DEVELOPMENT, PURCHASE AND LICENSE AGREEMENT FOR HYDROGEN SENSOR PRODUCTS AND RELATED SERVICES
Exhibit
10.1
HYDROGEN
SENSOR PRODUCTS AND RELATED SERVICES
This
Development, Purchase and License Agreement (“Agreement”) is made by and between
Nano-Proprietary, Inc. (“NPI”) and its wholly-owned subsidiary Applied Nanotech,
Inc. (“ANI”) with offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇, Ltd. (“▇▇▇▇▇▇”), a UK Limited Company with offices
located at Lissue Industrial Estate East, Lissue Road, Lisburn, BT28 2RB N.
Ireland UK (collectively “the parties”).
R
E C I T A L S:
WHEREAS,
ANI and NPI have developed certain hydrogen sensor technology as hereafter
defined; and
WHEREAS,
▇▇▇▇▇▇ desires: (a) to purchase such hydrogen sensors developed by ANI to be
used and incorporated in certain of ▇▇▇▇▇▇’▇ products, and (b) to take a license
from ANI and NPI for their hydrogen sensor technology for certain applications
and under certain limitations as hereinafter defined; and
WHEREAS,
the parties desire to accomplish the foregoing in certain phases and under
certain time constraints and conditions set forth more specifically herein
below.
NOW,
THEREFORE, in consideration of the mutual agreements set forth herein, and
other
good and valuable consideration, the receipt and sufficiency is hereby
acknowledged, the parties agree as follows:
I.
Definitions
1.1.
“Effective
Date”
means
July 6, 2005.
1.2
“ANI
Hydrogen Sensor”
means a
variable-range hydrogen sensor comprised of one or more fabricated
palladium-silver nanowires and/or nanobumps on a suitable substrate with the
performance defined in Appendix 1.
1.3
“Hydrogen
Sensor Product”
means
any product, including but not limited to software, which incorporates the
use
of the ANI Hydrogen Sensor.
1.4
“Hydrogen
Sensor Technology”
means
certain proprietary technology and know-how and improvements and enhancements
developed, licensed, and/or owned by NPI and/or ANI related to the manufacture
and use of Hydrogen Sensors, which includes, but is not limited to, the
inventions disclosed in U.S. Patent Application Publication No. 2004 /
0070006A1, published April 15,
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2004
under U.S. Patent Application No. 10 / 651,220 filed August 28, 2003 (the
“Application”), and any other applications, continuations and foreign
counterparts that may issue claiming in whole or in part the priority date
of
the Application, as well as all other confidential and proprietary information
and know-how related to the design, manufacture and use of Hydrogen Sensors
which has been provided or may be provided by NPI and/or ANI to ▇▇▇▇▇▇ over
the
course of their relationship.
1.5
“Territory”
means
the World.
1.6
“Technical
Field”
means
any instrumentation using in whole or in part the ANI Hydrogen Sensor for the
measurement of the content of hydrogen in insulated fluids for power
transformers.
1.7
“Gross
Selling Price”
means at
least the fair market value of the Hydrogen Sensor Products, that is, the
selling price which would result from an unaffiliated end-user of the completed
product in an arm’s length sale of a substantially identical product in the same
country, in the same quantity and at the same time subject to the same
royalty.
1.8
“Sales
Price”
means
the Gross Selling Price for the Hydrogen Sensor Products, less accepted returns
from customers, excise, sales or use taxes, customs duties and consular fees,
and transportation and insurance costs.
1.9
“Entity”
shall
mean any natural person, legal entity, partnership, limited partnership,
corporation and all other forms of organization or association, as well as
any
parent, subsidiary or affiliate of the same.
II.
Not
Used
2.1
Not
Used
III.
Purchase
Phase and Agreement
3.
Purchase
of Sensors
▇▇▇▇▇▇
shall purchase Hydrogen Sensors from ANI under the terms set forth herein.
If,
during the term of this agreement, ▇▇▇▇▇▇ determines that it wishes to
manufacture the sensors itself, ANI will provide training and expertise at
cost
to assist ▇▇▇▇▇▇ in the set-up and an initial operation of a plant to
manufacture the sensor for ▇▇▇▇▇▇’▇ use. In this event, prior to the
commencement of training, ANI and ▇▇▇▇▇▇ will develop a plan to minimize
training costs and quantify the amount.
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4.
Obligations
to Purchase
A.
