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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 15, 1999
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American Superconductor Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-19672 04-2959321
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
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
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________________________________________________________________________________
(Former Name or Former Address, if Changed from Last Report)
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Item 5. Other Events.
On December 15, 1999, American Superconductor entered into an agreement
with Pirelli Cavi e Sistemi S.p.A.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
The exhibit listed in the Exhibit index is filed as part of and is
included in this report..
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
American Superconductor Corporation
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(Registrant)
Date: January 19, 2000 By: /s/ Stanley D. Piekos
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Stanley D. Piekos
Vice President, Corporate Development and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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99.1* 1999 Program Addendum between between Pirelli Cavi e
Sistemi S.p.A. and American Superconductor Corporation
dated as of October 1, 1999.
_________________________
* Confidential treatment has been requested with respect to certain portions of
this exhibit, which portions are omitted and have been filed separately with the
Commission.
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Confidential Materials omitted and filed separately with the Securities
and Exchange Commission. Asterisks denote omissions.
EXHIBIT 99.1
1999 PROGRAM ADDENDUM
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This Addendum effective as of October 1, 1999, between Pirelli Cavi e Sistemi
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 Pirelli are parties to an amended research, development
and exploitation agreement, dated as of October 1, 1995 (the "Agreement");
WHEREAS, the parties wish to extend the Research and Development Program I
pursuant to Section 8 of the Agreement, and to have Pirelli participate in the
funding of a Subsequent Research and Development Program with respect to [**]
conductors pursuant to Section 2.17 of the Agreement (hereinafter, collectively,
the 1999 Programs);
Whereas, the parties accordingly wish to further delineate certain terms
and conditions of the Agreement with respect to the 1999 Programs and to provide
certain additional provisions with respect to provisions of the Agreement
concerning third parties;
NOW, THEREFORE, for and in consideration of these premises, which are part
and parcel of this Addendum, and of the mutual covenants and agreements
contained in this Addendum, and subject to the terms and conditions set forth in
this Addendum and the Agreement, the parties agree as set forth below.
1. Extension of the Research and Development Program I. Pursuant to section
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8 of the Agreement, the Research and Development Program I, due to expire on
September 30, 1999, is extended for a further period of four years from October
1, 1999 through September 30, 2003. Exhibit 2.1-A to this Addendum, attached
hereto, set forth goals, milestones and further details of research and
development activities to be performed by ASC in cooperation with Pirelli under
the extended Research and Development Program I. For the purposes of the
extended Research and Development Program I, Section 2.1 shall be understood to
state that the extended Research and Development Program is more specifically
described in Exhibit 2.1-A, and any reference to Exhibit 2.1 in Section 2 of the
Agreement shall be considered reference to Exhibit 2.1-A as well.
2. Funding of Extended Research and Development Program I. Pirelli shall,
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subject to the provisions of Section 8.3 of the Agreement and the timely
performance by ASC of all its obligations under the Agreement, pay to ASC for
its performance under the extended Research and Development Program I in each
contract year of the extensions period under point 1 above, starting from the
effective date of this Addendum the following amounts:
Year 1 Year 2 Year 3 Year 4
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US$ [**] [**] [**] [**]
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
The above payments shall be invoiced quarterly in advance, and payments
shall be made within sixty (60) days of the date of invoice in accord with the
above payment schedule. To the extent not inconsistent with this Addendum, the
provisions of Section 2.12(a) of the Agreement shall apply with respect to
payment of amounts under this point 2.
3. Subsequent Research and Development Program. Pursuant to Section 2.17 of
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the Agreement, Pirelli has elected to participate in the funding of a Subsequent
Research and Development Program (hereinafter Subsequent Research and
Development Program I) concerning [**] conductors. Exhibit 2.1-B to this
Addendum, enclosed hereto, set forth goals, milestones and further details of
research and development activities to be performed by ASC in cooperation with
Pirelli under Subsequent Research and Development Program I which, subject to
section 8.4 of the Agreement, shall extend from October 1, 1999 through
September 30, 2004, but shall also include work performed by ASC with respect to
Subsequent Research and Development Program prior to October 1, 1999. For the
purposes of Subsequent Research and Development Program I, Section 2.1 shall be
understood to state that Subsequent Research and Development Program I is more
specifically described in Exhibit 2.1-B, and any reference to Exhibit 2.1 in
Section 2 of the Agreement shall be considered reference to Exhibit 2.1-B as
well.
4. Funding of Subsequent Research and Development Program I.
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Notwithstanding any contrary provisions set forth in Section 2.12 (b), Pirelli
shall, subject to the provisions of Section 8.3 of the Agreement and related
provisions of this Addendum, and to the timely performance by ASC of all its
obligations under the Agreement, pay to ASC for its performance under Subsequent
Research and Development Program I detailed in Exhibit 2.1-B in each contract
year, starting from the effective date of this Addendum the following amounts:
Year 1 Year 2 Year 3 Year 4 Year 5
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US$ [**] [**] [**] [**] [**]
Of the amount for each year, US$[**] is for research and development work
performed by ASC with respect to Subsequent Research and Development I prior to
October 1, 1999 and US$[**] is for work to be performed subsequent to October 1,
1999.
