1
EXHIBIT 10.10
LICENSE AGREEMENT
(Republic of Korea & Democratic People's Republic of Korea)
PREAMBLE
The parties to this Agreement are A-55, L.P., a Nevada limited partnership
("A-55"), and ▇▇▇▇▇▇▇ Energy Fund Pty. Limited of ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ on behalf of a corporation to be incorporated in
the Republic of Korea referred to at paragraph 3.5 below ("Grantee").
This Agreement shall become effective on the date it is executed by the last
party to execute same, as set forth on the signature page hereof and payment of
the technical transfer fee pursuant to paragraph 3.2.1 below.
This Agreement is made with reference to the following facts:
A. A-55 owns the rights to transfer to others, the rights to certain worldwide
patent applications, issued patents and trademarks, and valuable
technology, know-how, trade secrets and prototypes which relate to and/or
use an aqueous fuel comprising a mixture of water and carbonaceous material
for combustion in an internal combustion engine and the use thereof,
including technologies as set forth in the patent applications and issued
patents as more fully defined below ("A-55 Technology").
B. Grantee desires to be licensed to use such rights and information from A-55
within a geographical territory.
Now, therefore, in consideration of the mutual promises and covenants, and upon
the conditions herein contained, the parties agree as follows:
1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
1.1 "A-55 Patent"
means without limitation any product claim of:
1.1.1 A-55 U.S. Patent No. 5,156,114, issued December 10,
1992;
-1-
2
1.1.2 Pending patent applications related to the A-55
Technology; and Aqueous Fuel for Internal Combustion
Engines and Method of Combustion, No. 92-702313, filed
November 5, 1990 in the Republic of Korea, Aqueous Fuel
and Method of Preparing the Same, No. 705638-96 filed
March 29, 1995 in the Republic of Korea and patents and
patents pending relating to the A-55 Technology.
1.2 "A-55 Clean Fuels"
means fuel covered by any product claim of the A-55 Patent.
1.3 "A-55 Processes"
means any process or procedure to produce and/or utilize the A-55 Clean Fuels or
any other product claim of the A-55 Patent.
1.4 "A-55 Know-how"
means proprietary information of a confidential nature owned by A-55 relating to
the techniques available for commercial exploitation of A-55 Patent and any A-55
Processes; and A-55 Know-how means proprietary information of a confidential
nature owned by A-55 relating to the techniques available for commercial
exploitation of A-55 Patent, including the subject matter of any A-55 Patent if
no patent should issue thereon.
1.5 "A-55 Products"
means any product sold by Grantee associated with the grant of this license or
the A-55 Technology. It is intended by the parties, that this term shall have
the broadest meaning and not in any way be limited to products which are capable
of patent or contractual protection. By way of example but not limitation, the
term would include any product bearing, utilizing or referring to the A-55
Trademark, clothing, pens, souvenirs, and the like.
1.6 "A-55 Technology"
means all know-how, trade secrets, confidential information, and expertise
including, but not limited to, designs, plans, specifications and all other
information and documentation,
-2-
3
whether patentable or not, relating to A-55 Patent. Unless the context
requires otherwise, the term "A-55 Technology" shall include all rights and
claims under the A-55 Patent, the A-55 Clean Fuels, the A-55 Processes, the
A-55 Know-how, and A-55 Products.
1.7 "A-55 Trademark"
means:
1.7.1 United States registered trademark number 1,848,044;
1.7.2 United States Registered Service ▇▇▇▇ No. 74/510,26
("Powered With Water"); and
1.7.3 Any identical or substantially similar trademarks or service
marks which may be obtained by A-55.
1.8 "Net Sales"
means the gross selling price of A-55 Clean Fuels and all other A-55
Products for which an invoice or like sales record has been prepared by
Grantee, or any sublicensee of or party or entity related to or affiliated
with Grantee, less any trade, or quantity (but not cash) discounts actually
allowed, transportation charges, sales or use taxes, if any, included in
the invoice price, and the price of any fuel or other A-55 Product
returned.
1.9 "Territory"
means the Republic of Korea and the Democratic People's Republic of Korea.
1.10 "Effective Date"
shall mean the date stated in the Preamble.
2. GRANT OF PATENT AND KNOW-HOW RIGHTS TO GRANTEE
2.1 Grant:
Subject to the terms and conditions set out herein, A-55 hereby grants to
Grantee:
-3-
4
2.1.1 The right under the A-55 Patent to manufacture, sell,
distribute and use A-55 Clean Fuels and A-55 Products in the
Territory and the right to practice any A-55 Process
necessary for such manufacture or sale in the Territory.
2.1.2 The right to use A-55 Know-how in the Territory.
2.1.3 The right to practice any and all A-55 Technology in the
Territory, and the right to allow its purchasers to practice
any and all A-55 Technology and patent rights in the
Territory.
2.2 Patent Marking:
Grantee shall, where possible, ▇▇▇▇ any A-55 Product produced under any
patent licensed hereunder with the number of the applicable patent.
2.3 Excluded Applications:
All aviation applications, including supplying fuel for such applications,
are excluded from this Agreement and specifically reserved to A-55.