From
July
1, 2005 until June 30, 2006 and for an “Extended Exclusivity Period” (as defined
in Section 7.2.D. herein below), subject to earlier termination of this
Agreement as provided herein, ▇▇▇▇▇▇ shall purchase Hydrogen Sensors solely
from
ANI for use in the Insulprobe product, and shall not purchase any product that
detects hydrogen from any other source or supplier for this product. During
such
periods, ANI may not sell Hydrogen Sensors or license Hydrogen Sensor Technology
to a company other than ▇▇▇▇▇▇ within the Technical Field.
B.
In
the
event: (a) ▇▇▇▇▇▇ chooses not to extend the exclusivity of this Agreement for
a
period of time beyond June 30, 2006 under Section 7.2.D.; then in such event
▇▇▇▇▇▇ may purchase or acquire from a source or supplier other than ANI a
product that detects hydrogen so long as such product does not use or involve
Hydrogen Sensor Technology or
an
ANI
Hydrogen
Sensor. In such event, ANI and NPI may sell Hydrogen Sensors to and/or license
Hydrogen Sensor Technology to Entities other than ▇▇▇▇▇▇ whether inside or
outside the Technical Field. At such points the license becomes non-exclusive
as
per Section 7.1.B.
5.
Price
and Discounts
A.
Pricing
for the Hydrogen Sensors will be as follows:
|
I.
|
10
to 49 units -
|
$250
per unit
|
|
II.
|
50
to 99 units -
|
$200
per unit
|
|
III.
|
100
to 499 units -
|
$150
per unit
|
|
IV.
|
500
and greater -
|
$100
per unit
|
B.
The
price
break levels are calculated based upon the total number of units sold to ▇▇▇▇▇▇
per order and include all varieties of Hydrogen Sensors sold by ANI to
▇▇▇▇▇▇.
C.
The
parties agree that neither of them is required to take any action in the future
with respect to any product other than the Hydrogen Sensors as is specifically
required herein. However, in the event the parties agree in the future to
develop, manufacture, sell or buy other products with, for, by or between one
another, pricing will be negotiated at such time on terms of which the parties
can mutually agree in writing
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6.
Ordering,
Delivery and Shipment
A.
All
orders shall be in writing and specify: the number of Hydrogen Sensors to be
purchased; the purchase price; the requested ship date; and if applicable,
state
the appropriate tax exemption certificate number. Any production order of
Hydrogen Sensors shall be for an amount not less than ten (10)
units.
B.
Shipments
of Hydrogen Sensors purchased by ▇▇▇▇▇▇ pursuant to this Agreement shall be
made
F.O.B. ▇▇▇▇▇▇’▇ place of business in Lisburn, N. Ireland, UK. ▇▇▇▇▇▇ shall take
title to the Hydrogen Sensors at the F.O.B. point and all risks of loss and
expenses in connection with the Hydrogen Sensors shall thereafter be the
responsibility of ▇▇▇▇▇▇.
C.
The
Hydrogen Sensors shall be deemed accepted by ▇▇▇▇▇▇ upon its receipt of the
Hydrogen Sensors either at its place of business in Lisburn, N. Ireland, UK,
or
at such earlier time that ▇▇▇▇▇▇ takes delivery of the Hydrogen Sensors at
ANI’s
place of business. ▇▇▇▇▇▇ shall have thirty (30) business days after receipt
to
inspect and test the Hydrogen Sensors. ▇▇▇▇▇▇ shall inspect these sensors using
a testing system substantially equivalent to the system installed at ANI’s
facilities using personnel trained to follow the testing procedures set forth
by
ANI. Any sensors not tested in the 30 day period will be deemed acceptable.
If
▇▇▇▇▇▇ discovers any defect in any of the Hydrogen Sensors within such 30-day
period, it shall notify ANI of such defect(s) in writing (by mail or fax) during
such 30-day period. ANI will have the option of replacing any defective sensors
or issuing ▇▇▇▇▇▇ a credit or refund for the purchase price of such defective
Hydrogen Sensors. ▇▇▇▇▇▇ shall make such defective Hydrogen Sensors ready for
shipment back to ANI at ▇▇▇▇▇▇’▇ offices in Lisburn, UK. ANI shall bear the
expense and risk of loss associated with the return of said defective Hydrogen
Sensors.
D.
ANI
shall
deliver to ▇▇▇▇▇▇ an invoice for each order at such time that the Hydrogen
Sensors covered by the order are shipped. Payment shall be made by ▇▇▇▇▇▇ within
thirty (30) business days from the date of receipt of the invoice.
7.