The above payments shall be invoiced quarterly in advance, and payments
shall be made within sixty (60) days of the date of invoice in accord with the
above payment schedule. To the extent not inconsistent with this Addendum, the
provisions of Section 2.12(a) of the Agreement shall apply with respect to
payment of amounts under this point 4.
If Pirelli terminates Subsequent Research and Development Program I prior
to September 30, 2004, it shall pay to ASC, in quarterly payments of $[**] each
as provided above, an amount equal to $US[**] less any amounts as Pirelli may
have previously paid under this point 4 for work prior to October 1, 1999. This
amount shall be in addition to any amounts that may remain unpaid with respect
to work performed on Subsequent Research and Development Program I subsequent to
October 1, 1999.
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
5. Success payment for Subsequent Research and Development Program I. In
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addition to the amounts under point 4 above, Pirelli shall pay to ASC a further
amount of US$[**] in case the Success Performance Milestone set forth in Exhibit
2.1-B has been achieved. ASC shall provide Pirelli a written report comparing
performance results to the Success Performance Milestone goals and stating that
the Success Performance Milestone has been met. Payment shall be due within 60
days as from completion of the Subsequent Research and Development Program I, or
30 days from Pirelli's receipit of such report, whichever is later, unless
Pirelli communicates in writing to ASC within said term that Pirelli deems that
the Success Performance Milestones have not been met. If ASC does not agree with
Pirelli's assessment, ASC may request that the relevant determination be made by
an independent expert agreed upon by the parties or, failing such agreement, by
arbitration as provided in the Agreement.
6. Third Party and Governmental Research and Licensing Rights. With respect
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to third parties, whether licensors of Contract Technology in the Field or
performing activities under a Program (whether 1999 Programs or any further
Subsequent Research and Development Program), ASC and Pirelli intend hereto to
amend and/or to clarify certain provisions of the Agreement as follows.
A. Section 4.11
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Under Section 4.11 of the Agreement, with respect to any third party
rights, ASC will inform the Project Review Board of its intent to take action
with respect to obtaining license rights from a third party in the Field before
taking any such action, will work with the Project Review Board to consider the
strategy to be followed with respect to obtaining such license rights, and
thereafter will keep the Project Review Board fully informed, including with
respect the status of ASC's efforts to obtain such license rights. For three (3)
months from the date that ASC informs the Project Review Board of its intent to
take action with respect to obtaining such license rights, ASC and Pirelli will
work together with respect to obtaining such license rights. If ASC and Pirelli
fail to reach agreement with the third party with respect to such license rights
within such three (3) month period, both ASC and Pirelli shall thereafter be
free separately to negotiate and reach an agreement with such third party.
Paragraphs 6.B and 6.C below, and not Section 4.11, shall apply to ASC's efforts
to obtain from third parties license rights under background technology that
must be used to practice technology produced by the third party in the
performance of a Third Party Research and Development Agreement.
B. Third Parties
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a. A "Third Party" shall mean any entity other than a Governmental Entity,
ASC, Pirelli or an Affiliate of ASC or Pirelli.
b. A "Third Party Research and Development Agreement" shall mean an
agreement between ASC and a Third Party pursuant to which the Third Party
conducts research and development relevant to the Field under a Subsequent
Research and Development Program.
c. Subsequent to December 1, 1999, ASC shall not enter into any Third Party
Research
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and Development Agreement unless, subject to U.S. security and export control
laws and regulations, all know-how produced by ASC and the Third Party in the
performance of the Third Party Research and Development Agreement will be
Technology and, consequently, Contract Technology as these terms are defined in
the Agreement. Accordingly:
(i) The last line of Section 1.28 of the Agreement is amended to read "or
license or sublicense";
(ii) For sake of clarity, ASC undertakes to cause to be free to disclose,
any and all data and information, whether or not patentable and
whether or not copyrightable arising from the performance by ASC and
the Third Party of the Third Party Research and Development Agreement
used by ASC in connection with the manufacture (whether in production
or on an experimental basis) of Cable Wire, to provide status reports
on Third Party research, to permit Pirelli to review any other such
data or information in ASC's possession upon Pirelli's request, and to
disclose any additional such data and information to Pirelli upon
Pirelli's request and expense.
