EXHIBIT 10.19
JOINT VENTURE AGREEMENT
(Joint Venture Entity With Exclusive Territory)
BETWEEN THE UNDERSIGNED:
Ocean Power Corporation established and governed under the laws of the State of
Delaware (USA) (hereinafter referred to as OPC) and maintaining its principal
place of business and headquarters at 5000 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Parkway, El Dorado
Hills, California, USA.
ON THE ONE HAND, AND:
Caribbean Water & Power, Inc. (hereinafter referred to as "Affiliate") and
maintaining its principal place of business and headquarters at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇; Nassau, Bahamas
ON THE OTHER HAND,
WHEREAS, OPC has enhanced and/or integrated various existing
technologies for the purpose of creating water and power production equipment
and systems, and is developing new systems, sub-systems and technologies for
creating water and power production equipment and systems, and
WHEREAS, Affiliate desires to own and operate integrated water/power
production systems and to market and sell the water and excess power produced by
OPC integrated water/power producing systems, and
WHEREAS, OPC and Affiliate hereby intend to establish the terms by
which they will purchase, finance, assemble, construct, install, own, operate
and maintain OPC integrated water/power producing systems in the Operating
Territory and market and sell the water and excess power produced therefrom, and
WHEREAS, it is contemplated that OPC will derive profits from the sale
of OPC of water and power production related equipment including integrated
water/power producing systems and related services and that OPC and Affiliate
will each derive income from the sale of water and excess power produced by
integrated water/power prodoucing systems in Operating Territory, and
WHEREAS OPC and Affiliate have concluded this Joint Venture Agreement
with the purpose of setting out the terms and conditions and the rights and
commitments which arise for each of them from this Joint Venture Agreement and
from the conditions specified in the Additional Documents to be drawn up between
OPC and Affiliate.
THUS HAVING BEEN STATED, the following has been stipulated and agreed:
SECTION I
GENERAL PROVISIONS
ARTICLE ONE: Definitions
1.0 For the purposes of this Joint Venture Agreement, the words and phrases used
herein shall have the following meanings:
1.1. "Joint Venture Agreement" refers to the present Joint Venture Agreement.
1
1.2.1 "Party(s)" refers to OPC and/or Affiliate and to any of their
subsidiaries, parents and assignees.
1.2.2 "OPC" refers to OPC and its subsidiaries, parents and assignees.
1.2.3 "Affiliate: refers to Affiliate and its subsidiaries, parents and
assignees.
1.3. "Venture Entity" refers to the Jointly Owned Limited Liability Entity to be
established in the Operating Territory pursuant to this Joint Venture Agreement.
1.4. "Subsidiary or Parent Company or Organization" refers to:
a) any company or organization at whose meetings a Party directly or
indirectly holds more than fifty percent (50%) of the voting rights, or
b) any person, company or organization or public body directly or
indirectly, holding more than fifty percent (50%) of the voting rights
at meetings of a Party, or
c) any company or organization at whose meetings more than fifty
percent (50%) of the voting rights are held directly or indirectly by
one or more companies or public bodies constituting a Subsidiary or
Parent to or of a Party within the spirit of paragraph a) and b) above,
together or separately.
1.5. "Dollar" refers to the United States of America Dollar.
1.6. "OPC Integrated Water / Power Systems" refers to integrated water and power
production systems, subsystems, components and/or attachments designed,
manufactured, and/or approved for use by OPC, and the subsystems, components and
attachments thereto when said subsystems, components and attachments are
integrated into a distinct water and power producing system.
1.7. "OPC Trademarks" refers to any word, name, symbol, dress and/or device by
which OPC's products and/or services are or can be distinguished from the
products and/or services of others.
1.8. "Know-how" refers to all non-public information and/or devises known to OPC
and relating in any way to the design, manufacture, integration, assembly,
shipping, construction, installation, commissioning, operation and/or
maintenance of water and power production systems regardless of whether such
information or devise is patentable, patented, recorded or unrecorded and
whether or not such information or devise has been incorporated or utilized in
an OPC Integrated Water/ Power System.
1.9. "Intellectual Property" refers to the OPC Trademarks and the Know-how
collectively.
1.10. "Operating Territory" refers to *** SEE ATTACHMENT ONE***.
1.11. "Additional Documents" refers to the following documents which are to be
negotiated and agreed to by OPC and Affiliate following the execution of this
Joint Venture Agreement:
a) Operating Agreement to be attached hereto as Appendix
A, and executed by the Parties and the Venture Entity
for the purpose of committing the Venture Entity to
the terms and conditions of this Joint Venture
Agreement.
b) Shareholders Agreement or similar document as
appropriate to the form chosen for the Venture
Entity, to be attached hereto as Appendix B and
executed by OPC and Affiliate for the purpose of
committing the Parties in their capacities as
shareholders or owners of the Venture Entity, to the
terms and conditions of this Joint Venture Agreement.
2
c) Initial Business Plan to be attached hereto as
Appendix C and executed by the members of the
Operations Committee.
d) Trademark License Agreement to be attached hereto as
Appendix D and executed by OPC and the Venture Entity
for the purpose of establishing the terms and
conditions under which the Venture Entity will be
allowed to utilize the OPC Trademarks in the
Operating Territory.
e) OPC Terms of Trade a copy of the current version of
which will be attached as Exhibit 1 and executed by
OPC and the Venture Entity for the purpose of
establishing the terms and conditions under which OPC
will sell and support and, the Venture Entity will
purchase, OPC Integrated Water / Power Systems.
f) OPC Terms of Service a copy of the current version of
which will be attached as Exhibit 2 and executed by
OPC and the Venture Entity for the purpose of
establishing the terms and conditions under which OPC
will provide commercial and technical consulting and
support services to the Venture Entity.
g) OPC Trademark Policy and Guidelines a copy of the
current version of which will be attached as Exhibit
3 for the purpose of providing detailed instructions
on the permissible uses and applications of the OPC
Trademarks
1.12 "Operations" refers to all activities carried out to market, purchase,
finance, assemble, construct, install, commission, own, operate and maintain
water and/or power production systems and to market, sell and deliver the water
and/or power.