License
and Royalties
7.1
License
In
connection solely with ▇▇▇▇▇▇’▇ purchase of the ANI Hydrogen Sensor, ANI and NPI
shall be deemed to have granted to ▇▇▇▇▇▇ a license as follows:
A.
NPI
and
▇▇▇ ▇▇▇▇▇ to ▇▇▇▇▇▇ a limited, exclusive,
non-transferable license to the Hydrogen Sensor Technology solely for use in
the
Technical Field, solely to the extent set forth in this section 7.1, and solely
for the time period July 1, 2005 to June 30, 2006, except as otherwise provided
in Section 7.2.D. below.
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B.
NPI
and
▇▇▇ ▇▇▇▇▇ to ▇▇▇▇▇▇ a limited, non-exclusive,
non-transferable license to the Hydrogen Sensor Technology solely for use in
the
Technical Field, solely to the extent set forth in this section 7.1, and solely
for the time period from July 1, 2005 until this Agreement is terminated, except
as otherwise provided in Sections 4 and 7.2.D. below.
C.
The
license granted herein gives ▇▇▇▇▇▇ the right to (1) make, have made, use and
sell Hydrogen Sensor Products to ▇▇▇▇▇▇’▇ end-user customers in the normal
course of business for use in the Technical Field; and (2) convey to, with
respect to any Hydrogen Sensor Product sold, leased or otherwise disposed of
by
▇▇▇▇▇▇ for use in the Technical Field, rights to use and re-sell such Hydrogen
Sensor Product in the Technical Field as sold, leased or otherwise disposed
of
by ▇▇▇▇▇▇.
▇.
▇▇▇▇▇▇
shall not have any rights under this license to make, have made, use, lease,
sell, or export Hydrogen Sensor Products for any application outside of the
Technical Field.
▇.
▇▇▇▇▇▇
shall have no right to sell Hydrogen Sensors to any Entity, and ▇▇▇▇▇▇ shall
have no right to make, use, sell, lease, export, or otherwise use Hydrogen
Sensors or Hydrogen Sensor Technology except as ▇▇▇▇▇▇ is permitted to so use
Hydrogen Sensors and Hydrogen Sensor Technology in connection with Hydrogen
Sensor Products as authorized in this Agreement.
▇.
▇▇▇▇▇▇
acknowledges that the Hydrogen Sensor Technology is proprietary to ANI and
that,
except for the rights and licenses expressly granted hereunder, ANI retains
all
right, title, and interest therein.
▇.
▇▇▇▇▇▇
agrees that this Agreement does not grant any right or license, under any other
intellectual property of ANI or otherwise, except as expressly provided herein,
and no other right or license is to be implied by or inferred from any provision
of this Agreement or the conduct of the parties hereunder.
H.
The
parties acknowledge that any know-how, trade secrets, patents, copyrights,
or
other intellectual property rights developed by ▇▇▇▇▇▇ without any participation
by ANI pertaining to the Hydrogen Sensor Technology shall belong solely to
and
remain the property of ▇▇▇▇▇▇. The parties acknowledge that any know-how, trade
secrets, patents, copyrights, or other intellectual property rights developed
by
ANI without any participation by ▇▇▇▇▇▇ pertaining to the Hydrogen Sensor
Technology shall belong solely to and remain the property of ANI. Any know-how,
trade secrets, patents, copyrights, or other intellectual property rights
developed jointly by the parties shall be jointly owned by ▇▇▇▇▇▇ and ANI.
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I.
All
licenses granted herein shall continue until this Agreement is terminated as
provided herein.
7.2
Royalty
For
each
and every Hydrogen Sensor Product sold or otherwise disposed of by ▇▇▇▇▇▇ to
the
extent permitted herein, ▇▇▇▇▇▇ shall pay to ANI the following royalty:
A.
Ten
percent (10%) royalty on the Sales Price for each and every Hydrogen Sensor
Product sold or otherwise disposed of by ▇▇▇▇▇▇, with the exception of Hydrogen
sensors used for initial in-house testing and beta field trials. Sensors to
be
used for initial in-house testing and beta field trials shall be identified
at
the time of order by ▇▇▇▇▇▇. If sensors from this order remain after completion
of such in-house testing or beta field trials, and such sensors are used in
products, royalties shall be due on these sensors in accordance with the terms
of the agreement. This ten percent (10%) royalty shall in no way be reduced,
offset, or otherwise affected by the payment required pursuant to Section 5;
that is, the amounts paid by ▇▇▇▇▇▇ to ANI for ▇▇▇▇▇▇’▇ purchase of Hydrogen
Sensors from ANI. Nor shall the purchase price in Section 5 in any way be
reduced, offset, or otherwise affected by the ten percent (10%) royalty in
this
section; and
B.