(iii)For further sake of clarity, ASC and Pirelli acknowledge that Section
4 of the Agreement shall apply with respect to any Technology: (a)
owned by ASC and exclusively licensed to Pirelli in the Field; (b)
owned by a Third Party or a Governmental Entity (as defined hereunder)
and exclusively licensed to Pirelli in the Field either by ASC or by
the Third Party or Governmental Entity; (c) owned by a Third Party or
a Governmental Entity and non-exclusively licensed to Pirelli in the
Field either by ASC or by the Third Party or Government Entity; (d)
owned by a Governmental Entity and not licensed to Pirelli in the
Field. In case circumstances under (d) occur with respect to Contract
Technology arising from a Governmental Research and Development
Agreement, ASC shall not have the right to exploit the concerned
Contract Technology in the Field until, and if, Pirelli has obtained,
or has obtained the ability to obtain, said exploitation rights by the
Governmental Entity concerned.
d. In connection with any Third Party Research and Development entered
into by ASC subsequent to December 1, 1999, ASC shall make all best efforts to
grant or have granted to Pirelli an exclusive license in the Field with respect
to any Contract Technology produced in the performance of the Third Party
Research and Development Agreement. In the event that such exclusive license
cannot be acquired in spite of best efforts from ASC, ASC undertakes to grant or
have granted to Pirelli at least a non-exclusive license in the Field with
respect to any Contract Technology produced in the performance of the Third
Party Research and Development Agreement. In any case the above license, whether
exclusive or non-exclusive, shall include a non-exclusive license under any
background technology of the Third Party to the extent that such background
technology must be used to practice the Contract Technology produced in the
performance of the Third Party Research and Development Agreement in the Field,
and in any event background rights not less than those granted in the Field to
ASC with respect to such Third Party. The Third Party shall not knowingly direct
the work under the Third Party Research and Development Agreement in a way that
would make ASC's or Pirelli's use of the technology developed under the Third
Party Research and Development Agreement to make Cable Wire dependent on any
background technology that the Third Party is not willing to license to ASC and
Pirelli, and shall agree that the Third Party will grant to
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ASC on terms that will permit ASC to sublicense Pirelli, or to both ASC and
Pirelli, a non-exclusive license of sufficient scope to permit ASC and Pirelli
to make and sell Cable Wire which uses the technology developed under the Third
Party Research and Development Agreement. Not later than the conclusion of work
under the Third Party Research and Development Agreement, ASC and Pirelli will
work together to determine what, if any, additional background rights should be
obtained from the Third Party with respect to any improvements and evolutions of
such Contract Technology and will negotiate with the Third Party in an effort to
obtain such additional background rights.
e. In the event that ASC decides itself not to seek exclusive rights, or an
option to obtain exclusive rights, or not to exercise such an option to seek
exclusive rights in the Field with respect to Contract Technology produced in
the performance of a Third Party Research and Development Agreement as provided
in paragraph d, above, but Pirelli wishes ASC to obtain exclusive rights with
respect to such Contract Technology for the benefit of Pirelli in the Field,
Pirelli shall pay all of ASC's additional costs, including additional initial
payments and additional future royalties, arising out of the acqusition of such
an option or rights. In the event that ASC directly grants Pirelli a non-
exclusive sublicense to Pirelli with respect to such Contract Technology, or ASC
is itself unable to grant a non-exclusive license to Pirelli with respect to
such Contract Technology and causes the licensor to grant non-exclusive license
to Pirelli with respect to such Contract Technology, Pirelli shall pay the
additional costs related to the acquisition of such non-exclusive license or
sublicense.
C. Governmental Entity
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a. A "Governmental Entity" means a U.S. National Laboratory, such as but
not limited to Oak Ridge National Laboratory, Los Alamos National Laboratory and
Brookhaven National Laboratory, and any other entity owned by or operated by or
under contract with the U.S. Government.
b. A "Governmental Research and Development Agreement" shall mean an
agreement between ASC and a Governmental Entity that is a Cooperative Research
and Development Agreement (CRADA), or pursuant to which ASC funds the
Governmental Entity, to conduct research and development relevant to the Field
under a Subsequent Research and Development Program.
c. Subsequent to December 1, 1999, ASC shall not enter into any
Governmental Research and Development Agreement unless, subject to U.S. security
and export control laws and regulations, all know-how first produced by ASC or
specifically used by ASC in the performance of the Governmental Research and
Development Agreement will be Technology and consequently Contract Technology as
these terms are defined in the Agreement. If the U.S. Government's standard
Rights in Data clause should be amended by the U.S. Government such that ASC's
rights to use know-how developed by the Governmental Entity are more restrictive
than in the clause presently in effect, ASC shall be deemed to have complied
with this provision if it has acquired such rights as are permitted by the then-
current Rights in Data clause. The Rights in Data clause presently in effect
provides that ASC "shall have the right to use, release, reproduce, distribute,
or publish any data first produced by the Participant [ASC] or used by the
Participant in the performance of this cooperative agreement, except to the
extent such data may be subject to the Federal export control or national
security laws or regulations...". ASC agrees to obtain for Pirelli the right for
Pirelli to use in the Field all know-how first produced by ASC or specifically
used by ASC in the performance of a particular
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Governmental Research and Development Agreement, or, if the U.S. Government's
Rights in Data should be amended, to use any know-how which ASC is permitted to
use under the then-current Rights in Data clause.
