Document:

Unassociated Document

Exhibit 10.1

 

LICENSE AGREEMENT

THIS AGREEMENT (the “Agreement”), dated the 29th day of September, 2011 (the “Effective Date”), is by and between PowerVerde, Inc., a Delaware corporation (“PWVI”), and Newton Investments B.V., a Dutch corporation (“Newton”).

INTRODUCTION

 

	  	
1.

	
PWVI owns and has the right to grant licenses under certain intellectual property.

	  	  	  
	  	
2.

	
PWVI has begun manufacturing and marketing proprietary emissions-free electric power generation systems.

	  	  	  
	  	
3.

	
Newton is in the business of manufacturing, marketing and distribution of renewable energy systems.

	  	  	  
	  	
4.

	
PWVI and Newton are interested in establishing a licensing relationship on the terms set forth herein.

 

NOW, THEREFORE, Newton and PWVI in consideration of the mutual covenants contained herein and other good and valuable consideration the receipt of and sufficiency of which are hereby acknowledged, the parties gree that the foregoing recitals are true and correct and further agree as follows:

Article I

Definitions

The matters contained within the introduction above are adopted into this Agreement. When used in this Agreement, each of the following terms shall have the meanings set forth in this Article I:

1.1           “Affiliate”. Affiliate means, with respect to a Person, any Person that controls, is controlled by, or is under common control with such Person. For purposes of this Section 1.1, “control” shall refer to (a) direct or indirect ownership of 50% or more of the stock or shares having the right to vote for the election of directors of such Person or (b) the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

1.2           “Business Day”. Business Day means a day other than a Saturday or Sunday or federal holiday in the United States.

1.3           “Commencement Date”. Commencement Date means the first day of the calendar month immediately following the month of the Effective Date.

1.4           “Commercial Year”. Commercial Year means each of the following: (a) the 12-month period beginning on the Commencement Date (the “First Commercial Year”) and (b) each 12-month period beginning on the anniversary of the Commencement Date (the “Second Commercial Year”, the “Third Commercial Year”, etc.).

  

  

  

 

1.5           “Confidential Information”. Confidential Information means all proprietary documents, technology or other information actually disclosed by one Party (the “Disclosing Party”) to the other (the “Receiving Party”) pursuant to this Agreement or the Prior CDA and marked as “confidential” or “proprietary”. Notwithstanding the foregoing to the contrary, information that is orally or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of such Party for 60 days after its disclosure and thereafter shall remain Confidential Information if, within such 60-day period after such disclosure, the Disclosing Party delivers to the Receiving Party a written document or documents describing the information and referencing the place and date of such oral, visual or written disclosure and the names of the persons to whom such disclosure was made with the designation that it is Confidential Information. “Confidential Information” shall not include information to the extent such information: (a) is or becomes generally available to the public other than as a result of disclosure thereof by the Receiving Party or its Affiliates; (b) is lawfully received by the Receiving Party on a non-confidential basis from a Third Party that is not itself under any obligation of confidentiality or nondisclosure to the Disclosing Party or any other Person with respect to such information; (c) is already known to the Receiving Party at the time of disclosure by the Disclosing Party; or (d) can be shown by the Receiving Party to have been independently developed by the Receiving Party without reference to the Disclosing Party’s Confidential Information.

1.6           “Control” or “Controlled”. Control or Controlled means, with respect to any Intellectual Property Right, the possession (whether by ownership or license, other than by a license granted pursuant to this Agreement) by a Party of the ability to grant to the other Party access, ownership, a license and/or a sublicense as provided herein without violating the terms of any agreement or other arrangement with any Third Party entered into or existing as of the time such Party would first be required hereunder to grant the other Party such access, ownership, license, or sublicense.

1.7           “Field”. Field means generation of electric power through emissions-free generation systems based on gas pressure and/or waste heat.

1.8           “Intellectual Property Rights”. Intellectual Property Rights means without limitation Patent Rights, Name Rights, copyrights, trademarks, trade secrets and other forms of proprietary or industrial rights pertaining to inventions, know-how, works of authorship and other forms of intellectual property.

1.9           “PWVI Documentation”. PWVI Documentation means all documentation reasonably required from time to time for operation of the Systems, to the extent such documentation is in existence on the date hereof or is actually created hereafter. PWVI shall have no obligation to create PWVI Documentation.

1.10         “PWVI Intellectual Property”. PWVI Intellectual Property means (a) the PWVI Patent Rights, (b) the PWVI Name Rights, (c) the PWVI Know-How, (d) the PWVI Documentation, and (e) all Intellectual Property Rights in the foregoing.

  

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1.11         “PWVI Know-How”. PWVI Know-How means all know-how disclosed by PWVI to Newton pursuant to the Prior CDA or this Agreement to the extent considered Confidential Information under the Prior CDA or hereunder.

1.12         “PWVI Name Rights”. PWVI Name Rights means all Name Rights Controlled by PWVI on the Effective Date or thereafter during the term of this Agreement that (a) are set forth in Exhibit “A”, as amended from time to time by mutual agreement of the Parties, or (b) otherwise relate to the Field.

1.13         “PWVI Patent Rights”. PWVI Patent Rights means all Patent Rights Controlled by PWVI on the Effective Date or thereafter during the term of this Agreement that (a) are set forth in Exhibit “A”, as amended from time to time by mutual agreement of the Parties, (b) claim priority from or are otherwise based on the Patent Rights set forth in Exhibit “A”, as amended from time to time by mutual agreement of the Parties, or (c) otherwise relate to the System or the Field. The absence of a Patent Right from Exhibit “A” as attached to this Agreement or as amended is not dispositive of whether such Patent Right is included in the PWVI Patent Rights.

1.14         “Name Rights”. Name Rights means existing and future United States, European and foreign trademarks, trade names, service marks, logos and commercial symbols.

1.15         “Party”. Party means Newton or PWVI; “Parties” means Newton and PWVI.

1.16         “Patent Rights”. Patent Rights means existing and future United States, European and foreign patents and patent applications, and all substitutions, divisions, continuations, continuations-in-part, reissues, reexaminations and extensions.

1.17         “Person”. Person means any natural person or any corporation, company, partnership, joint venture, firm or other entity, including without limitation a Party.

1.18         “Prior CDA”. Prior NDA means any prior non-disclosure agreement between the Parties.

1.19         “Sale” means each sale of a System by Newton and/or its Affiliates.

1.20         “Specifications” means the specifications for manufacture and operation of the Systems contained in PWVI’s Manual for the Systems, as amended by PWVI from time to time.

1.21         “System”. System means one or more of the PWVI systems, described in Exhibit “B” attached hereto, as such systems may be modified, improved, enhanced or upgraded from time to time.

1.22         “Territory”. Territory means the 27 countries which are members of the European Union as of the date hereof, as listed on Exhibit “C” attached hereto.

1.23         “Third Party”. Third Party means any Person other than a Party.

  

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1.24         Additional Definitions. Each of the following definitions is set forth in the section of this Agreement indicated below:

	
Definitions

	 	
Section

	  	 	  
	
Agreement

	 	
Preamble

	
Breaching Party

	 	
10.2(b)

	
PWVI Indemnified Parties

	 	
8.1

	
Disclosing Party

	 	
1.5

	
Effective Date

	 	
Preamble

	
Initial Quota

	 	
3.2

	
Invalidity Claim

	 	
4.5

	
Manual

	 	
2.5

	
Motors

	 	
2.6(a)

	
Receiving Party

	 	
1.5

	
Newton

	 	
Preamble

	
Newton Indemnified Parties

	 	
8.2

	
Subsequent Quotas

	 	
3.2

	
Technology Transfer Date

	 	
2.5

	
Term

	 	
10.1

	
Transfer

	 	
12.2(b)

	
Transferee

	 	
12.2(b)

 

Article II

Grant of License and Technology Transfer to Newton

2.1           License Grant. Subject to the terms and conditions of this Agreement, PWVI hereby grants to Newton an exclusive (even as to PWVI), sublicenseable only to Newton’s Affiliates (in accordance with Section 2.2), royalty-bearing (in accordance with Section 3.1) license, to utilize the PWVI Intellectual Property in order to manufacture, offer for sale, distribute and otherwise develop and commercialize the Systems in the Territory.

2.2           Sublicenses. Newton shall give PWVI prior written notice of the name of any Affiliate to which it wishes to sublicense any of the rights granted in Section 2.1 and shall not grant a sublicense to any such Affiliate without the prior written approval of PWVI, which shall not be unreasonably withheld. After receiving the prior written approval of PWVI, Newton shall be entitled to grant a sublicense to the approved Person only by means of a written agreement, and Newton shall provide to PWVI a copy of any such written agreement, in the form signed by each approved Person, promptly upon signature of such agreement. Newton Affiliates may utilize the PWVI Intellectual Property only pursuant to sublicenses in accordance with this Section 2.2. In each sublicense agreement, Newton shall require the sublicensee to be bound by terms no less restrictive than the terms restricting Newton in this Agreement, including, but not limited to, the term of the license and its termination.