However, subject to any contractual obligation A-55 may have existing at
the date hereof and the other limitations and restrictions set out herein,
this license shall extend to all aviation applications within the Territory
when in the opinion of ▇- ▇▇, such applications are commercially viable.
2.4 Licenses to OEM:
2.4.1 A-55 reserves the sole and exclusive right to negotiate license
agreements with original equipment manufacturers ("OEMs").
Grantee acknowledges that such licenses may be worldwide and may
include the right to utilize and practice the A-55 Technology in
the Territory. The grant of any such license to an OEM shall not
infringe on the grant of this Agreement; provided, however, that
royalties for the use and practice of the A-55 Technology within
the Territory under such a license shall be to the advantage of
Grantee.
2.4.2 Any license granted to an OEM as contemplated in paragraph 2.4.1
must not permit it to manufacture A-55
-4-
5
Clean Fuels in the Territory, whether for distribution or sale
or for its own consumption.
2.4.3 A-55 shall upon the grant of any license to an OEM, give notice
thereof to Grantee.
2.5 Nature of Grant:
2.5.1 Grantee acknowledges that, incident to the dissolution
of Advanced Fuels, L.L.C., Caterpillar Inc. retained
licensed rights to the A-55 Technology for use in
products of the kind it produces or will produce in the
Territory. Pursuant to retained license rights,
Caterpillar Inc. may sell, but not license until
October 24, 2001, a diesel emulsion based aqueous fuel
emulsion and may make, but not license, a naphtha fuel
emulsion for Caterpillar engines only.
2.5.2 Except as otherwise provided in paragraphs. 2.3, 2.4,
and 2.5. 1, A-55 shall grant no other license to the
A-55 Technology in the Territory while this Agreement
is in force and Grantee is not in default.
2.6 Sublicenses:
Subject to the express written approval of A-55, first had and obtained on
each occasion, Grantee shall have the right to grant sublicenses under this
Agreement provided that no such sublicense shall entitle Grantee or the
sublicensee to assign, transfer or part with any rights thereunder without
the prior written approval of A-55 first had and obtained. Unless waived by
A-55, each such sublicense that relates to the manufacture of A-55 Clean
Fuels by the sublicensee shall, in addition to other pertinent provisions,
contain provisions for the protection and preservation of A-55's equity
interest in Grantee and the payment of royalties of an amount not less than
that specified in paragraph 3.1 to Grantee, who shall hold the same in
trust for payment to ▇- ▇▇ or make some other stipulation which is
acceptable to ▇- ▇▇ to compensate fully A-55 for such royalties as if the
sale had been made directly by Grantee.
2.7 Purchase and Sale of Additives
2.7.1 A-55 shall sell and deliver in a timely manner to the
Grantee or the Grantee's order
-5-
6
such quantities of the surfactant as the Grantee shall
order from time to time.
2.7.2 The initial price of the surfactant (which shall
exclude for these purposes any cetane enhancer or
methanol) to Grantee will be Twenty Dollars (US$20) per
gallon plus all freight and transportation costs. That
price is fixed for 6 months from the date that this
License agreement comes into operation. The price of
the surfactant may be reviewed and adjusted by A-55
from time to time after the initial period of six
months. Any increase in price must be fixed by A-55 in
good faith by reference only to increases in raw
material costs of the surfactant. Any increase in price
will operate on orders placed after notification.
2.7.3 The Grantee shall pay the price for the surfactant sold
ex gate from A-55's premises by immediately available
funds such as an irrevocable Bank letter of credit
2.7.4 The additives must be of a merchantable quality and fit
for their intended purpose.
2.7.5 Property and risk in the additives pass to the Grantee
ex gate from A-55's premises
3. PAYMENTS FOR RIGHTS GRANTED UNDER PARAGRAPH 2.
3.1 Continuing Annual Royalty:
For the rights granted under paragraph 2. above, Grantee shall pay to A-55
a royalty of ONE PERCENT (1%) of the Net Sales in the Territory.
3.2 Technical Transfer Fee:
In consideration for the rights granted herein, Grantee shall pay to A-55 a
technical transfer fee of TEN MILLION DOLLARS ($10,000,000). The technology
transfer fee will be paid by four installments:
3.2.1 The first installment of US$1,000,000, will be paid to
A-55 by Grantee on 9th June 1997 but in any event no
later than 15th June 1997
-6-
7
3.2.2 Unless extended pursuant to paragraph 3.3 a second
installment of US$2,000,000, will be paid to A-55 on
9th December 1997.
3.2.3 Unless extended pursuant to paragraph 3.3 a third
installment of US$2,000,000, will be paid to A-55 on
9th March 1998
3.2.4 Unless extended pursuant to paragraph 3.3 the second
installment of US$5,000,000, will be paid to A-55 on
9th June 1998.
3.3 Extension of Time:
A-55 proposes in the near future to conduct a test with Tennessee Valley
Association in Alabama involving a combustion turbine and/or coal fired
test (`the Test'). ▇- ▇▇ anticipates that preliminary results of the Test
will become available by August 30, 1997. If neither of the preliminary
test results are received before that date, the Parties agree that each of
the dates for payment of the installments referred to in paragraphs 3.2.1
to 3.2.4 (inclusive) shall be deferred by a period equal to the period from
August 30 1997 to the date that either of the preliminary results of the
Test are received by A-55. but in any event no longer than six (6) months.
