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Development, Marketing And Distribution Agreement

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Sectors: Manufacturing
Governing Law: Connecticut, View Connecticut State Laws
Effective Date: November 10, 1999
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EXHIBIT 10.4


CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [*****]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION


DEVELOPMENT, MARKETING AND DISTRIBUTION AGREEMENT


MATHESON TRI-GAS, INC.


AND


PROTON ENERGY SYSTEMS, INC.


DATED AS OF NOVEMBER 10, 1999


_____________________________________________________________________________


DEVELOPMENT, MARKETING AND DISTRIBUTION AGREEMENT


This Development, Marketing and Distribution Agreement, dated as of November 10, 1999 (this "Agreement"), by and between Matheson Tri-Gas, Inc., a Delaware corporation, with its principal place of business at 959 Route 46 East, Parsippany, New Jersey 07054 ("Matheson"), and Proton Energy Systems, Inc., a Delaware corporation, with its principal place of business at 50 Inwood Road, Rocky Hill, CT 06067 ("Proton", and collectively with Matheson, the "Parties").


RECITALS


1. Proton has developed a technology for the generation of hydrogen gas
(the "Technology");


2. Proton desires to design, develop and manufacture the Systems (as
herein defined) using the Technology, and sell the Systems to Matheson
for distribution in the Field of Use (as herein defined), all on the
terms set forth in this Agreement; and


3. Matheson desires to select commercial names and design trademarks and
trade dress for the Systems, and to acquire certain rights to purchase
and distribute the Systems in the Field of Use (as herein defined),
all on the terms set forth in this Agreement.


NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, the Parties agree as follows:


1. Definitions.
-----------


"Bankruptcy", as to a Person, means an occurrence in which (a) a receiver is appointed for such Person or its property; (b) such Person makes an assignment for the benefit of its creditors; (c) any proceedings are commenced by, for or against such Person under any bankruptcy, insolvency or debtor's relief law; or (d) such Person is liquidated or dissolved.


"Conference" means the "Pittsburgh Conference" taking place in New Orleans, LA during calendar year 2000 at which Matheson intends to introduce the Initial Models of the Systems to the market.


"Exclusivity Period" means the period during which Matheson has exclusive rights to sell the Systems as described in Section 2.2(a) hereof.


"Field of Use" means the worldwide use solely in laboratory applications, but excluding laboratory applications involving hydrogen generation for fuel cells, meteorology, transportation, energy production, generation, storage, transmission, power or other energy-related activity.


1


*****CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.*****


"Force Majeure Act" means acts of God, floods, fires, explosions, storms, transportation difficulties, strikes, lockouts, or other industrial disturbances, wars, or any law, rule or action of any court or instrumentality of the federal or any state government or any other cause or causes beyond its reasonable control whether similar or dissimilar to those above stated, provided only that the same is not willfully done or brought about for the purpose of excusing failure or omission to perform under this Agreement.


"Governmental Authority" means any federation, nation, state, sovereign or government, any federal, supranational, regional, state or local political subdivision, any governmental or administrative body, instrumentality, department or agency or any court, administrative hearing body, commission or other similar dispute resolving panel or body, and any other entity exercising executive, legislative, judicial, regulatory or administrative functions of a government; provided, however, that the term "Governmental Authority" shall not
-------- ------- include any arbitral tribunal chosen pursuant to Section 12 of this Agreement.


"Initial Models" means the 300 cc/min and 600 cc/min models of the Systems described in the Specifications.


"Minimum Purchase Requirements" means (a) from the date of this Agreement to December 31, 2000, at least [*****] units of the Systems purchased by Matheson from Proton, (b) during calendar year 2001, at least [*****] units of the Systems purchased by Matheson from Proton, and (c) during calendar year 2002 and each calendar year thereafter during the term of this Agreement, at least [*****] units of the Systems purchased by Matheson from Proton; provided,
-------- however, that if Proton has not made the Initial Models of the Systems - -------- commercially available prior to [*****], so as to allow Matheson to introduce the Systems to the market at the Conference or if Proton has not made the Remaining Models of the Systems commercially available prior to [*****], then so long as such failure is not caused by Matheson, the foregoing minimum requirements applicable to periods prior to December 31, 2001 (i) shall cease to be applicable to Matheson and (ii) shall be revised by the Parties in good faith. If the Parties do not agree on revised minimum requirements in accordance with the foregoing sentence, the matter may be submitted to binding arbitration in accordance with Section 12 of this Agreement.


"Person" means any individual, firm, corporation, partnership, limited liability company, trust, association or entity of any kind.


"Plant" shall mean Proton's plant or facility at which manufacture of the Systems shall occur. Such plant currently is located at Proton's principal executive offices in Rocky Hill, Connecticut.


