EXHIBIT 10.8
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NATK ROYALTY AGREEMENT
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This Agreement (the NATK Royalty "Agreement") is made and entered into the
____ day of ____________, 2003 (the "Effective Date"), by and between North
American Technologies Group, Inc., a Delaware corporation ("NATK"), hereinafter
referred to as "Payor" and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and J. ▇▇▇▇▇
▇▇▇▇▇▇▇ as Co-Trustees for the benefit of Dune Holdings, L.L.C., assignee of
Gaia Holdings, Inc. ("Dune"), and Thor Ventures, L.L.C. ("Thor"), hereinafter
collectively referred to as "Payee."
RECITALS
1. Pursuant to that certain agreement between Payee and TieTek, Inc.
executed contemporaneously herewith ("the new TieTek Royalty
Agreement"), Payee acknowledges that TieTek, Inc., a Delaware
corporation and wholly owned subsidiary of NATK is, subject to the
payment of certain royalties set forth in the new TieTek Royalty
Agreement, the sole and exclusive owner of the "Technology" as
hereafter defined.
2. Payee approves and consents to the assignment of the rights to the
Technology to TieTek, Inc.
3. Payee was a party to that certain TieTek Royalty Agreement dated as of
December 30, 1997, which was amended by that certain Royalty
Settlement Agreement dated as of June 8, 2000. Payee is the only party
entitled to any royalty under these prior agreements.
4. Payee is a party to the new TieTek agreement executed
contemporaneously herewith providing for various royalty payments that
relate to the Technology. The parties hereto agree and acknowledge
that the New TieTek Royalty Agreement is separate and distinct from
this Agreement, and any obligations contained in the New TieTek
Royalty Agreement or any breach or default therein shall have no
effect on this Agreement and the obligations of Payor and Payee
contained herein.
5. The parties desire to terminate the certain agreements referred to in
3. above and to enter into this new Agreement for the payment of
royalties relating to the Technology.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
Article I
DEFINITIONS
The following terms shall have the following meanings for purposes
of the Agreement:
1.1 "Net Revenues From Product Sales" means the gross revenue generated
by the sale or transfer for value of Products less:
(i) refunds, rebates or allowances to customers resulting from
defects, failures, or malfunctions not in excess of the
original selling price of the products, and
(ii) governmental sales taxes, tariffs, duties, and similar charges
added to the selling price of the Products and paid by the
selling party to a government or quasi-governmental entity,
but excluding any taxes based on income, capital gains,
property, franchise, or any other tax.
1.2 "Net Revenues From Technology Sales" means the gross revenue
generated by the licensing, rental, or sale of the Technology, less
governmental sales taxes, tariffs, duties, and similar charges added
to the amount of such revenue and paid by the owner of the
Technology to a government or quasi-governmental entity, but
excluding any taxes based on income, capital gains, property,
franchise, or any other tax.
1.3 "Products" means railroad or transit authority ties manufactured
through the use or benefit of the Technology, as well as other items
manufactured through the use or benefit of the Technology, to
produce structural composite parts, including by way of example,
marine pilings, mining support timbers, and roofing materials.
Products would not include plastic-wood lumber, plastic extrusion
shapes, or unrelated businesses.
1.4 "Technology" shall mean (a) United States Patent Number 5886078
issued March 23, 1999, [and any international counterparts] and
United States patent Published Application No. 20020123553 with
Application Date of March 5, 2001 [and any international
counterparts], which have been acquired by Payor, together with any
modifications, improvements, corrections, or substitutions thereto,
and (b) the trade secrets, designs, and know-how developed, owned,
conceived, and/or reduced to practice by Payor (or its predecessor)
for materials, processes, and methods to be used in the production,
manufacture, or refinement of railroad or transit authority ties and
other composite parts.