d. In connection with any Governmental Research and Development Agreement
entered into subsequent to December 1, 1999, ASC will grant or cause to be
granted to Pirelli at least a non-exclusive license in the Field with respect to
any patentable Contract Technology created in the performance of the
Governmental Research and Development Agreement that is pertinent to the Field,
such license to include any background technology of the Governmental Entity to
the extent that such background technology must be used to practice the Contract
Technology produced in the performance of the Governmental Research and
Development Agreement in the Field, and in any event background rights not less
than those granted in the Field to ASC with respect to such Third Party. Not
later than the conclusion of the Governmental Research and Development
Agreement, ASC and Pirelli will work together to determine what, if any,
additional background rights should be obtained from the Governmental Entity
with respect to any improvements and evolutions of such Technology and will
negotiate with the Governmental Entity in an effort to obtain such additional
background rights. The provisions of paragraph 6 B. e. with respect to ASC
obtaining exclusive rights for Pirelli and with respect to Pirelli's obligations
to pay costs associated with exclusive and non-exclusive licenses shall apply.
D. Further Provisions
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a. ASC agrees that, in any calendar year, its total funding of Third Party
and Governmental Entity Research and Development Programs shall not exceed
[**] percent of ASC's total expenditures (including Pirelli funds) for
work related to the Subsequent Research and Development Program for that
calendar year.
b. ASC will inform the Project Review Board with respect to any Third Party
or Governmental Research and Development Agreements before taking any action
with respect to entering into a license agreement under such Agreements, will
agree with the Project Review Board regarding the strategy to be followed with
respect to such license agreement, and if the Project Review Board cannot agree
on strategy it will submit the question to Managements of Pirelli and ASC for
Final decision. ASC will keep the Project Review Board fully informed, including
with respect the status of ASC's efforts to obtain license rights as provided in
paragraphs 6 B and 6 C above.
c. If Basic IPR (i.e., a patent or piece of secret know-how which solves a
problem which is needed to be solved to practice the Technology produced from
the concerned Subsequent Research and Development Program, such technical
problem being such that it cannot be solved otherwise as shown in the art)
arises from work done by ASC alone or in conjunction with a Third Party under a
Third Party Research and Development Agreement under the Subsequent Research and
Development Program concerned, then ASC will obtain or make available to Pirelli
an exclusive license in the Field with respect to at least one (1) Basic IPR
relevant to the Subsequent Research and Development Program concerned.
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
d. ASC and Pirelli recognize that, in many instances, any exclusive rights
will be subject to a non-exclusive license to the U.S. Government and/or a non-
exclusive license permitting a university or other research organization to use
technology for its own internal purposes. For the purposes of this Addendum,
rights extensible or assignable to Pirelli that are subject to such a non-
exclusive license but are otherwise exclusive shall be considered to be
exclusive.
e. ASC will seek to reach agreement with [**] on terms and conditions that
will provide an option for Pirelli to obtain a sublicense for Pirelli under
terms no less advantageous than those set forth in the [**] on or before[**]. If
ASC does not reach such agreement, then Pirelli may direct that all remaining
funding provided by Pirelli to ASC for further work under the Subsequent
Research and Development Program, plus equal amounts provided by ASC additional
to the amounts which ASC had already committed to provide to the Subsequent
Research and Development Program in Schedule 2.1-B, be directed to provide an
alternative path to avoid the need for such a license. ASC and Pirelli shall
jointly use their best efforts to insure that a license or sublicense granted to
Pirelli by [**] includes the right for Pirelli to import Cable Wire in the
circumstances provided in Section 4.6 of the Agreement. In parallel with this
action, Pirelli and ASC shall consider alternative business arrangements which
would allow Pirelli to import Cable Wire as provided in Section 4.6 even in the
event that an agreement with [**] that would permit Pirelli to do so is not
reached. If ASC and Pirelli do not obtain such license or sublicense, or
determine an alternative business arrangement, by 31 December 2000 then, if
Pirelli has not already done so pursuant to the previous provisions of this
paragraph, Pirelli may direct that all remaining funding provided by Pirelli to
ASC for further work under the Subsequent Research and Development Program, plus
equal amounts provided by ASC additional to the amounts which ASC had already
committed to provide to the Subsequent Research and Development Program in
Schedule 2.1-B, be directed to provide an alternative path to avoid the need for
a license that would allow Pirelli to import Cable Wire as provided in Section
4.6. Pirelli shall be responsible for all option fees, up-front payments, and
mininum and running royalties relating to any such license or sublicense to
Pirelli.
f. Recognizing that ASC's potential use of technology developed by a Third
Party or a Governmental Entity may extend to use outside the Field, nothing in
this agreement shall prohibit ASC from funding a Third Party or a Governmental
Entity, or from entering into a license agreement outside the Field with respect
to technology developed by a third party, including technology developed under a
Third Party or Governmental Research and Development Program.
