Patent License Agreement 3/31/98

CONFIDENTIAL TREATMENT
AMERICAN SUPERCONDUCTOR CORPORATION HAS
REQUESTED THAT THE MARKED PORTIONS OF THIS
DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED


PATENT LICENSE AGREEMENT


BETWEEN


LUCENT TECHNOLOGIES INC.


AND


AMERICAN SUPERCONDUCTOR CORPORATION


EFFECTIVE AS OF MARCH 31, 1998


RELATING TO SUPERCONDUCTIVE WIRE PRODUCTS
AND RELATED SYSTEMS 2
PATENT LICENSE AGREEMENT


TABLE OF CONTENTS


ARTICLE 1 - GRANTS OF LICENSES.......................................1
1.01 Grant..............................................1
1.02 Duration...........................................1
1.03 Scope..............................................1
1.04 Ability to Provide Licenses........................2
1.05 Publicity..........................................3
1.06 Confidentiality....................................3


ARTICLE 2 - ROYALTY AND PAYMENTS.....................................4
2.01 Royalty Calculation................................4
2.02 Accrual............................................5
2.03 Exclusions and Limitations.........................5
2.04 Records and Adjustments............................6
2.05 Reports and Payments...............................6


ARTICLE 3 - TERMINATION..............................................7
3.01 Breach.............................................7
3.02 Voluntary Termination..............................9
3.03 Survival...........................................9


ARTICLE 4 - MISCELLANEOUS PROVISIONS.................................9
4.01 Patents Licensed...................................9
4.02 Disclaimer........................................10
4.03 Indemnification...................................10
4.04 Nonassignability and Change of Control of ASC.....10
4.05 Addresses.........................................12
4.06 Taxes.............................................12
4.07 Choice of Law.....................................12
4.08 Patents and Patent Applications...................13


4.09 Licensing.........................................13
4.10 Integration.......................................13
4.11 Dispute Resolution................................13
4.12 Outside of the United States......................14
4.13 Releases..........................................15
4.14 Good Faith Negotiations and Option................15


i 3
PATENT LICENSE AGREEMENT


Effective as of March 31, 1998, LUCENT TECHNOLOGIES INC., a Delaware corporation ("LUCENT"), having an office at 600 Mountain Avenue, Murray Hill, New Jersey 07974, and AMERICAN SUPERCONDUCTOR CORPORATION, a Delaware corporation ("ASC"), having an office at Two Technology Drive, Westborough, Massachusetts 01581, agree as follows:*


ARTICLE 1


GRANTS OF LICENSES


1.01 GRANT


LUCENT grants to ASC under LUCENT's PATENTS personal, nonexclusive and nontransferable licenses to make, to have made, use, lease, offer for sale, sell and import products of the following kind:


SUPERCONDUCTIVE WIRE PRODUCT
SUPERCONDUCTIVE WIRE WITHIN A SYSTEM
SYSTEMS PRODUCTS INCLUDING SUPERCONDUCTIVE WIRE PRODUCT


1.02 DURATION


All licenses granted herein under any patent shall continue for the entire unexpired term of such patent.


1.03 SCOPE


(a) Licenses granted herein are not to be construed either (i) as consent by LUCENT to any act which may be performed by ASC, except to the extent impacted by a patent licensed herein to ASC, or (ii) to include licenses to contributorily infringe or induce infringement under U.S. law or a foreign equivalent thereof. As a result, the licenses granted herein to the ASC are licenses to (i) make, have made, use, lease, offer for sale, sell and import LICENSED PRODUCTS; (ii) make, have made, use and import machines, tools, materials and other instrumentalities, insofar as such machines, tools, materials and other instrumentalities are involved in or incidental to the development, manufacture, testing or repair of LICENSED PRODUCTS which are


- --------


* ANY TERM IN CAPITAL LETTERS WHICH IS DEFINED IN THE DEFINITIONS APPENDIX SHALL HAVE THE MEANING SPECIFIED THEREIN.


2 4 or have been made by or are used, leased, owned, sold or imported by the grantee of such license; and (iii) convey to any customer of the grantee, with respect to any LICENSED PRODUCTS which is sold or leased by such grantee to such customer, rights to use and resell such LICENSED PRODUCTS as sold or leased by such grantee (whether or not as part of a larger combination); provided, however, that no rights may be conveyed to customers with respect to any invention which is directed to (1) a combination of such LICENSED PRODUCTS (as sold or leased) with any other product; however, nothing herein shall prohibit ASC from selling or delivering to third parties any LICENSED PRODUCTS made by ASC and licensed under this Agreement, (2) a method or process which is other than the inherent use of such LICENSED PRODUCTS itself (as sold or leased), or (3) a method or process involving the use of LICENSED PRODUCTS to manufacture (including associated testing) any other product. ASC customers, however, shall have the right to service and test LICENSED PRODUCTS, but such right does not include any rights or licenses to any patents of LUCENT, including but not limited any rights to make, have made, offer for sale, import, use or sell products that go to combinations of LICENSED PRODUCTS. The rights granted herein to ASC under this Agreement do not include licenses for products manufactured by a third party and sold by a Party to this Agreement where such sales do not meet a legitimate business purpose but are merely for the purpose of sublicensing LUCENT's PATENTS to such third party.


