Amended and Restated Sublicense Agreement, dated as of June 15, 2006, by and between Xethanol Corporation and H2Diesel, Inc AMENDED AND RESTATED SUBLICENSE AGREEMENT
Exhibit
10.2
Amended
and Restated Sublicense Agreement, dated as of June 15, 2006, by and between
Xethanol Corporation and H2Diesel, Inc
AMENDED
AND RESTATED SUBLICENSE AGREEMENT
This
Amended and Restated Sublicense Agreement (the "Agreement") is made by and
between H2Diesel, Inc., a Delaware corporation (hereinafter "Sublicensor")
and
Xethanol Corporation, a Delaware corporation (hereinafter "Sublicensee"), as
of
the 15th day of June, 2006 (the “Effective Date”).
WHEREAS,
Sublicensor
and Sublicensee are parties to a Sublicense Agreement entered into as of the
14th
day of
April, 2006, pursuant to which Sublicensor granted a license to Sublicensee
with
respect to intellectual property rights relating to a certain chemical additive
for use in making bio-fuel for internal combustion engines (the “Additive”);
and
WHEREAS,
the
parties desire to amend and restate the terms of said Sublicense Agreement
effective retroactively as of the date of said Sublicense Agreement on the
terms
and conditions set forth herein.
NOW,
THEREFORE,
in
consideration of the mutual covenants and terms expressed herein, and other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Parties hereby agree, covenant, and undertake as
follows:
1. DEFINITIONS.
In
addition to other capitalized terms defined elsewhere herein, the following
terms as used in this Agreement shall have the meanings set forth
below:
“Actual
Cost”
shall
be the price per applicable quantity unit of the Additive which shall be equal
to Sublicensor’s actual cost of raw materials used in making that quantity of
the Additive as determined in accordance with generally accepted accounting
principles (“GAAP”), plus ten percent (10%). As of the date of this Agreement
Sublicensor’s actual cost of the raw materials for the Additive in solid form is
not more than 10 cents ($0.10) per Gallon of biodiesel fuel producible in
accordance with the blending formulations currently forming part of the Know-How
to be provided to Sublicensee under this Agreement.
“Affiliate”
shall
mean any person or entity directly or indirectly Controlling or having the
power
to Control, or Controlled by or being under common Control with another person
or entity.
“Consolidated
Entity”
shall
mean an entity the financial results of which are consolidated with those of
Sublicensor for financial accounting purposes in accordance with
GAAP.
“Control”
means
the direct or indirect possession of power to direct or cause the direction
of
the management or policies of such party, whether through ownership of stock
or
other securities, by contract or otherwise. Ownership of more than fifty percent
(50%) of the beneficial interest of an entity shall be conclusive evidence
that
control exists.
“Exclusive
License Agreement”
means
the Exclusive License Agreement between ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as Licensor and
Sublicensor as Licensee, dated March 28, 2006.
“Gallon”
shall
mean a liquid unit equal to 4 quarts or 3.785 liters.
“Improvement”
shall
mean any enhancement, refinement, discovery, invention, trade secret or
additional technology, whether patentable or non-patentable under the laws
of
any country (including, without limitation, any test or other proprietary data,
experience, methods, processes, know-how, new apparatus, equipment, machinery,
Products, specifications, designs and information) of or related to the Know-How
licensed hereunder, the Additive or any Product developed, conceived or
otherwise arising after the date hereof.
“Know-How”
shall
mean technical information, including without limitation trade secrets, whether
or not patentable, relating to, used in, or useful in connection with, the
use
of the Additive for production of a Product (as defined below) for internal
combustion engines, including, without limitation, suggested chemical plant
configurations, plans and formulation(s) for blending of the Additive with
other
raw materials to create a Product.
“License”
shall
mean the license granted in Section 2 hereof.
“Licensor”
means
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
“Patent
Rights”
shall
mean all claims of such patent applications and issued patents that are directed
to the Additive, production of the Additive, Know-How or Improvements (each
as
defined herein) hereafter filed or issued to which Sublicensor may acquire
rights during the term of this Agreement.
“Product(s)”
shall
mean any fuel or chemical which is manufactured using the Additive.
“Specifications”
shall
mean the specifications applicable to the use of the Additive to produce
Products and the performance of those Products, as proposed by Sublicensor
in
good faith and reasonably agreed to by Sublicensee from time to time. The
Specifications shall at all times reflect the best commercial product being
delivered by Sublicensor to Sublicensee or any other party or being used by
Sublicensor for its own account.
“Territory”
shall
mean the geographic areas defined in Annex
A.
2. SUPPLY
OF THE ADDITIVE FOR USE IN PRODUCTION OF PRODUCTS; GRANT
OF SUBLICENSE
2
2.1
Sublicensor
agrees to supply the Additive to Sublicensee for use solely in manufacturing
Products made with the Additive blended therein while this Agreement is in
effect. The parties acknowledge and agree that the Additive as well as Products
utilizing the Additive have not yet been mass produced by either party and
that
therefore the parties will work cooperatively so that as Sublicensee’s capacity
to produce Products is established and increases over time, Sublicensor can
increase its capacity to produce sufficient quantities of the Additive to supply
Sublicensee’s requirements for same. In furtherance thereof, Sublicensee shall
inform Sublicensor when Sublicensee commences construction of manufacturing
facilities for Products as well as the timeframe for such facilities to commence
production of Products and will notify Sublicensor reasonably in advance of
such
facilities actually commencing production of Products to enable Sublicensor
to
coordinate its production capacity for the Additive accordingly to meet
Sublicensee’s supply needs for same. Additionally, Sublicensee shall thereafter
notify Sublicensor reasonably in advance of any increases in its Product
production capacity to enable Sublicensor to increase its Additive production
capacity such that Sublicensor can maintain a level of Additive production
capacity sufficient to supply one hundred ten percent (110%) of Sublicensee’s
needs for supply of the Additive. Subject to such cooperation, Sublicensor
agrees to supply all of the Additive required to fill all of Sublicensee’s
orders for same; provided, however, that, unless Sublicensor determines
otherwise, in no event shall orders for the Additive be made or accepted until
Sublicensor (or its designated supplier) has commenced manufacturing of the
Additive and all required regulatory and other legal approvals and requirements
have been obtained and/or satisfied. Quantities of the Additive to be supplied
to Sublicensee shall be confirmed to Sublicensee after the receipt by
Sublicensor of a purchase order for same from Sublicensor shall undertake
commercially reasonable efforts to fill orders within the timeframe specified
in
such order; provided, however, that Sublicensor shall not have any liability
for
failure to ship orders for the Additive within such timeframe due to
circumstances beyond its control. The purchase price for the Additive to be
paid
by Sublicensee shall be equal to the lesser of (a) Sublicensor’s then current
Actual Cost or (b) the lowest price charged by Sublicensor to any other third
party purchaser of Additive which is not an affiliate of Sublicensor, unless
(c)
another price is determined by mutual agreement of Sublicensor and Sublicensee.
