<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the Year Ended March 31, 1996
COMMISSION FILE NO. 0-19672
AMERICAN SUPERCONDUCTOR CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2959321
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Two Technology Drive, Westborough, Massachusetts 01581
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 836-4200
Securities registered pursuant to Section 12(b) of the Act:
None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
On April 30, 1996, the aggregate market value of voting Common Stock held
by nonaffiliates of the registrant was $125,214,587.50, based on the closing
price of the Common Stock on the Nasdaq National Market on April 30, 1996.
Number of shares of Common Stock outstanding as of June 21, 1996 was
9,558,457.
Documents Incorporated By Reference
-----------------------------------
Document Form 10-K Part
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Definitive Proxy Statement with Part III
respect to the Annual Meeting of
Stockholders for the fiscal year
ended March 31, 1996, to be filed
with the Securities and Exchange
Commission by July 29, 1996
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
Item 14(c) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 is hereby amended and restated in its entirety as set
forth below.
(a) The following documents are filed as APPENDIX B hereto and are
included as part of this Annual Report on Form 10-K.
Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
(b) The Company is not filing any financial statement schedules as part of
this Annual Report on Form 10-K because they are not applicable or the
required information is included in the financial statements or notes
thereto.
(c) The list of Exhibits filed as a part of this Annual Report on Form
10-K are set forth on the Exhibit Index immediately preceding such
Exhibits, and is incorporated herein by reference.
(d) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the last quarter of the Company's
fiscal year ended March 31, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A amending
its annual report on Form 10-K for the fiscal year ended March 31, 1996 to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN SUPERCONDUCTOR CORPORATION
By: /s/ Ramesh L. Ratan
--------------------------------------
Ramesh L. Ratan,
Executive Vice President,
Corporate Development,
Chief Financial Officer and Secretary
Date: March 7, 1997
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<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C>
3.1** -Restated Certificate of Incorporation of the
Registrant....................................................................
3.2* -By-laws of the Registrant, as amended to date..................................
4.1* -Specimen Certificate for shares of Common Stock,
$.01 par value, of the Registrant.............................................
$$10.1* -1987 Stock Plan................................................................
$$10.2* -1991 Director Stock Option Plan................................................
$$10.3* -Employment Agreement dated as of December 4, 1991
between the Registrant and Gregory J. Yurek...................................
$$10.4* -Employment Agreement dated as of December 4, 1991
between the Registrant and Alexis P. Malozemoff...............................
10.5* -Form of Employee Nondisclosure and
Developments Agreement........................................................
$$10.6* -Employee Nondisclosure and Developments Agreement
dated as of December 26, 1990 between
the Registrant and Alexis P. Malozemoff.......................................
$$10.7* -Noncompetition Agreement dated as of July 10,
1987 between the Registrant and John Vander
Sande.........................................................................
$10.8* -License Agreement between the Registrant and
MIT dated as of July 6, 1987..................................................
$10.9* -License Agreement between the Registrant and
MIT dated as of January 31, 1989..............................................
$10.10* -License Agreement dated as of August 1, 1991...................................
$10.11* -License Agreement dated as of September 1, 1991................................
$10.12** -Second Amendment dated as of January 27, 1992 between
the Registrant and MIT amending the License Agreement
dated as of July 6, 1987 between
the Registrant and MIT........................................................
$10.13*** -Technology Development and Patent Licensing
Agreement dated October 7, 1992 among the
Registrant and Electricity Corporation of
New Zealand Limited and Industrial Research
Limited.......................................................................
$$10.14*** -Employment Agreement dated as of December 31,
1992 between American Superconductor
Europe GmbH and Dr. Gero Papst................................................
10.15*** -Lease dated March 9, 1993 between CGLIC on
Behalf of its Separate Account R, as Landlord,
and the Registrant............................................................
10.16+ -First Amendment to Lease between CGLIC, on Behalf of its
Separate Account R, as Landlord, and the Registrant, as
Tenant dated October 27, 1993.................................................
$$10.17*** -1993 Stock Option Plan.........................................................
</TABLE>
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<TABLE>
<C> <S>
$10.18**** -Contract between the Registrant and the Naval Research
Laboratory dated as of July 27, 1993..........................................
10.19++ -Agreement dated January 1, 1994 between Pirelli Cavi S.p.A.
and the Registrant............................................................
$$$10.20 -Agreement between Pirelli Cavi S.p.A. and American Superconductor
Corporation, dated October 1, 1995
$10.21++ -Technology Development and Patent Licensing Agreement, First
Amendment dated August 7, 1993 among the Registrant and
Electricity Corporation of New Zealand and Industrial
Research Limited..............................................................
$10.22* -Research and Development Agreement dated May 25, 1990 between
Inco Alloys International, Inc. ("Inco") and the Registrant
(the "Inco Agreement")........................................................
10.23*** -Letter Agreement relating to the extension of the Inco
Agreement dated as of May 11, 1993 between Inco and the
Registrant....................................................................
$$$10.24 -Research and Development Agreement between Inco Alloys
International and American Superconductor Corporation, dated January 1,
1996
$10.25+++ -Amendment to Research and Development Agreement dated as of
March 1, 1994 by and between the Registrant and Inco
10.26+++ -Subcontract Agreement effective as of September 30, 1993 by
and between the Registrant and Reliance Electric Company
$10.27# -Fourth Amendment, dated May 15, 1995, to the Exclusive
License Agreement between the Registrant and MIT dated
July 6, 1987
$$10.28# -1994 Director Stock Option Plan
$$10.29## -1996 Stock Incentive Plan
$$$10.30 -Management Agreement between Electric Power Research Institute, Inc. and
American Superconductor Corporation, effective January 1, 1996
$$$10.31 -Technology License Agreement between Electric Power Research Institute,
Inc. and American Superconductor Corporation, effective January 1, 1996
$$$10.32 Warrant granted to Electric Power Research Institute, Inc. by American
Superconductor Corporation, dated March 26, 1996.
$$10.33## -Consulting Agreement dated as of January 1, 1996 between the Registrant
and John Vander Sande
$$10.34## Consulting Agreement dated as of May 1, 1996 between the Registrant and
Frank Borman.
$$10.35## Consulting Agreement dated as of October 1, 1995 between the Registrant
and Richard Drouin.
21.1*** -Subsidiaries
23.1 -Consent of Coopers & Lybrand L.L.P.
<FN>
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* Incorporated by reference to Exhibits to the Registrant's Registration Statement
on Form S-1 (File No. 33-43647).
</TABLE>
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** Incorporated by reference to Exhibits to the Registrant's Annual Report
on Form 10-K filed with the Commission on June 29, 1992.
*** Incorporated by reference to Exhibits to the Registrant's Annual Report
on Form 10-K filed with the Commission on June 29, 1993.
**** Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993 filed with the
Commission on August 16, 1993.
+ Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1993 filed with
the Commission on January 26, 1994.
++ Incorporated by reference to Exhibits to Amendment No. 1 to the
Registrant's Quarterly Report on Form 10-Q/A for the quarter ended
December 31, 1993 filed with the Commission on March 28, 1994.
+++ Incorporated by reference to Exhibits to the Registrant's Annual Report
on Form 10-K filed with the Commission on June 29, 1994.
# Incorporated by reference to Exhibits to the Registrant's Annual Report
on Form 10-K filed with the Commission on June 29, 1995.
## Incorporated by reference to Exhibits to the Registrant's Annual Report
on Form 10-K filed with the Commission on June 28, 1996.
$ Confidential treatment previously requested and granted with respect to
certain portions, which portions were omitted and filed separately with
the Commission.
$$ Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Form 10-K.
$$$ Confidential treatment requested as to certain portions, which portions
were omitted and filed separately with the Commission with this Annual
Report on Form 10-K.
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<PAGE> 1
EXHIBIT 10.20
AGREEMENT
BETWEEN
PIRELLI CAVI S.P.A.
AND
AMERICAN SUPERCONDUCTOR CORPORATION
DATED
OCTOBER 1, 1995
<PAGE> 2
INDEX
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Section 1. DEFINITIONS
- ----------------------
1.1 Affiliate
1.2 Agreement
1.3 ASC
1.4 Cable Wire
1.5 CPSA
1.6 Contract Technology
1.7 Control Cables
1.9 Excluded Technology
1.10 Far East
1.11 Field
1.12 Inco Agreement
1.13 Magnet Cables
1.14 Magnet Wire
1.15 Materials
1.16 Other Superconductor Products
1.17 Person
1.18 Pirelli
1.19 Power Cables
1.20 Products
1.21 Program
1.22 Project Board
1.23 Research and Development Program I
1.24 Research and Development Period
1.25 Specifications
1.26 Subsequent Research and Development Program
1.27 Superconductor Wire
1.28 Technology
1.29 Transmission Current Limiters
1.30 1990 Agreement
Section 2. THE PROGRAMS AND THE BUSINESS DEVELOPMENT PLAN
- ---------------------------------------------------------
2.1 Scope of the Programs
2.2 Pirelli Cable Research and Development
2.3 The Business Development Plan
2.4 Best Efforts Performance
2.5 Reciprocal Disclosures
2.6 Check Points
2.7 Participation of Pirelli Employees
2.8 Visits
2.9 Project Board
2.10 Project Board Meetings
2
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2.11 Records and Reports
2.12 Funding of Research and Development Program I and Subsequent
Research and Development Programs
2.13 Certain ASC Research Projects Not involving Power or Control
Cables
2.14 Other ASC Research Projects Involving Power Cables
2.15 Research Project relating to Transmission Current Limiters
2.16 Clearance
2.17 Pirelli option for additional research and development in
the Field
Section 3. OWNERSHIP OF RESEARCH AND DEVELOPMENT PROGRAM RESULTS
- ----------------------------------------------------------------
3.1 Ownership of Contract Technology
3.2 Cooperation
3.3 Confidentiality Restriction
Section 4. EXPLOITATION RIGHTS
- ------------------------------
4.1 Pirelli's Exploitation Rights
4.2 ASC's Exploitation Rights
4.3 Manufacturing and sub-licensing in Japan
4.4 Manufacturing in Canada, the United States of America,
Mexico and Far East
4.5 Manufacturing outside Canada, the United States of America,
Mexico and Far East
4.6 Exclusive Supply; Preservation of Pirelli's Supply
4.7 Irrevocability of Pirelli's Exploitation Rights
4.8 Price of Cable Wire
4.9 Sales of Superconductor Wire to Pirelli
4.10 Sublicense of Rights Under Inco Agreement
4.11 Additional licenses
4.12 Royalty Amounts
4.13 Transfer Costs
4.14 Disclosure of Technology and Technical Assistance by ASC
Section 5. 1990 AGREEMENT AND THE 1994 AGREEMENT
- ------------------------------------------------
5.1 Partial Termination of the 1990 Agreement
5.2 Partial Termination of the 1994 Agreement
Section 6. REPRESENTATIONS AND WARRANTIES
- -----------------------------------------
6.1 Representations and Warranties of Pirelli
6.2 Representations and Warranties of ASC
Section 7. CONFIDENTIALITY
- --------------------------
7.1 Obligation to Maintain Secrecy
7.2 Exceptions
3
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7.3 Matters Not Considered Public Knowledge
7.4 Period of Confidentiality
7.5 Covenant of ASC
Section 8. TERM AND EXTENSION
- -----------------------------
8.1 Term of Research and Development Program I
8.2 Term of Agreement
8.3 Early Termination
8.4 Extensions
8.5 Effect of Termination or Expiration
Section 9. MISCELLANEOUS
- ------------------------
9.1 Indemnification
9.2 Non-Solicitation
9.3 Export Controls
9.4 Force Majeure
9.5 Resolution of Disputes
9.6 Publicity
9.7 Assignment
9.8 Notices
9.9 No Prejudice by inaction
9.10 Relationship of Parties
9.11 Written Amendments Only
9.12 Applicable Law; Entire Agreement; Headings
9.13 Covenants with Respect to Conduct of Litigation
9.14 Provisions relating to the Bankruptcy Code
9.15 Hart-Scott-Rodino and European Commission Filings
Exhibits
- --------
2.1 Research and Development Program
2.7 ASC Secrecy Agreement
2.9 Responsibilities of the project Board
4.8 Price for Cable Wire
4
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AMENDED AGREEMENT
-----------------
This is an amended research, development and exploitation agreement (the
"Agreement"), dated and effective as of October 1, 1995, between PIRELLI CAVI
S.P.A., a corporation organized under the laws of Italy ("Pirelli"), and
AMERICAN SUPERCONDUCTOR CORPORATION, a corporation organized under the laws of
Delaware ("ASC").
WHEREAS, ASC and Cables Pirelli S.A. ("CPSA"), an Affiliate (as defined in
Section 1.1) of Pirelli, were parties to a Research and Development Agreement,
dated as of February 1st, 1990 (the "1990 Agreement"), which provided for basic
research on high-temperature superconductors to be used in wire and cable
products and development work on wire products using high-temperature
superconductors; and WHEREAS, ASC, when the 1990 Agreement was entered into, had
developed or acquired and had the ownership of or rights to utilize certain
proprietary technology relating to superconductors; and
WHEREAS, CPSA, when the 1990 Agreement was entered into, had developed and
had the ownership of certain proprietary technology relating to wire and cable
products; and
WHEREAS, CPSA, pursuant to Section 8.6 of the 1990 Agreement, has assigned
to Pirelli all of its rights, title and interest in
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and to the 1990 Agreement; and
WHEREAS, the research activities under the 1990 Agreement have continued
without interruption under an agreement between Pirelli and ASC dated as of
January 1, 1994 (the "1994 Agreement"); and
WHEREAS, Pirelli, prior to the effective date of the 1994 Agreement, had
developed and had the ownership of certain proprietary technology relating to
wire and cable products; and
WHEREAS, Pirelli is interested in developing commercially exploitable
superconducting wire and line transmission products and accessories using
superconductors and such superconductor wires not presently available and in
order to do so is willing to support the research and development of such
superconductors at ASC; and
WHEREAS, ASC has carried on and is willing to carry on research and
development program on superconducting wires, the goal of which is to produce
superconducting wires which are suitable for the production of commercially
exploitable superconducting line transmission products; and
WHEREAS, the parties wish to amend the 1994 Agreement and the terms and
conditions for the continued research and development program and to define the
ownership of the results of such a program and the rights of exploitation of
such results;
NOW, THEREFORE, for and in consideration of these premises,
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which are part and parcel of this Agreement, and of the mutual covenants and
agreements contained in this Agreement, and subject to the terms and conditions
set forth in this Agreement, the parties agree as set forth below.
Section 1. DEFINITIONS
----------------------
For the purpose of this Agreement the following capitalized terms have
the following meanings:
1.1 "AFFILIATE" means, as to any Person, another Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person.
1.2 "AGREEMENT" means this Agreement, including Exhibits 2.1, 2.7, 2.9 and
4.8 with the same effect as if they were incorporated in this Agreement itself.
1.3 "ASC" means American Superconductor Corporation, a Delaware
corporation.
1.4 "CABLE WIRE" means a Superconductor Wire, designed to transmit
electrical power or electrical signals, and to be used in the Field.
1.5 "CPSA" means Cables Pirelli S.A., an Affiliate of Pirelli.
7
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1.6 "CONTRACT TECHNOLOGY" means all Technology:
(i) conceived, first reduced to practice or developed by ASC alone or
in conjunction with any other party;
(ii) in which ASC has acquired rights other than by reason of this
Agreement;
during the Research and Development Period but before termination or
expiration of the Agreement and which has not become Excluded Technology (as
defined in Section 1.9).
1.7 "CONTROL CABLES" means single-core or multi-core cables made up from
Cable Wire, with or without a protective sheath, designed and intended to
operate at direct current or low frequency alternating current for the purpose
of transmitting control signals from an external transmitting point to an
apparatus to be controlled, or for transmitting signals from said apparatus to
said external transmitting point; provided, however, that for the purposes of
this Agreement, Control Cables shall not include cables for the transmission of
voice or video signals or digital signals other than digital signals which are
transmitted between said external transmitting point and said apparatus.
1.8 "CURRENT LEADS" means electrical leads made up from superconductors,
including but not limited to Materials, and designed to conduct electricity from
a source operating at room temperature to a device or equipment operating at
lower temperatures.
8
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1.9 "EXCLUDED TECHNOLOGY" means any Technology as described in Section
8.5.4.
1.10 "FAR EAST" means Bangladesh, Burma, Cambodia, China, India, Indonesia,
Korea, Laos, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.
1.11 "FIELD" means the field of Line transmission and distribution of (i)
electrical power from at least one point to another and (ii) electrical control
signals, where "Line transmission and distribution" means transmission and
distribution by cable, wire or the like physical link in the form of an
elongated conductor which is used to transport electrons, provided however that
the Field does not include Other Superconductor Products (as defined in section
1.16).
1.12 "INCO AGREEMENT" means the agreement, dated June 27, 1988, between ASC
and Inco Alloys, Inc. (together with its Affiliates, "Inco"), as that agreement
has been or may be amended, extended, modified or superseded.
1.13 "MAGNET CABLES" means single core or multi core cables made up from
Magnet Wires, with or without a protective sheath, which are designed to operate
with direct current or alternating current for the purpose of generating
magnetic fields.
1.14 "MAGNET WIRE" means an electrically insulated Superconductor Wire,
designed to operate with direct or alternating current and to be used in the
manufacture of magnet
9
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Cables, magnets, coils or other forms or devices for the generation of magnetic
fields.
1.15 "MATERIALS" means superconductor materials and precursors of these
materials in raw form such as granules or powder, or in any partially or fully
processed form such as Superconductor Wire which can be used, for example, as
Cable Wire, Magnet Wire or any other wire, tape, rod, sheet, tube, or
arbitrarily shaped superconductor, whether or not clad, and which become
superconductive when the temperature thereof is the temperature of liquid
nitrogen or higher.
1.16 "OTHER SUPERCONDUCTOR PRODUCTS" means the following products made from
Materials (or other superconductors): Current Leads; Magnet Wire; Magnet Cables;
Transmission Current Limiters; Distribution Current Limiters; transformers;
power electronic devices; energy storage devices; coils and other devices when
used for the generation of magnetic fields; wires or cables made from
Superconductor Wire when used for transmission of voice, data, or video signals
and which are other than Control Cables.
1.17 "PERSON" means any individual, partnership, joint venture,
corporation, trust, estate or government or any department or agency of a
government.
1.18 "PIRELLI" means Pirelli Cavi S.p.A., a corporation organized under the
laws of Italy.
1.19 "POWER CABLES" means single-core or multi-core cables
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made up from Cable Wires, with or without a protective sheath, and which are
designed to operate with direct current, or low frequency (typically 50 to 60
Hz) alternating current for the purpose of transmitting electric power.
1.20 "PRODUCTS" means any product, composition, method, machinery,
apparatus, service or the like which are or will be used in the Field including,
but without limitation, Cable Wire, Control Cables, Materials, Power Cables,
Superconductor Wire and raw materials or semi-finished products thereof, and any
method, composition or apparatus to produce them.
1.21 "PROGRAM" means Research and Development Program I and any Subsequent
Research and Development Program.
1.22 "PROJECT BOARD" see Section 2.9.
1.23 "RESEARCH AND DEVELOPMENT PROGRAM I" means the research and
development activities that are described in Section 2.
1.24 "RESEARCH AND DEVELOPMENT PERIOD" means the period prior to September
30, 1999 or prior to the end of period ASC is conducting Research and
Development Programs for New Products accepted by Pirelli, whichever is later.
1.25 "SPECIFICATIONS" means Pirelli's specifications for the electrical,
magnetic, geometrical and mechanical characteristics of, as well as their cost
objective for, the Cable Wires intended for use in the production of Power
Cables, all as currently set forth in EXHIBIT A TO EXHIBIT 2.1, as they may be
modified by
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mutual consent of the parties, and the consent of ASC shall not be unreasonably
withheld.
1.26 "SUBSEQUENT RESEARCH AND DEVELOPMENT PROGRAM" means a program for a
research and development relevant to the Field proposed by ASC pursuant to
Section 2.17.
1.27 "SUPERCONDUCTOR WIRE" means a fully reacted length of wire or tape
containing superconductor materials and which is designed to transmit either
direct or alternating current in the superconducting state.
1.28 "TECHNOLOGY" means any and all data and information of a Person,
whether or not patentable and whether or not copyrightable, including, without
limitation, ideas, concepts, formulas, methods, procedures, designs,
compositions, plans, applications, specifications (Specifications included),
drawings, techniques, processes, research, technical data, know-how, apparatus,
equipment, samples, inventions, discoveries, and the like, and financial data,
business plans, demonstrations and trade secrets (all whether or not in tangible
or oral form) and all intellectual property rights associated therewith,
including any of the aforesaid rights available to such Person which such Person
is free to disclose and license or sub-license.
1.29 "TRANSMISSION CURRENT LIMITERS" means current limiting devices for
preventing fault overload in a power transmission systems operating at voltages
greater than 20KV. Transmission
12
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Current Limiters does not include current limiting devices for preventing fault
overload in power distribution systems which operate at voltages equal to or
less than 20KV ("Distribution Current Limiters").
1.30 "1990 AGREEMENT" means the Research and Development Agreement dated as
of February 1, 1990 between ASC and CPSA.
1.31 "1994 AGREEMENT" means the Research and Development Agreement dated as
of January 1, 1994 between ASC and Pirelli.
Section 2. THE PROGRAMS AND THE BUSINESS DEVELOPMENT PLAN
---------------------------------------------------------
2.1 SCOPE OF RESEARCH AND DEVELOPMENT PROGRAMS. The Programs shall consist
of research and development activities performed by ASC in cooperation with
Pirelli (to which Pirelli has contributed as described in Sections 2.12 and
2.17) and by Pirelli as contemplated in Section 2.2 with the goal of developing
Cable Wire which can be used to produce Power and Control Cables. Research and
Development Program I is more specifically described in EXHIBIT 2.1.
2.2 PIRELLI CABLE RESEARCH AND DEVELOPMENT. Pirelli will during the
Programs and at its own expense develop, design and experimentally produce
prototypes of commercial Power and/or Control Cable(s) utilizing Cable Wire
produced by ASC.
2.3 THE BUSINESS DEVELOPMENT PLAN. Before October 1, 1997
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or another date mutually agreed by the parties, a Business Development Plan will
be performed by Pirelli at its own expense and in cooperation with ASC,
consisting of experimental production, investigating market needs, defining
technical specifications for Cable Wire and Power and Control Cable(s) meeting
such needs, defining price targets, to the extent and along the lines described
in Exhibit 2.1, with the goal of developing markets for Power Cables and/or
Control Cables.
2.4 BEST EFFORTS PERFORMANCE. Each party shall use its best efforts to
achieve the goals set forth in Sections 2.1, 2.2 and 2.3. In particular, each
party shall provide personnel qualified to perform the activities contemplated
by Sections 2.1, 2.2 and 2.3 and appropriate resources to enable Research and
Development Program I and the Business Development Plan to progress in
accordance with the goals and criteria set forth in Exhibit 2.1. During the
period extending from 1 October 1995 through 30 September 1999 (or during a
shorter period if Pirelli terminates Research and Development Program I before 1
October 1999), ASC shall spend at least US $5,000,000 per year in research and
development on superconductor materials, precursors of superconductor materials
and/or wire and tape containing superconductor materials, in addition to the
amounts paid by Pirelli pursuant to Section 2.12. If ASC cannot demonstrate that
it has either (i) spent at least US $5,000,000 as stated above or
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(ii) achieved the milestones defined in Research and Development Program I, ASC
shall be considered to have made a material breach of this Agreement.
2.5 RECIPROCAL DISCLOSURES. Subject to the provisions of Section 7
(Confidentiality), and solely for the purposes of the Programs, each party, to
the extent that it now has or hereafter obtains the right to do so, shall make
available to the other party all Technology necessary to carry out their
obligations under Sections 2.1, 2.2 and 2.3. The rights of either party to use
or exploit any Technology other than in the course of the Programs, and the
disclosure of Technology other than in and for the purposes of the Programs,
shall be as provided in Section 3 and Section 4.
2.6 CHECK POINTS. During the Programs and during the Business Development
Plan a check point in each calendar year shall be established by the parties in
order to verify the feasibility, timing and results of the activities undertaken
pursuant to that Program. In the event that Pirelli at the time of any check
point finds that a Program is not feasible from a technical point of view,
Pirelli may terminate its participation in the Program as provided in Section
8.3.
2.7. PARTICIPATION OF PIRELLI EMPLOYEES. ASC agrees to permit, and to
assist Pirelli in making it possible for, up to two (2) qualified technical
employees of Pirelli (or of any Affiliate
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of Pirelli designated by Pirelli) to participate as researchers in the Programs,
preferably for periods not less than 6 months. ASC and Pirelli agree that,
during the time in which any such employees are participating in Programs, they
shall be employees of Pirelli (or of an Affiliate of Pirelli), and shall not be
deemed to be employed by ASC or any of its Affiliates during that time. Pirelli
shall pay such employees, salaries and other benefits as additional funding for
Programs. As employees of Pirelli, such employees shall have no authority
whatsoever to act on behalf of or contractually bind Pirelli or any of its
Affiliates. At the end of their participation in Programs, Pirelli shall have
the right to appoint additional employees to replace the employees who leave
Programs. Each such individual designated by Pirelli shall execute a
confidentiality agreement with ASC, in form and substance as set forth in
EXHIBIT 2.7.
2.8 VISITS. During the Programs, each party may send technical personnel to
the other party or receive technical personnel from the other party for
consultation on the problems arising from the research and development
activities and for discussion of the results of the Programs. The duration and
frequency of these consultations and visits shall be determined by informal
agreement of the parties, from time to time, as requests may be made therefore,
and permission for such visits shall not be unreasonably withheld.
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2.9 PROJECT BOARD. There is hereby established a Project Review Board (the
"Project Board"), which shall have the responsibility for the management,
supervision, approval or disapproval of the research during the Programs and of
Program budgets. The Project Board shall be comprised of four members, two
appointed by ASC and two appointed by Pirelli. The Project Board's
responsibilities, obligations and powers are set forth in EXHIBIT 2.9.
2.10 PROJECT BOARD MEETINGS. The Project Board shall meet on the dates of
the check points established pursuant to Section 2.6 and at such other times as
the parties may agree to. Personnel of the parties, other than the Board
Members, may be invited to the meetings on the basis of their contribution to
the technical problems under discussion. Minutes of each meeting shall be kept
and shall be countersigned by one representative of each party within thirty
(30) days after each meeting.
2.11 RECORDS AND REPORTS. ASC will prepare and maintain full and accurate
records and books relating to the progress and status of the Programs, the
conception and reduction to practice of the Contract Technology, all financial
matters connected therewith, and all expenditures made or costs incurred in
connection therewith. These records and books shall be made available at all
reasonable times to Pirelli and the Project Board for the purposes of
management, supervision and verification of ASC's obligations
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hereunder. At least once each calendar quarter, within fifteen (15) days after
the end of the quarter, ASC will prepare and deliver to Pirelli and the Project
Board reports setting forth:
(a) summaries of the status and progress of then-current Programs;
(b) all expenditures made or costs incurred in connection therewith; and
(c) projections of expenditures required in connection with then-current
Programs for each of the four calendar quarters following the date of such
reports.
2.12 FUNDING OF RESEARCH AND DEVELOPMENT PROGRAM I AND SUBSEQUENT RESEARCH
AND DEVELOPMENT PROGRAMS.
