Exhibit 10.2


 


DEVELOPMENT AND LICENSE AGREEMENT


 


THIS
DEVELOPMENT AND LICENSE AGREEMENT, including Attachments and Exhibits attached
hereto and incorporated herein by reference, (this “Agreement”) is entered into
as of the 4th day of September, 2007 (the “Effective Date”) by and
between UTC Power Corporation, a
corporation organized and existing under the laws of the State of Delaware and
the successor in interest to UTC Power, LLC, having its principal office at 195
Governor’s Highway, South Windsor, Connecticut (“UTCP”) and Capstone Turbine Corporation, a corporation
organized and existing under the laws of the State of Delaware and having its
principal office at 21211 Nordhoff Street, Chatsworth, California (“Capstone”).
UTCP and Capstone shall be hereinafter individually referred to as a “Party”
and collectively referred to as the “Parties.”


 


RECITALS


 


WHEREAS, Capstone designs, develops, manufactures
and sells certain MicroTurbine generator systems, controls and accessories; and


 


WHEREAS, Capstone has established a development
program for the commercialization of a 200 kW MicroTurbine generator system
meeting the C200 System Specifications (defined below in Article 1) and may in the future make
changes to such 200 kW MicroTurbine and the C200 System Specifications,
pursuant to the terms set forth herein. For the purposes of this Agreement, “C200
System” is defined below in Article 1;
and


 


WHEREAS, Capstone desires UTCP to invest in
Capstone’s C200 System development and commercialization efforts and UTCP is
willing to make such investment through cash and in-kind contributions; and


 


WHEREAS, in exchange for UTCP’s investment in
Capstone’s development and commercialization of the C200 System, Capstone is
willing to provide UTCP: (1) favorable pricing pursuant to Section 9 of this
Agreement and (2) royalty payments for the sale of all other C200 Systems; and


 


WHEREAS, in exchange for UTCP’s investment in
Capstone’s development and commercialization of the C200 System, Capstone is
willing to grant UTCP, subject to the terms and conditions of this Agreement, a
non-exclusive, perpetual, fully paid up, worldwide license to the C200 System
with royalty payments to Capstone, should Capstone fail to complete the
Development and Commercialization of the C200 System as stated herein;


 


NOW,
THEREFORE, in
consideration of the foregoing, and of the mutual promises, covenants and
undertakings contained herein, the Parties hereto agree as follows:


 


1.                                       Definitions.


 


1.1                                 “Affiliate” shall mean a parent or
subsidiary of a corporation or other business entity (e.g., firm, limited
liability company, partnership, or joint venture) that directly or indirectly
controls or is controlled by a Party, or is under common control with a Party. For
the purpose of this definition, “control” means the possession of more than 50%
of the voting securities of a Party or to direct or cause the direction of the
management and policies of such Party, whether through the ownership of voting
securities, by contract or otherwise.


 

















 


1.2                                 “Agreement” shall have the meaning as
set forth in the Recitals.


 


1.3                                 “C200 Data” shall have the meaning as
set forth in Section 7.1.


 


1.4                                 “C200 Investment” shall mean the Cash
Payment and the value of the In-Kind Services performed by UTCP pursuant to the
terms of this Agreement.


 


1.5                                 “C200 System” shall mean a 200 kW
MicroTurbine generator system meeting the C200 System Specifications and all
engineering supporting documentation, including any future changes to the 200
kW MicroTurbine generator system, the C200 System Specifications, and the
engineering supporting documentation.


 


1.6                                 “C200 System Specifications” shall
mean the technical specifications of the C200 System as set forth in Attachment
A hereto and as amended in writing from time to time pursuant to Section 3.3
below.


 


1.7                                 “Capstone” shall have the meaning as
set forth in the Preamble.


 


1.8                                 “Cash Payment” shall have the meaning
set forth in Article 4.


 


1.9                                 “Commercialization” shall have the
meaning as set forth in Section 7.2.


 


1.10                           “Confidential Information” shall have
the meaning set forth in Section 10.2.


 


1.11                           “Deliverables” shall mean the
deliverables of Development as set forth in Attachment B.


 


1.12                           “Development” shall mean the work
necessary to develop the C200 System in accordance with this Agreement and such
that the C200 System meets the then current C200 System Specifications.


 


1.13                           “Disclosing Party” shall have the
meaning set forth in Section 10.1.


 


1.14                           “Dispute” shall mean any dispute,
controversy, claim or disagreement between the Parties hereto arising from,
relating to or in connection with the Agreement or other document referred to
herein or delivered in connection herewith, or the relationships of the Parties
hereunder, including questions regarding the interpretation, meaning or
performance of the Agreement, the release of the information in the Escrow
Account, and including claims based on contract, tort, common law, equity,
statute, regulation, order or otherwise.


 


1.15                           “Effective Date” shall have the
meaning as set forth in the Preamble.


 


1.16                           “Escrow Account” shall have the
meaning as set forth in Section 7.1.


 


1.17                           “Force Majeure Events” shall have the
meaning as set forth in Section 15.1.


 


1.18                           “In-Kind Services” shall mean the
Development commitments of UTCP as set forth in Attachment D and Attachment
E hereto.


 


1.19                           “Intellectual Property” means all: (i)
patents, trademarks, service marks, trade names, patent and trademark
applications, utility models, rights in licenses, designs, copyrights
(including rights in computer software), and all rights or forms of protection
of similar nature or having equivalent effect to any of the foregoing which may
subsist anywhere in the world; (ii) whether or not registered and including
applications for any of the foregoing; (iii) know-how, Project results and
Confidential Information, including trade secrets, industrial models,
processes, designs, methodologies, computer programs (including all source
code) and related documentation, technical information and manufacturing,
engineering and technical drawings; and (iv) the C200 Data.


 


2

















 


1.20                           “Losses” shall have the meaning set
forth in Section 12.1.


 


1.21                           “OEM Agreement” shall mean the March
23, 2005 OEM Agreement executed by the Parties, or an OEM Agreement executed by
the Parties subsequent to that date (whichever is the most recently executed).


 


1.22                           “Parties” or “Party” shall have
the meaning as set forth in the Preamble.


 


1.23                           “Program Task Sheet” shall have the
meaning as set forth in Section 3.4.


 


1.24                           “Project” shall mean the Development
of the C200 System in accordance with this Agreement.


 


1.25                           “Project Change” shall have the
meaning set forth in Section 3.3.


 


1.26                           “Project Meeting” shall have the
meaning set forth in Section 3.2.


 


1.27                           “Receiving Party” shall have the
meaning set forth in Section 10.1.


 


1.28                           “Representatives” shall have the
meaning set forth to it in Section 3.1.


 


1.29                           “UTCP” shall have the meaning as set
forth in the Preamble.


 


1.30                           “Withdrawal Event” shall have the
meaning as set forth in Section 7.2.


 


2.                                       Commitments.


 


2.1                                 Development Commitments.


 


2.1.1                        Capstone Development Commitments. Capstone shall conduct the Development in
accordance with this Agreement and shall deliver to UTCP the Deliverables as
set forth in Attachment B hereto. Any time references concerning the
delivery of the Deliverables in Attachment B are estimates only and are
subject to change upon written notice by Capstone to UTCP and UTCP’s written
approval of any such changes. UTCP’s written approval shall not be unreasonably
withheld such that it does not impact Commercialization.


 


2.1.2                        Capstone Right to Subcontract Development
Commitments. Capstone may
subcontract any part of the Development to a third party. Capstone shall impose
on such third party the same obligations as Capstone owes UTCP hereunder and
shall ensure that all such subcontractors comply with and abide by the terms
and conditions of this Agreement.


