JOINT VENTURE AGREEMENT
This Agreement is made and effective as of this 13th day of November, 1996, by
and between PROLEC-GE, S. DE X.X. DE C.V. , a corporation organized and existing
under the laws of Mexico ("PROLEC GE") and QUIETPOWER SYSTEMS, INC., a company
organized and existing under the laws of the State of Delaware ("QUIETPOWER").
WHEREAS QUIETPOWER owns certain intellectual property related to material
condition monitoring/failure diagnostics systems ("TECHNOLOGY") and is in the
business of developing, commercializing, marketing and selling this TECHNOLOGY;
and
WHEREAS PROLEC GE is in the business of designing, manufacturing and selling
power and distribution equipment ("PROLEC GE EQUIPMENT"); and
WHEREAS QUIETPOWER and PROLEC GE desire, by certain research and development
programs to further develop the TECHNOLOGY into marketable products ("COMMERCIAL
PRODUCTS"); and
WHEREAS by forming a joint venture ("JV") in order to combine certain of their
research and development resources, QUIETPOWER and PROLEC GE desire to
accelerate the development of the COMMERCIAL PRODUCTS in as short a time as
possible; and
WHEREAS QUIETPOWER and PROLEC GE wish to jointly market and sell the COMMERCIAL
PRODUCT once successful commercialization has been achieved; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1.0 DEFINITIONS
1.1. "TECHNOLOGY" means intellectual property rights related to
material condition monitoring/failure diagnostic systems for use with
the PROLEC GE Equipment. Condition monitoring/failure diagnostics
systems refer to the monitoring of electrical equipment using such
methods as acoustical measurements, electrical measurements and
chemical analysis, for the purpose of detection, diagnosis and location
of operational problems. These systems employ equipment such as
sensors, data acquisition devices, filters, amplifiers and software in
combination to monitor, measure, process and record diagnostic data.
Intellectual property rights shall include, but not be limited to,
patents of importation, patents of confirmation, patents of
improvements, patents and certificates of addition and utility models,
as well as divisions, reissues, reexaminations, continuations,
continuations-in-part, renewals and extensions of
any of the foregoing and applications therefor, and patents which may
be issued on such applications covering inventions with respect to
which are conceived or first actually reduced to practice in the course
of development work under this Agreement, as well as registered and
unregistered designs, secret or published designs and copyrights,
know-how, and manufacturing processes, made or developed by employees
of PROLEC GE and/or QUIETPOWER pursuant to the work under this
Agreement.
1.2 "PROLEC GE EQUIPMENT" means and includes: distribution and power
transformers, load tap changers, high voltage instrument transformers
and circuit breakers.
1.3 "COMMERCIAL PRODUCTS" means material condition monitoring/failure
diagnostics products, meeting reasonable commercial criteria, such as
cost, form and function that embody the TECHNOLOGY.
1.4 The term "Statement of Work" shall have the meaning set forth in
Section 5.2 of this Agreement.
1.5 The term "DELIVERABLE" shall mean the DELIVERABLES set forth in the
Approved Statement of Work.
1.6 The term "SUBSIDIARY" of a party as used herein shall mean any company
(including but not limited to affiliates, subsidiaries and joint
ventures) in which it owns or directly or indirectly controls at least
twenty-five percent (25%) of the voting rights during the term of this
Agreement.
1.7 "Effective Date" of this Agreement shall be November 13, 1996.
1.8 "Term" of this Agreement shall be as specified in Article 12.0 below.
2.0 ESTABLISHMENT OF JOINT VENTURE PARTNERSHIP
2.1 Upon the Effective Date of this Agreement, the parties shall
expeditiously form a partnership in order to effectuate the terms of
this Agreement.
2.2 QUIETPOWER shall grant the JV rights to the TECHNOLOGY pursuant to
Article 7.0.
2.3 The JV shall be empowered to open and maintain commercial bank accounts
and conduct such other activities that will enable it to perform the
necessary activities associated with agreed-upon product development,
commercialization and marketing efforts.
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2.4 Each party shall assign personnel to the JV to perform such tasks as
defined and agreed by the Team as defined in Section 4.1. The JV may,
upon the approval of the Team, directly hire personnel who are not
employees of either party.
3.0 JV CONTRIBUTION ACCOUNTS
3.1 As a means of accounting for each party's economic interest in the JV,
each party shall have two contribution accounts: one capital account
and one reimbursable account.