3.4 Outbreak of Hostilities:
If during the period between the payment of the first installment of the
technology transfer fee and the date of payment of the second installment
there occurs an outbreak of hostilities between the Republic of Korea and
the Democratic People's Republic of Korea which can be reasonably be
described as a major regional conflict the operation of this agreement,
including the time for payment of the second installment shall be suspended
during the term of such hostilities.
3.5 Equity Interest in Grantee:
▇▇▇▇▇▇▇ Energy Fund Pty Ltd shall forthwith incorporate a company in the
Republic of Korea to be called ▇▇-▇▇ ▇▇▇▇▇' or similar and take whatever
steps may be necessary to procure that the corporation shall immediately
assume the rights and obligations of the Grantee pursuant to this
Agreement. ▇▇▇▇▇▇▇ Energy Fund Pty Ltd shall raise and inject the capital
required to meet the Licensee's obligations under this Agreement and to
ensure the
-7-
8
Licensee's commercial success. Forthwith upon the incorporation of the
corporation, and in consideration of the grant of this license and incident
to the formation of the corporation, the corporation shall deliver to A-55
a share certificate evidencing the allotment to it of thirty percent (30%)
of the issued shares in the corporation deemed fully paid. The constituent
documents of the corporation shall provide that A-55 shall have no
obligation to make any contribution to the capital of corporation for the
issuance of such interest other than the grant of this license, and shall
further provide that such interest shall not be subject to dilution upon
future contributions of capital.
4. DISCLOSURE AND CONFIDENTIALITY OF KNOW-HOW
4.1 Disclosure:
Within thirty (30) days after the Effective Date of this
Agreement, A-55 shall use its best efforts to disclose to Grantee
all of the technology it possesses relating to the manufacture,
use or sale of A-55 Technology, which is required by Grantee to
exercise and exploit its rights hereunder. Such disclosure shall
include design, engineering and manufacturing information and
specifications, including without limitation; identification of
commercially-available equipment (and the name of the
manufacturers thereof), engineering drawings of special equipment
designed by or for A-55, and process operations and quality
control tests. It is understood by Grantee that the foregoing
obligation of disclosure shall not include any obligation to
disclose composition of the A-55 Clean Fuels surfactant package,
which will be made and distributed solely and exclusively by A-55
but which will be sold, within the Territory only to Grantee for
its use in the manufacture of the A-55 Clean Fuels.
4.2 Confidentiality:
Grantee agrees to use reasonable efforts to maintain as
confidential A-55 Know-how disclosed to it pursuant to paragraph
4.1, provided that:
4.2.1 All information, in whatever form transmitted to
Grantee from A-55, shall be presumed to be confidential
know-how unless expressly identified to the contrary.
4.2.2 Grantee shall not be required to treat as confidential
any A-55 Know-how which is:
-8-
9
(a) publicly disclosed by A-55, or disclosed to
another party by A-55 without a confidential
restriction, including disclosure by A-55 in any
patent, published patent application, any other
writing or verbally disclosed by A-55; or
(b) publicly available prior to its disclosure by
A-55, or which becomes publicly available after
disclosure by A-55 through no fault of Grantee; or
(c) known to Grantee prior to its disclosure by A-55;
or
(d) disclosed to Grantee by a third party who did not
acquire the information, directly or indirectly,
from A-55; or
(e) independently developed by an employee or
consultant of Grantee subsequent to disclosure by
A-55 but who did not have knowledge of the
disclosure made by ▇- ▇▇; or
(f) required to be disclosed to any local, state or
federal agency in connection with a proper and
lawful request, law or regulation; provided,
however, that prior to any such disclosure,
Grantee shall give notice of such request to ▇-
▇▇, which shall have a reasonable opportunity to
apply for such orders as it may deem appropriate
to protect its interests.
4.2.3 Grantee will maintain internal procedures to protect
any A-55 Know-how that is to be treated as confidential
in the same manner in which it protects its own
confidential technical information.
4.2.4 A-55 represents and warrants that the information it
identifies in accordance with paragraph 4.2.1 is
confidential information and that it treats it as such.
5. GRANT OF RIGHTS UNDER TRADEMARKS
-9-
10
5.1 Trademark Grant
Subject to the due execution and registration of a user agreement in a
form approved by ▇-▇▇, ▇-▇▇ hereby grants to Grantee, and its
sublicensees and distributors, the right to use the A-55 Trademark,
together with any other trademark that A-55 may acquire in connection
with its sale of A-55 Clean Fuels to third parties, and to use the
name "A-55" in a corporate name, division name, or other name of any
entity it may establish for the manufacture or distribution of A-55
Clean Fuels. Should "A-55" not be trademarked in any jurisdiction of
the Territory, Grantee shall have the obligation to do all things
necessary to obtain such trademark and register any related designs or
logos at its cost and to hold the same for the sole and exclusive
benefit of A-55. As used herein, the term "A-55 Trademark" shall refer
to any trademark or related design obtained by Grantee hereunder.