 


2.1.3                        UTCP Development Commitments and Right to
Subcontract Development Commitments. UTCP shall perform all In-Kind Services hereunder, pursuant to the
terms of this Agreement, in support of the Development and shall complete such
tasks, or cause such tasks to be completed, at UTCP’s sole expense, except as
otherwise agreed to by the Parties in writing. UTCP may subcontract any part of
the Development to a third party. UTCP shall impose on such third party the
same obligations as UTCP owes Capstone hereunder and shall ensure that all such
subcontractors comply with and abide by the terms and conditions of this
Agreement.


 


3

















 


2.1.4                        Joint Development Commitments. During Development, the Parties shall work
jointly to: (i) reduce costs and improve manufacturability of the C200 System
by using each Party’s processes to address manufacturing shop floor issues and
(ii) facilitate continuous improvement.


 


2.2                                 Other Capstone Commitments.


 


2.2.1                        Extension of the OEM Agreement. Capstone agrees to execute an amendment to
extend the term of the OEM Agreement as necessary to ensure that the OEM
Agreement is in effect for a six (6) month period of time following
Commercialization, as defined herein.


 


2.2.2                        Non Compete Provisions. Capstone is prohibited from designing,
marketing or selling the C200 System in conjunction with any energy system that
would compete with UTCP products in the combined heating, cooling and power
market (“the Market”). Capstone is prohibited from collaborating with any third
party to design, market, or sell the C200 System in conjunction with any energy
system that would compete with UTCP products in the Market. Subject to the
foregoing, Capstone may manufacture the C200 System for any third party.


 


2.2.3                        Assignment of Agreements with Solar Turbines,
Incorporated. Upon the
occurrence of a Withdrawal Event and UTCP’s request, Capstone shall use its
best efforts to assign to UTCP the agreements executed between Capstone and
Solar Turbines, Incorporated, as set forth in Section 1 of Attachment H,
attached hereto.


 


2.2.4                        ADG Compatibility. Capstone shall achieve ADG
compatibility with respect to the C200 System within twelve (12) months of
Commercialization.


 


3.                                       Project Management.


 


3.1                                 Project Representatives. Each Party shall appoint an equal number of
representatives to facilitate the Development and management of the Project
(the “Representatives”). A Party may replace a Representative by
providing prior notice in writing to the other Party of its intent to replace
the applicable Representative. The Parties have appointed their initial
respective Representatives as listed in Attachment F hereto.


 


3.2                                 Project Meetings. At least quarterly, the Parties will
conduct face-to-face project meetings (each a “Project Meeting”)
consistent with the development milestones identified in Attachment B
hereto until Commercialization is achieved at Capstone’s development facility.
Each Project Meeting shall require attendance of at least the project manager,
development and commercial Representatives. During a Project Meeting, the
Parties shall address the following:


 


	
  (i)

  	
   

  	
  Progress against the then
  current estimated Project time schedule;

  
	
  (ii)

  	
   

  	
  Achievement of milestones,
  including, without limitation, milestones related to payments;

  
	
  (iii)

  	
   

  	
  Current list of
  contractual amendments to date to be considered by the Parties;

  
	
  (iv)

  	
   

  	
  Current list of Disputes
  between the Parties, with complete description of issue, position, and impact
  on the Project (including, without limitation, with respect to cost and
  schedule and a summary of the status of any Dispute);

  
	
  (v)

  	
   

  	
  Current list of identified
  risks associated with the Project, with complete description of issue, impact
  on the Project (including, without limitation, with respect to cost and
  schedule), and mitigating actions to be taken;

  
	
  (vi)

  	
   

  	
  Project Change(s); and

  
	
  (vii)

  	
   

  	
  Joint Development
  Commitments, as set forth in Section 2.1.4 of this Agreement.

  



 


4

















 


3.3.                              Project Changes. If either Party wishes to change the scope
of the Project (a “Project Change”) as identified by the C200 System
Specifications, it shall consult with the other Party in a timely manner so
that the Parties can study and estimate the feasibility of such change. A
Project Change shall be effective and binding only upon execution of a change
order signed by a project manager and a corporate officer of each of the
Parties. Prior to Commercialization, as defined within this Agreement, Capstone
reserves the right to make commercially reasonable changes to the C200 System
Specifications; provided, however, any such change that materially affects the
fit, form, function, cost, or Commercialization schedule of the C200 System
shall be effective only upon 30 days prior written notice to UTCP and the
written approval of UTCP.


 


3.4                                 In-Kind Services. UTCP shall not provide any In-Kind Services
without a “Program Task Sheet” as defined in Attachment G, approved by each of
the Parties pursuant to the terms of this Section, setting forth the specific
In-Kind Services to be provided, the time and place of such services, the valuation
of the work to be provided, the completion date, and such other relevant
criteria as may be reasonably specified by the program task sheet, which shall
be prepared by Capstone and delivered to UTCP pursuant to Attachment B. Each
Program Task Sheet shall be executed by each of the Parties’ respective
designees as identified in Attachment F and no In-Kind Services shall be
provided except pursuant to the applicable Program Task Sheet. Capstone and
UTCP have already identified a list of proposed tasks in Attachment D
and Attachment E with task descriptions, deliverables, and estimated
costs of $829,900, which UTCP has agreed to support and will be confirmed with
Program Task Sheets. The value of UTCP’s In-Kind Services shall be adjusted,
pursuant to mutual written agreement of the Parties, based on actual cost of
the In-Kind Services.


 


4.                                       UTCP Obligations. UTCP shall also make the C200 Investment as
follows: (i) $12,000,000 in cash pursuant to the Milestone schedule attached
hereto as Attachment B (the “Cash Payment”). UTCP shall not make
any subsequent payments, pursuant to the Milestone schedule set forth in
Attachment B, after the initial payment of $1,500,000, until any and all due or
previously due Milestones and Deliverables (as set forth within the schedule)
have been satisfied and delivered, respectively, as agreed upon by both
Parties; and (ii) the provision of In-Kind Services as further described in Section 3.4 above.


 


5.                                       Purchase of the C200 System. UTCP shall purchase the C200 System in
accordance with terms and conditions of the OEM Agreement applicable to
equipment purchases only, or, in the event there is no OEM Agreement in effect,
terms and conditions that are substantially similar and no less favorable. In
addition, UTCP shall provide Capstone twelve (12) month rolling forecasts for
its projected C200 System purchases on a monthly basis. C200 System orders
shall be accepted by Capstone upon receipt of such orders from UTCP for
standard equipment using Capstone’s then current published standard lead times.
Subsequent to Commercialization, as defined within this Agreement, Capstone
reserves the right to make commercially reasonable changes to the C200 System
Specifications; provided, however, any such change that materially affects the
fit, form, cost, or function of the C200 System shall be effective only upon 90
days prior written notice to UTCP and the written approval of UTCP.


 


6.                                       Intellectual Property Ownership. Subject to the License granted in Article 7 hereof, as between the Parties,
Capstone shall own all right title and interest in and to all Intellectual
Property relating to the C200 System. Each Party shall own all right title and
interest in and to its own Background Intellectual Property.


 


5

















 


7.                                       C200 System License.


 


7.1                                 Escrow Account.


 


7.1.1                        Capstone shall select an escrow agent,
subject to UTCP’s prior written approval of such escrow agent, and establish
and maintain an escrow account within sixty (60) days following the Effective
Date of this Agreement (the “Escrow Account”) and shall deposit in such
Escrow Account all data and information controlled by Capstone relating to the
C200 System, including, but not limited to: (i) all design, development,
manufacturing, overhaul, repair and maintenance data and information then in
its possession or otherwise necessary to design, develop, manufacture,
overhaul, repair and maintain the C200 System; and (ii) a written
identification of all know-how and trade secrets in its possession or otherwise
necessary to design, develop, manufacture, overhaul, repair and maintain the
C200 System, which written identification shall include a list of the
individuals that possess such information reasonably necessary to practice all
such know-how or trade secrets (collectively, the “C200 Data”).