(b) The grant of each license hereunder includes the right of ASC to grant sublicenses within the scope of such license to ASC's SUBSIDIARIES for so long as they remain its SUBSIDIARIES. Any such sublicense may be made effective retroactively, but not prior to the effective date hereof, nor prior to the sublicensee becoming a SUBSIDIARY of ASC. If ASC is at least a minority owner, but not less than a thirty percent (30%) owner, of an entity in a foreign country where majority ownership by ASC is prohibited by law and ASC has control and management of said entity, then LUCENT shall reasonably consider all requests by ASC that such entity be considered a SUBSIDIARY hereunder. All such requests must be in writing from ASC to LUCENT.


1.04 ABILITY TO PROVIDE LICENSES


LUCENT's failure to meet any obligation hereunder, due to the assignment of title to any invention or patent, or the granting of any licenses, to the United States Government or any agency or designee thereof pursuant to a statute or regulation of, or contract with, such Government or agency, shall not constitute a breach of this Agreement. As of the execution date, LUCENT is unaware of any governmental claims to the patents licensed by this Agreement.


3 5 1.05 PUBLICITY


Nothing in this Agreement shall be construed as conferring upon ASC or its SUBSIDIARIES any right to include in advertising, packaging or other commercial activities related to a LICENSED PRODUCT, any reference to LUCENT (or any of its SUBSIDIARIES), its trade names, trademarks or service marks in a manner which would be likely to cause confusion or to indicate that such LICENSED PRODUCT is in any way certified by LUCENT or its SUBSIDIARIES.


1.06 CONFIDENTIALITY


(a) Both Parties shall hold the financial terms and conditions of this Agreement in confidence. Notwithstanding the foregoing, the confidentiality restrictions of this Agreement shall not apply to any information:


(i) lawfully received by a Party to this Agreement from another
source having the right to so furnish such information; or


(ii) after it has become generally available to the public without
breach of this Agreement by either Party to this Agreement; or


(iii) which the Parties agree in writing is free of such
restrictions;


(iv) which is necessary pursuant to any court order and where the
non-disclosing Party has been given notice of such an order;


(v) which must be disclosed as required by rules of the Security
Exchange Commission, but only to the extent that ASC has
provided LUCENT with the opportunity, at least ten (10) days
prior to ASC's initial EDGAR filing of the Agreement, to
designate the terms and conditions of the Agreement for which
LUCENT proposes confidential treatment in the filing, and
where ASC has made its initial EDGAR filing in accordance with
LUCENT's proposal, and ASC uses reasonable efforts to obtain
and to keep confidential treatment of the terms and conditions
designated by LUCENT;


(vi) which ASC discloses to its development partner, Pirelli Cavi e
Sistemi, S.p.A., an Italian Corporation having an office at
Viale Sarca 222, 20126 Milano, Italy and its wholly owned
subsidiaries ("Pirelli") pursuant to a confidentiality
agreement between ASC and Pirelli that is similar in scope to
this Section 1.06; or


4 6
CONFIDENTIAL TREATMENT
AMERICAN SUPERCONDUCTOR CORPORATION HAS
REQUESTED THAT THE MARKED PORTIONS OF THIS
DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED


(vii) ASC, BTG USA, Inc. and LUCENT shall be permitted to disclose
to raw material vendors that LUCENT provides ASC with a [**]
for using raw material vendors that are licensed for such
materials and processes covered under LUCENT's PATENTS.


ARTICLE 2


ROYALTY AND PAYMENTS


2.01 ROYALTY CALCULATION


(a) ASC will pay an initial licensing fee of [**] U.S.) due on the effective date hereto, but payable in two (2) parts. The first part of the initial payment in the amount of [**] U.S.) is due within the later of twenty-four (24) hours or the next business day of execution by the last party of this Agreement. As to this first part of the initial payment, time is of the essence; and the agreement will have no effect if such payment is not made within the twenty-four (24) hour time noted above. The second part of the initial payment in the amount of [**] U.S.) is due no later than August 31, 1998. As to this second part of the initial payment, time is of the essence; and this Agreement will automatically terminate on September 1, 1998 if such payment is untimely. The initial payment of [**] U.S.) is irrevocable and non-refundable.


(b) Continuing royalties shall be payable to LUCENT at the rate of [**] on all [**] which is sold, leased, or put into use by ASC, or any of its SUBSIDIARIES [**]. Such royalty rate shall be applied, except as otherwise provided in this Article 2, to the FAIR MARKET VALUE of such [**].


(c) Continuing royalty payments under Section 2.01(b) are due and payable [**] for all LICENSED PRODUCTS sold, leased or put into use after [**].


