Exhibit 10.1

 

AGREEMENT ON KEY TERMS (“TERM SHEET”)

Tri-Party Joint Venture Implemented Through a Limited Liability Company

 

The undersigned Parties by their signature below indicate their agreement to the
terms set forth below for purposes of entering into a definitive agreement
covering the relationships and transactions contemplated in this Term Sheet and
other customary terms.

 

I. Parties:                      MagneGas Corporation (“MNGA”), XX (Australia)
(“XX”) and XX (“XX”) (provided that any of the parties may assign their rights
herein to a wholly-owned affiliate)

 

II. Purpose:                   World Wide Commercialization of MagneGas or other
alternative fuel Co-Combustion with Coal and Coal By-Products greater than 5 MW
(the “JV Process”), in the Electric Power Plant Industry (as defined below) via
a 3-party joint venture.

 

III. JV Ownership and

Capitalization:

oJV shall be implemented through creation of new Delaware Limited Liability
Company (“NEWCO”).

oXX ownership of NEWCO by each party as described herein (no restrictions
relating to initial capital contribution or other condition)

o    

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oNo up-front payments to any Members (except to the extent required through a
License Agreement, and only if necessary to comply with legal requirements of
enforceability).

oFunds distributed as earned after payment of all NewCo expenses, subject to
unanimous approval of Managers, PROVIDED THAT Newco shall make mandatory minimum
distributions to Members in amounts equal to estimated applicable federal taxes
on NewCo income imputed to the Members.

oXX to have sole responsibility for and shall cover all costs of Verification;
thereafter all NewCo expenses shall be borne by the Members on a pro rata basis
from NewCo revenue (as stated below)

 

 

 

 

oIt is expected that XX (“XX”) will pay the expected cost of Validation
($1,000,000.00), but if XX demands unrealistic return for such cost of
Validation, the Members may consider other options, including but not limited to
going through another similar independent agency recognized for such Process
Validation, or effecting a Capital Call (in the absence of other preferred
financing). In the event a Capital Call is required, MNGA may cover XX’s and
XX’s portions at 20% interest per annum, payable solely from NewCo
distributions.

oNewCo will cover all NewCo expenses , thereby each Member is sharing equally in
such expense, to the extent NewCo revenues are available for such expenses. When
additional cash is required for expenses, Managers will decide whether third
party financing is available or a capital call is required, subject to the
requisite Manager and/or Member approval.

oNew capital/investors (subject to Member approval) will dilute existing Members
equally, on pro rata basis,

oNewCo will own data results of Verification and Validation.

oNo recovery of prior costs/expenses of each Member.

oNewCo will pay for the cost of Magnegas fuel plus freight after Verification is
achieved.

IV. Intellectual Property:

oMNGA and XX maintain current IP Rights but grant an exclusive license to NewCo
for the JV Process for use solely in the Electric Power Plant Industry (for
clarification, all IP rights revert to patentholders/ licensors in the event of
dissolution of NewCo).

oAny future IP developed by NewCo for the JV Process in the Electric Power Plant
Industry (e.g. patentable improvements, etc.) will be owned by NewCo, but
similar improvements with other applications in XX’s and MNGA’s respective
industries to be patentable by each of them, respectively.

oRoyalties to Patent Holders (MNGA and XX) to be provided in Licensing
Agreement, but to reflect annual fee estimated to cover costs of ongoing
development and maintenance of patents, with annual true-up to match actual
costs.

oUpon NewCo attainment of a revenue stream or funding in excess of funds
required to achieve Validation, NewCo shall pay for Costs of IP litigation
affecting NewCo technology or patents licensed to NewCo. NewCo to maintain
reserve account for this purpose. MNGA or XX, as the case may be, shall lead
such IP litigation, subject to consultation with NewCo.

oAll revenue received through IP licensed to NewCo will go through NewCo and
pooled for benefit of all Members pursuant to Operating Agreement provisions
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oNew NDAs to be signed by all parties in connection with NewCo formation;
Operating Agreement shall include confidentiality provisions to avoid separate
agreement.