2.3           References to Patent Rights. Whenever referring to the PWVI Patent Rights in writing, Newton shall designate PWVI, or the companies designated by PWVI, as the owner of the PWVI Patent Rights.

  

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2.4           Regulatory Approvals. It shall be the obligation of Newton to obtain, at its expense, all governmental and regulatory approvals required in the Territory for the manufacture, sale and operation of the Systems, as well as for the importation of components of the Systems.

2.5           Technology Transfer. Within five business days following the Effective Date (the “Technology Transfer Date”), PWVI shall deliver to Newton the technical manuals required for manufacture and operation of the Systems (collectively, the “Manuals”). In the event of termination of this Agreement, the Manuals shall be immediately returned to PWVI.

2.6           Operating Matters.

(a)           Newton, at its own expense and in accordance with the Specifications provided by PWVI, shall manufacture the Systems at a facility owned by it or by a manufacturing contractor in the Territory; provided, however, that the manufacturing contractor, facility, quality standards and costs shall be subject to PWVI’s approval, which shall not be unreasonably withheld.

(b)           Newton shall be solely responsible for all warranty claims relating to Systems sold in the Territory.

(c)           During the Term of the Agreement, Newton shall use its commercially reasonable best efforts to achieve maximum market penetration for the Systems in the Territory. Newton shall participate in trade shows and exhibitions, perform demonstrations of the Systems, purchase advertising and otherwise take appropriate steps to promote and market the Systems. Within 30 days following the end of each calendar quarter, Newton shall provide to PWVI a written report, in reasonable detail, summarizing Newton’s activities during the quarter.

(d)           PWVI shall provide to Newton at no charge:

(i)           Such technical support via email and telephone in the English language as Newton may reasonably request for manufacture, installation and operation of the Systems.

(ii)          Such promotional and advertising materials, e.g., brochures, DVDs, videos, graphics, etc., in sample or camera-ready form, as PWVI may have available and Newton may reasonably request.

(e)           Newton shall manufacture the Systems in accordance with the Specifications for the Systems provided by PWVI from time to time and in accordance with such additional reasonable directives and instructions as may be provided by PWVI.

(f)           Newton has installed the initial System sold by PWVI to Newton at Autonational B.V. in The Netherlands (the “Initial Location”) and will not move the Initial System to another location without PWVI’s prior written consent, which shall not be unreasonably withheld. Newton shall take all commercially reasonable steps required to prevent reverse engineering of the Systems and to otherwise protect the PWVI Intellectual Property. Among other things, Newton shall require each potential customer to disclose in writing where it intends to install each System to be purchased, and this location must be approved by PWVI (which approval shall not be unreasonably withheld) before Newton executes a sale contract. Each contract for sale of a System shall require the purchaser to maintain the System at the pre-approved location unless a new location is approved in writing by PWVI (which approval shall not be unreasonably withheld).

  

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(g)           Newton and its Affiliates shall not directly or indirectly sell within the Territory or for use within the Territory any products substantially similar to or competitive with the Systems.

(h)           The Parties shall, and shall cause their Affiliates to, at all times, comply in all material respects with all local, state, provincial and national laws applicable to their respective activities.

Article III

Financial Provisions

3.1           Royalties.

(a)           Amounts Due. Newton shall pay to PWVI royalties (the “Royalties”) at a rate equal to 20% of the gross sale price of each System sold less the amount paid to PWVI for the Motor included within the System; provided, however, that no System may be sold for a price less than the equivalent of $1 per Kw or more than the equivalent of $4 per Kw without PWVI’s prior written consent in its sole discretion. The foregoing minimum and maximum prices shall be subject to annual adjustment at the beginning of each Commercial Year in accordance with changes in the U.S. Consumer Price Index.

(b)           Reports and Accounting.

(i)           Contracts. Newton shall deliver to PWVI, by PDF, a copy of each contract for Sale of a System within two business days after the execution of the contract.

(ii)          Payments. Royalties shall be paid to PWVI by wire transfer quarterly on each January 15, April 15, July 15 and October 15 with respect to Systems delivered to the purchaser during the previous calendar quarter, regardless of when the purchase price is paid to Newton.

(iii)         Audits by PWVI. Newton shall keep, and shall require its sublicensees to keep, complete and accurate records of the latest three years relating to Sales. For the sole purpose of verifying payment in full of amounts payable to PWVI pursuant to this Section 3.1, PWVI shall have the right, no more than once each calendar year, at PWVI’s expense to retain an independent certified public accountant selected by PWVI and reasonably acceptable to Newton or a PWVI employee, to review such records in the location(s) where such records are maintained by Newton or its sublicensees upon reasonable notice and during regular business hours and under obligations of confidence to Newton. Results of such review shall be made available to both PWVI and Newton. If the review reflects an underpayment to PWVI, such underpayment shall be promptly remitted to PWVI. If the underpayment is equal to or greater than 5% of the amounts that were otherwise due under this Section 3.1, Newton shall pay all of the costs of such review and the one-audit-per-calendar year limitation shall be suspended to permit PWVI, at its discretion, to conduct an additional audit, in accordance with all other terms of this Section 3.1(b)(iii) during the same calendar year.

  

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3.2           Quotas. During the First Commercial Year there will be no sales quota. During the Second Commercial Year, Newton shall sell at least 100 Systems in accordance with the terms of this Agreement (the “Initial Quota”). Failure to satisfy the Initial Quota will entitle PWVI, at its option, to terminate this Agreement in accordance with Section 10.2(a). Within 30 days following the end of the Second Commercial Year, the parties shall meet and negotiate in good faith the sales quotas for subsequent years based on then-existing market conditions (the “Subsequent Quotas”); provided, however, that the Subsequent Quotas shall not be less than the Initial Quota without PWVI’s consent in its sole discretion, and, in the event that the parties are unable to reach agreement on the Subsequent Quotas, the matter shall be resolved by binding arbitration in Miami, Florida, through the American Arbitration Association.

3.3           Currency and Method of Payments. All payments under this Agreement shall be made in United States dollars by wire transfer to such bank account as PWVI may designate from time to time.

3.4           Expenses, Taxes. Except as otherwise specifically set forth in this Agreement, Newton will bear all of its costs and/or expenses incurred in connection with the performance of its obligations under this Agreement and shall not be entitled to any reimbursement from PWVI with regard to such costs and/or expenses. All amounts payable to PWVI in accordance with this Article III are exclusive of all national, federal, provincial, state, municipal or other governmental excise, sales, value-added, use, personal property and occupational taxes, excises, withholding obligations and other levies now in force or enacted in the future and, accordingly, the amount of all payments hereunder is subject to an increase equal to the amount of any tax that PWVI may be required to collect or pay in connection with this Agreement, other than any tax on the net income of PWVI.

Article IV

Intellectual Property Protection and Related Matters

4.1           Ownership.

4.1.1        If any invention that represents an improvement of a System or any component of a System or any new product, process, service or new component of a System is conceived and reduced to practice or otherwise developed by PWVI, any of its Affiliates or sublicensees, Newton, any of Newton’s Affiliates or sublicensees, and/or any agent(s) or contractor(s) of any of the foregoing, individually or jointly, then such inventions and all Intellectual Property Rights therein shall be owned by PWVI and shall be PWVI Intellectual Property. Newton agrees to disclose promptly to PWVI, and hereby assigns to PWVI all of its rights, title and interest in and to, each such invention, including all Intellectual Property Rights therein and all rights of action and claims for damages and benefits arising due to past and present infringement of any such Intellectual Property Rights. Newton shall cooperate and assist PWVI, at PWVI’s expense, by executing and causing all Newton and Affiliate personnel to execute, and delivering to PWVI, all documents reasonably requested by PWVI to enable PWVI to evidence, secure, effectuate and preserve the Intellectual Property Rights assigned to PWVI in accordance herewith. Newton shall obtain corresponding assignment and cooperation obligations from each Affiliate sublicensee as a condition of granting the applicable sublicense.

  

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4.2           Prosecution and Maintenance of Patent Rights.

4.2.1        PWVI shall have the first right and option to file and prosecute any patent applications and to maintain any patents included in the PWVI Patent Rights or any patents on inventions described in Section 4.1, all at PWVI’s expense. If PWVI declines the option to file and prosecute any such patent applications or maintain any such patents, it shall give Newton reasonable notice to this effect, sufficiently in advance to permit Newton to undertake such filing, prosecution and/or maintenance without a loss of rights, and thereafter Newton may, upon written notice to PWVI, file and prosecute such patent applications and maintain such patents in the name of PWVI, at Newton’s expense, provided that Newton shall be entitled to deduct such expenses from any payments due to PWVI pursuant to Section 3.1.

