Exhibit 10.6
DEVELOPMENT
AGREEMENT
This Agreement is made and entered
into this second day of June, 2000, ("Effective Date") by and
between Plug Power Inc., a Delaware corporation, having a place of
business at 968 Albany Shaker Road, Latham, New York 12110
(hereinafter referred to as "Plug"), and Engelhard Corporation, a
Delaware corporation, having a place of business at 101 Wood
Avenue, Iselin, New Jersey 08830-0770 (hereinafter referred to as
"Engelhard").
1. Recitals
1.1 Plug has developed and continues
to develop technology and manufacturing expertise related to fuel
cell systems. Plug has developed and continues to develop
technology related to catalyst products useful in the various
components of fuel cell systems including fuel processors and fuel
cell stacks.
1.2 Engelhard has developed and
continues to develop technology related to catalyst and sorbent,
methods of manufacture and methods of application of catalyst and
sorbent compositions to substrates, including catalysts and
sorbents useful in the various components of fuel cell systems
including fuel processors and fuel cell stacks. Engelhard has also
developed and continues to develop technology related to the use of
such catalysts and sorbents in fuel cell systems useful in
stationary and mobile applications.
1.3 Plug and Engelhard desire to
work together to design and develop catalysts for use in Plug's
fuel processors intended for use in Plug's stationary fuel cell
systems having a capacity to generate up to one hundred
(100) kW of electricity.
In consideration of the foregoing
and the terms set forth below, the Parties agree as
follows:
2. Definitions
The following terms shall have, for
the purposes of this Agreement, the meanings set forth in this
Article 2. The terms may be used in this Agreement in the plural or
the singular form.
2.1 "Materials" shall mean
catalysts, sorbents, catalytic sorbents, and/or reactive compounds
and compositions which are useful in Fuel Processors to catalyze
the oxidation and/or reduction of, or otherwise treat components
such as, carbon monoxide, hydrogen, and hydrocarbons including
components of natural gas and LPG. Materials shall also include
non-catalytic adsorbent materials and/or absorbent materials useful
in Fuel Processors. Materials additionally include catalyst
materials supported on carriers such as honeycomb monoliths,
plates, pipes, hardware and Fuel Processors. Specific Materials
include, but are not limited to, CO preferential oxidation
catalysts and autothermal reforming catalysts, oxidation catalysts
for the abatement of hydrogen from the anode of a fuel cell stack,
and shift catalysts which are catalysts that catalyze a gas stream
comprising hydrogen, carbon monoxide and water to increase the
hydrogen concentration and decrease the carbon monoxide
concentration of the gas stream. Materials shall also include
methods for application (e.g. coating) of Materials onto
substrates, and methods of use of these Materials.
2.2 "Fuel Processor" shall mean a
system (a) for converting hydrocarbon fuels (e.g., natural gas, LPG
etc.) to a gas containing hydrogen that is suitable for acceptable
operation at a fuel cell anode, and
(b)intended for use in Plug's fuel cell systems designed for
stationary applications, including residential and small commercial
applications, and having a capacity to generate up to one hundred
(100) kW of electricity. The Fuel Processor may consist of hardware
and control components designed to employ Materials in reactor,
exchanger, shift, CO polishing or treatment subsystems
2.3 "Program" shall mean the joint
effort of the Parties pursuant to this Agreement to design and
develop Materials for use in Plug's Fuel Processors.
2.4 "Project(s)" shall mean those
projects relating to the Program which are decided upon from time
to time within the scope of the work outlined in Exhibit A, made a
part hereof, and as may be modified by the Parties in writing, by
mutual agreement from time to time.
2.5 "Intellectual Property" shall
mean any invention, discovery, concept, expression or work, whether
or not patented or patentable, including, without limitation,
discoveries, compositions, know-how, procedures, technical
information, processes, methods, test results, devices, formulas,
protocols, techniques, designs and drawings, any physical
embodiment thereof, and any patent (and applications therefor),
copyrights (and applications therefor), trade secret or other
intellectual property right related thereto.
2.6 "Affiliated Company" shall mean
any company or entity owned by, or having common ownership with
either party to this Agreement, or being a joint venture partner of
either Party to this Agreement. Ownership
of a company or entity as used herein means the direct or indirect
ownership of more than thirty percent (30%) of the voting shares or
share capital, equity or voting rights of the company or entity
except that Affiliate shall include Engelhard's affiliates N.E.
ChemCat Co., Ltd. of Japan and Heesung Engelhard of South
Korea.
2.7 "Product Specification" shall
have the meaning set forth in the Supply Agreement Section
1.6.
3. Program for Establishment and
Determination of Projects and Exchange of
Technical
Information
3.1 Pursuant to the Program, Plug
and Engelhard will cooperate in the development of Materials for
use in Plug's Fuel Processors in accordance with the Project set
forth in Exhibit A. Generally, the goals of the Program shall be to
develop improved Materials that optimize the cost, performance and
durability of the Fuel Processor. Exhibit A will contain milestones
which are recognized by the Parties to be objectives and not
obligations. The Parties further recognize that the milestones may
change, as the Project progresses for reason not anticipated.
Therefore, the Parties agree that failure to meet a milestone
recited in Exhibit A shall not be a breach of this
Agreement.
3.2 Each Party shall appoint a
representative as its project manager for the Project (each such
representative a "Project Manager"). The Project Managers shall
appoint members to their respective teams to work on the Project
and shall share overall responsibility for the coordination of the
development of the Product. Each Party's Project Manager shall be
the other Party's point of contact for the
resolution of any problems that may arise in connection with this
Agreement or the Project. Each Party shall notify the other Party
within thirty (30) days after the execution of this Agreement of
the appointment of its Project Manager and shall notify the other
Party as soon as practicable upon changing such appointment.