<TABLE>
(a) Pirelli shall, subject to the provisions of Section 8.3 and the timely
performance by ASC of all its obligations hereunder, pay to ASC for its
performance under Research and Development Program I in each contract year,
starting from the effective date of this agreement the following amounts:
<CAPTION>
Year 1 Year 2 Year 3 Year 4
----------------------------------------------------------------
<S> <C> <C> <C> <C>
US$ 3,500,000 2,500,000 2,500,000 1,500,000
</TABLE>
Of the amount for Year 1, US $1,000,000 is for research and development
work performed prior to October 1, 1995 and US $2,500,000 is for work subsequent
to October 1, 1995.
The above payments shall be invoiced quarterly in advance.
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With respect to Year 1, the first two payments (in a total amount of
$2,000,000 now being due) shall be paid before March 31, 1996, and
subsequent payments shall be paid within ninety (90) days of the date of
invoice. Payments for Years 2 through 4 shall be made within sixty (60) days of
the date of invoice, in accordance with the payment schedule in the projected
budget set forth in Exhibit 2.1, as that budget may be reasonably adjusted by
the parties with reference to the quarterly projections submitted by ASC
pursuant to Section 2.11. All amounts paid by Pirelli pursuant to this Section
2.12 shall be expended for no purpose other than Research and Development
Program I unless re-allocated by Pirelli according to Section 2.17. All
equipment purchased with such amounts and with the approval of Pirelli shall be
the property of ASC. All payment obligations of Pirelli under this Section shall
cease upon early termination of this Agreement pursuant to Section 8.3. In the
event that Pirelli has made an advance quarterly payment and Research and
Development Program I is terminated before the end of a quarter for which
payment has been made, ASC shall refund to Pirelli the excess of the quarterly
payment above amounts expended prior to the notice of termination and amounts
reasonably required to terminate the Program after such notice has been given
unless Pirelli has not re-allocated funding in accordance with Section 2.17.
(b) The funding to be provided by Pirelli for a Subsequent
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Research and Development Program shall be as follows:
(i) 25% of the cost relating thereto; or
(ii) such different percentage the parties may establish as set forth
below;
PROVIDED HOWEVER that ASC shall make available funding for the development
of Technology relevant to such Program at a level that is not less than
Pirelli's contribution under the Program, which calculation shall not take into
account any funding received by ASC from third parties on specific programs
outside and not relevant to the Field.
The above joint funding by Pirelli and ASC of such Program is to be
proportional to the projected business in the Field utilizing the Technology
relative to the total projected business utilizing the Technology. The initial
funding shall be as provided in (b) (i) above unless the parties agree
otherwise. Thereafter, within the month of February each year the parties shall
discuss in good faith if there are elements at hand which may lead to the
determination of the value of the business in the Field related to the total
business to which the Technology in question relates. If the parties determine
to establish a different percentage then the funding, from the date of such
determination, shall be amended accordingly.
If the parties cannot agree on the percentage to be provided by Pirelli,
either party may request that the relevant percentage,
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based on the above criteria, be defined by an independent expert agreed upon by
the parties or, failing such agreement, by the President of the American
Arbitration Association, at the request of either party.
2.13 CERTAIN ASC RESEARCH PROJECTS NOT INVOLVING POWER OR CONTROL CABLES.
During the Research and Development Period, prior to entering into any
relationship with any third party concerning research directed to the
development, manufacture, installation or operation of products which are
designed to be used for transmission of voice, data or video signals, ASC shall
give Pirelli notice of its intent to enter a relationship with a third party,
and, if requested by Pirelli, Pirelli and ASC shall attempt, in good faith, to
agree upon a similar relationship between the two of them. If Pirelli does not
request such negotiation, or, after good faith negotiations by ASC and Pirelli
agreement on the terms of the relationship is not reached within six months of
ASC's notice, ASC shall have the right to enter into such a relationship with a
third party at any time during the subsequent 24-month period. If ASC does not
enter into a written agreement with such third party within that 24-month
period, ASC's right to enter into such an agreement shall cease and Pirelli
shall again have the right of first negotiation, described above, as to any such
proposed subsequent relationship.
2.14 OTHER ASC RESEARCH PROJECTS INVOLVING POWER CABLES.
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Without the prior written consent of Pirelli, during the Research and
Development Period ASC shall not enter into any other agreement or other
arrangement concerning participation in, funding of, or any partnership, joint
venture or similar relationship involving, ASC research activities directed
specifically to the Field with:
(a) a utility whose business includes the generation and/or distribution of
electricity,
(b) any person or company, or through an affiliate or company, engaged in
the manufacture and sale of Cable Wire, Control Cables or Power Cables, or
(c) any organization involved in Cable Wire, Control Cable or Power Cable
research.
This Section 2.14 shall not affect the right of ASC to enter into any
agreement with any person or company outside the Field, but during the Research
and Development Period ASC shall inform Pirelli of any proposed agreement with a
party within (a) through (c) above prior to entering into the same.
2.15 RESEARCH PROJECT RELATING TO TRANSMISSION CURRENT LIMITERS. Not later
than 1 June 1996, ASC shall provide Pirelli a proposal for a new separately
funded program to be carried out by the parties for the research and development
and commercial exploitation of Transmission Current Limiters. Thereafter, the
parties will negotiate in good faith with respect to an agreement
22
<PAGE> 23
for the research and development and commercial exploitation of Transmission
Current Limiters. If the parties fail to reach such agreement within three (3)
months from the date ASC provides its proposal to Pirelli, then ASC shall be
free to negotiate also with third parties provided that ASC hereby grants
Pirelli a first refusal right to enter into any such agreement. ASC shall,
before consummating any such agreement with a third party, give Pirelli notice
(a "License Notice") containing a copy of the proposed agreement with such third
party relating to the Transmission Current Limiters. Pirelli shall have a period
of ninety (90) days following the License Notice in which to exercise its right
of first refusal. If Pirelli does not exercise its right of first refusal within
the applicable time, ASC shall be free to consummate such arrangement with the
relevant third party; provided the transaction is consummated without any
material changes which are more favorable to such third party than the terms
specified in the License Notice.
2.16 CLEARANCE.
(a) The parties shall, before June 30, 1997, jointly perform a patent
clearance of Contract Technology.
(b) ASC shall, during the term of this Agreement, inform Pirelli of any
third party industrial property rights known to it that may be relevant to the
activities of ASC in the Field or to the rights granted to Pirelli in Section
4.1.
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(c) ASC shall, promptly after the date of this Agreement, inform Pirelli of
the existence of any third party know-how or intellectual property rights
relating to the Field available to it which it cannot disclose or license to
Pirelli and provide Pirelli evidence in support of such information.
(d) ASC Undertakes not to knowingly direct a Program in a way which would
result in Contract Technology being dependent on third party's intellectual
property right, unless ASC has either (i) disclosed to Pirelli all the relevant
information known to it with respect to such third party intellectual property
rights and any related negotiations or agreements, or (ii) succeeded in
obtaining licenses from such third parties relating to such rights, including
the right to grant Pirelli a sub-license to the extent necessary to exercise the
rights granted in Section 4.1.
2.17 PIRELLI OPTION FOR ADDITIONAL RESEARCH AND DEVELOPMENT IN THE FIELD.
(a) If ASC, during the term of this Agreement, becomes aware of Technology
which has potential applications in the Field or if ASC begins exploratory
research and development concerning such Technology, itself, in collaboration
with or through third parties, then ASC shall promptly inform Pirelli. When ASC
has concluded that the Technology has a potential for Product applications in
the Field, a research and development proposal for a Subsequent Research and
Development Program shall be submitted
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<PAGE> 25
to Pirelli. Such proposal shall contain a detailed written program, including:
(i) a proposed statement of work; (ii) an analysis of the potential advantages
of the proposed activities with respect to the Technology being developed under
Research and Development Program I or the then existing Subsequent Research and
Development Programs; (iii) to the extent feasible, an analysis of ASC's and any
third party's intellectual property rights relating to the proposed activities
and the exploitation of the resulting products which is known to ASC; (iv)
milestones; (v) and projected costs for such Program.
(b) If Pirelli accepts to fund a Subsequent Research and Development
Program the following shall apply:
(i) the terms and conditions of this Agreement shall apply to such
Subsequent Research and Development Program;
(ii) the funding to be provided by Pirelli for such Subsequent
Research and Development Program may be in addition to the funding provided for
Research and Development Program I pursuant to Section 2.12 or be provided by
allocating, wholly or partly, the funding under Section 2.12 to such Subsequent
Research and Development Program.
(c) If Pirelli elects not to participate in the funding of a proposal for a
Subsequent Research and Development Program the following shall apply:
(i) ASC shall have the right to pursue such Subsequent
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<PAGE> 26
Research and Development Program itself at its own expense, but ASC's right to
accept funding of such Subsequent Research and Development Program from any
third party is subject to the provisions of Section 2.14;
(ii) ASC shall from time to time inform Pirelli of the results of its
research and development relating to such Subsequent Research and Development
Program;
(iii) Pirelli shall, for a period of four (4) years from the date of
the proposal in section (a) above, have the right to participate in the funding
of such Subsequent Research and Development Program. If Pirelli makes such
election then Pirelli shall, in addition to the funding going forward calculated
in accordance with Section 2.12 (b), make a payment to ASC for the activities
undertaken by ASC prior to such election equal to the cost of such Subsequent
Research and Development Program up to the date of such election calculated in
accordance with Section 2.12 (b) multiplied by a factor of 1,5;
(iv) upon Pirelli exercising the right in Section (c) (iii) the
provisions of Section (b) shall apply to such Subsequent Research and
Development Program;
(d) if Pirelli has not exercised the right in Section (c) (iii) within the
period stated therein the provisions of Section 8.5.4 shall apply to such
Subsequent Research and Development Program.
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Section 3. OWNERSHIP OF RESEARCH AND DEVELOPMENT
------------------------------------------------
PROGRAM RESULTS
---------------
3.1 OWNERSHIP OF CONTRACT TECHNOLOGY.
(a) ASC shall own all Contract Technology, except as provided in Section
3.1 b., but Pirelli shall have exclusive rights in all such Contract Technology
in the Field as provided in Section 4.
(b) Pirelli shall own Contract Technology developed in the course of a
Program directed specifically to the design and manufacture of Power Cables and
Control Cables, but ASC shall have the exclusive, irrevocable and royalty-free
right to use all such Contract Technology outside the Field.
3.2 COOPERATION. Subject to Sections 3.3 and 7, ASC and Pirelli shall
provide each other with all Technology which is useful or needed to obtain
patents directed to Contract Technology owned by the other party in any country
according to the patent laws of the countries where the patent protection is
sought by the other party; including under any international patent convention
such as the Paris Convention, the Patent Cooperation Treaty or the European
Patent Convention. Prior to the filing by one party or its Affiliate of a patent
application containing information as to Technology of the other party, such one
party shall provide to such other party a copy of the proposed patent
application at
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least thirty (30) business days prior to the proposed filing date of or earliest
bar date for such application, and unless such one party has received the
consent of the such other party or its Affiliate (which consent shall not
unreasonably be withheld, provided that it shall not be unreasonable for ASC to
withhold consent to disclosure in a patent application of Technology owned by
ASC relating to the manufacture, but not to the specifications, properties or
characteristics, of Cable Wires or Superconductor Wires, and provided further
that it shall not be unreasonable for Pirelli to withhold consent to disclosure
in a patent application of Technology owned by Pirelli relating to the
manufacture, but not to the specifications properties or characteristics, of
Power Cables or Control Cables), or has met the conditions of Section 3.3, such
one party shall not file such proposed application.
3.3 CONFIDENTIALITY RESTRICTION. Neither party shall disclose any
Technology received from the other party, or otherwise disclose any such
Technology of the other party in a patent application or in connection with the
filing or prosecution of any patent application or the defense or enforcement of
any patent except: (i) as permitted by Section 7, and (ii) to the extent that
one party or its Affiliate has included any such Technology in a patent
application filed by such one party or its Affiliate, such Technology may be
included in applications filed by the other party or its Affiliates.
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<PAGE> 29
If in the judgment of the other party it is necessary to include any
Technology of such one party in a patent application, the other party will so
inform such one party, and the parties will consult in good faith to attempt to
resolve whether such Technology may be so included.
Section 4. EXPLOITATION RIGHTS
------------------------------
4.1 PIRELLI'S EXPLOITATION RIGHTS.
(a) ASC grants Pirelli and Pirelli's Affiliates the worldwide, irrevocable,
royalty-bearing, exclusive license in the Field, to use Contract Technology to
manufacture, have manufactured, use and sell the Products.
(b) Pirelli shall have the right in the Field to sub-license any ASC patent
rights included in Contract Technology licensed to Pirelli pursuant to Section
4.1 a. Pirelli will notify ASC before entering into formal negotiations with any
third party with respect to grant of sub-licenses hereunder, will keep ASC
constantly and fully informed with respect to any such negotiations under
specific ASC patent rights, and allow representatives of ASC to consult with
Pirelli's attorneys with respect to all aspects of such negotiations, provided
however that the foregoing shall not limit Pirelli's rights to conduct
preliminary discussions with third parties relating to
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<PAGE> 30
sub-licensing hereunder without prior notice to ASC. If the third party grants
any rights to Pirelli pursuant to such negotiations, Pirelli shall use its best
efforts to ensure that such rights inure to the benefit of ASC, ASC Affiliates,
and joint ventures to which ASC is a party at least to the extent that they
include rights to manufacture, use or sell any Products.
(c) Pirelli shall not knowingly sell Cable Wire, Superconductor Wire or
Materials to customers who intend to use them outside the Field. To the extent
it is reasonably practicable, Pirelli shall sell Cable Wire, Superconductor Wire
or Materials that potentially have applications outside the Field only under an
express agreement limiting the use thereof to use in the Field. If use outside
the Field has occurred notwithstanding the provisions of this Section, Pirelli
shall supply to ASC all data and information relating sales to a party making
such use as ASC may reasonably require to enforce its rights hereunder.
4.2 ASC'S EXPLOITATION RIGHTS.
(a) Pirelli grants to ASC, ASC's Affiliates, and any joint venture in which
ASC or ASC's Affiliates hold an interest, the exclusive, irrevocable and
royalty-free license, under all rights now and hereafter granted to Pirelli
pursuant to Section 4.1, to use Contract Technology in the Field:
(i) to manufacture Cable Wire in Canada, the United States of America,
Mexico, Japan and the Far East, subject to Sections
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4.1(b), 4.3 and 4.4;
(ii) to sell such Cable Wire in and for use in Canada, the United States of
America and Mexico exclusively to Pirelli and Pirelli's Affiliates, who shall
purchase such Cable Wire for use in Canada, the United States of America and
Mexico only from ASC or ASC's Affiliates or, at ASC's option, a joint venture in
which ASC or ASC's Affiliates hold an interest, subject to Sections 4.1(b), 4.6,
4.8 and 8.5.3;
(iii) to sell such Cable Wire in Japan for use in the domestic market of
Japan, subject to the provisions of Sections 4.1(b) and 4.3;
(iv) to sell such Cable Wire in and for use in the Far East exclusively to
Pirelli and Pirelli's Affiliates who shall purchase such Cable Wire for use in
Products sold in the Far East only from ASC, ASC Affiliates or manufacturing
operations established pursuant to Sections 4.1(b), 4.3, 4.4 or 4.5.
(b) Nothing in this Agreement shall limit ASC's right to manufacture, use
or sell Materials or Superconductor Wire for any application which is not in the
Field. ASC shall not knowingly sell Materials or Superconductor Wire to
customers (other than Pirelli) who intend to use such Materials or
Superconductor Wire in the Field. To the extent it is reasonably practicable,
ASC shall sell Materials or Superconductor Wire that potentially have
applications in the Field only under an express agreement limiting
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the use thereof to use outside the Field. If use in the Field has occurred
notwithstanding the provisions of this Section, ASC shall supply to Pirelli all
data and information relating sales to a party making such use as Pirelli may
reasonably require to enforce its rights hereunder.
4.3 MANUFACTURING AND SUB-LICENSING IN JAPAN.
Notwithstanding the provisions of Sections 4.1 and 4.2:
(a) MANUFACTURE OF CABLE WIRE. Any manufacturing of Cable Wire in Japan by
a joint venture in which ASC or ASC Affiliates hold an interest shall be by such
a venture in which ASC and/or ASC Affiliates, alone or in combination with
Pirelli and/or Pirelli Affiliates, hold a majority interest;
(b) PIRELLI RIGHTS. Pirelli may grant any third party in Japan
non-exclusive rights in the Field under any patent rights included in Contract
Technology;
(c) SUB-LICENSING FOR CONTROL AND POWER CABLES. Pirelli will, at the
request of ASC, grant customers in Japan of ASC, ASC Affiliates, or joint
ventures in which ASC or ASC Affiliates hold an interest, a royalty-free,
non-exclusive, sub-license under any patent rights included in the Contract
Technology to use Cable Wire in Power and Control Cables in the domestic market
of Japan, provided that Pirelli shall not be obliged to grant any such
sub-license unless any such customer, at the request of Pirelli, has disclosed
to Pirelli all patent rights available to it at the
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time that ASC's request is made relating to Cable Wire and Power and Control
Cables, and, at the request of Pirelli, has granted Pirelli non-exclusive,
royalty-free rights under such patent rights to use Cable Wire in Control or
Power Cables in the domestic market of Japan. For the avoidance of doubt it is
hereby declared that nothing contained in this Agreement shall constitute an
obligation on Pirelli to grant licenses under any patent rights owned by it or
its Affiliates relating to Power and Control Cables.
4.4 MANUFACTURING IN CANADA THE UNITED STATES OF AMERICA AND MEXICO AND THE
FAR EAST.
(a) CANADA, THE UNITED STATES OF AMERICA AND MEXICO. In the event that ASC
decides to establish a separate manufacturing facility exclusively for the
manufacture of Cable Wire in Canada, the United States of America or Mexico,
Pirelli and ASC agree to investigate in good faith the potential for Pirelli's
participation in the manufacturing of Cable Wire in Canada, the United States of
America or Mexico through a minority interest in such facility. ASC shall have
the right to sub-license the rights granted in Section 4.2 a. to such a
manufacturing operation. Such sub-license shall be a royalty-bearing license and
may include the right to use any Contract Technology licensed to ASC under
Section 4.2 a.
(b) THE FAR EAST. If the opportunity to establish
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manufacturing facilities for the production of Cable Wire in the Far East shall
be identified by ASC or be offered to ASC by a third party, then ASC shall
promptly notify Pirelli of such opportunity and, within sixty (60) days of such
notification, Pirelli may elect to have such Cable Wire manufactured by a joint
operation controlled by ASC in which ASC shall have a majority interest if
permitted by law, and otherwise an interest greater than that of any other
single participant, and in which Pirelli also shall have an interest. ASC shall
have the right to sub-license the rights granted in
Section 4.2 a. to such a manufacturing operation. Such sub-license shall be a
royalty-bearing license and may include the right to use any Contract Technology
licensed to ASC under Section 4.2 a. in the manufacture of Cable Wire. Such
manufacturing operation shall sell such Cable Wire to third parties only for use
in the domestic market of Japan, as provided in Section 4.2 a., or to Pirelli
and Pirelli's Affiliates.
4.5 MANUFACTURING OUTSIDE CANADA, THE UNITED STATES OF AMERICA, MEXICO,
JAPAN AND THE FAR EAST. Notwithstanding the provisions of section 4.1, Pirelli
shall, subject to Section 4.8, purchase from ASC or ASC Affiliates, in the
aggregate, acumulative total of at least US $10,000,000 (ten million US
dollars) of Cable Wire for use in Control Cable and Power Cables to be sold
outside Canada, the United States of America, Japan,
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Mexico and the Far East prior to commencing commercial manufacture of Cable Wire
pursuant to the license in Section 4.1 itself or through any Affiliate. ASC
shall have the right to participate, and at its request may participate, in any
such manufacturing of such Cable Wire by a joint Pirelli-ASC venture in which
ASC has a minority interest, the terms and conditions of such joint venture and
the extent of ASC's interest therein to be determined by subsequent negotiations
between the parties, the conduct of such negotiations shall not delay any
activities in relation to the setting up of such manufacturing. In any event,
however, Pirelli and ASC agree to investigate in good faith the potential for
the supply of partially processed Materials, such as billets or rods, for use in
the manufacture of such Cable Wire employing a metallic precursor process from
ASC or a joint venture including ASC and Inco, to the extent that ASC or such
joint venture can supply such partially processed Materials on reasonable
commercial terms.
4.6 EXCLUSIVE SUPPLY; PRESERVATION OF PIRELLI'S SUPPLY
(a) Pirelli agrees that Pirelli and Pirelli Affiliates will purchase from
ASC, ASC Affiliates, and joint ventures (other than manufacturing operations
established pursuant to Section 4.5) in which ASC or ASC Affiliates have an
interest Pirelli's and Pirelli Affiliates' requirements for Cable Wire utilizing
or covered by any Contract Technology ("Contract Technology Cable Wire") as
follows:
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(i) Pirelli's and Pirelli Affiliates' requirements for Contract
Technology Cable Wire used or sold in Canada, the United States of America, and
Mexico,
(ii) To the extent that such requirements are not purchased from
manufacturing operations established pursuant to Section 4.5, Pirelli's and
Pirelli Affiliates' requirements for Contract Technology Cable Wire used or sold
in the Far East and Japan, and
(iii) To the extent that such requirements are not purchased from
manufacturing operations established pursuant to Section 4.5, Pirelli's and
Pirelli Affiliates' requirements for Contract Technology Cable Wire used or sold
outside Canada, the United States of America, Canada, Mexico, Japan and the Far
East.
(b) ASC shall, with respect to the countries and geographical areas of
Section 4.6 a. supply to Pirelli and Pirelli's Affiliates all the quantities for
Contract Technology Cable Wire that may be ordered by them under this Agreement.
Two years before the expected commencement of commercial sales, the parties will
develop a procedure to be followed for forecasting and meeting the needs of
Pirelli of such Cable Wire to be manufactured by ASC, ASC Affiliates and any
joint venture (other than manufacturing operations established pursuant to
Section 4.5) in which ASC or ASC Affiliates hold an interest and supplied to
Pirelli and Pirelli Affiliates pursuant to Section 4.6 a. and for
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forecasting the facility requirements of ASC for such supplies of such Cable
Wire on an on-going basis. If ASC, ASC Affiliates or such joint ventures
thereafter (i) do not together commit to supply all requirements of such Cable
Wire meeting the Specifications for use in Products to be sold in Canada, the
United States of America and Mexico for a given calendar year, (ii) do not
together commit to supply all requirements (other than requirements provided by
manufacturing operations established pursuant to Section 4.5) of such Cable Wire
for use in Products to be sold in the Far East or Japan by Pirelli and Pirelli
Affiliates for a given calendar year, (iii) do not together commit to supply all
requirements (other than requirements provided by manufacturing operations
established pursuant to Section 4.5) for such Cable Wire for use in Products to
be sold outside Canada, the United States of America, Canada, Mexico, Japan and
the Far East for a given calendar year, or (iv) having committed to supply a
particular quantity of such Cable Wire to Pirelli or Pirelli's Affiliates for a
given calendar year, fail to supply at least 80% of that amount as ordered by
Pirelli and Pirelli's Affiliates, then Pirelli may, notwithstanding the
provisions of Sections 4.2, 4.5 and 4.6 a., (i) import such Cable Wire from
manufacturing operations established pursuant to Section 4.5 during the period
of shortage to make up for the resulting shortage or (ii) purchase such Cable
Wire from other sources in the relevant territory,
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provided that to the extent Pirelli purchases any Contract Technology Cable Wire
from other sources Pirelli will pay ASC a royalty with respect to such Cable
Wire at the royalty rate specified in Section 4.12.
(c) If, in any calendar year, Pirelli, Pirelli Affiliates and Pirelli joint
ventures (other than joint Pirelli-ASC joint ventures authorized by Section 4)
obtain less than all of their requirements of Contract Technology Cable Wire
from ASC, ASC Affiliates, joint Pirelli-ASC joint ventures authorized by Section
4 or manufacturing operations established pursuant to Section 4.5. Pirelli will
pay ASC a royalty with respect to all Contract Technology Cable Wire obtained
from anyone other than ASC, ASC Affiliates, joint Pirelli-ASC joint ventures
authorized by Section 4 or manufacturing operations established pursuant to
Section 4.5. The royalty shall be paid at the royalty rates specified in section
4.12 with respect to the first 5% of such requirements of Contract Technology
Cable Wire obtained from such others and, only with respect to the royalty rate
specified in section 4.12 (b) for royalties to ASC, at 150% of such royalty with
respect to all other Contract Technology Cable Wire obtained from such others.
(d) The provisions of Section 4.6 c. shall not apply to the extent that the
failure of Pirelli, Pirelli Affiliates and Pirelli joint ventures (other than
joint Pirelli-ASC joint ventures
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authorized by Section 4) is caused by ASC's failure to commit to supply or to
supply cable wire as provided in Section 4.6 b.
4.7 IRREVOCABILITY OF PIRELLI'S EXPLOITATION RIGHTS.
(a) It is agreed and understood that the rights granted to Pirelli in
section 4.1, shall not and cannot be revoked, voided, or rescinded for any
reason whatsoever in consideration of the financing of the Programs provided by
Pirelli under this Agreement, the 1990 Agreement and the 1994 Agreement. ASC's
sole remedy in case of Pirelli's breach of any of the provisions of this
Agreement shall be limited to the recovery of any damages, if applicable, and of
any payments due hereunder, plus interest on any sum recovered. ASC waives any
claims or rights to seek recision of this Agreement.
(b) If Pirelli terminates this Agreement as provided in section 8.5.2 the
rights granted to Pirelli shall be modified as provided in Section 8.5.2.
4.8 PRICE OF CABLE WIRE. The price at which Cable Wire shall be sold by ASC
and ASC Affiliates and purchased by Pirelli for commercial applications pursuant
to this Section 4 shall be determined by the parties within two (2) years from
the date of this Agreement in accordance with SCHEDULE 4.8 attached hereto.
4.9 SALES OF SUPERCONDUCTOR WIRE TO PIRELLI. In consideration of the
contribution made by Pirelli through the 1990 and 1994 Agreements, Pirelli and
its Affiliates shall have the
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right, in any year following the first year in which ASC and its Affiliates
sell at least US $7,500,000 (seven and one-half million US dollars) worth of
Magnet Wire in Europe, to purchase from ASC and its Affiliates Superconductor
Wire to be used in the manufacture of Magnet Wire and to sell Magnet Wire only
in Europe. The price and other terms for the sale of Superconductor Wire to
Pirelli pursuant to this Section 4.9 shall be determined by future agreement
between the parties, but in any case shall be at least as favorable to Pirelli
as those on which Superconductor Wire in similar quantities and under similar
conditions is sold by ASC to third parties.
4.10 SUBLICENSE OF RIGHTS UNDER INCO AGREEMENT. In connection with the
joint ventures authorized by Section 4.5 or the license granted under Section
4.1 and to the extent it is permitted to do so, ASC will offer to sublicense the
wire forming technology, licensed to it pursuant to the Inco Agreement, to
Pirelli, Pirelli Affiliates, Pirelli's sub-licensees or Pirelli joint ventures
authorized by Section 4.5; and Pirelli, Pirelli Affiliates, Pirelli's
sub-licensees and Pirelli joint ventures authorized by Section 4.5 may accept
such sublicenses on the terms required by the Inco Agreement as needed in
connection with their manufacture and sale of Products.