4.2.2        Cooperation. Each Party shall cooperate with the prosecuting Party with respect to the filing, prosecution, maintenance and extension of patents and patent applications pursuant to this Section 4.2, including:

(a)           the execution of all such documents and instruments and the performance of such acts as may be reasonably necessary in order to permit the prosecuting Party to file, prosecute, maintain or extend patents and patent applications as provided for in this Section 4.2;

(b)           making its employees, agents and consultants reasonably available to the prosecuting Party (or to the prosecuting Party’s authorized attorneys, agents or representatives), to the extent reasonably necessary to enable the prosecuting Party to file, prosecute or maintain patents and patent applications as provided for in this Section 4.2;

(c)           providing the prosecuting Party with copies of all material correspondence with the United States Patent and Trademark Office or its foreign counterparts pertaining to the filing, prosecution or maintenance of patents and patent applications as provided for in this Section 4.2; and

(d)           cooperating, if necessary and appropriate, with the prosecuting Party in gaining patent term extensions wherever applicable to such Patent Rights.

4.3           Third Party Infringement.

(a)           Notifications of Third Party Infringement. Each Party agrees to notify the other Party when it becomes aware of the reasonable probability of infringement of the PWVI Intellectual Property.

  

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(b)           Infringement Action. Within 90 days of becoming aware of any such infringement, PWVI shall decide whether to institute an infringement suit or take other appropriate action that it believes is reasonably required to enforce and protect the PWVI Intellectual Property. If PWVI fails to institute such suit or take such action within such 90 day period and such infringement is occurring in the Territory, then Newton shall have the right at its sole discretion to institute such suit or take other appropriate action in the name of either or both Parties.

(i)           Costs. Each Party that institutes such litigation or proceedings described in Section 4.3(b) shall assume and pay all costs incurred in connection with such litigation or proceedings, including without limitation the fees and expenses of such Party’s counsel, and expenses incurred by the other Party, including without limitation the fees and expenses of such other Party’s counsel, at the request of the Party that instituted such litigation or proceedings.

(ii)          Recoveries. Any recovery obtained by any Party as a result of such proceeding or counterclaim, by settlement or otherwise, shall first be applied to reimburse the Party that initiated the litigation or counterclaim for all costs incurred in connection with such proceeding paid by such Party and not otherwise recovered, and any remaining balance shall be shared equally by the Parties.

(c)           Cooperation; Settlements. In the event that either Newton or PWVI takes action pursuant to Section 4.3(b), the other Party shall cooperate with the Party so acting to the extent reasonably possible, including the joining of suit if necessary or desirable at the request and expense of the Party that takes such action.

4.4           Claimed Infringement; Third Party Actions. In the event that a Party becomes aware of any claim that the development or commercialization of the Systems infringes the Intellectual Property Rights of any Third Party, such Party shall promptly notify the other Party. Each Party shall provide to the other Party copies of any notices it receives from Third Parties regarding any alleged infringement or misappropriation of Third Party Intellectual Property Rights arising out of or in connection with the development or commercialization of the Systems. Such notices shall be provided promptly, but in no event after more than 15 days following receipt thereof. Newton shall not settle any such claim without PWVI’s prior written consent, such consent not to be unreasonably withheld.

4.5           Patent Invalidity Claim. If a Third Party at any time asserts a claim that any PWVI Intellectual Property is invalid or otherwise unenforceable (an “Invalidity Claim”), whether as a defense in an infringement action brought by Newton or PWVI pursuant to Section 4.3 or in an action brought against Newton or PWVI described in Section 4.4, the Parties shall cooperate with each other in preparing and formulating a response to such Invalidity Claim. Newton shall not settle or compromise any Invalidity Claim without the consent of the PWVI, which consent shall not be unreasonably withheld.

  

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Article V

Confidentiality

5.1           Confidential Information. The Receiving Party shall (a) not use any of the Disclosing Party’s Confidential Information except in connection with the activities contemplated by this Agreement, (b) maintain in confidence the Disclosing Party’s Confidential Information (except to the extent reasonably necessary for regulatory approval of the Systems, for the filing, prosecution and maintenance of Patent Rights or to develop and commercialize the System in accordance with this Agreement), and (c) not otherwise disclose the Disclosing Party’s Confidential Information to any other person, firm, or agency, governmental or private (except consultants and advisors in accordance with Section 5.2), without the prior written consent of the Disclosing Party. If the Disclosing Party’s Confidential Information is required to be disclosed by the Receiving Party to comply with applicable laws or regulations, to defend or prosecute litigation or to comply with legal process, the Receiving Party may do so, provided that (y) to the extent permitted by law, the Receiving Party provides written notice of such disclosure request to the Disclosing Party within two Business Days following receipt of the request and (z) the Receiving Party discloses Confidential Information of the Disclosing Party only to the extent reasonably necessary and no sooner than reasonably required for such legal compliance or litigation purpose.

5.2           Employee, Consultant and Advisor Obligations. The Receiving Party agrees that it shall provide the Disclosing Party’s Confidential Information only to those employees, consultants and advisors of the Receiving Party or its sublicensees permitted hereunder who have a need to know such Confidential Information to assist the Receiving Party in fulfilling its obligations or exercising its rights under this Agreement; provided that the Receiving Party shall remain responsible for any failure by it and its Affiliates and sublicensees and their respective employees, consultants and advisors to treat such Confidential Information as required under Section 5.1.

5.3           Confidentiality Term. All obligations of confidentiality imposed under this Article V shall survive the termination or expiration of this Agreement.

5.4           Equitable Relief. Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event that a Party breaches the provisions of this Article V. Accordingly, each Party agrees that the other Party shall be entitled to an injunction or other equitable relief to prevent such breaches and to enforce specifically such provisions of this Agreement in any action instituted in any court of competent jurisdiction, in addition to any other remedy to which it may be entitled, at law or in equity. The Parties agree and stipulate that each Party shall be entitled to such injunctive relief without posting a bond or other security; provided, however, that if the posting of a bond is a prerequisite to obtaining injunctive relief, then a bond in the amount of $1000 shall be sufficient.

Article VI

Representations and Warranties

6.1           Representations of Authority. Newton and PWVI each represents and warrants to the other that, as of the Effective Date, it has full right, power and authority under its organizational documents to enter into this Agreement and to perform its respective obligations under this Agreement.

6.2           No Conflict. Newton and PWVI each represents and warrants that, notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not and will not conflict with, violate or breach or constitute a default of, or require any consent under, any contractual obligations of such Party, except such consents as shall have been obtained prior to the Effective Date.

  

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6.3           Fees Payable. Newton and PWVI each represents and warrants that there are no broker’s commissions, finder’s fees or other amounts payable with regard to this transaction.

6.4           Intellectual Property. PWVI represents and warrants to Newton that (a) PWVI owns the exclusive right to use the PWVI Intellectual Property in the Territory, free and clear of all claims, liabilities, licenses, liens, pledges, charges and encumbrances of any kind, (b) PWVI has the right to grant to Newton the rights and licenses under the PWVI Intellectual Property granted in this Agreement; (c) none of the PWVI Patent Rights was fraudulently procured from the relevant governmental patent granting authority; (d) as of the Effective Date, there is no claim or demand of any Person, or any proceeding which is pending or, to the knowledge of PWVI, threatened, that asserts the invalidity, misuse or unenforceability of the PWVI Patent Rights or challenges PWVI’s ownership or right to use or license the PWVI Intellectual Property or makes any adverse claim with respect thereto, and, to the knowledge of PWVI, there is no basis for any such claim, demand or proceeding; (e) as of the Effective Date, there is no claim or demand of any Person, or any proceeding which is pending or, to the knowledge of PWVI threatened, that asserts that the use, sale, operation, offer, or other development or commercialization of the System would or could infringe the Intellectual Property Rights of any Third Party, and, to the knowledge of PWVI, there is no basis for any such claim, demand or proceeding; and (f) to the knowledge of PWVI, as of the Effective Date, the PWVI Intellectual Property is not being infringed by any Third Party; NOTWITHSTANDING THE FOREGOING, PWVI MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACTUAL VALIDITY OF THE PATENTS UNDERLYING THE PWVI PATENT RIGHTS.