1.13 "Studies and Information" refers to the results of experiments,
observations, data collection, expert consultations and experiences relating to
the operation and/or maintenance and/or performance of water or power production
systems, subsystems or components and the environment in which they operate.
1.14 "Option Commencement Date": As used herein, the Option Commencement Date
shall be determined as follows:
a) If the basis for the termination is the mutual
written agreement of the parties, then the Option
Commencement Date will be the date the written
agreement is fully executed unless a different Option
Commencement Date is agreed to therein.
b) If the basis for the termination is at the option of
either party upon the giving of written notice, then
the Option Commencement Date will be the later of (i)
the date the written notice was given, or (ii) the
expiration of any applicable cure period.
c) If the basis for termination is disputed by either
Party or the Venture Entity then the Option Commence
Date will be the date on which a final decision is
issued by the arbitration panel confirming the
claimed basis for termination unless the Parties
agree in writing to the resolution of the dispute in
which case the Option Commencement Date will be the
date of the written resolution.
ARTICLE TWO: Purpose of the Joint Venture Agreement
2.1 Purpose: This Joint Venture Agreement is concerned with defining the
conditions under which the Parties plan jointly to carry out the marketing,
3
purchase, assembly, construction, installation, commissioning, operation,
maintenance and finance of OPC Integrated Water / Power Systems in the Operating
Territory and the marketing, sale and delivery of water and power produced by
said systems.
2.2 Commencement: Starting from the signing of this Joint Venture Agreement, a
Joint Venture (hereinafter referred to as "the Joint Venture") is set up between
the Parties. This Joint Venture has no legal status and its only purpose is to
carry out the terms of this Joint Venture Agreement. Neither Party shall be
obligated to undertake Operations unless and until the Parties have agreed to
the terms and conditions of the Operating Agreement, Shareholder Agreement, the
Business Plan, Trademark License, Terms of Trade and the Terms of Service.
Should the Parties fail to reach agreement as to any of the Documents listed
above within sixty days of the date this Joint Venture Agreement is last
executed, then either Party may declare this Joint Venture Agreement null and
void without liability or compensation being paid by or to either Party.
However, the confidentiality and intellectual property provisions will survive
such null and void determination.
ARTICLE THREE: Ownership of Joint Venture
3.1 Ownership: Each Party shall have the following share in the Venture Entity:
a) Forty-nine percent (49%) for OPC
b) Fifty one percent (51%) for Affiliate
3.2 Profits: Except as may otherwise be stated in the present Joint Venture
Agreement and/or the Additional Documents, the Parties will share,
proportionally to their interest defined above, the profits of the Venture
Entity and, if losses may be passed through to the owners for tax purposes, then
also as to said losses.
3.3 Non-assessable: Except as may be otherwise provided in this Joint Venture
Agreement and/or the Additional Documents, each Party's interest in the Venture
Entity will be fully paid and non-assessable.
3.4. Approval Required for Transfer: Neither Party is at liberty to transfer its
rights and commitments arising from this Joint Venture Agreement in part or in
full without the consent of the other party except to a subsidiary company or
organization as set forth in Article 1 of this Joint Venture Agreement. For
purposes of this Article any change in the voting control of Affiliate and any
transfer, encumbrance or hypothecation of shares of the Venture Entity shall be
considered as a transfer of rights and commitments arising from this Joint
Venture Agreement
3.5 Termination: If a Party requests approval from the other Party for a
transfer of its rights and commitments arising from this Agreement and the other
Party refuses to grant its approval, the transferring Party may either proceed
under the terms of this Agreement without transferring its interests, or declare
this Agreement terminated.
ARTICLE FOUR: Running of the Joint Venture.
4.1 Venture Entity: Except as provided in Section 7.1.2 Operations by the
Parties in the Operating Territory are to be carried out directly or indirectly
by and through the Venture Entity in faithful adherence to the Business Plans
approved by the Operations Committee.
4
4.2 Operations Committee
4.2.1 Constitution: The Operations Committee will be made up of two equal
halves, one being the representative(s) appointed by OPC and the other being the
representative(s) appointed by Affiliate. The Operations Committee will be
chaired by an OPC representative appointed to said position by OPC.
4.2.2 Duties: The Operations Committee will be responsible for approving (a) the
annual Business Plan of the Venture Entity prepared by the Venture Entity and
submitted to the Operations Committee at least ninety (90) days prior to the
commencement of each fiscal year and, (b) any amendments thereof. The annual
Business Plan of the Venture Entity will identify the Operations to be
undertaken by the Venture Entity during the budget year and the methods and
means of undertaking those Operations and will include, but will not be limited
to:
a) the type and schedule for implementation of all works;
b) a list of suppliers to be used by the Venture Entity;
c) the contracts to be entered into by the Venture Entity during the
year which amount to more than two hundred and fifty thousand dollars
($250,000.00) or which contain commitments which extend beyond the
budget year;
d) the itemized budget of the Venture Entity including all projected
income and expenses and sources of same.
4.2.3 Access to Information: The Operations Committee shall have complete access
to all information and data concerning the Venture Entity which information and
data will be provided to the Operations Committee by the Venture Entity upon the
request of the Chairman of the Operations Committee.
4.2.4 Decisions: Approval of the annual business plan by the Operations
Committee will be taken unanimously by the representatives designated by the
Parties. In the event of the Operations Committee being unable to arrive at a
unanimous approval of the business plan, any deadlock shall be resolved in
accordance with the provisions of Article 12 of this Joint Venture Agreement
4.2.5 Convening and Meetings: The Operations Committee shall meet at least once
every quarter in any place decided in advance by mutual agreement after each
representative has been notified by the Chairman with twenty (20) calender days
notice; in urgent circumstances this period may be shortened by mutual
agreement.
a) Written notification shall give details of the date, time, place and
agenda for the meeting; in particular, the agenda shall include a draft
of all questions to be written out beforehand by the representatives.