From
July
1, 2005 to June 30, 2006, ▇▇▇▇▇▇ shall pay royalties as follows:
At
the
end of each calendar quarter, ▇▇▇▇▇▇ shall pay royalties due on all products
shipped by ▇▇▇▇▇▇ during the calendar quarter. Such payment is due within 30
days of the end of the calendar quarter, however ▇▇▇▇▇▇ shall notify ANI within
10 days of the end of each month, the amount of royalty due for that month
that
will be paid at the end of the quarter.
C.
No
credit
against future royalties shall be given for any amount paid prior to the
effective date of this agreement.
▇.
▇▇▇▇▇▇
shall have the right, at its sole discretion, to extend the exclusivity of
the
license granted by NPI and ANI to a period of time longer than that set forth
in
7.I.A.; i.e,
July 1,
2005 to June 30, 2006) (the “Extended Exclusivity Period”) by:
(a)
providing
written notice to ANI and NPI (the “Extended Exclusivity Notice”) no later than
the following dates; and
(b)
making
the following payment for the corresponding time period (“Extended Exclusivity
Payment”):
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|
Extended
Exclusivity
Period
|
Extended
Exclusivity
Notice
Date
|
Extended
Exclusivity
Payment
|
|
7/01/06
- 06/30/07
|
03/03/06
|
$1,000,000
|
|
7/01/07
- 06/30/08
|
03/03/07
|
$1,500,000
|
|
7/01/08
- 06/30/09
|
03/03/08
|
$2,000,000
|
Each
Extended Exclusivity Payment will be paid at the time of notification as set
forth in Section 7.2B. The full amount of the Extended Exclusivity Payment
shall
be due and payable regardless of whether the Agreement is terminated after
the
occurrence of the Extended Exclusivity Notice and the Extended Exclusivity
Notice Date.
E.
It
is
understood between the parties that during any Extended Exclusivity Period,
as
contemplated by this Section 7, the exclusivity provision in Section 4 shall
apply as applicable and described in Section 4.
F.
If, as of a date 12 months after the date of an order by ▇▇▇▇▇▇, any sensors
from an order have not been shipped as part of a product by ▇▇▇▇▇▇ and a royalty
paid to ANI on such sensors, an additional royalty shall be paid by ▇▇▇▇▇▇
as
follows. With the end of the quarter payment that is due immediately after
sensors from a specific order have been on hand for 12 months, ▇▇▇▇▇▇ shall
pay
an additional royalty payment equal to the amount of royalty which would have
been due on the unsold sensors. The amount of additional royalties due will
be
based on the average royalty rate for the units shipped. For example, if 400
units from an order of 500 sensors are shipped with an average royalty of $400
per unit shipped and 100 sensors were purchased but not part of shipped units,
than royalties will be due on an additional 100 units at the average rate of
$400. If ▇▇▇▇▇▇ pays additional royalties on sensors that have not been shipped
by ▇▇▇▇▇▇ as part of a product, then no royalty will be due on such sensors
if
they are subsequently shipped as part of a product.
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7.3
Accrual
of Royalties
The
royalty in Section 7.2.A. shall accrue on each and every Hydrogen Sensor Product
sold or otherwise disposed of by ▇▇▇▇▇▇. Obligations to pay accrued royalties
shall survive termination of this Agreement. “Disposed of” means (1) Hydrogen
Sensor Products not sold but delivered (except warranty replacements or out
of
warranty spare parts for repairs) by ▇▇▇▇▇▇ or by any other Entity for ▇▇▇▇▇▇,
regardless of the basis for compensation, if any. Whether or not Hydrogen
Sensors are used in connection with Hydrogen Sensor Products and whether or
not
Hydrogen Sensor Products are sold or otherwise disposed of as set forth in
this
Agreement, the royalty to be paid by ▇▇▇▇▇▇ to ANI shall be based on the Sales
Price for such Hydrogen Sensor Products sold or otherwise disposed of.
7.4
Payment
of Royalties
The
Royalty payments of Section 7.2.A. are due quarterly, however to the extent
that
the minimum payments to maintain exclusivity have been made by ▇▇▇▇▇▇, no
quarterly payments will be required until the royalties based on actual
shipments exceed the minimum payment made for the period. Reports shall be
furnished to ANI monthly, no later than ten (10) days following the end of
each
monthly period as set forth in Section 13.2.
