectly, by fire, flood, earthquake, elements of nature
or acts of God, riots, civil disorders, rebellions or revolutions, or any other
cause beyond the reasonable control of such party (including the inability to
receive raw materials from a supplier), provided the non-performing party is
without fault in causing such default or delay, and such default or delay could
not have been prevented by reasonable precautions nor reasonably be circumvented
by the non-performing party through the use of alternate sources, work-around
plans or other means. In such event, the non-performing party shall be excused
from any further performance or observance of the obligation(s) so affected for
as long as such circumstances prevail and such party continues to use reasonable
efforts to recommence performance or observance of the obligations so affected
for as long as such circumstances prevail. Notwithstanding the foregoing, a
party shall not be entitled to the benefits of this Paragraph 11.12 unless any
party so delayed in its performance promptly notifies the party to whom
performance is due by telephone, radio, messenger or other available means (to
be confirmed in writing within two (2) working days of the inception of such
delay) and describe at a reasonable level of detail the circumstances causing
such delay.
11.11 Public Acknowledgement. Both Solar and Capstone may publicly
acknowledge and announce that they have entered into an agreement for the
transfer and licensing of rights to manufacture PSRs for incorporation into
Capstone's Microturbines.
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<PAGE> 14
Notwithstanding the foregoing, Capstone agrees that it will not advertise, or
otherwise indicate that any Capstone Special Order PSRs are sponsored, endorsed,
or otherwise guaranteed by Solar or that this Agreement is an exclusive
agreement.
11.12 Interpretation. Each party to this Agreement has had the opportunity
to review the Agreement with legal counsel. This Agreement shall not be
construed or interpreted against either party on the basis that such party
drafted or authored a particular provision, parts of, or the entirety of this
Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by two authorized and elected officers of each party.
CAPSTONE TURBINE SOLAR TURBINES INCORPORATED
CORPORATION
By: /s/ GARY STROUP
------------------------------------
By: /s/ AKE ALMGREN
---------------------------------
Printed
Printed Name: Gary Stroup
Name: Ake Almgren ---------------------------------
Title: President
Title: President & CEO
Date: August 4, 2000
Date: August 7, 2000 ----------------------------------
-------------------------------
CAPSTONE TURBINE SOLAR TURBINES INCORPORATED
CORPORATION
By: /s/ DAVID W. ESBECK
------------------------------------
By: /s/ WILLIAM TREECE
---------------------------------
Printed
Printed Name: David W. Esbeck
Name: William Treece ----------------------------------
-------------------------------
Title: Vice President
Title: Sr. VP Strategic Technology ---------------------------------
------------------------------
Date: August 4, 2000
Date: August 7, 2000 ----------------------------------
-------------------------------
14
<PAGE> 15
APPENDIX A
RELEASE
This Release is made effective as of August 2, 2000 by Solar Turbines
Incorporated, a corporation organized and existing under the laws of the state
of Delaware ("Solar"), on behalf of itself and each of its predecessors,
successors, parent companies, subsidiaries, affiliates, divisions, assignees,
attorneys and nominees, and all present and former partners, employees,
directors, officers, agents, attorneys, beneficiaries, representatives and
stockholders (the "Releasor") for the benefit of Capstone Turbines Corporation
("Capstone"), and its respective predecessors, successors, parent companies,
subsidiaries, affiliates, divisions, assignees, attorneys and nominees, and all
present and former partners, employees, directors, officers, agents, attorneys,
beneficiaries representatives, and stockholders (the "Releasees"). This Release
is being provided in connection with Paragraph 7 of that certain Transition
Agreement dated August 2, 2000 ("Transition Agreement") between the Releasor and
the Releasees that is being executed contemporaneously herewith. All capitalized
terms used in this Release that are not otherwise defined herein shall have the
same meaning as set forth in the aforesaid Transition Agreement.
This Release shall be deemed effective and operative automatically and
without any further action on the part of Capstone or Solar.
