EXHIBIT 10.21
Agreement
for an
Initial Collaboration in the development of mCHP
Made between
Sigma Elektroteknisk AS
and
Baxi Group Ltd
6 March 2001
1. Introduction
This document sets out an agreement between Sigma Elektroteknisk AS and Baxi
Group Ltd ('the parties') for collaboration in the development of a micro
combined heat and power (mCHP) device for sale In the UK marketplace.
The remainder of this document is structured as follows:
- Section 2 Objective of the Agreement
- Section 3 Background to the Agreement
- Section 4 The Initial Collaboration
- Section 5 The Agreement
2. Objective of the Agreement
The objective of this agreement is the execution of a programme of joint working
('the Initial Collaboration') between the parties in the development of an mCHP
package.
The package consists of two main elements:
- the Sigma Energy Converter (the PCP)
- The cabinet for domestic use, into which the PCP is mounted, including
controls and connections to both domestic systems and the electricity
supply network (the ancillaries).
In overall terms, Sigma will contribute expertise on the PCP element to the
partnership and Baxi will contribute expertise in the ancillaries' element. .
3. Background to the Agreement
Sigma
Sigma has developed a prototype PCP. The design requires to be re-engineered for
volume manufacture and for this design to then be sourced for manufacture. Sigma
has committed to a re-engineering programme using world class engineering
expertise including Xxxxxxx Engineers and Kockums. Sigma will also use
Xxxxxxx, who have extensive experience in sourcing automotive components. to
assist in the setting up of the low to medium volume manufacturing strategy and
sourcing. The first units of the re-engineered version of the PCP are planned to
be ready for delivery to Sigma for testing by November 2001.
Sigma aims to manufacture the PCP with extensive outsourcing and the use of
existing manufacturing capacity and to supply it to industrial customers (OEM's)
In the UK, Germany and the Netherlands. The OEM will mate the PCP with suitable
ancillaries to produce packages for use in each national marketplace.
Baxi
The advent of mCHP is judged to have significant impact on the business of
boiler manufacturers. mCHP packages will primarily be installed in older and
larger houses as replacements for boilers that have reached the end of their
service life. This element of the boiler replacement market will, therefore,
become subject to a product substitute. This substitution may be either an
opportunity or a threat to the boiler OEM's, depending upon their reaction. Baxi
has recognised -the opportunity offered by mCHP and has chosen to play an
aggressive role in the development of this new market. Having evaluated the
technical and commercial issues associated with mCHP,
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Baxi wishes to partner with energy converter manufacturers and act as systems
integrator-effectively supplying the complete package.
UK mCHP delivery chain
The supply chain envisaged for the mCHP package Is as follows:
i. The manufacturing of the PCP by Sigma and supply to Baxi together with
other UK OEM partners.
ii. The manufacturing of the mCHP package by Baxi and other Sigma OEM
partners.
iii. The supply of the mCHP package to the marketplace (i.e. the end-users)
in conjunction with an Energy Service: Company (ESCO).
The detail manner of supply to the marketplace (by whom and whether by sale,
leasing arrangement or other means together with installation and maintenance
arrangements) remains to be determined. It is proposed that this supply strategy
be developed jointly by Sigma and Baxi subject to:
- the successful initiation of the Initial Collaboration covered by this
agreement and a desire on both parts to extend the Initial
Collaboration into a long-term commercial partnership.
4. The Initial Collaboration
At this time, there are substantial uncertainties as to the future direction of
development of mCHP. The Initial Collaboration is designed as a flexible vehicle
that allows:
- Sigma and Baxi to work together to reduce the level of uncertainty and
undertake Initial package development while
- giving both Sax[ and Sigma the opportunity to work with other companies
active In the mCHP field during the period of the Initial
Collaboration.
This agreement is, therefore, an Interim arrangement to allow both parties to
work together to reduce the level of uncertainty and to subsequently develop a
full commercial agreement.
The tasks to be addressed by the Initial Collaboration are as follows:
i. The development of a prototype package design based on the current
prototype PCP. The main purpose here is to understand how a package
based on the PCP needs to be designed with respect to:
- Safety
- Thermal output and control.
- Legal & regulatory requirements
- Installation & maintenance
ii. Testing of the prototype package design, The production version of PCP
will have interfaces that are Identical to the prototype PCP, so the
substitution of the prototype by the production version will not give
any difficulties.
iii. Once the prototype package has been successfully developed and tested,
the development and testing of a B-package, potentially suitable as
the basis for a production package.
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5. Agreement
Both parties agree to the following:
i. To work together to develop and test an mCHP package, as described
above. Either party may initiate discussions for a broadening of the
scope of this agreement.
ii. To assign sufficient priority and allocate the necessary resources to
the above tasks so that the package is developed in line with timing to
be separately agreed but currently anticipated by mid 2002. Each party
shall carry its own costs. .
iii. The outputs from the co-operation, Including specifications and other
engineering information, will be fully shared by both parties. However,
in the event of inventions being made during the Initial Collaboration,
the party making the invention shall retain the 1PR.
iv. To protect each other's confidentiality and 1PR, and not to disclose
any information having been disclosed or arisen within the framework of
the Initial Collaboration,
v. Each party is free to work in parallel with alternative partners on any
subject or matter within the field of mCHP.
vi. Subject to a satisfactory development of the co-operation to transform
this agreement into a long-term commercial agreement by July 2002.
vii. This agreement will become effective as of 6 March 2001 and can be
terminated by either party on 3 months' notice.
viii. This agreement is subject to English law.
For Baxi Group Ltd For Sigma Elektroteknisk AS
Signature: /s/ Xxxxxxxxxxx Drodgan Signature: /s/ Xxxxx Xxxxx
---------------------------------- --------------------------
Xxxxxxxxxxx Drodgan Xxxxx Xxxxx
Title: Group Development Director Title: V.P. Marketing
Date: 5-3-01 Date: 6-3-01
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(SIGMA LETTERHEAD)
Date: 5. March, 2001.
1 hereby authorize
Xx. Xxxxx Xxxxx, V.P of Marketing and/or
Mr. Lars Kjosbakken, V.P. of Operations at
SIGMA Elektroteknisk AS, Xxx 00, 0000 Xxxxx, Xxxxxx
to sign the
"Agreement for Initial Collaboration In the development of mCHP"
up until today being presented by SIGMA and commented upon by BAXI, and finally
agreed in the meeting today, 6. March, 2001,
between
BAXI Group Ltd
And
SIGMA Elektroteknisk AS
The agreement should hold a copy of this authorization as an Appendix.
Yours sincerely
By: /s/ Svein Hestevik
----------------------
Svein Hestevik
CEO
SIGMA Elaktrateknisk AS
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