EXHIBIT 99.2
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is made as of the 28th day of
January, 2005 between HiEnergy Technologies, Inc. ("HiEnergy"), a corporation
organized under the laws of the State of Delaware, U.S.A., and having its
principal office at 0000-X Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000, U.S.A., and
Ing. Xxxxxx Xxxxxxxxx Xxxxxxxxxx, I.D. # 15,312,406H, with principal office at
Xx. Xxxxxx Xx. 00-0 Xxxx 00000, Xxx Xxxxxxxxx, Xxxxx ("Xxxxxxxxx"). HiEnergy and
Xxxxxxxxx are hereinafter collectively referred to as the "Parties".
A. BACKGROUND. Based on a proposal submitted by Xxxxxxxxx to HiEnergy, both
Parties have agreed to proceed with the completion of definitive agreements
which are necessary for the formation of a joint-venture company to be named
Tecnologia de Alta Energia, S.A. ("TAESA") as contemplated herein (the
"Transaction").
B. PURPOSE OF MOU. The purpose of this MOU is to: (1) describe at a high level
the key principles and terms which will apply in the definitive agreements that
the Parties currently contemplate will have to be settled to complete the
Transaction (the "Transaction Agreements"); and (2) establish the process and
timetable to be followed by the Parties in the completion of the Transaction.
UNDERSTANDINGS AND AGREEMENTS:
1. SCOPE OF TRANSACTION
1.1. OVERVIEW: The Parties intend to complete the Transaction and
accomplish the formation of TAESA, which will provide for the
construction and/or build-out of an assembly, testing, and service
center in Tenerife, Spain for HiEnergy's StoitechTM explosive
detection products, including the CarBomb FinderTM and SIEGMA
systems (the "Products"), as well as sell and market the Products to
private, governmental and military clients, including NATO,
throughout Spain and the European Union on an exclusive basis, and
throughout South America and Africa on a non-exclusive basis,
subject to certain conditions and exclusions (the "Territories").
1.2. NEGOTIATIONS PROCESS AND TIMETABLE: Both Parties acknowledge that
definitive Transaction Agreements will be required to complete the
Transaction and agree to diligently proceed in good faith with
negotiations regarding the Transaction Agreements according to the
key principles, process and timetable described in this MOU. The
Parties acknowledge that the Transaction and Transaction Agreements
are subject to the approval by the respective Board of Directors
and/or authorized representatives of HiEnergy and Xxxxxxxxx.
1.3. TRANSACTION STRUCTURE: Both Parties will work cooperatively to
investigate, analyze, assess and plan the completion of the
Transaction with a view toward mutually developing and adopting a
Transaction structure that meets both Parties' objectives and takes
into consideration commercial, labour, tax, regulatory, accounting
and other factors.
2. JOINT VENTURE AGREEMENT
2.1 OWNERSHIP AND GOVERNANCE. The primary purpose of the Joint Venture
Agreement is to establish the ownership and governance structure for
the TAESA that will facilitate: (A) the participation of both
Parties in: (I) board level oversight of the assets, capital and
resources contributed to TAESA; and (II) key decisions regarding the
establishment and future growth of the TAESA business in and from
the Territories; and (B) the capital structure and equity
distribution of TAESA.
2.2 MARKETING COOPERATION: Both Parties will work together to establish
and agree upon terms and conditions as to the assignment of the
Territories to TAESA and as to the manner each Party will support
and participate in the ongoing development and growth of TAESA's
business, including: (A) minimum commitments of capital and
resources to support the establishment and growth of an assembly,
testing, marketing & sales, and service center in Tenerife, Spain;
(B) identification and appraisals of the geographic and functional
markets intended to be served by TAESA; (C) the nature of and
conditions governing marketing and technical support to TAESA during
the term of the assignment; (D) the distribution model and pricing
policy of the Products; and (E) certain performance guidelines,
including sales and marketing developmental milestones, including
mutually agreed upon sales quotas required to maintain exclusivity.
2.3 GENERAL TERMS AND CONDITIONS:
(A) HiEnergy shall supply the technical know-how for the assembly,
testing and servicing of the Products. The technical know-how shall
comprise: (I) the complete documentation required for production,
including technical data related to sub-systems and components, (II)
product engineering, (III) design and layout of plant to ensure
commercial production of the product, and (IV) the deputation of
technicians by HiEnergy's scientific and technical teams as required
in order to ensure the fulfilment of the undertaking and training of
TAESA's personnel in its proposed plant in Tenerife, Spain; and
(B) HiEnergy will grant TAESA a limited license (subject to
HiEnergy's standard license terms and conditions) as to certain
intellectual property rights necessary to assembly, test, sell,
distribute and service the Products in the Territories (the
"License"); and
(C) HiEnergy will participate in, and hold no less than 1/3, of all
classes of equity capital of TAESA, so long as HiEnergy continues to
hold said equity, meets its obligations and provides ongoing support
and improvements to the Products, their manufacture and
technologies. Beyond the initial grant of the License rights,
HiEnergy is not required to provide any paid-in capital or financing
in connection with the Transaction; and
(C) Xxxxxxxxx will bear all initial costs related to the formation
of TAESA, which upon mutual agreement may be debited to the account
of TAESA and subsequently shared by all equity holders of the joint
venture company on a pro-rata basis. Eguizabel will secure on a best
efforts basis the amount of equity paid-in capital necessary to fund
the joint-venture and ensure the viability and sustainability of
TAESA, including the necessary financing to meet its commitment to
manufacture and sell one hundred and five (105) units of the
Products within a two (2) year period. Xxxxxxxxx will provide a
monthly progress report as to the establishment and capital funding
of TAESA; and
(D) Xxxxxxxxx, with the assistance and cooperation of HiEnergy, will
prepare and file all necessary applications before its Government
authorities for registration of TAESA, sanction of the proposed
foreign collaboration, the import, licensing and permitting of the
Products and related components, and their distribution throughout
the Territories. Xxxxxxxxx will provide a monthly report as to the
licensing and permiting of the Products and other regulatory events
material to TAESA and its business; and
(E) Xxxxxxxxx shall recruit and employ, subject to the approval of
HiEnergy, no less than two (2) technologists into TAESA to work with
HiEnergy's scientific and engineering groups in adopting and
translating HiEnergy's Manufacturing Plan for the Territories, which
details the process, steps, logistical requirements and labor tasks
associated with the assembly, service and maintenance of the
Products.