If one of the representatives issues a request in writing for a
meeting, the Chairman is obliged to convene the Operations Committee
within a term not exceeding twenty (20) calender days.
b) Within twenty (20) calender days following the meeting of the
Operations Committee, the Chairman shall forward to each of the
representatives a detailed minutes.
c) Each of the representative shall have twenty (20) calender days for
making remarks and corrections statements, absence of a response
constitutes acceptance of the minutes. After gathering the remarks of
the representatives, the Chairman shall forward the final report for
signature.
5
d) Attendance at Operations Committee meetings may be made by telephone
or video conference facilities provided that all representatives
participating can hear one another.
e) The Chairman may require the attendance at any Operations Committee
meeting of any officers, employees, consultants, contractors and/or
directors of the Venture Entity as he or she may determine.
4.3 Carrying out: The Venture Entity will carry out the purchase, assembly,
construction, installation, commissioning, operation, maintenance and finance of
all OPC Integrated Water/Power Systems in the Operating Territory and the
marketing, sale and delivery of water and excess power produced by said systems.
The Venture Entity shall take all necessary actions for preserving and
protecting human life, the environment, goods and properties of the Parties and
the Venture Entity and shall conduct the Operations in accordance with the rules
of the respective trades, all laws and regulations, the Business Plans approved
by the Operations Committee, this Joint Venture Agreement and the then current
Additional Documents. The Venture Entity is especially in charge of:
a) preparing and entering into service and supply contracts with third
Parties, with the priority being given to companies in the Operating
Territory, and to monitor the proper performance of the works assigned
to them;
b) assuring compliance with all of its contracts and obligations;
c) protecting the Parties from any liability arising from Operations in
the Operating Territory;
d) preparing the annual Business Plan and all budgets and attachments
thereto;
e) maintaining a skilled and dedicated workforce, and;
f) complying with all laws, rules, regulations and similar directives
properly applied to its Operations by any government, quasi-government
or multi-national agency and appealing and contesting any laws, rules,
regulations and similar directives which it reasonably believes are
improperly applied to its Operations by any government,
quasi-government or multi-national agency, and;
g) retaining the services of a "Big 5" accountancy firm with offices in
the Operating Territory and cooperating with said firm in that firm's
preparation of audited annual financial reports of the Venture Entity's
Operations.
4.4 Venture Entity:
4.4.1 Formation: Affiliate shall form the Jointly Owned Limited Liability Entity
under the laws of the Operating Territory within thirty (30) calender days
following OPC's written notification to Affiliate that OPC is capable of
delivering OPC Integrated Water / Power Systems in accordance with the Terms of
Trade Agreement.
4.4.2 Operations: The Jointly Owned Limited Liability Entity shall be organized
and operated in accordance with the provisions of this Joint Venture Agreement
6
including those contained in the Operating Agreement, the Shareholders
Agreement, the Trademark License, the approved Business Plan(s) and any other
Additional Documents that pertain to its activities.
4.4.3 Financing of Operations: Unless otherwise agreed between the Parties,
expenditures arising from the Venture Entity's Operations in the Operating
Territory shall be borne by the Venture Entity.
4.4.4 Royalties / Taxes and Dues: Taxes, dues and royalties and similar expenses
connected to Operations shall be payed by the Venture Entity.
4.5 Appendices: The Appendices to be attached to this Agreement form an
integral part of this Joint Venture Agreement.
4.6 Representation of the Joint Venture: Each Party shall secure its
representation before any Operating Territory administrative or other public
agency for matters involving its own rights and interests when such are separate
from or, in conflict with the interests of the Venture Entity. Otherwise, the
Venture Entity shall represent the Joint Venture in all Operating Territory
administrative or other public agency matters.
4.7 International Standards Organization (ISO): Within ninety (90) calender
days following its formation the Venture Entity shall commence reasonable and
diligent efforts to obtain certification, by an accredited certification body in
the Operating Territory, that its Operations conform with current ISO 9001,
9002, 9003 and 14001 standards. The Venture Entity shall continue its reasonable
and diligent ISO 9000 and 14000 certification efforts until said certifications
are obtained and thereafter shall undertake all necessary actions to ensure that
its ISO 9000 and 14000 certifications remain valid and current.
SECTION II
SPECIAL CONDITIONS FOR OPERATIONS
ARTICLE FIVE: OPC Integrated Water /Power Systems: Except as provided in Section
7.1.2 below, all Operations, in the Operating Territory, by the Parties and the
Venture Entity will be undertaken exclusively through the Venture Entity's
purchase from OPC of OPC Integrated Water/ Power Systems and the Venture
Entity's ownership and operation of said OPC Integrated Water/Power Systems and
the sale of water and excess power produced therefrom.
ARTICLE SIX: Operations Finance: Except for Operations undertaken pursuant to
Section 7.1.2 below and, except as the Parties may otherwise agree, all
Operations in the Operating Territory shall be financed by and shall be
maintained on the books of the Venture Entity.
ARTICLE SEVEN: Exclusivity:
7.1 Operating Territory:
7.1.1 Operations: Neither Party nor the Venture Entity shall undertake, either
itself or with others, directly or indirectly, any Operations in the Operating
Territory except in accordance with the terms and conditions of the this Joint
Venture Agreement and the Additional Documents.
7
7.1.2 Independent Sales: Notwithstanding Section 7.1.1 above, OPC may, but is
not obligated to, own, operate, or sell water or power related equipment other
than OPC Integrated Water/Power Systems within the Operating Territory. Such
ownership, operation or sales may be undertaken directly by OPC or through
others, which others may include Affiliate and/or the Venture Entity as OPC
shall determine.
7.1.3 Supplemental Marketing and Finance: Notwithstanding Section 7.1.1 above,
Affiliate may, but is not obligated, to market and/or finance water and/or power
supply contracts in the Operating Territory to be fulfilled by the Venture
Entity. Affiliate is authorized to undertake such marketing and finance
activities prior to the establishment of the Venture Entity in accordance to the
terms and conditions of this Joint Venture Agreement. Once the Venture Entity
has been established, if the Affiliate determines to continue such marketing
and/or finance activities it shall enter into a representation agreement with
the Venture Entity which agreement shall:
a. establish the capacity of Affiliate as an independent sales and/or
finance representative of the Venture Entity,
b. preclude Affiliate from marketing and/or financing water and/or
power supply contracts to be fulfilled by persons or firms other
than the Venture Entity,
c. require Affiliate to actin strict adherence to the terms and
conditions of the Trademark License and Trademark Guidelines, and
d. prevent Affiliate from entering into any contract or agreements on
behalf of the Venture Entity.