2


"Proprietary Information" of a Person means (a) all inventions, designs, processes, materials, trade secrets, know-how and ideas of such Person, including without limitation, as applicable, designs, drawings, specifications and technical information with respect to the Systems and component parts thereof; (b) non-public financial information concerning such Person; (c) such Person's research and development, pricing, new product and marketing plans and customer lists or information, unless and until publicly announced; (d) the terms and conditions of this Agreement; and (e) any other information designated as confidential by such Person in writing; provided, that no oral communications
--------- shall be deemed confidential unless confirmed in writing to be so within twenty (20) days of the time such information is orally communicated, and provided
-------- further, that Proprietary Information shall not include any information that: - -------- (i) is or becomes known to the general public or the industry in which the Parties hereto do business without fault or breach on the part of the receiving Person; (ii) the disclosing Person customarily provides to others without restriction on disclosure; or (iii) the receiving Person obtains from a third Person without breach of any nondisclosure obligation.


"Purchase Order" means a signed agreement on a standard form between Proton and Matheson for supply of the Systems. Such Purchase Order shall designate, at a minimum, the method of delivery, delivery date and the models and quantity of Systems ordered.


"Remaining Models" means the 80 cc/min and 2 liter/min models of the Systems described in the Specifications.


"Systems" means the four high purity hydrogen generation products to be developed by Proton pursuant to this Agreement in accordance with the Specifications, each having a flow rate capacity of 10 standard cubic feet per hour ("scfh") or less and bearing the trade dress, commercial names and trademarks developed, designed, selected and owned by Matheson as hereinafter provided.


"Specifications" means the specifications for the Systems set forth in Schedule 1 hereto. - ----------


2. Appointment.
-----------


2.1 Development Responsibilities. Proton shall design, develop
----------------------------- and manufacture the Systems substantially in accordance with the Specifications. Matheson shall select commercial names and design the trademarks and trade dress for the Systems, and supply Proton such names, trademarks and trade dress designs for use in the manufacturing of the Systems.


2.2 Grant of Rights; Acceptance of Grant. Proton hereby grants to
------------------------------------ Matheson (a) the exclusive right during the term of this Agreement to (i) procure the Systems as manufactured by Proton and to sell, promote, advertise, exploit, market and distribute the


3


*****CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.*****


Systems in the Field of Use, each upon the terms and conditions set forth herein; and (ii) make applications with relevant Governmental Authorities for approval of the Systems as needed; (b) the non-exclusive right to take the actions described in (a) above outside the Field of Use, subject to any limitations that Proton may impose due to exclusive rights Proton has granted to other parties in accordance with the terms hereof, and (c) the right to develop and solely own a Matheson commercial name/trademark for the Systems and/or series of Systems. The rights described in Section 2.2(a) shall be exclusive only so long as Matheson meets the Minimum Purchase Requirements. Proton shall have the right, at any time upon written notice thereof to Matheson, to limit or terminate the non-exclusive rights described in Section 2.2(b) if and to the extent that Proton grants exclusive rights to third parties outside the Field of Use with respect to hydrogen generation products having a flow rate capacity of 10 scfh or less. Matheson hereby accepts the grants made by Proton under this Section 2.2.


2.3 Exclusivity.
-----------


2.3.1 Proton shall not at any time, whether during the term of this Agreement or at any time following termination thereof, sell to third parties hydrogen generation equipment having the same trade dress as the Systems or otherwise having an exterior package design which is confusingly similar to that of the Systems such that a purchaser might reasonably infer that such equipment is one of the Systems or from the same line of products as the Systems. Proton may sell directly or grant exclusive or non-exclusive rights to third parties outside the Field of Use as to other equipment in the 10 scfh or under size range.


2.3.2 During the Exclusivity Period, Proton (a) shall not sell, market, distribute or sublicense any of the Systems to any Person other than Matheson, and (b) shall promptly refer and forward to Matheson any inquiries it receives regarding sales, marketing or distribution of Systems in the Field of Use.


2.3.3 Beginning on the date of commercial availability of the Systems and throughout the term of this Agreement, Matheson will not sell or distribute any hydrogen generation systems or products having a flow rate capacity of 10 scfh or less other than the Systems purchased from Proton pursuant to this Agreement; provided, however, that upon termination of the
-------- ------- Exclusivity Period, Matheson may elect to purchase the right to distribute or sell other hydrogen products having a flow rate capacity of 10 scfh or less by giving written notice of such election to Proton within sixty (60) days following the termination of the Exclusivity Period, accompanied by payment in an amount equal to [*****] for each year that Matheson has satisfied the Minimum Purchase Requirements prior to the termination of the Exclusivity Period.


