Joint Technology Development Agreement

JOINT TECHNOLOGY DEVELOPMENT AGREEMENT

THIS JOINT TECHNOLOGY DEVELOPMENT AGREEMENT (the " Agreement" ) is made and entered into this 30th day of August, 2002, by and among the following:

Lennox International, Inc ., having its principal place of business at 2140 Lake Park Blvd., Richardson, TX 75080-2254 (" Lennox" );

Outokumpu Oyj , a Finnish company, having its principal place of business at Riihitontuntie 7 A, P.O. Box 144, FIN-02201 Espoo, Finland (" Outokumpu" );

A World-wide Heat Transfer Joint Venture consisting of: Outokumpu Heatcraft USA LLC ., a Delaware limited liability company (" Heat-Transfer-US" ), and Outokumpu Heatcraft B.V. , a Dutch company (" Heat-Transfer-Europe" ), and collectively the " Heat-Transfer-JV" ; and

Advanced Heat Transfer LLC. , a Delaware limited liability company (" HTX Tech JV" ).

This Agreement is entered into under the following circumstances:

A. Outokumpu and Lennox have created and jointly own the HTX Tech JV for the purpose of conducting the development of technology to provide advanced heat transfer solutions to the Heat-Transfer-JV and to the members of HTX Tech JV (Outokumpu and Lennox), and to be the worldwide authority and technology leader in the heat transfer industry, all for the purpose of providing technology to be used for the development of improved engineering technology, product technology and manufacturing processes for the development of products for commercial application that conform to the Strategic Application Area (as hereinafter defined) (" Products" ) and as provided for in the Strategic Filter attached hereto as Exhibit " A" (the " Strategic Filter" ) with the intention that the activities of the HTX Tech JV benefit Outokumpu, Lennox and the Heat-Transfer-JV equally;

B. Lennox, Outokumpu, Heat-Transfer-JV and HTX Tech JV desire to work together to jointly develop new and unique technology to be used in heat transfer components for products that conform to the Strategic Application Area, as well as improved engineering technology, product technology and manufacturing processes related thereto (" Technology" ); and

C. The parties also desire to provide for the ownership and licensing of the technology related to the Projects (as hereinafter defined) and to establish the ownership of the Technology that is developed in the course of completing the conduct of the Projects.

NOW, THEREFORE, in consideration of these premises and the mutual covenants contained herein, the parties hereto, intending to be legally bound, agree as follows:

1. Obligations of the Parties.

A. The purpose of this Agreement is to set forth the mutual obligations of the parties with respect to the conduct of the development activities for the development of Products and to provide


for the ownership and licensing of Technology. The parties acknowledge that it is only possible to describe the general process by which Technology may be developed, and that the parties shall confer the authority for the management and oversight of these activities to the Board of Directors of the HTX Tech JV (the " Board" ) in order to achieve the objectives hereof. The parties agree that they shall be obligated, subject to all of the terms and conditions of this Agreement, to proceed with reasonable efforts in good faith to fulfill the purposes hereof. The parties further agree that the development activity will be principally carried out in the form of separate projects, each submitted, selected and conducted under the terms of this Agreement (the " Projects" ). Pursuant to this Agreement, the parties agree to: i. commit necessary available resources, work together and share technology, equipment and other resources, in order to develop new and unique technology within the Strategic Application Area. The parties agree that any resources within the said area, which are requested by the HTX Tech JV, will be provided, if reasonably available with accommodation to the needs of the contributing organization. If there is a dispute regarding the availability of the resources, the parties will negotiate in good faith to resolve such dispute and if they fail, the dispute will be referred to the Chief Executive Officers of the parties for resolution. The parties will be reasonably compensated for any resources made available to the HTX Tech JV pursuant to this Paragraph i in accordance with the terms of the applicable Project Agreement or, if there is not an applicable Project Agreement, pursuant to the terms of a separate written agreement.
ii. make available for review and to license, if requested, the use of any Intellectual Property (as hereinafter defined) of the party to the HTX Tech JV that has possible application within the Strategic Application Area, unless such contributing party deems such Intellectual Property to give it a strategic competitive advantage that would be lost by the licenses contemplated by this Agreement in which case such party may, acting reasonably, refuse to make such Intellectual Property available under this Agreement. The initial license of such Intellectual Property for development purposes and any subsequent license thereof for commercialization purposes shall be in accordance with Section 8 of this Agreement.
iii. appoint members to the Board as specified in the Restated LLC and Members Agreement to serve. It being further understood and agreed that the members of the Board will be selected with consideration of their training, experience and other attributes so as to be those individuals best qualified to serve in this capacity. It is further agreed that the members of the Board will undertake their actions in this capacity so as to advance the strategic objectives of the HTX Tech JV as specified above, but with due regard to the interests of the party which appointed them.
iv. subject to any contractual obligations any party may have towards any third party, submit to the HTX Tech JV any development project which it proposes to undertake that falls within the Strategic Application Area, provided however, and to the extent possible under any agreements with above referred third parties, each party will submit projects under such agreement to the HTX Tech JV pursuant to this Agreement.