 


7.1.2                        For purposes of Section 7.1, “controlled by”
means the possession of the ability to grant a license or sublicense as
provided herein without violating terms of any third party agreements. For
purposes of Section 7.1, “Third Party Agreements” shall mean any and all such
agreements or arrangements that would prevent or in any way limit the deposit
of any data or information in the Escrow Account, if such data or information
would otherwise be deposited into the Escrow Account and included as C200 Data,
but for Capstone’s inability to grant a license or sublicense pursuant to the
definition of “controlled by” set forth above (“Third Party Data”). With
respect to any Third Party Agreements existing prior to, or as of, the
Effective Date, Capstone shall make all commercially reasonable efforts to
secure for UTCP a license or sublicense to any Third Party Data; if Capstone is
unable to secure such a license or sublicense for UTCP, then Capstone shall set
forth, in Attachment H attached hereto: (i) a description of the Third Party
Agreement (including the parties and date of execution) and (ii) a description,
reasonably acceptable to UTCP, of the Third Party Data and the information
relevant to the development of the C200 System (including information on form,
fit and function) which shall be deposited in the Escrow Account. With respect
to any Third Party Agreement that may come into existence after the Effective
Date, Capstone shall make all commercially reasonable efforts to secure for
UTCP a license or sublicense to the Third Party Data; if Capstone is unable to
secure such a license or sublicense for UTCP, Capstone shall, prior to
execution of the Third Party Agreement: (i) provide written notice to UTCP,
(ii) provide UTCP with a description, reasonably acceptable to UTCP, of the
Third Party Data and information relevant to the development of the C200 System
(including information on form, fit and function) which shall be deposited in
the Escrow Account, and (iii) obtain UTCP’s written approval of the
arrangement.


 


7.1.3                        Both the records of Capstone and the C200
Data deposited in the Escrow Account shall be subject to inspection and audit
by a mutually acceptable third party to determine whether the deposited
materials represent the C200 Data to comply with this Section 7.1. The audit shall be conducted
at a time and place reasonably convenient to Capstone, and each Party shall be
responsible for fifty percent (50%) of expenses related to the audit. Capstone
shall update the Escrow Account at least once every calendar quarter and upon
completion of major elements of the continued design, Development and
manufacture of the C200 System, upon any material redesign of all or a material
portion of the C200 System, or upon the reasonable request of UTCP.


 


6

















 


7.2                                 Escrow Account Release Conditions. Upon the occurrence of any of the following
events and ten (10) days prior written notice to Capstone, (each, a “Withdrawal
Event”) UTCP shall have the right to access the Escrow Account and receive
copies of all C200 Data deposited therein:


 


(i)                                     Failure by Capstone, to complete, or take
reasonable action to complete, the Development, commercialization and product
readiness of the C200 System; including, but not limited to, the failure by
Capstone to make significant capital investment in, or establish, manufacturing
facilities and equipment for the C200 System (collectively, “Commercialization”)
by February 28, 2009. If Capstone fails to meet this Commercialization
deadline, Capstone shall be granted a six (6) month grace period in which to
cure such failure. If Capstone fails to achieve Commercialization of the C200
System during the six (6) month grace period, the cure period shall be extended
for six (6) months during which time Capstone shall pay to UTCP liquidated
damages of $25,000 per week until Commercialization is achieved or the cure
period expires, whichever occurs first. UTCP shall have the right to access the
Escrow Account only upon the expiration of the cure period; provided, however,
if the delay in Commercialization is caused by UTCP’s failure to timely deliver
the In-Kind Services in accordance with the applicable agreed upon Program Task
Sheet, Capstone’s supply issues out of Capstone’s reasonable control or other
issues out of Capstone’s reasonable control, or if UTCP fails to make timely
Cash Payments pursuant to the terms of this Agreement, all deadlines shall be
extended on a day-for-day basis for the period of such delay and the Parties’
rights shall remain intact;


 


(ii)                                  Capstone fails to take reasonable actions to
fulfill UTCP purchase orders made in accordance with Article 5 above. Capstone shall be provided a reasonable
time to respond to any material changes to the (12) month rolling forecast in
accordance with Article 5 above.
Capstone shall communicate product requirement changes to UTCP with (90) days
advanced written notice.


 


(iii)                               Capstone voluntarily or involuntarily
transfers all or substantially all of its assets or business or all or
substantially all of the assets necessary for the continued delivery of the
C200 System to UTCP to any third party, including through any merger or
acquisition, and such third party is incapable or unwilling to fulfill
Capstone’s obligations to UTCP related to the C200 System, including delivery
of C200 equipment to meet UTCP C200 System order forecast, in accordance with
this Agreement.


 


7.3                                 Standby License.


 


7.3.1                        License Grant. Upon the occurrence of a Withdrawal Event,
Capstone shall grant to UTCP, its successors and assigns, a perpetual, fully
paid up, worldwide license to all C200 Data either then deposited in the Escrow
Account or otherwise necessary for the exercise of the rights and purposes set
forth in this Agreement, as well as all intellectual property rights pertaining
to such C200 Data:


 


(i)                                     To make, or have made, use, sell, or have
sold, to end-use customers the C200 System (and any spare parts thereof) in
conjunction with any energy systems and excluding the right to make, use or
sell individual components of the C200 System separate from an integrated
energy system;


 


and


 


(ii)                                  To provide, or cause to be provided, all
services associated with the installation, maintenance, repair and overhaul of
the C200 System in conjunction with energy systems.


 


Such license to the C200
Data shall be non-exclusive; provided, Capstone shall be prohibited from
granting to a third party a license to the C200 Data for the specific purposes
set forth above that would compete with UTCP products in the Market. Subject to
the provisions of Section 2.2.2, the grant of this license shall not prohibit
Capstone or its successors and assigns from: (i) marketing, manufacturing and
selling the C200 System, or (ii) granting Licenses to other third parties for
purposes other than any of the purposes set forth within this section 7.3.1.


 


7

















 


7.3.2                        Standby License Fees. In connection with the grant of the
foregoing license in Section 7.3
hereof, UTCP shall pay to Capstone, or its successor, a royalty equal to three
percent (3%) of the C200 System burdened manufacturing cost for all C200
Systems sold by UTCP or its Affiliates as part of any energy system.


 


7.3.3                        Termination of License. UTCP’s right to withdraw the C200 Data and
obtain a license to the C200 Data shall terminate if the Parties mutually agree
in writing either: to a proposed alternative product or to product
obsolescence. Once the C200 Data has been withdrawn, this Section 7.3.3 shall
have no force and effect.


 


8.                                       UTCP Royalties.


 


8.1                                 Upon the sale of each C200 System by Capstone
to an entity other than UTCP or its Affiliates, Capstone shall pay to UTCP a
royalty equal to ten percent (10%) of the sale price of each such third party
C200 System until the aggregate cash value of UTCP’s C200 Investment has been
recovered by UTCP and, thereafter, the royalty shall be reduced to five percent
(5%) of the sale price.


 


8.2                                 All royalties shall be paid to UTCP on a
quarterly basis and are due when Capstone recognizes such revenue for a sale of
a C200 System or when a C200 System is delivered to a party leasing a C200
System from Capstone.