4


2.3.4 Following the termination of the Exclusivity Period, Proton shall not grant exclusive rights (but may grant non-exclusive rights) to any third party in the Field of Use during the term of this Agreement with respect to the distribution or sale of hydrogen generation systems or products having a flow rate capacity of 10 scfh or less. In the event that Matheson ceases to meet the Minimum Purchase Requirements at any time during the term of this Agreement, and later again meets the Minimum Purchase Requirements, the rights granted by Proton to Matheson shall again become exclusive only at Proton's discretion and subject to any rights which Proton may have granted in the interim.


2.4 Sub-Distributors. Matheson may appoint subdistributors, sales
---------------- representatives and Persons to sell, promote, advertise, exploit, market or distribute products containing the Systems in the Field of Use on terms and conditions consistent with the provisions of this Agreement, provided, that
-------- Matheson shall at all times remain responsible for the performance of such Persons, including without limitation those relating to exclusivity and to the use and disclosure of Proprietary Information.


2.5 Configuration Changes. The Parties contemplate that initially
--------------------- there will be four (4) different configurations of Systems, as reflected in the Specifications. Matheson may request that Proton design and manufacture additional configurations for purchase by Matheson hereunder, so long as (a) such additional configuration(s) are for sale and distribution in the Field of Use and have a flow rate capacity of 10 scfh or less, and (b) Matheson (i) describes the reason for the additional configuration(s) (e.g., the opportunity for volume growth, or the minimization of volume decline due to product obsolescence) and (ii) procures Proton's approval therefor. If Proton does not grant such approval, Matheson may pursue other sources to design and manufacture hydrogen generation systems having the applicable configurations without regard to any restrictions contained in Section 2.3 of this Agreement; provided that
-------- Matheson shall not disclose any Proprietary Information of Proton to such other sources and such other sources shall not use the Technology or any Proprietary Information of Proton in connection with the design or manufacture of such equipment or otherwise.


2.6 No Implied Rights. Except as is explicitly set forth in Section
----------------- 2.1, nothing in this Agreement shall be construed as granting Matheson any rights in or to any intellectual property of Proton or of restricting Proton's rights with respect to its intellectual property, including, but not limited to, Proton's right to grant exclusive or non-exclusive rights to third parties outside the Field of Use as to other equipment in the 10 scfh or under size range. Furthermore, nothing herein shall be construed as granting Matheson rights in or to any improvements to the Systems.


3. Purchases and Purchase Order Procedure.
--------------------------------------


5


*****CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.*****


3.1 Orders and Forecasts. On or before December 31, 1999 and not
-------------------- less than fifteen days prior to the first day of each calendar quarter thereafter, (15 March, 15 June, 15 September, 15 December) Matheson shall submit to Proton the following:


(a) A firm, irrevocable written Purchase Order for the Systems
to be purchased by Matheson each month during the subject
calendar quarter specifying the quantities of each model of
the Systems to be purchased. All such Purchase Orders shall
be for at least [*****] of the quantities listed in the
Forecast submitted during the preceding quarter, and during
the Exclusivity Period all such Purchase Orders shall cover
a minimum of [*****] of the then applicable annual Minimum
Purchase Requirements. Proton shall not be required to
accept or fill (a) any Purchase Order to the extent such
Purchase Order exceeds (i) [*****]of the quantities
estimated in the Forecast for the subject quarter submitted
by Matheson prior to the beginning of the calendar quarter
then ended, or (ii) [*****] of the largest quantities
purchased by Matheson during any previous calendar quarter
during the term of this Agreement; or (b) any supplemental
or additional Purchase Order which is submitted during any
quarter after the initial purchase order for the subject
quarter is placed. In no event shall Proton be required to
accept or fill any Purchase Order submitted by Matheson
pursuant to this Agreement unless all amounts payable to
Proton hereunder have been paid in full when due. This
Agreement and the terms and conditions hereof shall prevail
over any inconsistent or additional terms set forth in any
Purchase Order.


(b) With the submission of each Purchase Order, Matheson shall
provide a quarterly written forecast of Systems required
("Forecast") for the subsequent three calendar quarters
following the purchase order period. Such Forecast shall
indicate the number of units required by System type for
each quarter. At any time during the term of this Agreement,
if Matheson plans to place Purchase Orders for the Systems
in quantities which vary significantly from those set forth
in its most recent Forecast, then Matheson shall use
reasonable efforts to update such Forecast sufficiently in
advance to enable Proton to timely fill all purchase orders
placed. Each Forecast shall supersede the terms of the prior
Forecast, provided, that no Forecast shall vary the terms of
--------
any purchase order without the written consent of Proton
(which consent shall not be unreasonably withheld).


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