Article II
ROYALTIES
2.1 Payment of Royalties. Payor shall compensate and deliver to Payee
(in exchange for reducing Royalty Payments from TieTek, Inc. during
years 2004 and 2005 and accepting certain Annual Royalty Caps) in a
timely manner as set forth in Article II below the following:
(a) Contemporaneously with the execution of this Royalty
Agreement, the sum of $250,000 in cash; and
(b) For the period beginning January 1, 2004 and ending December
31, 2005, 62,500 shares of NATK common stock per quarter for
eight quarters. NATK will obtain shareholder approval and
issue the stock within five working days of the end of each
quarter and will issue the stock in such certificate
quantities as shall be designated by Payee; and
(c) On or before May 1 of each calendar year, shares of NATK
common stock equal to the value of the royalty set forth in
(ii) below and reduced by the amount of cash royalty received
by the Payee from TieTek, Inc. pursuant to the New TieTek
Royalty Agreement.
(i) The number of shares of common stock to be delivered
shall be determined by dividing the average closing
share price during the first quarter immediately
following the end of each calendar year into the amount
of money owed to Payee by Payor. NATK will issue the
stock in such certificate quantities as shall be
designated by the Payee.
(ii) For the period ending December 31, 2005, value of
royalties equal to one and one-quarter percent (1.25%)
of all Net Revenue from Product Sales and Net Revenue
from Technology Sales; and for the period beginning
January 1, 2006 and ending December 31, 2013, the value
of royalties equal to two and one-half percent (2-1/2%)
of all Net Revenue from Product Sales and Net Revenues
from Technology Sales.
2.2 Related Provisions
(a) If the Royalty Payable in any subsequent year (after reaching
a $1,000,000 Royalty payable year) falls below $1,000,000,
then the Royalty Payable for the single year immediately
following will be increased by the difference between the
Royalty Payable and $1,000,000 and will become the basis for
NATK's commitment for that single year.
(b) All shares of NATK common stock previously issued to Payee
and/or issued to Payee under the terms of this agreement will
be registered for public resale on the next subsequent
registration statement filed by NATK with the Securities and
Exchange Commission, exclusive of S-4 and S-8 registrations.
(c) At such time that the total royalties paid to Payees reaches
the amount where the Sponsor Investments, LLC option to
acquire 49.9% of TieTek, Inc. reaches $10.00 or less, then
NATK shall assume all further Royalty Payment obligations of
Sponsor to the Payees.
(d) In the event that NATK utilizes the Technology outside of
TieTek, Inc., Payor will pay Payee Royalties as defined in 2.1
(c) (ii) above.
Article III
ACCOUNTING MATTERS
3.1 Royalty Statements. Within 90 days after the end of each calendar
quarter during which royalties are due, Payor will deliver to Payee
a statement signed and certified to by an officer of Payor which
accurately sets forth in reasonable detail which royalties are to be
paid during said quarter, and will contemporaneously therewith pay
any royalties due.
3.2 Record of Payor. All of Payor's accounting records related to the
calculations of and payment of royalties hereunder shall be
maintained in accordance with generally accepted accounting
principles, objectively applied. All books of account, records,
sales slips, invoices, purchase orders, franchise tax returns, and
federal income tax returns relating to Payor's operations will be
retained by Payor for a period of three (3) years after preparation,
and will be open to inspection by Payee (or Payee's representative)
at all reasonable times.
3.3 Audit Rights of Payee. Payee may, at any time or times during normal
business hours, and upon five (5) business days' prior written
notice to Payor conduct an audit of any royalty statement delivered
pursuant to Section 3.1, and may examine relevant records for the
calendar quarter covered by the royalty statement. Acceptance of any
royalty tendered by Payor shall not prejudice their rights to
contest a royalty statement.
Article IV
MISCELLANEOUS
4.1 Governing Law. The construction and interpretation of this Agreement
shall be in accordance with the laws of the state of Texas and the
applicable laws of the United States of America.
4.2 Notice. Any payment, report, communication, request or notice
required or permitted by this Agreement shall be in writing and
shall become effective at the time of receipt thereof and shall be
addressed to the parties as follows:
(a) If to Payor:
With a copy to:
(b) If to Payee:
With a copy to :
Notice may be effected by hand delivery, U.S. Mail or telecopy. Each
party shall have the continuing right to change its address for
notice at any time or times by giving ten (10) days' notice in the
manner hereinafter described. Notices shall be deemed given only
upon actual receipt; however, notice sent by U.S. mail, postage
prepaid, certified, return receipt requested shall be deemed
received three business days after deposited with the U.S. Postal
Service.