 


9.                                       C200 System Discounts. With respect to all sales of the C200
System to UTCP by Capstone, UTCP shall receive: (i) a discount of 25% less (or
30% less in the event the C200 System fails to receive CARB 2007 Certification)
than the advertised list price at the time of the applicable sale; or (ii)
pricing as favorable as any other customer, distributor or other channel
partner of Capstone at the time of the applicable sale, whichever results in a
lower price to UTCP. All discounts hereunder shall only be provided on a
prospective basis and UTCP shall not be entitled to retroactive discounts on
the C200 System, unless UTCP demonstrates that lower, or more favorable,
pricing was, or has been, previously available to another party; upon such a
demonstration, UTCP shall be entitled to the lower, or more favorable pricing,
and shall be entitled to credits pursuant to UTCP’s past purchases to account
for the difference in pricing.


 


10.                                 Confidentiality.


 


10.1                           Confidentiality Obligations. Each Party (in such capacity, the “Receiving
Party”) acknowledges and agrees to maintain the confidentiality of
Confidential Information provided by the other Party (in such capacity, the “Disclosing
Party”) hereunder. Unless it has the prior written consent of the
Disclosing Party, the Receiving Party shall not disclose or disseminate the
Disclosing Party’s Confidential Information to any person other than those
employees, and contractors of the Receiving Party who have a need to know it in
order to assist the Receiving Party in performing its obligations under this
Agreement and the Project. In addition, the Receiving Party (i) shall take all
reasonable steps to prevent unauthorized access to the Disclosing Party’s
Confidential Information, and (ii) shall not use the Disclosing Party’s
Confidential Information, or authorize other persons or entities to use the
Disclosing Party’s Confidential Information, for any purposes other than in
connection with performing its obligations hereunder. As used herein,
“reasonable steps” means steps that a Party takes to protect its own, similarly
confidential or proprietary information of a similar nature, which steps shall in
no event be less than a reasonable standard of care.


 


8

















 


10.2                           The term “Confidential Information,”
as used herein, shall mean the C200 Data, all business strategies, plans and
procedures, proprietary information, software, drawings, test data, tools,
processes, methodologies, data and trade secrets, and other confidential
information and materials of the Disclosing Party and any Intellectual Property
that may be developed as a result of this Agreement. Confidential Information
specifically includes, without limitations, any technology, data, results,
Deliverables or other information developed or created during Capstone’s
performance under the terms of this Agreement and which relate to the C200
System.


 


10.3                           The provisions of this Article 10 shall not apply to the extent
that such Confidential Information is: (i) already known to the Receiving Party
free of any restriction at the time it is obtained from the Disclosing Party,
(ii) subsequently learned from an independent third party free of any
restriction and without breach of this Agreement; (iii) is or becomes publicly
available through no wrongful act of the Receiving Party or any third party;
(iv) can be demonstrated by actual written evidence as being independently
developed by the Receiving Party without reference to or use of any
Confidential Information of the Disclosing Party; or (v) is required to be
disclosed pursuant to an applicable law, rule, regulation, government
requirement or court order, or the rules of any stock exchange (provided,
however, that the Receiving Party shall advise the Disclosing Party of such
required disclosure promptly upon learning thereof in order to afford the
Disclosing Party a reasonable opportunity to contest, limit and/or assist the
Receiving Party in crafting such disclosure).


 


10.4                           The Receiving Party shall advise its
employees and contractors of the Receiving Party’s obligations of
confidentiality and non-use under this Article
10 and shall be responsible for ensuring compliance by its and its’
affiliates employees, agents, contractors, subcontractors and licensees with
such obligations. In addition, the Receiving Party shall require all persons
and entities who are provided access to the Disclosing Party’s Confidential
Information, other than the Receiving Party’s employees, accountants and legal
counsel, to execute confidentiality or non-disclosure agreements containing
provisions reasonably similar to those set forth in this Article 10. The Receiving Party shall promptly
notify the Disclosing Party in writing upon learning of any unauthorized
disclosure or use of the Disclosing Party’s Confidential Information by such
persons or entities and shall be responsible, to the extent of and pursuant to
the standards, terms and conditions of Article 10, for any breach of an
obligation of confidentiality by its employees who have had access to the
Disclosing Party’s Confidential Information.


 


10.5                           Upon the Disclosing Party’s written request
following expiration or termination of this Agreement, the Receiving Party
promptly shall return to the Disclosing Party, or destroy, all Confidential
Information of the Disclosing Party provided hereunder, including all copies
thereof. If requested by the Disclosing Party, the Receiving Party shall
certify in writing its compliance with the provisions of this Article 10. The obligations of
confidentiality and non-use of Confidential Information shall survive
termination or expiration of this Agreement for three (3) years or as long as
the Confidential Information is protectable as a trade secret under applicable
law.


 


10.6                           The Parties shall issue a joint press release
concerning this Agreement upon its execution and upon the written approval of
both Parties of such joint press release prior to any release or publication.


 


10.7                           Notwithstanding anything to the contrary
herein, the Parties acknowledge that a breach or threatened breach of the
confidentiality provisions of this Agreement cannot be adequately compensated
by monetary damages and would cause irreparable injury and damage. Accordingly,
in the event of such breach or threatened breach of confidentiality, the
injured Party shall be entitled to seek injunctive or other equitable relief in
addition to recovery of monetary damages in accordance with the provisions of
Article 11 of this Agreement.


 


9

















 


11.                                 Warranties and Limitation of Damages.


 


11.1                           EXCEPT AS PURSUANT TO THE TERMS OF THE OEM
AGREEMENT (OR TERMS NO LESS FAVORABLE), CAPSTONE MAKES NO WARRANTIES TO UTCP,
EXPRESS OR IMPLIED, WITH RESPECT TO THE C200 SYSTEM AND ANY SERVICES OR
DELIVERABLES PROVIDED HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED.


 


11.2                           UTCP MAKES NO WARRANTIES TO CAPSTONE, EXPRESS
OR IMPLIED, WITH RESPECT TO THE IN KIND SERVICES AND ANY SERVICES OR
DELIVERABLES PROVIDED HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANT ABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. ALL SUCH OTHER WARRANTIES ARE HEREBY DISCLAIMED.


 


11.3                           A PARTY SHALL NOT BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES WHETHER IN CONTRACT, TORT OR OTHER THEORIES OF LAW, EVEN IF
THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


 


11.4                           THE TOTAL, CUMULATIVE MONETARY LIABILITY OF
EITHER PARTY TO THE OTHER PARTY WITH RESPECT TO A BREACH OF THE CONFIDENTIALITY
OBLIGATIONS SET FORTH IN ARTICLE 10 OF THIS AGREEMENT SHALL NOT EXCEED TWELVE
MILLION DOLLARS ($12,000,000.00). IN THE EVENT OF A BREACH BY UTCP OF ITS
CONFIDENTIALITY OBLIGATIONS WITH RESPECT TO CAPSTONE’S AIR BEARING TECHNOLOGY
UTCP’S TOTAL, CUMULATIVE MONETARY LIABILITY SHALL NOT EXCEED THIRTY-FIVE
MILLION DOLLARS ($35,000,000.00). A PARTY’S RIGHT TO SEEK AND RECOVER MONETARY
DAMAGES WITH RESPECT TO THE OTHER PARTY’S BREACH OF ITS CONFIDENTIALITY
OBLIGATIONS UNDER ARTICLE 10 OF THIS AGREEMENT SHALL BE WITHOUT PREJUDICE TO
RECEIPT OF ADDITIONAL INJUNCTIVE OR OTHER EQUITABLE NON-MONETARY RELIEF.