In
addition to the applicable purchase price, Sublicensor shall be entitled to
separately invoice for, and Sublicensee shall pay, all sales, use, excise,
value
added, gross receipts, turnover and other taxes and charges imposed by law
or
required to be paid or collected by Sublicensor in connection with the purchase,
delivery, sale or use of the Additive pursuant to this Agreement, excluding
taxes based on Sublicensor’s net income.
All
payments relating to purchases of the Additive shall be due to Sublicensor
from
Sublicensee within thirty (30) days after the date on which the ordered Additive
is shipped to Sublicensee. Payments shall be made by check or wire transfer
or
as otherwise specified by Sublicensor in the invoice for the applicable
shipment. Each order shall constitute an independent transaction and Sublicensee
shall pay the invoice for each such transaction strictly in accordance with
these payment terms. All orders for the Additive shall be deemed to incorporate
the warranty disclaimers, limitations of liability and other applicable terms
of
this Agreement, and shall be nonreturnable and the price paid nonrefundable
unless the Additive does not meet the Specifications for the Additive in effect
at the time of order. Sublicensee shall designate the shipping method and pay
all costs incurred in connection with shipment of the Additive to Sublicensee’s
designated destination, including the cost of the shipper and any in transit
insurance (which shipping costs shall be paid directly by Sublicensee and not
as
reimbursement to Sublicensor). Risk of loss with respect to orders of the
Additive purchased and sold hereunder shall pass to Sublicensee at the time
that
the order is deposited with Sublicensee’s designated shipper. No less often than
every calendar quarter while this Agreement is in effect, Sublicensee shall
provide to Sublicensor forecasts of Sublicensee’s anticipated Additive purchase
requirements. Without Sublicensor’s prior written consent or unless Sublicensor
fails to fulfill its obligations to provide Additive pursuant to this Agreement,
Sublicensee may not procure the Additive from any third party other than
Sublicensor or a Sublicensor designated supplier or produce the
Additive.
2.2 Subject
to the terms and conditions of this Agreement, Sublicensor hereby grants to
Sublicensee while this Agreement in effect, a non-transferable, exclusive
license, with no right to grant sub-sublicenses other than to (a) any holding
company formed to hold all of the equity interests in Sublicensor and any wholly
owned subsidiaries of Sublicensee or such holding company and (b) entities
in
which it has an equity interest (determined in accordance with GAAP) of not
less
than twenty percent (20%) and which are not competitors of Sublicensor
(it
being
understood that an entity that produces Product using the Additive and sells
such Product shall not be deemed by reason thereof to be a competitor of
Sublicensor), provided
that any such holding company, subsidiary or other entity agrees in writing
to
observe all of the obligations and limitations set forth under this Agreement,
including the payment of Royalties, and Sublicensee guarantees performance
of
such obligations by such other party, under the Patent Rights and under the
Know-How to make, cause to be made, use and sell any Product in the Territory
and the non-exclusive right to sell any Product anywhere else within North
America, namely, the United States of America, its possessions and territories,
Canada and Mexico), Central America (namely, Belize, Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, Panama), and Caribbean countries (namely,
Antigua & Barbuda, Aruba, Bahamas, Cayman Islands, Cuba (currently subject
to U.S. embargo), Dominica, Dominican Republic, Grenada, Guadeloupe, Haiti,
Jamaica, Martinique, St. Kitts & Nevis, St. Lucia, St. ▇▇▇▇▇▇▇ and the
Grenadines, Trinidad & Tobago, Turks & Caicos Islands, and Virgin
Islands). Sublicensee shall not engage any third party to make any Product
without the prior written approval of Sublicensor, which approval shall not
be
withheld or delayed unreasonably, and shall not directly or indirectly re-sell
the Additive or any Product which has the Additive as a component outside the
Territory. In the event that Sublicensor acquires rights in South America under
Section 1(c) of the License, the permitted non-exclusive resale territory shall
be expanded to include South America (namely, Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, French Guiana, Guyana, Peru, Suriname, Uruguay and
Venezuela), but specifically excluding Paraguay.
3
Sublicensee
shall undertake reasonable efforts to ensure compliance with the foregoing
restrictions, including, without limitation, imposing contractual restrictions
in connection with its sale of Products to third parties. Sublicensee shall
handle and treat all Know-How provided hereunder with the highest degree of
secrecy and care in accordance with the requirements of Section 18.8 hereof.
Sublicensee shall not reproduce or provide access to any of the Know-How to
any
person except as necessary to perform its obligations hereunder, or in the
exercise of its right to engage others to make the Product if approved by
Sublicensor as provided above, and any such person receiving disclosure of
any
Know-How pursuant hereto shall be required to comply with the confidentiality
obligations imposed herein with respect to same, with Sublicensee remaining
fully responsible for such compliance. Sublicensee shall not directly or
indirectly reverse engineer, attempt to reverse engineer or otherwise attempt
to
derive the formula or other trade secrets with respect to the Additive, or
assist or permit others to do so.