5.2 Marking:
Grantee shall ▇▇▇▇ any A-55 Product which it produces or sells
pursuant to this Agreement with the A-55 Trademark, which, when used,
shall bear an "(r)" to denote its federal registration.
5.3 Use of Trademark:
Grantee acknowledges that any use by it of the A-55 Trademark shall be
to the advantage of the exclusive benefit of A-55. Grantee shall use
the A-55 Trademark only in a manner approved and directed from time to
time by A-55. In connection with such use, Grantee shall comply with
all trademark notice, registered user, and other requirements to
maintain the validity of the A-55 Trademark registration in the
Territory. Grantee shall not make any use of the A-55 Trademark that
would misrepresent to the public that Grantee rather than A-55 is the
owner of such ▇▇▇▇ or the registration thereof.
5.4 Quality Standards:
A-55 shall establish product specifications or quality standards of
any A-55 Product, including A-55 Clean Fuels, to be sold under the
A-55 Trademarks, and Grantee agrees that its products using the
Trademark
-10-
11
shall comply therewith to ensure that the A-55 Trademark is being
properly protected. In order to ensure high and consistent quality of
the A-55 Clean Fuels, Grantee shall manufacture and blend all A-55
Clean Fuels which it distributes pursuant to this Agreement with
standard blending equipment sold to it by A-55 unless the use of other
equipment is approved in advance by A-55 (such approval not to be
unreasonably withheld). A-55 may from time to time require Grantee to
ship actual production samples of A-55 Clean Fuel to A-55 for
inspection and testing to ascertain compliance with such product
specifications or quality standards.
5.5 Price:
There shall be no additional royalty for the license under the A-55
Trademarks.
6. TIME AND MANNER OF PAYMENTS.
6.1 Time for Payments:
Payments required under paragraph 3.1 shall be made within fifteen
(15) days following the last day of each calendar quarter in which
there are Net Sales of A-55 Clean Fuels or A-55 Products by Grantee
during the preceding calendar quarter.
6.2 Manner of Payments:
Payments shall be made by certified or registered mail to A-55's
address as specified herein accompanied by a written report signed by
an authorized representative of Grantee setting forth the dollar
amount of the Net Sales of A-55 Clean Fuels or A-55 Products as to
which a royalty is payable for each quarter.
6.3 Overdue Payments:
Payments shall, when overdue, bear interest at an annual rate of one
percent (1%) above the prime rate of Citibank in effect in New York
City on the last day payment was due. In no event shall the interest
so charged exceed the legal limit that may be charged for interest.
-11-
12
7. RECORDS, INSPECTION, AUDITS AND REPORTS
7.1 Records:
Grantee shall keep true and accurate records and books of account
showing the use and/or practice of the A-55 Technology by Grantee, the
manufacture, marketing and sale of A-55 Clean Fuels and A-55 Products
by Grantee, and all other information necessary for the accurate
determination of the payments to be made to A-55 hereunder.
7.2 Inspection:
It is a condition of this Agreement, and Grantee represents and
guarantees, that it will permit a mutually acceptable firm of
certified public accountants as representatives of A-55 to inspect and
audit, at reasonable times during Grantee's usual business hours, any
and all parts of the records kept by Grantee pursuant to this
paragraph which are required to be rendered by Grantee herein, and to
make excerpts from such records. In the event that Grantee and A-55
are unable to agree on a mutually acceptable firm of certified public
accountants it is hereby agreed that such inspection and audit may be
performed by the certified public accounting firm of Price Waterhouse,
whose principal offices are now at New York City, New York. All fees
of any such firm for such inspection and audit shall be paid by A-55
except in the event of a discrepancy described in paragraph 7.3 below,
in which case Grantee shall pay such fees.
7.3 Discrepancy Expenses:
In the event any audit performed by A-55 results in a finding that
there is a discrepancy in excess of five percent (5%) between the
amounts paid to A-55 and the amounts which should have been paid to
A-55, the cost of such audit shall be borne entirely by Grantee.
7.4 Retention of Records:
Grantee's obligation to retain records and A-55's right to inspect and
audit and make excerpts with respect to the records for each year in
which royalty payments are due, in the absence of a charge of fraud or
intentional misrepresentations, shall terminate three (3) years after
the end of each such year to which such records pertain.
-12-
13
7.5 Audit:
The Grantee shall at its cost cause an audit of its financial affairs
to be conducted each year during the term of this Agreement to
coincide with the financial year of A-55. Such audit will be conducted
by an auditor selected by A-55 and the Grantee shall deliver such
audited accounts prepared in accordance with generally accepted
accounting principles and practices for public companies in the united
states of America to A-55 within 3 months of the end of the financial
year to which they relate.
8. REPRESENTATIONS AND WARRANTIES
8.1 Grantee Represents And Warrants That:
8.1.1 Organization, Standing, etc: Grantee is a limited
company duly organized, validly existing, and in good
standing under the laws of Australia and has all
requisite corporate power and authority to own and
operate its properties, to carry on its business as now
conducted, and as proposed to be conducted, to enter
into this Agreement, and to carry out the provisions
hereof.
8.1.2 Qualification: Grantee is duly qualified to do business
in the Territory.