 


11.5                           EXCEPT FOR A BREACH OF THE CONFIDENTIALITY
OBLIGATIONS SET FORTH IN ARTICLE 10 HEREOF, THE TOTAL CUMULATIVE LIABILITY OF
EITHER PARTY WITH RESPECT TO ALL OTHER CLAIMS PERTAINING TO THIS AGREEMENT
SHALL NOT EXCEED THE LESSER OF: (A) THE TOTAL AMOUNT PAID TO CAPSTONE UNDER THE
AGREEMENT AT THE TIME OF SUCH CLAIM OR (B) TWELVE MILLION DOLLARS
($12,000,000.00).


 


12.                                 Indemnity.


 


12.1                           Capstone Indemnification. Capstone shall indemnify, defend and hold
harmless UTCP and its Affiliates and their respective officers, directors,
employees, agents, successors and assigns, from any and all costs, expenses,
damages, liabilities, losses and judgments, including reasonable attorneys’
fees and legal expenses (collectively, “Losses”), and threatened Losses
arising from, or in connection with: (i) any intentional misconduct of Capstone
or its employees in the design, manufacture, supply or delivery of the C200
System, or execution of this Agreement; (ii) any claims of infringement or
misappropriation of any patent, trademark, trade secret, copyright arising out
of the Development, the C200 System or Deliverables provided by Capstone to
UTCP, or otherwise caused by Capstone; and (iii) Capstone’s breach of its
obligations with respect to UTCP’s Confidential Information. Capstone’s
obligations under this paragraph shall not apply to any infringement claim or
Loss to the extent it is not caused in whole or part by Capstone and arises from
or concerns: (a) a Deliverable prepared in accordance with UTCP’s specific
technical designs or instructions; (b) inclusion in a Deliverable of any
content or other materials provided by UTCP and the infringement or Loss
relates to or arises from such UTCP provided material; (c) modification of a
Deliverable or the C200 System made by UTCP and not approved by Capstone; (d)
use of the Deliverable in combination with C200 System not provided by Capstone
or otherwise not approved by Capstone under the applicable documentation and
specification; or (e) use by UTCP of an outdated or superseded version of a
Deliverable.


 


10

















 


12.2                           UTCP Indemnification. UTCP shall indemnify, defend and hold
harmless Capstone and its Affiliates and their respective officers, directors,
employees, agents, successors and assigns, from all Losses and threatened
Losses arising from, or in connection with, (i) any intentional misconduct of
UTCP or its employees in the performance of this Agreement; (ii) UTCP’s breach
of its obligations with respect to Capstone’s Confidential Information; and
(iii) any claims of infringement or misappropriation of any patent, trademark,
trade secret, copyright to the extent that the Loss or threatened Loss is not
caused by Capstone and arises from or concerns: (a) UTCP provided material; (b)
modification of a Deliverable or the C200 System made by UTCP and not approved
by Capstone; or (iv) use of the Deliverable or the C200 System in combination
with products not provided by Capstone or otherwise not approved by Capstone
under the applicable documentation and specification; or (iii) UTCP’s use of an
outdated or superseded version of a Deliverable.


 


13.                                 Term & Termination.


 


13.1                           Term. Unless earlier terminated pursuant to Section 13.2, this Agreement shall, be effective for the
product life of the C200 System.


 


13.2                           Termination. Either Party may terminate this Agreement by written notice to the
other Party, if any material breach of this Agreement has not been cured within
sixty (60) days after delivery of written notice demanding remedy of such
material breach. This Agreement shall be deemed immediately terminated without
the requirement of further action or notice by either Party in the event the
other Party: (i) shall become subject to voluntary or involuntary bankruptcy,
insolvency, receivership, conservatorship or like proceedings pursuant to
applicable law; (ii) ceases to conduct its normal and customary business
operations.


 


13.3                           Survival. The provisions of Sections 1, 6, 8, 10, 11, 12, 13, 14, 15, including
subsections, hereof shall survive the termination or expiration of this
Agreement. The provisions of Section 2.2
and Articles 7 and 9, including
subsections, shall also survive termination or expiration of this Agreement,
unless the termination of this Agreement is caused, in whole part, by UTCP’s
breach of its obligation to make payments of the Cash Payment to Capstone,
pursuant to the terms and conditions of this Agreement.


 


13.4                           Disputes. Disputes not otherwise resolved by the Parties shall be resolved
pursuant to Attachment C hereto.


 


11

















 


14.                                 Notices. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given if: (a) delivered personally to the
recipient; (b) sent to the recipient by reputable express courier service
(charges prepaid); (c) mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid; or (d) transmitted by facsimile
to the recipient with a confirmation copy to follow the next day to be
delivered by express courier. Such notices, demands and other communications
shall be sent to the addresses indicated below:


 


	
  If to Capstone:

  	
   

  	
  If to UTCP:

  	 

	
   

  	
   

  	
   

  	 

	 
	
  Capstone Turbine
  Corporation

  	
   

  	
  UTC Power Corporation

  
	 
	
  21211 Nordhoff Street

  	
   

  	
  195 Governor’s Highway

  
	 
	
  Chatsworth, CA 91311

  	
   

  	
  South Windsor, CT 06074

  
	 
	
  United States

  	
   

  	
  United States

  
	 
	
  Ann: EVP & CTO

  	
   

  	
  Attn: Vice President
  Onsite Power

  
	 
	
   

  	
   

  	
  Solutions

  
	 
	
   

  	
   

  	
   

  
	 
	
  With copy to:

  	
   

  	
  With copy to:

  
	 
	
   

  	
   

  	
   

  
	 
	
  Waller Lansden Dortch
  & Davis, LLP

  	
   

  	
  UTC Power Corporation

  
	 
	
  520 South Grand Avenue

  	
   

  	
  195 Governor’s Highway

  
	 
	
  Suite 800

  	
   

  	
  South Windsor, CT 06074

  
	 
	
  Los Angeles, CA 90071

  	
   

  	
  United States

  
	 
	
  United States

  	
   

  	
  Attn: Legal Department,
  Counsel

  
	 
	
  Ann E. Lee Horton, Esq.

  	
   

  	
   

  
							



 


or to such other address or
to the attention of such other person as the recipient party has specified by
prior written notice to the sending party. Date of service of such notice shall
be: (i) the date such notice is personally delivered; (ii) three (3) days after
the date of mailing if sent by certified or registered mail; (iii) the next
business day after the date of delivery to the overnight courier if sent by
overnight courier; or (iv) the date of transmittal by facsimile, if transmitted
on a business day, or the next business day following transmittal, if
transmitted other than on a business day.


 


15.                                 General Provisions.


 


15.1                           In addition to any other provisions of this
Agreement regarding due dates or times of performance, neither Party shall be
liable to the other Party for, and shall be excused from, any failure or delay
in performing an obligation under this Agreement that is due to causes beyond
its reasonable control, such as natural catastrophes, governmental acts or
omissions, laws or regulations, disruptions in the supply of public utilities,
labor strikes or difficulties, transportation stoppages or slowdowns, failures
or disruptions caused by suppliers, terrorism, or other similar disruptions or
interferences (“Force Majeure Events”). If the occurrence of any of the
Force Majeure Events prevent or delay a Party’s performance for a period of
less than twenty (20) consecutive days, the time for that performance shall be
extended on a day-for-day basis. If the Force Majeure events cause a delay of
twenty (20) or more consecutive days the Party’s time for performance shall be
extended on a day-for-day basis plus ten (10) days from the end of the Force Majeure
Events. The occurrence of Force Majeure Events shall not, however, excuse the
performance of a Party’s payment obligations under this Agreement for a period
in excess of seven (7) days.