2.3 Sublicensor
shall use its commercially reasonable efforts on a continual basis throughout
the term of this Agreement to make Improvements to the Additive and shall use
all such improvements that result in an improvement in the Additive or the
performance of the Product in the production of the Additive.
2.4 Sublicensee
shall be jointly and severally obligated with Sublicensor and liable to Licensor
for all of the obligations of Sublicensor to pay royalties under the Exclusive
License Agreement, to the extent that such obligations arise from the exercise
by Sublicensee of the rights granted to it in this Agreement; provided, however,
that Sublicensee shall have no obligation to make any payments to Licensor
in
excess of the unpaid Royalty payments due from Sublicensee to Sublicensor at
the
relevant time.
2.5 This
Agreement creates no relationship of partnership, joint venture, employment,
franchise, or agency between the parties. This Agreement shall not constitute
the designation of either party as the representative or agent of the other,
nor
shall either party to this Agreement have the right or authority to make any
promise, guarantee, warranty, or representation, or to assume, create, or incur
any liability or other obligation of any kind, express or implied, against
or in
the name of, or on behalf of, the other party, without the other party’s prior
written consent and approval.
2.6 Sublicensee
agrees not to contest, challenge or attack the ownership of the intellectual
property rights relating to the Additive, the Know-How or anything else provided
by Sublicensor hereunder, or Sublicensor's right to grant licenses or
sublicenses to use same on whatever terms and conditions acceptable to
Sublicensor in its sole and absolute discretion, or assist others in doing
any
of same.
3. ROYALTIES
3.1 In
consideration of the grant of license hereunder, Sublicensee agrees to pay
to
Sublicensor a royalty per Gallon of Product sold directly or indirectly by
or
through Sublicensee, its agents, affiliates, subsidiaries and permitted
sub-sublicensees, equal to the lesser of (a) ten U.S. cents ($0.10) and (b)
the
lowest royalty per Gallon of Product that is charged as a royalty to any other
third party that is not a Consolidated Entity, which third party is licensed
or
otherwise authorized to make or sell any fuel or chemical using the Additive
(the “Royalties”).
4
3.2 In
the
first twelve (12) months from the date on which (a) Sublicensor notifies
Sublicensee that it is able to produce and deliver to Sublicensee Additive
conforming to the Specifications in quantities that are necessary to meet
Sublicensee’s requirements (and provided that Sublicensor is in fact then able
to do so), and (b) Sublicensor provides Sublicensee with the necessary technical
and engineering specifications for a process plant to produce the Products
(the
“Trigger Date”), Sublicensee shall be obligated to pay Royalties with respect to
at least twenty million (20,000,000) Gallons of Products (the “Initial Mandatory
Minimum Sales”). The mandatory minimum sales with respect to which Royalties are
required to be paid shall increase by ten million (10,000,000) Gallons of
Products for each subsequent twelve (12) month period following the first
anniversary of the Trigger Date while this Agreement is in effect as compared
to
the mandatory minimum for the immediately prior twelve (12) month period (the
“Follow-On Mandatory Minimum Sales”). For example, the Follow-On Mandatory
Minimum Sales for the twelve (12) month period commencing twelve (12) months
after the Trigger Date shall be thirty million (30,000,000) Gallons of Products,
and so on. Sublicensee’s obligation to pay Royalties on the Initial Mandatory
Minimum Sales is irrevocable, whether or not Sublicensee actually achieves
such
Initial Mandatory Minimum Sales. In the event that Sublicensee fails to achieve
the Initial Mandatory Minimum Sales requirement or the Follow-On Mandatory
Minimum Sales requirements in any period during the first two (2) twelve (12)
month periods after the first anniversary of the Trigger Date, Sublicensor
shall
have the right, at its option, to either terminate this Agreement and
Sublicensee’s rights hereunder or convert Sublicensee’s exclusive rights
hereunder to non-exclusive rights (in addition to its right to payment of the
Royalties payable on the Initial Mandatory Minimum Sales) unless Sublicensee
shall pay the difference between the amount of Royalties actually due for such
period under this Agreement and the amount of Royalties that would have been
due
had Sublicensee sold the minimum amounts required as set forth above during
such
period, within the time provided herein for payment of Royalties for such period
(the “Cure Right”). In the event that Sublicensee fails to achieve the Follow-On
Mandatory Minimum Sales for the fourth twelve (12) month period after the
Trigger Date or any subsequent twelve (12) month period while this Agreement
is
in effect, Sublicensee’s exclusive rights shall automatically be converted to
non-exclusive, unless Sublicensee exercises the Cure Right with respect thereto.
If Sublicensee shall elect, in its sole discretion, not to exercise the Cure
Right with respect to a failure to achieve the Follow-On Mandatory Minimum
Sales
for any twelve (12) month period after the first two (2) twelve (12) month
periods after the first anniversary of the Trigger Date, then the obligation
of
Sublicensee to pay Royalties based upon Follow-On Mandatory Minimum Sales for
any subsequent period, commencing with the period as to which the Cure Right
was
not exercised, shall also terminate.
3.3 All
Royalties shall be paid by Sublicensee to Sublicensor on a quarterly basis,
with
all Royalties payable with respect to sales of Products in a particular calendar
quarter due within thirty (30) days after the end of the calendar quarter in
which sales of Products caused such Royalties to be accrued. Royalty amounts
not
paid when due shall accrue interest at the rate of one and one-half percent
(1
1/2%) per month or the highest rate permitted by law, whichever is less, until
paid in full. Each such payment shall be accompanied by an accounting statement,
which shall include:
(i)
the
quantity of Products sold; and
(ii)
the
total of all Royalties payable to Sublicensor.