8.1.3 Challenged Validity: If Grantee should challenge the
validity or enforceability of the A-55 Patent licensed
under this Agreement, in whole or in part, A-55 shall
have the option, by notice in writing, to immediately
terminate this Agreement.
8.1.4 Business Plan: Grantee shall within thirty (30) days of
the date of this Agreement prepare and submit for
approval to A-55 a business and financing plan for the
use and exploitation of the A-55 Technology in the
Territory. The approval of this plan by A-55 shall not
be unreasonably withheld. Grantee shall expend its best
efforts to implement or exceed the business plan and,
during the term of this Agreement to exploit and
-13-
14
commercialize the A-55 Technology within the Territory
to the fullest extent commercially possible.
8.2 A-55 Represents And Warrants That:
8.2.1 Organization, Standing, etc: A-55 is a limited
partnership duly organized, validly existing, and in
good standing under the laws of the State of Nevada and
has all requisite power and authority to own and
operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to enter
into this Agreement, and to carry out the provisions
hereof.
8.2.2 Qualification: There is no jurisdiction wherein the
character of the properties owned by A-55 or the nature
of the activities conducted by ▇- ▇▇ makes necessary
the licensing or qualification of A-55 as a foreign
partnership therein, in which it is not so licensed.
8.2.3 Disclosure: Neither this Agreement nor any document,
certificate, or statement referred to herein or
furnished to Grantee pursuant hereto contains any
untrue statement known to A-55 of a material fact or
omits to state a material fact necessary to make the
statements contained herein and therein not misleading.
8.2.4 Ownership of Patent, etc: A-55 warrants and represents
that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ is the sole and exclusive
owner of the entire right, title and interest in and to
the A-55 Patent, and any reissues or extensions of such
Patent, and will be the sole and exclusive owner of all
patent improvements thereto which it makes, in each
case free and clear of all liens, claims, charges,
pledges, mortgages, security interests and other
encumbrances, and that, pursuant to exclusive license
from Mr. Gunnerman, it has the full and sole right,
power and authority to enter into,
-14-
15
consummate and perform the transactions and obligations
contemplated by this Agreement.
8.2.5 No Conflicting Agreements: A-55 has not entered into
any agreement or understanding, written or oral,
regarding the A-55 Technology, any patent improvement
thereof, or any know-how licensed hereunder, which is
in conflict or inconsistent with any of the terms and
conditions of this Agreement.
8.2.6 Validity: A-55 warrants and represents that it is not
aware of any law or facts which would permit any person
or entity to challenge the validity or enforceability
of the patent rights granted herein.
8.2.7 Infringement: The A-55 Patent, all patent improvements,
and know-how as now practiced by A-55 and all of its
current licensees do not, to A- 55's knowledge,
violate, infringe or conflict with the rights of any
person, firm or government.
9. EXCHANGE OF TECHNICAL INFORMATION, MUTUAL TRANSFER OF MODIFICATIONS,
VARIATIONS, IMPROVEMENTS AND PATENT PROTECTION.
9.1 Exchange of Technical Information:
Each party hereto shall exchange with the other all technical
information acquired during the term of this Agreement relating to the
A-55 Technology and developments with respect to same and will
communicate to the other all information and data obtained therefrom.
Each party further agrees that designated representatives of the other
may, at reasonable times, visit the laboratory, plants, and other
installations of the other in which research and operations relating
to the A-55 Technology are being conducted.
9.2 Disclosure of Modifications:
The parties shall promptly inform each other in writing of any
modifications, variations, or improvements relating to the A-55
Technology, and the know-how licensed hereunder, which are developed
by them or otherwise come to their attention. It is
-15-
16
expressly agreed that modifications, variations or improvements
disclosed to A-55 by any other licensee, Grantee, joint venturer, or
any other party having the right to practice any rights licensed
hereunder, shall, subject to any contractual obligations imposed upon
A-55, be disclosed to Grantee under the scope of this paragraph.
9.3 Rights to Modifications:
Notwithstanding which party hereunder shall have discovered any
modification, variation or improvement to the A-55 Technology, all
such modifications, variations or improvements shall be owned solely
by ▇- ▇▇; provided, however, that Grantee shall have the right to use
all modifications, variations and improvements, whether patented or
unpatented, made or acquired by A-55 during the term of this Agreement
without further compensation to A-55. The parties shall cooperate with
each other in connection with the filing of any patent applications
relating to any such modifications, variations or improvements.
9.4 Intellectual Property Protection:
A-55 shall at its own cost, use its best endeavors to seek patent
protection in the Democratic People's Republic of Korea. A-55 and
Grantee agree to diligently seek patent protection for all inventions,
modifications and improvements to the A-55 Technology in the Territory
at Grantee's expense. A-55 may, at its own option, apply for patent
protection which is not pursued by Grantee, in which case the cost
thereof shall be borne solely by A-55 and all benefits therefrom shall
be solely owned by A-55 and not subject to the terms of this
Agreement; provided, however, that Grantee may, within three (3)
months of the issuance of a patent to A-55, give A-55 notice of its
election to take rights under such patent by paying all costs and
expenses of A-55, together with interest thereon at one percent (1%)
over the prime rate charged by Citibank New York from time to time.