7.2 Extra-Territorial Operations: Neither Affiliate nor the Venture Entity
shall undertake any Operations either themselves or with others, directly or
indirectly outside the Operating Territory.
7.3 Remedies: In addition to any other remedies in law or in equity which may
otherwise attach, the Parties agree that any violation or threatened violation
of any of the provisions of this Section II may be enjoined and prevented by any
legal means.
7.4 Sub-Ventures: The Venture Entity may itself enter into joint ventures for
the purchase, assembly, construction, installation, commissioning, operation,
maintenance and finance of OPC Integrated Water/Power Systems in the Operating
Territory and the marketing, sale and delivery of water and excess power
produced by said systems. Any such sub-venture shall be organized and operated
in accordance with the terms and conditions of this Joint Venture Agreement and
the Additional Documents and must be approved by both Affiliate and OPC.
SECTION III
PROVISIONS RELATING SPECIFICALLY TO INTELLECTUAL PROPERTY
ARTICLE EIGHT: Ownership
8.1. Know-how:
8.1.1 Ownership: All Know-how is and will remain the sole and exclusive property
of OPC.
8
8.1.2 Disclosure and Use: OPC shall disclose to Affiliate and the Venture Entity
such Know-how as is reasonably necessary to allow the Venture Entity to utilize
OPC Integrated Water/Power Systems in the Operating Territory and Affiliate and
the Venture Entity will be allowed to use said disclosed Know-how for the
purpose of fulfilling their obligations in accordance with this Joint Venture
Agreement and the Additional Documents and for no other purpose.
8.1.3 Grant Back Rights: All rights to improvements, advances and derivative
technologies and/or processes created or discovered by or through Affiliate
and/or the Venture Entity relating to any Know-how will be and are hereby
unconditionally and irrevocably granted back to OPC.
8.1.4 Grant Forward: Any right to use and to have know-how disclosed under
Section 8.1.2 above will include the right to use and have disclosed any
improvements, advances, and derivative technologies and processes of said
Know-how including such as are obtained by OPC through its Grant Back rights.
8.2 Trademarks:
8.2.1 Ownership: All Trademarks are and will remain the sole and exclusive
property of OPC.
8.2.2 Use: The Venture Entity will prominently display the Trademarks in all
correspondence, marketing materials and equipment in accordance with the then
current OPC Trademark Policy and Guidelines.
8.3 Studies and Information:
8.3.1 Ownership: All rights to and in all Studies and Information collected
during Operations carried out in the scope of this Joint Venture Agreement will
be the property of OPC.
8.3.2 Access and Use: Each Party and the Venture Entity shall have access to all
Studies and Information collected by either of the Parties or by the Venture
Entity within the framework of Operations relating to this Joint Venture
Agreement and Affiliate and the Venture Entity will be allowed to use said
Studies and Information a necessary to fulfill their obligations in accordance
with this Joint Venture Agreement and the Additional Documents and for no other
purpose.
8.4 Confidentiality
8.4.1 Protection and Non-disclosure: Affiliate and the Venture Entity and each
of their officers, directors, shareholders, employees, contractors and
consultants, and Subsidiary and Parent Companies and Organizations and their
officers, directors, shareholders, employees, contractors and consultants will
and do hereby undertake and agree to keep all Know-how and Studies and
Information strictly confidential, to disclose same to no one without OPC's
prior written consent, to utilize said information only for the purpose of
performing their obligations in accordance with this Joint Venture Agreement and
the Additional Documents, and to return any document or other form of recording
and all objects which contain any Studies, Information or Know-how to OPC upon
request. Affiliate and the Venture Entity with take all actions which are
reasonable and necessary to ensure that the officers, directors, shareholders,
employees, contractors, and consultants mentioned above are aware of and are
acting in compliance with this Confidentiality provision.
8.4.2 Disclosure of Studies and Information. Nothing in Section 8.4.1 above
shall be construed as preventing Studies or Information from being disclosed
9
pursuant to proper legal compulsion to government authorities in the Operating
Territory or to any third Party entitled by law to obtain such Studies or
Information.
8.5. Intellectual Property Acknowledgment and Challenge: Affiliate hereby
acknowledges OPC's ownership of the Know-how, Trademarks, Studies and
Information and agrees that any act by Affiliate or the Venture Entity whether
alone or through others and whether directly or indirectly which challenges or
contests OPC's ownership of any Know-how, Study, Information and/or Trademark
will be considered sufficient grounds to terminate this Joint Venture Agreement
and all Operations associated with this Joint Venture.
8.6 Remedies: In addition to any other remedies in law or in equity which may
otherwise attach, the Parties agree that any violation or threatened violation
of any of the provisions of this Article Eight may be enjoined and prevented by
any legal means.
8.7 Warranty of Rights: To the best knowledge of OPC, there are neither
pending nor threatened, any actions, suits, proceedings or claims or, to the
best knowledge of OPC, any basis therefor, with respect to the use of the OPC
Integrated Water/Power Systems, OPC Trademarks or Know-how or the manufacture or
sale of any product using or incorporating the OPC Integrated Water/Power
Systems, Trademarks or Know-how, and no such use of the OPC Integrated
Water/Power Systems, Trademarks or Know-how will infringe or otherwise violate
the rights of any third party, whether such rights are in the nature of patent,
copyright, trademark or other intellectual or industrial property rights.
SECTION V
MISCELLANEOUS PROVISIONS
ARTICLE NINE: Responsibility and Insurance
9.1 Personnel: Except in the case of gross negligence, each Party shall bear
the costs of any personal injuries occurring in the performance of duties laid
down by this Joint Venture Agreement to personnel directly employed by them,
whatever Party is to blame for the injury. Consequently, neither of the Parties
shall have any remedy at law against the other for personal injury caused to
personnel, without prejudice to the rights of those injured or their
beneficiaries.