5
3.4 Sublicensee
shall keep proper books of account showing sales of Products. Sublicensor's
designated auditing firm shall have access to the books and records of
Sublicensee once per twelve (12) month period to independently determine the
amount of Royalties payable hereunder, but for no other purpose. All information
obtained by Sublicensor and its auditing firm shall be kept strictly
confidential by Sublicensor and its auditing firm; provided that such
information may be used by Sublicensor and its counsel in enforcing its rights
under this Agreement. In the event that an underpayment of Royalties in excess
of five percent (5%) of the total Royalties that should have been paid is
determined to have occurred, Sublicensee shall promptly pay to Sublicensor
the
amount of the deficiency together with interest accrued thereon, as well as
the
expenses incurred by Sublicensor in connection with verifying Royalty payments
pursuant hereto.
4. RETENTION
OF RIGHTS.
Notwithstanding any other provisions herein, Licensor, Sublicensor and
Sublicensor's other sublicensees will have the absolute, right to use the
technology covered by the Patent Rights and Know-How and all Improvements
thereof, for conducting research and for any other purposes permitted pursuant
to the Exclusive License Agreement or any valid sublicense
agreements.
5. OWNERSHIP
OF IMPROVEMENTS; PATENT
PROSECUTION. Sublicensee
acknowledges and agrees that, except as otherwise expressly provided below,
Sublicensor shall own the intellectual property rights with respect to any
Improvements that are developed by or for Sublicensee. In the event that
Sublicensee, or any person employed or engaged by Sublicensee (including any
person employed or engaged by any entity engaged by Sublicensee), develops
or
creates Improvements, Sublicensee promptly shall offer to, and upon
Sublicensor’s acceptance, shall assign, or shall cause any and all such persons
to grant back and assign, to Sublicensor or Sublicensor’s designated Affiliate,
free of charge, all rights of ownership in such Improvements, whether such
Improvements are patentable or non-patentable under the laws of any country.
Sublicensee shall retain a right to use such Improvements solely in accordance
with the license and other terms of this Agreement, provided that Sublicensee
treats the Improvements with the same obligations of secrecy and care that
apply
to Know-How and Confidential Information. Sublicensee hereby agrees to assist
Sublicensor in any manner as shall reasonably be requested by Sublicensor to
evidence, perfect and protect Sublicensor’s rights with respect to the Know-How
and the Additive and Sublicensor’s ownership of intellectual property rights
with respect to Improvements and to execute and deliver such legal instruments
and other documents as Sublicensor may reasonably request in connection
therewith, including, but not limited to, declarations of inventorship, powers
of attorney and assignment documents. Sublicensee will at any time, including
after termination of this Agreement, upon request, communicate to Sublicensor,
its successors, assigns, or other legal representatives, such facts relating
to
any Improvements as may be known to the Sublicensee, and to testify, at
Sublicensor’s or such successors’, assigns’ or other legal representatives’
expense, as to the same in any interference or other legal proceeding related
thereto. Sublicensee will make and maintain adequate and current written records
and evidence of all Improvements, all of which shall be provided to Sublicensor
upon request and upon the termination of this Agreement, regardless of the
reason for such termination, and shall not be disclosed to any third party
without the prior written consent of Sublicensor. Sublicensee will not
incorporate or allow to be incorporated into any Improvement anything which
is
subject to the intellectual property rights of any third party, unless
Sublicensee has the right to copy and incorporate such material.
As
between Sublicensor and Sublicensee, Sublicensor, and not Sublicensee, shall
be
responsible for prosecuting all United States patent applications, and foreign
patent applications in such foreign jurisdictions as Sublicensor chooses, with
respect to Improvements, the Know-How, the Additive and any Product, and for
taking action at its discretion as shall perfect or effect its title to the
Patent Rights. If Sublicensor shall elect not to take any action to perfect,
effect or maintain any Patent Right with respect to an Improvement, it shall
give Sublicensee prompt (and in any event not less that thirty days prior to
the
last date on which such action may be taken) notice of its election not to
do
so, and Sublicensee may take such action, at its own expense; provided, however,
that if Sublicensee’s efforts to perfect, effect or maintain any Patent Right
are successful, then Sublicensor shall reimburse Sublicensee for the reasonable
costs of such action from any royalties or other revenues derived by Sublicensor
attributable to the perfection effectuation or maintaining of any such Patent
Right. Sublicensor shall cooperate with Sublicensee in all respects as
Sublicensee may reasonably request in connection with the taking of any such
action.
6
Notwithstanding
the foregoing, the requirements of this Section 5 shall not apply to new
developments with respect to vegetable oil feedstock processes, or any know-how,
designs or other information relating to the design, construction or operation
of plants or other facilities for the production of Products developed
independently by Sublicensee, which shall be owned by Sublicensee; provided,
however, that Sublicensee shall disclose any such developments to Sublicensor
and Sublicensor shall have a perpetual royalty-free nonexclusive license to
use
such developments in connection with its own business with rights to sublicense
same to its other sublicensees,
subject, however, to an obligation of Sublicensor to pay Sublicensee all
royalties that Sublicensee is obligated to pay to third parties as a result
of
Sublicensor’s exercise of its rights under this Section 5 plus an amount equal
to 10 percent of such royalties.
6. PATENT
INFRINGEMENT.
Sublicensee shall promptly notify Sublicensor of all claims, allegations and
notifications of infringement of third party patents involving any of the
Products, the Additive, the Know-How or any Improvements. Sublicensor shall
have
no obligation or liability in the event that legal action is brought against
Sublicensee for patent infringement. Such obligation and liability shall be
borne by Sublicensee. Sublicensee may choose legal counsel and defend the patent
infringement lawsuit.
7. PATENT
MARKING.
Sublicensee shall use reasonable efforts to place all appropriate patent and
other intellectual property notices, markings and indicia on product and
marketing literature for any Products as needed to protect the patent and other
intellectual property rights of Sublicensor and right for damages for
infringement thereof.
