Document:

LPC Due Diligence

MD TECHNOLOGIES INC.

620 Florida St.

Baton Rouge, La. 70801

(225) 343-7169

 

Date: April 10, 2006

 

 

 Ecare India Private Limited

C/O Deepak Sanghi and Richa Sanghi

 B.R.Complex

 2nd Floor

 27-28 Woods Road

Chennai -- 600 002. India

 
Re:Letter of Intent for the Acquisition of a [CONFIDENTIAL TREATMENT REQUESTED] interest in ECARE INDIA PRIVATE LIMITED by MD Technologies Inc.

Dear Mr. and Mrs. Sanghi:

1.The Transaction.  This letter confirms our agreement in principle that Deepak and Richa Sanghi the owners of ECARE INDIA PRIVATE LIMITED ("ECARE", the "Company" or the "Seller") shall sell or cause to be sold to MD Technologies Inc. (the "Purchaser" or "MDTO")),  [CONFIDENTIAL TREATMENT REQUESTED] interest in the equity of the the Company (the "Transaction").  The structure of the Transaction will be a stock purchase. The Transaction shall also include the granting of an exclusive North American marketing and distribution agreement between ECARE and MD Technologies Inc.except in the states of [CONFIDENTIAL TREATMENT REQUESTED] (hereinafter called "Specified States") wherein MDTO shall not hold an "exclusive" marketing and distribution agreement. MD Technologies Inc. agrees to promote and market the services of ECARE in North America  including in the Specified States  for a royalty fee equal to [CONFIDENTIAL TREATMENT REQUESTED] from all incremental North American revenues generated by ECARE after the execution of the marketing and distribution agreement in North America, except for in the Specified States wherein the royalty shall be paid only on contracts secured for ECARE with the assistance of MDTO. Any business generated by ECARE in the Specified States without the assistance of MDTO shall not be burdened by a royalty payable to MDTO. This exclusivity will be for a period of  [CONFIDENTIAL TREATMENT REQUESTED] from the date of execution of the transaction and can be renewed based on the performance. ECARE shall have the right, in its absolute discretion, to decline to enter into contract(s) with any potential customer(s) developed by MDTO. Should ECARE decline to enter into a contract with potential customer(s) developed by MDTO, MDTO shall be free to refer that cutomer to another company which may be a competitor of ECARE. 

2.Purchase Price.  The purchase price and other items of consideration shall be paid as follows:

(a)Cash. The total purchase price for the Transaction shall be a cash payment equal to $[CONFIDENTIAL TREATMENT REQUESTED] US.   

	Stock Options. In addition to the cash Purchase Price, Purchaser shall caused to be issued stock and stock options to the owners of Seller in the proportion chosen by them on the following schedule: 

[CONFIDENTIAL TREATMENT REQUESTED].

[CONFIDENTIAL TREATMENT REQUESTED]

The stock which issued pursuant to this transaction and the stock which may be issued as a result of the options granted pursuant to this transaction shall be restricted for a period of 12 months from issuance.

	Definitive Agreement; Closing.  The Purchaser and the Seller shall negotiate in good faith to execute definitive purchase agreement, shareholder agreement and marketing and distribution agreement, all containing terms consistent with the terms of this letter as well as customary covenants, representations and warranties, closing conditions, provisions for indemnification and survival and other customary terms ("Definitive Agreements").  Purchaser's counsel shall draft the Definitive Agreements and other agreements necessary to consummate the Transaction.  The Definitive Agreements and all other such agreements must be satisfactory to the parties to such agreements.  The parties will use their best efforts to proceed expeditiously to consummate the Transaction.  The Purchaser and Ecare shall take all steps to ensure  the closing will take place on or before September 30, 2006. By mutual consent alone, the Purchaser and Ecare  shall have the ability to extend the closing for up to 90 days. The perties hereto further specify and agree that the respective interests in Ecare which each party will own after the contemplated transaction is completed may be transferred by them freely without the necessity of obtaining the other's consent as follows:

	By Deepak and Richa Sanghi, to a company/entity owned or controlled by member(s) of their family.