Any annual fees with respect to maintenance of patents or trademarks
within the Territory shall be paid by Grantee or, at the option of
A-55, paid by A-55 and reimbursed upon invoice.
10. INFRINGEMENT
10.1 Notification of Infringement:
-16-
17
Grantee and A-55 shall each notify the other promptly in writing of
any known infringement of the A-55 Patent, unauthorized use of any
confidential know-how licensed hereunder, or any infringement or
unfair competition relating to a trademark licensed hereunder, which
either party learns of during the term of this Agreement.
10.2 Litigation by A-55:
A-55 shall have no obligation to ▇▇▇ any such infringers or
competitors, but shall have the right to do so at its own expense and
the right to join Grantee and obtain Grantee's full cooperation, if
necessary, at no legal expense to Grantee. If A-55 brings suit against
an infringer or competitor, A-55 shall have the sole right to control
such lawsuit and to settle the same on terms and conditions approved
by A-55. All monetary and other recoveries resulting from such a
lawsuit or any settlement thereof shall belong to A-55. A-55 shall not
be required to have pending more than one (1) suit for infringement of
any patent licensed under this Agreement.
10.3 Litigation by Grantee:
If, after notice of any infringement of the A-55 Patent or any other
patent licensed hereunder, unauthorized use of any confidential
know-how licensed hereunder, or infringement or unfair competition
relating to a trademark licensed hereunder, A-55:
10.3.1 is unable to bring any such infringement or unfair
competition to a halt, or
10.3.2 fails to file and commence diligent prosecution of a
suit against such third party for patent infringement
or unfair competition, within six (6) months after A-55
learns thereof,
then Grantee may take any action it deems necessary to stop the
infringement or unfair competition, joining A-55 therein if necessary
but at no expense to A-55. Any recoveries made upon any such suit
shall belong solely to Grantee
-17-
18
except for any award made by the court in favor of A-55.
10.4 Actions by Third Parties:
If, during the term of this Agreement one (1) or more third
parties file suit in the Territory against Grantee or any of its
purchasers for patent infringement due to Grantee's or any
purchaser's manufacture, marketing, use, export or sale of A-55
Products in the best modes contemplated by A-55 or in modes
approved by ▇- ▇▇, ▇▇▇▇▇▇▇ shall notify A-55 of such suit and
tender defense thereof to A-55. If A-55 refuses the defense of
same, Grantee may at its option elect to defend said suit. A-55
shall indemnify and hold Grantee harmless from damages assessed
against Grantee in any third party infringement suit, but said
indemnification shall be limited to an amount equal to the
payments made to A-55 by Grantee under the terms of this
Agreement.
10.5 Conduct of Defense:
In the event that an action described in paragraph 10.4 is
commenced against Grantee in any jurisdiction, A-55 hereby
authorizes Grantee to join A-55 in said action as either an
additional original defendant or third party defendant.
10.6 Declaratory Judgment:
Grantee may elect to file a declaratory judgment action against
any third party referred to in paragraph 10.4, in which event it
will notify ▇- ▇▇ of its intention and tender the filing of any
such suit to A-55. If A-55 refuses to institute such declaratory
judgment action against a third party, Grantee shall have the
option to institute such action. Further, A-55 hereby authorizes
Grantee to join A-55 as a plaintiff in any such declaratory
action.
11. CONSULTATION SERVICES
11.1 Consultation Services:
-18-
19
A-55 shall provide to Grantee such qualified technical personnel
to assist Grantee in the exercise of the rights granted pursuant
to this Agreement. Grantee shall pay for the reasonable cost of
such assistance, including all necessary travel, food, lodging
and other expenses, and the pro rata pay (plus 20%) of the
persons rendering such technical assistance. If travel is
required, technical personnel shall fly coach, management
personnel shall fly business class, and the President or Chairman
shall fly first class.
11.2 Manner of Payment:
Upon any request from Grantee of technical assistance from A-55
pursuant to this, A-55 shall prepare and render to Grantee an
estimate of the cost thereof, together with an approximate time
frame within which such assistance may be rendered. Grantee
shall, upon receipt and review of the same, forward the amount to
A-55 whereupon such assistance shall be rendered within the
agreed upon time. Any differences in the estimated and actual
expenses shall be accounted for and paid or refunded upon
termination of such services.
12. TERMINATION AND CONSEQUENCES OF DEFAULT
12.1 Termination for Invalidity:
12.1.1 This Agreement shall terminate in twenty-five (25)
years, or upon the expiration of the last A-55 Patent
to expire, whichever is later, in which event Grantee
shall be entitled to continue to exploit the rights
granted under this Agreement without the payment of any
additional royalties to A-55.
12.1.2 Upon a judgment of invalidity or unenforceability of
the A-55 Patent, Grantee shall be entitled to continue
to exploit the rights granted under this Agreement by
payment of the royalties specified in paragraph 3 if
Grantee continues to practice A-55 Know-how; provided
such payments shall be payable by Grantee until
twenty-five
-19-
20
(25) years after the Effective Date of this Agreement
and Grantee shall then be entitled to exploit the
rights granted under this Agreement without payment of
any royalties to A-55.