7.5
Taxes
▇▇▇▇▇▇
shall be solely responsible for any applicable sales or use or other like taxes
based upon or measured by the royalty paid by ▇▇▇▇▇▇ to ANI.
7.6
Nonpayment
If
▇▇▇▇▇▇
fails to pay any past-due amount payable under this Agreement (including
interest thereon), then, in addition to all other rights and remedies that
ANI
may have at law or in equity, ANI shall, in its sole discretion, have the right
to terminate this Agreement but only after a 15-day written notice to that
effect has been sent to ▇▇▇▇▇▇.
8.
Obligations
and Restrictions of ▇▇▇▇▇▇
8.1
Restriction
of Rights
▇▇▇▇▇▇
shall make, have made, use, lease, or sell Hydrogen Sensor Products only for
use
only in the Technical Field, and as otherwise permitted and restricted herein.
This Agreement shall not be construed to grant to ▇▇▇▇▇▇ any license or any
other rights in NPI’s and/or ANI’s patents, trademarks, copyrights, trade
secrets, proprietary technology or know-how, or any other intellectual property
rights, except as expressly stated herein.
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8.2
Marking
▇▇▇▇▇▇
shall ▇▇▇▇ each Hydrogen Sensor or Hydrogen Sensor Product used, sold or
otherwise disposed of under the authority of this Agreement with the patent
numbers mutually agreed upon in accordance with 35 U.S.C. § 287.
9.
Obligations
and Restrictions of ANI
NPI
and
ANI shall have the right to license the Hydrogen Sensor Technology to Entities
other than ▇▇▇▇▇▇ for use outside of the Technical Field for any time period.
10.0
Limitation
of Warranty
ANI
shall
warrant that the performance of the ANI Hydrogen Sensor shall meet or exceed
the
specifications in Appendix 1. As set forth in Section 6C, ▇▇▇▇▇▇ shall have
30
days to determine that the ANI Hydrogen Sensor meets such specifications.
10.1
Novelty
NPI
and
ANI do not warrant the novelty of the Hydrogen Sensor Technology.
10.2
Exclusions
A.
NPI
and
ANI shall not be responsible for any obsolescence of the Hydrogen Sensor
Technology that may result from changes in ▇▇▇▇▇▇’▇ requirements.
▇.
▇▇▇▇▇▇
shall not withhold the payment of any royalty, nor use as a ground for
termination of this Agreement, that the Hydrogen Sensor Technology is obsolete,
that ▇▇▇▇▇▇ has made alterations or improvements to the Hydrogen Sensor
Technology, that ▇▇▇▇▇▇ has made alterations or improvements to the Hydrogen
Sensors, that ▇▇▇▇▇▇ has made alterations or improvements to the Hydrogen Sensor
Products, or that ▇▇▇▇▇▇ is offering a “next generation” of the Hydrogen Sensors
or Hydrogen Sensor Products.
▇.
▇▇▇▇▇▇
expressly acknowledges that its royalty obligations extend to any use, sale
or
disposition of any Hydrogen Sensor Products in the Technical Field.
D.
Except
as
may be otherwise provided for herein in this Agreement, ANI shall not be
responsible to ▇▇▇▇▇▇ for any causes of action asserted by third parties
resulting from any use or sale of Hydrogen Sensors or Hydrogen Sensor Products
made, used, or sold by ▇▇▇▇▇▇ under the terms of this Agreement.
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10.3
Disclaimer
A.
Except
as
expressly provided for herein, NPI AND ANI DISCLAIM ANY AND ALL PROMISES,
REPRESENTATIONS, AND/OR WARRANTIES WITH RESPECT TO HYDROGEN SENSORS OR HYDROGEN
SENSOR PRODUCTS MADE, USED, OR SOLD BY ▇▇▇▇▇▇ UNDER THE TERMS OF THIS AGREEMENT,
INCLUDING THEIR CONDITION, THEIR CONFORMITY TO ANY REPRESENTATION OR
DESCRIPTION, THE EXISTENCE OF ANY LATENT OR PATENT DEFECTS, ANY NEGLIGENCE,
THEIR MERCHANTABILITY, AND/OR THEIR FITNESS FOR A PARTICULAR PURPOSE OR USE.
B.