4.11 ADDITIONAL LICENSES. In connection with the license granted pursuant
to Section 4.1 and to the extent it is permitted
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to do so, ASC will exercise its best efforts to cause its licensors of Contract
Technology to grant to Pirelli or Pirelli Affiliates, such rights as may be
required by Pirelli or Pirelli Affiliates, to exercise the rights in the Field
granted herein. ASC shall, within thirty (30) days after the execution of this
Agreement, supply Pirelli with a list of any such licenses, and shall up-date
such list twice per year before June 30 and December 31. If ASC, notwithstanding
exercising its best efforts, is unable to secure such rights for Pirelli or
Pirelli's Affiliates it shall promptly inform Pirelli giving full details
relating to the arrangement in question.
4.12 ROYALTY AMOUNTS. Under any royalty-bearing license granted pursuant to
Section 4.1 to Pirelli, Pirelli's Affiliates, or Pirelli joint ventures
authorized by Section 4.5, Pirelli will pay ASC royalties with respect to
Products (other than Control Cables or Power Cables) used or sold by or on
behalf of the relevant licensee, provided however that no royalty shall be
payable in relation to the use or sale of such Products purchased from ASC or
ASC Affiliates. The royalties shall be paid in an amount including (a) the
aggregate royalties payable by ASC to third parties with respect to the exercise
by or on behalf of the licensee of any rights sublicensed to the relevant
licensee hereunder (such payments required by any existing agreements of ASC to
be disclosed within ninety (90) days after the date of this
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Agreement and any payments required by future agreements of ASC to be
disclosed promptly after the execution of such agreements, subject to the
provisions of Section 2.16) and (b) a royalty with respect to Products (other
than Control Cables or Power Cables) used or sold by or on behalf of the
relevant licensee calculated from the net sales price of Products (other than
Control Cables or Power Cables) at a rate of **** of the net sales price for
Products (other than Control Cables or Power Cables) sold by or on behalf of the
licensee up to US $10,000,000 (ten million US dollars) in any year, and **** of
the net sales price for any excess over US $10,000,000 (ten million US dollars)
in Product (other than Control Cables or Power Cables) sales in any year. The
net sales price for any sale to a party which is neither Pirelli nor a Pirelli
Affiliate shall be defined as the gross sales price less (i) normal sales
discounts (ii) allowances for defective products, (iii) freight, (iv) insurance,
(v) packing, (vi) commissions, and (vii) any value added or other taxes levied
on the manufacture or the sale. The net sales price for any sale to Pirelli or a
Pirelli Affiliate shall be defined as the net sales price for the most recent
sale to a party which is neither Pirelli nor a Pirelli Affiliate involving
similar types and quantities of Products (other than Control Cables or Power
Cables). In the event that a net sales price cannot be established in this
manner, the applicable net sales price will be
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
negotiated in good faith by the parties, and if the parties cannot, in good
faith, agree on an applicable price, for the purpose of settling such dispute
only, royalties will be payable by the licensee at the royalty rate specified
above multiplied by *************************** of the direct manufacturing
costs (including, without limitation, materials, labor and energy) of the
Products (other than Control Cables or Power Cables) sold, however, the **** of
the direct manufacturing costs shall not be used for any other purpose,
including determining the net sales price of Products (other than Control Cables
or Power Cables).
It is understood that only one royalty under this Section shall be payable
in respect of any Product and that royalty shall accrue on the Product sold by
Pirelli, Pirelli's Affiliates, or Pirelli joint ventures authorized by Section
4.5 to a third party, except that the royalty due on sale of Cable Wire should
accrue on its sale to either a third party or to Pirelli or a Pirelli Affiliate
as provided in this Section 4.12.
4.13 TRANSFER COSTS. Pirelli shall reimburse ASC its reasonable expenses,
including salaries and other reasonable and customary benefits of ASC personnel,
for the implementation of the licenses granted pursuant to Section 4.1, of
Contract Technology relating to facilities, equipment and processes employed in
ASC's manufacture of Cable Wire.
4.14 DISCLOSURE OF TECHNOLOGY AND TECHNICAL ASSISTANCE BY
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ASC. In connection with the license granted pursuant to Section 4.1, ASC shall
disclose to Pirelli, on a continuing basis, such licensed Contract Technology as
it exists from time to time during the term of this Agreement as may be
necessary or useful for Pirelli to exercise such rights and shall, at the
request of Pirelli, provide reasonable technical assistance as hereinafter
provided.
The disclosure of Technology by ASC, for use by Pirelli in connection with
the exploitation of Pirelli's rights under this Section 4, shall take place
through exchange of written reports, personal meetings, visits of Pirelli
personnel to the facilities of ASC and/or ASC's Affiliates and ASC allowing
Pirelli access to and the right to review and copy documents, interview
personnel of ASC etc., at reasonable intervals, during normal office hours and
with reasonable prior written notice.
ASC shall, at the request of Pirelli, provide Pirelli with Contract
Technology and technical assistance as reasonably required to permit Pirelli to
exercise the rights granted in section 4.1 through:
(a) supply of technical information such as, without limitation,
drawings, blue-prints, raw material and technical specifications, machinery,
equipment and plant designs, manufacturing data and procedures, maintenance
procedures, manuals, list of suppliers, quality control and waste handling;
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(b) training of Pirelli personnel in the facilities of ASC;
(c) technical assistance as reasonably requested by Pirelli by ASC's
personnel at the facilities of Pirelli, including assistance for installation
and commissioning of the first plant of Pirelli;
(d) as reasonably requested by Pirelli, periodic visits of ASC's
technicians to Pirelli facilities for reasonable periods of time (e.g. visits by
two technicians each for a period of two days once every six (6) months) to meet
with Pirelli's technicians to discuss the techniques for the manufacture of
Cable Wire and the maintenance of the equipment for such manufacture;
(e) reasonable availability of ASC's technicians to answer questions and
solve problems that Pirelli may submit in writing or by phone.
The duration and timing of the technical assistance and the training shall
be defined by the parties in good faith negotiations, provided that Pirelli
shall, prior to starting its own production, have the right to send up to ten
(10) technicians to any Cable Wire manufacturing facility of ASC or ASC's
Affiliates or, if ASC or its Affiliates have no such facility, the manufacturing
facility of a joint venture of ASC, for a period of up to six (6) months each to
receive training, and further provided that ASC shall provide reasonable
technical assistance
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for a period of six (6) months to the first facility constructed by Pirelli,
Pirelli's Affiliates or Pirelli-ASC joint ventures to provide assistance in the
installation and commissioning of such facility for the manufacture of Cable
Wire.
As provided in section 4.14, Pirelli shall pay all of ASC's reasonable
expenses in connection with any and all technical assistance, training and
transfer of information envisaged or provided for under this Section 4.15.
Pirelli may from time to time supply to ASC data and information relating
to its manufacturing techniques relating to Cable Wire as required to permit ASC
to supply Pirelli and Pirelli's Affiliates with Cable Wire of similar quality as
the Cable Wire produced by Pirelli.
SECTION 5. 1990 AGREEMENT AND THE 1994 AGREEMENT
5.1 PARTIAL TERMINATION OF THE 1990 AGREEMENT. The 1990 Agreement shall
terminate upon payment to ASC of all payments due to ASC from Pirelli under the
1990 Agreement, and thereafter shall have no further legal effect except that
the following provisions of the 1990 Agreement shall remain in effect: Article
II, Section 2.13 (RIGHTS AND OBLIGATIONS OF CLOSE OF RESEARCH PROGRAM) and, to
the extent required by Section 2.13, Article I (Definitions) and Article III
(NEW TECHNOLOGY). ASC agrees that it has received from Pirelli all payments due
to ASC from Pirelli under the 1990 Agreement.
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5.2 PARTIAL TERMINATION OF THE 1994 AGREEMENT. The 1994 Agreement shall
terminate upon payments to ASC of all payments due to ASC from Pirelli under the
1994 Agreement, and therefore shall have no further legal effect except that the
following provisions of the 1994 Agreement shall remain in effect: Section 3.1
and 3.2; Article 1 (Definitions); and Article 7 (Confidentiality).
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF PIRELLI. Pirelli represents and
warrants to ASC as follows:
6.1.1 ORGANIZATION AND AUTHORITY. Pirelli is a corporation duly
organized, validly existing and in good standing under the laws of the Republic
of Italy and has full corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Pirelli is
qualified and in good standing as a foreign corporation doing business in all
jurisdictions where failure to so qualify would have a material adverse effect
on its business and/or assets. Pirelli has full corporate power and authority to
enter into and perform its obligations under this Agreement in accordance with
its terms.
6.1.2 AUTHORIZATION; NO VIOLATION. The execution, delivery and
performance of this Agreement by Pirelli have been duly authorized by all
requisite corporate action of Pirelli, and this Agreement constitutes the valid
and binding obligation of
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Pirelli, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the performance by Pirelli of its obligations
hereunder shall (i) violate any provision of its Certificate of Incorporation or
by-laws; (ii) violate, conflict with, or result in the breach or termination of
any agreement or instrument to which Pirelli is a party or by which it is bound,
which breach or termination would adversely affect Pirelli's ability to perform
its obligations under this Agreement; (iii) violate any judgment, order,
injunction, decree or award against, or binding upon, Pirelli; or, (iv)
constitute a violation by Pirelli of any law, directive or regulation of any
jurisdiction.
6.1.3 APPROVALS AND CONSENTS. The execution and delivery of this
Agreement and the performance by Pirelli of its obligations hereunder do not
require notice to, or the approval or consent of, any third party, including
without limitation any educational institution, or governmental or other
regulatory agency, except as provided in section 9.15.
6.2 REPRESENTATIONS AND WARRANTIES OF ASC. ASC represents and warrants to
Pirelli as follows:
6.2.1 ORGANIZATION AND AUTHORITY. ASC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own, lease and operate its
properties and
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to carry on its business as now being conducted. ASC is qualified and in good
standing as a foreign corporation doing business in all jurisdictions where
failure to so qualify would have a material adverse effect on its business
and/or assets. ASC has full corporate power and authority to enter into and
perform its obligations under this Agreement in accordance with its terms.
6.2.2 AUTHORIZATION; NO VIOLATION. The execution, delivery and
performance of this Agreement by ASC has been duly authorized by all requisite
corporate action of ASC, and this Agreement constitutes the valid and binding
obligation of ASC, enforceable in accordance with its terms. Neither the
execution and delivery of this Agreement nor the performance by ASC of its
obligations hereunder shall (i) violate any provision of its Certificate of
Incorporation or by-laws; (ii) violate, conflict with or result in the breach or
termination of any agreement or instrument to which ASC is a party or by which
it is bound, which breach or termination would adversely affect ASC's ability to
perform its obligations under this Agreement; (iii) violate any judgment, order,
injunction, decree or award against, or binding upon, ASC; or, (iv) constitute a
violation by ASC of any law, directive, or regulation of any jurisdiction.
6.2.3 APPROVAL AND CONSENTS. The execution and delivery of this
Agreement and the performance by ASC of its obligations hereunder do not require
notice to, or the approval or
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consent of, any third party, including without limitation any governmental or
other regulatory agency, except as provided in section 9.15.
6.2.4 THIRD PARTY AGREEMENTS AND INTELLECTUAL PROPERTY RIGHTS. ASC has
obtained certain intellectual property licenses from third parties and to the
extent that it is permitted to do so by such licenses, it will sublicense to
Pirelli and its Affiliates on reasonable terms any intellectual property covered
by those licenses which is necessary in order for Pirelli or its Affiliates to
exercise the rights which Pirelli and its Affiliates have received or are to
receive under this Agreement. Any Cable Wire sold by ASC to Pirelli shall be
sold free of any claim by any third party with which ASC has any agreement that
the sale is in breach of such agreement, and from any claim by any third party
licensor of ASC with respect to any intellectual property licensed to ASC by
such licensor.
SECTION 7. CONFIDENTIALITY
7.1 OBLIGATION TO MAINTAIN SECRECY. Each party undertakes to keep secret
and confidential and to use only as provided in this Agreement, all Technology
disclosed to it by the other party during the term of this Agreement.
7.2 EXCEPTIONS. Notwithstanding the provisions of Section 7.1, a party
receiving Technology from the other party may disclose such Technology:
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(a) pursuant to an order or judgment of any competent court or
governmental body, provided that the receiving party so obliged to disclose
shall give written notice of such order or judgment to the other party prior to
making such disclosure and shall use reasonable efforts to obtain a protective
order covering such Technology,
(b) if required to do so by any law, rule or regulation provided
notice has been given as required by Clause (a) above,
(c) if such Technology is or becomes generally available to the public
through any means other than breach of this Agreement,
(d) if such Technology is disclosed to the receiving party without any
obligation of confidentiality by a third party who has the right to make such
disclosure,
(e) if such Technology has been developed independently by the
receiving party without use of or benefit from such Technology of the other
party as can be shown by written evidence,
(f) if such Technology was in the possession of the receiving party
without an obligation of confidence prior to the 1990 Agreement, as can be shown
by written evidence,
(g) if the disclosing party provides advance written authorization for
the disclosure,
(h) if such Technology was disclosed by the disclosing party to a
third party other than under conditions of confidence,
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(i) to those of its employees, consultants, contractors, who have
agreed in writing to be bound by the same confidentiality obligations contained
in this Section 7 and who need to use such Technology for the purposes of this
Agreement, provided with respect to such consultants and contractors that
disclosure shall be made on a "need to know" basis for work performed on the
behalf of Pirelli or its Affiliates.
7.3 MATTERS NOT CONSIDERED PUBLIC KNOWLEDGE. For the purposes of Section
7.2, Technology shall not be deemed to be generally available to the public,
disclosed without any obligation of confidentiality or conditions of confidence,
or developed independently (hereinafter in this Section 7.3 collectively
referred to as "public knowledge"), if
(a) the general principle is public knowledge or known but the
particular practice is not itself public knowledge,
(b) the generic information is public knowledge but the specific
information is not itself public knowledge or,
(c) it constitutes a combination (not itself public knowledge) of
information which is public knowledge.
7.4 PERIOD OF CONFIDENTIALITY. The provisions of this Section 7 shall
remain in effect for five (5) years after the expiration or termination of this
Agreement or any extensions thereto, but in no event less than ten (10) years
from the date of this Agreement.
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7.5 COVENANT OF ASC. ASC undertakes, notwithstanding the provisions of
Section 7.2 (e), (f) and (h), for the period of confidentiality in section 7.4,
not to make available Contract Technology to the public in any way which would
be materially detrimental to or materially diminish the value of the rights
granted to Pirelli under this Agreement.
SECTION 8. TERM AND EXTENSION
8.1 TERM OF RESEARCH AND DEVELOPMENT PROGRAM I. Insofar as they relate to
the Research and Development Program I (including redirection thereof as
provided in Section 2.17), the provisions set forth in Section 2 of this
Agreement shall remain in force until October 1, 1999 unless earlier terminated
or extended pursuant to this Section 8. Except as otherwise provided herein,
termination of a Program (including but not limited to Research and Development
Program I) shall not affect any other rights or obligations of the parties
contained in this Agreement.
8.2 TERM OF AGREEMENT. Unless earlier terminated or extended pursuant to
this Section 8, this Agreement shall expire twenty (20) years from the date of
ASC's first commercial supply of Cable Wire to Pirelli or to any Pirelli
Affiliate, twenty-five (25) years from the date of this Agreement, or upon the
expiration of the last-to-expire patent included in Contract Technology licensed
to Pirelli hereunder, whichever is the last to occur.
8.3 EARLY TERMINATION. Pirelli shall have the right to
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terminate Research and Development Program I, the Business Plan, and this
Agreement upon (a) the failure of ASC, after consultation, to provide and
continue to provide qualified personnel and appropriate resources to enable
Research and Development Program I and the Business Development Plan to progress
in accordance with the goals and criteria set forth in Exhibit 2.1, (b) a
determination by Pirelli that further development in Research and Development
Program I is not technically feasible, and/or (c) a determination by Pirelli
that the results of the clearance in section 2.16 or the non-availability of
additional licenses under Section 4.11 do not justify the further financing of
Research and Development Program I in accordance with section 2.12. Pirelli
shall have the right to terminate its participation in any other Program upon
(d) the failure of ASC, after consultation, to provide and continue to provide
qualified personnel and appropriate resources to enable such Program to progress
in accordance with the goals and criteria set forth in statement of work for
such Program, (e) a determination by Pirelli that further development pursuant
to such Program is not technically feasible, or (f) a determination by Pirelli
that the results of the clearance in section 2.16 for such Program does not
justify the further financing.
Subject to Section 4.7, either party shall have the right to terminate a
Program, the Business Development Plan, and this
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Agreement upon a material breach by the other of any representations,
warranties, covenants or obligations hereunder. Termination pursuant to the
provisions of this Section 8.3 shall be accomplished by the giving of written
notice by the terminating party to the other party of its election to terminate
and specifying the date of termination, the failure or the breach, such notice
to be given not less than 90 days prior to such date of termination. If such
breach can be cured, the party receiving such notice shall have the right to
prevent termination by curing the specified breach within such 90 day period.
8.4 EXTENSIONS.
(a) This Agreement and/or a Program may be extended by mutual agreement.
(b) If either party requests an extension of a Program, both parties shall
then negotiate in good faith to reach an agreement on such an extension; however
if agreement is not reached, Pirelli nonetheless shall have the right to extend
a Program in a manner consistent with the then-current statement of work for
such Program and under the terms and conditions set forth in Section 2, provided
that the amount paid by Pirelli to ASC for such extended Program shall be equal
to the amount paid or to be paid by Pirelli with respect to the last year of the
then-current Program. All of the other terms of this Agreement shall be
effective with respect to any such extension.
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8.5. EFFECT OF TERMINATION OR EXPIRATION.
8.5.1 Except as specifically otherwise set forth in this Section 8.5, upon
termination (but not expiration) of Research and Development Program I as
provided in Section 8.5.2 or 8.5.3, or upon either termination or expiration of
this Agreement, the provisions of this Agreement shall no longer have any legal
effect except that the following provisions shall survive and shall not be
subject to any limit of time except those expressed in the provisions
themselves:
Section 1 (Definitions)
Section 3 (Ownership of Research and Development Program Results)
Section 4.1 (Pirelli's Exploitation Rights)
Section 4.2 (ASC's Exploitation Rights)
Section 4.7 (Irrevocability of Pirelli's Exploitation Rights)
Section 5 (1990 Agreement and 1994 Agreement)
Section 6 (Representations and Warranties)
Section 7 (Confidentiality)
Section 9.1 (Indemnification)
Section 9.2 (Non-Solicitation)
Section 9.3 (Export Controls)
Section 9.5 (Resolution of Disputes)
Section 9.6 (Publicity)
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Section 9.7 (Assignment)
Section 9.8 (Notices)
Section 9.9 (No Prejudice by Inaction)
Section 9.11 (Written Amendments Only)
Section 9.12 (Applicable Law; Entire Agreement; Headings)
8.5.2 Termination of a Program shall not be considered termination of this
Agreement. However, if Pirelli terminates the Programs prior to
****************** or before paying to ASC the amount of US $10,000,000 pursuant
to Section 2.12 for reasons other than a breach of this Agreement by ASC
(including the provisions of Section 8.3(a)) then the rights granted to Pirelli
in Section 4.1(a) shall become non-exclusive, Pirelli shall have no rights under
Sections 2.17 and 4.1(b), and ASC shall have no further obligations under
Section 2.
8.5.3 If this Agreement is terminated by Pirelli as a result of a breach of
this Agreement by ASC (including the provisions of Section 8.3(a)), or Research
and Development Program I (including any redirection thereof as provided in
Section 2.17) expires prior to the supply by ASC to Pirelli of Cable Wire
meeting the Specifications and ASC elects not to continue Research and
Development Program I notwithstanding Pirelli's request to do so, then this
Agreement and all rights of ASC under Sections 4.3(c), 4.4, 4.5 and 4.6 shall
immediately terminate, and ASC's rights under Sections 4.2 (ii) and (iv) shall
become non-exclusive.
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8.5.4 If Pirelli elects not to participate in a Subsequent Research and
Development Program and the period in Section 2.17 (c) (iii) has elapsed for
such Subsequent Research and Development Program or if Pirelli terminates its
participation in a Subsequent Research and Development Program, for reasons
other than those of Section 8.3(d), (e) or (f), prior to the supply by ASC to
Pirelli of a product meeting the specifications established for such Subsequent
Research and Development Program, then (i) all rights of Pirelli in any Contract
Technology developed in the course of such Subsequent Research and Development
Program shall terminate and such Contract Technology shall be considered
Excluded Technology; (ii) ASC shall have the right to manufacture, use and sell
(but not to sublicense others to manufacture) Cable Wire employing Excluded
Technology. To the extent that ASC requires the right to use Contract Technology
to exercise its right to use Excluded Technology to manufacture, use and sell
Cable Wire Pirelli shall, at the request of ASC, grant ASC such rights on
reasonable terms and conditions to be agreed upon.
8.5.5 Upon expiration (but not termination) of this Agreement, Pirelli
shall have a fully paid-up license to use Contract Technology licensed pursuant
to Section 4.1 with no further payments to ASC. Expiration of this Agreement
shall not affect the rights or obligations of ASC, ASC Affiliates, Pirelli or
Pirelli Affiliates with respect to any joint venture in which
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ASC or an ASC Affiliate, one hand, and Pirelli and a Pirelli Affiliate on the
other hand, have an interest.
SECTION 9. MISCELLANEOUS
9.1 INDEMNIFICATION. ASC acknowledges that substantially all research
activities conducted pursuant to this Agreement shall be carried on in
facilities controlled by it. All activities carried on by either party pursuant
to this Agreement in the United States of America shall be made in full
compliance with all applicable United States federal, state and local laws,
regulations and ordinances, including, without limitation, all such laws,
regulations and ordinances pertaining to the protection of the environment and
hazardous or toxic substances or wastes as defined in such laws, regulations or
ordinances. Each party shall indemnify and hold the other harmless from and
against any and all claims, liabilities, costs, losses or expenses suffered by
the other resulting from or arising in connection with any violation or alleged
violation of any such laws, regulations or ordinances by the party, or resulting
from the negligence of the party or from the intentional act or failure to act
of the party, if the other party has given the party prompt written notice of
the assertion of any such claim against it and cooperates with the party in the
defense of any such claim.
9.2 NON-SOLICITATION. While this Agreement is in effect and for a period of
one year after it has been terminated, neither
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party will employ, nor solicit for employment, any executive, officer or other
employee of the other or its Affiliates. Each party acknowledges that any
violation by it of the covenant contained in this Section 9.2 is likely to cause
damage to the other party, which may not be adequately compensated by money
damages, and each party agrees that this Section 9.2 may be enforced by an order
for specific performance or injunctive or other appropriate relief by a court of
competent jurisdiction, in addition to any other remedies provided by law.
9.3 EXPORT CONTROLS. The parties agree to comply with all applicable export
control laws and regulations of the United States, Italy, or any other country.
The parties will not export or re-export the technical data, computer software,
prototypes and other commodities which are the subject of this Agreement to any
prohibited destination, including, but not limited to, Libya, Iran, Iraq, South
African military or police entities, Syria, and other destinations found in
Country Groups Q, S, W, Y or Z in the U.S. Export Administration Guidelines. The
parties will obtain all appropriate export and re-export authorizations required
under the Export Administration Regulations of the U.S. Department of Commerce,
the International Traffic in Arms Regulations of the U.S. Department of State,
the Nuclear Regulatory Commission, and any other government agency controlling
the export of technical data, computer software, prototypes and other
commodities which
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are the subject of this Agreement. Each party neither represents that a license
shall not be required nor that, if required, it shall be issued. To the extent
licenses are required, each party will use its best efforts to obtain, or to
assist the other party to obtain, them.
9.4 FORCE MAJEURE. If the performance of any obligation under this
Agreement is prevented by any cause beyond the reasonable control of a party,
such party shall be excused from such performance for so long as is reasonable.
The party so prevented shall use all practical efforts to perform its
obligations as soon as possible.
9.5 RESOLUTION OF DISPUTES. Any dispute arising under or in connection with
this Agreement shall be resolved by arbitration at a mutually agreeable site
within four hundred (400) kilometers of New York City under the rules of the
American Arbitration Association, applying the law of the State of New York.
Demands for arbitration shall be made in writing and shall be served upon the
party to whom the demand is addressed by registered mail. Application may be
made to any court having jurisdiction for judicial acceptance of the award and
for an order of enforcement.
9.6 PUBLICITY. During the term of this Agreement and any extension thereof,
and unless otherwise required by court order, governmental law or regulation, or
any other operation of law, neither ASC nor Pirelli shall issue, nor permit its
employees to
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issue, any news release, advertisement, publicity or promotional material, or
technical articles or paper that quotes any of its employees, officers or
directors in connection with the Research and Development Program, or that
discloses Technology of the other party, the results of the Research and
Development Program or any of the terms of this Agreement (except insofar as
such Technology, results or terms previously have been properly disclosed),
without the prior review and consent of the other party. All such material shall
be submitted by fax to:
FOR PIRELLI: A. Bolza
FOR ASC: G. Yurek, President
The recipient shall be deemed to consent to the technical article or paper only
if the recipient does not respond within ten (10) business days and shall be
deemed to consent to any other publication hereunder if the recipient does not
respond within fifteen (15) business days.
9.7 ASSIGNMENT. This Agreement shall be binding upon, and inure to the
benefit of, ASC and Pirelli and their respective successors and permitted
assigns. Neither party may assign its rights and obligations under this
Agreement without the prior written consent of the other party, EXCEPT THAT, (i)
either party may assign all or any part of its right, title and interest in and
to this Agreement to any entity that succeeds to all or substantially all of the
business assets of the assignor to which
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this Agreement relates, provided however that if an assignee of either party
uses a technology for the manufacture of Products which permits such assignee to
manufacture the Products without using Contract Technology licensed hereunder,
then, in case Pirelli is the assignor, the rights in Section 4.1 a. shall become
non-exclusive and, in case ASC is the assignor, the rights in Section 4.2 shall
become non-exclusive, and (ii) either party may assign all or any part of its
right, title and interest in and to this Agreement (other than ASC's obligations
under Section 2 which may be assigned under this clause (ii) only with the
consent of Pirelli) to an Affiliate or Affiliates without giving prior notice to
or obtaining the consent of the other party. In the event of any such assignment
or sublicense under this Section 9.7, the assigning party shall remain liable
for all of its obligations under this Agreement accrued prior to such assignment
or sub-license and shall continue to be bound by the secrecy obligations in
Section 7.
9.8 NOTICES. Any notice or communication given pursuant to this Agreement
by either party to the other shall be in writing and delivered or mailed by
registered or certified mail, airmail postage prepaid (airmail notices shall be
deemed to have been given 10 days after having been mailed), as follows:
If to Pirelli: Pirelli Cavi S.p.A,
Viale Sarca, 202
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20126 Milano MI
Italy
Attention: Director of Research and Development
If to ASC: American Superconductor Corporation
Two Technology Drive
Westborough, MA 01583
Attention: President
9.9 NO PREJUDICE BY INACTION. NO failure or delay on the part of a party to
exercise any of its rights under this Agreement shall be construed to prejudice
its rights in connection with that or any subsequent default.