7. Applicability of Provisions of the Agreement. To the extent not
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inconsistent with this Addendum, the provisions of the Agreement shall remain
unchanged and shall apply to this Addendum and to the 1999 Programs. However,
for the purposes of the 1999 Programs:
(i) The Business Development Plan referred to in the Agreement shall be
the Business Development Plan enclosed as Exhibit 2.3-A to this
Addendum, and references in the Agreement to the Business Development
Plan shall be considered reference to Exhibit 2.3-A as well.
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
(ii) Section 2.4 shall apply to the period from 1 October 1999 through
September 30, 2004 (or during a shorter period if Pirelli terminates
both the extended Research and Development Program I and Subsequent
Research and Development Program I before September 30, 2004);
(iii) In Section 8.1, the period referred to in line 5 thereof shall extend
to October 1, 2003.
(iv) In Section 8.5.1, the words "upon termination (but not expiration) of
Research and Development Program I as provided in Section 8.5.2 or
8.5.3, or" in lines 2 through 4 thereof shall have no effect;
(v) In Section 8.5.3, the words "(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)" in
lines 2 through 4 thereof shall be considered to read "the Extended
Research and Development Program I and Subsequent Research and
Development Program I (or any redirection thereof as provided in
Section 2.17) expire prior to the supply by ASC to Pirelli of Cable
Wire meeting the goals of the 1999 Programs and ASC elects not to
continue either of the Programs.
In the event that ASC is unable to obtain acceptable license rights for
Pirelli from [**] with respect to [**] technology, such event shall not
provide the basis of "a determination by Pirelli that the results of the
clearance in section 2.16 for such Program does not justify the further
financing."
For the purposes of the extended Research and Development Program I, in Section
8.3, the words "Program, the Business Plan and this Agreement upon" in lines 2
and 3 thereof shall be considered to read "Program I upon".
For the purposes of Subsequent Research and Development Program I, the following
point 6 shall be added to Schedule 2.9: As of the effective date of this
Addendum, ASC has provided, and the Project Review Board has approved, a
detailed statement of work for Subsequent Research and Development Program I.
The Project Review Board has the responsibility of periodically reviewing the
statement of work and the actual work performed, and approving the on-going work
plan.
8. Machinery. In case ASC intends to sell any significant equipment or
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machinery employed by either of the 1999 Programs, or any equipment and
machinery employed by any of the Programs having an expected sales price not
less than US$[**], ASC shall provide Pirelli a written statement detailing which
machinery and equipment ASC intends to offer for sale, and Pirelli, within 30
days of the receipt of such statement, may offer to purchase such machinery on
such terms and conditions as Pirelli may choose. ASC, at its sole option, may
accept or reject such offer, but ASC will not sell any of such machinery and
equipment to any third party for 30 days after it has provided the above written
statement to Pirelli.
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9. Capitalized terms. Capitalised terms, unless otherwise agreed hereabove,
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will have the same meaning as in the Agreement.
IN WITNESS WHEREOF, the parties have caused this Addendum to be executed
and delivered by their duly authorized officers as of the date first written
above.
PIRELLI CAVI E SISTEMI S.p.A. AMERICAN SUPERCONDUCTOR
CORPORATION
By: [illegible] By: G. Yurek
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Its:________________________ Its: President
----------------
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Exhibit 2.1-A
EXTENDED RESEARCH AND DEVELOPMENT PROGRAM I
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STATEMENT OF WORK FOR PERIOD OCTOBER 1999 - SEPTEMBER 2003
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Date: 31 October 1999 Issue: Final
Foreword
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The existing Research and Development Program on BSCCO concludes in September
1999, and has brought the technology to the point where it has been decided to
"consolidate" the technology and to seek improvements which will enable its
implementation in "demonstrator" and "pilot" projects until such time as more
cost-effective technologies such as [**] Conductors are a practical
reality.
Thus, considering the progress achieved in the initial BSCCO program (Research &
Development Program I), new objectives and targets have been set for an ongoing
4-year program which focuses on incremental performance improvement,
reliability, and the routine availability of BSCCO tapes in lengths commensurate
with cable system installation limits.
Accordingly the funding level for the ongoing BSCCO program is reduced to
$[**]per annum for the 4-year period commencing October 1999, against which the
following Objectives and Milestones have been set:
Objectives
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Objectives have been defined to reflect the strong desire of Pirelli and ASC to:
(a) maintain critical current performance leadership in the World, (b) improve
the tape design and manufacturing technology to achieve a high level of BSCCO
tape reliability[**], (c) increase the effective current density of the Cable
Wire by [**] over the four year Agreement period, and (d) increase the piece
length that can be ordered by Pirelli for prototype manufacture by [**] over the
four year period.
Critical Current (minimum end-to-end Ic): The critical current performance will
be increased by invoking "evolutionary" manufacture improvements. These
improvements will be centered on observations obtained during production
manufacture campaigns. Key focus areas will include [**].
Width (maximum mm): The current lamination process will be optimized to provide
the minimum width [**]. The focus of effort for the first year will be
determining the minimum possible lamination width [**] and [**] the [**] in the
narrower final tapes, and demonstration of the optimized minimum width tape. The
second year of the program will be to qualify this minimum width lamination
process for all future Pirelli Cable Wire (BSCCO) manufacture.