5 7
CONFIDENTIAL TREATMENT
AMERICAN SUPERCONDUCTOR CORPORATION HAS
REQUESTED THAT THE MARKED PORTIONS OF THIS
DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED


(d) If LUCENT loses the [**] and exhausts or chooses not to file appeals during the time period from the date of this Agreement to [**], then ASC will be credited [**] U.S.) only against future royalties due during the time period from [**] until [**]. If LUCENT loses the [**] and exhausts or chooses not to file appeals after [**], then ASC will be credited [**] U.S.) in the subsequent five (5) year period thereafter only against future royalties. If ASC incurs no future royalty obligation or less than the credited amount of [**] U.S.), then it forfeits the credit or balance of said credit. In no circumstance will LUCENT make a payment to ASC pursuant said credit provided by this Section 2.01(d).


(e) If ASC purchased its raw materials for the LICENSED PRODUCTS hereunder from a LICENSEE OF LUCENT, ASC shall have to pay a [**] royalty rate of [**] under Section 2.01(b) for the sale of LICENSED PRODUCTS made from raw materials purchased from a LICENSE OF LUCENT.


2.02 ACCRUAL


(a) Royalty shall accrue on any LICENSED PRODUCT [**] and shall become payable upon the first sale, lease or putting into use of such LICENSED PRODUCT. (Rebuilding or enlarging any product shall be deemed to be a first putting into use of such product to the extent [**] is [**] or [**] or where any [**] is [**] and [**] is not due to expected and normal product life wear. Testing of LICENSED PRODUCT by on or behalf of ASC shall not be deemed putting into use). Obligations to pay accrued royalties shall survive termination of licenses and rights pursuant to Article 3 and the expiration of any patent.


(b) When a company ceases to be a SUBSIDIARY of ASC, royalties which have accrued with respect to any products of such company, but which have not been paid, shall become payable with ASC's next scheduled royalty payment.


(c) Notwithstanding any other provisions hereunder, royalty shall accrue and be payable only to the extent that enforcement of ASC's obligation to pay such royalty would not be prohibited by applicable law.


2.03 EXCLUSIONS AND LIMITATIONS


(a) A LICENSED PRODUCT of one or more of LUCENT's PATENTS, may be treated by ASC as not licensed and not subject to royalty with respect to sales of such LICENSED PRODUCT if the purchaser is licensed under the same one or more


6 8 patents to have said LICENSED PRODUCT made and/or imported, and the purchaser advises ASC, in writing at or prior to the time of such sale, that it is exercising its own license under such one or more patents with respect to such manufacture and/or importation.


(b) Subject to the exhaustion principle, payment of a royalty shall be due for any LICENSED PRODUCT manufactured, used, sold, put into use or imported by ASC or its SUBSIDIARIES even though such LICENSED PRODUCT may incorporate materials or components, which materials or components are (i) covered by one or more claims of LUCENT's PATENTS and (ii) purchased by ASC or its SUBSIDIARIES from a third party having a license to LUCENT's PATENTS.


2.04 RECORDS AND ADJUSTMENTS


(a) ASC shall keep full, clear and accurate records with respect to all LICENSED PRODUCTS and shall furnish any information which LUCENT may reasonably prescribe from time to time to enable LUCENT to ascertain the proper royalty due hereunder on account of products sold, leased and put into use by ASC or any of its SUBSIDIARIES. ASC shall retain such records with respect to each LICENSED PRODUCT for at least seven (7) years from the sale, lease or putting into use of such LICENSED PRODUCT. LUCENT shall have the right through its accredited auditors to make an examination by giving ASC thirty (30) days written notice, during normal business hours, of all records and accounts bearing upon the amount of royalty payable to it hereunder. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such examination. All such information reviewed will be treated as confidential by LUCENT and its auditors in accordance with Section 1.06 of this Agreement.


(b) Independent of any such examination, LUCENT will credit to ASC the amount of any overpayment of royalties made in error which is identified and fully explained in a written notice to LUCENT delivered within twelve (12) months after the due date of the payment which included such alleged overpayment, provided that LUCENT is able to verify, to its own satisfaction, the existence and extent of the overpayment.


(c) No refund, credit or other adjustment of royalty payments shall be made by LUCENT except as provided in this Section 2.04 and Sections 2.01(d) and (e) of this Agreement. Rights conferred by this Section 2.04 shall not be affected by any statement appearing on any check or other document, except to the extent that any such right is expressly waived or surrendered by a party having such right and signing such statement.


7 9
CONFIDENTIAL TREATMENT
AMERICAN SUPERCONDUCTOR CORPORATION HAS
REQUESTED THAT THE MARKED PORTIONS OF THIS
DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED


2.05 REPORTS AND PAYMENTS


(a) [**] and at all times thereafter, that within sixty (60) days after the end of each semiannual period ending on June 30th or December 31st, commencing with the semiannual period during which this Agreement first becomes effective, ASC shall furnish to LUCENT at the address specified in Section 4.03 a statement certified by a responsible official of ASC showing in a manner acceptable to LUCENT:


(i) all LICENSED PRODUCTS which were sold, leased or put into use
during such semiannual period;


(ii) the FAIR MARKET VALUES of all [**] or [**] LICENSED PRODUCTS;
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