9.10 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be construed
to constitute either party as the partner, joint venturer, agent, employee or
Affiliate of the other, it being intended that the parties shall remain
independent contractors and neither party shall be liable for the obligations,
liabilities or representations of the other.
9.11 WRITTEN AMENDMENTS ONLY. No agreement or understanding varying or
extending this Agreement will be binding upon either party unless it is in
writing and signed by a duly authorized officer or representative of both
parties.
9.12 APPLICABLE LAW; ENTIRE AGREEMENT; HEADINGS. This Agreement shall be
construed in accordance with the laws of the
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State of New York. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument. This Agreement contains the entire understanding
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings. The headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
9.13 COVENANTS WITH RESPECT TO CONDUCT OF LITIGATION. The parties agree,
with respect to the conduct of any litigation (including any mediation or
arbitration) regarding any aspect of Contract Technology licensed to Pirelli
pursuant to Section 4.1, as follows:
9.13.1 Each party shall promptly notify the other regarding any
suspected or ascertained infringement of such rights of which it becomes aware.
9.13.2 Pirelli shall have the right to take any action it deems
necessary against suspected or ascertained infringement of Contract Technology
in the Field, provided, with respect to such Technology licensed to ASC from
third parties, that ASC itself has been granted such right and that such right
is transferable to Pirelli. ASC shall disclose any such limitations in its
agreements with third parties to Pirelli as part of the clearance pursuant to
Section 2.16. Pirelli shall inform ASC
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before commencing any suit involving any Contract Technology. If Pirelli is
sued it shall promptly notify ASC.
9.13.3 If Pirelli sues or is sued ASC shall have the right to join in
such litigation at its own expense. Any such suit shall be conducted by Pirelli,
provided that ASC shall have the right, but not the obligation, to join in any
such suit at its own expense, and also shall have the right to control any such
suit to the extent that such suit involves any ASC Contract Technology
applicable outside the Field. ASC shall exercise the right to take control over
such suit within thirty (30) days of receipt of Pirelli's written request to
make such election. If ASC does not exercise its right to take control within
said thirty-days-period, ASC shall be deemed to have waived such right to do so.
9.13.4 If ASC wants to sue, it shall have the right to so, provided
that it shall inform Pirelli in advance. If ASC brings a suit or is sued, to the
extent that such suit involves any infringement of Contract Technology in the
Field, Pirelli shall have the right to join in such litigation at its own
expense, provided that any such suit shall be conducted by ASC.
9.13.5 Each party shall keep the other party constantly and fully
informed in relation to any litigation pursued by it under this Section and
shall allow representatives of the other party to consult with its attorneys
with respect to
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all aspects of such litigation.
9.13.6 Pirelli shall have the full control of the direction of any
lawsuit which is conducted by Pirelli and does not involve ASC Contract
Technology applicable outside the Field, including the settlement thereof,
subject to the provisions of section 9.13.7
9.13.7 Neither party shall enter into any settlement or consent
judgment or voluntary final disposition of any lawsuit, without the consent of
the other, if such settlement would require such other party to be subject to an
injunction or to make a monetary payment or other consideration, other than
legal fees and expenses. Neither shall either party enter into any such
settlement, consent judgment or voluntary final disposition that affects any
rights owned by or licensed to the other, which consent shall not be
unreasonably withheld. ASC will not enter into any settlement or consent
judgment or voluntary final disposition of any suit commenced by or against
Pirelli as to which ASC has assumed control as provided in Section 9.13.3
without the consent of Pirelli, which consent will not be unreasonably withheld.
9.13.8 Except as otherwise provided, each party shall cover its own
costs in connection with any litigation under this section. Any recovery made
either by Pirelli or ASC in any lawsuit under this Section shall be applied
first to repay
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Pirelli's and ASC's respective actual legal out-of-pocket expenses and fees, or
equitable proportions of them, associated with any lawsuit under this Section
out of any recovery made by either Pirelli or ASC; and if ASC and Pirelli are
both parties to the suit, any excess amount shall be divided equally between
them.
9.14 PROVISIONS RELATING TO THE BANKRUPTCY CODE. All rights and licenses
granted under this Agreement by either party to the other party are, and shall
be deemed to be for the purpose of Section 365(n) of Title 11 of the United
States Code (collectively, the Bankruptcy Code), licenses of rights to
"intellectual property," as defined under Section 101 of the Bankruptcy Code.
The parties agree that: (i) each party, as licensee or sublicensee under this
Agreement, shall retain and may fully exercise all of its rights and election
under the Bankruptcy Code, including, without limitation, any and all rights to
use and exploit all technology and other rights licensed hereunder and any
improvements and developments thereof in accordance with the provisions of this
Agreement, to the extent that the technology and other rights licensed hereunder
or improvements or developments exist prior to the commencement of case under
the Bankruptcy Code involving the other party (as debtor) and regardless of when
a patent application, continuation application or any other application or
registration with respect to technology and other rights licensed hereunder or
any improvements
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or developments thereof is filed; and (ii) all rights to sue and exploit any and
all intellectual property rights relating to the technology and other rights
licensed hereunder and any improvements or developments thereof in accordance
with the provisions of this Agreement, shall be deemed to exist immediately
prior to the commencement of such case under the Bankruptcy Code, regardless of
which the technology and other rights licensed hereunder, improvements or
developments arise.
9.15 HART-SCOTT-RODINO AND EUROPEAN COMMISSION FILINGS.
(a) As promptly as practicable after the execution of this Agreement,
Pirelli and ASC shall:
(i) file all reports and notifications that are required to be
filed under the Hart-Scott-Rodino Act and shall cooperate in connection with
such filings or responses to requests for additional information;
(ii) file all reports and notifications that may be required to
be filed with the Commission of the European Community and shall cooperate in
connection with such filings or responses to requests for additional
information.
The parties shall use their best efforts to resolve objections, if any, as
the Antitrust Division of the Department of Justice, the Federal Trade
Commission, the European Commission, state antitrust enforcement authorities or
competition authorities of any other jurisdiction may assert under the antitrust
and
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competition laws with respect to the transaction contemplated hereby.
(b) The entering into force of the license granted under Section 4 of this
Agreement is subject to approval of this Agreement under the Hart-Scott-Rodino
Act. All other provisions of this Agreement enter into force on the effective
date.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first written
above.
PIRELLI CAVI S.p.A. AMERICAN SUPERCONDUCTOR CORPORATION
By: /s/ Giusseppe Morchio By: /s/ G. J. Yurek
------------------------- ----------------------------
Its: Its: President
------------------------ ---------------------------
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EXHIBIT 2.1
Pirelli/ASC
-----------
Technical Development Program Statement of Work
-----------------------------------------------
FOREWORD
The Research, Development and Exploitation Agreement, between Pirelli Cavi
S.p.A. and American Superconductor Corporation (the "Agreement") has established
the basic requirements and time lines needed for HTS Cable Wire to be evaluated
for commercial power transmission applications. During the period between 1
February 1990 and 31 September 1995, the parties developed, manufactured and
evaluated the MCA1 wire and conceived and demonstrated the laminated Cable Wire
(a new Cable Wire geometry which can significantly enhance performance and
minimize future development cost). The Project Review Board and Business Review
Board have judged that the accomplishments under this Agreement are sufficient
to demonstrate the potential for HTS Cable Wire to be economically and
technically viable, and therefore warrants additional focused effort to produce
a commercially viable HTS Cable Wire by October 1999.
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CONFINDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSION.
TECHNICAL PROGRAM OBJECTIVES
o The principal objective of the Phase III Pirelli/ASC Technical
Development is to develop HTS wire that meets the specifications for
cable applications.
o A second objective of the program is for Pirelli/ASC to analyze and
model the future potential for HTS cable technology to be economically
competitive with ************ technology upon reaching
**************** wire production level.
Details of the technical program plan will be established and updated by the
Project Review Board. Details of the business development program plan will be
established and updated by a Development Review Board which shall substitute the
Business Review Board under the 1994 Agreement. These plans will be based on the
following general outline.
WIRE SPECIFICATIONS FOR POWER CABLE APPLICATIONS
The specification is focused on achieving a commercially viable HTS Cable Wire
by ************. It is based on the current Pirelli/ASC understanding of
*************************** ************, suitable for **********************
and **** ********** applications. This specification will be updated on a
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
regular basis, as new information is developed concerning wire operating
performance, commercial cable performance and commercial cable system costs.
The Cable Wire specification is composed of two exhibits; Table 1 provides the
**************************** performance and ******** ********* targets as a
function of *************, Table 2 provides basic Cable Wire requirements and
objectives for all wires produced between *************. This combined wire
specification (Table 1 and 2) defines the specifications and the quantifiable
method for Pirelli to monitor **************************** for the Cable Wire
during the Phase III of this Pirelli/ASC Technical Development Program.
TABLE 1: Table 1 provides a listing of the **************** ********** as a
function of time. The target milestones include; (a) **************** in
*************, indicating the potential for
************************************, (b) demonstration of the
******************* in the *************, assuming a ************
***************, and (c) the ASC theoretical *************** cost per
*************, assuming Cable Wire manufacture in ******** quantities and
********************* price. These milestones provide a meaningful way to judge
future potential of ******** ******************, the existing performance
characteristics in
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
************** lengths and a method for ************************* over time.
ASC has completed a preliminary analysis of the direct material and labor cost
for Cable Wire produced in 1999, at ************ manufacture volume. The
projected direct costs assume **** ******* (no **************** has been
applied), constant cost for *********** market price
***************************** associated with ****** and **** fabrication, and
************ costs associated with *********************** (no **************
are included).
The forecast direct costs are divided by the following categories:
*************** cost (******): $******
*************** cost (**********): $******
************ cost: $******
------
Total Forecast Direct Cost: $******
ASC will provide to Pirelli a revised forecast for direct material and labor
cost per meter of Cable Wire on December 1996, 1997 and 1998. The forecast will
define the projected **************, assuming: ************ manufacture volume,
manufacture experience and new processes developed during the given year, and
dollar
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
values will be provided in the "then year" dollars.
TABLE 2: Table 2 defines the ************************ for the
**************************************** program. ******** ******************
are defined in terms of the ******************* ***** for each given period.
TECHNOLOGY DEVELOPMENT
A *********** technology development program is envisioned to improve wire
performance to meet the ********************* *****************************
specification: ***************** ************************** and *******. The
Program ********* ***** for each element is identified in Table 1.
WIRE PERFORMANCE
The objective for this effort is to produce a Cable Wire which will be
technically and economically viable for **************** ********* product.
Wire Performance is divided into two major categories; (a) *************
optimization (optimization of ******************, Table 2) and (b) ***********
optimization (optimization of the **************** of the *************, Table
1).
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
The ********* Cable Wire is composed of *********************** ******** to an
**************** (the traditional ********).
This Cable Wire configuration offers the wire designer ***** new ******** in
incorporating ************* and *************** materials into Cable Wires. The
**************************** will serve as the ******** for subsequent Cable
Wire development. The ************** development effort will be focused on
achieving the Table 2 objectives: significantly improving the ***************
******************************* and ********************* (which affects
***********************).
This ************************************** will be enhanced over time by
replacing the ******** with subsequently *************** ***************. The
intent is to qualify one ******** Cable Wire for
************************************************************ and ************,
and then **************** Cable Wires can be qualified with significantly less
effort as *** ***************************************** are ******** into
********** Cable Wire ***********************.
ASC will take the critical current performance enhancements discovered and
funded by the ASC R&D group (typically ********
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
*********************) and define and demonstrate the manufacture process to
produce *****************************************.
Topics under the Wire Performance task include: ********** ********* vs
***********, **************, ****************, ****** *********,
*******************, ************, *****************, ***********************,
*********, *******, *****, **********, ** ****. ****************** vs
****************, ****************, ****************. ********************** vs
******, ***********, ****************, *******, ***********************,
*************, ******************, ************** and *****************.
LONG LENGTH WIRE AND COST
The objective for this effort is to develop and implement a Cable Wire
manufacture and test process which will produce technically and economically
viable Cable Wire for ************************** product.
ASC will provide to Pirelli a revised forecast for direct material and labor
cost per meter of Cable Wire on December 1996, 1997 and 1998. The forecast will
define the projected 1999 unit cost, assuming: 1000 km/year manufacture volume,
manufacture experience and new processes developed during the given year, and
dollar
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<PAGE> 78
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
values will be provided in the "then year" dollars.
The strategy for reducing the ********* for the commercial HTS Cable Wire is
based on the following elements: Increase ********************** to reduce the
********* unit and increase *****. This can be accomplished by ********** the
**** and ***** *************** and ******. Implement ********** for ******
*********** to ************. Implement ********************* and
************************** to ************** and ********* *******. Maximize
********************** and ********, ***** ****** to **************. Maximize
***************** to reduce ***** per unit and **************. Implement method
for **** ********************* to ************ per unit and **************.
Establish confidence using ************** vs ************ to ************ per
unit and **************. Reduce ************ unit **** by strengthening
********************. Develop methods for further reducing **************.
AC LOSS
The objective for this effort is to characterize the ** performance of each
Cable Wire generation and working closely with Pirelli determine the
relationship between ************* *********** and the ************** for the
****************
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
*********. The intent is to define the ************************** needed and
possible for ***************************. This effort will provide
***************** guidance for the **************** ************ effort.
PROGRAM MANPOWER AND SPENDING BUDGET
Pirelli funding for the Phase III Pirelli/ASC Technical Development Program will
be applied to the tasks defined in the Technology Development Section above. The
ASC Manufacture Development efforts will be directed to the *********** of the
******************. The average annual budget for this activity is **********
and a ***************** is anticipated. This program will yield a
**********************************.
RECORDS AND REPORTS
ASC will prepare reports in accordance with section 2.11 of the Agreement
concerning all expenditures made or costs incurred in connection with the
Research and Development Program and on all expenditures relating to its
research and development on ************************, ********** of
************************ and/or **** and **** containing
************************, in addition to the amounts paid by Pirelli, in
accordance with
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
section 2.4. These reports shall be submitted to Pirelli at least once each
calendar quarter, within fifteen (15) days after the end of the quarter, and
will include:
(a) a detailed statement of all expenditures made or costs incurred in
connection with the above items; and
(b) projections of expenditures required in connection with the Research
and Development Program for each of the four calendar quarters following the
date of such reports.
BUSINESS DEVELOPMENT PROGRAM
- ----------------------------
Pirelli and ASC will form a Development Review Board which shall substitute the
Business Review Board under the 1994 Agreement, which shall meet on a
semi-annual basis. The objectives for this effort will be to prepare Pirelli and
ASC for the exploitation of the license granted to Pirelli under this Agreement
and in particular to exchange information concerning:
1. the ****** for ********** and ***** and ************** made therefrom with
particular reference to ****** needs/requirements;
2. ****** development;
3. definition of ************************ of ********** and ****** to meet
such market needs/requirements;
4. status of ********* or potentially ********* HTS products;
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
5. review of **************************** of ************* which may affect
the activities of Pirelli and ASC;
6. programing of the **** necessary to ***** the ****** and the *******
necessary to ******* for *************.
Table 1: Phase III Pirelli/ASC Technical Development
Specification
October 1, 1996
MILESTONE TARGETS FOR THE AMENDED PROGRAM
Manufacture Theoretical
Performance Material
Research ********** Unit Cost ********
Development ** ************** ***************,
***** ************** **************
************* ***** *************
********** ************* **************
************* ************** ***
**** **** ********
**************** ************ ****** *******
********* ****** *******
************* ************ ******* *******
************* ************ ******* *******
************* ************* ******* *******
************ ************* ******* *******
Note: All material unit costs are provided in 1995 dollars.
ASC PROPRIETARY DATA
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Table 2: Phase III Pirelli/ASC Technical Development
Specification
October 1, 1995
CABLE WIRE SPECIFICATION
Requirements
**** **************
********** ****
**************** ****************
************************* ******************
********************** *******
********************************* ***********************
***********************************
**************** ***
*********************************
********** ****
********** ************
************* *********************
********************* *****
*********************************
**************** *******************
*******************************
*************** *******************
******************************** ********************
********* ****
*****************************
**************** **********
Objectives (expectation, not formal obligation)
**************************** ***********************
*************************** ********
************************** ***************
**********
ASC PROPRIETARY DATA
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Exhibit 2.7
-----------
AGREEMENT
---------
THIS AGREEMENT (the "Agreement") is made this _____ day of ______________
199_ by American Superconductor Corporation ("ASC"), Pirelli Cavi, S.p.A.
("Pirelli"), and ________________ an individual employed by Pirelli (or a
Pirelli Affiliate) and residing at ____________________________________ (the
"Assigned Employee").
Contemporaneously herewith, ASC and Pirelli have entered into an Agreement
(the "Pirelli-ASC Agreement"), to which this Agreement is Exhibit 2.7, pursuant
to which Pirelli and ASC will enter into and conduct a research and development
program regarding the development and production of superconducting wires and
cables. As provided in Section 2.7 of the Pirelli-ASC Agreement, various
technical employees of Pirelli may participate in the Research Program (as
defined in the Pirelli-ASC Agreement).
In consideration of the mutual covenants and promises contained in the
Pirelli-ASC Agreement and of ASC's permitting such technical employee to obtain
access to confidential and proprietary information of ASC, ASC, Pirelli and the
Assigned Employee agree as follows:
1. EXPENSES; BENEFITS. Pirelli shall pay the Assigned Employee's salary and
reimburse the Assigned Employee for all reasonable and necessary expenses
incurred or paid by her/him in
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connection with, or related to, his/her activities at ASC. The Assigned Employee
shall not be entitled to any benefits, coverages or privileges, including,
without limitation, social security, unemployment, medical or pension payments,
made available to employees of ASC.
2. INVENTIONS AND PROPRIETARY INFORMATION
2.1 INVENTIONS
(a) Except as otherwise provided in, and subject to ASC's
obligations under, the Pirelli-ASC Agreement (i) all inventions, discoveries,
innovations and improvements whether or not patentable and whether or not
copyrightable) ("Inventions") related to the business of ASC which are conceived
or reduced to practice by the Assigned Employee, solely or jointly with others
and whether during normal business hours or otherwise, during the period that
s/he is at ASC, or thereafter if resulting or directly derived from Proprietary
Information (as defined below), shall be the sole property of ASC; and (ii) the
Assigned Employee hereby assigns, and agrees to assign, to ASC all Inventions
and any and all related patents and other industrial and intellectual property
rights and applications therefor, in the United States and elsewhere, and agrees
further, at the request of ASC and at ASC's expense, to take such further acts
and to execute such further documents as may be necessary or desirable to fully
and completely effectuate this assignment and to secure and protect any such
<PAGE> 85
patents and other industrial or intellectual property rights.
(b) The Assigned Employee shall promptly disclose to ASC all
Inventions and will maintain adequate and current written records (in the form
of notes, sketches, drawings and as may be specified by ASC) to document the
conception and/or first actual reduction to practice of any Invention.
2.2 PROPRIETARY INFORMATION.
(a) The Assigned Employee acknowledges that his/her relationship
with ASC is one of high trust and confidence and that in the course of
activities at ASC s/he will have access to and contact with Proprietary
Information. The Assigned Employee agrees that s/he will not at any time
disclose to others, or use for his/her benefit or the benefit of others (except
as may be permitted by written agreement between ASC and Pirelli), any
Proprietary Information or Invention.
(b) For purpose of this Agreement, Proprietary Information shall
mean, by way of illustration and not limitation, all information (whether or not
patentable and whether or not copyrightable) owned, possessed or used by ASC,
including, without limitation, any Invention, formula, apparatus, equipment,
trade secret, process, research, technical data or know-how, that is
communicated to, learned of, developed or otherwise acquired by the Assigned
Employee in the course of his/her activities at ASC.
(c) The Assigned Employee's obligations under this
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Section 2 shall not apply to any information that (i) is or becomes known to the
general public under circumstances involving no breach by the Assigned Employee
or others of the terms of this Section 2.2, (ii) is generally disclosed to third
parties by ASC without restriction on such third parties, (iii) is approved for
release by written authorization of the Board of Directors of ASC, or (iv) was
known to the Assigned Employee (as shown by tangible evidence and other than
under condition of confidence) before the commencement of his/her assignment to
ASC.
(d) Upon termination of his/her activities at ASC, or at any
other time upon request by ASC, the Assigned Employee shall promptly deliver to
ASC all records, laboratory and research notebooks and other documents (and all
copies or reproductions of such materials) relating to the business of ASC;
provided however that U.S. counsel to Pirelli in connection with Pirelli-ASC
Agreement shall retain one copy of each of the foregoing in confidentiality and
under lock and key for the sole purpose of reference with respect to the
obligations of the parties hereunder.
3. PIRELLI EFFORTS. Pirelli agrees to use its best efforts to insure that
the Assigned Employee meets all of his/her obligations hereunder.
4. REMEDIES. Pirelli and the Assigned Employee acknowledge that any breach
of the provisions of Section 2 shall
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result in serious and irreparable injury to ASC for which ASC cannot be
adequately compensated by monetary damages alone. The Assigned Employee and
Pirelli agree, therefore, that, in addition to any other remedy it may have, ASC
shall be entitled to enforce the specific performance of this Agreement and to
seek both temporary and permanent injunctive relief (to the extent permitted by
law) without the necessity of proving actual damages.
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Exhibit 2.9
-----------
Pirelli Cavi, S.p.A. - ASC Agreement
Project Review Board
Terms of Reference of the Project Review Board (PRB)
1 - The PRB shall be composed of 2 representatives of each party, with the
possibility of inviting specialists whenever required by the complexity
of any item to be discussed.
2 - The PRB has the task of
(a) agreeing to any changes to the Scope of Work presented as Exhibit
2.1 to the Pirelli-AS Agreement, including changes in any specific
targets to be achieved or any time limits.
(b) monitoring performance against the Scope of Work, and setting up
check points for the critical results to be achieved.
(c) recommending action as required to achieve the objectives of the
Project, including change of scope if convenient in the light of
new developments in the field.
(d) monitoring costs of the Project and advising Management of Pirelli
and ASC of any change with respect to the original plan.
3 - At least one of the Pirelli representatives shall be a person with
significant involvement in R&D on superconductivity.
One of the ASC representatives shall be the person responsible for the
implementation in ASC of the agreed research program.
4 - The PRB shall meet as provided in the Pirelli-ASC Agreement, typically
quarterly, and shall have access to the necessary technical and financial
documentation which shall be provided by the Parties before the meeting.
5 - The decisions of the PRB shall be taken unanimously. In case of failure
to agree, the relevant matter shall be submitted to the Managements of
Pirelli and ASC for final decision.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
SCHEDULE 4.8 PRICE FOR CABLE WIRE
The transfer price of Cable Wire from ASC to Pirelli will be based on a
pricing mechanism that provides a ********** of the ******************* and
*******.
The ****** to be ***** is defined as the difference between (a) the
********* charged by ******** to the ***************** and (b) the *** of the
************** incurred by *** to *********** the ********** and by ******* to
*********** the ***********.
The ****** so determined will be ***************** and ******* on either
the basis of the *********************** and ******* in their respective
*************, and ***************, or of another mechanism that is acceptable
to both parties. For the purposes of this calculation, *********** will not be
included.
Both Pirelli and ASC will work together to further define the transfer
pricing mechanism when more concrete information such as the commercial
specifications, forecasted demand, facility requirements, etc. on the Cable Wire
and Power Cable and/or Power Cable system is available. This work will be
completed by ****************** or another date mutually acceptable by the
parties.
1
<PAGE> 1
EXHIBIT 10.24
ASC/IAI
RESEARCH & DEVELOPMENT AGREEMENT
JANUARY 1, 1996
<PAGE> 2
CONTENTS
--------
ARTICLE I: DEFINITIONS.................................................. 3
1.1 "Precursor Material(s)"...................................... 3
1.2 "Mechanical Deformation"..................................... 3
1.3 "Superconducting Materials".................................. 3
ARTICLE II: THE PROGRAM................................................. 3
2.1 Scope........................................................ 3
2.2 Duration..................................................... 4
2.3 Funding...................................................... 4
2.3.1 IAI Funding of Work performed by ASC.................. 4
2.3.2 IAI Funding of Work performed by IAI.................. 5
2.3.3 ASC Funding........................................... 6
2.4 Management of Research....................................... 6
2.5 Program Review Board......................................... 6
2.6 Parties to Make Technology Available......................... 7
2.7 Renewal, Expiration or Termination........................... 7
2.7.1 Early Termination..................................... 8
2.7.2 Conditional Stock Warrants............................ 9
2.8 Records and Reports.......................................... 11
2.9 Precursor Material(s)........................................ 12
2.10 Success of Program........................................... 12
2.11 Rights and Obligations at Close of the Program............... 13
2.12 Inventions................................................... 15
ARTICLE III: JOINT VENTURE.............................................. 17
ARTICLE IV: RIGHTS AND OBLIGATIONS REGARDING JOINT VENTURE............... 22
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4.0 The Joint Venture............................................ 22
4.1 American Superconductor Corporation.......................... 24
4.2 Inco Alloys International, Inc............................... 25
ARTICLE V: CONFIDENTIALITY.............................................. 26
ARTICLE VI: Miscellaneous................................................ 28
6.1 Assignment: Benefit and Binding.............................. 28
6.2 Export Controls.............................................. 28
6.3 Notices...................................................... 29
6.4 Applicable Law; Entire Agreement; Headings................... 29
Exhibits A-D
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<PAGE> 4
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
RESEARCH AND DEVELOPMENT AGREEMENT
----------------------------------
THIS RESEARCH AND DEVELOPMENT AGREEMENT, which is effective as of January
1, 1996 ("EFFECTIVE DATE"), is made by and between American Superconductor
Corporation ("ASC"), a Delaware corporation having a place of business at Two
Technology Drive, Westborough, Massachusetts 01581, and Inco Alloys
International, Inc. ("IAI"), a Delaware corporation having a place of business
at 3200 Riverside Drive, Huntington, West Virginia 25705
W I T N E S S E T H
WHEREAS, ASC has developed and/or acquired, and owns a body of proprietary
technology, or rights thereto, relating to superconductors, including but not
limited to high temperature oxide superconductors and techniques for causing the
oxidation of metals for subsequent use in the form of superconductive wires,
rods, ribbons and other product forms ("ASC PROPRIETARY TECHNOLOGY");
WHEREAS, IAI has developed and owns rights to (a) proprietary technology
relating to a *************************************
******************************************************************
****************************************************************
**************************************************************
***************************************************************
******************************************************************
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
**************************************************************
********************************************************
************************* (hereinafter collectively referred to as the "IAI
PROPRIETARY TECHNOLOGY");
WHEREAS, pursuant to a prior agreement (the "OLD AGREEMENT") entered into
between them and dated May 25, 1990 (which agreement, as heretofore amended is
now superseded hereby), ASC and IAI have, during the period July 1, 1988 through
December 31, 1995, conducted a research and development program which
demonstrated the feasibility of forming precursor materials using IAI
Proprietary Technology and converting them to superconducting materials using
ASC's Proprietary Technology, and in which the parties jointly developed
technology (the "JD TECHNOLOGY") related to the formation of specific
superconducting materials;
WHEREAS, the parties are desirous of entering into a further research and
development Program (the "PROGRAM") in which work will be done by both parties
with the objectives of further developing processing technologies, providing
superconducting materials for evaluation/research purposes and for sale, and
generating engineering data that will be useful or necessary in setting up a
pilot plant to produce Precursor Material(s) in a joint venture, which the
parties contemplate entering into at such time that the demand for the Precursor
Material(s) in question reaches a level that makes a joint venture commercially
viable;
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<PAGE> 6
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1 "PRECURSOR MATERIAL(S)" shall mean any system of at least one reactive
metallic component which has been subjected to IAI's Mechanical Alloying
process, both as originally produced by such Mechanical Alloying and as
subsequently consolidated and formed into a rod, wire or other such form by
Mechanical Deformation. Precursor Material shall not include a system which has
been processed to be superconducting. The term "REACTIVE METALLIC COMPONENT"
shall not include a non-reactive or noble metal such as gold, silver or
platinum.