Piece Length (meters): Whilst "demonstrator" field trials may typically require
BSCCO tape lengths of [**], in line with ASC's previous supply capability,
"pilot" and "commercial" installations will require cable (and hence tape)
lengths commensurate with conventional cables. ASC will work to establish a
capability to supply Pirelli routinely with high-performance tapes in lengths of
less than or equal to [**]. It is anticipated that Pirelli will continue to
purchase wire in "engineered" piece lengths (exact lengths), specific to each
cable to be manufactured. To increase the minimum unit piece length offered to
Pirelli, ASC will need to (a) eliminate all significant sources of defects and
wire breaks, and (b) increase the physical size of the multifilament billet
package. Defect and wire
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
breakage elimination will continue throughout the Agreement period. The larger
billets will be available in the calendar years 2002 and 2003 (billet yield will
exceed [**]vs. the current [**] capability).
Tape Current Density (minimum Amps per mm width of tape): The intent for
"Critical Current" and "Width" targets listed above is to significantly increase
the effective current density of the tape (and hence the cable conductor); this
is [**] are required [**]. It is recognized that the optimization of Cable Wire
may create conflicting requirements, therefore, as further guidance for Cable
Wire development, Pirelli has defined a new parameter to resolve this potential
conflict. Pirelli has requested that ASC maximize the Tape Critical Current (at
current tape thickness) per mm of tape (calculated by Amps per finished tape
divided by width of finished tape). The [**]). The [**]).
Confirmation of Tape Performance Levels: In order for the above performance
improvements to be validated against the targeted milestones, and in order to
demonstrate the "manufacturing process capability" (as opposed to "champion
results" on single tape samples), at periodic intervals (nominally at the end of
each program year), Pirelli will authorize ASC to embark on a tape production
campaign to produce [**] of cable wire against which the actual performance with
respect to the relevant milestones will be judged. The targeted yield to deem
that the milestone has been met is greater than or equal to [**]%; Pirelli will
purchase from ASC the tape which has met the milestone target. The commencement
date of each production campaign can be amended by the Project Review Board in
the light of relevant program parameters (such as the BSCCO technological status
and likelihood of meeting the targeted tape performances).
Milestones
- ----------
The performance milestones are defined and listed by year in Table 1 below. This
table augments the current Pirelli/ASC Cable Wire specifications.
Table 1 - BSCCO Development Targets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Agreement Year September September September September September
1999 2000 2001 2002 2003
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ic (Amps minimum) [**] [**] [**] [**] [**]
- ---------------------------------------------------------------------------------------------------
Width (mm Maximum) [**] [**] [**] [**] [**]
- ---------------------------------------------------------------------------------------------------
Piece Length [**] [**] [**] [**] [**]
(meters)
- ---------------------------------------------------------------------------------------------------
Cable Current [**] [**] [**] [**] [**]
Density (Amp/mm
width)
- ---------------------------------------------------------------------------------------------------
</TABLE>
Program Costs
- -------------
Pirelli will pay ASC $[**] for BSCCO wire development effort conducted between
October 1, 1999 and September 30, 2003. ASC commits to at least match the total
$[**] Pirelli funding (within the four year period) to complete the proposed
milestone tasks.
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks
denote omissions.
Exhibit 2.1-B
SUBSEQUENT RESEARCH AND DEVELOPMENT PROGRAM I
---------------------------------------------
STATEMENT OF WORK FOR PERIOD OCTOBER 1999 - SEPTEMBER 2004
----------------------------------------------------------
Date: 31 October 1999 Issue: Final
Foreword
- --------
Pirelli has elected to participate in the funding of a Subsequent Research and
Development Program concerning [**]. The demonstrated performance and potential
low cost of these developmental conductors have justified the establishment of
this program. This program has been designed to produce a [**] by [**],
consistent with the requirements for commercial power transmission cables.
The critical program Milestones and Statement of Work are defined in the
following sections. However, it is understood that the [**] cable wire concept
is still being developed and understanding of the fundamental properties of the
[**] conductor are still emerging. It is further understood that the specific
target items may be modified over time based on new information relative to the
cable wire or commercial cable. The Project Review Board (PRB) will have the
responsibility for; (a) assessing and approving the Subsequent Research and
Development Program I direction and (b) modifying (if necessary) the target
specifications for the program.
The program provides for three types of payment for ASC; (a) $[**]. for work
performed prior to October 1, 1999, (b) $[**]. for work performed during the
program period (October 1999 to September 2004), and (c) a "Success Payment" to
be paid if the "Proving Level" performance is achieved by the end of the
program.
Subject of the Research & Development Program
- ---------------------------------------------
The program will focus on the development of process technologies to produce in
long-lengths high-performance HTS tapes meeting Pirelli's product, performance
and cost targets using an [**]suitable HTS superconducting material. Currently
the selected HTS material is [**] but the use of alternative materials is not
precluded should such a change be technically advantageous to the achievement of
the program objectives.