3.2 The capital accounts shall accumulate the value of internal resources
and licenses contributed to Approved Statements of Work. Specifically
this shall include, but not be limited to: i) the direct cost, without
overhead, of personnel, ii) the use of both parties' equipment, iii)
the use of PROLEC GE's Transformer development, manufacturing and test
facilities, iv) the use of QuietPower's software development, system
integration and acoustic/vibration test facilities, and v) the
Technology licenses granted under Article 9.0. For purposes of
accounting for these contributions to the parties' capital accounts,
all of the above items shall be valued, those values shall be totaled
and one-half of the total shall be credited to each party's capital
account. Crediting of these items to the capital accounts shall occur
on a straight-line basis over the expected life of an approved project.
3.3 The reimbursable accounts shall accumulate expenditures for external
costs, including but not limited to cash expenditures for: i) system
components, ii) test equipment, iii) travel costs, iv) outside
subcontractor costs, and v) contributions made directly to the JV.
These costs shall be credited to the respective party's reimburseable
account when incurred.
4.0 IMPROVEMENT TEAM
4.1 Function. An Improvement Team ("Team") is hereby established as of the
Effective Date. The Team shall function as an advisory body to provide
recommendations to PROLEC GE and QUIETPOWER and to manage the JV's
implementation of the Statement of Work as defined in Section 5.2 of
this Agreement. Each party shall have an equal vote on the Team
regardless of capital account balance.
4.2 Team Tasks. The initial tasks of the Team shall be:
A. Identify, design, develop and test potential improvements to
the TECHNOLOGY that will facilitate the development of the
COMMERCIAL PRODUCT.
B. Identify, design, develop and test potential product
components and manufacturing processes and designs for
COMMERCIAL PRODUCTS.
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4.3 For a period of three (3) years from the Effective Date, neither party
shall solicit for employment nor employ any employee of the other party
assigned to the Team or to the JV.
5.0 ADOPTION OF PROGRAMS; FUNDING
5.1 Joint programs of research, design and development shall be conducted
by the JV in the fields of TECHNOLOGY and COMMERCIAL PRODUCT upon the
recommendation of the Team and subject to the agreement in writing of
each party to participate in and provide resources for a specific
program.
5.2 Prior to commencement of work on each such program, a description
(hereinafter the "Statement of Work") of the objectives, phases and
respective scope of work of each party shall be prepared jointly by the
parties as may be designated for this purpose, together with a budget
including details of estimated costs to be incurred.
5.3 The obligations of the parties in respect of a joint program shall
arise only upon the approval, in writing by each party of the Statement
of Work. Upon such approval, the Statement of Work shall be referred to
as an "Approved Statement of Work." The Approved Statement of Work
shall obligate each party to assign the agreed upon personnel and other
resources to the program and to contribute funds in accordance with the
budget described in Section 5.2.
5.4 Each Approved Statement of Work shall be subject to the terms of this
Agreement. Each party hereto will deliver to the other party the
DELIVERABLES which it is required to deliver pursuant to the Approved
Statement of Work and to otherwise fully contribute to the generation
of DELIVERABLES as required in the Approved Statement of Work.
5.5 Neither party shall have the right to withdraw from an Approved
Statement of Work without the prior written consent of the other party,
unless (1) performance by the other party of the objectives and phases
of work established pursuant to Section 5.2 is not timely; (2)
information disclosed by the other party to a third party is not in
accordance with the requirements of Section 7.2 hereof; or (3) subject
to the provisions of Section 5.6, the total external costs are expected
to exceed original approved projections by greater than 20%. In such
event, the party desiring to withdraw shall give sixty (60) days' prior
written notice to the other party of its intent to withdraw.
5.6 In the event that the total external costs of the project are expected
to exceed those projected in the Approved Statement of Work by greater
than 20%, the other party must be expeditiously notified of such
expected occurrence by that
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party which discovers such. Upon such notification each party shall
have the option to:
A. pay the additional costs in the same ratio as agreed in the
Approved Statement of Work, or
B. pay a greater percentage of the costs than agreed in the
Approved Statement of Work, if the other party chooses to
reduce their contribution level, or
C. pay all additional costs if the other party chooses not to pay
any additional costs, or
D. not pay any additional costs and halt work on the Approved
Statement of Work. If the parties choose this option, then
continued financial commitments under the Approved Statement
of Work shall cease.