B. In order to administer the development activities under this Agreement, the Board is designated to make the decisions and to exercise the authority granted herein to determine programs and strategies to expedite the conduct of the Projects hereunder. The Board will take the following actions to consider and approve projects for the HTX Tech JV:

i. The Board will adopt a set of strategic criteria which will guide the activities of the HTX Tech JV, the initial form of which is the Strategic Filter attached hereto as Exhibit " A" . The Strategic Filter specifies the threshold product and/or service field(s) of use to which the research and development activities of any Project must relate (the " Strategic Application Area" ) before a proposed Project will be considered by the Board and the criteria that will be used to evaluate the relative merit of each project in order to guide the Board in its selection. The Strategic Application Area will also be used to determine when the parties must submit such Projects to the HTX Tech JV for its consideration (as provided above). The Strategic Filter will be reviewed at least annually and modified as necessary.

ii. The Board shall approve and prioritize selected Projects based on the application of the Strategic Filter on the following basis:

(a) Unanimous approval will be required for the determination of or changes to the Strategic Filter, selection and conduct of a project outside the Strategic Filter, and any Project involving a competitor of any party; (b) The approval of 75% of the parties eligible to vote will be required for any Project with a budget in excess of 30% of the total available resources of the HTX Tech JV, or of any resource the limitation of which will adversely impact the HTX Tech JV, for the equivalent period or any Project that will result in Intellectual Property (as hereinafter defined) created by the Project being owned by a party other than a party to this Agreement; and (c) The approval of a majority of the parties eligible to vote will be required for any other project considered by the Board.

iii. The Board will establish a schedule for meetings, at least semi-annually, for the review of Projects that are proposed, at the call of the Chairman of the Board. The Board will provide notice to any relevant party at least ninety (90) days in advance of the submission date for projects to be considered.

C. Each of the parties hereto shall devote and use reasonable efforts to develop the Technology necessary to refine existing Products and to produce new and unique Products as contemplated by this Agreement in an expeditious manner. Such efforts shall include, but are not limited to, the exchange of appropriate Confidential Information and other information and making available appropriate personnel and other resources of each party in accordance with Section 1.A.i. above.

D. Parties have agreed that Lennox, Heat-Transfer-JV and Outokumpu will share equally the Base Costs (as that term is defined in the Restated Limited Liability Company Agreement of the


HTX Tech JV) of the HTX Tech JV in accordance with Section 3.2 of the Restated Limited Liability Agreement of the HTX Tech JV.

2. Project Selection. Each Project shall be conducted in accordance with the provisions set forth in this Agreement. The submission and selection of Projects shall be as follows:

A. Decision Making Authority for Project Selection. In order to administer the development activities under this agreement, the Board is designated to make the decisions and to exercise the authority granted herein to determine programs and strategies to expedite the conduct of Projects.

B. The Basis for the Decision for Project Selection. The following shall provide the basis for the decision making process for the selection of Projects for the HTX Tech JV:

i. Any party may submit a proposal for review by the Board; ii Each Project proposed for consideration shall be presented in the format established by the Board as may be amended from time to time; iii Project Definition. Each Project submitted shall define the following: (1) The objective of, and the program and budget for, the Project; (2) The funding required, including any resources that are to be provided by a party and the cost and other relevant arrangements therefor; (3) Any Intellectual Property required for the Project; (4) The ownership proposed for any resulting Intellectual Property; (5) The potential commercial application of Products or Technology, financial return and the timing of such application; and (6) Any other items specified by the Board.

iv. The staff of the HTX Tech JV shall review and provide a recommendation to the Board with regard to all Projects submitted; and

C. Post-Selection Review. Upon the selection of Project, the Board shall establish milestones for each Project to assure that its objectives are achieved in a timely and cost effective manner. Thereafter, the Board shall periodically review the progress of the Project to determine whether the milestones are being achieved on the planned schedule, determine whether the Project is accomplishing and can accomplish its objective, conduct a cost benefit analysis on the Project and such other purposes as the Board may decide appropriate. The Board may modify the Project or terminate the Project as it determines to be appropriate with such modifications or termination being subject to the same basis of decision as the Project selection basis originally as described above in Section 2 B ii.

3. Conduct of Projects. Each Project shall be conducted in accordance with the provisions set forth in this Agreement. For each Project, however, the parties shall enter into a separate Project Agreement which shall set forth the particular aspects of the conduct of such Project, including but not limited to, a development schedule, project objectives, product specifications, target costs and dates, target sales volumes, allocation of development responsibilities, Project funding, the ownership of the Intellectual Property (as hereinafter defined) and any other issues specifically


related to the conduct of such Project (" Project Agreement" ). The development work with respect to each Project shall be done in sequential phases, as much as reasonably possible, with Lennox, Outokumpu, Heat-Transfer-JV, HTX Tech JV and third parties, all participating in each of the development phases as more particularly described in the Project Agreement for each Project. The phases of execution will be established for each Project and may include such activities as are specified on " Exhibit B" attached hereto. It is contemplated that a number of Projects shall be conducted and be in different stages of development at all times. For each Project, the parties shall each appoint a project leader who will be responsible for coordinating the joint efforts of the parties, for monitoring the progress of the development phases, and for communications between the parties.

4. Time of the Essence. The parties acknowledge that maintaining the development dates set forth in each Project Agreement is essential. The parties shall immediately advise one another in the event of circumstances, which might lead to changes in the anticipated completion dates. If changes in the schedule become necessary, they shall only be adopted after agreement of the parties ...