Except
as
expressly provided herein, ANI licenses and sells the Hydrogen Sensors on an
"AS
IS" basis. NPI and ANI MAKE AND ▇▇▇▇▇▇ RECEIVES NO WARRANTIES OR CONDITIONS,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND THEIR
EQUIVALENCE UNDER THE LAWS OF ANY JURISDICTION, REGARDING THE HYDROGEN SENSORS
AND/OR THE HYDROGEN SENSOR TECHNOLOGY.
C.
Except
in
a case of fraud or an intentional tort, IN NO EVENT SHALL NPI OR ANI BE LIABLE
FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, OR SPECIAL DAMAGES, INCLUDING
(WITHOUT LIMITATION) DAMAGES FOR LOSS OF REVENUE, LOST PROFITS, COST OF CAPITAL,
CLAIMS OF CUSTOMERS FOR SERVICE INTERRUPTIONS OR FAILURE OF SUPPLY.
10.4
Cumulative
Liability
A.
ANI
warrants that the hydrogen sensors shall be free from defects in materials
and
workmanship for a period of one (1) year following date of shipment. Except
in a
case of fraud or an intentional tort, ANI’S AND NPI’S CUMULATIVE AND SOLE
LIABILITY AND OBLIGATION WITH RESPECT TO BREACH OF THIS WARRANTY, INCLUDING
ANY
CAUSE OF ACTION SOUNDING IN CONTRACT, TORT, OR OTHERWISE IS, AT THE SOLE
DISCRETION OF ANI, TO EITHER REPLACE THE DEFECTIVE HYDROGEN SENSORS OR REFUND
OR
CREDIT THE PURCHASE PRICE OF THE DEFECTIVE HYDROGEN SENSORS. This section is
intended to apply to sensors in use and does not supercede the provisions of
Section 6C.
B.
ANI
AGREES TO ASSIGN TO ▇▇▇▇▇▇ ALL MANUFACTURER’S WARRANTIES APPLICABLE TO THE
HYDROGEN SENSORS.
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11.
Indemnification
11.1
Indemnification
Related to Infringement
A.
Except
as
expressly provided herein, NPI and ANI make no representations or warranties
concerning the make-up or quality of any Hydrogen Sensors or Hydrogen Sensor
Products made, used, sold, or otherwise disposed of by ▇▇▇▇▇▇, including but
not
limited to any representations or warranties that such products infringe or
do
not infringe any intellectual property rights of any third parties.
B.
ANI
agrees to indemnify and hold harmless ▇▇▇▇▇▇ from any and all claims that may
be
instituted against ▇▇▇▇▇▇ for any alleged infringement of any United States
patent that is related to Hydrogen Sensors as provided to ▇▇▇▇▇▇ by ANI,
provided that: (1) such alleged infringement consists only of the use of
Hydrogen Sensors in the manner per which the Hydrogen Sensors were designed,
and
does not relate to any modification or alteration of Hydrogen Sensors by ▇▇▇▇▇▇;
(2) ▇▇▇▇▇▇ gives ANI immediate notice of any such claim or suit; and (3) ▇▇▇▇▇▇
provides ANI with the information and assistance reasonably necessary for the
defense of any such claim or suit.
C.
In
support
of the indemnification provided to ▇▇▇▇▇▇ by ANI in Section 11.C., ANI shall
have the right at its option and expense to: (i) procure for ▇▇▇▇▇▇ the right
to
continue using, marketing, leasing, or selling the Hydrogen Sensors; (ii)
replace the same with non-infringing Hydrogen Sensors that are substantially
equivalent in functionality and performance; or (iii) modify the Hydrogen
Sensors so that they become non-infringing yet remain substantially equivalent
in functionality and performance. If one of the foregoing alternatives is not
reasonably available in ANI’s judgment, ▇▇▇▇▇▇ shall, on one month’s written
notice from ANI, return or destroy all Hydrogen Sensors, upon which ANI shall
return the purchase price paid by ▇▇▇▇▇▇ under this Agreement for the returned
Hydrogen Sensors.
D.
With
the
exception of claims described in Paragraph B above, ▇▇▇▇▇▇ agrees to indemnify
and hold harmless ANI from any and all claims that may be instituted against
ANI
arising out of the sale, lease, sublicense or use of the Hydrogen Sensors by
▇▇▇▇▇▇.
11.2
Exclusion
for Unauthorized Actions
NPI
and
ANI shall have no liability under any provision of this Agreement with respect
to any performance problem, claim of infringement, or other matter to the extent
that such problem, claim, or other matter is caused by or substantially
contributed to by any unauthorized action or breach of this Agreement by
▇▇▇▇▇▇.
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12.