oNotwithstanding any provision herein regarding MNGA’s patent rights, NewCo and
each NewCo Member (including their respective employees or agents) shall have
the non-exclusive right to address and assist with the design and engineering of
MagneGas Recyclers suitable for the JV Process, provided that any new
intellectual property resulting from such activity, or improvements, whether or
not patentable, are assigned to or owned by MNGA. MNGA may elect to subcontract
the manufacture of such Recyclers to a party that offers more efficient
production.

o    XX and MNGA shall sell all proprietary equipment necessary for the JV
Process NewCo at a negotiated mark-up of no greater than XX above the direct
cost to MNGA or XX, respectively,

 

 

 

 

V. Governance:

oNewCo to be Manager- managed by a Board of Managers (Delaware) comprised of 7
Managers: 2 designated by each Member upon formation of NewCo, and 1
“independent” Manager to be elected at a later date by the Managers. It is the
parties’ intent that the 7th Manager be either a CEO hired full-time for NewCo
or an independent executive with a suitable skill set approved by the Members.

oUnanimous Vote Required for:

1.Addition of new Members and resulting dilution of any current Member’s
interest

2.Compensation, hiring and firing of direct-reports to the Board (e.g. CEO, CFO)

3.Change in number of Manager (Board) seats and election of 7th Manager

4.Issuance/transfer/sale of any ownership interest of a Member unless complies
with process to be delineated in Operating Agreement (right of first refusal on
terms matching those brought to the Board by Member seeking to sell, with
verified third-party offer)

5.Filing of new patents by NewCo

6.Incurrence of Bank or Commercial Financing Debt, or issuance of Debt
Instrument (Bond or other debenture) in excess of $100,000

7.Annual budget and deviation therefrom (budget to include limits on
expenditures and incurrence of liabilities/obligations for future expenses)

8.Profit distributions (except for mandatory distributions required for payment
of NewCo taxes on income imputed to Members)

 

 

 

 

 

9.Capital Calls.

10.Dissolution of NewCo

11.Any intercompany sub-agreements affecting this joint venture.

12.Any restructuring of the Company’s state of residence, or the selection of a
forum or residence for tax purposes for any of its operating subsidiaries.

13. Any changes to the voting requirement necessary to adopt any of the
foregoing items (1-12 above).

VI. License Fees

 

oTo be covered in License Agreements from XX and MNGA to NewCo

oLicense Fees to commence upon NewCo achieving a revenue stream or funding in
excess of funds required to achieve Validation

oLicense Fees to be structured so that each Licensor recovers costs of IP
development and maintenance PLUS nominal amount that may be legally adequate to
enforce patent in its jurisdiction ($100 or less per year)

oAny license fees from patents developed by or assigned to NewCo (e.g. for
improvements to JV Process) shall be retained by NewCo and distributed through
the process of profit distribution to Members as outlined in Operating Agreement
(pro rata to the Members except as specified in this term sheet for Abatement)

 

VII. Operating Agreement Dispute Resolution Process:

 

oArbitration or mediation process aiming for best practice to be outlined in
Operating Agreement to resolve Board deadlocks or Member disputes

 

VIII. Term & Termination

 

oTerm will be subject to established goals/milestones:

1.If Verification is not attained by 12/31/15, NewCo shall be terminated unless
Members elect to extend term by unanimous consent;

2.If Validation or a significant commercial sale (not less than $1,000,000) is
not attained by 12/31/16, NewCo shall be terminated unless Members elect to
extend term by unanimous consent;

 

 

 

 

3.Upon attainment of both above benchmarked performance criteria by the
requisite dates, the NewCo term shall be indefinite, until Members unanimously
agree to dissolve.

