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Licensing Agreement
MBS(R) Exclusive License Model-Specific for Smart International Ltd.
"OVERVIEW" DEFINITION OF LICENSE:
[ ] Smart International Ltd. (SL hereafter) would obtain the right to
"Make, Market, Use & Sub-license" CaS-based MBS under license for a
minimum term of 5 years, with a 5 year Option to continue.
[ ] The license would guarantee SI exclusivity of supply and control of
MBS use & marketing within the People's Republic of China ("China"
hereafter).
() SI would be granted unlimited opportunities to use &/or
market MBS in both On-Site Remediation projects, Fixed Site
Landfill operations and for In-Line applications to
stabilize heavy metals contaminated waste by-products at the
production source.
() In the event that another company - or an MBS Licensee for
another region or territory has access to a project within
China which is not available to SI, SI would have the
automatic right to enter a Teaming Agreement with such a
company for completion of the project, and would be the sole
supplier of MBS reagents for the project. SI's rights would
also include the option to Sub-license the other company in
these circumstances, the period of such a Sub-license to be
one (1) year with a one (1) year option to renew.
[ ] SI's right to manufacture the CaS-based MBS formula/s would require
an agreement to accept SOLUCORP's Technical Expertise Service for a
minimum period of 1 year to insure complete compliance with production
protocols and Quality Assurance/Quality Control standards.
[ ] SOLUCORP would provide on-going marketing and sales advice and support
to SI for a minimum period of 2 years.
[ ] The terms of SI's financial obligations for these rights will include
an initial fee, payable within the first year, an annual licensing fee
for all subsequent years, and a royalty payable per ton
of MBS-processed materials.
[ ] This Agreement is subject to SI completing a Market Survey within
sixty (60) days of this date, and establishing viable operations and
agreeing on-going financial arrangements with Solucorp within a
further four (4) months.
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SPECIFIC SUBJECTS FOR LICENSE TERMS:
(NOTE: The following is not necessarily to be regarded as a complete listing)
1. Manufacturing & Blending:
(/) SI would agree to SOLUCORP maintaining technical oversight of MBS
production and Quality Control for a minimum period of one year, with
an additional year optional if deemed necessary by SOLUCORP's
technical experts.
(/) SOLUCORP would retain the right of final arbitration &/or veto in all
matters relating to product quality in SI's CaS production facility,
including:
* Ability to consistently produce above a specified grade (%
purity) of CaS;
* Ability to manufacture & stockpile sufficient supplies of CaS and
MBS.
(/) SI would agree to accept a SOLUCORP-devised(3) production auditing
process (Per our Attorney & Accountant) to confirm tonnage used on
projects for calculation of royalty fees.
(/) SI would agree to manufacture MBS for sale to SOLUCORP on the basis of
* SOLUCORP's agreement to non-competitive "use &/or sale" of the
chemicals;
* SI's agreement to supply such chemicals matched to defined
specifications;
* SI supplying the chemicals exclusively for SOLUCORP and its own
use.
(/) Any derivation or modification of the MBS process - developed by
either SOLUCORP or SI - remains the proprietary property of SOLUCORP.
2. Marketing / Sales & Use:
(/) SOLUCORP would commit to aiding SI's marketing efforts by:
~~ Establishing "Corporate Identity" directives and guidelines
to maintain one consistent image/presence for MBS throughout
the world.
~~ Directing all freelance sales personnel and "finders" to
report to SI without requiring any fee or reimbursement for
this extension of the sales force.
NOTE: This would entail SI paying their commissions for
projects which proceed instead of SOLUCORP.
~~ Offering a support program for SI's sales staff which could
include:
~~ Defining MBS features & benefits and market-specific
sales techniques
~~ Directing production of physical sales aids
~~ Training &/or supporting staff in selling MBS to
potential clients.
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(MARKETING/SALES & USE cont.)
(/) SI would commit to accepting SOLUCORP's licensees for other
regions which may have exclusive access to projects in China as
Preferred Partners to insure:
* SI's involvement in/control of all projects in the licensed
region of China;
* Establishment of a "partnership network" to expand SI's
operational span via sub-contracting, joint venturing, etc.
on projects;
(/) SI would guarantee to use MBS on every project to which it can be
applied, and would commit to assisting Preferred Partners on
projects for MBS by offering all possible assistance with
government agencies within China.
(/) SI would accept minimum annual tonnage requirements for royalty
payments based on any or all combinations of the following:
~~ SOLUCORP's need to recoup substantial development costs -
and establish a viable income level from such an extensive
relinquishing of its technology.
~~ A budget basis for sales and revenue targeting by SI's
operational staff
NOTE: Total tonnage per year could be established on an
escalating basis after Year #1, but would always be
calculated to include SI's marketing to other end users of
MBS technology.
(/) SI would commit to acting on SOLUCORP'S behalf in China on such
matters as:
-- All reviews of and compliance with relevant environmental
regulations;
-- Obtaining all pertinent Permits and authorizations;
-- All contact with and representations to regulatory authorities.
SOLUCORP agrees to issue 200,000 Stock Options @ $3 value, with
an option exercising period of five (5) years, as remuneration
for this commitment by SI.
LICENSE FEE & ROYALTY STRUCTURE
A. Basic License Fee:
Al. Year #l SOLUCORP's License and Signing-On fee of $2,000,000, payable during
the year.
NOTE: Payment of this amount could include the expected profits from the
exercising of all or some of the 200,000 Stock Options detailed above in
the event that its Year #1 payments cannot be entirely funded from
commercial project sources.
However, in the event of the Options being exercised in the first year,
the Profit Percentage derived from the exercising must be applied to the
total of the Year #l Licensing Fee.
(BASIC LICENSE FEE cont.)
-- SI has sixty (60) days from the signing of this Agreement to ascertain
the market viability of MBS within China. Within six (6) months after
the signing of this Agreement, SOLUCORP and SI will negotiate the
specific Annual Licensing and Royalty Fees for the full term of the
Agreement. If mutually satisfactory terms cannot be agreed within this
period, and if an extension of the period cannot be agreed, this
Agreement would terminate.
-- If this Agreement is canceled as indicated above, the balance of Stock
Options not exercised would also be canceled. NOTE: All prior payments
in such an event would be non-refundable.
A2. Years #2 to #5 License Fees would be agreed within the first six (6) months
of Year #1, based on an assessment of SI's initial Market Survey.
B. Technical Expertise Consulting Fee:
SI would commit to paying all expenses and SOLUCORP staff's time if
required for direct consulting on technical &/or formula evaluations.
This would be via a standard invoice for service at the end of each month.
C. Royalty Structure:
As an integral part of both parties' negotiations for the flail term of
this Agreement would be a $ amount Royalty for the use of CaS-based MBS in
projects, based on an assessment of SI's initial Market Survey.
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This Agreement In Principle is signed this 4th day of June, 1997 by:
For Solucorp Industries: For Smart International Ltd.:
/s/ Xxxxx X. Xxxxxx /s/ Q. B Xxxxx
Xxxxx X. Xxxxxx Dr. Q. B. Zheng
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President Chairman & Managing Director