3. COOPERATIVE DEVELOPMENT AGREEMENT
HiEnergy and TAESA will enter into a Cooperative Development
Agreement ("CDA") which shall establish the manner in which HiEnergy
and TAESA may cooperate in the advancement and/or development of the
Products. The CDA will also provide protections against the
unauthorized use, assignment, transfer or infringement of HiEnergy's
intellectual property, as well as prohibit or
restrict employment and ownership of any advancements and/or
developments made by TAESA to HiEnergy's technologies and Products,
including that: (I) TAESA shall treat all HiEnergy deliverables as
Confidential Information and use all HiEnergy deliverables in
accordance with the protective provisions contained in the CDA; (II)
TAESA shall forfeit and immediately surrender any advancement to, or
development based upon, HiEnergy's products or technologies; (III)
TAESA will make no claim whatsoever to HiEnergy's intellectual
property and is prohibited to file any patent applications,
trademarks or copyrights based on, or derived from, HiEnergy's
intellectual property, technoloies and Products; and (IV) all TAESA
employees will be expected to enter into confidentiality,
non-disclosure, and, in certain cases, non-compete agreements with
both TAESA and HiEnergy.
4. TIMETABLE/MILESTONES
The Parties will diligently proceed with the negotiation and
completion of the Transaction Agreements and with the satisfaction
in the manner contemplated by this MOU. On signing of this MOU, the
Parties shall promptly proceed to negotiate the terms of the
definitive agreements.
5. CONFIDENTIALITY
From the date of this MOU and for a period of two (2) years
thereafter, the Parties agree not to disclose to any person any
proprietary information or other confidential information of the
other party. This provision shall not apply to information which was
already in the public domain at the time of disclosure.
6. MEDIA
The Parties confirm that they shall not, without the prior written
consent of the other Party, issue any press release or make any
public announcement with regard to the provision of this MOU or the
transactions and actions contemplated herein, except when required
to be disclosed by virtue of applicable law.
7. BINDING EFFECT
The Parties agree that with the exception of the terms and
conditions of Paragraphs 5 through 12 of this MOU, inclusive, there
is no intention to create legally binding obligations on either of
the Parties and none are hereby created.
8. TERMINATION
The provisions of this MOU shall terminate on the happening of the
following:
(a) the execution of the Transaction Agreements by both Parties; or
(b) by mutual written consent of the Parties; or
(c) the non-completion of the Transaction Agreements within 30 days
(or such extended period as the Parties may agree).
9. MODIFICATIONS
The Parties agree that this MOU shall not be amended in any way
other than by mutual written agreement to amend this MOU.
10. ENTIRE AGREEMENT
This MOU constitutes the agreement of the Parties in connection with
the matters set forth herein, and shall supersede all previous
understandings, communications, negotiations and arrangements either
oral or written, between the Parties with respect to the subject
matter of this MOU.
11. COSTS OF THE PARTIES
Each Party shall bear its own costs in the preparation, negotiation
and closing of this MOU and the Transaction, including the
Transaction Agreements, none of which shall be borne by the Joint
Venture, unless otherwise specified in the closing of the
Transaction.
12. GOVERNING LAW AND JURISDICTION
This memorandum of understanding is, and all negotiations and any
Transaction Agreements prepared in connection with the Transaction
shall be, governed by and construed in accordance with the internal
laws of the State of California. The Parties irrevocably agree that
the courts of the State of California will have exclusive
jurisdiction to settle any dispute or claim that arises out of or in
connection with this MOU and negotiations relating to the proposed
Transaction. In the event any dispute shall arise, the prevailing
party in such dispute shall be entitled to the reimbursement of all
expenses, including reasonable attorney fees, incurred in bringing
or defending against any such action.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
executed by their respective duly authorized representatives on the day and year
first above written.
HIENERGY TECHNOLOGIES, INC. ING. XXXXXX XXXXXXXXX XXXXXXXXXX
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxx Xxxxxxxxx Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chairman/CEO