Otherwise, unless Option D is selected, each party shall continue to be
obligated for their respective commitments under the Approved Statement of Work.
5.7 Upon unanimous vote of the Improvement Team, excess cash not needed for
the ongoing approved development and marketing operations of the JV may
be distributed to the parties in the following manner:
A. All additional costs paid by the parties pursuant to Section
5.6 shall be reimbursed in the same ratio as incurred by the
parties, and such costs shall be paid in full before any other
payments to the parties, then
B. external costs paid by the parties pursuant to the Approved
Statement of Work shall be reimbursed in the same ratio as
incurred by the parties, and such costs shall be paid in full
before any other payments to the parties, then
C. after all reimbursements of external costs, any further
distributions by the JV shall be shared equally by the
parties.
6.0 INDEPENDENT ACTIVITIES
Nothing contained in this Agreement shall be construed to prevent either party
from carrying out independently its normal business activities. Specifically,
PROLEC GE shall not be prevented or hindered from pursuing other technologies
for the enhancement of its PROLEC GE EQUIPMENT, nor shall QUIETPOWER be
prevented or hindered from using or further developing the TECHNOLOGY for other
uses.
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7.0 PROTECTION OF PROPRIETARY AND CONFIDENTIAL INFORMATION
7.1 All information disclosed by one party to the other during the course
of this Agreement and any Approved Statement of Work shall be
considered confidential and proprietary information which shall be
subject to the following provisions of this Article.
7.2 During the Term of this Agreement and for a period of ten (10) years
after the termination date of this Agreement, each party agrees to use
reasonable care to prevent disclosure to third parties of the other
party's information. The foregoing obligations of a party receiving
information from another party shall not apply to information which:
a. Is necessarily disclosed solely by its use in products
manufactured and sold by a party;
b. Is made public by the furnishing party;
c. Is established to be in the public domain otherwise than as a
consequence of a breach of the obligation herein undertaken;
d. Is shown by the receiving party: (1) to have been in its
possession prior to its receipt from the furnishing party; or
(2) to have come subsequently into the receiving party's
possession through channels independent of the furnishing
party; or (3) to have been independently developed by the
receiving party or its contractors by individuals who did not
have access to the information;
e. Must reasonably be disclosed by the receiving party to its
customers or users of COMMERCIAL PRODUCT in connection with
the marketing, product service and maintenance activities,
provided that the receiving party shall require such customers
or users to maintain such information in confidence to the
extent of the foregoing requirements of this Article;
f. Must reasonably be disclosed by the receiving party to a
supplier of a part or component (as opposed to major
subassemblies) as essential to their supply of the part or
component (as opposed to major subassemblies) to the receiving
party; provided however that receiving party shall require
such supplier to use such information solely for the
manufacture of such part or component for such receiving party
and to maintain such information in confidence to the extent
of the foregoing requirements of this Article
Any combination of known information shall be within any of the
foregoing exclusions only if the combination as such is within such
exclusion.
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8.0 OWNERSHIP AND USE OF RESULTS OF Approved Statement of Work
8.1 QUIETPOWER shall own all copyright, patent, trade secret and other
intellectual property rights in TECHNOLOGY. PROLEC GE shall own all
copyright, patent, trade secret and other intellectual property rights
in PROLEC GE EQUIPMENT. Nothing in this Agreement shall alter such
ownership by each party.
8.2 In the event that an invention is jointly made or conceived as a result
of carrying out an Approved Statement of Work for TECHNOLOGY or
COMMERCIAL PRODUCT, any and all patent applications, whether domestic
or foreign, based on such inventions shall be owned by QUIETPOWER, who
may patent such inventions. With respect to the filing and prosecution
of patent applications on such inventions, PROLEC GE agrees to
cooperate with QUIETPOWER and to make reasonable efforts to furnish
information in a timely fashion to enable the prompt filing and
prosecution of all patent applications on such inventions. QUIETPOWER
shall bear the expense of filing and prosecution of each such patent
application. If QUIETPOWER desires not to bear the filing expenses
associated with such invention, PROLEC GE shall be entitled to file the
application on its own behalf and at its own expense and shall own all
rights, title and interest in the invention and all patents issuing
thereon, and QUIETPOWER agrees to assign its ownership rights in such
invention to PROLEC GE and execute all documents necessary to effect
that result without the payment of any compensation. If, after the
filing of a patent application, QUIETPOWER decides not to continue
incurring the expenses associated with the prosecution, issuance or
maintenance of an invention, QUIETPOWER shall promptly give notice to
PROLEC GE and shall, if requested by PROLEC GE, convey its entire
right, title and interest to PROLEC GE and execute all documents
necessary to effect that result without the payment of any
compensation.