1.2 "MECHANICAL DEFORMATION" shall mean the deforming, whether by hot, warm
or cold working and whether by forging, rolling, extruding or any other process,
of a Precursor Material from one product form (such as billet, slab, powder,
plate, bar, etc.) into another product form (such as rod, wire, strip, sheet
tubing, or other shape), or reducing the size thereof.
1.3 "SUPERCONDUCTING MATERIALS" shall mean any ceramic material(s), which
is superconducting, including but not limited to oxides, sulfides, nitrides,
carbides and other ceramics, ceramics produced from Precursor Materials, and
ceramics produced directly from other metal forming methods and subsequently
formed into rod, wire or other such form.
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<PAGE> 7
ARTICLE II: THE PROGRAM
2.1 SCOPE. The Program shall consist of research and development conducted
by ASC and IAI, subject to the terms and conditions of this Agreement, into the
development and production of Precursor Materials, the development of Mechanical
Deformation, and the development and manufacture of Superconducting Materials in
the form of wires, bars, rods, sheets, strip, tubing or other shapes, all as
more specifically described in the Statement of Work attached hereto as Exhibit
A and incorporated herein by reference.
2.2 DURATION. The Program shall remain in effect for a period of three
years from 1 January 1996, subject to annual renewals, and unless earlier
terminated, all as hereinafter set forth.
2.3 FUNDING.
2.3.1 IAI FUNDING OF WORK PERFORMED BY ASC. IAI will provide funds to
support the Program in an aggregate amount of up to $1.1 Million during the
first year. The amount of funding, expected to be no more than the first year
annually, for the second and third years of the Program, subject to mutually
agreed to renewals of the Agreement, will be determined at least sixty (60) days
before the end of each year of the Program. Funding for the first year of the
Program will be in four equal quarterly payments of $275,000.00 each, payable by
no later than February
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
15, 1996 and the fifteenth day of each calendar quarter thereafter. Payments for
the second and third years of funding will be made quarterly within fifteen (15)
days of the start of each calendar quarter. All funds paid by IAI pursuant to
this Section shall be expended for no purpose other than the Program. All
equipment purchased with such funds shall be the property of ASC, but the Joint
Venture will be given any of such equipment it requests. If ASC ceases
operations and is liquidated during the term of the Agreement, IAI will become
the owner of the equipment. All funding obligations of IAI under this Section
shall cease upon early expiration or termination of this Agreement pursuant to
Section 2.7 hereof.
2.3.2 IAI FUNDING OF WORK PERFORMED BY IAI.
(a) IAI will provide funds to support the IAI portion of the Program in an
aggregate amount of at least *********** during the first year of the Program.
The level of funding for the second and third years of the Program subject to
mutually agreed Agreement renewals will be determined at least sixty (60) days
before the end of the prior calendar year of the Program.
(b) As part of the work to be performed by IAI, IAI will have the option to
assign by mutual agreement one or more IAI employee(s) to be located at ASC to
directly participate in ASC R&D work covered under the Program. All employee
related costs, e.g., salary, benefits, travel, supplies and office rental, for
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<PAGE> 9
such IAI employee(s) will be paid by IAI. The IAI employee(s) will report to the
Chief Technical Officer, VP Manufacturing or Program Manager unless otherwise
agreed, on Program issues, and to the IAI VP. Research & Technology on
administrative matters.
2.3.3 ASC FUNDING. ASC will fund the Program in an annual aggregate amount
of up to US $1.2 Million. The amount of funding for the second and third years
of the Program subject to mutually agreed to renewals of the Agreement will be
determined at least sixty (60) days before the end of each year of the Program.
All funds paid by ASC pursuant to this Section shall be expended for no purpose
other than the Program. All equipment purchased with such funds shall be the
property of ASC, but the Joint Venture will be given any of such equipment it
requests. If ASC ceases operations and is liquidated during the term of the
Agreement, IAI will become the owner of the equipment. All funding obligations
of ASC under this Section shall cease upon early termination by IAI or ASC
pursuant to Section 2.7 hereof.
2.4 MANAGEMENT OF RESEARCH. ASC shall be responsible for the direct
management and supervision of the research conducted in the Program at ASC, and
IAI shall be responsible for the direct management of the research in the
Program at IAI and Michigan Technical University, subject to the oversight
responsibilities of the Review Board referred to below. Both ASC and IAI shall
staff the Program with qualified personnel to enable the Program to
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<PAGE> 10
progress in accordance with the goals and criteria set forth in Exhibit A
hereto.
2.5 PROGRAM REVIEW BOARD. There is hereby established a Program Review
Board (the "REVIEW BOARD"), which shall have the responsibility of overseeing
and monitoring the Program. The Review Board shall be comprised of four (4)
members, consisting of two (2) representatives appointed by ASC and two (2)
representatives appointed by IAI. The Review Board's responsibilities,
obligations and powers (including alteration of the scope and direction of the
Program as made necessary or desirable by developments in the Program and/or in
the field of superconductivity) shall be as specifically set forth on Exhibit B
attached hereto and incorporated herein by reference.
2.6 PARTIES TO MAKE TECHNOLOGY AVAILABLE. To the extent that they now or
hereafter have the legal right to do so, ASC and IAI hereby agree that,
throughout the Program, each will make available to the other such technology
(including proprietary technology) relating to Precursor Material(s), Mechanical
Deformation, and/or converting Precursor Material(s) to Superconducting
Material(s) as may be reasonably necessary to carry out the Program.
2.7 RENEWAL, EXPIRATION OR TERMINATION. The parties will determine the
business viability of continuing the Program at the end of each year of the
Program and renew the Agreement, effective
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<PAGE> 11
January 1, 1997 and January 1, 1998 respectively, for years two and three of the
Agreement. If the Program is not renewed, i.e. the Program is to be terminated,
the party deciding not to renew the Agreement will advise the other party in
writing sixty (60) days prior to the scheduled renewal date. Funding of the
Program will continue during this notice period, at the end of which the
Agreement shall expire. Notwithstanding the absence of any such notice of a
decision not to renew, the Agreement shall expire, and be deemed to have
terminated without default by either party:
a) on December 31, 1996 if the parties fail to agree, on or before
such date, upon either the funding of the Program for calendar year 1997,
or the formation of a joint venture.
b) on December 31, 1997 if the parties fail to agree, on or before
such date, upon either the funding of the Program for calendar year 1998,
or the formation of a joint venture.
c) on December 31, 1998 if the parties fail to agree, on or before
such date, upon a further renewal of the Agreement and the appropriate
funding therefor, or the formation of a joint venture.
2.7.1 EARLY TERMINATION. Either party shall have the right to terminate the
Program, in the event of a breach by the other party of a material obligation
hereunder, by serving sixty
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
(60) days' written notice upon the other party, setting forth the cause and
specifying the date of termination. The party in breach shall provide a plan for
corrective action to cure the breach within this sixty (60) day period. The
non-breaching party shall have thirty (30) days to either approve the plan or
reject it. If the parties are unable to agree upon a plan for corrective action
within sixty (60) days the agreement shall terminate.
2.7.2 CONDITIONAL STOCK WARRANTS. If the Agreement is terminated after
December 31, 1997 or the Joint Venture is not formed at the end of the Agreement
period, then ASC will provide the following consideration to IAI:
(a) If either or both of ASC and IAI determine(s) that the Precursor
Material product will not achieve the technical goals set forth
in Exhibit A hereto, or will not be commercially viable,
OR If the Joint Venture discounted Cash Flow ("DCF") analysis shows
a return on investment ("ROI") of less than *** and IAI decides
not to proceed with the program or Joint Venture,
then at the time when it is determined that a joint venture will
not be formed between ASC and IAI for the manufacture of
Precursor Materials, ASC will convey to IAI, ASC warrants (the
"WARRANTS"), as full consideration for the IAI investments
disbursed to ASC pursuant hereto, as follows:
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
(i) To compute the number of ASC shares into which the Warrants
to be so issued may be subsequently converted (the "NUMBER OF
WARRANTS"), the IAI quarterly investment made pursuant hereto
after December 31, 1995 will be divided by the greater of
***************************** ********* for ASC stock during that
calendar quarter, or ********************** agreed floor price,
with appropriate adjustment of (x) and (y) for any stock splits.
The Number of Warrants so calculated for each quarterly
investment during the period from January 1, 1996 to the date of
conveyance of the Warrants, will be adjusted for any subsequent
stock splits, and will be added together and distributed to IAI,
without payment of any additional consideration by IAI. (ii) The
Warrants so conveyed to IAI will be exercisable at any time
during the ten (10) year period following the date of such
conveyance. (iii) The price (the "Strike Price") at which the
various Warrants so conveyed will be exercisable will be
specified as the relevant ******************************
******************************************* used to compute the
Number of Warrants for the IAI calendar quarter investment for
which the Warrants in question were issued.
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<PAGE> 14
(iv) At IAI's option, ASC will permit IAI to exercise the
Warrants in the form of a cashless transaction, whereby ASC will
sell the IAI Warrants on IAI's behalf and at no additional cost
to IAI, and will remit to IAI the funds corresponding to the
excess of the ASC stock price at the time of such exercise over
the specified Strike Price of the Warrants.
(b) If IAI determines that the Precursor Material product or Joint
Venture will not be commercially viable, for reasons other than
as identified in Section 2.7.2(a),
OR If IAI decides not to continue investing in the Precursor
Material product for reasons that are not associated with the
technical or commercial viability of the Precursor Material
product, then ASC will convey Warrants to IAI in accordance with
all of the terms set forth in Section 2.7.2 (a), except that the
Number of Warrants shall be one-half (1/2) of the number computed
in the manner set forth in Section 2.7.2(a).
2.8 RECORDS AND REPORTS. ASC and IAI will prepare and maintain full and
accurate records and books relating to the progress and status of the Program,
all financial matters connected therewith, and all expenditures made or costs
incurred in connection therewith. Such records and books shall be made
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<PAGE> 15
available at all reasonable times for inspection and review by the Review Board
and/or its designees. At least once each calendar quarter, ASC and IAI will
prepare and deliver to the other (with copies to the Review Board) reports
setting forth: (a) summaries of the status and progress of the Program; (b) all
expenditures made or costs incurred in connection therewith; and (c) projections
of expenditures required in connection with the Program for each of the 12
months following the date of such reports.
2.9 PRECURSOR MATERIAL(S). Should one party conclude that a Precursor
Material(s) tested under the Program is not commercially viable, or should one
party choose for any reason to discontinue development of such Precursor
Material(s) under the Program or to exclude such Precursor Material(s) from the
products to be exploited by a joint venture formed pursuant hereto, the other
party shall have the right to exploit (and have exploited on its behalf) such
Precursor Material(s) in the field of superconductivity without accounting to
the one party. Should such situation occur, if IAI is the one party it hereby
agrees to license its Mechanical Alloying and its Mechanical Deformation
technologies to ASC, or on behalf of ASC, under reasonable terms and conditions
for use in connection with such Precursor Material(s) and if ASC is the one
party it hereby agrees, at IAI's option, to either (a) issue warrants to IAI in
accordance with
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Section 2.7.2, or (b) license its Proprietary Technology for converting
Precursor Materials to Superconducting Materials to IAI, or on behalf of IAI,
under reasonable terms and conditions for use in connection with such Precursor
Material(s).
2.10 SUCCESS OF PROGRAM.
(a) By no later than October 1, 1998 (or within sixty (60) days after
the end of calendar year 1996 or 1997, in the event that this Agreement is not
extended for the subsequent year upon mutually acceptable terms) IAI and ASC
shall determine in good faith whether to enter into a joint venture pursuant to
the terms of ARTICLE III hereof for the purpose of commercially exploiting the
Joint Technology.
(b) If the parties determine not to enter into a joint venture, of if
for any reason the parties fail to enter into a Joint Venture not later than
October 1, 1998 (or any mutually agreed upon extension pursuant to Section
2.10(c)), then
(i) neither party shall have any further rights or obligations
pursuant to Articles III and IV hereof; and
(ii) all other provisions of this Agreement shall remain in full
force and effect.
(c) IAI and ASC may mutually agree to extend the Program beyond
December 31, 1998 and postpone the decision in regard to a joint venture until
more data, information and expertise is assembled, or to complete negotiations
directed to
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formation of joint venture.
2.11 RIGHTS AND OBLIGATIONS AT CLOSE OF THE PROGRAM. At such time as the
Program comes to any end, whether by expiration or as a result of early
termination by IAI or ASC,
(a) Neither party shall have any further obligations to make technology
available pursuant to Section 2.6;
(b) with respect to technology that either pary has previously
furnished to the other pursuant to Section 2.6, subject to the licensing
obligations set forth in paragraphs (e) and (f) below, neither party shall have
any license under any patent rights of the other and (ii) either party's rights
to use or disclose Confidential Information of the other party shall be governed
by the provisions of Section 5.1;
(c) Subject to the provisions of Sections 2.12, 5.1 and 5.3, either
party may use any information in its possession that was generated in the course
of the Program;
(d) ASC shall retain ownership of all equipment purchased by ASC with
funds provided hereunder by IAI, except that if the Joint Venture comes into
being this equipment will if so requested become the property of the Joint
Venture, and if ASC and the Joint Venture both cease to operate, the equipment
will be transferred to IAI.
(e) In the event that the Program is terminated as a result of a
decision by one party not to proceed therewith, the
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<PAGE> 18
one party shall be prepared to make available to the other party, upon
reasonable terms, a non-exclusive license to such technology, relating to
Precursor Materials and previously disclosed pursuant to Sections 2.6 and 2.9,
as may be useful to the other party to make Superconducting Material(s). This
non-exclusive licensing provision shall apply only to the extent that the
terminating party (or, at the option of the other party, a joint venture formed
pursuant to Articles III and IV) is unwilling or unable to supply Precursor
Materials to the other party under terms and conditions reasonably acceptable to
the other party.
(f) In the event that the parties do not proceed with a joint venture
within the period(s) provided by Section 2.10, then each party shall be
obligated to make available to the other party, upon reasonable terms, a
non-exclusive license to such technology, relating to Precursor Material(s) and
previously disclosed pursuant to Sections 2.6 and 2.9, as may be useful to the
other party to make Superconducting Materials, to the extent that the granting
party in question may legally grant such license.
2.12 INVENTIONS. With respect to any inventions, discoveries, manufacturing
processes or procedures, trade secrets, or other technical information or
know-how (hereinafter collectively, "INVENTIONS") conceived or reduced to
practice as a result of or otherwise in the course of the efforts expended by
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ASC and/or IAI during the course of or as a consequence of the Program,
(a) all such Inventions shall be owned jointly by the parties;
(b) ASC shall not use (or license others to use) such Inventions relating
to Mechanical Alloying or Mechanical Deformation except to make, use or sell (i)
Superconducting Materials, (ii) any other superconductors, including elemental,
metallic alloy, intermetallic and organic superconductors, or (iii) any products
or systems containing any such Superconducting Materials or other
superconductors, or any parts or components of any such products or systems;
(c) IAI shall not use (or license others to use) any such Invention (i) to
make, use or sell Superconducting Materials (ii) except as provided as Section
4.2.3 to make, use or sell Precursor Material(s);
(d) Either party may, at its own cost and option, file patent applications
directed to jointly owned Inventions, but the parties will consult with each
other prior to filing any such applications and, after filing, IAI and ASC will,
jointly, and then the Joint Venture, if it comes into being will be responsible
for further prosecution, maintenance and record keeping;
(e) To the extent there is any infringement of rights in jointly-owned
patents, either party may (at its own option and
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<PAGE> 20
expense) bring suit with respect to any such infringement in its field of
interest and the other party (at the cost of the party bringing suit) will
cooperate. Either party, at its own option and expense, may bring suit with
respect to any infringement of a patent owned solely by it;
(f) If ASC ceases to conduct business in the field of Superconducting
Materials; then IAI shall have an exclusive license (subject to any licenses
then previously granted) to use such Inventions to make, use or sell Precursor
Materials and Superconducting Materials;
(g) If IAI ceases to conduct business in the Mechanical Alloying or
Mechanical Deformation field, then ASC shall have an exclusive license (subject
to any licenses then previously granted) to use such Inventions to make, use or
sell Precursor Materials and Superconducting Materials.
ARTICLE III: JOINT VENTURE
3.1 Provided that ASC and IAI agree that it is feasible and desirable to
proceed towards the commercial exploitation of the Proprietary and Joint
Technologies, then the parties shall negotiate in good faith to form a jointly
owned business entity (the "JOINT VENTURE"), to produce Precursor Materials
and/or, as noted below, Superconducting Materials ("JV PRODUCTS"). The parties
have agreed that each of them shall advise the other, by no later than October
1, 1998, of its intention to form such a
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Joint Venture, notwithstanding the possibility that further expenditures may be
required on development or scale-up activities before commercial production can
be commenced.
3.2 Should the parties proceed with forming such Joint Venture, then the
rights and obligations of the parties in and to the Joint Venture, will be set
forth in a suitable agreement (the "JOINT VENTURE AGREEMENT") which the parties
will enter into at such time. It is agreed and understood that the parties will
seek to ensure that any Joint Venture Agreement which they enter into will
incorporate and implement the general principles set forth in the following
sections of this ARTICLE III.
3.3 The business of the Joint Venture will comprise the operations of
Mechanically Alloying of metallic powders, and consolidation and Mechanical
Deformation to produce agreed forms of Precursor Materials.
In the event that ASC plans to manufacture Superconducting Material(s)
based on Precursor Material(s) other than with a third party with whom it has a
strategic alliance or relationship to produce end products, then the Joint
Venture will be provided an opportunity to participate in the manufacturing of
the Superconducting Materials.
3.4 The prime assets of the Joint Venture will comprise all of the patents
and know-how developed jointly by the parties since the commencement of their
collaboration, and the right to practice
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
the patents and know-how owned by, or licensed to, either of the parties and
required to produce the JV Product(s), to the extent that the parties may
legally grant such licenses (collectively the "JV TECHNOLOGY"), as well as
contributions of equipment and/or cash made by the parties to the Joint Venture
upon its formation.
3.5 For purposes of computing the percentage ownership ("EQUITY INTEREST")
of each of the parties in the Joint Venture at the time of its formation, and of
adjusting such equity interests to reflect any future dilution due to a failure
to contribute to future cash requirements of the Joint Venture, the contribution
of the JV Technology to the Joint Venture by the parties shall be deemed an
equal investment by each party, and the value of such combined investment
through December 31, 1995 deemed to be $**********. Effective January 1, 1996,
the investment base for the Joint Venture will be the sum of the deemed
investment base for the period prior to January 1, 1996, plus dollar for dollar
investments made by either party from January 1, 1996 onwards.
3.6 It is intended that the contributions, of cash or equipment, to be made
by the parties to the Joint Venture at the time of its formation, will be
substantially equal so that their Equity Interests in the Joint Venture will be
substantially equal.
3.7 The parties may agree to add minority participants to the Joint
Venture, in which event the equity interests to be acquired by such participants
would be contributed equally from
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<PAGE> 23
the equity interests of ASC and IAI, unless otherwise agreed.
3.8 Major decision making for Joint Venture matters would be by a Joint
Venture committee ("BOARD"), on which the representation and voting power would
reflect the equity interests of the Joint Venture partners, with appropriate
protection for any minority interest, as explained below.
3.9 Matters to be decided by the Board would include major expenditures,
approval of budgets and issuing of called sums seeking additional capital
contributions from the partners, in proportion to their respective equity
interests.
3.10 Failure to contribute to approved budgets would result in dilution of
the equity interest of the party in question, based on the valuation of the
investments of the parties, at the time of such failure to contribute, in
accordance with the provision of Section 3.5 above.
3.11 Unless or until otherwise decided by the Board, ASC will provide
management for operations of the Joint Venture's facility, as well as technical
and/or administrative services for the Joint Venture, all in accordance with
contracts approved by the Board.
3.12 Decisions of the Board will be made based on simple majority voting,
except that the following matters will require the approval of a two thirds
majority of the Board:
a) dissolution of the Joint Venture;
b) sale or disposition of any Joint Venture asset
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having a fair market value of ONE MILLION (U.S.$1,000,000.00) DOLLARS or
more;
c) location or relocation of any Joint Venture owned or leased
commercial production facility;
d) approval of any right or license to be granted to a third party to
practice any of the JV Technology;
e) approval of any budget entailing an expenditure, in any given year,
amounting to more than 50% of the then current total cumulative investment
of the partners in the Joint Venture.
f) approval of any contract between the Joint Venture and one of the
Joint Venture partners.
3.13 The Joint Venture would supply and ASC would purchase all of ASC's
requirements for JV Product(s), at a price (the "PURCHASE PRICE") to be set by
the Board of the Joint Venture. The Joint Venture may also sell JV Product(s) to
third parties, as authorized by ASC.
3.14 The understanding is that the Purchase Price should correspond to the
price obtainable by the Joint Venture from an arm's length transaction with a
third party (less any customary sales commission), and, in the absence of such a
reference price, the Purchase Price should be reasonable in relation to the
market price of the system, device or component (the "END PRODUCT") which is
made by ASC from the JV Product(s), and should ensure to the
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<PAGE> 25
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Joint Venture a reasonable level of profit, in accordance with Section 3.15
below.
3.15 It is understood that the Board will seek to establish the Purchase or
Transfer Price, and modify it from time to time, considering, among others, the
following criteria:
a) Taking into account all costs, both fixed and variable, other than
the cost of silver used which is to be passed through to ASC (the "SILVER
ACCOUNTING COSTS") incurred in the various operations involved in the
production of the End Product, and the selling price of such End Product,
exclusive of the cost of the silver therein (the "SILVER-FREE SELLING
PRICE"), the Purchase Price should consist of the cost of the included
silver (adjusted for processing yield, inventory carrying and
scrap-recycling costs) plus an amount which would be related to the
Silver-free Selling Price in a ratio commensurate with the relation of the
Silver-free Cost of producing the JV Product to the Silver-free Cost of
producing the End Product.
b) The Board will aim to set the Purchase Price in order to achieve a
minimum gross margin as defined by standard accounting practice that
results in a *** DCF ROI calculation for the Joint Venture, again using
standard accounting practice and treating the Silver Accounting Costs as
indicated in paragraph 3.15(a).
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<PAGE> 26
c) The gross margin for the Joint Venture will be similar to the
average gross margin for Metallic Precursor Superconducting wire sold by
ASC.
ARTICLE IV. RIGHTS AND OBLIGATIONS REGARDING JOINT VENTURE
4.0 THE JOINT VENTURE
4.0.1 The Joint Venture shall produce JV Product(s), using technology
(including Joint Technology (as defined in Exhibit D) and technology developed
in the course of the Program and thereafter) relating to Mechanical Alloying or
Mechanical Deformation, and shall sell such JV Product(s) to or through ASC upon
the terms and conditions referred to in ARTICLE III above.
4.0.2 The Joint Venture may also decide to sell one or more JV
Product(s) to third parties as authorized by ASC.
4.0.3 The Joint Venture will be responsible for:
(a) The prosecution, maintenance and enforcement of patents and
patent applications and Inventions used by the Joint Venture owned by either
party; and
(b) Payment of all royalties due to third parties on account of
manufacture, use or sale of any Inventions licensed or sublicensed to the Joint
Venture.
4.0.4 Any Inventions conceived or reduced to practice in the course of
work by or for the Joint Venture shall be owned, and the, parties shall have
rights therein, as provided in Section 2.12; however, the Joint Venture shall
have the
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<PAGE> 27
exclusive, royalty-free right to use such Inventions to manufacture JV
Product(s).
4.0.5 So long as ASC purchases all its requirements of JV Product(s)
from the Joint Venture, the Joint Venture will not compete with ASC in respect
of the commercial sale of JV Products. The Joint Venture also will agree that,
if in any country ASC owns or is the exclusive licensee of an issued duly
maintained patent having one or more claims which have not been held invalid
that encompass oxidation of Precursor Materials, it will not knowingly sell
Precursor Materials to any customer (other than a licensee of ASC regarding said
oxidation process) for manufacture or sale of JV Products in such country. To
implement this provision, ASC shall provide the Joint Venture with a list of
apposite patents, which list shall be updated from time to time.
4.0.6 ASC and IAI will form a Joint Venture Planning Team by June 1,
1997 to initiate detailed reviews of the JV business model, assess the
commercial status of development work and establish the plan and timing for the
formation of the Joint Venture.
4.1 AMERICAN SUPERCONDUCTOR CORPORATION.
4.1.1 In the event ASC, during the life of this Agreement or of the
contemplated Joint Venture, obtains rights from a third party, determines that
it already possesses, or independently develops materials or materials
processing
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<PAGE> 28
technology that would be of value in the Joint Venture, it shall endeavor to
make such technology available for use in the Joint Venture.
4.1.2 ASC agrees to purchase all its commercial requirements for JV
Product(s) exclusively from the Joint Venture, to the extent the Joint Venture
is ready, willing and able to supply the same upon the terms and conditions
referred to in ARTICLE III above, for a period commensurate with the life of the
Joint Venture. It is understood and agreed that ASC is free to produce or to
purchase Superconducting Materials other than the JV Product(s); it is also
understood and agreed that ASC is free to produce and purchase Precursor
Materials of the type which are unavailable from the Joint Venture. This
provision does not apply to Precursor Material(s) which fall within Section
4.2.1, below.
4.2 INCO ALLOYS INTERNATIONAL, INC.
4.2.1 In the event that the Joint Venture is unable to manufacture
Precursor Material(s) so as to satisfy its requirements therefor, IAI agrees to
use its best efforts to do so, and only if it is unable to do so, IAI will
license its Mechanical Alloying and Mechanical Deformation technologies to ASC,
or another company designated by ASC, solely for the purpose of producing
Precursor Materials under reasonable terms and conditions in order that ASC
shall have a source of Precursor Materials.
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<PAGE> 29
4.2.2 In the event IAI, during the life of this Agreement or of the
contemplated Joint Venture, obtains rights from a third party, determines that
it already possesses, or independently develops materials, materials processing,
or oxidation technology, which would be of value in the Joint Venture, it shall
endeavor to make such technology available to the Joint Venture.
4.2.3 IAI agrees not to commercially sell, or license a third party to
sell, Precursor Materials or JV Superconducting Materials competitive with
Precursor Materials or Superconducting Materials of ASC or the Joint Venture for
a period of three (3) years from the termination of this Agreement or for the
period of the Joint Venture, whichever is longer. IAI further agrees that, if in
any country ASC holds an issued, duly maintained patent having one or more
claims which have not been held invalid that encompass oxidation of Precursor
Materials, it will not knowingly sell Precursor Materials to any customer (other
than a licensee of ASC regarding said oxidation process) for manufacture or sale
of Superconducting Materials in such country. To implement this provision, ASC
shall provide IAI with a list of apposite patents, which list shall be updated
from time to time.