 


15.2                           The Parties may not assign this Agreement
except with the other Party’s prior written consent or as specifically provided
herein.


 


15.3                           Unless otherwise specifically provided
herein, nothing in this Agreement, whether express or implied, shall be
construed as granting to either Party any license with regard to intellectual
property rights of the other Party.


 


15.4                           This Agreement sets forth the entire
understanding of the Parties, and supersedes and preempts all prior oral or
written understandings and agreements with respect to the subject matter
hereof. No modification, termination or attempted waiver of this Agreement
shall be valid unless in writing and signed by both parties to this Agreement.


 


12
















 


15.5                           This Agreement shall be
construed and controlled by the laws of the State of New York, without regard
to New York’s rules relating to conflicts of law, and United States federal law
applicable to patents, copyrights and trademarks, as such laws are applied to
contracts made and to be performed entirely within the State of New York. In
the event either Party brings an action to enforce its rights under this
Agreement, the prevailing Party shall be entitled to recover all reasonable
attorneys’ fees and expenses from the other Party arising out of such action.


 


15.6                           The Parties shall resolve
all disputes, controversies or differences that may arise between the Parties
in accordance with Attachment C.


 


15.7                           Each Party at its own
expense shall keep records of all C200 Systems it sells. From time to time
during regular business hours, on reasonable prior written notice, each Party
or its authorized representatives may examine the other Party’s sales records
for the C200 System.


 


15.8                           Failure by either Party to
enforce any provisions of this Agreement or any rights that may arise as a
result of breach of this Agreement by the other Party shall not be construed as
a waiver of any of its rights, nor affect the validity of this Agreement, nor
prejudice either Party as regards any subsequent action.


 


15.9                           If any court of competent
jurisdiction finds any provision of this Agreement to be unenforceable or
invalid, then the provision shall be ineffective to the extent of the court’s
finding, without affecting the enforceability or validity of this Agreement’s
remaining provisions.


 


15.10                     In making and performing this
Agreement each Party shall be deemed to be acting as an independent contractor
and shall not be deemed an employee, agent, legal representative, joint venturer
or partner of the other Party. Neither Party is authorized to bind the other to
any obligation, affirmation or commitment with respect to any other person or
entity.


 


15.11                     This Agreement and shall be deemed
executed by both Parties when any one or more counterparts hereof, individually
or taken together, bears the signatures of each of the Parties.


 


15.12                     Unless this Agreement expressly
provides that an approval, consent, waiver, acceptance, concurrence or
permission may be given or withheld in the “sole discretion” of a Party (or
words of similar import), then such Party may not unreasonably withhold, delay
or condition any approvals, consents, waiver, acceptances, concurrences and
permissions required to be given or made by any Party hereunder taking into
account relevant business and economic factors.


 


IN WITNESS WHEREOF,
the Parties have caused this Agreement to be executed in duplicate, one
executed original to be retained by each Party.


 


	
  Capstone Turbine Corporation

  	
   

  	
  UTC Power Corporation

  
	
   

  	
   

  	
   

  
	
  Name: 

  	
  Darren R. Jamison

  	
   

  	
   

  	
  Name: 

  	
  Jan van Dokkum

  
	
  Signature: 

  	
  /s/ Darren R. Jamison

  	
   

  	
   

  	
  Signature: 

  	
  /s/ Jan van Dokkum

  
	
  Title: 

  	
  President & CEO

  	
   

  	
   

  	
  Title: 

  	
  President

  
	
  Date: 

  	
  September 4, 2007

  	
   

  	
   

  	
  Date: 

  	
  September 4, 2007

  
										



 


13

















 


Attachment A


 


C200 System
Specifications


 


	
  Item

  	
   

  	
  Specification

  
	
   

  	
   

  	
   

  
	
  High Pressure Natural Gas

  	
   

  	
   

  
	
  Power Output (1)

  	
   

  	
  200kW net (+01/-10)

  
	
  Efficiency (1)

  	
   

  	
  32.5 (±2) %

  
	
  Fuel Pressure

  	
   

  	
  75 psig

  
	
   

  	
   

  	
   

  
	
  Low Pressure Natural Gas

  	
   

  	
   

  
	
  Power Output (1)

  	
   

  	
  190kW net (±10)

  
	
  Efficiency (1)

  	
   

  	
  31.0 (±2) %

  
	
  Fuel Pressure

  	
   

  	
  > 0.25 psig (7 inch WC)

  
	
   

  	
   

  	
   

  
	
  All Configurations

  	
   

  	
   

  
	
  Fuel Type

  	
   

  	
  Natural Gas or ADG

  
	
  Fuel Heat Content

  	
   

  	
  36 to 42 MJ/m3

  (970 to 1,130 BTU/scf) HHV

  
	
  Electrical Configuration

  	
   

  	
  Grid Connect and Stand Alone

  
	
  Electrical Output

  	
   

  	
  480V, 60 Hz, 3 ph

  
	
  Exhaust Gas Temperature (1)

  	
   

  	
  ~ 275°C (527°F)

  
	
  Exhaust Gas Mass Flow (1)

  	
   

  	
  ~1.3 kg/s (2.9 lb/s)

  
	
  Exhaust Emissions (1)

  	
   

  	
  NOx < 9 ppmV @ 15% O2

  
	
  Package Height

  	
   

  	
  < 2.9 m (9.6 ft)

  
	
  Package Footprint

  	
   

  	
  < 7.5 m2 (81 ft2)

  
	
  Weight

  	
   

  	
  < 3,000 kg (6,614 lbs) Grid Connect

  < 4,900 kg (10,800 lbs) Standalone

  
	
  Sound

  	
   

  	
  < 68 dBA @ 10 m (33 ft)

  
	
  Certifications (2)

  	
   

  	
  UL1741

  UL2200

  CARB 2007

  



 






(1) Specifications given at ISO Conditions
(15°C / 59°F at sea level)


(2) CARB2007 version available combined with 80% heat recovery system


 


14

















 


Attachment B


 


Payment
Milestones


 


	
  Milestone

  	
   

  	
  Deliverable

  	
   

  	
  Payment

  	
   

  	
  ECD

  	
   

  
	
  Contract Signing

  	
   

  	
  Signed
  Agreement to Start

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  Upon
  contract signing

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  System Requirements Review

  	
   

  	
  C200 System
  Requirements Specification C200 System Architecture Specification Review
  Charts Review Minutes (actions included All Program Task Sheets, agreed upon
  pursuant to Section 3.4 of the Agreement)

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  11/19/2007

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preliminary Design Review

  	
   

  	
  Preliminary
  System Demonstration Engine Performance Model (Baseline Review Charts Review
  Minutes (actions included)

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  2/29/2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Critical Design Review

  	
   

  	
  C200 System
  Qualification Plan C200 Package Qualification Plan C200 System ATP
  Specification Prototype System and Package C200 Product Datasheet
  (Preliminary C200 Product Specification (Preliminary C200 System Price List
  (Preliminary C200 O&I Drawings (Preliminary Review Charts Review Minutes
  (actions included)

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  5/30/2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MicroTurbine Build Complete

  	
   

  	
  Physical
  Verification Delivery of one (1 complete C200 System to UTCP)

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  8/31/2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Qualification Results

  	
   

  	
  C200 System
  Qualification Report - including CARB and UL test results that demonstrate
  the C200 System’s ability to receive CARB 2007 Certification. C200 Package
  Qualification Report Engine Performance Model (Final C200 Preventive
  Maintenance Schedule Review Charts Review Minutes (actions included)

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  12/1/2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
  $

  	
  12,000,000

  	
   

  	
   

  	
   

  



 






	
  1.