8.3 During the Term of this Agreement, each party agrees that with respect
to its employees and contractors assigned to an Approved Statement of
Work, it will maintain invention and patent assignment agreements from
those employees and contractors that assign all ownership of all
inventions developed pursuant to an Approved Statement of Work to
QUIETPOWER.
9.0 LICENSES TO THE JV
QUIETPOWER agrees to grant to the JV licenses to use the TECHNOLOGY and
COMMERCIAL PRODUCT for the purposes as prescribed in this Article 9.0. All
licenses granted hereunder shall be royalty free.
9.1 QUIETPOWER agrees to grant a license to the JV for the purpose of
developing the TECHNOLOGY or for further developing any COMMERCIAL
PRODUCT necessary to conduct work pursuant to an Approved Statement of
Work.
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9.2 Upon the successful completion of an Approved Statement of Work that
results in a new COMMERCIAL PRODUCT, QUIETPOWER shall grant a world
wide exclusive license to the JV for the purpose of marketing,
manufacturing and selling such COMMERCIAL PRODUCT to original equipment
manufacturers ("OEM's"), including PROLEC GE.
9.3 Upon the successful completion of an Approved Statement of Work that
results in a new COMMERCIAL PRODUCT, QUIETPOWER shall grant an
exclusive license to the JV for the purpose of marketing and
selling such COMMERCIAL PRODUCT to end users for retrofit applications.
9.4 In preparation for the production of COMMERCIAL PRODUCT, the JV shall
seek competing bids from third parties for the manufacture of such
COMMERCIAL PRODUCT. Factors to be considered when evaluating the bids
shall include, but not be limited to, the cost, quality control, and
capability to deliver the COMMERCIAL PRODUCT in a required time period
in such quantities as to maximize the commercial success of the
product. Also with respect to obtaining a manufacturing source for the
COMMERCIAL PRODUCT, the JV shall grant to PROLEC GE a right of first
refusal for the manufacturing sublicense to the COMMERCIAL PRODUCT and
such right shall be evaluated in relation to the above third party
bids. In situations where PROLEC GE chooses not to bid on the
manufacture, or where PROLEC GE's bid is not competitive with such
third party bids, PROLEC GE and QUIETPOWER, represented by the Team,
shall mutually agree, and such agreement shall not be unreasonably
withheld by either party, on the grant of a manufacturing license for
the COMMERCIAL PRODUCT.
9.5 It is understood that no license is granted under this Agreement to use
the TECHNOLOGY and COMMERCIAL PRODUCT for any purpose other than that
described in this Article 9.0.
9.6 It is understood and agreed to by the parties hereto that the rights
conferred hereunder do not extend to either of the parties' respective
technology, even though such technology may be necessary to practice
the COMMERCIAL PRODUCT, with the exception of the license granted by
QUIETPOWER to the JV pursuant to this Article 9.0.
10.0 VALUATION OF COMMERCIAL PRODUCT
10.1 Upon the completion of an Approved Statement of Work, the JV shall
establish a sale price of the COMMERCIAL PRODUCT. This price shall be
based on factors such as cost of components, a reasonable return on
development expenditures, a reasonable profit margin, and improvements
in TRANSFORMER reliability resulting from such COMMERCIAL PRODUCT.
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10.2 If a party wishes to acquire units of the COMMERCIAL PRODUCT for its
own use or for resale to third parties, the acquiring party must
purchase the units from the JV at the price established in Section 10.1
of this Agreement.
11.0 CONTINUING SUPPORT FOR COMPLETED PROGRAMS
11.1 During the Term of this Agreement, each party shall use all reasonable
efforts to inform the other of improvements and modifications to
TECHNOLOGY or COMMERCIAL PRODUCT.
11.2 Nothing in Articles 8.0 or 9.0 shall be construed to require either
party to disclose to the other or grant to the other any license to use
any information except as specifically provided in this Agreement.
12.0 DURATION AND TERMINATION
This Agreement shall take effect on the Effective Date and shall remain in
effect for a period of ten (10) years, renewable upon mutual agreement of the
parties; provided that Article 7.0 shall remain in effect for ten years after
the termination of this Agreement.