Article VII

[Intentionally Deleted]

Article VIII

Indemnification

8.1           Newton. Newton agrees to defend, indemnify and hold harmless PWVI, its Affiliates and its and their respective directors, officers, employees and agents (the “PWVI Indemnified Parties”) from and against any losses, costs, damages, fees or expenses arising out of any Third Party claim to the extent arising out of (a) any breach by Newton of any of its representations or warranties pursuant to Article VI of this Agreement or any of its obligations contained in this Agreement, (b) any death, personal bodily injury or property damage arising from the use of any System sold by Newton or its Affiliates which is not caused by any failure of the Motor to function in accordance with the Specifications or (c) any sale by Newton or its Affiliates of a System for use outside of the Territory. In the event of any Third Party claim against the PWVI Indemnified Parties in respect of which indemnity may be sought hereunder, PWVI shall promptly notify Newton in writing of the claim and Newton shall manage and control, at its sole expense, the defense of the claim and its settlement. The PWVI Indemnified Parties shall cooperate with Newton and may, at their option and expense, be represented in any such action or proceeding by counsel of their own selection. Newton shall not be liable for any litigation costs or expenses incurred by the PWVI Indemnified Parties without Newton’s prior written authorization. In addition, Newton shall not be responsible for the indemnification of any PWVI Indemnified Party to the extent arising from negligence or intentional misconduct by such Person, or as the result of any settlement or compromise by the PWVI Indemnified Parties without Newton’s prior written consent. Notwithstanding anything to the contrary herein, in the event that Newton does not pay the cost of the defense of such claim and its settlement, then PWVI may, in addition to its other rights and remedies, undertake the defense of such claim and may settle such claim without Newton’s consent.

  

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8.2           PWVI. PWVI agrees to defend, indemnify and hold harmless Newton, its Affiliates. its and their respective directors, officers, employees and agents (the “Newton Indemnified Parties”) from and against any losses, costs, damages, fees or expenses arising out of any Third Party claim to the extent arising out of (a) any breach by PWVI of any of its representations or warranties pursuant to Article VI of this Agreement or any of its obligations contained in this Agreement, (b) any death, personal bodily injury, or property damage arising from any failure of a Motor to function in accordance with the Specifications, (c) any sale of a System in the Territory by PWVI or its Affiliates or licensees, or (d) any claim alleging that development, commercialization or use of the System in the Territory by Newton or its Affiliates infringes the Intellectual Property Rights of any Third Party. In the event of any Third Party claim against the Newton Indemnified Parties in respect of which indemnity may be sought hereunder, Newton shall promptly notify PWVI in writing of the claim and PWVI shall manage and control, at its sole expense, the defense of the claim and its settlement (subject to Section 4.4). The Newton Indemnified Parties shall cooperate with PWVI and may, at their option and expense, be represented in any such action or proceeding by counsel of their own selection. PWVI shall not be liable for any litigation costs or expenses incurred by the Newton Indemnified Parties without PWVI’s prior written authorization. In addition, PWVI shall not be responsible for the indemnification of any Newton Indemnified Party to the extent arising from negligence or intentional misconduct by such Person, or as the result of any settlement or compromise by the Newton Indemnified Parties without PWVI’s prior written consent. THE INDEMNIFICATION SET FORTH IN ITEM (d) HEREOF SETS FORTH THE ENTIRE LIABILITY OF PWVI AND THE SOLE REMEDY OF NEWTON WITH RESPECT TO INFRINGEMENT AND ALLEGATIONS OF INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OR OTHER PROPRIETARY RIGHTS OF ANY KIND IN CONNECTION WITH THE MANUFACTURE OR COMMERCIALIZATION OF THE SYSTEM IN THE TERRITORY BY NEWTON OR ITS SUBLICENSEES.

Article IX

Insurance

Each Party shall obtain and provide on or before the Commencement Date certified evidence of general liability insurance with a policy limit of not less than $5,000,000 inclusive for bodily injury and property damage, the terms of which shall extend for the Term of this Agreement to insure any liabilities in whatsoever form or source which such Party has assumed or will assume in due course pursuant to the conditions of this Agreement. Each Party’s insurance policy shall be taken out with a large insurance provider reasonably acceptable in the Field and the Territory and shall include the other Party as additional insured such that the insurer shall provide to the other Party at least 30 days prior written notice of any cancellation, lapse or modification of its insurance policy.

  

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Article X

Term and Termination

10.1         Term. Unless terminated earlier pursuant to Section 10.2, this Agreement shall commence on the Effective Date and shall expire 10 years after the Commencement Date (the period through such date, the “Term”).

10.2         Termination.

(a)           Failure to Satisfy Quotas. In the event that Newton fails to satisfy the Initial Quota during the Second Commercial Year or a Subsequent Quota during a subsequent Commercial Year, then PWVI may, at its option exercised within 30 days following the end of the applicable Commercial Year, terminate this Agreement. For purposes of this Section 10.2(a) and Section 3.2, a Sale shall be deemed to have occurred when the subject System is delivered to the purchaser.

(b)           Termination For Material Breach. Upon any material breach of this Agreement, including without limitation any payment default hereunder, by either Party (in such capacity, the “Breaching Party”), the other Party may terminate this Agreement by providing 30 days’ written notice to the Breaching Party, specifying the material breach. The termination shall become effective at the end of the 30 day period unless the Breaching Party cures such breach during such period; provided, however, that PWVI may terminate the Agreement on 15 days’ written notice in the event of a payment default by Newton under Section 3.1, provided that the breach is not cured within such 15-day period.

(c)           Termination by Reason of Claims against the PWVI Patent Rights. If circumstances materially affecting the validity of the PWVI Patent Rights arise after the execution of this Agreement, PWVI shall promptly notify Newton in writing, and Newton shall be entitled to terminate this Agreement with immediate effect without prejudice to Newton’s right to sue for any breach of PWVI’s representations and warranties set forth in Section 6.4.

(d)           Liquidation, etc. In the event that Newton (a) has a directors’ resolution passed or a court order entered or other substantive step taken for its winding up, liquidation or dissolution, which step is not retracted within 30 days, or (b) ceases to carry on the business contemplated by this Agreement, then PWVI shall have the right to terminate this Agreement immediately upon written notice to Newton.

(e)           Remedies. Termination shall be in addition to, and shall not prejudice, any of the Parties’ remedies at law or in equity.

  

13

  

 

10.3         Effects of Termination.

(a)           Upon any expiration or termination of this Agreement, nothing in this Agreement shall be construed to release either Party from any obligations that accrued or matured prior to the effective date of expiration or termination, and the following provisions shall expressly survive any such expiration or termination: Sections 3.1, 4.1, 4.2, and 4.4, Article V, Article VIII, Section 10.3 and Articles XI and XII.

(b)           Upon any expiration or termination of this Agreement, each Receiving Party shall return to the Disclosing Party the Confidential Information of the Disclosing Party, including all copies and reproductions thereof and will not retain any copies, extracts, analyses, or other reproductions, in whole or in part, of such Confidential Information, except that (i) each Receiving Party may retain the Disclosing Party’s Confidential Information to the extent necessary to exercise its licenses which survive termination or expiration, and (ii) one copy may be retained by the legal counsel of the Receiving Party for purposes of complying with the Receiving Party’s obligations hereunder.

(c)           Termination shall be in addition to, and shall not prejudice, any of the Parties’ remedies at law or in equity.

Article XI

Applicable Law and Dispute Resolution

11.1         General. This Agreement and any disputes arising hereunder shall be governed by and construed in accordance with the substantive laws of the State of Florida, without regard to its conflict of law rules. The state and federal courts located in Miami-Dade County, Florida, shall have exclusive jurisdiction of and be the exclusive venue for any litigation arising under this Agreement, and each Party irrevocably waives any argument to the effect that any such court is an inconvenient forum. Notwithstanding the foregoing, either Party may seek injunctive relief in any court of competent jurisdiction, and the governing law of any proceeding for injunctive relief shall be the law of the jurisdiction in which the court is located. Injunctive relief shall be the sole remedy sought in the Territory.

11.2         Attorney’s Fees. In the event of litigation arising under this Agreement, the prevailing Party shall be entitled to recover its reasonable attorney’s fees and expenses incurred in connection with such litigation at all levels, including before the filing of suit.

Article XII

Miscellaneous Provisions

12.1         Assignment.

(a)           Neither Party may assign this Agreement in whole or in part without the consent of the other, except to an Affiliate of the assigning Party.

(b)           The licenses granted to Newton under this Agreement are appurtenant to and run with the PWVI Intellectual Property and shall bind any Transferee (as defined below). PWVI shall (i) ensure that any Person acquiring any right, title or interest in or to the PWVI Intellectual Property, or any Intellectual Property Rights underlying the licenses granted herein, including any purchaser, assignee or transferee of such intellectual property rights or any Person obtaining a security interest therein, (collectively, “Transferees”) shall be bound by the licenses and other rights granted to Newton under this Agreement, and (ii) require that Transferees confirm in writing prior to any such sale, assignment, transfer or acquisition of any right, title or interest in or to such intellectual property rights (“Transfer”) that the licenses and other rights granted to Newton under this Agreement shall not be affected in any manner by such Transfer.