  	
   

  	
  ECDs are
  target dates only. Capstone will receive payments in connection with
  providing Deliverables and invoicing for completed milestones.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  UTCP shall
  have its assigned program manager or approved alternate present at the
  technical reviews for each milestone to audit program deliverables. The
  milestone shall be deemed completed upon written notice by Capstone to UTCP
  and UTCP’s written approval. UTCP’s written approval shall not be
  unreasonably withheld.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Capstone
  will invoice UTCP for the dollar amount specified at the completion of each
  milestone.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Payment is
  due upon complete delivery of each item required by the milestone and receipt
  of an invoice.

  



 


15

















 


Attachment C


 


Dispute
Resolution Procedures


 


Level 1 Dispute Review.
Upon the written request of either party, UTCP and Capstone shall each appoint
a designated representative whose task shall be to meet the other party’s
designated representative (by conference telephone call or in person at a
mutually agreeable site) in an endeavor to resolve any Dispute (“Level 1
Dispute Review”). The designated representatives shall meet as often as the
parties reasonably deem necessary to discuss the Dispute and negotiate in good
faith in an effort to resolve the Dispute without the necessity of any formal
proceeding. Such Level 1 efforts may include discussion of the Dispute at a
regular or ad hoc Project Meeting for the purpose of resolving such Dispute.


 


Level 2 Dispute Review.
If resolution of the Dispute cannot be resolved within the earlier of (a)
fifteen (15) days of the first Level 1 Dispute Review meeting and (b) such time
as when either party gives the other notice of an impasse (“Level 1 Dispute
Termination Date”), the designated executive of UTCP will meet with the
designated executive of Capstone (by conference telephone call or in person at
a mutually agreeable site) within 72 hours after the Level 1 Dispute
Termination Date for the purpose of resolving such unresolved Dispute (“Level
2 Dispute Review”).


 


Arbitration.                             (a)
If the parties are unable to resolve the Dispute within a thirty (30) days
after commencement of the Level 2 Dispute Review, either party may give the
other party notice of the existence of a continuing impasse (the date on which
both parties are in receipt of such notice, the “Level 2 Dispute Termination
Date”) and shall thereafter immediately submit the Dispute to binding
arbitration in accordance with the following provisions of this Exhibit,
regardless of the amount in controversy or whether such Dispute would otherwise
be considered justifiable or ripe for resolution by a court or arbitration
panel.


 


(b)                                 Any such arbitration
shall be conducted by the American Arbitration Association (“AAA”) in
accordance with its current Commercial Arbitration Rules (the “AAA Rules”),
except to the extent that the AAA Rules conflict with the provisions of this
Attachment, in which event the provisions of this Attachment shall control.


 


(c)                                  Unless otherwise
agreed by the parties, the arbitration panel (the “Panel”) shall consist
of three neutral arbitrators (“Arbitrators”), each of whom shall be an
attorney having five or more years experience in the primary area of law as to
which the Dispute relates, and shall be appointed in accordance with the AAA
Rules (the “Basic Qualifications”); except if the amount in controversy
is less than One Million Dollars (US) ($1,000,000.00) the Panel shall consist of
one Arbitrator.


 


(d)                                 Should an Arbitrator
refuse or be unable to proceed with arbitration proceedings, a substitute
Arbitrator possessing the Basic Qualifications shall be appointed by the AAA.
If an Arbitrator is replaced after the arbitration hearing has commenced, then
a rehearing shall take place in accordance with the provisions of this
Attachment and the AAA Rules.


 


(e)                                  The arbitration shall
be conducted in Chatsworth, California.


 


(f)                                    The Panel may in
its discretion order a pre-exchange of information including production of
documents, exchange of summaries of testimony or exchange of statements of
position and shall schedule promptly all discovery and other procedural steps
and otherwise assume case management initiative and control to effect an efficient
and expeditious resolution of the Dispute.


 


(g)                                 At any oral hearing of
evidence in connection with any arbitration conducted pursuant to this Exhibit,
each party and its legal counsel shall have the right to examine its witnesses
and to cross-examine the witnesses of the other party. No testimony of any
witness shall be presented in written form unless the opposing parties shall
have the opportunity to cross-examine such witness, except as the parties
otherwise agree in writing and except under extraordinary circumstances where,
in the opinion of the Panel, the interests of justice require a different
procedure.


 


16

















 


(h)                                 Within fifteen (15)
days after the closing of the arbitration hearing, the Panel shall prepare and
distribute to the parties a written award. The Panel shall have the authority
to award any remedy or relief that a court of competent jurisdiction could
order or grant, and shall award interest on any monetary award from the date
that the loss or expense was incurred by the successful party. In addition, the
Panel shall have the authority to decide issues relating to the interpretation,
meaning or performance of the Agreement, any agreement, certificate or other
document referred to herein or delivered in connection herewith, or the
relationships of the parties hereunder or thereunder, even if such decision
would constitute an advisory opinion in a court proceeding or if the issues
would otherwise not be ripe for resolution in a court proceeding, and any such
decision shall bind the parties in their performance of the Agreement and such
other documents.


 


(i)                                     Except as
necessary in court proceedings to enforce this arbitration provision or an
award rendered hereunder, to obtain interim relief, or as otherwise required by
law, neither the parties nor any arbitrator shall disclose the existence,
content or results of any arbitration conducted hereunder without the prior
written consent of the other parties.


 


(j)                                     To the extent that
the relief or remedy granted in an award rendered by the Panel is relief or a
remedy on which a court could enter judgment, a judgment upon the award
rendered by the Panel may be entered in any court having jurisdiction thereof.
Otherwise, the award shall be binding on the parties in connection with their
obligations under the Agreement and in any subsequent arbitration or judicial
proceedings among any of the parties.


 


(k)                                  The parties agree to
share equally the cost of any arbitration, including the administrative fee, the
compensation of the arbitrators and the costs of any neutral witnesses or proof
produced at the direct request of the Panel.


 


Recourse to Courts and Other Remedies.
Notwithstanding the Dispute resolution procedures contained in this Attachment,
any party may apply to any court having jurisdiction (a) to enforce the
Agreement to arbitrate, (b) to seek injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the Dispute is otherwise
resolved, (c) to avoid the expiration of any applicable limitation period, (c)
to protect Confidential Information, or (d) to preserve a superior position
with respect to other creditors.


 


17

















 


Attachment D


 


In-Kind
Engineering Services


 


	
  Service

  	
   

  	
  Deliverable

  	
   

  	
  Task Description

  	
   

  	
  Cost Estimate

  	
   

  
	
  Casting Support

  	
   

  	
  Advice and
  support for casting activity to support 40,000 hrs Life Requirement.

  	
   

  	
  Provide
  consultation/advice from casting engineer/expert in the development of 5
  components – turbine rotor, turbine nozzle, bearing supports and generator
  housing. Work with suppliers and provide input to develop key component
  characteristics, e.g. grain size, stress rupture strength as required. Assist
  in qualifying supplier to produce quality components. Review supplier
  processes and their material data for acceptability. Make recommendations for
  additional material testing/qualification to ensure component meets
  durability requirements and consistent casting process output.

  	
   

  	
  $

  	
  110,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Compressor Analysis

  	
   

  	
  Structural
  and Thermal Analysis including: Transients Clearance Analysis including
  Transients Vibration Analysis Life Analysis including Fracture Mechanics as
  Required

  	
   

  	
  Provide
  structural and thermal analysis of the compressor rotor and shaft under
  steady state and transient conditions. Determine acceptability of: clearance
  during transients, component vibratory response, component life and fracture
  mechanics life. Capstone to provide first pass geometry and thermal analyses.
  Review compressor material data with respect to UTC material database to
  provide a broader statistical basis for the design. Produce review to reduce
  program risk. Investigate sensitivity of component life and clearances to
  secondary flow schemes per the performance modeling task.