Confidentiality
12.1
Confidential
Information
Prior
to
the Effective Date of this Agreement, ANI and ▇▇▇▇▇▇ entered into a
confidentiality agreement entitled “Mutual Non-Disclosure Agreement”
(hereinafter “Confidentiality Agreement”), a copy of which is attached hereto as
Exhibit “A” and incorporated by reference. ANI and ▇▇▇▇▇▇ agree that all terms
of the Confidentiality Agreement shall continue in force and effect with respect
to all dealings of the parties to this Agreement and shall survive the
termination of this Agreement.
The
parties acknowledge that this agreement is a material agreement ( as defined
by
the U.S. Securities and Exchange Commission) for NPI and that NPI will have
to
file a copy of this agreement as an exhibit to Form 8K within 4 business days
of
signing this agreement and that such document will become a matter of public
record.
If
any
party to this agreement issues a press release related to this agreement, the
other party has the right to review and approve such press release prior to
its
release
13.
Records
13.1
▇▇▇▇▇▇’▇
Records
▇▇▇▇▇▇
shall keep true and accurate records, files and books of account containing
all
the data reasonably required for the full computation and verification of the
quantity, gross selling price data, gross revenue, and sales price data for
Hydrogen Sensor Products used, sold or otherwise disposed of by ▇▇▇▇▇▇ as
permitted and restricted herein. Following seven (7) days prior written notice
to ▇▇▇▇▇▇, any certified accountant appointed by ANI (provided, however, that
ANI will first make a good faith effort to choose a certified accountant
acceptable to both ANI and ▇▇▇▇▇▇, although ANI’s decision will ultimately
control if such agreement cannot be reached) shall be given access to such
records, files and books during usual business hours; provided, however, that
such inspection shall be at ANI’s expense but shall not occur more often than
once every six (6) months. If the audit results indicate that ▇▇▇▇▇▇ has
underpaid ANI by ten percent (10%) or more in royalty fees under this Agreement,
then ▇▇▇▇▇▇ shall remit to ANI the amount underpaid plus the cost of the
examination and audit that led to the discovery that ▇▇▇▇▇▇ had underpaid ANI
within ten (10) business days of receiving the results of the audit. If the
audit results indicate that ▇▇▇▇▇▇ has underpaid ANI by ten percent (10%) or
more in royalty fees under this Agreement, the amount underpaid shall be subject
to a one-and-a-half percent (1.5%) per month late payment charge or such lesser
maximum amount as may be allowed under Texas law.
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13.2
▇▇▇▇▇▇’▇
Reports
Each
month, within ten (10) days after the end of the previous month during the
continuance of this Agreement, ▇▇▇▇▇▇ shall render written reports stating
in
each such report the quantities of all Hydrogen Sensors used and gross selling
price data, gross revenue data and sales price data of all Hydrogen Sensor
Products sold or otherwise disposed of (as permitted and restricted herein)
during the proceeding month.
13.3
Terminal
Report
If
this
Agreement is for any reason terminated before all payments herein provided
for
have been made, ▇▇▇▇▇▇ shall immediately submit a terminal report and ▇▇▇▇▇▇
shall pay to ANI any remaining unpaid balance even though the due date as
provided in Section 5.4 has not been reached.
14.
Termination
14.1
Termination
In
the
event that ▇▇▇▇▇▇ elects not to maintain the exclusivity of this agreement
and
during the period of non-exclusivity fails to maintain certain predefined
minimum royalties, this Agreement is terminable by NPI and/or ANI by giving
written notice to ▇▇▇▇▇▇.
14.2
Survival
Articles
I and IV, and Sections 7.2 - 7.6, 10.1 - 10.4, 11.1 - 11.2, 12.1, 13.3, and
14.2
shall survive termination of this Agreement.
IV.
Miscellaneous
15.1
Governing
Law
This
Agreement shall be governed by and construed in accordance with the laws of
the
state of Texas, without reference to conflict of law principles.
15.2
Jurisdiction
and Venue
Exclusive
jurisdiction and venue for all disputes arising under this Agreement shall
be
with the state or federal courts located in ▇▇▇▇▇▇ County, Texas, and the
parties expressly submit themselves to the personal jurisdiction of such courts.
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15.3
Severability
If
any
provision of this Agreement shall be held illegal, invalid or unenforceable
by a
court of competent jurisdiction, that provision shall be deleted and the
remainder of this Agreement shall remain in full force and effect.
15.4
Integration
This
Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges all prior discussions between them.