  

14

  

 

12.2         Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all previous arrangements and agreements with respect to the subject matter hereof, whether written or oral, including the Prior CDA and the Binding Letter of Intent between the Parties dated January 31, 2011, which are hereby terminated. Any amendment or modification to this Agreement shall be made in writing signed by both Parties.

12.3         Notices.

Notices to PWVI shall be addressed to:

 

	
PowerVerde, Inc.

420 S. Dixie Highway

Suite 4B

Coral Gables, FL 33146

Attention: Richard H. Davis, CEO

Fax: 305-660-0028

	  

 

Notices to Newton shall be addressed to:

 

	
Newton Investments B.V.

Nieuwestad 105B

8911 CM Leeuwarden

Netherlands

Attention: Piet Van der Hoop

Fax: __________________________

	  

 

Any Party may change its address by giving notice to the other Party in the manner herein provided. Any notice required or provided for by the terms of this Agreement shall be in writing and shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight or international express courier service, (c) sent by facsimile transmission, or (d) personally delivered, in each case properly addressed in accordance with the paragraph above. The effective date of notice shall be the actual date of receipt by the Party receiving the same.

12.4         Public Announcements. Any announcements or similar publicity with respect to the execution of this Agreement shall be agreed upon by the Parties in advance of such announcement; provided that either Party may make any public announcements that are required, as reasonably determined by the announcing Party, by applicable law, by applicable stock exchange or Nasdaq regulation or by order or other ruling of a court. Newton may announce and advertise the manufacture and commercialization of the Systems.

  

15

  

 

12.5         Independent Contractors. It is understood and agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for either PWVI or Newton to act as agent for the other.

12.6         No Strict Construction. This Agreement has been prepared jointly and shall not be strictly construed against any Party.

12.7         Headings. The captions or headings of the sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have no effect on the meaning of the provisions hereof.

12.8         No Implied Waivers; Rights Cumulative. No failure on the part of PWVI or Newton to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.

12.9         Severability. If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, PWVI and Newton hereby waive any provision of law that would render any provision hereof prohibited or unenforceable in any respect.

12.10       Execution in Counterparts. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument.

12.11       No Third Party Beneficiaries. No person or entity other than PWVI, Newton and their permitted assignees hereunder shall be deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Agreement.

12.12       Construction of this Agreement. Except where the context otherwise requires, wherever used, the singular will include the plural, the plural the singular, the use of any gender will be applicable to all genders, and the word “or” is used in the inclusive sense. When used in this Agreement, “including” and “includes” mean “including without limitation” and “includes without limitation”, respectively. References to either Party include the successors and permitted assigns of such Party.

12.13       Cooperation. The Parties shall cooperate in good faith and execute and deliver such documents and take such further action as shall be reasonably required to fulfill the purpose and intent of this Agreement.

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above.

 

	  	
NEWTON INVESTMENTS B.V.

	  
	 	 	 
	  	
By:

	
/s/ P.C. Van der Hoop

	  
	  	  	
P.C. Van der Hoop

	  
	  	  	
Duly Authorized Representative

	  
	  	  	  	  
	  	
POWERVERDE, INC.

	  
	 	 	 
	  	
By:

	
/s/ Richard H. Davis

	  
	  	  	
Richard H. Davis

	  
	  	  	
Chief Executive Officer

	  
	  	  	  	  

  

  17edgewave_8k-ex1001.htm

 

Exhibit 10.1

 

Amended and Restated Employment Agreement

This Amended and Restated Employment Agreement ("Agreement") is dated as of September 14, 2011, by and between Louis E. Ryan ("Employee") and EdgeWave, Inc., a Delaware corporation ("Employer" and/or "Company"), located at 15333 Avenue of Science, San Diego, CA 92128.

W I T N E S S E T H :

      WHEREAS, Employee and Employer entered into that certain Employment Agreement dated January 15, 2009 as amended by that certain Amendment to Employment Agreement dated January 18, 2010 (collectively the "Original Employment Agreement"); 

WHEREAS, Employee and Employer desire by this Agreement to amend and restate the Original Employment Agreement as set forth herein, effective July 1, 2011 ("Effective Date");

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Employee and Employer agree as follows:

	
1)

	
Services; Title.  Employee shall be employed as Chief Executive Officer and shall fully and faithfully perform such services as Employer shall reasonably request to be performed (the "Services"). The position shall report directly to the Board of Directors of Employer.

	
2)

	
Compensation and Benefits.  Subject to all the other terms of this Agreement, in connection with Employee's performance of the Services, Employer shall:

	 	
a)

	
Commencing on the Effective Date, pay Employee's salary by check or direct deposit twice per month in equal installments in accordance with Employer's regular salary payment schedule, which shall be paid at the rate of $14,583.33 semi-monthly (which equates to an annualized amount of $350,000) before deductions made at Employee's request, if any, and for deductions required by federal, state and local law.

	 	
b) 

	
Grant Employee  a one-time grant of 200,000 restricted shares ("Restricted Shares") of the Company's Common Stock out of the Company's 2010 Employee, Director and Consultant Equity Incentive Plan (the "2010 Plan") on the date this Agreement is signed by Employee and Employer and approved by a majority of the disinterested Board of Directors of the Company or the Compensation Committee. All such Restricted Shares shall be granted pursuant to the terms and conditions of the 2010 Plan and Employer's form Restricted
Stock Grant Agreement at a per share purchase price of $0.01 and with no Company Lapsing Forfeiture Right (as such term is defined in the 2010 Plan i.e. fully vested) once granted.

	 	
c) 

	
Subject to the approval by a majority of the disinterested Board of Director of the Company or the Compensation Committee, periodically and on a case-by-case basis, Employer may pay Employee discretionary cash bonuses, Restricted Shares and/or stock options in such amounts and subject to such vesting schedule as determined by a majority of the disinterested Board of Director of the Company or the Compensation Committee in its sole and absolute discretion.

	 	
d) 

	
Reimburse Employee for housing and automobile related expenses pursuant to Employer's accountable plan in an amount not to exceed five thousand dollars ($5,000) per month.

	 	
e) 

	
Grant Employee the option to participate in the benefit plans offered by Employer to all of its employees from time to time, including without limitation, insurance plans, 401(k) and other savings plans, short and long term disability insurance, Section 125 (cafeteria) and similar pre-tax expense plans, holidays, PTO- Personal Time Off, etc., which may be amended from time to time in Employer's discretion.

  

 

  

	
  

	
f)

	
Participate in health insurance for Employee and Employee's dependents, and such other benefits as Employer shall determine to provide to all of its employees from time to time.

	
  

	
g)

	
Reimburse Employee for all reasonable travel, meals, lodging, communications, entertainment and other business expenses incurred by Employee in connection with Employee's employment.

	
  

	
h)

	
Grant Employee four (4) weeks vacation with pay for each twelve-month period, to be taken at times agreed with Employer.  Unused vacation shall accrue according to the Employer's accrued vacation policy, as may be amended from time to time.

	
3) 

	
Term and Termination.

	 	
a) 

	
Term and Termination. The term of this Agreement shall be for a period of twenty-four (24) months (the "Initial Term"). Unless the parties enter into a new contract before the expiration of the Initial Term the Employee's employment shall continue on an "at-will" basis.

	
  

	
b)

	
Termination Without Cause.

I) In the event that Employee shall be terminated by Employer without "Cause", shall resign for "Good Reason" or shall be terminated in connection with a Change of Control, Employee shall receive from Employer following the date of such termination, with appropriate deductions and withholdings, (i) the compensation required by Paragraph 2(a) of this Agreement for the remaining term of the Initial Term, but no less than for a period of twelve (12) months from the date of termination (the "Twelve Months Severance Period") payable semi-monthly in accordance with Employer's regular
payroll practices, (ii) COBRA premium until the earlier of the expiration of the Twelve Months Severance Period or until Employee finds another job that provides at least substantially similar health insurance, and (iii)  the acceleration by twelve (12) months of Employee's unvested stock options; (subsection (i),(ii), and (iii) of this Paragraph 3(b)(I) shall be referred to collectively herein as the "Twelve Months Severance"), plus all accrued but unpaid salary and vacation time and any applicable bonus (if any) which has been earned but not yet paid to the date of termination. The first installment will be paid on the first regular semi monthly payroll date following the 30th day after the termination date provided that the Severance Agreement and General Release
of All Claims agreement in the form attached as Exhibit B (the "Severance Agreement") as well as the termination certificate described in Section 4 and attached as Exhibit A (the "Termination Certificate") has been signed by Employee and delivered to Employer within 22 days and not revoked within the 7 day revocation period.