ARTICLE V. CONFIDENTIALITY
5.1 The parties agree that throughout the duration of the Program and any
Joint Venture which is formed, and for a period of
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<PAGE> 30
five (5) years thereafter, or until December 31, 2001, whichever is longer,
neither party shall disclose Confidential Information belonging to the other to
any third party or, except as provided by Sections 2.11 and 2.12, use the same
for any purpose other than the Program. Information shall not be deemed
Confidential, and the receiving party shall have no obligations in respect of
any information which (i) is known to the receiving party prior to disclosure,
as evidenced by the receiving party's tangible records; or (ii) is or becomes
known to the public through no act or omission on the part of the receiving
party; or (iii) is obtained by the receiving party from a third party who is not
under any obligation or restriction not to disclose the same; or (iv) is
approved for release or utilization outside the scope of the Program by the
express written authorization of the disclosing party. As used herein,
"Confidential Information" shall mean information designated and labeled as such
in writing by the disclosing party and, if disclosed verbally, reduced to
writing and forwarded to the receiving party with a "Confidential" designation
within thirty (30) days after verbal disclosure. This provision applies only to
information provided in connection with the Development Period, and the parties
agree that any Joint Venture or other commercial agreement may include further,
longer term and more stringent confidentiality provisions.
5.2 It is understood that third parties will be doing
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<PAGE> 31
consulting work, or working in partnership, for or with IAI and/or ASC. Thus,
either IAI or ASC may disclose on a need to know basis Confidential Information
of the other provided that each individual or company to whom such information
is disclosed undertakes in writing to maintain such information confidential on
the same basis as required in Section 5.1.
5.3 All information relating to Inventions, including but not limited to
information included in Program reports and technical data generated at either
IAI or ASC in the course of the Program shall be "Confidential Information"
subject to the obligations of Section 5.1; and such information may be released
only after approval of the Review Board, except that to the extent that either
party is required to release or disclose such information as part of its normal
business operation it may do so on terms and conditions consistent with those on
which it releases or discloses its own similar confidential information.
ARTICLE VI. MISCELLANEOUS
6.1 ASSIGNMENT: BENEFIT AND BINDING. This Agreement shall be binding upon,
and inure to the benefit of, ASC and IAI and their respective successors and
permitted assigns. Except to a successor of substantially its entire business to
which this Agreement relates, neither party hereto may assign its rights and
obligations under this Agreement without the prior written consent of the other
party.
-28-
<PAGE> 32
6.2 EXPORT CONTROLS. It is understood that ASC, IAI and the Joint Venture
are (or will be) subject to United States laws and regulations controlling the
export of technical data, computer software, laboratory prototypes and other
commodities (including the Arms Export Control Act, as amended, and the Export
Administration Act of 1979), and that its obligations hereunder are contingent
on compliance with applicable United States export laws and regulations. The
transfer of certain technical data and commodities outside the United States may
be prohibited, and even if permitted may require a license from the cognizant
agency of the United States Government and/or written assurances by ASC, IAI or
the Joint Venture that ASC, IAI or the Joint Venture shall not export data or
commodities to certain foreign countries without prior approval of such agency.
Neither ASC, nor IAI, nor the Joint Venture represent that a license shall not
be required or that, if required, it shall be issued.
6.3 NOTICES. Any notice or communication given pursuant to this Agreement
by either party to the other shall be in writing and delivered or mailed by
registered or certified mail, postage prepaid (mailed notices shall be deemed
given when duly mailed), as follows:
If to IAI: Inco Alloys International, Inc.
3200 Riverside Drive
Huntington, West Virginia 25705
Attention: VP., Research & Technology
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<PAGE> 33
If to ASC: American Superconductor Corporation
Two Technology Drive
Westborough, Massachusetts, 01581
Attention: Chief Financial Officer
6.4 APPLICABLE LAW; ENTIRE AGREEMENT; HEADINGS. This Agreement shall be
construed in accordance with the laws of Massachusetts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement and the other agreements, certificates, instruments and documents
provided for or contemplated by this Agreement contain the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings. The headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
written above.
AMERICAN SUPERCONDUCTOR INCO ALLOYS INTERNATIONAL,
CORPORATION INC.
By: /s/ Ramesh Ratan By: /s/ John H. Tundermann
----------------------------- -----------------------------
Title: Exec. V.P. Title V.P. Research & Technology
-------------------------- ---------------------------
Date: March 26, 1996 Date 2 April 1996
-------------------------- ---------------------------
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT - A
COLLABORATIVE ASC/IAI PROGRAM
FOR ********** CONDUCTOR DEVELOPMENT
*************************************************************
INTRODUCTION
The ************************************ in the ********* system is particularly
attractive for *************************** because of its intrinsic
*************************************** ********************************
vis-a-vis the ******* phase that is currently under development worldwide. No
matter what its **************************** much of its ability to carry
supercurrent well below ************************************* to
**************** of the ************** at ****, whereas well textured ********
can carry substantial supercurrent out to several ****** at any ***********,
enabling ******* in this important and significantly ******************.
******** is also an attractive for ************ and ******* ************ -
particularly within a ***************************** ****************. Low
AC-loss requires fine filaments that in turn require small superconducting oxide
grains. The ****** of *************************** made by the ********** are
about an ***** of ***************** than **************, enabling the
fabrication of the fine filament composite wires that are required for
*************.
******** has, however, not been ********* in a ****************** thus far
because the ************************ for ************** ************* to the
********** and *********************** to the *********) has not been ********.
Recent developments have, however, opened up an opportunity to establish the
required level of ***************:
ASC demonstrated a significant level of *************** in the closely
related ****************** of the *********** via ********************* in
an ********. Unfortunately, *** *************************************** and
the need for even better textures limit the direct use of this material.
**************** and ********************** demonstrated the ability to
************************ for **************, and the ********* of
**************************** that are
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<PAGE> 35
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
********* on such *******************.
*********************** demonstrated ********************
*************************** in *************************** *********** (up
to *********) on ************************** ********** using an
********************************** ******.
ASC demonstrated ************************* in ******** using only a
**************************** with ************* (less than **************)
***********************************). *************** in these ********* is
under investigation.
These results, combined with the unique ability of an ********** to make
************** via a ****************************, present us with a major
opportunity to develop and manufacture ******* ******* and ********** in
*********************************** ***** that are suitable for use in
****************** applications above ****.
The focus of the proposed program is to ************************* in
********************************* made by an **************** *******,
demonstrate commanding ***************************, demonstrate *********** and
scale up through process development to full scale manufacturing over a
********************.
The performance and manufacturing capability specified below will be so uniquely
superior to the existing ********************** process (whether **** or **)
that full displacement of the ***** ********** can be anticipated. A **********
timescale is feasible if yearly milestones are met, because the program builds
on the extensive ************************* already established.
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<PAGE> 36
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
PROPOSED MILESTONES FOR ****** PROGRAM BEGINNING JAN. 1996:
*******:
*************:
Development of ************ and ******************* ***** for ********
of *************** Demonstration of ********* or
************************ to an initial level of
************************** ************ of *****************
Demonstration of reaction to form ******** with at least an
************** of ***************** (*************)
*************:
Demonstration of ************************************** *************
in ***************** to the **********, at ******* over
******************* Demonstration of
*********************************** ******************** in
***************** to the **** *****, at ******* over
*******************
*******:
*************:
Enhancement of ** to **************** at ******* in **** ******
Demonstration of **************** in ********* ******************* at
******* Process development and scale up to *************
Demonstration of **********: *** for ****************** ******* for
********* or ********************* application.
*******:
***********:
Enhancement of ** to ********* in *** at ******* in **** *******
Reduction of ****************** in ********* ******************* at
******* ******************* established with ********** to ****
*********** manufacturing Demonstration of
********************************:
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
***********************, ******* at **************** for ***********
and *********
PROGRAM OUTLINE, *******
A. *************************** development and fabrication
1) ****************** and ******************* development
2) *********************** fabrication
B. ***** development in ******************
1) ************************ in *********************** *****
2) ************ and *********** development for
************************
3) ************** for ************************* formation a)
*********** b) ************************
4) Establish ************************************ techniques
PROJECTED RESOURCES FOR IN-HOUSE WORK AT ASC IN ******
***************** ********* ********* *********
Cost at current rates:
labor and misc. - eqmt. - ********
*******
(fully burdened)
Additional resource, particularly in the ************ development, required at
*** and ***. Also some support in the **************** area at ****.
For ****** and ****, resource will be substantially increased to ***********,
because of ******** and ******************* work proceeding in parallel with
ongoing ************ to push ** and ** and minimize *******.
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<PAGE> 38
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
DETAILED PLAN FOR **************** DEVELOPMENT, *******
A. *************************** DEVELOPMENT AND FABRICATION
Goal:
- ----
Develop a *********************************************** process and make
*************** required for experiments.
Method Overview:
- ---------------
1) Develop ************* for * and ** that allow ********** ********, and
develop a ******************* (perhaps involving ************) via
correlations between ******* **********, ************** and **************.
Major responsibility here at *******.
2) Establish ********* and other *********** parameters for
**********************
3) Fabricate ********* as needed
Key tasks
- ---------
- Complete analysis of **************** alloys
- Complete *************** experiments with ************* to establish
their suitability for *******************
- Select the best ************* and develop optimal
*************************** via correlations between *******
************************** and **************
- Optimize the process to attain the control over
****************************** and *********** required for forming
**************************************
- Establish ********* and other *********** parameters for
**********************
- Make ********************* and **** for experiments
B. ***** DEVELOPMENT IN ******************
B1) ******************** IN ****************************
Goal:
- ----
Establish ******************************** adjacent to each
******************** for the ******************** of ******* ********
Method overview:
- ---------------
Test feasibility of and develop methods for attaining *********************
in the ******************* using ***** **** and *******************
-5-
<PAGE> 39
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
a) Develop thermal-mechanical processes to form *********************
adjacent to the ************* ********* in **** and/or
************************ **************
b) Test the feasibility of packing ****************** ***** in the ******
and thereby maintaining or forming suitably *************************
adjacent to **** ******** after *********.
Key tasks:
- ---------
- set up ******************** (****************************) ******** with
******************** capability.
- make ***************** and *************************** without
************* following the ******* - identify promising
********************************, starting with ********************. -
process ******************** or ********************** following promising
conditions identified above and optimize processes for *****************
adjacent to ****** - determine promising ************************ for
********* ********* the *************** between ********* and correlate to
********* in ***********.
- test the feasibility of introducing a *****************
************************************ in ************** such that its
******* throughout **************** is preserved or enhanced
(********************, etc.).
- *************************, see part B4 below. This will include both ****
and ************************* with focus on ********* and
******************** at the *****************, as well as
****************** throughout each ******** and across the ************* of
*********************.
- ******** as in part B3 below
B2) ************ AND *********** DEVELOPMENT FOR **************** *******
Goal:
- ----
Establish a route to *************** using *********** *************
Method overview:
- ---------------
Build on initial work of ******** to develop suitable **
********************** and ************ to enable obtaining
************************ in ********
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Tasks:
- -----
- Determine ******** and **************** effects on ********* and ** (how
**** do they have to be?). Reaction as in part B3 below
- Investigate ********************************* in different portions of
each or neighboring *********; reaction as in part B3 below
- Determine ******************* (************** and *********) effects on
****************
- After initial phase development of both B1 and B2, develop configurations
in conjunction with ********************* (**************************) as a
base for ***************** ******* in ********
- Make ******************************************** following the results
from above and optimize ***** for ******** ***********
B3) ************** FOR ************************* FORMATION
Goal:
- ----
Develop and optimize ************** to form ********** ****************
from ************ demonstrating ******* and **.
Method overview:
- ---------------
Building on the favorable ************************* of ** and the favorable
********************** of *** ******************* and *** of ****************
will be explored to achieve favorable ******** reaction. Use knowledge base from
earlier in-house **** ** work as well as outside work on ***** and ************.
A particular opportunity is in the ******* and ****************** used for
************************* that have never before been tested in a
***************************************************** environment.
Two basic mechanisms will be explored: 1) ***** *************** of ********
on the ***************************** of ** to transfer the ******* from the
********* into the ***** and 2) **************************************** in
************* ************** of **.
Key tasks
- ---------
B3A) DEVELOP METHODS FOR *************** FROM ********* *********** TO *****
- Adapt some ************ for attaining the desired ***
************************ conditions using ********* ***********************
and/or ************,
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
- Determine the ******** of *********************** within ***** at various
stages of ********** after *********.
- Determine ************* for *************** via ***** and *** to
establish ************************** at ******* (to be used for
***************************************).
B3B) DEVELOP AND UNDERSTAND OPTIMAL ************** FOR ********,
**************************
- Develop correlations between ******************************
*********************************************************** ******* and **.
- In proximity with ***********************************
- In ************************* for ***************
**************************
- Explore **************** for *********************** processing
- Determine potential benefit of ********** some of the ********* to
different ******** of each ********.
- Determine the utility of *** or *********************** for
************** and ******************.
- Use ********** or ********************* wherever possible, with the *****
and *************************** for ******* and *************************
as in B4
- As a ******* study, investigate possible ************* ********* in the
***************
- Optimize ** and ** towards the performance milestones
B4) CHARACTERIZATION TECHNIQUES
GOAL: establish ***** and ************************ for determining ******* in
both ****** and *****, and do **********, ********** and
*************************** samples
METHOD OVERVIEW: These measurements are critical for the program and rapid
turnaround will be essential. ASC must therefore bring the required
**************** in house (approx **************), with resolution to
******************** via ************ and/or **************.
******************************* will be used to evaluate
***********************, and *************************** for ****** will also be
employed. ********************* will also be confirmed (*************).
Tasks:
- -----
- hire ******************* at ASC with ***************; purchase and
install ****************
- develop ******* and *************** techniques to enable
******************* of both ************* and ********
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
*********
- prepare ************** and generate **************** ********; analyze
********** for *******
- interact with **** for **************************** of ***************,
both ********* and *********
- carry out standard ************** and ********** **************** in
support of the overall program
-9-
<PAGE> 43
EXHIBIT B
ASC/IAI Research and Development Agreement
Program Review Board
Terms of Reference of the Program Review Board (PRB).
1. The PRB shall be composed of 2 representatives of each party, with the
possibility of inviting specialists wherever required by the complexity of
any item to be discussed.
2. The PRB has the task of
(a) agreeing in detail on the research plan, including specific targets to
be achieved within well defined time limits;
(b) monitoring performance against plan, setting up check points for the
critical results to be achieved;
(c) recommending action to respective management of IAI and ASC as
required to achieve the objectives of the Program, including change of
scope if convenient in the light of new developments in the field.
(d) monitoring costs of the Program and advising Management of IAI and ASC
of any change proposed with respect to the original plan.
(e) setting milestones for the subsequent year of the program at least 90
days before the end of the current program year.
3. At least one representative of IAI and ASC, respectively shall be a person
with significant involvement in R&D of the agreed research program.
4. The PRB shall meet quarterly and shall have access to the necessary
technical and financial documentation which shall be provided by the
Parties before the meeting.
5. The PRB will review invention disclosures and make recommendations to the
Managements of ASC and IAI regarding which disclosures are to be submitted
for patent consideration. It is further understood by IAI and ASC that the
burden of full prior art disclosure to the United States Patent and
Trademark Office rests with both parties.
<PAGE> 44
6. The decisions of the PRB shall be taken unanimously. In case of failure to
agree, the relevant matter shall be submitted to the Managements of IAI and
ASC for final decision.
<PAGE> 45
EXHIBIT C
---------
ASC/IAI Research & Development Agreement
Inco Superconducting Investments/Expenditures
1988 - 1995
<TABLE>
The Inco expenditures for the period 1988 - 1995 on the joint superconductor R&D
activities are:
IAI Expenditures (US $)
<CAPTION>
Year IAI Internal MTU Total
---------------------------------------------------------------------
<S> <C> <C> <C>
1988 11,987 17,730 29,717
1989 107,410 123,434 230,844
1990 69,896 166,520 236,416
1991 88,145 127,805 215,950
1992 267,362 93,756 361,118
1993 95,022 96,110 191,132
1994 109,989 167,821 200,307
1995 230,268 90,318 398,089
------- ------- ---------
TOTAL 980,079 883,494 1,863,573
</TABLE>
<TABLE>
Inco US Expenditures (US $)
<CAPTION>
Year Amount
-------------------------------------
<S> <C>
1990 825,000
1991 1,100,000
1992 1,100,000
1993 575,000
1994 1,100,000
1995 1,100,000
---------
TOTAL 5,800,000
</TABLE>
Grand Total Inco Investment/Expenditures 1988 - 1995:
US $7,663,573
<PAGE> 46
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
RESEARCH AND DEVELOPMENT AGREEMENT
----------------------------------
EXHIBIT D
JOINT TECHNOLOGY INVENTORY
--------------------------
1. Preparation of Superconducting Oxides And Oxide-Metal Composites
- ---------------------------------------------------------------------
ASC-1; Owner MIT; exclusive license
Patent Number 4,826,808, issue date 5/2/89
Patent Number 5,204,318, issue date 4/20/93
Patent Number 5,189,009, issue date 2/23/93
Patent Number 5,439,880, issue date 8/8/95
Patent Application ***********************************, application pending
Patent Application ***********************************, application pending
A method of preparing a superconducting oxide by combining the metallic elements
of the oxide to form an allow, followed by oxidation of the alloy to form the
oxide. Superconducting oxide-metal composites are prepared in which a noble
metal phase intimately mixed with the oxide phase results in improved mechanical
properties. The superconducting oxides and oxide-metal composites are provided
in a variety of useful forms.
2. Textured Oxide Composites bv Directional Oxidation
- -------------------------------------------------------
ASC-3; Owner MIT; License option abandoned, Disclosure Status: Closed
Methods for getting texturing by oxygen or temperature gradients from metallic
precursors.
3. Process for Forming Superconductor Precursor
- -------------------------------------------------
ASC-9; Patent applied for jointly
Patent Number 5,034,373, issue date 7/23/91
The invention provides a process for production of silver-containing precursor
alloys to oxide superconductors, said alloys having reduced amounts of
intermetallics. Powders containing metallic elemental components of an oxide
superconductor are high energy milled for a predetermined amount of time to
increase homogeneity of the mixed metallic elemental components of the oxide
superconductor. Silver is then high energy milled into the metallic components.
The mixed silver and metallic elemental components of the oxide superconductor
are compacted for the silver-containing superconductor precursor. The compacted
powder is preferably hot worked at a temperature of at
<PAGE> 47
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
least 50% of the precursor alloy's melting temperature in degrees Kelvin.
4. Process for Making Electrical Connections to High Temperature
- ------------------------------------------------------------------
Superconductors Using a Metallic Precursor and The Product Made Thereby
-----------------------------------------------------------------------
ASC-l0; Owner: ASC
Patent Number 5,116,810, issue date 3/2/92
Patent Number 5,321,003, issue date 6/14/94
Superconducting joint metallurgically bonding a pair of shaped superconducting
pieces. Each of the pieces is formed by combining the metallic elements of a
superconducting oxide in substantially the stoichiometric proportions needed to
form the superconducting oxide, and then forming the combined metallic elements
into a shaped piece.
5. Process for Making Ceramic/Metal and Ceramic/Ceramic Laminates bv Oxidation
- --------------------------------------------------------------------------------
of a Metal Precursor
--------------------
ASC-11; Owner ASC
Patent Number 5,259,885, issue date 11/9/93
A method of preparing a laminated ceramic. The method includes preparing a
precursor having at least one noble metal element component and at least two
non-noble metal elements. The precursor is iteratively exposed to a first
environment to form an oxidized zone having a first concentration of a primary
ceramic phase containing the non-noble metal elements and then to a second
environment to form a second oxidized zone having a second concentration of the
primary ceramic phase, the second concentration being less than the first
concentration.
6. A Method of Producing *************************************
- ----------------------------------------------------------------
********************* of **************************** *******************
-------------------------------------------------------------------------
of ********************
-----------------------
******; Owner: ***
Patent Application ***************************************** *********,
application pending
A method for ************************** of **************** uses the
************** as **********************.
7. ************************************ and ********* ************
- --------------------------------------------------------------------
******; Owner: ***
Patent Application ****************************************; application
pending
<PAGE> 48
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
A process for making ***** ******************************* or **** *** from a
************ includes an ************** to form ********************** followed
by a series of *********** ************ and ******* to form the **************.
8. High Pressure Oxidation of Precursor Allovs
- ------------------------------------------------
ASC-20; Owner: ASC
Patent Number 5,472,527, issue date 12/5/95
A method for forming unsegregated metal oxide-silver composites includes
preparing a precursor alloy comprising silver and precursor elements of a
desired metal oxide and oxidizing the allow under conditions of high oxygen
activity selected to permit diffusion of oxygen into silver while significantly
restricting the diffusion of the precursor elements into silver, such that
oxidation of the precursor elements to the metal oxide occurs before diffusion
of the metallic elements into silver. Further processing of the metal oxide
composite affords an oxide superconducting composite with a highly unsegregated
microstructure.
9. ******************* for *********************
- --------------------------------------------------
******; Owner: ***
Patent Application ******************************** ******; application
pending
************** after ***************** improves properties by
*******************.
10. *************************************
- ------------------------------------------
******; Owner: ***
Patent Application ***************************************; application
pending
Using a ********************* of ************ achieves higher **** than by
conventional techniques.
11. Method for Improving the ************************** of
- -----------------------------------------------------------
******************************
------------------------------
*****;Owner:***
Patent Application ****************************************; application
pending
An added ******************* at ************************ and *** ************
improves ****************.
<PAGE> 49
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
12. Method For *********** and *********************** and ******************
- ------------------------------------------------------------------------------
in ******************************** *********************
---------------------------------------------------------
******; Owner: ***
Notebook entries and disclosure at ASC
************** during ******* is reduced by **************** ******* to the
********* on its way into and out of *********.
13. A Method for **************************************** in *** ********** by
- -------------------------------------------------------------------------------
*********
---------
*******; Owner: ***
Notebook entries and disclosure at ASC
The adverse effects of *********** between ********** and *** for ****** in
******************** are ********* by ****************.
14. ************************************************
- -----------------------------------------------------
*******; Owner: ***
Patent Application *******************; application pending
********************** of ************* suitable for ********* may be formed by
******************* in a ****************.
15. *********************************************
- --------------------------------------------------
*******; Owner: ***
Patent Application ******************; application pending
A process for producing **********************************
************************ in ************************* surrounded by a
**************** at least the ****************** of which are also
******************. Key process steps are the *********** of a
********************************************************* ********* to *******
at least the ****************** of the ****** ********* the **************** to
**** and ******* the *********************** within the ********* via
************** *************** by the *************************** and
substantially without *********** of the **********************.
16. Production of Oxidic Superconductor Precursors
- ---------------------------------------------------
Owner: IAII
Patent Number 4,962,084, issue date 10/9/90
A process for producing an oxidic superconductor precursor alloy which comprises
mechanically alloying metallic elemental constituents of the oxidic
superconductor in stoichiometric proportions and in the presence of a process
control agent
<PAGE> 50
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
non-detrimental to the superconductor to provide a uniform mechanically alloyed
product which is compacted and worked to provide a product form such as wire,
tape or thin strip. This product form can then be given the configuration
required for use (e.g. open coil) and then oxized to provide the superconductor.
7 claims.
17. Production of Oxidic Superconductors By Zone Oxidation Of A Precursor Alloy
- --------------------------------------------------------------------------------
Owner:IAII
Patent Number 4,962,085, issue date 10/9/90
Discloses a process for producing oxidic superconductors having advantageously
textured oxide structures which involves zone oxidizing elongated metallic
precursors of the superconductors. 11 claims.
18. Methods For Producing ********************* And **************
- -------------------------------------------------------------------
****************** From ******************** Or
-----------------------------------------------
********************************
--------------------------------
Owner: ***************
This patent application (not filed but reflects ongoing activity) describes
************************* and ********************* ********** into
********************, with particular emphasis on methods for improving the
********* and *********** of such **********. Upon **************, the
*********** or *********** ********** transform to ********************* or
*************** **********************.
19. Method(s) For Producing **********************************
- ---------------------------------------------------------------
******************* Using a Combination Of *********** And
----------------------------------------------------------
*******************
-------------------
Owner: ****
************* or ********************* of ****************
********************************* compositions, coupled with
****************************************************** results in a
**************************** that overcomes a **************** ***************
problem associated with only ******************* processing. *******************
parameters are defined.
20 Method(s) For Producing **********************************
- ---------------------------------------------------------------
******************* Using ************* To ***************** **************
---------------------------------------------------------------------------
And *****************
---------------------
Owner: ****
<PAGE> 51
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Utilization of ************* of ******************** can markedly enhance
quality of **************************************** **************** by
increasing ******, minimizing ********** and aiding **************.
Manufacturing of ***************** can also be improved by reducing
*********************************** problems, accelerating *************,
reducing ********* ********** and eliminating propensity for ********** of
****************** in the final product. Compositional ranges and methods of
manufacturing the ************* are defined.
21. Process for Extrusion Of *************** And ***************
- -----------------------------------------------------------------
*******; Owner: ***
A method for achieving very high **************** (up to *****) of
**************** encased in ***********. ********* of both ***** and
************************* are treated, and their collection using an
******************** apparatus. Key process variables are
******************************************************** ******, and
******************************.
22. Process For ***************************
- --------------------------------------------
*******; Owner: ****
A method for ***************************************************.
***********************************, both ***** and ***********, are covered.
Key process variables are ******************* ***************************** and
******************.
<PAGE> 1
EXHIBIT 10.30
MANAGEMENT AGREEMENT
BETWEEN
ELECTRIC POWER RESEARCH INSTITUTE, INC.
AND
AMERICAN SUPERCONDUCTOR CORPORATION
This management Agreement ("Agreement") effective January 1, 1996, by and
between the Electric Power Research Institute, Inc. ("EPRI"), a non-profit
corporation organized and existing under the laws of the District of Columbia
and American Superconductor Corporation ("ASC"), a corporation organized and
existing under the laws of the State of Delaware.
WHEREAS, EPRI funds and supports research and development activities for
the benefit of the American utility industry and the public as a whole,
including research and development with respect to high temperature
superconducting biaxially textured coated conductors (the "Field"); and
WHEREAS, ASC has carried on and is willing to carry on a research and
development program on superconducting wires, the goal of which is to produce
superconducting wires which are suitable for commercial exploitation; and
WHEREAS, EPRI has or shall grant, and ASC desires to acquire, an exclusive
license under terms and conditions set forth in the Technology License
Agreement, and ASC has reviewed the terms and conditions of the agreements
between EPRI and third parties presently in effect and identified in Attachment
A of the Technology License Agreement; and,
WHEREAS, ASC has agreed, subject to the terms of the Technology License
Agreement and the Warrant Agreement, to issue EPRI a Warrant to purchase 100,000
shares of ASC Common Stock at a purchase price of $14 per share.
WHEREAS, EPRI and ASC desire to form a strategic alliance to fund certain
research and development programs in the area of high temperature superconductor
("HTS") biaxally coated conductors ultimately leading to the production and
commercialization by ASC of advanced HTS wire and other products.
<PAGE> 2
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
NOW, THEREFORE, for and in consideration of these premises and of the
mutual covenants and agreements contained in this agreement, and subject to the
terms and conditions set forth in this Agreement, the parties agree as set forth
below.