9.2 Waiver of Right of Recourse: The Parties waive all recourse against the
other with respect to any act or omission causing personal injury to the others
employees and will undertake to obtain a similar waiver of recourse from their
own insurers.
ARTICLE TEN: Force Majeure:
10.1 Non-Liability: In the performance of its duties, neither of the Parties is
responsible for loss or damage arising from any delay or failure resulting from
a Force Majeure.
10.2 Definition of Force Majeure: The term "Force Majeure refers to any
happening beyond the control of the affected party and preventing it from
fulfilling in part or in full commitments including:
10
a) wars,
b) riots or civil disturbances,
c) earthquakes, floods, lightning or other natural disasters,
d) impossibility to use railways, ports, airports, roads,
e) strikes and lockouts,
f) acts of God
10.3 Government Interference: Cases of Force Majeure include, but are not
limited to, delays resulting from application of Operating Territory legislation
or the acts of the Operating Territory government and its agencies. Such delays
shall entail no compensation for either Party.
ARTICLE ELEVEN: Termination
11.1 Grounds for Termination: This Joint Venture Agreement may be terminated as
follows:
a) By the mutual written agreement of the Parties
b) At the option of either Party upon written notice to
the Venture Entity and the other Party in the event
that:
(i) the Venture Entity is declared by an agency
of competent jurisdiction to be unqualified
or disqualified from undertaking one or more
of its necessary functions;
(ii) the Venture Entity has operated without an
approved Business Plan for a period in
excess of ninety (90) days;
(iii) the Venture Entity has failed to pay a
dividend for three (3) consecutive years;
(iv) the Venture Entity's gross revenues have
increased at a rate of less than twenty-five
percent (25%) in each of three (3)
consecutive years;
(v) the Venture Entity remains in default on any
of its water or power production obligations
for a period in excess of one hundred and
twenty (120) days, unless such default is
caused by the failure of either Party to
comply with its obligations under this Joint
Venture Agreement or the Additional
Documents, in which case the defaulting
Party shall not have the option to terminate
this Joint Venture Agreement;
(vi) the Venture Entity remains in default on any
of its financial obligations for a period in
excess of one hundred and twenty (120) days.
(vii) the Venture Entity has caused or allowed a
material breach of the Operating Agreement
and failed to rectify the default within
ninety (90) days of being notified of the
breach.
11
c) At the option of the non-defaulting party upon the
occurrence of a breach of a material obligation by
the other Party which the defaulting Party does not
rectify within a period of ninety (90) days from the
date of receiving formal notice from the non-breach
Party of its intention to terminate.
d) Any other grounds for termination provided for in
this Joint Venture Agreement, the Operating
Agreement, the Shareholders Agreement, or the
Additional Documents.
11.2 Continued Operation Option: In the event this Joint Venture Agreement is
terminated, OPC shall have the option to continue Operations in the Operating
Territory with compensation being paid to Affiliate in accordance with the terms
of Section 11.3. OPC must notify Affiliate in writing within thirty (30) days of
the Option Commencement Date of its intention to exercise this option. Following
said thirty day period the option shall terminate.
11.3 Compensation: In the event OPC elects to continue Operations in the
Operating Territory as provided for in Section 11.2 above, it shall purchase
from Affiliate all of Affiliate's rights, titles and interests in the Operations
in the Operating Territory by purchasing all of Affiliate's shares in the
Venture Entity. The value of Affiliate's shares in the Venture Entity shall be
the greater of the values produced through application of the following
valuation methods, subject to receipt of a fairness opinion letter, if required.
Should OPC exercise this Continued Operation Option, then all of OPC's
Operations within the Operating Territory must be undertaken by and through the
Venture Entity during the effective period of the Look Back Capitalization of
Earnings valuation described in Section 11.3.3 below.
11.3.1 Book value with account adjustments: The book value as of the close of
business on the last day of the calendar month preceding the date of the event
providing the grounds for the termination. The book value shall be determined
from the Venture Entity's books and records as of that date by the independent
certified public accountants regularly engaged by the Venture Entity on that
date. That determination shall be made in accordance with generally accepted
accounting principles applied on a basis consistent with those previously
applied by the Venture Entity, but observing the following principles:
a) There shall be subtracted any value attributable to
goodwill, patents, copyrights, and similar intangible
items to the extent so included in book value under
the formula, unless such items were purchased by the
Venture Entity and had previously been entered in its
books in the regular course of business and with the
authorization of its Board of Directors.
b) All accounts payable shall be taken at face amount
less normal discount, and all accounts receivable
shall be taken at face amount less normal discount
and a reasonable reserve for bad debts.
c) All real property, machinery, furniture, fixtures and
equipment shall be taken at the valuation appearing
on the Venture Entity's books and records, without
adjustment for depreciation taken on them. Any
amounts shown on the Venture Entity's books and
records for leases to which it is a party shall be
excluded.
12
d) Inventory and supplies shall be computed at cost,
e) All accrued and properly accruable taxes and
assessments shall be deducted as liabilities
f) There shall be subtracted the adjusted cost basis as
shown on the Venture Entity's books of any securities
owned by it, and there shall be added a sum equal to
the "value of such securities as of the valuation
date. For this purpose, the value of any such
securities shall be deemed to be (1) the fair market
value, if they are traded on any stock market,
over-the-counter market or similar market or if they
are readily liquidatable money market instruments,
(2) the value as calculated under any bylaw provision
or agreement to which the Venture Entity is a party
that establishes a valuation method with respect to
said securities, or (3) there book value as computed
under this provision from financial statements
obtained from the issuer but if no current or
sufficient financial information can be obtained from
the issuer then, the cost basis for the securities
shall be used.
g) The Venture Entity's "book value" shall mean the
difference between its total assets and total
liabilities as herein determined. The book value per
share shall be determined by dividing the book value
of the Venture Entity by the number of shares
outstanding on the valuation date.