 

II) In the event that Employee shall be terminated by Employer for failing to achieve performance targets set by Employer, then Employee shall receive from Employer following the date of such termination, with appropriate deductions and withholdings, (i) the compensation required by Paragraph 2(a) of this Agreement for a period of six (6) months from the date of termination (the "Six Months Severance Period") payable semi-monthly in accordance with Employer's regular payroll practices, (ii) COBRA premium until the
earlier of the expiration of the Six Months Severance Period or until Employee finds another job that provides at least substantially similar health insurance, and (iii)  the acceleration by six (6) months of Employee's unvested stock options granted under Paragraph 2(c) of this Agreement (subsection (i),(ii) and (iii) of this Paragraph 3(b)(II) shall be referred to collectively herein as the "Six Months Severance" and both the Six Months Severance as well as the Twelve Months Severance are also referred to herein as the "Severance"), plus all accrued but unpaid salary and vacation time and any applicable bonus (if any) which has been earned but not yet paid to the date of termination. The first installment
will be paid on the first regular semi monthly payroll date following the 30th day after the termination date provided that the Severance Agreement as well as the Termination Certificate has been signed by Employee and delivered to Employer within 22 days and not revoked within the 7 day revocation period. 

  

2

  

III) Employee's eligibility for Severance is conditioned on Employee and Employer having first signed the Severance Agreement and Termination Certificate. Employee acknowledges that any Severance, if due, will either be in the amount of the Twelve Months Severance or the Six Months Severance but never combined. Notwithstanding anything herein to the contrary, if at the time of Employee's termination of employment with Employer, Employee is a "specified employee" as defined in Code Section 409A and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax
under Code Section 409A, then Employer will, if requested by Employee in writing at the time of Employee's termination, defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee except as set forth herein) until the date that is either twelve (12) months, six (6) months, or whichever other period is applicable, following Employee's termination of employment with Employer (or the earliest date as is permitted under Code Section 409A) (the "Delay Period").  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 3b (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid to Employee in a lump
sum on the first business day after the end of the Delay Period, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

	 	
c)

	
Termination For Cause. Upon termination of Employee's employment with Employer for "Cause", Employer shall be under no further obligation to Employee for salary or other compensation, except to pay all accrued but unpaid salary and accrued vacation time up to the date of termination.  For purposes of this Agreement, "Cause" shall mean that Employee: has (i) been negligent in the discharge of his duties to Employer or has failed to substantially perform his reasonable assigned duties (other than any such failure resulting from incapacity due to physical or mental illness or any
failure after the Employee properly gives notice of resignation for Good Reason (as defined below)), which failure is not cured (if curable) within 30 days after a written demand is received by the Employee from Employer which identifies the manner in which Employer believes the Employee has been negligent or has not substantially performed Employee's duties; (ii) has acted in a manner constituting gross negligence or willful misconduct; (iii) has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a material breach of confidentiality, an unauthorized disclosure or use of inside information, customer lists, trade secrets or other confidential information; (iv) has breached a fiduciary duty; (v) has been convicted of, or plead guilty or nolo contendere to a felony or a misdemeanor (other than minor traffic violations or similar offenses) injurious to the
reputation, business or assets of Employer; (vi) has materially breached any of the material provisions of this Agreement; (vii) has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, Employer or an affiliate; (viii) has materially violated Employer's policies and procedures, and specifically a violation of Employer's sexual harassment and/or anti-discrimination policies, or a violation of Employer's trade secrets policies, or used or disclosed Employer's trade secrets for personal gain; (ix) or has improperly induced a vendor or customer to break or terminate any contract with Employer or an affiliate or induced a principal for whom Employer or an affiliate acts as agent to terminate such agency relationship.

  

3

  

	 	
d)

	
Change of Control. "Change of Control", for purposes of this Agreement, means a change in the ownership or control of the Company affected through any one of the following transactions:

(i) a merger or consolidation approved by the Company's stockholders in which securities possessing more than eighty percent (80%) of the Company's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction;

(ii) any sale, transfer or other disposition of all or substantially all of the Company's assets in a complete liquidation or dissolution of the Company; or

(iii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Act of 1934, as amended) of securities possessing more than eighty percent (80%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders.

	 	
e)

	
"Good Reason" means the occurrence, without the Employee's written consent, of any of the events or circumstances set forth in clauses (i) and (ii) below:

	
  

	
(i) a material and continuing diminution of the Employee's position, duties, authority or responsibilities in the operation and management of the Company as compared to such position, duties, authority or responsibilities on the Effective Date;

	
  

	
(ii) a material reduction in the compensation set forth in Paragraph 2(a) of this Agreement;

	 	
f)

	
Conditions to Effectiveness.  This Agreement shall become effective upon; (i) Employer and Employee shall have duly executed this Agreement and delivered this Agreement to Employer, and (ii) the consent by a majority of Employer's disinterested Board of Directors' or Compensation Committee of the terms of this Agreement.

	
4.

	
Termination Certificate.  Upon the termination of Employee's engagement under this Agreement, for any reason whatsoever, Employee agrees to sign, date and deliver to Employer the Termination Certificate in the form of Exhibit A, and to deliver and take all other action necessary to transfer promptly to Employer all records, materials, equipment, drawings, documents and data of any nature pertaining to any invention, trade secret or confidential information of Employer or to Employee's engagement, and Employee will not take with Employee any documents containing or pertaining
to any confidential information, knowledge or data of Employer that Employee may produce or obtain during the course of Employee's engagement under this Agreement. This Paragraph 4 shall survive indefinitely any termination of this Agreement or Employee's employment.

	
5.

	
Nondisclosure.  Employee agrees to keep confidential and not to disclose or make any use of (except for the benefit of Employer), at any time, either during or after Employee's engagement under this Agreement, any trade secrets, confidential information, knowledge, data or other information of Employer relating to products, processes, know-how, designs, formulas, test data, customer lists, business plans, marketing plans and strategies, pricing strategies or other subject matters pertaining to any business or future business of Employer or any of its clients, customers, Employees, licensees or affiliates, which Employee may produce, obtain or otherwise acquire or become aware of during the course of Employee's
engagement under this Agreement. Employee further agrees not to deliver, reproduce or in any way allow any such trade secrets, confidential information, knowledge, data or other information, or any documentation relating thereto, to be delivered or used by any third party without specific direction or consent of a duly authorized officer of Employer. This Paragraph 5 shall survive indefinitely any termination of this Agreement or Employee's employment.

  

4

  

	
6.

	
Work for Hire; Ownership of Intellectual Property. Employee understands and agrees that all of Employee's work and the results there arising out of or in connection with the work performed for Employer, whether made solely by Employee or jointly with others, during the period of Employee's employment by Employer, that relate in any manner to the actual or anticipated business, work, activities, research or development of Employer or its affiliates, or that result from or are suggested by any task assigned to Employee or any activity performed by Employee on behalf of Employer, shall be the sole property of the Employer, and, to the extent necessary to ensure that all such property shall belong solely to the Employer, Employee by
Employee's execution of this Agreement transfers to the Employer any and all right and interest Employee may possess in such intellectual property and other assets created in connection with Employee's employment by Employer, and that may be acquired by Employee during the term of this Agreement from any source that relates, directly or indirectly, to Employer's business and future business.  Employee also agrees to take any and all actions requested by Employer to preserve Employer's rights with respect to any of the foregoing. This Paragraph 6 shall survive indefinitely any termination of this Agreement or Employee's employment.

	
7.

	
No Partnership; Not Assignable by Employee. This Agreement is between Employee and Employer, as at-will employer, and shall not form or be deemed to form a partnership or joint venture. Employer's rights, benefits, duties and obligations under this Agreement shall inure to its successors and assigns. Employee's rights, obligations and duties under this Agreement are personal to Employee and may not be assigned.

	
8.

	
Trade Secrets of Others: Employee represents that Employee's performance of all the terms of this Agreement and as the Employer's Employee does not, and will not breach any agreement to keep in confidence any proprietary information, knowledge or data acquired by Employee in confidence or in trust before Employee's engagement under this Agreement, and Employee will not disclose to Employer or induce Employer to use any confidential or proprietary information or material belonging to any other person or entity. Employee agrees not to enter into any agreement, either written or oral, in conflict with this Paragraph 8.

	
9.