  	
   

  	
  $

  	
  168,000.00

  	
   

  



 


18

















 


	
  Service

  	
   

  	
  Deliverable

  	
   

  	
  Task Description

  	
   

  	
  Cost Estimate

  	
   

  
	
  Turbine Analysis

  	
   

  	
  Structural
  and Thermal Analysis including Transients Clearance Analysis including
  transients Vibration Analysis Life Analysis including Fracture Mechanics as
  Required

  	
   

  	
  Provide
  structural and thermal analysis of the turbine rotor under steady state and
  transient conditions. Determine acceptability of: clearance during
  transients, component vibratory response, component life and fracture
  mechanics life. Capstone to provide first pass geometry and thermal analyses.
  Review turbine rotor material data with respect to UTC material database to
  provide a broader statistical basis for the design. Provide thorough review
  to reduce program risk. Investigate sensitivity of component life and
  clearances to secondary flow schemes per the performance modeling task.

  	
   

  	
  $

  	
  165,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Materials

  	
   

  	
  Review of
  engine materials utilizing the UTC Materials Database for acceptance to
  40,000 hr and 80,000 hr design life targets. Review and Recommend inspection
  methods and surface treatments, e.g., shot peening & coating to assure
  component integrity and Damage Tolerance is met.

  	
   

  	
  Review the
  C200 materials with respect to the UTC material database to better define
  material characteristics, property statistical variation, etc. Make
  suggestions for improved material properties and statistical control. Make
  recommendations for, and help develop processes including but not limited to
  surface treatments, coatings, and heat treatment to improve component
  durability. Recommend process changes to reduce turbine rotor porosity.
  Recomment inspection techniques for the turbine casting to reduce the risk of
  durability problems stemming from casting porosity or defects.

  	
   

  	
  $

  	
  132,000.00

  	
   

  



 


19

















 


	
  Service

  	
   

  	
  Deliverable

  	
   

  	
  Task Description

  	
   

  	
  Cost Estimate

  	
   

  
	
  Performance Modeling

  	
   

  	
  Support
  Aerodynamic/thermody namic modeling and engine validation testing

  	
   

  	
  Capstone to
  provide cycle model. Model will be exercised to understand C200 operational
  characteristics and to evaluate Capstone provided changes to the cooling flow
  levels, paths, or sealing schemes. Model output to be used in the thermal
  modeling tasks to investigate sensitivity to secondary flow schemes on
  operation and durability.

  	
   

  	
  $

  	
  110,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Approved Supplier List

  	
   

  	
  List of
  approved suppliers and the ability to procure under the umbrella of UTCs
  master purchase agreements.

  	
   

  	
  Review Capstone
  supply base requirements and evaluate opportunities for use of UTC supply
  base. Identify opportunities for consolidated purchasing with UTC under UTC
  master purchase agreements.

  	
   

  	
  $

  	
  20,000.00

  	
   

  



 


20

















 


Attachment E


 


In-Kind Test
Services


 


	
  Test

  	
   

  	
  Deliverable

  	
   

  	
  Task Description

  	
   

  	
  Cost Estimate

  	
   

  	 

	
  System Performance

  	
   

  	
  Performance
  for system integration - Report containing system
  performance including ambient temperature, ambient pressure, air flow,
  exhaust flow, exhaust temperature, and system power over an ambient
  temperature range. 

   

  Performance
  at Cold/Altitude Test — Report containing system performance including
  ambient temperature, ambient pressure, air flow. exhaust flow, exhaust
  temperature, and system power over at —20 C to 10 C; altitude to 1000 m

  	
   

  	
  Perform data
  acquisition for UTC Power system integration.

   

   

   

   

  Obtain a
  performance data point at a UTC owned or contracted facility that simulates
  cold weather and altitude (to 1000m operation. C200 unit not attached to
  PureComfort( system)

  	
   

  	
  $

   

   

   

   

   

  	
   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

  $

  	
  0

   

   

   

   

   

   

   

   

   

   

  17,600.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Package Acoustic Testing

  	
   

  	
  Report that
  characterizes sound pressure level.

  	
   

  	
  Obtain sound
  pressure at 1m and 10m as measured per ANSI methods.

  	
   

  	
  $

  	
  8,800.00

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Package Shipping

  	
   

  	
  Report
  evaluating the ability of C200 system packaging to withstand transportation
  vibration levels without sustaining damage.

  	
   

  	
  Conduct a
  vibration test simulating exposure to transportation vibration loads.
  Vibration table must be capable of testing a C200 unit in its shipping
  container. C200 unit does not have to be operating during the test. Capstone
  will provide the shipping vibration test spectrum.

  	
   

  	
  $

  	
  60,000.00

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Reliability Demonstration

  	
   

  	
  Reliability
  Demonstration data

  	
   

  	
  Operate 5000
  hours. Maintain log book of all service and faults. Record operating data in
  CRMS. UTCP’s performance of this task is contingent upon Capstone’s delivery
  to UTCP of one (1) complete C200 System, for this purpose.

  	
   

  	
  $

  	
  38,500.00

  	
   

  	 

												



 


21

















 


Attachment F


 


Bo Halamandaris

Program Manager, C200 Development

Capstone Turbine Corporation


 


Libby Reynolds

Vice President and Chief Accounting Officer

Capstone Turbine Corporation


 


George Hirko

Program Management or Engineering


 


John Fox

Business Level Employee


 


22

















 


Attachment G


 


UTC/Capstone In-Kind Support


 


Program Task Sheet


 


Capstone
Turbine Corp • 21211 Nordhoff Street • Chatsworth • CA
91311 •
USA

Main: (818) 734-5300 • Fax: (818) 734-5321


 


	
  Task Scope Description:

  
	
   

  
	
  Performing Organization:

  
	
   

  
	
  Deliverables:

  
	
   

  
	
  Acceptance Criteria:

  
	
   

  
	
  ECD:

  	
  Budget:

  
	
   

  	
   

  
	
  Other:

  	
   

  
	
   

  	
   

  
	
  Capstone Designee:

  Program:

   

  Officer

  	
  UTC Designee:

  Program:

   

  Officer

  



 


This information is proprietary to Capstone Turbine Corporation. Neither
the information contained herein shall be copied, disclosed to others, or used
for any purposes other than the specific purpose for which this document was
delivered. Capstone reserves the right to change or modify without notice the
design, the product specifications, and/or the contents of this document
without incurring any obligation either with respect to equipment previously
sold or in the process of construction.


 


23

















 


Attachment H


 


	
  Item

  	
   

  	
  Third
  Party Agreement:

  	
   

  	
  Description
  of the Third Party Data and information relevant to the development of the
  C200 System (including information on form, fit and function) which shall be
  deposited in the Escrow Account:

  
	
  1.

  	
   

  	
  August 2, 2000 — Amended and Restated
  License Agreement and August 2, 2000 — Transition Agreement with Solar
  Turbines, Incorporated.

  	
   

  	
  •                  Agreement
  to license recuperator core technology from Solar Turbine Incorporated for
  manufacture, use, and sale by Capstone Turbine Corporation in microturbine
  products.  

  •                  Licensed
  technology includes at least the fin fold, cell stacking, and annular design
  features as well as the manufacturing techniques.  

  •                  Capstone
  shall deposit in the Escrow Account data related to the performance of the
  recuperator module, which shall include flow rate, pressure drop, and thermal
  effectiveness.

  



 


24