	By MDTO to a subsidiary of MDTO or to an entity that purchases the assets of  MDTO. 

 
4.Conditions Precedent.  In addition to the other terms and conditions set forth in this letter, the Purchaser's obligation to proceed is conditional upon:

	registration of ECARE to do business in the United States of America, specifically in the States of Florida and Louisiana.

	the election of a nominee from MD Technologies Inc. to the Board of Directors of ECARE.

	the completion of financial, business and legal due diligence investigations by the Purchaser and its advisors of the financial condition, operating results, business, prospects and material business relationships of the Company, the results of which investigations shall be satisfactory to the Purchaser in its sole discretion; 

	Purchaser securing sufficient financing, in its sole discretion, to consumate the contemplated Transaction;

	the receipt of all material third party and all governmental consents and approvals necessary for the consummation of all transactions contemplated herein, or any necessary modifications of third party agreements, all without any material expense to the Purchaser;

	the absence of any material adverse change since March 10, 2006 in the Company's businesses, assets, financial condition, operating results, customer, supplier and employee relations, or business prospects, with the exception that the parties agree and recognize that Ecare will restate its capital accounts in order to more accurately reflect the investment of MDTO; and

	aproval of the Transaction by the Board of Directors of MD Technologies Inc.

5.Conduct of Business.  During the period from the date hereof through the closing (or the abandonment of the Transaction as provided herein), Seller will cause the Company to:

	conduct its businesses in substantially the same manner as it has been regularly conducted;

	use reasonable best efforts (i) to maintain the Company's businesses and employees, customers, assets, suppliers, licenses and operations as an ongoing business in accordance with past custom and practice;

	not enter into any transaction other than in the ordinary course of business or any transaction which is not at arms-length with unaffiliated persons or entities; and

 
6.Access.  Seller shall use reasonable efforts to make available all information (financial or otherwise) reasonably requested by or on behalf of the Purchaser and its representatives in connection with our due diligence review of the Company, including at all reasonable times and upon reasonable notice, access to the Company's books, records, facilities, properties, officers, key employees, accountants and representatives.  The Purchaser will use reasonable efforts to minimize any disruption to the Company's businesses in connection with its due diligence efforts.

7.Confidentiality.  

(a)The Purchaser shall use reasonable efforts to maintain, and shall cause its employees and agents to use reasonable efforts to maintain, any confidential information received from the Company as confidential and shall use reasonable efforts to protect the same from misuse, espionage, loss or theft.  The Purchaser shall not, and shall cause its employees and agents not to, disclose or use such confidential information at any time or in any manner other than in connection with its evaluation of the Transaction contemplated herein.

(b)Notwithstanding the other provisions stated herein, the Purchaser and its employees and agents shall not be required to maintain information as confidential if the information:

(i)is now, or hereafter becomes, through no act or failure to act on the part of the receiving party which constitutes a breach of this paragraph 7, generally known or available to the public; 

(ii)is known to the receiving party at the time of disclosure of such information;

(iii)is hereafter furnished to the receiving party by a third party, who to the knowledge of the receiving party is not under obligations of confidentiality to the Company, without restriction on disclosure;

(iv)is made public by the disclosing party;

(v)is disclosed with the written approval of the disclosing party; or

(vi)is required to be disclosed by law, court order, or similar compulsion or in connection with any legal proceeding involving the disclosing party and the receiving party, provided that such disclosure shall be limited to the extent so required and the receiving party shall give the disclosing party notice of its intent to so disclose such information and cooperate with the disclosing party in seeking suitable confidentiality protections.

8.Expenses.  Each party will pay (and hold the other parties harmless from) all of his or its respective expenses incurred in connection with the Transaction; provided that this provision shall not limit any party's right to include expenses in any claim for damages against any other party who breaches any legally binding provision of this letter.

9.Exclusivity.