8. TERM
OF THE AGREEMENT. The
Term
of this Agreement shall commence on the Effective Date and end on the tenth
(10th)
anniversary of the Trigger Date (the "Term"), unless earlier terminated pursuant
to Section 9. This Agreement shall automatically renew for additional successive
one (1) year terms (each, a “Renewal Period”) unless a party is in default of
its obligation at the end of the Term, in which case the non-defaulting party
may elect not to renew this Agreement. In the event of renewal of this Agreement
on the tenth (10th)
anniversary of the Trigger Date and any renewal for additional one (1) year
terms thereafter, the Royalty rate shall be increased or decreased on the
renewal date, based on the GNP Implicit Price Deflator as published by the
United States Department of Commerce (the “Index”) which is published
immediately preceding the applicable adjustment date (the “Current Index”), by
comparing the Current Index to the Index published immediately preceding Trigger
Date (for the first adjustment) or the first day of the previous Renewal Period
(for the adjustment with respect to each successive Renewal Period), as
appropriate (the “Prior Index”). If the Current Index has increased over the
Prior Index, then the Royalty rate shall be increased by the percentage amount
by which the Current Index exceeds the Prior Index. If the Current Index has
decreased as compared to the Prior Index, then the Royalty rate shall be
decreased by the percentage amount by which the Current Index is less than
Prior
Index. In the event that the Current Index shall be unavailable on the
applicable adjustment date, Sublicensee shall continue paying Royalties at
the
rate required for the preceding year until such time as the required adjustment
is determined, at which time an accounting shall be made retroactive to the
applicable adjustment date. If the Index is discontinued or revised, then such
other governmental index or computation with which it is replaced or with which
it is similar (as determined by mutual agreement of the parties) shall be used
in order to obtain substantially the same result if the Index had not be
discontinued or revised. Notwithstanding the foregoing, if the revised Royalty
rate that is calculated in accordance with the provisions of this Section 8
for
any Renewal Period exceeds the Royalty rate that is prescribed by Section
3.1(b), then the Royalty rate for such Renewal Period shall be the Royalty
rate
that is prescribed by Section 3.1(b).
7
9. TERMINATION
9.1 In
addition to other termination rights mentioned elsewhere in this Agreement,
Sublicensor may terminate this Agreement upon the occurrence of any of the
following:
(i)
A
default in the payment of Royalties payable on the Initial Mandatory Minimum
Sales, or in the payment of Royalties payable on the Follow-On Mandatory Minimum
Sales required in the first three (3) twelve (12) month periods after the first
anniversary of the Trigger Date (if Sublicensor elects not to convert
Sublicensee’s exclusive rights hereunder to non-exclusive), or a default in the
payment of any Royalties when due and payable, or a failure to submit to
Sublicensor when due a true and complete accounting statement pursuant to
Section 3.2 of this Agreement, which default or failure continues for a period
of at least thirty (30) days after Sublicensor has given to Sublicensee written
notice of such default or failure.
(ii)
Sublicensor may also terminate this Agreement immediately by providing written
notice to Sublicensee in the event that Sublicensee knowingly breaches the
confidentiality, or non-transferability obligations contained herein or exceeds
the scope of the license granted hereunder.
(iii)
Immediately upon a material breach of any obligation of Sublicensee under this
Agreement, which breach shall not have been cured with thirty (30) days after
Sublicensor has given to Sublicensee written notice of such breach, in which
notice Sublicensor shall have specified in reasonable detail the nature of
such
breach.
9.2 Upon
termination of this Agreement regardless of the reason for termination,
Sublicensee shall immediately cease and desist from further use of the rights
licensed hereunder as well as further manufacture, distribution or sale of
Products, except that, Sublicensor shall either repurchase all inventories
of
Additive then owned by Sublicensee, at the same price paid for same by
Sublicensee, or permit Sublicensee to use such Additive to manufacture and
sell
Product until its inventory of Additive has been used in its entirety, provided
that it pays Royalties timely with respect to such sales in accordance with
this
Agreement. When all inventories of Additive have been used by Sublicensee or
delivered by Sublicensee to Sublicensor, then Sublicensee shall provide written
certification of same together with payment of all Royalties remaining to be
paid within ten (10) days after the disposition of all such inventories of
Additive.
10. REMEDIES.
Sublicensee acknowledges and agrees that any violation of this Agreement by
Sublicensee would result in irreparable harm to Sublicensor. Accordingly,
Sublicensee consents and agrees that, if Sublicensee violates any of the
provisions of this Agreement, Sublicensor shall be entitled, in addition to
other remedies available to it, to an injunction to be issued by any court
of
competent jurisdiction restraining Sublicensee from committing or continuing
any
violation of this Agreement, without the need for posting any bond or any other
undertaking.
8
11. NOTICES,
REPORTS AND PAYMENTS. Any
notice, report or payment permitted or required under this Agreement shall
be in
writing, and shall be sent or delivered to the receiving party at the address
set forth below or at such address as either Party may from time to time
designate in writing.
|
If
Sublicensor to: H2Diesel, Inc.
|
If
to Sublicensee: Xethanol Corporation
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
|
1185
Avenue of the Americas, ▇▇▇▇
▇▇▇▇▇
|
|
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
|
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|
Attention:
▇▇▇ ▇▇▇▇▇, CEO
|
Attention:
▇▇▇▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇-▇▇▇▇▇▇, CEO
|
|
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
|
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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12. SEVERABILITY.
Should
any term or provision of this Agreement be finally determined by a court of
competent jurisdiction to be void, invalid, unenforceable or contrary to law
or
equity, the offending term or provision shall be modified and limited (or if
strictly necessary, deleted) only to the extent required to conform to the
requirements of law and the remainder of this Agreement (or, as the case may
be,
the application of such provisions to other circumstances) shall not be affected
thereby but rather shall be enforced to the greatest extent permitted by
law.
13. CONTROLLING
LAW, JURISDICTION AND VENUE.
13.1 The
validity, construction, and interpretation of this Agreement shall be solely
and
exclusively governed by and construed in accordance with the laws of the State
of New York, USA, excluding any otherwise applicable rules of conflict of laws
that would cause the laws of another jurisdiction to apply.