Whilst the project Statement of Work refers throughout to the [**] technology
[**] technology), this is understood to include alternative routes for the
preparation of a [**], and the use of the term [**] is understood to include the
possibility of using HTS materials, including other [**].
Objectives
- ----------
The objectives of this effort are to develop a commercially viable cable wire
and establish pilot manufacture capability [**] for this wire. ASC will
investigate and develop low cost manufacturing practices for building the [**]
cable wire. The[**] conductor is composed of [**], including; [**]. Each
conductor [**]will be optimized and scaled-up to yield long length manufacturing
capability.
1
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks
denote omissions.
Milestones
- ----------
The performance milestones are defined and listed in Table 1. This table
augments the current Pirelli Cable Wire Product "Pirelli Target" specifications
listed in Table 2. These milestones reflect the strong desire of Pirelli and ASC
to rapidly develop the next-generation HTS product that can enable broad
commercial penetration of HTS Cables into the global cable market. Wire
production at the end of the 5 year program will be consistent with ASC direct
cost (labor, materials, vendors) of $[**] when projected to [**] production
quantities.
Table 1 Program Years (October 1 to September 30)
-----------------------------------------------------------------
'99-'00 '00-'01 '01-'02 '02-'03 '03-'04
-----------------------------------------------------------------
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
-----------------------------------------------------------------
Program Target Specifications
- -----------------------------
The Program Target Specifications (Table 2) define the objective attributes for
the program, two sets of data are presented for the key parameters:-
1. "Proving Levels" which together comprise the final [**] Project Targets by
which the "Success Payment" will be judged,
2. "Pirelli Targets" which describe the targets which Pirelli has set for the
eventual commercial volume production of [**] tapes for commercial
applications.
Table 2: Properties to be measured over every length
- ----------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Parameter Proving Level Pirelli Target Comments
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Dimensions
- -------------------------------------------------------------------------------
Total width [**] [**] [**]
- -------------------------------------------------------------------------------
Width tolerance [**] [**]
- -------------------------------------------------------------------------------
Total thickness [**] [**] [**]
- -------------------------------------------------------------------------------
Thickness tolerance [**] [**]
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
<TABLE>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Single Length [**] [**]
- -------------------------------------------------------------------------------
Electrical Properties
- -------------------------------------------------------------------------------
Critical current (Ic) [**] [**] [**]
- -------------------------------------------------------------------------------
Critical current uniformity [**] [**] [**]
- -------------------------------------------------------------------------------
Ageing Tests on every
length
- -------------------------------------------------------------------------------
[**] [**] [**]
- -------------------------------------------------------------------------------
</TABLE>
Table 2: "Type Approval Tests" (TAT) on Representative Samples
--------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Parameter Proving Level Pirelli Target Comments
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
A.C. Losses [**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
[**] [**]
- ---------------------------------------------------------------------------------------------------------
[**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
[**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
Temperature dependence of [**] [**] [**]
Ic, Ic(T)
- ---------------------------------------------------------------------------------------------------------
Straightness [**] [**]
- ---------------------------------------------------------------------------------------------------------
Filaments bundle thickness [**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
Thermo-Mechanical
properties
- ---------------------------------------------------------------------------------------------------------
Coefficient of Thermal [**] [**]
Expansion
- ---------------------------------------------------------------------------------------------------------
Stress tolerance at room [**] [**]
temperature
- ---------------------------------------------------------------------------------------------------------
Critical strain at room [**] [**]
temperature
- ---------------------------------------------------------------------------------------------------------
[**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
Thermal aging [**] [**]
- ---------------------------------------------------------------------------------------------------------
[**] [**] [**]
[**]
- ---------------------------------------------------------------------------------------------------------
[**] [**] [**]
- ---------------------------------------------------------------------------------------------------------
Projected Direct Cost
(labor, material, vendor) [**] [**]
for Volume Manufacture
- ---------------------------------------------------------------------------------------------------------
</TABLE>
It should be noted that certain parameters and performance levels for
[**]cannot be precisely defined at present because the worldwide state
of [**] technology has yet to reach the level where fundamental
experimentation and analysis can determine the "intrinsic" performance
limits. (For example, we consider the[ **] one important point that
has to be addressed in detail to
3
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks
denote omissions.
establish the best design of the [**]) In this regard, performance targets,
milestone evaluation levels, and precise test criteria will be agreed by mutual
consent as the program proceeds.
SUCCESS PAYMENT FOR SUBSEQUENT RESEARCH AND DEVELOPMENT PROGRAM I
- -----------------------------------------------------------------
Basis of Evaluation: In order to evaluate the results of the Subsequent R&D
Program I against the final [**] Project Targets milestone, to demonstrate the
[**] process technology and the related Cable Wire product performance, and in
order to demonstrate the "manufacturing process capability" (as opposed to
"champion results" on single tape samples), at the end of the program period the
Project Review Board will authorize ASC to embark on a tape production campaign
to produce [**]of cable wire against which the actual performance with respect
to the final [**]Project Targets will be judged. Moreover, the projected costs
of the resultant [**] tape will be evaluated, calculated using the established
models, on the basis of an annual production volume of [**].