	
Employee's Representations and Warranties. Employee represents, promises, understands and agrees that: (i) Employee is free to enter into this Agreement; (ii) Employee is not obligated or a party to any engagement, commitment or agreement with any person or entity that will, does, or could conflict with or interfere with Employee's full and faithful performance of this Agreement, nor does Employee have any commitment, engagement or agreement of any kind requiring Employee to render services or preventing or restricting Employee from rendering services or respecting the disposition of any rights or assets that Employee has or may hereafter acquire or create in connection
with his/her employment with Employer; (iii) Employee shall not use any material or content of any kind in connection with Employer's products, software or website that is copyrighted or owned or licensed by a party other than Employer or that would or could infringe the rights of any other party; (iv) Employee shall not use in the course of Employee's performance under this Agreement, and shall not disclose to Employer, any confidential information belonging, in part or in whole, to any third party; (vi) EMPLOYEE UNDERSTANDS ALL OF THE TERMS OF THIS  AGREEMENT, AND HAS REVIEWED THIS AGREEMENT IN DETAIL BEFORE AGREEING TO EACH AND ALL OF THE PROVISIONS; was allowed adequate opportunity to seek legal counsel before signing this Agreement; and (vii) no statement, representation, promise, or inducement has been made to Employee, in connection with the terms of this Agreement,
except as expressly set forth in this Agreement.

  

5

  

	
10.

	
Governing Law; Arbitration.  This Agreement shall be subject to and construed in accordance with the laws of the State of California, and without giving effect to conflicts of laws principles. In the event of any dispute in connection with the Services, Employee's employment or termination thereof, relationship with the Employer, or this Agreement (or any other agreement) that cannot be resolved privately between the parties, resolution shall be through binding arbitration conducted in the County of San Diego, California.  Any arbitration shall be conducted in accordance with the provisions of the California Code of Civil Procedure, Part 3, Title 9 (commencing with Section 1280). Employer will pay the cost of
arbitration.  The arbitration process shall be in compliance with any laws or rules then in effect for employment arbitration agreements at the time of a demand for arbitration. The parties may obtain discovery in aid of the arbitration in accordance with California Code of Civil Procedure Section 1283.05. Nothing contained in this paragraph 10 shall limit either party's right to seek temporary restraining orders or injunctive or other equitable relief in the Superior Court of California in connection with this Agreement. EMPLOYEE UNDERSTANDS THAT BY AGREEING TO ARBITRATION IN THE EVENT OF A DISPUTE BETWEEN EMPLOYER AND EMPLOYEE, EMPLOYEE AND EMPLOYER BOTH  EXPRESSLY WAIVE THEIR RIGHT TO REQUEST A TRIAL BY JURY IN A COURT OF LAW. This Paragraph 10 shall survive indefinitely any termination of this Agreement
or Employee's employment.

	
  

	 

	
11.

	
Entire Agreement; Modification; Waiver; Construction Generally. This Agreement constitutes the entire agreement between Employer and Employee relating to Employee's employment with Employer, and supersedes all previous agreements, whether oral or written. No provision of this Agreement shall be construed strictly against any party, including, without limitation, the drafter. Neither this Agreement nor any provision may be amended, waived or modified in any way other than by a writing executed by the party against whom such amendment, waiver or modification would be enforced. No failure to exercise, and no delay in exercising with respect to any right shall operate as a waiver. A waiver by any party of a breach of any provision
shall not be deemed a waiver of any later breach.  The exercise of any right or remedy by either party (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive its right to exercise any or all other rights and remedies. The headings or titles of the several paragraphs of this Agreement are inserted solely for convenience and shall not be used in the construction of any provision of this Agreement. Words in the singular shall include the plural, and vice versa. All references to the masculine or feminine shall mean all genders.

	
12.

	
Assignment. Employee acknowledges and agrees that this Agreement, and Employee's rights and obligations hereunder, may be assigned by Employer to any affiliate, subsidiary or parent company of Employer.

[The remainder of the page is left intentionally blank.  The Signature page follows]

  

6

  

EMPLOYER:

EdgeWave, Inc., a Delaware corporation

By: /s/ Humphrey P. Polanen

 

Print Name:  Humphrey P. Polanen

Its: (title)  Director

Date:   September 14, 2011

EMPLOYEE:

By: /s/ Louis E. Ryan

Print Name:  Louis E. Ryan

Date:  September 14, 2011

  

7

  

EXHIBIT A

TERMINATION CERTIFICATE

This is to certify that undersigned does not have in the undersigned's possession, nor has undersigned failed to return, any customer information, records, files, programs, documents, data, specifications, drawings, blueprints, reproductions, sketches, notes, reports, proposals, or copies of them, or other documents or materials, equipment, or other property or asset belonging to EdgeWave, Inc., ("Employer"), its successors and assigns.

Undersigned further certifies that undersigned has fully complied with, and will continue to comply with, all the terms of the Amended and Restated Employment Agreement dated as of September__, 2011 between Employer and the undersigned (the "Agreement").

Undersigned further agrees that, in compliance with the Agreement, undersigned will preserve as confidential any and all trade secrets, confidential information, knowledge, data or other information of Employer relating to products, processes, know-how, designs, formulas, test data, customer lists, business plans, marketing plans and strategies, pricing strategies or other subject matters pertaining to any business of Employer or any of its clients, customers, Employees, licensees or affiliates, that Employee produced, obtained or otherwise acquired or became aware of during the course of Employee's engagement under the Agreement.

EMPLOYEE:

_______________________________

Louis E. Ryan

Date:   __________________________

  

8

  

EXHIBIT B

SEVERANCE AGREEMENT

AND GENERAL RELEASE OF ALL CLAIMS

This Severance Agreement and General Release of All Claims ("Agreement") is entered into between Louis E. Ryan ("Employee") and EdgeWave, Inc., and all related holding, parent or subsidiary entities and their affiliates, directors, officers, representatives, agents, principals, partners and employees, stockholders, predecessors and successors and/or assigns, insurers, and attorneys (all collectively referred to as
"Employer"). (Employee and Employer are hereinafter collectively referred to as "the Parties").

1.  Termination of Employment.  Employee's employment with Employer is terminated effective ___________  ("the termination date").

2.  Severance.  In consideration of and in return for the promises contained in this Agreement, and as full and final compensation to Employee for all services as an employee:

[OPTION 1: IN THE EVENT THAT EMPLOYEE IS TERMINATED BY EMPLOYER WITHOUT "CAUSE", RESIGNS FOR "GOOD REASON" OR TERMINATED IN CONNECTION WITH OR FOLLOWING A CHANGE OF CONTROL, THEN THE FOLLOWING PARAGRAPH 2(a) SHALL APPLY]

 

 

a. Employee shall receive from Employer following the termination date, with appropriate deductions and withholdings, (i) the compensation required by Paragraph 2(a) of the Amended and Restated Employment Agreement dated September __, 2011 (the "Employment Agreement") for the remaining term of the Initial Term, but no less than for a period of twelve (12) months from the termination date (the "Severance Period") payable semi-monthly in accordance with Employer's regular payroll practices, (ii) the COBRA premium, if any, set forth in Paragraph 2(b) of this Agreement, and (iii) the
acceleration by twelve (12) months of Employee's unvested stock options granted under Paragraph 2(c) of the Employment Agreement (subsection (i),(ii), and (iii) of this Paragraph shall be referred to collectively herein as the "Severance"), in addition to all accrued and unused wages and vacation pay and any applicable bonus (if any) which has been earned but not yet paid through the termination date. The first installment will be paid on the first regular semi monthly payroll date following the 30th day after the termination date provided that this Agreement as well as the termination certificate in the form attached as Exhibit A to the Employment Agreement has been signed by Employee and delivered to
Employer within 22 days and not revoked within the 7 day revocation period. Notwithstanding anything herein to the contrary, if at the time of Employee's termination of employment with Employer, Employee is a "specified employee" as defined in Code Section 409A and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Code Section 409A, then Employer will, if requested by Employee in writing at the time of Employee's termination, defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee except as set forth herein) until the date that is between twenty four (24) to twelve (12) months (whichever is applicable) following
Employee's termination of employment with Employer (or the earliest date as is permitted under Code Section 409A) (the "Delay Period").  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid to Employee in a lump sum on the first business day after the end of the Delay Period, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