12.2 Consequences of Default by Grantee:
In the event of a default by Grantee which is not cured in a
timely manner as provided herein:
12.2.1 A-55 may, by written notice, terminate this Agreement.
12.2.2 At its option, A-55 may, in its unfettered discretion,
elect to continue this Agreement but convert it to a
non-exclusive license, as to any third party or entity,
within the Territory.
12.2.3 All unpaid sums due A-55 under paragraph. 3.1 herein to
and including the Effective Date of any such default
shall be due and payable within thirty (30) days
thereafter.
12.3 Consequences of Default by A-55:
In the event of a default by A-55 Grantee shall be entitled to
exploit the rights granted under the terms of this Agreement and
shall pay all royalties which accrue hereunder to the independent
auditors named in paragraph 7.2 until such default is resolved or
cured, whereupon the funds so held shall be dispersed in
accordance with such resolution.
12.4 General Consequences:
12.4.1 Termination pursuant to paragraph 12.1 or the
consequences of default as specified in paragraphs 12.2
or 12.3 shall not relieve either party of any
obligations due to the other under the terms of this
Agreement to and including the date of termination or
the Effective Date of any such default.
-20-
21
12.4.2 In no event will default operate to release Grantee or
A-55 from any damages, costs and expenses that may be
due as a result of such default.
12.4.3 Either of the parties hereto shall have the right to
give public notice of any termination or default in
such manner and at such times and places as it may deem
advisable.
12.5 Delivery of A-55 Technology:
In the event of termination of this Agreement for whatever
reason, Grantee shall at the request of A-55, deliver to A-55 all
papers, drawings and other documents samples and models relating
to any matters that are the subject of this Agreement, shall
execute such documents as are reasonably requested by A-55 and
shall cease to exploit the rights granted under the terms of this
Agreement. Without limiting the activities that shall cease upon
such termination, Grantee shall remove all trademark designation
from A-55 Products; transfer any trademarks to A-55 which it has
acquired, change its name to delete reference to A-55; and
transfer to A-55 any related business names which it has used in
the practice of the A-55 Technology.
13. EVENTS OF DEFAULT, NOTICE OF DEFAULT, AND CURING THEREOF
13.1 Events of Default:
A default shall occur hereunder if any one of the following
events shall occur:
13.1.1 Grantee fails to pay any sum due hereunder and such
failure continues for thirty (30) days; or
13.1.2 Without reasonable cause, Grantee fails to materially
implement the business plan or the financial plan
approved by A-55; or
13.1.3 A party fails to perform or comply with any term hereof
which materially affects this Agreement; or
-21-
22
13.1.4 Without the prior written approval of A-55 first had
and obtained, there is a change in control of the
Grantee; or
13.1.5 Without the prior written approval of A-55 first had
and obtained, by virtue of any issue of shares, capital
reduction or any means whatsoever, A- 55's shareholding
(representing voting shares or entitlement to equity)
in Grantee falls below 30%; or
13.1.6 A party files a voluntary petition for bankruptcy or
any similar relief under laws for the benefit of
creditors; a party is adjudged bankrupt or a receiver
is appointed by a court of competent jurisdiction, and
such adjudication is not vacated within thirty (30)
days; or an involuntary petition is filed for
reorganization or similar relief and is not dismissed
or stayed within sixty (60) days; or
13.1.7 Any representation or warranty made in this Agreement
proves to have been incorrect in any material respect
which significantly affects this Agreement.
13.2 Notice of Default:
Before any default is effective herein, the party declaring the
default shall provide the defaulting party with a written notice
specifying the claimed default. Such notice shall provide a
period of thirty (30) days from the date of the notice within
which the defaulting party may cure such default.
13.3 Failure to Cure:
In the event the defaulting party fails to cure any default to
the reasonable satisfaction of the other party within the thirty
(30) day period described in paragraph 13.2, the default will,
unless the other party specifies otherwise, become effective on
the last day of the thirty (30) day period, provided that if
either party in good faith denies there is a breach or default
(other than a breach or default for the
-22-
23
nonpayment of money), such party may within such thirty (30) day
period submit the matter to binding arbitration and in the event
it is finally determined that a breach or default has occurred,
such party shall have thirty (30) days from the date of
determination to cure the same.
14. INDEMNITY AND DISCLAIMER
14.1 Indemnification by Grantee:
Grantee shall defend, indemnify and hold A-55 harmless from and
against any action, claim, liability, expense (including
reasonable attorneys' fees and costs) or damage (including
consequential damages) to persons or property resulting from any
acts or omissions of Grantee and its employees and agents in
connection with the performance of this Agreement or the
manufacture, use and sale of A-55 Products hereunder.
14.2 Indemnification by A-55:
A-55 shall defend, indemnify and hold Grantee harmless from and
against any action, claim, liability, expense (including
reasonable attorneys' fees and costs) or damage (including
consequential damages) to persons or property resulting from any
breach or untruth of any representation or warranty hereunder or
failure to perform any covenant hereunder).
15. GENERAL PROVISIONS
15.1 Notices:
Any notice required to be given under this Agreement shall be in
writing and shall be sent by certified or registered mail, or its
equivalent, postage prepaid, to each party at the address below
or at such other address of which one party shall notify the
other in the same manner:
To A-55: A-55, LP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
-23-
24
To Grantee: ▇▇▇▇▇▇▇ Energy Fund Pty. Limited
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇
15.2 Governing Law:
This Agreement shall be governed by the law of Nevada. for performance
in the Territory.