11.3.2 Weighted Capitalization of Earnings: The price per share calculated as
seven (7) times the quotient determined by dividing by fifteen the sum of the
following products and dividing the result by the number of outstanding shares
as of the date of the event giving rise to the termination: five times the net
profit or loss of the most recent fiscal year before the termination under this
Agreement; four times the net profit or loss of the second most recent fiscal
year; three times the net profit or loss of the third most recent fiscal year;
twice the net profit or loss of the fourth most recent fiscal year; and the net
profit or loss of the fifth most recent fiscal year. If the valuation is made
prior to the end of the fifth fiscal year of Operations, then the earnings or
losses for each year shall be multiplied according to the above calculations
through the first fiscal year with the resulting sum being divided by the total
of the multipliers used. The net profit or loss for any fiscal year shall be as
disclosed on the Venture Entity's statement of profit and loss for that year
except that:
a) Capital gains or losses shall be computed at 100
percent;
b) No adjustment shall be made for loss carry-backs or
carry-overs.
11.3.3 Return on Investment. The price per share calculated as Affiliate's basis
in the share increased at the rate of ten percent (10%) per year from the date
of purchase to the date of the event giving rise to termination.
11.3.4 Look Back Capitalization of Earnings: For three years following the event
causing the termination, the price per share shall be recalculated at the close
of each financial quarter. The price per share shall be recalculated as an
amount equal to five and one half (5.5) times the aggregate of the corporation's
net losses and profits during that quarter divided by the number of shares
outstanding as of the last day of the quarter and appropriately adjusted to
account for any intervening stock split or reverse split. At the close of the
twelfth financial quarter the average price per share for the twelve quarters
shall be determined and this average shall be used as the Look Back value of the
13
shares. Any additional compensation owed to the Seller as a result of this look
back calculation shall be paid to the Seller in accordance with the payment
provisions herein. The net profit or net loss for any fiscal year shall be as
disclosed on the statement of profit and loss of the Venture Entity for that
year except that:
a) Capital gains or losses shall be computed at 100
percent;
b) No adjustment shall be made for loss carry-backs or
carry-overs.
11.4 Buy/Sell Offer Option: In the event OPC fails to notify Affiliate of its
intention to exercise its Option under Section 11.2 above within thirty (30)
calender days following the Option Commencement Date, then Affiliate shall have
the option to set a single price per share at which it is willing to either buy
all of OPC's shares or sell all of its shares in the Venture Entity. Affiliate
shall notify OPC of its intention to present a Buy/Sell Offer within twenty (20)
calender days after the lapse of OPC's option rights. Affiliates option to
present a Buy/Sell offer to OPC will terminate at the end of the twenty (20)
calender day option period.
11.4.1 License, Terms of Trade and Terms of Service Agreements: Within fifteen
(15) calender days after being notified by Affiliate of its intention to make a
buy/sell offer, OPC shall present Affiliate with the agreements listed below.
a) License Agreement setting forth the terms and
conditions under which Affiliate will be allowed to
utilize the Know-how, Studies and Information in
conducting Operations in the Operating Territory
which terms and conditions will be consistent with
the intellectual property provisions of this Joint
Venture Agreement but including a reasonable ongoing
royalty to OPC.
b) Terms of Trade Agreement setting forth the terms and
conditions under which Affiliate will be allowed to
purchase OPC Integrated Water / Power Systems and
Spares for use within the Operating Territory which
Terms of Trade shall be consistent with the then
existing OPC terms of Trade.
c) Terms of Service Agreement setting forth the terms
and conditions under which OPC will provide services
to Affiliate which terms and conditions will be
consistent with the then existing OPC Terms of
Service.
11.4.2 Presentation and Acceptance of the Buy/Sell Offer: Within fifteen (15)
calender days of receipt of the License Agreement, Terms of Trade Agreement and
Terms of Service Agreement, Affiliate will present OPC with a written Buy/Sell
offer. OPC will have fifteen (15) calender days to notify Affiliate in writing
of its acceptance of the offer and its intention to purchase Affiliates shares
at the price per share provided for in the Buy/Sell offer. If the fifteen (15)
calender day acceptance period expires without an acceptance being received
Affiliate then, Affiliate shall be the Purchaser and OPC the Seller.
11.4.3 Closing: Within fifteen (15) calender days of acceptance or lapse of the
acceptance period, whichever occurs last, the Seller shall deposit with the
Venture Entity's accountants all of its Venture Entity share certificates
endorsed in favor of the Purchaser and Purchaser shall deposit with the Venture
Entity's accountants the funds or funds and promissory note as the case maybe in
accordance with the payment provisions in Section 11.5 below. Once the share
certificates and payment documents have been deposited, the accountants shall
deliver the funds, notes and certificates to the Seller and Purchaser as
14
appropriate. Both Seller and Purchaser shall defend and hold the Venture
Entity's accountants harmless from any liability arising from its acts in
accordance with this Section 11.4 and shall share equally in paying the
accountant's fees in performing these tasks.
11.5 Payment: At the option of the purchasing Party, the purchased shares may
be paid for in either of the following two fashions
11.5.1 Cash: By wire transfer of immediately available funds or a certified,
cashier's or other check acceptable to the selling Party for the full amount of
the compensation less a ten percent (10 %) discount.
11.5.2 Instalments: By payment of twenty-five percent (25%) of the compensation
amount in cash as described above with the remaining amount payable in twelve
(12) equal quarterly payments with interest on the unpaid principal at LIBOR
plus 1% adjusted quarterly. Said remainder will be evidenced by a Promissory
Note in standard form without pre-payment penalty. The promissory note shall be
secured by the shares being sold.
11.6 Cooperation: The Parties agree to cooperate fully with each other during
the termination, valuation, payment and transition process, to execute such
documents as are reasonably necessary for the consummation of all necessary
transactions and to take no action that would devalue the Venture Entity ,
compromise it operations or negatively impact its future prospects.