[OPTION 2: IN THE EVENT THAT EMPLOYEE IS TERMINATED BY EMPLOYER FOR FAILING TO ACHIEVE PERFORMANCE TARGETS SET BY THE BOARD OF DIRECTORS OF EMPLOYER, THEN THE FOLLOWING PARAGRAPH 2(a) SHALL APPLY]

a. Employee shall receive from Employer following the termination date, with appropriate deductions and withholdings, (i) the compensation required by Paragraph 2(a) of the Amended and Restated Employment Agreement dated September__, 2011 (the "Employment Agreement") for a period of six (6) months from the termination date (the "Severance Period") payable semi-monthly in accordance with Employer's regular payroll practices, (ii) the COBRA premium, if any, set forth in Paragraph 2(b) of this Agreement, and (iii) the acceleration by six (6) months of Employee's unvested stock options
granted under Paragraph 2(c) of the Employment Agreement (subsection (i),(ii) and (iii) of this Paragraph shall be referred to collectively herein as the "Severance"), in addition to all accrued and unused wages and vacation pay and any applicable bonus (if any) which has been earned but not yet paid through the termination date. The first installment will be paid on the first regular semi monthly payroll date following the 30th day after the termination date provided that this Agreement as well as the termination certificate in the form attached as Exhibit A to the Employment Agreement has been signed by Employee and delivered to Employer within 22 days and not revoked within the 7 day revocation period.
Notwithstanding anything herein to the contrary, if at the time of Employee's termination of employment with Employer, Employee is a "specified employee" as defined in Code Section 409A and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Code Section 409A, then Employer will, if requested by Employee in writing at the time of Employee's termination, defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee except as set forth herein) until the date that is six (6) months following Employee's termination of employment with Employer (or the earliest date as is permitted under Code Section 409A) (the
"Delay Period").  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid to Employee in a lump sum on the first business day after the end of the Delay Period, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

  

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[OPTION 1 AND OPTION 2]

b. Employee will continue on Employer's medical plan up to and including Employee's termination date. Employee shall have the right to continue his/her medical and dental insurance, at Employer's expense until the earlier of the expiration of the Severance Period or until Employee finds another job that provides at least substantially similar health insurance and thereafter at Employee's sole expense, pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") provided, however, that Employee timely elects COBRA continuation.  The COBRA period shall be deemed to have commenced on the first of
the month following the date of termination;

c. Employee acknowledges and agrees that the Severance provided for in this Agreement is due under the Employment Agreement only if Employee signs this Agreement; and

e. Employer warrants and Employee acknowledges that the agreements described under this Paragraph 2 constitute full payment of any and all claims of every nature and kind arising out of or relating in any way to Employee's employment by Employer or the termination thereof, benefits owed, or any other claims as outlined below.

3.  Employee's Release of All Claims Against Employer.

a. In consideration of the above described payment, and for other good and valuable consideration, Employee agrees that employment with Employer has terminated as of the termination date, and that Employee has received full payment of all wages, vacation accrued but not used, bonuses and any and all other sums and/or other considerations due as a result of such employment by Employer.  In further consideration of and in return for the promises and covenants undertaken herein, Employee does hereby unconditionally, irrevocably and absolutely release and discharge Employer and all related holding, parent or subsidiary entities and their affiliates, directors, officers, representatives,
agents, principals, partners and employees, stockholders, predecessors and successors and/or assigns, insurers, and attorneys from any and all liability, claims, demands, causes of action, or suits of any type, whether in law and/or in equity, known or unknown, related directly or indirectly or in any way connected with any transaction, affairs or occurrences between them to date, including, but not limited to, Employee's employment with Employer and the termination of said Employment.  This Agreement shall include but not be limited to a release of claims arising under any state or federal statute or common law regulating or affecting employment, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Equal Pay Act, Age Discrimination in Employment Act, the Fair Labor Standards Act, federal and state wage and hour laws including, without
limitation, the California Labor Code, California Government Code Sections 12940 et seq., any applicable California Industrial Wage Orders, all as amended, all claims for breach of contract, employment discrimination, sexual harassment, wages, severance, overtime compensation, vacation, torts, fraud, and/or claims any other local, state or federal law, rule, or regulation relating to or affecting Employee's employment by Employer, except any claim for unemployment insurance or worker's compensation.

b. In further consideration of the above described payments and benefits, and for other good and valuable consideration, Employee irrevocably and absolutely agrees that he will not prosecute nor allow to be prosecuted on his behalf in any administrative agency, whether federal or state, or in any court, whether federal or state, any claim or demand of any type related to the matters released above.  It is the intention of the Parties that, with the execution of this Agreement, Employer and all related holding, parent or subsidiary entities and their affiliates, directors, officers, representatives, agents, principals, partners and employees, stockholders, predecessors and successors
and/or assigns, insurers, and attorneys will be absolutely, unconditionally and forever discharged of and from all obligations to or on behalf of Employee related in any way to the matters released.  Employee represents that he has not filed any complaint, charges or lawsuits against Employer and all related holding, parent or subsidiary corporations (including their affiliates, officers, directors, and employees) with any governmental agency or any court.

  

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4.  Left Intentionally Blank.

5.  Unknown Claims.  Employee understands and agrees that this Agreement extends to all claims of every nature, known or unknown, suspected or unsuspected, past or present, and that any and all rights granted to Employee under Section 1542 of the California Civil Code or any analogous federal law or regulation are hereby expressly waived.  Section 1542 provides:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OF OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

Employee certifies that he has read this release, the quoted Civil Code section and that he fully understands this release.

6.  Binding Effect.  This Agreement and all promises and agreements set forth in this Agreement shall be binding upon and shall inure to the benefit of the respective parties, their legal successors, heirs, assigns, partners, representatives, agents, attorneys, officers, directors and shareholders.

7.  Entire Agreement.  Employee further declares and represents that no promise or representation not contained in this Agreement has been made to him and acknowledges and represents that this Agreement contains the entire understanding between the parties and contains all terms and conditions pertaining to the compromise and settlement of the subjects referenced in this Agreement.   However, any proprietary or trade secrets agreement or any agreement regarding ownership of intellectual property by Employer entered into previously, as well as
Paragraphs 4,5,6,8 and 10 of the Employment Agreement shall remain in full force and effect.  Employee further acknowledges that the terms of this Agreement are contractual and not a mere recital.

8.  Left intentionally blank

9.  Confidential Information and Trade Secrets.  Employee acknowledges that all confidential materials, records and documents concerning Employer that have come into Employee's possession during his/her employment with Employer have been returned to Employer.  Employee agrees not to disclose to any person or entity, including any competitor of Employer and any future employer, any of Employer's trade secrets or other confidential information. Employee acknowledges all Employer's property obtained during the course of her employment with Employer has been
returned to Employer.  To the extent that Employee has entered into any Confidentiality, Proprietary or Trade Secrets agreement or any agreement regarding ownership of intellectual property of Employer, if such Agreements provide greater protection to Employer than this Agreement, such other Agreements shall take precedence over this Agreement.

10.  Interpretation and Severability.  The validity, interpretation, and performance of this Agreement shall be construed and interpreted according to the laws of the State of California.  This Agreement shall not be interpreted for or against either party hereto on the ground that such party drafted or caused this Agreement to be drafted.  If any provision of this Agreement, or part thereof, is held invalid, void or voidable as against public policy or otherwise, the invalidity shall not affect other provisions, or parts thereof, which may be
given effect without the invalid provision or part.  To this extent, the provisions, and parts thereof, of this Agreement are declared to be severable.

  

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11.  Arbitration of Disputes.  Any dispute arising out of this Agreement or Employee's employment or termination shall be resolved by binding arbitration in San Diego, California, pursuant to Paragraph 10 of the Employment Agreement, and the findings of the arbitrator shall be final and binding upon the parties.

12.  Attorneys' Fees.  In any dispute involving this Agreement, the prevailing party shall be entitled to attorneys' fees and costs.

13.  Age Discrimination in Employment Act Release.

A.   Employee acknowledges Employer hereby has advised Employee in writing to discuss this Agreement with an attorney before executing it and that Employer has provided Employee at least twenty-one (21) days within which to review and consider this Agreement before signing it.

B.  The Parties acknowledge and agree that Employee may revoke this Agreement for up to seven (7) calendar days following the execution of this Agreement, and that it shall not become effective or enforceable until the revocation period has expired.  The Parties further acknowledge and agree that such a revocation must be in writing, addressed to Michel Urich, Esq., at 7668 El Camino Real, Suite 104-238, Carlsbad, CA 92009 and received not later than 5:00 p.m. on the seventh (7th) day following execution of this Agreement by Employee.  If Employee revokes this Agreement, it shall not be effective or enforceable and
Employee will not receive the monies and benefits described above.

C. If Employee does not revoke this Agreement in the time frame specified in this Paragraph 20, the Agreement shall become effective at 12:01 a.m. on the eighth (8th) day after it is signed by Employee.

I have read the foregoing Severance Agreement and General Release of All Claims and I accept and agree to the provisions contained in this Agreement and execute it voluntarily and with full understanding of its consequences.

[The remainder of the page is left intentionally blank.  The Signature page follows]

  

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PLEASE READ CAREFULLY, THIS AGREEMENT CONTAINS A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

EMPLOYER:

EdgeWave, Inc., a Delaware corporation

By: _______________________________

Print Name:  ________________________

Its: (title)  __________________________

Date:

EMPLOYEE:

By:________________________________

 

Print Name:  Louis E. Ryan

Date:

 

 

 

 

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