(a)You acknowledge that the Purchaser will devote substantial time and incur out-of-pocket expenses (including attorneys', accountants' and consultants' fees and expenses) in connection with conducting business, financial and legal due diligence investigations of the Company, drafting and negotiating this letter, the Definitive Agreement and related documents, arranging financing, obtaining third party consents and other related expenses (collectively, "Acquisition Expenses").  To induce the Purchaser to incur Acquisition Expenses, you agree that from and after the signing date of this letter until the earlier of (i) the Final Date, or (ii) the date upon which the Purchaser notifies you in writing that it no longer wishes to pursue the Transaction (the "Exclusivity Period"), you shall not, nor shall you permit any of your officers, directors, agents or affiliates to:  (A) enter into any written or oral agreement or understanding with any person or entity (other than the Purchaser) regarding Another Transaction (as defined below); (B) enter into or continue any negotiations or discussions with any person or entity (other than the Purchaser) regarding the possibility of Another Transaction; or (C) except as otherwise required by law, court order or similar compulsion, provide any nonpublic financial or other confidential or proprietary information regarding the Company (including this letter and any other materials containing the Purchaser's proposal and any other financial information, projections or proposals regarding the Company) to any person or entity (other than to the Purchaser or its representatives) whom you know, or have reason to believe, would have any interest in participating in Another Transaction.  The Purchaser will promptly notify you of its decision to no longer pursue the Transaction pursuant to clause (ii) above.  As used herein, the term "Another Transaction" means the sale (whether by sale of stock, merger, consolidation or other disposition) of all or any part of the Company or any material portion of its assets or issued or unissued capital stock.  

(b)You hereby represent to the Purchaser that you are not bound to negotiate Another Transaction with any other person or entity and that your execution of this letter does not violate any agreement to which you are bound or to which any of the assets of the Company are subject.

10. Press Release.  Prior to the closing and except as may otherwise by required by law, the timing and content of all press releases and other public announcements and all announcements to the Company's customers, suppliers, licensors or employees relating to the Transaction will be determined jointly by the Purchaser and Seller.

11.Binding Effect; Counterparts.  Except for paragraphs 5 through 11 hereof (which are binding), this letter is intended to be a non-binding expression of mutual intent between the parties hereto.  Notwithstanding any negotiations and statements made in this letter or made after the execution of this letter, no party shall be deemed to be legally obligated to proceed with the purchase and sale of the Company contemplated by this letter until the Definitive Agreement is executed and delivered.  Paragraphs 5 and 6 shall cease to be effective at the end of the Exclusivity Period.  Paragraphs 7, 8, 10, 11 and shall continue to be binding on the parties notwithstanding any abandonment of the Transaction or expiration of the Exclusivity Period.  This letter may be signed in two or more counterparts, any one of which need not contain the signature of more than one party, but all such counterparts taken together will constitute one and the same agreement.

12.  The parties recognize that in the event of a dispute between them, the law of the place which obtains jurisdiction over the dispute, including the conflict of laws rules of such jurisdiction, will control. 

 

If you are in agreement with the terms of this letter, please sign in the space provided below and return a signed copy.  We will then immediately proceed toward a rapid closing.  We appreciate this chance to work with you and are confident this transaction will prove mutually beneficial and rewarding.

Very truly yours,

MD Technologies Inc.

By:_________________________

      

Agreed and accepted:

ECARE INDIA PRIVATE LIMITED

By: __________________________By: ___________________________

Deepak SanghiRicha Sanghi

Date: _____________Date: ____________EX10_5

Exhibit 10.5

LIMITED EXCLUSIVE 

PATENT LICENSE AGREEMENT 

For 

ZINC AIR FUEL CELL TECHNOLOGY 

Between 

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA 

POWER AIR TECH, INC.

LLNL Case No. TL-1667-01 

Lawrence Livermore National Laboratory 

University of California 

P.O. Box 808, L-795, Livermore, CA 94551 

Industrial Partnerships and Commercialization -  March 2001

	
TABLE OF CONTENTS 

	
1.
	
BACKGROUND
	
 1 

	
2.
	
DEFINITIONS
	
1 

	
3.
	