15.5
Alteration
A
provision of this Agreement may be altered only by a writing signed by
authorized persons of all Parties.
15.6
Notice
All
notices and communications to be given by each party to the other shall be
in
writing and addressed respectively to the parties at the following addresses:
|
To
NPI and ANI:
|
To
▇▇▇▇▇▇:
|
|
▇▇.
▇▇▇ ▇▇▇▇▇
|
|
|
APPLIED
NANOTECH, INC.
|
▇▇▇▇▇▇,
Ltd.
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ East
|
|
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇▇▇▇
▇▇▇▇
|
|
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
|
▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇
|
|
▇.
▇▇▇▇▇▇▇, ▇▇
|
15.7
Relationship
of Parties
Nothing
in this Agreement shall be construed to constitute or appoint either party
as
the agent, partner or representative of the other party for any purpose
whatsoever, or to grant to either party any rights or authority to assume or
create any obligation or responsibility, express or implied, for or on behalf
of
or in the name of the other, or to bind the other in any way or manner
whatsoever.
15.8
Headings
The
headings in this Agreement are for purposes of convenience and reference only
and are not intended to affect the meaning or interpretation of this
Agreement.
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15.9
Counterparts
This
Agreement may be executed in duplicate and either copy or both copies are
considered originals.
15.10
No
Bias
This
Agreement shall be interpreted as written and negotiated jointly by the parties.
It shall not be strictly construed against either party, regardless of the
actual drafter of the Agreement.
15.11
Force
Majeure
If
ANI is
unable to perform its obligations under this Agreement due to circumstances
beyond its reasonable control (including without limitation, acts of nature,
acts of government, labor disputes, delays in transportation, and delays in
delivery or inability to deliver by ANI’s suppliers), such obligations shall be
suspended so long as those circumstances persist, provided that ANI notifies
▇▇▇▇▇▇ promptly of the delay and its causes and uses commercially reasonable
efforts to recommence performance without delay.
15.12
Export
Controls
▇▇▇▇▇▇
shall comply with all relevant U.S. export laws and regulations and will obtain
all required export licenses prior to exporting or re-exporting Hydrogen Sensor
Products. ANI does not represent to ▇▇▇▇▇▇ that an export license shall not
be
required nor that, if required, it shall be issued. ▇▇▇▇▇▇ assumes all
responsibility for their exports or re-exports of Hydrogen Sensor Products.
15.13
Assignments
and Sublicenses
(a)
Except
with respect to Entities affiliated with, controlled by, or under the control
of
▇▇▇▇▇▇, this Agreement may not be assigned by ▇▇▇▇▇▇ without the prior written
consent of ANI.
(b)
Except
with respect to Entities affiliated with, controlled by, or under common control
of ANI, this Agreement may not be assigned by ANI without the prior written
consent of ▇▇▇▇▇▇.
(c)
No
acquisition of either ▇▇▇▇▇▇ or ANI by another entity (whether by merger, stock
transfer, asset transfer, or otherwise) shall constitute a basis for the
acquired party to avoid the performance of its obligations under this
Agreement.
(d)
▇▇▇▇▇▇
shall not grant any sublicenses concerning any of the rights or obligations
set
forth in this Agreement without the prior written consent of ANI.
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15.14
Successors
and Assigns
This
Agreement shall be binding on the parties hereto and their respective
representatives, successors and assigns.
15.15
Related
Companies
Any
reference to ▇▇▇▇▇▇ herein shall mean only ▇▇▇▇▇▇, and shall not mean or include
any parent, subsidiary, or affiliate of ▇▇▇▇▇▇, or other company, organization,
or association related to ▇▇▇▇▇▇.
15.16
U.S.
Dollars
All
monetary references herein are to U.S. Dollars, and payments required herein
shall be made in U.S. Dollars.
IN
WITNESS WHEREOF,
the
Parties have caused this Agreement to be executed by authorized persons on
the
respective dates hereinafter set forth.
|
APPLIED
NANOTECH, INC.
|
▇▇▇▇▇▇,
LTD.
|
| /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ | /s/ ▇. ▇▇▇▇▇▇▇▇▇▇ |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇ |
Name: ▇. ▇▇▇▇▇▇▇▇▇▇ |
|
Title:
Chairman
|
Title:
Managing Director
|
|
Date:
July 8, 2005
|
Date:
6 July, 2005
|
NANO-PROPRIETARY,
INC.
/s/
▇▇▇▇
▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title:
Chief
Executive Officer
Date:
July 8, 2005
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