 

IX. Philosophy, policy, goals and miscellaneous:

 

oParties will respect each other, each other’s property rights, each other’s
respective technology and proprietary information.

oParties are jointly driven by environmental and social goals, although success
may be measured in terms of financial results.

oNew NDAs and Non-Circumvention provisions to be signed by all parties (to be
included in Operating Agreement)

oOperating Agreement containing provisions covering the foregoing and other
provisions deemed standard or necessary under Delaware law.

oXX to have authority and responsibility for Verification (including costs),
plus oversight of Validation (excluding costs); other responsibilities and/or
roles of MGNA or XX to be defined, with overall goal of joint cooperation by all
parties in furtherance of MGNA patent protection in India and in any other
territory where NewCo might not otherwise be able to expand into due to patent
right issues.

oIndependent Auditing firm to be selected by joint approval of the Members

oExisting “SES”-related documentation between or among the parties hereto shall
be terminated and deemed superseded in all respects by the joint venture
contemplated hereby. The parties hereby release and hold each other harmless
from any obligations, damages, causes of action or other claims arising from or
relating to any prior agreements between any of them through the date hereof.
referenced SES-referenced

oAny equipment or systems sourced to NewCo from any of its Members (or
controlled affiliates of such Members) shall be on reasonable commercial terms.

oNewCo to obtain and maintain adequate insurance to include, but not be limited
to: product s liability, D&O, General Liability, Errors & Omissions and other
coverage standard for its industry.

oTo the extent this term sheet is subject to disclosure or publication due to
SEC or Nasdaq obligations of MNGA, it shall be redacted to remove the names of
XX and XX and any other information proprietary to them, respectively, which
they may request be redacted from any such public disclosure.

oThe parties agree that XX may continue to pursue discussions with current
contacts that may lead to other opportunities for the benefit of NewCo, which
may or may not be related to the projects and contacts listed on Exhibit A.

oIn the event of a dispute as to the terms contained in this Term Sheet and the
enforcement of same, the parties agree to mediate such dispute prior to
instituting any litigation. Venue for any litigation relating to this Term Sheet
or its enforcement shall lie exclusively in the state or federal courts of
Florida, US, each party waiving their right to any other venue.

 

 

 

 

X. Certain Definitions: As used in this Term Sheet, the following defined terms
shall have the meanings ascribed below:

a. Abatement Revenue shall mean revenue to NewCo resulting from Abatement, as
that term is described in Kyoto Protocol, as recognized by the members of this
treaty and, in particular, of Australia.

b. Electric Power Plant Industry shall mean any business engaging in the
production of electric power through the firing of coal and commercial supply
thereof to third party customers (for clarification, this shall not include
businesses which produce electric power for their own consumption and then sell
surplus energy to third parties). There shall be a specific exclusion of
projects with potential customers of XX which have signed Confidentiality
Agreements with XX as of the date of this term sheet, such projects to be listed
on Exhibit A attached hereto, and provided that such customers enter into
definitive contracts for such projects with XX by no later than December 31,
2015. Exhibit A shall be confidential and excluded from any public filings of
any party hereto.

c. Verification shall mean the “Process Verification” by XX or another similar
independent agency recognized for such Process Verfication, which consists of
completion of proof-of-concept demonstrations, analysis and documentation of
performance and development of detailed process models for purposes of
evaluating whether or not a product, service or system complies with a
regulation, requirement, specification or imposed condition. The Verification
shall be evidenced by a certificate to that effect issued by the Process
Verification agency.

d. Validation shall mean the “Process Validation” by XX or another similar
independent agency recognized for such Process Validation, which consists of
identification and qualification of candidate Carbon Dioxide reduction process
applications (including technical and economic feasibility studies), design,
build and test pilot plant scale process for purposes of assuring that a
product, service or system meets the needs of the customer and other identified
stakeholders. The Validation shall be evidenced by a certificate to that effect
issued by the Process Validation agency.

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IN WITNESS WHEREOF, the Members have executed this Agreement as of this 20th day
of March, 2015.

 

 

 

MEMBERS:

 

MNGA:

 

MagneGas Corporation

 

By:_________________________________

 

Title:________________________________

 

 

By:_________________________________

 

Title:________________________________

 

 

XX:

 

XX

By:_________________________________

 

Title:________________________________

 

 

XX:

 

XX

 

By:_________________________________

 

Title:________________________________

 

 

 

 

CONFIDENTIAL

 

Exhibit A

 

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