LICENSE GRANT 
	
 3 

	
4
	
SUBLICENSING RIGHTS AND OBLIGATIONS 
	
 3 

	
5.
	
FEES. ROYALTIES AND PAYMENTS
	
 4 

	
6.
	
PERFORMANCE OBLIGATIONS 
	
4 

	
7.
	
PROGRESS AND ROYALTY REPORTS 
	
5 

	
8.
	
BOOKS AND RECORDS 
	
7

	
9.
	
TERM
	
7

	
10.
	
TERMINATION AND DISPOSITION OF LICENSED PRODUCTS 
	
8

	
11.
	
PATENT PROSECUTION AND MAINTENANCE 
	
8 

	
12.
	
PATENT INFRINGEMENT
	
 9 

	
13.
	
USE OF NAMES AND TRADEMARKS
	
 9 

	
14.
	
LIMITED WARRANTY
	
 10 

	
15.
	
INDEMNIFICATION 
	
10 

	
16.
	
INSURANCE 
	
10 

	
17.
	
WAIVER
	
11 

	
18.
	
ASSIGNABILITY
	
11 

	
19.
	
LATE PAYMENTS. 
	
12 

	
20.
	
NOTICES
	
12 

	
21.
	
DISPUTES AND GOVERNING LAWS
	
12 

	
22.
	
PATENT MARKING
	
13 

	
23.
	
GOVERNMENT APPROVAL OR REGISTRATION
	
 13 

	
24.
	
EXPORT CONTROL LAWS
	
13 

	
25.
	
FORCE MAJEURE
	
13 

	
26.
	
UNITED STATES PREFERENCE
	
13 

	
27.
	
PROPRIETARY INFORMATION
	
13 

	
28.
	
MISCELLANEOUS
	
14 

	
EXHIBIT A -LICENSED PATENTS
	
15

	
EXHIBIT B -RIGHTS GRANTED AND PERFORMANCE OBLIGATIONS
	
16

	
EXHIBIT C -FEES AND ROYALTIES
	
18

 

 

LIMITED EXCLUSIVE PATENT LICENSE AGREEMENT 

for ZINC AIR FUEL CELL TECHNOLOGY 

This Agreement is effective on the Effective Date by and between The Regents of the University of California ("THE REGENTS"), under its U.S. Department of Energy (DOE) Contract No. W-7405-ENG-48 to manage and operate Lawrence Livermore National Laboratory ("LLNL"), and Power Air Tech, Inc., a Delaware corporation having its principal place of business at 3801 Albert Matthews Road, Columbia, Tennessee 38401. THE REGENTS is a corporation organized and existing under the laws of the State of California, with its principal office at 1111Franklin Street, 12th Floor, Oakland, California 94607-5200. THE REGENTS and POWER AIR TECH, INC., are referred to jointly as "Parties." 

1.         BACKGROUND 

1.1      Certain inventions characterized as Continuous-Feed Electrochemical Cell with Non-Packing Particulate Electrode, and Production Zinc Pellets ("Inventions") described in LLNL patent applications and patents listed in Exhibit A (LICENSED PATENTS), which may be useful for zinc air fuel cells technology, were made at LLNL and are covered by THE REGENTS' Patent Rights as defined in Article 2 (DEFINITIONS). 

1.2      POWER AIR TECH, INC. entered into a Cooperative Research and Development Agreement (CRADA), (TC-1544-98); and Option Agreements (TL-1538-98), and (ATL-008-00) that allowed POWER AIR TECH, INC. to evaluate its interest in taking a license to the Inventions. 

1.3      POWER AIR TECH, INC. recognizes that royalties due under this Agreement will be paid on licensed patent applications and issued patents. 

1.4      POWER AIR TECH, INC. is interested in acquiring certain rights to the Inventions for the development, manufacture, and sale of the technology. THE REGENTS is willing to grant such rights so that the Inventions may be developed and used to the fullest extent for the benefit of the U.S. economy and the general public. 