4.3 Amendments. This Agreement shall not be modified, amended or
otherwise varied by any oral agreement or representation and all
modifications, amendments, and variations shall be by an instrument
in writing executed by the parties hereto.
4.4 Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their successors and
assigns.
4.5 No Partnership. Nothing in this Agreement shall in any way be
construed to make the parties partner, joint venturers, agents,
servants or employees of one another, and no such relationship is
intended.
4.6 Confidentiality. During the performance of each party's obligation
under this Agreement, each party may obtain information of various
types from the other party. Each party agrees that all such
information, whether technical, financial, business or other nature
shall be held in confidence and not used to the detriment of the
disclosing party by the non-disclosing party nor disclosed to any
third party by the non-disclosing party. This Section 4.6 shall not
apply to any information which (a) can be shown by a party to have
been in that Party's possession prior to the date hereof; b) is now
or hereafter (by operation of law) becomes information in the public
domain; (c) can be shown by a party to have been received on a
non-confidential basis from a third party who did not acquire same,
directly or indirectly, from the other Party; (d) can be shown by a
Party to have been developed without access to any confidential
information otherwise covered by this Section 4.6; (e) is required
to be disclosed as a matter of law; or (f) is required to be
disclosed pursuant to a written agreement between the parties.
4.7 Payee Representatives.
(a) Payor shall only be required to rely on instruments and
directives from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and J.
▇▇▇▇▇ ▇▇▇▇▇▇▇ or their successors as Co-Trustees, acting in a
majority or unanimously, which instructions and directives, if
required by Payor, shall be in writing. If, at any time,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ or
their successors as Co-Trustees, unanimously notify the Payor
in writing (a) that the rights to receive Royalty have been
assigned or otherwise transferred to Dune and Thor; and (b) of
the portion of the total Royalty to be paid to each Dune and
Thor, then Payor shall thereafter, and until future notice
from the President of either Dune and/or Thor; (c) distribute
such Royalty as directed; and (d) only be required to rely on
instruction and directives from the President of Dune and/or
Thor with respect to their respective pro rata share of
Royalty.
(b) In the event that Dune or Thor should dissolve or,
alternatively, the rights to receive Royalty should otherwise
be distributed to the members of Dune or Thor or another
entity such as a royalty trust (as the case may be), then
Payor may rely on (a) a duly executed copy of the Agreement,
Plan, and/or Articles of Dissolution of Dune or Thor (as the
case may be, in the case of dissolution), or (b) a duly
executed assignment (in the case of distribution) to determine
the ownership of the rights to receive Royalty. In addition,
the members of Dune and/or Thor shall each, unanimously,
designate among themselves representatives, and thereafter
Payor shall only be required to rely on instructions and
directives from such representatives. Payor shall have the
right to request and rely on instruction from each such
representative, provided such instructions do not impair the
rights of any members represented by the other
representatives.
4.8 Integration and Release. This Agreement supersedes that certain
Royalty Agreement dated December 30, 1997 as amended by agreement
dated June 8, 2000 between the parties hereto and other parties.
This Agreement represents the final agreement between NATK and the
Payees and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements by the parties with
respect to the subject matter of this Agreement. There are no
unwritten oral agreements between the parties.
By the execution of this Agreement, and the New TieTek Royalty
Agreement. Payee releases all claims to royalties due under the
royalty agreements referred to above and dated December 30, 1997 as
amended June 8, 2000 or for any breaches of such agreements and
acknowledges full satisfaction.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate by duly authorized persons.
"PAYOR"
NORTH AMERCIAN TECHNOLOGIES GROUP, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ February 5, 2004
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Date
Title: Chief Executive Officer
"PAYEE"
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
and J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Co-Trustees for
the Benefit of Dune Holdings, L.L.C.
(assignee of Gaia Holdings, Inc.) and
Thor Ventures, L.L.C., one certain
Trust Agreement dated December 29,
1995, by and among them.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ February 5, 2004
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date
Co-Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ February 5, ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Date
Co-Trustee
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ February 5, 2004
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇ Date
Co-Trustee