The targeted process yield against the "Proving Criteria" to demonstrate that
the performance milestone has been met is greater than or equal to [**]%;
Pirelli will purchase from ASC the tape which has met the milestone target. If
the actual tape performance levels, process yield, and projected costs satisfy
the evaluation criteria defined Table 2 (above), Pirelli will pay to ASC the
"Success Payment" of $[**].
Evaluation of the cable wire performance will be determined through joint work
by Pirelli and ASC. The decision on achievement of the target will be determined
by the Project Review Board. In the event of disagreement, the matter can be put
to arbitration under the established contractual procedure.
Program Costs
- -------------
Table 3 provides a listing of the estimated total Program R&D expenses and the
Pirelli payment schedule for the period between October 1, 1999 and September
30, 2003.
Table 3. ASC [**] Development Program Year (Oct.-Sept.) Expenditures ($k)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Category `99-`00 `00-`01 `01-`02 `02-`03 `03-`04
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Program Labor and [**] [**] [**] [**] [**]
Expenses
- ----------------------------------------------------------------------------------------------------
Pirelli payment for work [**] [**] [**] [**] [**]
performed prior to
October 1, 1999
- ----------------------------------------------------------------------------------------------------
Pirelli payment for work [**] [**] [**] [**] [**]
performed during the
period.
- ----------------------------------------------------------------------------------------------------
Pirelli "Success [**]
Payment" to be paid if
the "Proving Level"
performance is achieved
by the end of the
program.
- ----------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks
denote omissions.
Detailed [**] Work Scope
- ------------------------
I. Scope of Work/Task Description Year I, October 1999 to September 2000
(completion of Phase I).
Program First Year - September 2000 Objective:
. Demonstrate [**] using [**] and [**] and all ASC [**].
During this period, work will focus on the basic R+D to establish the low-cost
fabrication and [**] approaches for [**] in a [**] demonstration, using low-cost
fabrication techniques, fully performed at ASC (to demonstrate completed
tech-transfer from collaborative organizations). Although this basic materials
R+D will be the main focus, applications, manufacturing and [**]issues will be
analyzed in parallel to insure that the R+D paths are consistent with a
practical and manufacturable long-length conductor.
II. Scope of Work/Task Description Year II, October 2000 to September 2001
(Phase II)
Program Year-end Objectives:
Demonstrate [**] at [**] by [**]
Deliver [**] by [**].
During this period, the principal focus is to address process scale-up issues.
These include configuring the [**] to a [**], establishing statistics for
defects and performance, and optimizing processing techniques for low cost.
Basic R+D work will also continue to optimize performance parameters and
identify improved process paths. Some work will start on equipment design for
manufacturing.
III. Scope of Work/Task Description Years III,IV, and V, October 2001 to
September 2004 (Phase III)
Principal program-end objectives:
. Install and [**] for [**] by [**]
. Demonstrate [**] by [**]
. Qualify [**] for [**] by [**]
. Demonstrate [**] by [**]
During this final portion of the program, the pilot manufacturing facility
design will be finalized, equipment ordered and installed, the facility
activated and process capability established. Statistical process control will
be established. Actual manufacturing cost will be determined. Some R+D will
continue. The first applications prototypes will be built using initial output
from the manufacturing facility.
5
<PAGE>
Confidential Materials omitted and field separately with the
Securities and Exchange Commission. Asterisks denote
omissions.
Exhibit 2.3-A
Business Development Plan
-------------------------
Date: 31 October 1999 Issue: Final
Pirelli and ASC will form a Development Review Board, which shall meet on a
quarterly basis. The results of the quarterly meetings will be reported to
Pirelli and ASC senior management. The objective for this effort, which
anticipates the concurrent achievement of the technical targets established for
the 1999 R&D Programs, is to prepare Pirelli and ASC for the exploitation of the
HTS Cable market and in particular to exchange information concerning:
1. the market for Cable Wire and Power and Control Cables made therefrom with
particular reference to market needs, requirements, and product attributes;
2. market development;
3. definition of technical specifications of Cable Wire and cables to meet
such market needs/requirements;
4. status of competing or potentially competing products and solutions;
5. review of intellectual property rights of third parties which may
affect the activities of Pirelli and ASC;
6. programming of the time necessary to reach the market and the actions
necessary to prepare for manufacturing;
7. forecast requirements to permit Cable and Cable Wire manufacture capacity
planning 8. defining more HTS Business opportunities and starting
additional cable demonstration trials to; (a) prove technical feasibility,
reliability, and end-user benefits and (b) build manufacturing expertise
and establish commensurate volume capacity.
It is anticipated that success in the above combination of technical and
business efforts will lead to the initiation of [**] in the period 2000 to 2003.