3.3 Exhibit A of this Agreement has been prepared by the business
and technical personnel of Engelhard and Plug who have met prior to
the Effective Date to outline the initial Project or Projects,
within the scope of the Program, to be undertaken. Such Project(s)
shall include the nature, scope, estimated resource requirements,
milestones, performance and the estimated completion
date.
3.4 The Parties shall meet as
mutually agreed but at least every three (3) months during the term
of this Agreement. During such meetings, each Party shall review
the status of the Projects, including:
3.4.1 A review of current Projects,
including reports of work done subsequent to the previous
meeting;
3.4.2 The extent to which any
previous or current Project is proceeding towards
commercialization; and
3.4.3 A review of invention
disclosures, patent applications filed or issued relating to the
Project, including contemplated foreign filings.
3.4.4 During the course of such
meetings, the Parties shall decide whether the Projects shall be
modified and, if so, the Parties shall agree in writing on specific
actions to be taken by each Party.
3.4.5 Minutes shall be taken at each
meeting by each Party's Project Leader or his/her designee and a
written version of such minutes shall be provided to the other
Party within thirty (30) days of the conclusion of each such
meeting.
3.5 Plug shall bear its own costs
and expenses with respect to the Program, and Engelhard shall be
compensated for its costs and expenses with respect to the Program
in accordance with Article 4 hereinbelow. To the extent Engelhard
purchases property in accordance with, and for the primary purpose
of carrying out, the Project, any and all such property including
materials, equipment, software, and the like purchased or otherwise
acquired by Engelhard in connection with the Program, shall be the
property of Engelhard, regardless of whether the funds for such
purchased or otherwise acquired property were obtained using the
compensation provided by Plug or by Engelhard.
3.6 To the extent that either Party
is prevented from disclosing commercial and technical information
hereunder by reason of obligations to third parties, it shall use
all reasonable efforts to secure the approval of such third parties
for the purpose of making disclosures hereunder.
4. Engelhard
Compensation
4.1 Payment for Development Efforts
Plug shall pay one hundred percent (100%) of its own development
costs and expenses incurred in connection
with the Project. The Parties hereto agree that Ten Million Dollars
($10,000,000) represents the development costs and expenses
estimated by Engelhard and Plug that Engelhard will incur in
connection with the Program from the Effective Date through the
third anniversary of the Effective Date. Plug agrees to pay such
development costs incurred by Engelhard in connection with the
Project (the "Development Fee"). The Development Fee shall be paid
to Engelhard in cash in three installments as follows: Five Million
Dollars ($5,000,000) within five (5) days of the Effective Date;
Three Million Dollars ($3,000,000) within five (5) days of the
first anniversary of the Effective Date; and Two Million Dollars
($2,000,000) within five (5) days of the second anniversary of the
Effective Date.
4.2 Investment in Plug:
(a) Within ten (10) days of the
Effective Date, Plug shall issue and sell to Engelhard, and
Engelhard shall purchase from Plug, for a purchase price of Five
Million Dollars ($5,000,000) in cash such number of shares (the
"Shares"), Plug's common stock, par value one cent ($.01) per share
(the "Common Stock") having a market value of Five Million Dollars
($5,000,000) based on the Effective Date Market Price (as defined
below). As used herein, "Effective Date Market Price" means with
respect to one share of Common Stock, the closing price for such
share ("Closing Price") as reported on NASDAQ for the trading day
immediately preceding the Effective Date; provided that in
calculating such Effective Date Market Price the Closing Price
shall be reduced by five percent (5%) of its arithmetic
value.
(b) Within ten (10) days of the
first anniversary of the Effective Date, Plug shall issue and sell
to Engelhard, and Engelhard shall purchase from Plug, for a
purchase price of Three Million ($3,000,000) in cash such number of
Shares of Common Stock having a market value of Three Million
($3,000,000) based on the First Anniversary Market Price (as
defined below). As use herein First Anniversary Market Price" means
with respect to one share of Common Stock, the Closing Price as
reported on NASDAQ for the trading day immediately preceding the
first anniversary of the Effective Date; provided that in
calculating such First Anniversary Market Price the Closing Price
shall be reduced by five percent (5%) of its arithmetic
value.
(c) Within ten (10) days of the
second anniversary of the Effective Date, Plug shall issue and sell
to Engelhard, and Engelhard shall purchase from Plug, for a
purchase price of Two Million ($2,000,000) in cash such number of
Shares of Common Stock having a market value of Two Million
($2,000,000) based on the Second Anniversary Market Price (as
defined below). As use herein, "Second Anniversary Market Price"
means with respect to one share of Common Stock, the Closing Price
as reported on NASDAQ for the trading day immediately preceding the
second anniversary of the Effective Date; provided that in
calculating such Second Anniversary Market Price the Closing Price
shall be reduced by five percent (5%) of its arithmetic
value.
(d) Each obligation of Engelhard to
purchase Common Stock pursuant to clauses (a), (b) and (c) above is
conditioned upon the receipt by Engelhard
of the related installment payment of the Development Fee as
specified in Section 4.1.
4.3 Engelhard hereby covenants that
it shall use the entire Development Fee primarily for its
development activity in connection with the Project. Provided that
property purchased with the development fee can be used outside of
the Program.
5. Intellectual
Property
5.1 Ownership of Intellectual
Property in the possession of either Party prior to the date of
this Agreement or developed outside the scope of this Agreement, as
substantiated by reasonable documentary evidence
("Backgrou