15.3 Arbitration:
All disputes, differences, or questions between the parties concerning
the construction, interpretation, and effect of this Agreement or of
any paragraph herein contained or the rights and liabilities of the
parties, shall be settled by arbitration in accordance with the Rules
of Arbitration of the American Arbitration Association by arbitrators
appointed in accordance with such rules; provided that either party
shall have the right to appeal the result of any such arbitration; and
provided further that arbitration under this paragraph shall not apply
to disputes, differences or questions between the parties concerning
violations of United States Anti-Trust laws or regarding the validity
of the A-55 Patent or regarding the confidentiality of any know-how
licensed hereunder. Unless the parties otherwise agree, the site for
arbitration shall be Reno, Nevada.
15.4 No Affiliations:
Nothing in this Agreement shall be construed to create between the
parties a partnership, association, joint venture, or agency.
15.5 Prior Agreements, Amendments:
This Agreement cancels and supersedes all prior oral or written
representations, agreements and understandings between the parties
with respect to the subject matter hereof, and embodies all of the
understandings and obligations between the parties with respect to the
subject matter hereof. This Agreement may be modified and amended at
any time, including the addition of new or deletion of existing
know-how and technology pertinent to the rights transferred under this
Agreement, provided that no agreement or modification or extension of
this Agreement shall be binding upon any of the parties hereto unless
made in writing and signed by both parties.
-24-
25
15.6 Waivers:
Failure of either party to require strict performance of any term of
this Agreement shall not affect that party's right to fully enforce
the same, nor shall any waiver of a default be construed to be a
waiver of any succeeding default.
15.7 Provisions Severable:
If any term or provision of this Agreement shall be held or adjudged
illegal, invalid, or unenforceable by any court having jurisdiction,
such shall not affect the validity of any other term or provision
hereof, and any such illegal, invalid, or unenforceable term or
provision shall be deemed to be severable and shall be deleted from
this Agreement. A-55 agrees to send Grantee notice within thirty (30)
days after the date any term or provision of this Agreement is
adjudged illegal, invalid or unenforceable. The parties agree that
the grant of this Agreement insofar as it relates to that part of the
Territory known as the Democratic People's Republic of Korea is
subject to any applicable law of the United States of America. If the
grant of such license by A-55 is prohibited by, or would contravene
any such law, the operation of this Agreement in that part of the
Territory as relates to the Democratic People's Republic of Korea
shall, without in any way affecting any other provisions of this
Agreement (including but without limiting the generality of the
foregoing paragraph 3), be suspended until such license may lawfully
be granted.
15.8 Binding Agreement:
This Agreement shall be binding upon and be to the advantage of the
parties, their successors and signs to the extent this Agreement is
assignable by its terms.
15.9 Authority to Contract, Counterparts:
Each of the parties covenants that this Agreement is executed under
authority duly granted by its board of directors. The Agreement has
been signed in two (2) counterparts, one for each party, each of
which shall be deemed to be an original.
15.10 Costs of Litigation:
In the event of any dispute arising as the result of the breach or
alleged breach of any term of this
-25-
26
Agreement, if such dispute is taken by either party to arbitration or
to any court, the successful party in any such arbitration or court
action shall be entitled, in addition to any damages suffered, to
receive its actual costs of arbitration or suit including, without
limiting the generality of the foregoing, attorneys' fees, experts'
fees, the cost of exhibits and the preparation thereof, and all other
costs reasonably incident to such arbitration or court action.
15.11 Financial Statements:
During the term hereof, Grantee shall furnish A-55 annually with the
annual report and a copy of the 10-K (or such other substantially
similar statement required by the laws of the Territory) statement of
it and its parent and Subsidiaries, if any.
15.12 Injunction:
The parties hereto acknowledge that the damages for any breach of
this Agreement by either party relating to any matter other than the
payment of money would be incapable of precise determination and
would cause the nondefaulting party irreparable harm. Accordingly,
each party accepts the other party's right to obtain an injunction to
prevent any further breach of the Agreement should the nondefaulting
party deem it necessary to do so.
15.13 No Assignment:
Grantee shall have no right to assign or otherwise transfer this
Agreement or any of the rights granted to or obligations imposed upon
Grantee without the express prior written consent of A-55. A-55 may
transfer this Agreement or any of the rights granted hereunder to it
without the prior consent of Grantee; provided, however that A-55
shall not be relieved of any obligations hereunder unless such
transfer is consented to in writing by Grantee.
15.14 Headings:
Caption headings are for convenience of reference only.
SIGNING PROVISION
In witness whereof, the parties have signed this Agreement as of the date
appearing below their respective signatures..
-26-
27
A-55, L.P., a Nevada limited partnership
By RWG, Inc., a Nevada corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
President
"A-55"
DATED: June 9, ,1997
-----------------------
▇▇▇▇▇▇▇ Energy Fund Pty Ltd for
and on behalf of a corporation yet to
be incorporated
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman
"Grantee"
DATED: June 9 , , 1997.
-----------------------
-27-