11.7 Non-Competition: In the event of termination, the selling Party shall
not, directly or indirectly, carry on or engage in, as an owner, manager,
operator, employee, salesman, agent, consultant, or other participant, any
Operations or any similar activities in the Operating Territory, for as long as
the purchasing Party, or any person deriving title to the goodwill of the
Venture Entity, carries on Operations in the Operating Territory. This
restriction will terminate five years from the date of the first payment by the
purchasing Party to the selling Party in accordance with the either payment
provision .
11.8 Dissolution and Winding-Up: In the event that this Joint Venture
Agreement is terminated and neither Party purchases the Venture Entity's shares
owned by the other Party, then the Venture Entity shall be dissolved and its
affairs wound-up as follows:
11.8.1 Procedures During Dissolution. On commencement of dissolution proceedings
the Venture Entity will cease to carry on business except as necessary to wind
up its business and distribute its assets. The Chief Executive Officer, the
President, or any Party appointed by the President, will perform the following
acts, as necessary, to wind up the affairs of the Venture Entity:
a) Employ agents and attorneys to liquidate and wind up
the affairs of the Venture Entity;
b) Continue the business as necessary for the winding up
of the affairs of the Venture Entity;
c) Carry out contracts and collect, pay, compromise, and
settle debts and claims for or against the Venture
Entity;
d) Defend suits brought against the Venture Entity;
15
e) ▇▇▇, in the name of the Venture Entity for all sums
due to the Venture Entity or recover any of its
property;
f) Collect any amounts owing on subscriptions to shares
or recover unlawful distributions;
g) Sell at public or private sale, exchange, convey, or
otherwise dispose of all or any part of the assets of
the Venture Entity for cash in an amount considered
reasonable by the President, or his or her
appointee(s); and
h) Make contracts and take any steps in the name of the
Venture Entity that are necessary or convenient in
order to wind up the affairs of the Venture Entity.
11.8.2 Distribution of Assets on Winding-up. The President, or the President's
appointee(s), will apply the assets of the Venture Entity in the order as
established below. For the purposes of this paragraph, assets distributed in
kind will be valued at their fair market value as of the date of the proposed
distribution, determined in good faith by the President or the President's
appointee(s).
a) To all debts and liabilities of the Venture Entity in
accordance with the law, including the expenses of
dissolution and liquidation, but excluding any debts
to a Shareholder;
b) To all senior debts to a Shareholder in accordance
with the terms of any subordination agreement;
c) To the accrued and unpaid interest on unsubordinated
debts to a Shareholder;
d) To the principal of unsubordinated debts to a
Shareholder;
e) To undistributed net profits of the Venture Entity
f) To repayment of the purchase price of the shares of
the Venture Entity actually paid by each Shareholder;
and finally,
g) To the Shareholders in proportion to the number of
shares of the Venture Entity held by each.
11.9 Survival: All provisions in this Joint Venture Agreement and the
Additional Documents relating to the confidential nature and limited use of
Know-how, Trademarks, Studies and Information, all non-competition provisions
and all provisions which by their nature are intended to operate after
termination, shall survive the Termination.
ARTICLE TWELVE: Settlement of Operating Committee Deadlock
12.1 Expertise: Should the Operating Committee be unable to obtain unanimous
approval of the Venture Entity's annual business plan at the request of either
Party, the proposed business plan shall be submitted for decision to an expert
16
appointed by mutual agreement. Failing agreement on such an appointment within
five calender days (5) following the request from either of the Parties to
consult expert advice, the more diligent of the two Parties may have recourse to
the International Centre for Expertise of the International Chamber of Commerce
in accordance with the rules on technical expertise made by the latter. Unless
by agreement between the Parties, the expert appointed by the Centre should be
able to speak English and shall be from a nationality different from the
Parties. The Parties undertake to accept the decision of the expert. Costs of
the expertise shall be borne equally by the Parties to the dispute.
ARTICLE THIRTEEN: Arbitration
13.1 Arbitration: Except with respect to specific issues as described in
Sections 13.2 and 13.3 below, all disputes between OPC, the Venture Entity
and/or Affiliate which can not be resolved first by good faith negotiation and
then by ICC conciliation procedures, will be resolved by a single ICC arbitrator
in accordance with the then current ICC arbitration rules and facilities. No
arbitrator will be of the same nationality as the contestants and the
arbitration proceedings will be conducted in the English language and held in
London unless a different venue is agreed to by the Parties.
13.2 Disputes Concerning Sums and Quantities (Baseball Arbitration): All
disputes within the Venture Entity and/or between OPC, the Venture Entity and/or
Affiliate concerning sums or quantities which are not resolved first by good
faith negotiation and then through ICC conciliation proceedings will be
submitted to a single ICC arbitrator. Each party shall submit to the arbitrator
and exchange with each other in advance of the hearing their last, best offers.
The arbitrator shall be limited to awarding only one or the other of the figures
submitted If the dispute concerns contract interpretation and/or other issues as
well as sums and/or quantities, the arbitration should be bifurcated with the
arbitrator first arbitrating and rendering his or her decision with respect to
the non-sums/quantities issues in accordance with standard ICC rules and, after
allowing the Parties a reasonable opportunity to submit to the arbitrator and
exchange with each other their last, best offers, the arbitrator shall award
only one or the other of the figures submitted.
13.3 License, Operations and Affiliate Termination: Disputes in which any
Party claims a right to terminate a License, the Venture Entity , Venture Entity
Operations, or this Joint Venture Agreement which cannot be resolved first
through good faith negotiation and then through ICC conciliation proceedings
will be submitted to a three member ICC arbitration panel. Sums or quantities
issues resulting from such terminations will be excluded from the baseball
arbitration requirement of Section 13.2 above. Arbitration decisions concerning
such terminations shall be appealable to a second panel, constituted in
accordance with the ICC rules which appeal panel shall have the power to adopted
the initial decision, modify the initial decision, or substitute its own
decision but such modification or substitution shall only be allowed in order to
correct clear errors of law or clear and convincing errors of fact. The appeal
panel shall have the authority to order such interim relief during the pendency
of the appeal as it deems just and proper. The award of the appeal tribunal
shall be final and binding, and judgment may be entered by any court having
jurisdiction thereof.
