JOINT VENTURE AGREEMENT
This Agreement is made and effective as of this 15th day of June, 1996, by and
between ABB Business Area Power Transformers, represented here by ABB Secheron
SA ("ABB"), having a place of business at Xxx xxx Xxxxxxxxx 0-0, Xxxxxxxxxx xxxx
Meyrin-Satigny, X.X. Xxx 0000, XX-0000 Xxxxxx 0, Xxxxxxxxxxx and QUIETPOWER
SYSTEMS, INC., having a place of business at 0000 Xxxxxxxx, Xxxxx 0000, Xxx
Xxxx, XX 00000 ("QUIETPOWER").
WHEREAS QUIETPOWER owns certain intellectual property related to active quieting
systems for transformers ("Technology") and is in the business of developing,
commercializing, marketing and selling this Technology; and
WHEREAS ABB is in the business of designing, manufacturing and selling power and
distribution transformers ("Transformers"); and
WHEREAS QUIETPOWER and ABB desire to further develop the Technology and active
transformer quieting products ("Commercial Products"); and
WHEREAS QUIETPOWER and ABB wish to establish a Joint Venture to market and sell
the Commercial Products; 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 active
transformer quieting systems for Transformers which sense, analyze and
transduce signals with the purpose of electronically reducing acoustic
and vibration signals emitted from the transformer. This 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 ABB and/or QUIETPOWER pursuant to the work under this Agreement.
1.2 "Transformers" means and includes: distribution and power transformers.
1.3 "Commercial Products" means active transformer quieting 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 4.2 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
fifty percent (50%) of the voting rights during the term of this
Agreement.
1.7 "Effective Date" of this Agreement shall be the date first written
above.
1.8 "Term" of this Agreement shall be as specified in Article 11.0 below.
1.9 "European Countries" are defined as: Austria, Belgium, Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Israel
Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania,
Slovakia, Spain, Sweden, Switzerland, United Kingdom, and former
Yugoslavia.
1.10 The "Transformer Retrofit Market" shall mean that market segment for
the application of the Commercial Products to Transformers that are
already in operation end users or to Transformers previously
manufactured but not yet installed at an end user.
2.0 SCOPE OF AGREEMENT
The terms contained in the Agreement apply to Technology and Commercial
Products for the European Countries defined in Section 1.9,
specifically for the transformer retrofit market.
3.0 COMPANY REPRESENTATIVES
3.1 Function. As of the Effective Date each party shall select an employee
of or agent for their respective company as a representative
("Representative"). The Representatives shall function as advisors to
provide recommendations to ABB and QUIETPOWER and as managers of the
sales, marketing, design, development and testing of Commercial
Products and the implementation of the
-2-
Approved Statement of Work as defined in Section 4.3 of this AGREEMENT.
Each Representative shall have an equal vote with respect to policy
decisions, or material operating and financial decisions concerning the
joint venture. A party may replace its representative at any time. The
representatives shall meet at least four times per year. Meetings may
be held in person or telephonically. Minutes of the meetings shall be
kept and provided to the Representatives within 30 days after such
meetings for review. Status reports will be prepared in advance of the
meetings. These reports shall describe the progress in all Approved
Statements of Work, as defined in Section 4.3, and all Approved
Marketing Plans, as defined in Section 5.4. Quarterly financial
statements shall be prepared detailing all joint venture financial
transactions, including bank reconciliations of the Joint Account and
the Joint Marketing Account.
3.2 Tasks. The initial tasks of the Representatives shall be:
A. Identify markets and develop a marketing and sales plan for
the penetration of the Commercial Products into the European
Market.
B. Identify, design, develop and test potential improvements to
the Technology that will further develop the Commercial
Products.
C. Identify, design, develop and test potential product
components and manufacturing processes and designs for the
Commercial Products.
4.0 PRODUCT IMPROVEMENT FUNDING
4.1 Joint programs of product improvement shall be conducted in the fields
of Technology and Commercial Product upon the recommendation of the
Representatives and subject to the agreement in writing of each party
to participate in the specific program.
4.2 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
such employees of each of the parties as may be designated for this
purpose, including a budget with details of estimated costs to be
incurred and the ratio in which they will be shared by the parties.