The Releasor, in consideration of good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, does hereby release
and forever discharge Releasees of and from any and all manner of claims,
rights, actions, causes of actions, suits, liens, obligations, accounts, debts,
damages (whether general, special, indirect or punitive), demands, agreements
promises, covenants, contracts, judgments, indemnities, guarantees, liabilities,
controversies, costs, expenses and attorneys' or paralegals' or other fees
whatsoever, whether based on contract, tort, statute or other legal or equitable
theory of recovery, whether choate or inchoate, mature or unmatured, contingent
or fixed, liquidated or unliquidated, known or unknown, accrued or unaccrued, or
asserted or unasserted (individually, a "Claim" and collectively, "Claims"), in
connection with, arising out of, or which are in any way related to a (i) the
Alliance Agreement dated August 25, 1997 between Capstone and Solar ("Alliance
Agreement"), (ii) any purchase order issued by Capstone under the Alliance
Agreement (except for Capstone Purchase Order 292, which shall remain in
effect), iii) the termination of the Alliance Agreement pursuant to the
Agreement, (iv) any and all actual, pending, threatened, or anticipated
administrative and/or judicial proceedings relating to any of the provisions of
subparagraphs (i) through (ii) and (iv) hereof, and (v) all discussions,
meetings, memoranda documents and/or negotiations relating to subparagraphs (i)
through (iv) above. This Release shall not in any way excuse or limit any and/or
all obligations to be performed under the Transition Agreement and/or under the
Amended and Restated License Agreement.
TO THE EXTENT THAT SECTION 1542 OF THE CALIFORNIA CIVIL CODE IS APPLICABLE
TO THE RELEASES CONTAINED HEREIN, EACH PARTY
15
<PAGE> 16
HERETO EXPRESSLY WAIVES ANY AND ALL RIGHTS AND BENEFITS OTHERWISE CONFERRED BY
THE PROVISIONS OF THAT SECTION TO THE FULL EXTENT THAT THEY MAY WAIVE ALL SUCH
RIGHTS AND BENEFITS PERTAINING TO THE MATTERS RELEASED HEREIN AND ACKNOWLEDGES
THAT IT IS FAMILIAR WITH THE SECTION, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
The Releasor warrants and represents to the Releasees that (i) it has read
and reviewed the terms and conditions hereof, (ii) it understands, acknowledges
and accepts its duties and obligations hereunder; (iii) it has been represented
by counsel in all matters relating to this Release, including the preparation
and execution hereof; (iv) it has full legal and corporate authority to enter
into this Release and assume the duties and obligations imposed upon it
hereunder; and (v) it shall execute promptly such documents as may be reasonably
requested by the Releasees to confirm the Releasor's obligations hereunder.
This Release may be amended or modified only by a written instrument
executed by the Parties hereto.
This Release shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, Solar Turbines Incorporated has executed this Release
as of the date first written above.
Solar Turbines Incorporated
By: /s/ GARY STROUP
------------------------------------
Title: President
---------------------------------
16
<PAGE> 17
APPENDIX B
RELEASE
This Release is made effective as of August 2, 2000, by Capstone Turbines
Corporation, a corporation organized and existing under the laws of the State of
California ("Capstone"), on behalf of itself and each of its predecessors,
successors, parent companies, subsidiaries, affiliates, divisions, assignees,
attorneys and nominees, and all present and former partners, employees,
directors, officers, agents, attorneys, beneficiaries, representatives and
stockholders (the "Releasor") for the benefit of Solar Turbines Incorporated
("Solar"), a corporation organized and existing under the laws of the state of
Delaware, and its respective predecessors, successors, parent companies,
subsidiaries, affiliates, divisions, assignees, attorneys and nominees, and all
present and former partners, employees, directors, officers, agents, attorneys,
beneficiaries, representatives, and stockholders (the "Releasees"). This Release
is being provided in connection with Paragraph 7 of that certain Transition
Agreement dated August 2, 2000 ("Transition Agreement") between the Releasor and
the Releasees that is being executed contemporaneously herewith. All capitalized
terms used in this Release that are not otherwise defined herein shall have the
same meaning as set forth in the aforesaid Transition Agreement.
This Release shall be deemed effective and operative automatically and
without any further action on the part of Capstone or Solar.