13.2 The
courts of the State of New York shall have sole and exclusive jurisdiction
over
the parties with respect to any legal proceedings brought by either party with
respect to this Agreement. For implementation of this Agreement and all its
consequences, each party waives such of its rights and privileges under any
other law or legal system, such as the law of the place of performance, as
is
necessary to give effect to the term and conditions hereof. Each party hereby
expressly consents to personal jurisdiction in the courts of the State of New
York with respect to legal proceedings involving this Agreement, and expressly
waives any right to object to such personal jurisdiction, or the convenience
of
such forum. In the event that there is a default under this Agreement and it
becomes reasonably necessary for any party to employ the services of any
attorney, either to enforce or terminate this Agreement, with or without
arbitration, the non-defaulting party shall be entitled to collect from the
defaulting party its reasonable attorneys fees and such other costs and expenses
as are incurred by it in enforcing or terminating this Agreement. EACH
PARTY ACKNOWLEDGES THAT A JURY TRIAL IS A CONSTITUTIONAL RIGHT BUT HEREBY WAIVES
ANY RIGHT TO A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT.
14. NEGATION
OF CERTAIN WARRANTIES; SUBLICENSEE REPRESENTATIONS AND
WARRANTIES
14.1 Nothing
in this Agreement shall be construed as:
(i)
a
warranty or representation by Sublicensor as to the validity or scope of any
of
the Patent Rights (as the only Patent Rights are pending applications which
have
not yet been examined) or the usefulness, commercial viability or value of
any
of the Additive (as neither the Additive nor any Products containing the
Additive have been mass produced or have received required regulatory
approvals), the Patent Rights, Know-How or anything else provided or licensed
hereunder; provided, however, that Sublicensor warrants to Sublicensee that
the
Additive and Products produced in accordance with the Specifications will at
all
times conform to the Specification and applicable regulations of the United
States Department of Energy s then in effect, or
9
(ii)
a
warranty or representation other than it has no actual knowledge that any
Products made, used, sold or otherwise disposed of under any license granted
in
this Agreement infringes or will infringe any patents of third parties;
or
(iii)
any
obligation to furnish any Know-How not provided by Licensor to Sublicensor;
provided that Sublicensor shall use its commercially reasonable efforts to
obtain such Know-How from Licensor.
14.2 EXCEPT
AS
OTHERWISE EXPRESSLY SET FORTH HEREIN, SUBLICENSOR MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF ANY KIND, AND DISCLAIMS ANY IMPLIED WARRANTIES, INCLUDING, WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. SUBLICENSOR DOES NOT REPRESENT OR WARRANT THAT THE USE OF THE ADDITIVE
SUPPLIED OR THE RIGHTS GRANTED HEREUNDER WILL RESULT IN PRODUCTS THAT ARE
COMMERCIALLY VIABLE, BUT DOES WARRANT THAT THE ADDITIVE AS SUPPLIED TO
SUBLICENSEE WILL CONFORM TO THE SPECIFICATIONS IN EFFECT AT THE TIME OF THE
CORRESPONDING ORDER OF SUCH ADDITIVE.
14.3
Sublicensee represents and warrants to Sublicensor the following:
(i)
It
is a
corporation duly organized, validly existing and in good standing under the
laws
of the jurisdiction of its formation, with full power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii)
The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby by it has been duly and validly authorized
and no further authorization is required on its part to consummate the
transactions contemplated hereby.
(iii)
This
Agreement and all other documents executed and delivered by it pursuant to
this
Agreement constitute its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms.
(iv)
The
individual executing this Agreement on its behalf has been duly authorized
and
empowered to execute this Agreement for the purpose of binding it to this
Agreement. Its performance of this Agreement does not require any third party
consents or governmental approvals, filings, registrations or permits that
have
not already been obtained or will not be obtained prior to Sublicensee’s
commencement of manufacturing and sale of Products, or that will not be
maintained during the Term. The execution, delivery and performance of this
Agreement by it does not and will not violate any contract or other arrangement
between it and any third party, or any applicable law or regulation, or infringe
or otherwise violate any third party right.
14.4 It
shall
be Sublicensee’s sole responsibility to comply with any and all applicable
local, state, or federal laws and regulations with respect to the manufacture
and sale of Products and Sublicensee shall obtain any required licenses,
permits, and approvals at its sole cost and expense. Sublicensee shall provide
Sublicensor with a copy of any required licenses, permits, and approvals, upon
the written request of the Sublicensor.
10
14.5 Sublicensor
represents and warrants to Sublicensee the following:
(i) It
is a
corporation duly organized, validly existing and in good standing under the
laws
of the jurisdiction of its formation, with full power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby by it has been duly and validly authorized
and no further authorization is required on its part to consummate the
transactions contemplated hereby.
(iii) This
Agreement and all other documents executed and delivered by it pursuant to
this
Agreement constitute its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms.
(iv) The
individual executing this Agreement on its behalf has been duly authorized
and
empowered to execute this Agreement for the purpose of binding it to this
Agreement. Its performance of this Agreement does not require any third party
consents or governmental approvals, filings, registrations or permits that
have
not already been obtained or will not be obtained prior to Sublicensee’s
commencement of manufacturing and sale of Products, or that will not be
maintained during the Term. The execution, delivery and performance of this
Agreement by it does not and will not violate any contract or other arrangement
between it and any third party.
15. INDEMNITY;
LIMITATION OF LIABILITY
15.1 Sublicensee
shall defend, indemnify and hold harmless Sublicensor and its partners,
employees, officers, directors, stockholders and agents, and their respective
successors, heirs and assigns (the "Indemnitees"), against all liabilities,
demands, losses, costs, and expenses (including, without limitation, attorneys'
fees) incurred by or imposed upon the Indemnitees or any one of them in
connection with any claims, suits, actions, demands or judgments arising out
of
any theory of liability (including but not limited to, actions in the form
of
tort, warranty, or strict liability) for death, personal injury, illness, or
property damage arising from Sublicensee's use, sale, or other disposition
of
any Products, or exercise of any of rights hereunder, except any such claims,
suits, actions, demands or judgments that arise from a breach by Sublicensor
of
its agreements, representations and warranties with respect to the Additive
set
forth in this Agreement.