4.3 The obligations of the parties with respect to 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
-3-
to assign the agreed upon personnel to the program and to contribute
funds in accordance with the budget described in Section 4.2.
4.4 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.
4.5 Neither party shall have the right to withdraw from an Approved
Statement of Work without the prior written consent of the other party,
unless performance by the other party of the objectives and phases of
work established pursuant to Section 4.3 is not timely or does not
conform to the Approved Statement of Work in all material respects.
4.6 At the commencement of the first Approved Statement of Work, the
parties shall open a bank account ("Joint Account") in the name of
ABB/QUIETPOWER Joint Project. This account shall be used to receive
each party's share of the costs for all Approved Statements of Work.
4.7 Payments from the Joint Account shall be made only in accordance with a
budget that is part of an Approved Statement of Work. All other
payments shall be made only upon advance written agreement of the
parties. For payments of less than $10,000, either Representative shall
have authority for signing checks or instructions for wire transfers.
For payments greater than $10,000, authority for signing checks or
instructions for wire transfers shall be signed jointly by both
Parties.
4.8 All books and records pertaining to the Joint Account, and for
development activities in general, shall be kept by ABB, and shall be
available for inspection and copying by a representative of either
party during normal business hours. Either party shall have the right
to appoint, at its own expense, an accounting firm for the purpose of
conducting an audit of the Joint Account and other related financial
activities.
5.0 COMMERCIAL PRODUCT MARKETING AND SALES
5.1 A Joint marketing and sales program for the Commercial Products shall
be developed by the Representatives. The program shall be reviewed and
revised annually by the parties. It is the intent of the parties to
prepare the plan for the program 30 days after the execution of this
Agreement. Thereafter, the revised program will be prepared by October
1, of each succeeding year.
-4-
5.2 Generally, the responsibilities of the parties shall be as follows.
QuietPower shall design, fabricate market and sell the Commercial
Products. ABB shall market and sell Commercial Products, including
performing site visits, measurements, installation and maintenance.
5.3 Prior to commencement of a given marketing effort, the parties shall
jointly prepare a description (hereinafter the "Marketing Plan") of the
objectives of each party and a budget including details of estimated
market size, sales targets, and projected costs to be incurred.
5.4 The responsibilities of the parties with respect to a given marketing
program shall arise only upon the approval, in writing by each party,
of the Marketing Plan. Upon such approval, the Marketing Plan shall be
referred to as an "Approved Marketing Plan." The Approved Marketing
Plan shall obligate each party to assign the agreed upon personnel to
the program and to expend funds to accomplish the prescribed tasks.
5.5 At the commencement of the joint marketing and sales program, the
parties shall open a bank account ("Joint Marketing Account") in the
name of ABB/QUIETPOWER Joint Marketing Project.
5.6 The Joint Marketing Account will be used to carry out normal commercial
activities such as purchasing product components and inventory, and
collecting receipts from sales and licensing activities. All
expenditures from the account shall be approved in advance by both
parties. For payments of less than $10,000, either Representative shall
have authority for signing checks or instructions for wire transfers.
For payments greater than $10,000, authority for signing checks or
instructions for wire transfers shall be signed jointly by both
Parties.
5.7 After the end of the calendar quarter, if the amount in the Joint
Marketing Account exceeds current payment obligations to outside
vendors and the amount necessary to perform any then existing Marketing
Plan commitments, after adjusting for any existing obligations of the
parties to make payments into the Joint Marketing Account, the excess
will then be used to pay each party's pro rata share of their approved
direct marketing expenditures, and any remaining balance shall be
shared equally by the parties.
5.8 All books and records pertaining to the Joint Marketing Account, and
for marketing activities in general, shall be kept by ABB, and shall be
available for inspection and copying by a representative of either
party during normal business hours. Either party shall have the right
to appoint, at its own expense, an accounting firm for the purpose of
conducting an audit of the Joint Marketing Account and other related
financial activities.
-5-
6.0 PROTECTION OF PROPRIETARY AND CONFIDENTIAL INFORMATION
All information disclosed by one party to the other during the course of this
Agreement and any Approved Statement of Work or Approved Marketing Plan shall be
governed by the Confidential and/or Proprietary Information Agreement between
the parties dated April 25, 1996.