Section 1. DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined as follows:
1.1 "Agreement" means this Agreement, including Table 1 and 2.
1.2 "ASC" means American Superconductor Corporation.
1.3 "Contract Year" means any National Laboratory or other organization
conducting research and/or development activities funded in whole or in part by
EPRI and/or ASC.
1.4 "Contract Year" means a twelve-month period commencing on the effective
date of this Agreement or any anniversary of such effective date.
1.5 "EPRI" means the Electric Power Research Institute, Inc.
1.6 "EPRI Technology" means Technology useful in the Program in which EPRI
has rights or as to which EPRI at any time has the right to grant licenses
conceived, created, reduced to practice or otherwise developed at any time prior
to the end of the Research and Development Program in the course of any of the
contracts between EPRI and third parties listed below in Table 1 (and any
extensions or modifications thereof) or in the course of any work in connection
with the Research and Development Program.
TABLE 1
PERIOD OF
CONTRACTOR CONTRACT NUMBER PERFORMANCE
******** ************ ****** ********
**** ********
*********** ********** ****** ********
**** ********
************* ********** ****** ********
**** ********
-2-
<PAGE> 3
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
******************** ********* ****** ********
**** ********
1.7 "Program Field" means the "high temperature superconductor ("HTS")
biaxally textured coated conductors, including any compositions, processes or
apparatus used in the manufacture of such conductors.
1.8 "Research and Development Program" means a research and development
program directed to the "development of HTS biaxially textured coated
conductors.
1.9 "Program Contract" means any contract between EPRI and/or ASC, on the
one hand, and a Contract Organization, on the other hand, pursuant to which such
Contract Organization conducts activities in connection with the Research and
Development Program.
1.10 "Proprietary Data" means all confidential information or data of any
type, whether or not patentable and whether or not copyrightable, including,
without limitation, ideas, concepts, formulas, methods, procedures, designs,
compositions, plans, applications, specifications, drawings, techniques,
processes, research, technical data, know-how, apparatus, equipment, samples,
inventions (patented and not patented), discoveries, and the like, and financial
data, business plans, demonstrations and trade secrets (all whether or not in
tangible or oral form).
1.11 "Research and Development Period" means the four-year period
commencing on the effective date of this Agreement, unless extended pursuant to
Section 5.6 or earlier terminated pursuant to Section 5.2 or 5.3 in which case
it means that period as so extended or limited.
1.12 "Warrant" means the Common Stock Purchase Warrant issued to EPRI by
ASC of even date herewith, a copy of which is included as Attachment B to the
Technology License Agreement.
1.13 "Technology License Agreement" means the Agreement of even date
between EPRI and ASC pursuant to which EPRI has licensed certain Technology to
ASC, a copy of which is included herein as Attachment A.
1.14 "Warrant Agreement" means the agreement of even date between EPRI and
ASC, a copy of which is included as Attachment B to the Technology License
Agreement, a copy of which is included
- 3 -
<PAGE> 4
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
as Attachment A to this Agreement, providing the grant to EPRI of Warrants for
the purchase of ASC Common Stock.
1.15 "First Contract Year" shall include EPRI activities and funding in the
Program Field prior to the effective date of this Agreement, together with EPRI
activities and funding in the Field during the first twelve month period
commencing on the effective date of this Agreement.
1.16 "Second Contract Year" shall mean the twelve month period commencing
on the first anniversary of the effective date of this Agreement.
Section 2. THE RESEARCH AND DEVELOPMENT PROGRAM
<TABLE>
2.1 Scope of Research and Development Program. The Research and Development
Program shall consist of research and development activities in the Program
Field performed by ASC to the extent financially supported by EPRI or performed
by Contract Organizations pursuant to contracts with EPRI or ASC to the extent
financially supported by EPRI and/or ASC, with the goal of developing HTS
biaxially textured coated conductors, all as more specifically provided below in
Table 2. Table 2 details the anticipated annual funding allocations for Research
and Development for Phase I. The Research and Development Program shall consist
of two phases. Phase I shall be an initial phase directed principally to
determining the viability of the concepts of the Research and Development
Program and shall be conducted during the first two Contract Years of this
Agreement. Phase II shall consist of further work conducted during subsequent
Contract Years. No obligation is created hereunder for EPRI to contribute funds
towards Phase II or beyond the first two contract years of this Agreement.
<CAPTION>
TABLE 2
Contractor EPRI ASC Total
<S> <C> <C> <C>
**** **** **** ****
**** *** ***
************ *** ** ***
**** ** **
******** *** ***
********* *** ***
*** *** ***
********** *** ****
TOTAL* $1,000 $2,500 $3,500
</TABLE>
-4-
<PAGE> 5
* Amounts above in K$.
2.2 Contracts and Working Relationships with Other Parties.
a. ASC and EPRI recognize that the work contemplated by the Research
and Development Program will involve work done pursuant to Program Contracts and
will require the negotiation and execution of Program Contracts, including
modification(s) and extension(s) of both existing and future contracts and
agreements.
b. ASC and EPRI agree to work together to:
i. negotiate and execute such contracts and agreements as may be
necessary to carry out the Research and Development Program contemplated by this
Agreement.
ii. enlist the support of and participation by the U.S. Department
of Energy ("DOE") in research and development activities to be conducted by
National Laboratories in connection with the Research and Development Program,
and
iii. enlist the support of and participation by those responsible
for or in any way controlling the activities of any Contract Organization.
c. Research and development activities that are funded and contracted
separately by either ASC or EPRI, will be managed by the sponsoring
organization. The sponsoring organization is obligated to ensure that the other
organization is able to participate in developing, approving, coordinating,
reviewing and providing input to all separately funded research and development
in the Research and Development Program and to use its best efforts to permit
the non-sponsoring organization to participate in all negotiations and
discussions between the sponsoring organization and any Contract Organization
regarding Program Contracts and research and development activities conducted,
or potentially to be conducted, in connection with the Research and Development
Program. The Non-sponsoring organization will be informed of the technical
progress and will be provided copies of all correspondence and the like relating
thereto on regular intervals but will not have direct control over the research
and development activities. The Joint Steering Committee will develop, approve,
review, and provide input with respect to all separately and jointly funded
research and development activities in connection with the Research and
Development Program, and shall be provided copies of all records, reports, and
other documents relating thereto.
- 5 -
<PAGE> 6
2.3 Best Efforts Performance. Each party shall use its best efforts to
achieve the goals set forth in Section 2.1 and Table 2. In particular, each
party shall provide personnel qualified to perform the activities contemplated
so that the Research and Development Program will achieve such goals, and shall
use its best efforts to enter into such project contracts as may be reasonably
required to achieve such goals.
2.4 Disclosures.
a. Subject to the provisions of Section 4 (Confidentiality), solely
for the purposes of the Research and Development Program, EPRI shall make
available to ASC all EPRI Technology necessary for ASC to carry out its
obligations under Section 2. The rights of ASC to use or exploit any Technology
(including Proprietary Data) other than in the course of the Research and
Development Program, and to use or disclose Proprietary Data other than for
purposes of the Research and Development Program, shall be as provided in the
Technology License Agreement.
b. Solely for the purposes of the Research and Development Program,
ASC and EPRI shall make available to Contract Organizations such Technology
(including Proprietary Data) as is reasonably necessary for the respective
Contract Organization to carry out its obligations under a particular contract
or agreement. The extent to which disclosure of its Proprietary Data shall be
made shall be at the option of the disclosing party taking into account the
reasonable needs of the Person to which disclosure is to be made. No such
Technology or Proprietary Data is required to be disclosed under terms that
would permit the Person to which disclosure is made to use or disclose the same
other than for the purpose of the Research and Development Program.
2.5 Check points. During the Research and Development Program a check point
in each calendar year shall be established by the parties in order to certify
the feasibility, timing and results of the activities undertaken pursuant to
that program.
2.6 Visits. During the Research and Development Program, each party may (i)
send technical personnel to the other party or Contract Organizations as
provided in the Program Contract terms and conditions or (ii) received technical
personnel from the other party for consultation on the problems arising from the
research and development activities and for discussion of the results of the
Research and Development Program. The duration and frequency
-6-
<PAGE> 7
of these consultations and visits shall be determined by informal agreement of
the parties, from time to time, as requests may be made therefore, and
permission for such visits shall not be unreasonably withheld.
2.7 Joint Steering Committee. ASC and EPRI agree to form a Joint Steering
Committee consisting of an equal number of representatives from ASC and EPRI for
the purpose of developing, approving, coordinating reviewing and providing input
with respect to all research and development activities in the Research and
Development Program. Dr. Alexis P. Malozemoff of ASC and Dr. Paul M Grant of
EPRI would be the principal members of the Joint Steering Committee. The members
of the Joint Steering Committee agree to communicate together routinely and on a
continuing basis concerning all the work in the Field.
In the event the Joint Steering Committee is unable to reach agreement in
approving, coordinating, reviewing and providing input with respect to the
research and development activities, a group consisting of an equal number of
representatives from ASC and EPRI from senior management, including Dr. Gregory
J. Yurek of ASC and Dr. Tomas R. Schneider of EPRI, shall be assembled for the
purpose of resolving management disagreement(s).
2.8 Joint Steering Committee Meetings. The Join Steering Committee shall
meet on the dates of the check points established pursuant to Section 2.5 and at
such other times as the parties may agree to. Personnel of the parties, other
than the Committee members, may be invited to the meetings on the basis of their
contribution to the technical problems under discussion. ASC will be responsible
for keeping the minutes of each meeting, and these minutes shall be
countersigned by one representative of each party within thirty (30) days after
each meeting.
2.9 Records and Reports.
a. Records. Each party will prepare and maintain full accurate records
and books relating to the progress and status of the Research and Development
Program performed or funded by it, all financial matters connected therewith,
and all expenditures made or costs incurred in connection therewith. These
records and books shall be made available at all reasonable times to the Joint
Steering Committee for management and supervision purposes and verification of
the parties' obligations hereunder. Upon the written request of either party,
the records of the other shall be subject to audit, by a public accountant
selected by the requesting party and reasonably acceptable to the other party,
at
- 7 -
<PAGE> 8
the cost of requesting party. It is the intent of the parties that no such
audits shall be performed more than once a year, and once upon expiration or
termination of this Agreement.
b. Reports. At least once each calendar quarter, within fifteen (15)
days after the end of the quarter, each party will prepare and deliver to the
Joint Steering Committee reports setting forth:
(i) summaries of the status and progress of the Research and
Development Program;
(ii) all expenditures made or costs incurred in connection
therewith; and
(iii)projections of expenditures required in connection with the
Research and Development Program for each of the four calendar quarters
following the date of such reports.
2.10 Research and Development Payments and Expenditures. EPRI agrees to
contribute a minimum of $2.0 million during calendar 1996 and 1997 to fund and
manage the EPRI Technology. The funding by EPRI would be made directly to the
National Laboratories and other organizations depending on the terms of the
agreement reached with the National Laboratories and other organizations. Any
monies paid by EPRI to ASC pursuant to this Agreement will be subject to a
separate Program Contract. The parties anticipated that increased work may be
performed during Phase II if Phase I of the Research and Development Program is
successful, and agree that the amounts to be contributed by EPRI will negotiate
a new warrant agreement in view of such subsequent contributions.
Section 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations And Warranties of EPRI. EPRI represents and warrants to
ASC as follows:
a. Organization and Authority. EPRI is a non-profit corporation duly
organized, validly existing and in good standing under the laws of the District
of Columbia and has full power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. EPRI is
qualified and in good standing as a foreign corporation doing business in all
jurisdictions in which where failure to so qualify would have a material adverse
effect on its business and/or assets. EPRI has
-8-
<PAGE> 9
full power and authority to enter into and perform its obligations under this
Agreement in accordance with its terms.
b. Authorization; No violation. The execution, delivery and performance
of this Agreement by EPRI have been duly authorized by all requisite corporate
action of EPRI, and this Agreement constitutes the valid end binding obligation
of EPRI, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the performance by EPRI of its obligations
hereunder shall (i) violate any provision of its Certificate of Incorporation or
By-Laws; (ii) violate, conflict with, or result in the breach or termination of
any agreement or instrument to which EPRI is a party or by which it is bound,
which breach or termination would adversely affect EPRI's ability to perform its
obligations under this Agreement, (iii) violate any judgment, order, injunction,
decree or aware against, or binding upon, EPRI; or, (iv) constitute a violation
by EPRI of any law, directive or regulation of any jurisdiction.
c. Approvals and Consents. The execution and delivery of this Agreement
and the performance by EPRI of its obligations hereunder do not require notice
to, or the approval or consent of, any third party, including without limitation
any educational institution, or governmental or other regulatory agency.
3.2 Representations and Warranties of ASC. ASC represents and warrants to
EPRI as follows:
a. Organization and Authority. ASC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. ASC has full
corporate power and authority to enter into and perform its obligations under
this Agreement in accordance with its terms.
b. Authorization; No Violation. The execution, delivery and performance
of this Agreement by ASC has been duly authorized by all requisite corporate
action of ASC, and this Agreement constitutes the valid and binding obligation
of ASC, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the performance by ASC of its obligations
hereunder shall (i) violate any provision of its Certificate of Incorporation or
by-laws; (ii) violate, conflict with or result in the breach or termination of
any agreement or instrument to which ASC is a party or by which it is bound,
which breach or termination would adversely affect ASC's ability to
- 9 -
<PAGE> 10
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
perform its obligations under this Agreement; (iii) violate any judgment, order,
injunction, decree or aware against, or binding upon. ASC; or, (iv) constitute a
violation by ASC of any law, directive, or regulation of any jurisdiction.
c. Approval and Consents. The execution and delivery of this Agreement
and the performance by ASC of its obligations hereunder do not require notice
to, or the approval or consent of, any third party, including without limitation
any governmental or other regulatory agency.
d. ASC has made a good faith determination that the fair market value
of the assets acquired pursuant to the Technology License Agreement is less than
***********.
Section 4. CONFIDENTIALITY
4.1 Obligation to Maintain Secrecy. Each party undertakes to keep secret
and confidential and to use only as provided in this Agreement, all Proprietary
Data disclosed to it by other party during the term of this Agreement or that is
Program Technology.
4.2 Exceptions. Notwithstanding the provisions of Section 4.1, a party may
disclose Proprietary Data received from the other party or that is Program
Technology.
a. pursuant to a nonappealable order or judgment of any competent
court or governmental body, provided that the receiving party so obliged to
disclose shall give notice of such order or judgment to the other party and
shall use reasonable efforts to obtain a protective order covering this
Proprietary Data,
b. if required to do so by any law, rule or regulation,
c. if such Proprietary Data is or becomes generally available to the
public through any means other than breach of this Agreement,
d. if such Proprietary Data is disclosed to the receiving party without
any obligation of confidentiality by a third party who has the right to make
such disclosure,
-10-
<PAGE> 11
e. if such Proprietary Data was in the possession of the receiving
party without an obligation of confidence prior to the effective data of this
Agreement,
f. if the other party provides advance written authorization for the
disclosure,
g. under terms and conditions substantially the same as those provided
in this Section 4, to those of its employees, consultants, contractors, and
sub-licensees who need to use such Proprietary Data for the purposes of this
Agreement,
h. as permitted by the Technology License Agreement.
4.3. Disclosure in Patent Applications. Neither party will disclose
Proprietary Data received from the other party or that is Program Technology in
a patent application or in connection with the filing or prosecution of any
patent application without the prior approval of the other party. If, in the
judgment of the other party, it is reasonably necessary to include any such
Proprietary Data in a patent application, the party will so inform the other
party and the parties will consult in good faith to attempt to resolve whether
and the manner in which such Proprietary Data may be so disclosed.
4.4 Matters Not Considered Public Knowledge For the Purposes of Section
4.2. Proprietary Data received from the other party or that is Program
Technology in a patent application or in connection with the filing or
prosecution of any patent application without the prior approval of the other
party. If, in the judgment of the other party, it is reasonably necessary to
include any such Proprietary Data in a patent application, the party will so
inform the other party and the parties will consult in good faith to attempt to
resolve whether, and the manner in which, such Proprietary Data may be so
disclosed.
a. the general principle is public knowledge or known to such party
but the particular practice is not itself public knowledge or so known,
b. the generic information is public knowledge or known to such party
but the specific information is not in itself public knowledge or so known, or,
c. it constitutes a combination (not itself public knowledge or known
to such party) of information which is public knowledge or known to such party.
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<PAGE> 12
4.5 Period of Confidentiality. The provisions of this Section 4 shall
remain in effect for five (5) years after the expiration or termination of this
Agreement or any extensions thereto, provided, however, that as to any
particular Proprietary Data such provisions shall remain in effect for not less
than ten (10) years from the date that such particular Proprietary Data was (i)
first created or (ii) first disclosed by the disclosing party to the receiving
party of this Agreement, whichever is longer.
Section 5. TERM, TERMINATION AND EXTENSION
5.1 Term of Agreement. This Agreement shall be effective January 1, 1996
and remain in force four years from the effective date of this Agreement, unless
earlier terminated as provided in this Section 5.
5.2 Early termination. EPRI may discontinue expenditures of funds pursuant
to this Agreement at any time within thirty (30) days written notice to ASC;
however, if EPRI discontinues expenditures of funds during the first two
Contract Years of this Agreement, then (a) EPRI's right to acquire or exercise
Warrants will be adjusted in proportion to the fraction of $2.0 million dollars
that EPRI has expended under EPRI Technology. In the event of early termination,
the five hundred thousand dollar amount referenced in section 4.02(b) of the
Technology License Agreement shall be changed in accord with the fraction of
$2.0 million provided in section 2.1 that EPRI has expended during the First and
Second Contract Years.
Either party shall have the right to terminate this Agreement effective two
years after the effective date hereof, upon a determination by it that the
results of Phase I of the Research and Development Program do not justify
continuing with Phase II, by giving written notice to the other party of its
intent to so terminate not later than ninety (90) days before the second
anniversary of the effective date of this Agreement. If neither party makes such
a determination and gives such notice, then this Agreement shall remain in
effect for the full term thereof.
5.3 Termination for Bankruptcy. EPRI may terminate this Agreement by giving
ten (10) days written notice to ASC if ASC files or has filed against it any
petition in bankruptcy or any proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors, if that petition or
proceeding is not dismissed with prejudice within thirty (30) days after filing.
Such termination shall be effective as of the tenth
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<PAGE> 13
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
day following such notice. If EPRI terminates this Agreement pursuant to this
paragraph, EPRI shall not be obligated to make any further payments to ASC
hereunder.
5.4 Continuation Program Contracts. If either party terminates the Research
and Development Program or this Agreement as provided in this Section 5, then
the other party shall have the right to insure the continuation of any Program
Contracts then in effect by (i) providing the termination party written notice
of its desire to do so and (ii) agreeing to assume responsibility for any
payments thereunder due under any such Program Contracts with respect to periods
more than two years after the effective date of this Agreement.
5.5 Termination for Material Breach. Either party shall have the right to
terminate the Research and Development Program and this Agreement upon a
material breach by the other of any warranties, covenants or obligations
hereunder. Termination pursuant to the provisions of this Section 5.5 shall be
accomplished by the giving of written notice by the terminating party to the
other party of its election to terminate and specifying the date of termination,
and the breach that is the basis for termination, such notice to be given not
less than 90 days prior to such date of termination. If such breach can be
cured, the party receiving such notice shall have the right to prevent
termination by curing the specified breach within such 90 day period.
5.6 Extensions. This Agreement and/or the Research and Development Program
may be extended by mutual agreement. If either party requests an extension, both
parties shall then negotiate in good faith to reach an agreement on such an
extension.
5.7 Effect of Termination or Expiration. Except as specifically otherwise
set forth in this Section 5.7, upon either termination or expiration of this
Agreement, the provisions of this Agreement shall no longer have any legal
effect except that the following provisions shall survive and shall not be
subject to any limit of time except those expressed in the provisions
themselves:
Attachment A Technology License Agreement
Attachment B Warrant Agreement
Section 1 Definitions
Section 2.9,a. Records
Section 3 Representations and Warranties
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<PAGE> 14
Section 4 Confidentiality
Section 5.4 Continuation of Program Contracts
Section 5.7 Effect of Termination or Expiration
Section 6.1 Export Controls
Section 6.2 Indemnification
Section 6.3 Resolution of Disputes
Section 6.5 Publicity
Section 6.6 Assignment
Section 6.7 Notices
Section 6.10 Written Amendment Only
Section 6.11 Application Law; Entire Agreement,
Headings
Section 6.12 National Cooperative Research and
Production Act Filings
Section 6. MISCELLANEOUS
6.1 Export Controls. The parties agree to comply with all applicable export
control laws and regulations of the United States.
6.2 Force Majeure. If the performance of any obligation under this
Agreement is prevented by any cause beyond the reasonable control of a party,
such party shall be excused from such performance for so long as is reasonable.
The party so prevented shall use all practical efforts to perform its
obligations as soon as possible.
6.3 Resolution of Disputes. If a dispute arises out of or relating to this
Agreement, or any breach thereof, and if such dispute cannot be settled through
direct negotiation between the parties, the parties shall submit the dispute to
nonbinding mediation with a mediator to be mutually agreed upon by the parties.
The mediation may be initiated by the written request of either party to the
other party and shall commence within fifteen (15) days of receipt of such
notice, unless otherwise agreed by the parties.
6.4 Arbitration. In the event of the failure of any such mediation as
provided for under Section 6.3 above, the parties shall then settle the dispute
by arbitration conducted in San Francisco, California, in accordance with the
rules then in effect of the American Arbitration Association by three (3)
arbitrators appointed in accordance with such rules. The award rendered by the
Arbitrators shall be final and binding, and judgment may be entered upon it in
any court having jurisdiction thereof.
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<PAGE> 15
Notwithstanding the foregoing, the parties may apply to any court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
agreement and without any abridgement of the powers of the arbitrators.
6.5 Publicity. During the term of this Agreement and any extension thereof,
and unless otherwise required by court order, governmental law or regulation, or
any other operation of law, neither ASC nor EPRI shall:
a. Issue any statement to the public or the press regarding the subject
matter of this Agreement without the prior consent of the other; provided,
however, that ASC may issue any statement or communication if it is advised by
counsel that such statement or communication is required to comply with
applicable law, governmental rule or regulation, or stock market rule.
b. Permit its employees to issue any technical article or paper that
quotes any of its employees, officers or directors in connection with the
Research and Development Program, or that discloses Proprietary Data of the
other party, the results of the Research and Development Program or any of the
terms of this Agreement (except insofar as such Proprietary Data, results or
terms previously have been properly disclosed), without the prior review and
consent of the other party, provided, however, that the recipient shall be
deemed to consent to the technical article or paper only if the recipient does
not respond within ten (10) business days.
6.6 Assignment. This Agreement shall be binding upon, and inure to the
benefit of, ASC and EPRI and their respective successors and permitted assigns.
Neither party may assign its rights and obligations under this Agreement without
the prior written consent of the other party, except that either party may
assign all or any part of its right, title and interest in and to this Agreement
to (i) a wholly-owned subsidiary or (ii) any entity that succeeds to all or
substantially all of the business assets of the assignor, provided that the
other party is advised of the assignment in writing at least thirty (30) days
before the effective date of the assignment, that the assignee agrees in writing
prior to the effective date of the assignment to be bound by all of the terms
and conditions of this agreement, and that assigning party shall remain liable
for all of its obligations under this Agreement.
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<PAGE> 16
6.7 Notices. Any notice or communication given pursuant to this Agreement
by either party to the other shall be in writing and delivered or mailed by
registered or certified mail, airmail postage prepaid (airmail notices shall be
deemed to have been given 10 days after having been mailed), as follows:
If to EPRI: Electric Power Research Institute
P. O. Box 10412
Palo Alto, CA 94303
Attention: Director of Contracts
If to ASC: American Superconductor Corporation
Two Technology Drive
Westborough, MA 01583
Attention: President
or to such other address as the address shall have last furnished in writing to
the addressor.
6.8 No Prejudice by inaction. No failure or delay on the part of a party to
exercise any of its rights under this Agreement shall be construed to prejudice
its rights in connection with that or any subsequent default.
6.9 Relationship of Parties. Nothing in this Agreement shall be construed
to constitute either party as the partner, joint venture, agent, employee or
affiliate of the other, it being intended that the parties shall remain
independent contractors and neither party shall be liable for the obligations,
liabilities or representations of the other.
6.10 Written Amendments Only. No agreement or understanding varying or
extending this Agreement will be binding upon either party unless it is in
writing and signed by a duly authorized officer or representative of both
parties.
6.11 Applicable Law; Entire Agreement; Headings. This Agreement including
the Technology License Agreement and the Warrant Agreement shall be construed in
accordance with the laws of the State of California. This Agreement may be
executed in two counterparts, each of which shall be deemed an original, but
both of which together shall constitute one and the same instrument. This
Agreement including the Technology License Agreement and the Warrant Agreement
contain the entire understanding between the parties with respect to the subject
matter of this Agreement and
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<PAGE> 17
supersedes all prior agreements and understandings. The headings contained in
this agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first written
above.
ELECTRIC POWER RESEARCH AMERICAN SUPERCONDUCTOR
INSTITUTE, INC. CORPORATION
BY: /s/ Alan Germanis BY: /s/ Ramesh Ratan
--------------------------- ---------------------------
Its:Director of Contracts Its: Exec. V.P.
-------------------------- --------------------------
3/25/96 3/26/96
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<PAGE> 18
ATTACHMENT A
AND ATTACHMENT B
ARE FILED HEREWITH AS
EXHIBIT 10.31 AND
EXHIBIT 10.32,
RESPECTIVELY
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<PAGE> 1
EXHIBIT 10.31
TECHNOLOGY LICENSE AGREEMENT
between
ELECTRIC POWER RESEARCH INSTITUTE, INC.
and
AMERICAN SUPERCONDUCTOR
CORPORATION
<PAGE> 2
TECHNOLOGY LICENSE AGREEMENT
BETWEEN
ELECTRIC POWER RESEARCH INSTITUTE, INC.
AND
AMERICAN SUPERCONDUCTOR
CORPORATION
THIS AGREEMENT effective on the 1st day of January, 1996 between
ELECTRIC POWER RESEARCH INSTITUTE, INC. (hereinafter called "EPRI"), a
non-profit corporation organized under the laws of the District of Columbia,
having offices at 3412 Hillview Avenue, Palo Alto, California 94304, and
AMERICAN SUPERCONDUCTOR CORPORATION, a corporation of the State of Delaware,
having a principal place of business at Two Technology Drive, Westborough, MA,
01581 (hereinafter referred to as "LICENSEE").
WITNESSETH
WHEREAS, EPRI is engaged in a research and development program with respect to
the area of superconducting technologies described at Subarticle 1.01; and
WHEREAS, LICENSEE is engaged and will continue to be engaged in its own research
and development programs with respect to the Field; and
WHEREAS, EPRI shall own or owns or shall have the right to grant licenses in
Intellectual Property created under EPRI contract(s) in the Field; and
WHEREAS, EPRI and LICENSEE desire to form an alliance in the Field ultimately
leading to production and commercialization by LICENSEE of advanced HTS wire or
other products in the Field; and
WHEREAS, EPRI desires to grant, and agrees to grant, and LICENSEE desires to
obtain an exclusive license under patents (if any when granted to EPRI), patent
applications, confidential data and trade secrets owned by EPRI or which EPRI
otherwise has the right to license pertaining to the Field,
<PAGE> 3
NOW, THEREFORE, in consideration of the premises, mutual covenants, and
obligations herein contained, it is agreed by and between the parties hereto as
follows:
ARTICLE I - DEFINITIONS
1.01 "Field" shall mean superconducting technologies which result from research
and development in the area of high temperature superconducting biaxially
textured coated conductors as described in greater detail in Attachment A
incorporated herein by this reference.