15.2 Sublicensee
agrees, at its own expense, to provide attorneys reasonably acceptable to
Sublicensor to defend against any actions brought or filed against any party
indemnified hereunder with respect to the subject of indemnity contained herein,
whether or not such actions are rightfully brought. Notwithstanding the
foregoing, any of the indemnified parties may participate with counsel of their
own choosing at their expense.
15.3 IN
NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR ANY THIRD PARTY WITH RESPECT
TO ANY PUNITIVE, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES RELATING
TO OR ARISING OUT OF THIS AGREEMENT, OR WITH RESPECT TO THE ADDITIVE, THE KNOW
HOW OR ANY PRODUCT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. IN NO EVENT SHALL EITHER PARTY’S LIABILITY HEREUNDER EXCEED THE
TOTAL AMOUNT OF ROYALTIES PAID TO SUBLICENSOR BY SUBLICENSEE HEREUNDER FOR
THE
TIME PERIOD OR TRANSACTIONS GIVING RISE TO THE PARTICULAR CLAIM.
11
16. NON-TRANSFERABILITY
This
Agreement shall not be assignable or otherwise transferable by Sublicensee
except in connection with (a)
any
transaction the purpose of which is to reorganize the corporate structure of
Sublicensee, reincorporate Sublicensee in another jurisdiction or undertake
any
other action which does not materially affect the ownership and control of
Sublicense at the time of such transaction and (b) any
transfer (whether by sale, merger or otherwise) of all of the stock or assets
of
Sublicensee or of that portion of the business of Sublicensee in which this
Agreement and the rights conveyed hereby are used, other than any such transfer
of this Agreement to a competitor of Sublicensor and provided that such
assignee, acquiror or resulting person shall assume all of the obligations
of
Sublicensee hereunder and that no such assignment shall relieve Sublicensee
of
any of its obligations hereunder.
Sublicensor may freely assign this Agreement to an Affiliate or in connection
with a sale of all or substantially all of its assets or stock (whether by
sale,
merger, or otherwise), provided that such
assignee, acquiror or resulting person shall assume all of the obligations
of
Sublicensor hereunder and that no such assignment shall relieve Sublicensor
of
any of its obligations hereunder.
17. MISCELLANEOUS
18.1 Entire
Agreement. The parties hereto have read this Agreement and agree to be bound
by
all its terms. The parties further agree that this Agreement, together with
the
Investment Agreement entered into as of the 14th
day of
April, 2006 by and among Crestview Capital Master, LLC, TOIBB Investment, LLC,
Sublicensor and Sublicensee, as amended, and the Management Services Agreement
entered into on the same date by and between Sublicensor and Sublicensee
constitute the full, complete and exclusive statement of the agreements between
them and supersedes all proposals, oral or written, and all other communications
between them relating to the subject matter of this Agreement, including
specifically, but without limitation, the Sublicense Agreement entered into
by
the parties as of the 14th
day of
April, 2006 which is superseded by this Agreement effective retroactively as
of
said date.
18.2 Modifications.
No agreement changing, modifying, amending, extending, superseding, discharging,
or terminating this Agreement or any provisions hereof shall be valid unless
it
is in writing and is dated and signed by duly authorized representatives of
the
party against which enforcement is sought.
18.3 Waiver.
Failure of any of the parties hereto to enforce any of the provisions of this
Agreement or any rights with respect thereto or to exercise any election
provided for therein, shall in no way be considered a waiver of such provisions,
rights, or election or in any way to affect the validity of this Agreement.
No
term or provision hereof shall be deemed waived and no breach excused, unless
such waiver or consent shall be in writing and signed by the party claimed
to
have waived or consented. Any consent by any party to, or waiver of, a breach
by
the other, whether express or implied, shall not constitute a consent or waiver
of, or excuse for any other, different or subsequent breach. All remedies herein
conferred upon any party shall be cumulative and no one shall be exclusive
of
any other remedy conferred herein by law or equity.
12
18.4 Currency;
Days; Time of the Essence. All monetary amounts referred to herein are in U.S.
Dollars and all references to days mean calendar days. Time is of the essence
in
the performance of each and every obligation and covenant imposed by this
Agreement.
18.5 Binding
Agreement. This Agreement shall be binding not only upon the parties hereto,
but
also upon their respective successors and permitted assigns.
18.6 Expenses.
Except as provided elsewhere in this Agreement, all of the legal, accounting,
and other miscellaneous expenses incurred in connection with this Agreement
and
the performance of the various provisions of this Agreement shall be paid by
the
party who incurred the expense.
18.7 Survival.
All covenants, agreements, representations, warranties, indemnities and
provisions of this Agreement which by their nature are intended survive the
termination of this Agreement (including, without limitation, Sections 1, 2.4,
2.5, 2.6, 3-5 and 9-18) shall so survive after the effective date of termination
of this Agreement.
18.8 Confidentiality.
Each party acknowledges that it has in the past and may in the future receive
Confidential Information belonging to, and disclosed to it, by the other party
and/or its authorized representatives, and that all of the other party’s
Confidential Information is material and confidential and greatly affects the
goodwill and the effective and successful conduct of the other party and its
business and operations, and that maintaining confidentiality of the other
party’s Confidential Information is reasonably necessary to protect the
legitimate business interests of the other party. Accordingly, each party hereby
agrees to receive all such Confidential Information provided by the other party
in strict confidence and that neither it nor any of its officers, directors,
representatives, employees or agents (including any consultants, subcontractors
or advisors) shall, at any time while this Agreement is in effect or thereafter,
directly or indirectly, divulge, reveal or communicate any such Confidential
Information to any person, firm, corporation or entity whatsoever, or use,
pursue or exploit any such Confidential Information for its own benefit or
for
the benefit of others. Each party shall disclose to and enforce the
confidentiality provisions of this Agreement in writing with respect to all
of
its officers, directors, representatives, employees or agents (including any
consultants, subcontractors or advisors), as applicable.