7.0 OWNERSHIP AND USE OF RESULTS OF APPROVED STATEMENT OF WORK
7.1 QUIETPOWER shall own all copyright, patent, trade secret and other
intellectual property rights in Technology now existing, or hereinafter
created, as a result in whole or in part of this Agreement. ABB shall
own all copyright, patent, trade secret and other intellectual property
rights in Transformers now existing, or hereinafter created, as a
result in whole or in part of this Agreement. Nothing in this Agreement
shall alter such prior ownership by either party.
7.2 In the event that an invention or other intellectual property right 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, and all other intellectual property rights of any kind
shall be owned by QUIETPOWER. QUIETPOWER may patent all such
inventions. With respect to the filing and prosecution of patent
applications on such inventions, ABB agrees to cooperate with
QUIETPOWER and to furnish all information requested in a timely fashion
to enable the expeditious filing and prosecution of all patent
applications on such inventions and other applications for intellectual
property rights. 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, ABB 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 ABB 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 ABB and shall, if requested by ABB, convey its
entire right, title and interest to ABB and execute all documents
necessary to effect that result without the payment of any
compensation.
7.3 In the event that an invention or other intellectual property right is
jointly made or conceived as a result of carrying out an Approved
Statement of Work for
-6-
improved Transformers not involving Technology as defined in Section
1.1, any and all patent applications, whether domestic or foreign,
based on such inventions, and all other intellectual property rights of
any kind shall be owned by ABB. ABB may patent all such inventions.
With respect to the filing and prosecution of patent applications on
such inventions, QUIETPOWER agrees to cooperate with ABB and to furnish
all information requested in a timely fashion to enable the expeditious
filing and prosecution of all patent applications on such inventions
and other applications for intellectual property rights. ABB shall bear
the expense of filing and prosecution of each such patent application.
7.4 During the Term of this Agreement, each party agrees that with respect
to its employees and contractors assigned pursuant to an Approved
Statement of Work, it will secure and 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.
8.0 LICENSES TO ABB
Subject to Section 8.5, QUIETPOWER agrees to grant to ABB licenses to use and
sell the Technology and Commercial Product for the purposes as prescribed in
this Article 8. Furthermore the licenses to ABB described hereunder shall be
extendible by ABB to its Subsidiaries. All licenses granted hereunder shall be
royalty free.
8.1 Subject to Section 8.5, QUIETPOWER agrees to grant, and does hereby
grant, to ABB an exclusive license for retrofit applications for all
European Countries, for the sale to the Transformer Retrofit Market.
ABB shall have the right to sublicense the rights granted pursuant to
this Section 8.1.
8.2 Cash receipts from the activities described in Section 8.1 shall be
deposited into the Joint Marketing Account and shall be distributed to
the parties pursuant to Section 5.7
8.3 In preparation for the production of Commercial Product, ABB and
QUIETPOWER shall seek competing bids 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.
8.4 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 8 and Article 9.
-7-
8.5 Commencing with the third year after the effective date of this
Agreement, QUIETPOWER and ABB shall mutually agree on yearly sales
targets. Achievement of these targets will become the basis for
maintaining exclusivity within the Agreement. Both parties shall
negotiate sales targets in good faith. This provision shall provide for
a one year make-up period for the sales targets. If the joint venture
falls short of the target in any one year, ABB will have an additional
year for the joint venture to make up any short-fall from the prior
year, in order to maintain exclusivity.
8.6 In addition to the retrofit Commercial Product, QUIETPOWER intends to
develop a Commercial Product for integration into new Transformers by
original equipment manufacturers ("OEM's"). QUIETPOWER hereby grants to
ABB a right of first refusal to bid on the OEM license for the European
Countries. ABB shall have three months from the date that QUIETPOWER
notifies ABB of the specific details of a competing OEM bid to exercise
its right. If ABB chooses to place a bid for the OEM license,
QUIETPOWER shall evaluate this bid using such factors as cost, quality
control, and capability to deliver the OEM product in a required time
period in such quantities as to maximize the success of the OEM
product.