13.4 Remedies: The Parties waive any right to claim or receive an award of
punitive or exemplary damages by way of arbitration or other legal proceeding
against each other or the Venture Entity. The Secretariat of the International
Court of Arbitration of the ICC, the arbitrator and/or the chairman of the
17
arbitration panel shall be empowered to order emergency interim relief by way of
injunction or similar equitable relief which emergency interim relief may be
ordered whenever appropriate including before or during any conciliation
process.
13.5 Reasoned Decisions and Enforceability: All decisions in every arbitration
will be reasoned. All arbitration decisions are final, non-appealable (except as
set forth in Section 13.3). The Parties agree to take whatever actions are
ordered by an Arbitration Decision, to refrain from such actions as are
precluded by an Arbitration Decision and to allow judgement to be entered in
accordance with any Arbitration Decision in any Court of competent jurisdiction.
13.6 Attorney's fees and costs: Should any litigation or arbitration be
commenced between the parties to this Agreement concerning this Agreement, or
the rights and duties of the parties in relation to this Agreement, the party
prevailing in such litigation or arbitration shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum for attorneys' fees and
costs in connection with such litigation or arbitration, which sum shall be
determined by the trier of fact in such litigation or arbitration.
ARTICLE FOURTEEN: Amendment of Joint Venture Agreement
14.1 Written Amendments: Provisions in this Joint Venture Agreement may only
be amended by an additional clause drawn up between the Parties.
14.2 Periodic Review and Modification: Not less than once every thirty-six
(36) months the Operations Committee shall meet for the purpose of discussing
the terms and conditions of this Joint Venture Agreement and the Additional
Documents to ascertain their continued effectiveness and fairness. To the extent
that any such term or condition or combination thereof is determined to have
become ineffective or unfair the Parties agree to negotiate diligently and in
good faith to reach agreement on amendments or modifications to this Joint
Venture Agreement and/or the Additional Documents as are deemed necessary to
overcome any ineffectiveness or unfairness that has developed.
ARTICLE FIFTEEN: Duration of Joint Venture Agreement
15.1 Duration: This Joint Venture Agreement and any amendments or replacements
of it shall be valid as long as the Parties jointly conduct Operations through
the Venture Entity or otherwise and until all accounts between the Parties are
still to be finally settled.
ARTICLE SIXTEEN: Notification
16.1 For the purposes of this Joint Operating Agreement, any notice may be
given by messenger, in writing (express air mail, post paid) or by facsimile
from one Party to the other and received at the following addresses:
Ocean Power Corporation: Affiliate
▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ (▇▇▇) 95672
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
16.2 If any Party changes its address,it shall notify the other by registered
letter with acknowledgment of receipt.
18
ARTICLE SEVENTEEN: Severability
17.1 Should any portion or provision of this Agreement be declared invalid or
unenforceable in any jurisdiction, then such portion or provision shall be
deemed to be severable from this Agreement as to such jurisdiction (but, to the
extent permitted by law, not elsewhere) and shall not affect the remainder of
this Agreement unless, enforcement of the Agreement without the affected
provision would deny either Party a fundamental benefit of the Agreement in
which case the Agreement will be amended to remedy such lose.
ARTICLE EIGHTEEN: Waiver
18.1 No waiver of any obligation of either party hereto under this Agreement
shall be effective unless in writing, specifying such waiver, and executed by
the other party. A waiver by either party hereto of any of its rights or
remedies under this Agreement on any occasion shall not be a bar to the exercise
of the same right or remedy on any subsequent occasion or of any other right or
remedy at any time.
ARTICLE NINETEEN: Interpretation
19.1 Headings and Titles: The designation of a title, or a caption or a heading,
for each section of this Agreement is for the purpose of convenience only and
shall not be used to limit or construe the contents of this Agreement.
19.2 Presumptions: Because both parties hereto have participated in drafting
this Agreement, there shall be no presumption against any party on the ground
that such party was responsible for preparing this Agreement or any part of it.
19.3 Counterparts: This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
19.4 Complete Agreement: This Agreement and the Additional Documents constitute
the complete understanding of the Parties regarding the subject matter hereof
and supersede all prior or contemporaneous agreements of the parties, whether
written or oral.
ARTICLE TWENTY: Warranty of Authority:
20.1 Each Party warrants that it has the power to enter into and perform this
Agreement; and this Agreement's execution has been duly authorized by all
necessary corporate action.
Ocean Power Corporation
Date: 2/23/01
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Caribbean Water & Power, Inc.
Date: Oct.5, 2000
By: /s/ G. ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
G. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Pres.
ATTACHMENT 1 TO THE JOINT VENTURE AGREEMENT BETWEEN OPC AND CARIBBEAN WATER AND
POWER
ATTACHMENT ONE
To the Joint Venture Agreement between
Ocean Power Corporation and Caribbean Water & Power
"Operating Territory" refers to the following countries:
a. Antigua and Barbuda o. Anguilla
b. The Bahamas p. British Virgin Islands
c. Barbados q. Turks and Caicos Islands
d. Belize r. Puerto Rico
e. Dominica s. U.S. Virgin Islands
f. Grenada t. Dominican Republic
g. Jamaica u. Haiti
b. Montserrat V. Cuba
i. St. Kitts and Nevis W. Martinique
j. St. ▇▇▇▇▇ ▇. Grand Cayman
k. St. ▇▇▇▇▇▇▇ and the Grenadines y. St. Barts
1. Suriname z. Bermuda
m. Trinidad aa. Aruba & Curaca
n. Tobago bb. Guyana
Ocean Power Corporation Caribbean Water & Power, Inc.
Date: 2/23/01 Date: Oct. 5, 2000
By: /s/ ▇▇ ▇▇▇▇▇▇ By: G. ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------- --------------------
▇▇ ▇▇▇▇▇▇, President G. ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
--------------------------------------------------------------------------------
Print or type name and title Print of type name and title
Attachment One
Joint Venture Agreement
Ocean Power Corporation
Caribbean Water & Power