For
purposes of this Agreement, “Confidential Information” means information
relating to a party hereto and the Additive, the Patent Rights, the Know-How
and
other information with respect to the technology licensed hereunder, as well
as
a party’s assets, operations, clients, and past, present, and future businesses,
including but not limited to drawings, manuals, reports, formulae, algorithms,
processes, trade secrets, research products, inventions, technical data,
specifications, designs, ideas, product plans, research and development efforts,
personal and customer information, financial information, quotations, price
lists, customer lists, business methods and marketing programs, all of which
are
proprietary with such party and involve trade secrets, know-how, techniques,
and
combinations of known information of a character regarded by such party as
confidential.
The
foregoing restrictions shall not apply to the extent that, with respect to
either party, such information:
(i) is
or
becomes public knowledge (other than by breach of that
restriction);
(ii) was
obtained by the recipient party from a third party having the right to disclose
it, without the obligation to keep such information confidential;
or
(iii) is
required to be provided by law (including, without limitation, the rules and
regulations of the Securities and Exchange Commission), legal process (including
subpoena, civil investigative demand or similar process) or any regulatory
authority; provided, that the recipient party shall promptly notify the
disclosing party in writing so the disclosing party may seek a protective order
and/or other motion to prevent or limit the production of such
Information.
13
18.9 Quality
Control.
Sublicensee acknowledges that if the Additive can be used to produce Products
of
a commercially acceptable quality, then the Products made by or for Sublicensee
must be of a consistent quality and standard, and that Sublicensee’s production
and sale of the Products pursuant to this Agreement must be in a manner that
does not have a detrimental impact on Sublicensor’s reputation or the goodwill
associated with Sublicensor’s business and technologies. Sublicensee agrees that
to the extent that the Additive is such that it can do so, it shall maintain
a
high standard of quality with respect to the Products manufactured and sold
pursuant to this Agreement. The quality control requirements expressed above
are
subject to confirmation via testing that Products of a commercially consistent
quality and standard are possible using the Additive, the Know-How and the
other
information licensed to Sublicensee under this Agreement
18.10 Negative
Events. Sublicensee acknowledges that Sublicensor has an overriding interest
in
protecting the market and quality of the Products. Accordingly, if Sublicensee,
at any time, has a reasonable basis to believe that any act or occurrence
related to the Products presents or has presented any threat to public health
or
safety or otherwise are likely to draw negative attention from any governmental
agency, consumer or environmental group, media or other organization or any
individual (any of such occurrences being a “Negative Event”), Sublicensee will
promptly notify Sublicensor of the facts giving rise to such belief or
suspicion. In all such cases, (and subject to obligations of either party under
applicable law, including, without limitation, its disclosure obligations under
the Securities Exchange Act of 1934, as amended) Sublicensee will closely
coordinate with Sublicensor with respect to any actions Sublicensee might take
or permit and in respect to all public statements Sublicensee might make
regarding the particular Negative Event, and shall, after consultation with
Sublicensor, follow all reasonable advice and instructions of Sublicensor with
respect thereto.
18.11 Insurance.
Sublicensee shall provide to Sublicensor insurance certificates and other
evidence of insurance benefits and coverage for general commercial liability
including claims relating to its performance of this Agreement as well as
product liability coverage, with coverage amounts reasonably satisfactory to
Sublicensor, and shall maintain such insurance in effect while this Agreement
is
in effect and for a period of six (6) years thereafter. Sublicensee shall
provide a copy of its insurance policies to Sublicensor promptly following
a
request therefor, shall cause Sublicensor to be added to such policy as an
additional insured party and shall require that the insurer provide notification
directly to Sublicensor in the event of any cancellation, termination,
nonrenewal or denial of coverage.
18.12 Further
Assurances. Each party agrees to execute and deliver such other and further
documents and instruments as may be necessary to effectuate the intent and
purposes of this Agreement upon request by the other party.
18.13 Construction;
Counterparts. The headings used in this Agreement are for reference purposes
only and shall not be considered a part of this Agreement. This Agreement may
be
executed in counterparts, each of which shall be deemed to be an original and
all of which shall constitute one and the same agreement.
14
18.14
Force
Majeure. Neither party shall be deemed in default or otherwise liable for any
delay in or failure of its performance under this Agreement (other than the
payment of money) by reason of any act of God, fire, natural disaster, accident,
riot, terrorism, act of government, strike or labor dispute, shortage of
materials or supplies, or any other cause beyond the reasonable control of
such
party, and which cannot be reasonably circumvented by such party, provided
that
the party invoking force majeure (a) gives the other party prompt notice of
such
cause, and (b) uses its commercially reasonable best efforts to correct promptly
such failure or delay in performance. In the event of a force majeure event
which prevents performance permanently or for more than twelve (12) months
in
duration, either party may terminate this Agreement without further obligation
except with respect to those provisions that survive termination; provided,
however, that if such force majeure event prevents Sublicensee from performing
its obligations hereunder but does not prevent Sublicensor from performing
its
obligations hereunder, Sublicensor shall have the option to convert the license
granted to Sublicensee under Section 2.2 above from exclusive to nonexclusive
or
terminate this Agreement, and if Sublicensor elects to terminate such
exclusivity, this Agreement shall remain in effect but Sublicensee shall
continue to be deemed not to be in default for failing to perform its
obligations hereunder while prevented by such force majeure event.
[SIGNATURE
PAGE FOLLOWS]
15
IN
WITNESS WHEREOF,
the
Parties hereto have executed this Agreement as of the date first above
written.
H2Diesel,
Inc.
By:
/s/
▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇, CEO and President
Xethanol
Corporation
By:
/s/
▇▇▇▇▇▇▇▇▇▇▇ ▇’▇▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇'▇▇▇▇▇▇-▇▇▇▇▇▇, CEO
16
Annex
A
The
Territory
U.S.
states of Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode
Island, New York, Pennsylvania, Delaware, New Jersey, Virginia, West Virginia,
North Carolina, South Carolina, Georgia, Florida, and other areas that may
be
added by written agreement of the parties.