9.0 VALUATION OF COMMERCIAL PRODUCT
9.1 Upon the completion of an Approved Marketing Plan, the parties shall
establish a sales price of the Commercial Product for end users. 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. The sales price may be changed from time to time by
agreement of the parties. Sales of Commercial Product at terms of less
than the sales price established in this Section 9.1, must first be
approved by both parties.
9.2 The proceeds from sales of Commercial Product shall be deposited in the
Joint Marketing Account and handled in the manner as prescribed in
Section 5.7.
10.0 CONTINUING SUPPORT FOR COMPLETED PROGRAMS
10.1 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.
10.2 Nothing in Articles 7.0, 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.
-8-
11.0 DURATION AND TERMINATION
11.1 This Agreement shall extend for five (5) years from the Effective Date
and shall be renewable upon mutual agreement of the parties.
11.2 This agreement may be terminated by a party if the other party (a)
violates Article 6.0, including the Confidential and/or Proprietary
Information Agreement between the parties dated April 25, 1996, or (b)
commits a material breach of this Agreement, provided that such breach
has a material adverse affect on the marketing and/or development of
the Technology and/or Commercial Product, and further provided that
such breach is not remedied within 30 days from notice of said breach
by the other party.
11.3 In the event of termination or expiration of this agreement:
(a) all payments of any kind from third parties shall be deposited in
the Joint Account, from which all approved expenses due or payable
shall be paid. After all expenses due or payable are paid, the balance
in the Joint Account shall be distributed equally to the parties within
15 days;
(b) any balance in the Joint Marketing Account shall be immediately
paid into the Joint Account and be governed by subsection (a) above;
(c) Sections 7.1, 7.2 and 7.3 shall continue to be of full force and
effect and shall survive the expiration or termination of this
agreement;
(d) licenses granted by QuietPower in connection with this agreement
shall expire and revert to QuietPower;
(e) Article 6.0, including the Confidential and/or Proprietary
Information Agreement between parties dated April 25, 1996, shall
continue to be of full force and effect and shall survive the
expiration or termination of this agreement.
12.0 MISCELLANEOUS PROVISIONS
12.1 Anything done by either party before the Effective Date which would be
in discharge of any obligations hereunder if this Agreement were then
in effect, shall, on the Effective Date, be treated as being in
discharge of such obligations under this Agreement.
12.2. If an employee or agent of one of the parties to this agreement commits
an act or omission that renders that party liable for such act or
omission, then such party shall be liable for same and attorney's fees,
both if and as required by
-9-
applicable law, without contribution from the other party. If the
parties jointly hire employee(s) or agent(s), and such employee or
agent commits an act or omission that renders either of the parties
liable for such act or omission, the parties shall share equally the
cost of same and attorney's fees, both if and as required by applicable
law.
12.3 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.
12.4 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.
12.5 This Agreement shall be construed and the legal relations between the
parties hereto shall be determined in accordance with the laws of
Switzerland.
12.6 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.
-10-
12.7 All disputes arising out of or in connection with this Agreement shall
be finally settled under the rules of conciliation and arbitration of
the International Chamber of Commerce by three arbitrators appointed in
accordance with the said rules. The arbitration proceedings shall take
place in Paris and shall be conducted in English.
13.0 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:
ABB Secheron SA QuietPower Systems, Inc.
Xxxx-Xxx Xxxxx Xxxxxxxx X. Xxxxxx, Ph.D.
Vice President President and Chief Executive Officer
Rue des Sablieres 4-6 1675 Broadway
X.X. Xxx 0000 Xxxxx 0000
XX-0000 Xxxxxx 2 Xxx Xxxx, XX 00000
Switzerland United States of America
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.
14.0 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 with the sole exception
of the Confidential and/or Proprietary Information Agreement between the parties
dated April 25, 1996. 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.
-11-
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. ABB Secheron SA
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxxxxx and Favre, JrL
------------------------------- ---------------------------------
Name: Xxxxxxxx X. Xxxxxx Name: Xxxxxxxxx and Favre, JrL
------------------------------- ---------------------------------
Title: President and CEO Title: Vice President - PROLEC 6E
------------------------------- ---------------------------------
-12-