1.02 "Intellectual Property" shall mean all intellectual property rights vested
in EPRI (i.e., owned by EPRI or which EPRI otherwise has the right to license)
pertaining to the Field. Said Intellectual Property shall include, but is not
limited to, patents (if and when granted), patent applications (if any),
confidential data, proprietary designs and design procedures, computer programs
and databases, test procedures and related trade secrets, developed or owned by
or licensed to EPRI in the Field.
1.03 "Management Agreement" means the agreement of even date between EPRI and
ASC pursuant to which EPRI and ASC have agreed to cooperate with each other
regarding their separate R&D Programs and to fund these research and development
programs in the Field.
1.04 "Program Technology" means all Technology conceived, reduced to practice,
created or otherwise developed under a contract in the Field funded in whole or
in part by EPRI and/or ASC pursuant to the Management Agreement.
1.05 "Warrant Agreement" means the agreement of even date between EPRI and ASC,
a copy of which is attached as Attachment B to this Agreement, providing the
grant to EPRI of warrants for the purchase of 100,000 shares ASC Common Stock.
1.06 "Effective Date" of this Technology License Agreement shall mean January 1,
1996.
ARTICLE II - GRANT
2.01 EPRI hereby grants, and agrees to grant, to LICENSEE an exclusive,
nontransferable, (except as set forth in Subarticles 3.02 and 7.01) worldwide,
royalty-free license to use the Intellectual Property in the further
development, use,
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<PAGE> 4
manufacture, distribution, lease, sale and in other forms of commerce, subject
to the terms and conditions of this Agreement.
2.02 Nothing contained in this Agreement shall be construed as granting to
LICENSEE any other right or license, either express or implied, under any right
of EPRI now or hereafter owned or controlled by EPRI, except the express rights
hereinabove granted.
2.03 The license hereinabove granted neither constitutes nor includes an
agreement by EPRI to provide or to furnish service, support or assistance of any
nature and no service, support or assistance has been, is being or will be
furnished by EPRI hereunder.
2.04 To the extent that EPRI is unable to license any EPRI Intellectual Property
to LICENSEE on an exclusive, worldwide, royalty-free basis, EPRI will grant such
license as it has the right to grant.
ARTICLE III - PROPRIETARY RIGHTS AND CONFIDENTIALITY
3.01 As between the parties, LICENSEE acknowledges that the Intellectual
Property is and shall at all times be and remain the sole and exclusive property
of EPRI, and LICENSEE shall derive no rights, title or interest therein except
as expressly set forth in this Agreement. Further, LICENSEE hereby acknowledges
that a breach of the confidentiality provisions hereunder may cause EPRI
irreparable harm and damage which may not be recoverable at law.
3.02 Subject to the terms and conditions set forth herein, with the consent of
EPRI, which consent shall not unreasonably be withheld, LICENSEE may:
(A) grant sublicenses in the EPRI Intellectual Property or any portion
thereof to others; or
(B) disclose Proprietary Data (including patent applications, confidential
data and trade secrets) associated with or embodied in EPRI
Intellectual Property.
EPRI consents to LICENSEE granting Sublicense(s) to Pirelli (i.e., Pirelli
S.P.A., its subsidiaries and affiliates), and to joint ventures to which
LICENSEE or Pirelli are a party, and to disclosure of Proprietary Data to the
extent that such disclosure is reasonably required and consistent with exercise
of the rights
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<PAGE> 5
licensed hereunder and with the standard of care which LICENSEE uses to protect
its own similar proprietary information. The terms of the Pirelli Sublicense(s)
to EPRI Intellectual Property may be exclusive in the field of Line transmission
and distribution of electrical power and electrical control signals, where
"Line" means cable, wire or like physical link in the form of an elongated
conductor which is used to transport electrons, and non-exclusive in other
fields of use. LICENSEE shall grant no exclusive rights to EPRI Intellectual
Property unless required by Agreements between Pirelli and LICENSEE which
existed prior to the Effective Date of this Agreement. Upon EPRI's written
request and under terms of confidentiality, LICENSEE shall allow EPRI to review
Agreements (past and future) between LICENSEE and Pirelli which pertain to
EPRI's Intellectual Property.
3.03 LICENSEE agrees to protect the confidentiality of the patent applications,
confidential data and trade secrets included in the Intellectual Property with
the same standard of care which it uses to protect its own valuable trade
secrets and proprietary information. LICENSEE shall not be so obligated for such
portions of the Proprietary Information which:
(A) are already or otherwise become publicly known through no act or
failure to act of LICENSEE; or
(B) are received from third parties asserting they are subject to no
restriction of confidentiality; or
(C) were developed by LICENSEE independently of and prior to the
disclosure of EPRI Proprietary Information to LICENSEE.
ARTICLE IV - CONSIDERATION
4.01 In consideration of the rights granted to LICENSEE under Article III
herein, EPRI shall receive an equity position ownership position in LICENSEE
corporation in the form of valuable stock warrants, as provided in the Warrant
Agreement attached to this Agreement and incorporated herein at Attachment B.
4.02 LICENSEE shall show due diligence in its commercialization of the EPRI
Intellectual Property in the Field. The following criteria shall be used to
determine whether the required due diligence has been shown by LICENSEE:
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<PAGE> 6
(A) During the two years following the Effective Date of this
Agreement, LICENSEE shall expend a total of not less than
$5,000,000 in research and development pertaining to high
temperature superconducting ("HTS") biaxially textured coated
conductors and multifilmentary wires produced by metallic precursor
technology, at least $2,000,000 of which shall be expended in each of
such years. For the purposes of this paragraph, the amount expended
by LICENSEE includes, but is not limited to, costs and expenses of
work done by LICENSEE and any amounts paid by LICENSEE to fund work
done by LICENSEE and any amounts paid by LICENSEE to fund work done by
others as provided in the Management Agreement.
(B) Subsequent to the term of the Warrants issued to EPRI pursuant to
Attachment B, if there was no time during the term of the Warrants
that EPRI could have received at least five hundred thousand dollars
($500,000) by exercising the Warrants, then the license hereunder
shall convert to a non-exclusive license; provided however, that ASC
shall have the option to retain the license on an exclusive
royalty-free basis by promptly paying EPRI in cash an amount equal to
the difference between five hundred thousand dollars ($500,000) and
the maximum realizable amount to EPRI if EPRI had exercised at any
time during the term of the Warrants;
(C) LICENSEE shall offer for sale at commercial quantities products based
on EPRI Intellectual Property Rights and/or Program Technology within
ten (10) years after execution of this Technology License Agreement.
This period will be extended for five (5) additional years if LICENSEE
demonstrates to the reasonable satisfaction of EPRI that during such
additional years LICENSEE is diligently engaged in research and
development directed to offering such products for sale at commercial
quantities.
4.03 If LICENSEE fails to meet the criteria of due diligence set forth above,
EPRI shall, in writing, advise LICENSEE of these deficiencies. LICENSEE shall
have sixty (60) days to provide either a justification for the deficiencies or
to propose a plan of corrective action. EPRI shall have (30) days either to
approve the plan (or to accept the justification) or to reject it. If the
parties are either unable to agree upon a plan or corrective
-5-
<PAGE> 7
action or if the agreed-upon plan does not cure the failure of due diligence
within ninety (90) days (or whatever time is provided for in the plan), the
license shall convert without further action by EPRI to a non-exclusive License.
Upon such failure of due diligence, LICENSEE grants to EPRI a non-exclusive
license to LICENSEE's Program Technology; provided however that such license
shall not extend to the field of Line transmission and distribution of
electrical power and electrical control signals, where "Line" means cable, wire
or like physical link in the form of an elongated conductor which is used to
transport electrons. This exclusion is due to the relationship between Pirelli
and LICENSEE in the above field of use.
4.04 A failure of LICENSEE to meet the criteria of due diligence set forth in
Subarticle 4.02 or to cure any such failure pursuant to a plan as provided in
Subarticle 4.03 shall not be deemed a material breach of this Agreement.
4.05 LICENSEE shall maintain accurate and auditable accounting records relating
to its research and development activities in the Field. This includes necessary
records and source documents verifying that the requirement of subarticles 4.01
and 4.02 are being satisfied. Upon the written request of EPRI, said accounting
records shall be subject to audit by EPRI or, at EPRI's option, a public
accounting firm designated by EPRI. It is the intent of the parties that such
audits shall not be performed more frequently than once a year and once upon
expiration or termination of this Agreement.
4.06 During the normal course of EPRI's research Program in the Field, from time
to time, EPRI may seek and obtain patent protection regarding inventions in the
Field. EPRI agrees to inform LICENSEE of all patent disclosures and of EPRI's
intention to file for patent protection prior to the filing of any patent
application; and to provide LICENSEE copies of documents filed in or received
from any patent office in connection with any such application. Within a
reasonable time of not more than thirty (30) days after receiving notice of such
intention or a copy of any document received from a patent office, if LICENSEE
does not object in writing to the filing of such patent protection or to the
continued prosecution or maintenance of such patent application, then LICENSEE
agrees to reimburse EPRI for all reasonable and normal costs and expenses
actually incurred by EPRI regarding such patent filing and application. These
costs and expenses shall not include any of EPRI's internal management or
administrative expenses. If EPRI decides not to seek patent protection with
respect to any invention in the Field, or not to
-6-
<PAGE> 8
maintain any application or patent in the Field, it shall notify LICENSEE and
LICENSEE may seek such patent protection or maintain such application or patent
in EPRI's name but at LICENSEE's sole expense.
ARTICLE V - DURATION AND TERMINATION
5.01 Unless sooner terminated, this License Agreement shall continue for a
period of twenty (20) years from the effective date herein or until the date of
expiration of the last patent to expire, whichever date is later.
5.02 Failure by either party to comply with any of the material obligations and
conditions contained in this Agreement shall constitute a default and shall
entitle the other party to give to the party in default notice requiring the
party in default to cure or to make good such default. If such default is not
cured or made good within sixty (60) days after receipt of such notice, the
other party shall be entitled and empowered to terminate this Agreement by
giving to the party in default notice of termination of this Agreement which
termination shall take effect upon the later of either the date of receipt of
such notice of termination or a later date of termination if specified therein.
5.03 Upon termination of this Agreement by EPRI for material breach by LICENSEE,
the license granted to LICENSEE under the Subarticle 2.01 shall terminate and
LICENSEE shall promptly cease to manufacture, or to have manufactured, HTS wire
or other products which infringe any of the EPRI Intellectual Property.
Termination under this Subarticle shall have no impact on the Warrant Agreement.
5.04 Surviving termination of this Agreement for any reason are:
(A) the provisions of Article III; and
(B) the provisions of Article IV: and
(C) the provisions of subarticle 5.02,5.03 and 5.04; and
(D) the provisions of subarticles 6.01 and 6.04; and
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<PAGE> 9
(E) any cause of action or claim of either party accrued or to accrue
because of any breach or default by the other party including, but not
limited to, injunctive relief and any other relief available whether
in law or in equity.
5.05 In the event of possible receivership or bankruptcy of LICENSEE, LICENSEE
must inform EPRI of its intention to file a voluntary petition in bankruptcy or
of another's intention to file an involuntary petition in bankruptcy, if known
to LICENSEE, to be received, if possible at least thirty (30) days prior to
filing such a petition. LICENSEE's filing without conforming to this requirement
shall be deemed a material, pre-petition incurable breach. In the event LICENSEE
shall make an assignment for the benefit of creditors, or in the event LICENSEE
shall substantially discontinue its business, EPRI may terminate this License
Agreement effective immediately on notice to LICENSEE, but without prejudice to
any rights of EPRI under this Agreement.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES
6.01 EPRI represents and warrants that it has the right to grant the license
herein.
6.02 EPRI does not represent or warrant that the use of the Intellectual
Property licensed hereunder will be free of infringement of the right of other
parties.
6.03 NEITHER EPRI, ANY MEMBER OF EPRI, NOR ANY PERSON OR ORGANIZATION ACTING ON
BEHALF OF ANY OF THEM MAKES ANY REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED
WITH RESPECT TO:
(A) THE ACCURACY, COMPLETENESS OR USEFULNESS OF THE INTELLECTUAL PROPERTY
LICENSED UNDER THIS AGREEMENT, OR
(B) THE MERCHANTABILITY OR THE FITNESS FOR ANY PURPOSE OF THE INTELLECTUAL
PROPERTY LICENSED UNDER THIS AGREEMENT.
6.04 LICENSEE agrees to indemnify EPRI and to hold EPRI harmless against all
loss, cost or damage resulting from judgments arising from claims of third
parties for physical loss or injury, or economic loss, arising from or in
connection with LICENSEE's manufacturing, assembly, use, sale or lease of HTS
wire or other
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<PAGE> 10
Field products incorporating the embodiments of the EPRI Intellectual Property.
ARTICLE VII - MISCELLANEOUS
7.01 This License Agreement may be assigned by either party to a wholly owned
subsidiary, without the prior consent of the other party, provided that:
(A) the other party is advised of the assignment, in writing, at least
thirty (30) days before the effective date of the assignment; and
(B) the subsidiary to whom this Agreement is assigned agrees, in writing
prior to the assignment, to be bound by all the terms and conditions
of this Agreement.
Other than to a wholly-owned subsidiary, this License Agreement may not be
assigned by LICENSEE without the prior, written consent of EPRI and then only to
a party which assumes all the obligations of LICENSEE.
7.02 LICENSEE agrees that any disclosure of technical information under the
terms of this Agreement shall be in compliance with the regulations of any
United States governmental agency exercising jurisdiction with respect to the
transfer of technical data and information outside the United States of America.
7.03 LICENSEE may use the term "EPRI LICENSEE" in connection with any use,
manufacture, distribution, or sale of HTC wire or other Field products. If so
instructed in writing by EPRI, LICENSEE shall cease to use this or similar
language associating EPRI with the HTS wire or other Field products.
7.04 To the extent practical, and unless otherwise instructed, in writing, by
EPRI, LICENSEE agrees to incorporate in its promotional literature suitable
acknowledgment of EPRI participation in co-funding and co-developing LICENSEE
products, and, furthermore, to also acknowledge such participation in
LICENSEE-authored publications in the open scientific and technical literature
in the manner traditional to the professional community.
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<PAGE> 11
7.05 This License Agreement constitutes the entire agreement between the parties
hereto with respect to its subject matter and supersedes all previous agreements
whether written or oral.
7.06 This Agreement may be modified, amended, superseded or terminated, other
than by its terms, only by a writing duly signed by authorized representatives
of both parties. This Agreement, which includes the Warrant Agreement at
Attachment B, is the controlling document with regards to the rights and
obligations each party has to the other in the rights of the Program Technology
and any ambiguity, uncertainty or conflict which arises between prior or
concurrent documents and this Agreement shall be resolved in favor of this
Agreement.
7.07 If any term or provision of this Agreement shall be determined by a court
of competent jurisdiction to be invalid, the remaining terms and provisions
shall remain in effect.
7.08 Any notice, report, or statement required to be given or made hereunder
shall be considered properly given when mailed by registered or certified mail,
return receipt requested, postage prepaid to the respective address of each
party as follows:
EPRI: LICENSEE:
Manager, Intellectual Property Ramesh Ratan
Electric Power Research American Superconductor
Institute Corporation
P.O. Box 10412 Two Technology Drive
Palo Alto, CA 94303 Westborough, Massachusetts 01581
or to such other address as the addressee shall have last furnished in writing
to the addressor.
7.09 This License Agreement shall be construed in accordance with the laws of
the State of California.
7.10 Except for injunctive relief relating to breaches of the confidentiality
provisions of this License Agreement, any dispute or controversy arising out of
or relating to this License Agreement, or any modification or extension thereof,
shall be settled by arbitration conducted in the City of San Francisco,
California, in accordance with the rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The parties consent to the jurisdiction of
the Supreme
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<PAGE> 12
Court of the State of California, and of the United States District Court for
the Northern District of California, for all purposes in connection with
arbitration.
IN WITNESS WHEREOF, the parties have respectively caused this instrument to be
executed by duly authorized officers of each of the dates indicated.
AMERICAN SUPERCONDUCTOR ELECTRIC POWER RESEARCH
CORPORATION INSTITUTE, INC.
By: /s/ Ramesh Ratan By: /s/ Arthur Kenny
- ------------------------------- --------------------------------
Name: Ramesh Ratan Name: Arthur Kenny
Title: Executive Vice President Title: Intellectual Property
Date: 3/26/96 Attorney
Intellectual Property
Department
Date: 3/25/96
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<PAGE> 13
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENT A
The Field specifically includes the following research and development between
EPRI and third parties listed below in Table A:
TABLE A
Period of
Contractor Contract Number Performance
******** ********** Start ********
End ********
************ ********** Start ********
End ********
************* ********** Start ********
End ********
******************** ********** Start ********
End ********
The Field shall further consist of research and development activities
performed by ASC to the extent financially supported by EPRI or performed
pursuant to contracts with EPRI or ASC to the extent financially supported by
EPRI and/or ASC, with the goal of *********************************************
*****, all as provided below in Table B representing the anticipated annual
funding for *******:
TABLE B
Contractor EPRI ASC Total
**** **** **** ****
**** *** ***
*********** *** ** ***
**** ** **
******** *** ***
********* *** ***
*** *** ***
Total* $1,000 $500 $1,500
*Amounts above in K$.
**The anticipated annual funding for ASC's ****************************
program is $2,000 K$ per year, bringing the ASC total to $5,000 K$
over two years, with at least $2,000 K$ to be expended in each of
such years.
A-1
<PAGE> 14
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
NOTES:
1) EPRI/ASC Program Funding at a total of $7M over two years and $5M over two
years for ASC, with at least $2M to be expended by ASC in each of such years.
2) ********** funding includes ****** to ****************, remaining funding
via **********.
3) EPRI contracts to fund *************************************************
program.
A-2
<PAGE> 1
EXHIBIT 10.32
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTIONS 4 AND 10 OF THIS WARRANT
Date of Issuance: March 26, 1996 Number of Shares: 100,000
(subject to adjustment)
American Superconductor Corporation
-----------------------------------
Common Stock Purchase Warrant
-----------------------------
(Void after March 26, 2006)
American Superconductor Corporation, a Delaware corporation (the
"Company"), for value received, hereby certifies that Electric Power Research
Institute ("EPRI"), or its registered assigns (the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time on or after the date of issuance and on or before March 26, 2006 at not
later than 5:00 p.m. (Boston, Massachusetts time) (the "Expiration Time"),
100,000 shares of Common Stock, $.01 par value per share, of the Company, at a
purchase price of $14.00 per share. The shares purchasable upon exercise of this
Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price," respectively.
1. EXERCISE.
(a) Subject to the terms set forth below and subject to any revisions
described therein, this Warrant shall be exercisable for 100,000 shares of
Common Stock of the Company as follows:
(i) On the date one year after the date of issuance of this
Warrant and at any time thereafter until the Expiration Time, this Warrant shall
be exercisable for 12,500 shares of Common Stock of the Company (the "First Year
Warrant Shares").
<PAGE> 2
(ii) In addition to the First Year Warrant Shares, on the date
two years after the date of issuance of this Warrant and at any time thereafter
until the Expiration Time, this Warrant shall be exercisable for an additional
25,000 shares of Common Stock of the Company (the "Second Year Warrant Shares").
(iii) In addition to the First Year Warrant Shares and Second
Year Warrant Shares, on the date three years after the date of issuance of this
Warrant and at any time thereafter until the Expiration Time, this Warrant shall
be exercisable for an additional 25,000 shares of Common Stock of the Company
(the "Third Year Warrant Shares"); provided however, that in the event that the
aggregate amount contributed by EPRI (the "EPRI Contribution") in the form of
direct costs pursuant to Section 2 of the Research and Development Agreement
dated as of the date of this Warrant between the Company and EPRI (the
"Agreement") during the first two contract years under the Agreement is less
than $2.0 million, then the number of Third Year Warrant Shares (and, if
necessary, the number of Fourth or Fifth Year Warrant Shares, as defined below)
shall be reduced by the number obtained by dividing (x) the excess of
$2.0 million over the EPRI Contribution by (y) the number 20, it being agreed
that the exercisability of this Warrant is not contingent upon amounts
contributed by EPRI in excess of the $2.0 million to be contributed during the
first two contract years under the Agreement.
(iv) In addition to the First Year Warrant Shares, Second Year
Warrant Shares and Third Year Warrant Shares, on the date four years after the
date of issuance of this Warrant and at any time thereafter until the Expiration
Time, this Warrant shall be exercisable for an additional 25,000 shares of
Common Stock of the Company (the "Fourth Year Warrant Shares").
(v) In addition to the First Year Warrant Shares, Second Year
Warrant Shares, Third Year Warrant Shares and Fourth Year Warrant Shares, on the
date five years after the date of issuance of this Warrant, and at any time
thereafter until the Expiration Time, this Warrant shall be exercisable for an
additional 12,500 shares of Common Stock of the Company (the "Fifth Year Warrant
Shares").
(vi) Notwithstanding anything to the contrary contained in
subsections 1(a)(i) through 1(a)(v) above, in the event that any person or
entity acquires ownership of capital stock of the Company representing a
majority of the total outstanding voting power, whether by merger, acquisition
or otherwise, or in the event of a sale of all or substantially all
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<PAGE> 3
of the assets of the Company, this Warrant shall be exercisable, immediately
upon such an event and at any time thereafter until the Expiration Time, for
100,000 shares of Common Stock of the Company (less any shares previously
purchased upon exercise of this Warrant) or for such securities for which this
Warrant may become exercisable pursuant to subsection 2(b) below.
(b) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as EXHIBIT I duly executed by such Registered Holder or by such Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
(c) The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by cancelling a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (i) the total Purchase Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (ii) the excess
of the Fair Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(d) below (the "Exercise Date")
over the Purchase Price per share. If the Registered Holder wishes to exercise
this Warrant pursuant to this method of payment with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq Small-Cap Market, or another
nationally recognized exchange or trading system as of the Exercise Date, the
Fair Market Value per share of Common Stock shall be deemed to be the last
reported sale price per share of Common Stock thereon on the Exercise Date; or,
if no such price is reported on such date, such price on the next preceding
trading day (provided that if no such price is reported
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<PAGE> 4
on the next preceding trading day, the Fair Market Value per share of Common
Stock shall be determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, the Nasdaq Small-Cap Market or another
nationally recognized exchange or trading system as of the Exercise Date, the
Fair Market Value per share of Common Stock shall be deemed to be the amount
most recently determined by the Board of Directors to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company); and, upon request of the
Registered Holder, the Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market Value per share of
Common Stock. Notwithstanding the foregoing, if the Board of Directors has not
made such a determination within the three-month period prior to the Exercise
Date, then (A) the Fair Market Value per share of Common Stock shall be the
amount next determined by the Board of Directors to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company), (B) the Board of Directors
shall make such a determination within 15 days of a request by the Registered
Holder that it do so, and (C) the exercise of this Warrant pursuant to this
subsection 1(c) shall be delayed until such determination is made.
(d) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(b) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in subsection 1(e) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
(e) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
-4-
<PAGE> 5
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of (a) the number of such shares purchased by
the Registered Holder upon such exercise plus (b) the number of Warrant Shares
(if any) covered by the portion of this Warrant cancelled in payment of the
Purchase Price payable upon such exercise pursuant to subsection 1(c) above.
2. ADJUSTMENTS.
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the distribution date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the distribution date of such dividend be proportionately reduced. If
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(a) above), or
any consolidation or merger of the Company with or into another corporation, or
a transfer of all or substantially all of the assets of the Company, then (in
addition to any rights to which the Registered Holder may be entitled under
subsection 1(a)(vi) above), as part of any such
-5-
<PAGE> 6
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in subsection 2(a) or (b) above.
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(c) above.
4. REQUIREMENTS FOR TRANSFER.
(a) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is, and the issuance by
the Company of shares of Common Stock upon exercise thereof will be, exempt from
the registration requirements of the Act.
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<PAGE> 7
(b) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until
such securities are registered under such Act or an
opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. NOTICES OF RECORD DATE, ETC. in case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such
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<PAGE> 8
case, the Company will mail or cause to be mailed to the Registered Holder of
this Warrant a notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder
of any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
-8-
<PAGE> 9
10. TRANSFERS, ETC.
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and
all rights hereunder are transferable, in whole, upon surrender of this Warrant
with a properly executed assignment (in the form of EXHIBIT II hereto) at the
principal office of the Company; provided that no such transfer may be made
unless such transfer is made to an affiliate of EPRI (including without
limitation any for-profit or non-profit corporation or other entity in which
EPRI holds, directly or indirectly, a controlling interest).
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; PROVIDED, HOWEVER, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
11. REPRESENTATIONS OF THE REGISTERED HOLDER. The Registered Holder of this
Warrant represents and warrants to the Company as follows:
(a) INVESTMENT. The Registered Holder is acquiring this Warrant and
the Warrant Shares issuable upon the exercise of this Warrant for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same, except as otherwise may be permitted under applicable
securities laws.
(b) AUTHORITY. The Registered Holder has full power and authority to
enter into and to perform this Warrant in accordance with its terms. The
Registered Holder has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
(c) EXPERIENCE. The Registered Holder has made detailed inquiry
concerning the Company, its business and its personnel; the officers of the
Company have made available to the
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<PAGE> 10
Registered Holder the opportunity to ask questions and receive answers
concerning the terms and conditions of the this Warrant and the Warrant Shares
and to obtain any additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to verify the
accuracy of information provided by the Company to the Registered Holder; and
the Registered Holder has adequate net worth and means of providing for its
current needs and personal contingencies to sustain a complete loss of its
investment in the Company; the Registered Holder's overall commitment to
investments which are not readily marketable is not disproportionate to his or
its net worth and the Registered Holder's investment in this Warrant and the
Warrant Shares issuable upon exercise of this Warrant will not cause such
overall commitment to become excessive.
(d) ACCREDITED INVESTOR. The Registered Holder is an Accredited
Investor within the definition set forth in Rule 501(a) promulgated under the
Securities Act.
12. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified in such notice.
13. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
14. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
-10-
<PAGE> 11
15. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
16. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
AMERICAN SUPERCONDUCTOR CORPORATION
By: /s/ Ramesh Ratan
--------------------------------
[Corporate Seal] Title: Exec. V.P.
-----------------------------
AGREED AND ACCEPTED:
ELECTRIC POWER RESEARCH INSTITUTE
By: /s/ Kurt Yeager
--------------------------------
Title:
-----------------------------
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<PAGE> 12
EXHIBIT I
---------
PURCHASE FORM
-------------
To:_________________ Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _____ shares of the Common Stock
covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
/ / $_________ in lawful money of the United States, and/or
/ / the cancellation of such portion of the attached Warrant as is
exercisable for a total of ______ Warrant Shares (using a Fair Market
Value of $_______ per share for purposes of this calculation).
Signature:
--------------------------
Address:
----------------------------
----------------------------
<PAGE> 13
EXHIBIT II
----------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Common Stock covered thereby set
forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: Signature:
-------------- -------------------------
Dated: Witness:
-------------- ---------------------------