The Releasor, in consideration of good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, does hereby release
and forever discharge Releasees of and from any and all manner of claims,
rights, actions, causes of actions, suits, liens, obligations, accounts, debts,
damages (whether general, special, indirect or punitive), demands, agreements
promises, covenants, contracts, judgments, indemnities, guarantees, liabilities,
controversies, costs, expenses and attorneys' or paralegals' or other fees
whatsoever, whether based on contract, tort, statute or other legal or equitable
theory of recovery, whether choate or inchoate, mature or unmatured, contingent
or fixed, liquidated or unliquidated, known or unknown, accrued or unaccrued, or
asserted or unasserted (individually, a "Claim" and collectively, "Claims"), in
connection with, arising out of, or which are in any way related to a (i) the
Alliance Agreement dated August 25, 1997 between Capstone and Solar ("Alliance
Agreement"), (ii) any purchase order issued by Capstone under the Alliance
Agreement (except for Capstone Purchase Order 292, which shall remain in
effect), iii) the termination of the Alliance Agreement pursuant to the
Agreement, (iv) any and all actual, pending, threatened, or anticipated
administrative and/or judicial proceedings relating to any of the provisions of
subparagraphs (i) through (ii) and (iv) hereof, and (v) all discussions,
meetings, memoranda documents and/or negotiations relating to subparagraphs (i)
through (iv) above. This Release shall not in any way excuse and/or limit any
and/or all obligations to be performed under the Transition Agreement and/or the
Amended and Restated License Agreement.
TO THE EXTENT THAT SECTION 1542 OF THE CALIFORNIA CIVIL CODE IS APPLICABLE
TO THE RELEASES CONTAINED HEREIN, EACH PARTY
17
<PAGE> 18
HERETO EXPRESSLY WAIVES ANY AND ALL RIGHTS AND BENEFITS OTHERWISE CONFERRED BY
THE PROVISIONS OF THAT SECTION TO THE FULL EXTENT THAT THEY MAY WAIVE ALL SUCH
RIGHTS AND BENEFITS PERTAINING TO THE MATTERS RELEASED HEREIN AND ACKNOWLEDGES
THAT IT IS FAMILIAR WITH THE SECTION, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
The Releasor warrants and represents to the Releasees that (i) it has read
and reviewed the terms and conditions hereof; (ii) it understands, acknowledges
and accepts its duties and obligations hereunder; (iii) it has been represented
by counsel in all matters relating to this Release, including the preparation
and execution hereof; (iv) it has full legal and corporate authority to enter
into this Release and assume the duties and obligations imposed upon it
hereunder; and (v) it shall execute promptly such documents as may be reasonably
requested by the Releasees to confirm the Releasor's obligations hereunder.
This Release may be amended or modified only by a written instrument
executed by the Parties hereto.
This Release shall be governed by and construed in accordance with the
laws of the State of California.
WHEREFORE, Capstone Turbines Corporation has executed this Release as of
the date first written above.
Capstone Turbine Corporation
By: /s/ AKE ALMGREN
------------------------------------
Title: President & CEO
---------------------------------
18
<PAGE> 19
SCHEDULE 1
List of Machine Tools
***
19
<PAGE> 20
SCHEDULE 2
Bill of Sale
KNOW BY ALL THESE PRESENTS;
That for and in consideration of, good and valuable consideration, the
receipt of which is hereby acknowledged, the undersigned Solar Turbines
Incorporated, a Delaware corporation ("Solar") effective as of the _______ day
of _________, 2000, hereby sells, assigns and transfers to Capstone Turbine
Corporation, a California corporation ("Capstone"), all Solar's right, title and
interest in and to the machine tools described in the list below hereto
("machine tools"), to have and to hold the machine tools and each part thereof,
for Capstone's own use and benefit forever. Solar hereby warrants to Capstone
that the machine tools and all components of the Machine Tools transferred
hereby shall be as of the transfer date, owned by Solar and are held free and
clear of any mortgage, pledge, lien, charge, encumbrance, lease, or security
interest except liens created by or existing by or through Capstone, if any, and
that Solar has full right, title and authority as to all persons to sell the
same aforesaid; and Solar hereby covenants with Capstone that, to the extent of
the foregoing warranty, Solar will warrant and defend the same and all
components thereof against the claims and demands of all persons. IN WITNESS
WHEREOF, Solar has caused this instrument to be executed by its duly authorized
officer and its seal to be affixed hereto this _____ day of _______ 2000.
Solar Turbines Incorporated
By:
-------------------------------------
Title:
----------------------------------
LIST OF MACHINE TOOLS COVERED BY THIS BILL OF SALE:
20