13.0 MISCELLANEOUS PROVISIONS
13.1 Anything done by either party before this Agreement becomes effective
which would be in discharge of any obligations hereunder if this
Agreement were then effective, shall, after this Agreement becomes
effective, be treated as being in discharge of such obligations under
this Agreement.
13.2 Any failure by either party to enforce any of the provisions of this
Agreement or to require at any time performance by the other party of
any of the provisions hereof, shall in no way affect the validity of
this Agreement or any part thereof, or the right of either party
thereafter to enforce each and every such provision, nor shall the
types or quantities of data or consultation actually given or supplied
by either party to the other whether or not under this Agreement, be
deemed in any way indicative of the scope of the obligation of either
party under this Agreement.
13.3. All disputes arising out of or in connection with this Agreement shall
be exclusively and finally settled only by arbitration, in accordance
with the Rules of the American Arbitration Association. The arbitration
proceeding shall take place in New York City. The parties agree to
abide by and perform in accordance with any award rendered by the
arbitration panel and agree that such an award is to be final and
non-appealable and that a judgment of any court having jurisdiction may
be entered upon the award.
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13.4 This Agreement may not be assigned by either party in whole or in part
without the prior written consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that either
party shall have the right to assign this Agreement without the consent
of the other to any of its subsidiaries or affiliates or to the
successor to or purchaser of substantially all of the business thereof
to which the whole or any part of the subject matter of this Agreement
pertains. Any other attempted assignment without such prior written
consent shall be null and void.
13.5 This Agreement shall be construed and the legal relations between the
parties hereto shall be determined in accordance with the laws of the
State of New York, USA, disregarding any conflicts of laws/rules which
may dictate the application of the laws of another jurisdiction.
13.6 If either party is rendered unable, wholly or in part, to carry out any
of its duties or obligations under this Agreement by reason of (i) act
of God or the public enemy, fire, explosion, perils of the sea, flood,
drought, war, riot, sabotage, accident, embargo; or (ii) without
limiting the foregoing circumstances, any circumstances of like or
different character beyond the reasonable control of the party so
failing; or (iii) interruption of or delay in transportation,
inadequacy or shortage or failure of supply of materials or equipment,
breakdowns, labor trouble from whatever cause arising and whether or
not the demands of the employees involved are reasonable and within
said party's power to concede; or (iv) compliance by either party with
any order, action, direction or request of any Governmental officer,
department, agency, authority or committee thereof; and (v) whether in
any case the circumstance now exists or hereafter arises, such party
shall forthwith give written notice thereof to the other party (such
notice briefly to describe the circumstance causing such inability);
and thereupon, to the extent that the party giving such notice is
unable to perform such duty or obligation by reason of said
circumstance, such duty or obligation shall be suspended during, but no
longer than, the continuance of such circumstance.
14.0 NOTICES
Any notice or request with reference to this Agreement shall be by personal
delivery, cable, telex or facsimile followed by a confirming letter mailed
within seven (7) days, and shall be directed by one party to the other at its
respective address, as follows:
PROLEC GE QuietPower Systems, Inc.
Xxxxx X. Xxxxx Xxxxxxxx X. Xxxxxx, Ph.D.
Vice President President and Chief Executive Officer
Marketing and Business Integration 0000 Xxxxxxxx
Xxxx. Xxxxxx Xxxxxxx Xxxxxxx Xx. 0.00 Xxxxx 0000
Xxxxxxx X.X. 00000 Xxx Xxxx, XX 00000
Mexico
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or to such other address or addresses as either party may from time to time
designate as its address by notice in writing to the other. All notices so
addressed are effective when received.
15.0 ENTIRE AGREEMENT AND AMENDMENTS
This Agreement contains the entire and only agreement between the parties
respecting the subject matter hereof and supersedes all previous negotiations,
agreements, commitments and writings in respect thereto. This Agreement may not
be amended, supplemented, released, discharged, abandoned, changed or modified
in any manner, orally or otherwise, except by an instrument in writing of
concurrent or subsequent date signed by duly authorized officers or
representatives of the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in duplicate, as of the date first written above, by its duly
authorized representative.
QuietPower Systems, Inc. PROLEC-GE, S. DE X.X. DE C.V.
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ X. X. Xxxxx
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Name: Xxxxxxxx X. Xxxxxx Name: X. X. Xxxxx
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Title: President and CEO Title: Vice President - PROLEC 6E
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