1.5      POWER AIR TECH, INC. is a "small entity" as defined in 37 CFR 5 1.9. 

1.6      POWER AIR TECH, INC. is a "small business firm" as defined at Section 2 of Pub. L. 85-536 (15 U.S.C. §  632). 

1.7      THE REGENTS have advised POWER AIR TECH, INC. that there are existing patents in the area of zinc air fuel cell technology owned by other entities. It is the sole responsibility of POWER AIR TECH, INC. should perform due diligence, including reviewing such patents to determine if a sublicense or other action may be required. 

THEREFORE, the Parties agree as follows: 

2.         DEFINITIONS 

2.1      "Effective Date" means the date of execution by the last signing party. 

2.2      "Field of Use" is the application or use defined in Exhibit B (RIGHTS GRANTED AND PERFORMANCE OBLIGATIONS). 

1

 

2.3      "Government" means the United States Government. 

2.4      "Lease Price" means gross income from a contract by which LICENSEE conveys Licensed Products for a specified term at a specified fee. 

2.5      "Licensed Methods" are any methods, procedures, processes, or other subject matter whose use or practice would constitute an infringement of THE REGENTS' Patent Rights but for the license granted to LICENSEE under this Agreement. 

2.6     "Licensed Patents" are: 

2.6.1   U.S. patents and U.S. patent applications specified in Exhibit A (LICENSED PATENTS), and U.S. patents resulting from these applications and continuations of these applications, including divisionals, but not including continuation-in-part applications resulting from these applications; 

2.6.2   reissues of 2.6.1; 

2.6.3   foreign patent applications filed under Article 11(PATENT PROSECUTION AND MAINTENANCE) and patents resulting from these applications. 

2.7      "Licensed Products" are products, whole or in-part, that incorporate or are produced by the practice of subject matter claimed in Licensed Patents, and whose manufacture, use, sale, import, or offer for sale would constitute an infringement of THE REGENTS' Patent Rights but for the license granted to LICENSEE under this Agreement. 

2.8      "LICENSEE" means POWER AIR TECH, INC. 

2.9      "Net Sales," as used in this Agreement to compute royalties, means the aggregate Sale Price, Lease Price, or Licensed Methods by LICENSEE and any sublicensees in transactions with independent third parties for cash, or other consideration, as mutually agreed by the Parties, using generally accepted accounting principles. No deductions will be made from Net Sales for commissions paid to individuals whether they are with independent sales agencies or regularly employed by LICENSEE and on its payroll, or for cost of collections. 

2.10    "Sale Price" means the gross invoice selling price after deducting: 

2.10.1 Discounts allowed in amounts customary in the trade; 

2.10.2 Sales, tariff duties or use taxes directly imposed and with reference to particular sales; 

2.10.3 Allowances actually paid and limited to rejections, returns, and prompt payment and volume discounts granted to customers of Licensed Products, whether in cash or Licensed Products in lieu of cash; 

2.10.4 Freight, transport packing, insurance charges associated with transportation; and 

2.10.5 Taxes, tariff, or import/export duties based on sales when included in gross sales, but not value-added taxes or taxes assessed on income derived from such sales. 

2

The Sale Price of Licensed Products that are disposed of other than by sale or lease is LICENSEE's gross invoice selling price for products of similar kind and quality, sold in similar quantities. If LICENSEE is not currently offering comparable products for sale, then the Sale Price is the average gross invoice selling price at which products of similar kind and quality, sold in similar quantities, are currently offered for sale by other manufacturers. If comparable products are not currently sold or offered for sale by others, then the Sale Price 

will be LICENSEE's cost of manufacture, determined by LICENSEE's customary accounting procedures, plus LICENSEE's standard markup. 

2.11    "Sales of Licensed Products" means sale or lease of Licensed Products or performance of services using Licensed Products or Licensed Methods. 

2.12    "THE REGENTS' Patent Rights" means THE REGENTS' rights in Licensed Patents under applicable patent laws. 

3.        LICENSE GRANT 

3.1     The license rights granted to LICENSEE by THE REGENTS are set forth in Exhibit B (RIGHTS GRANTED AND PERFORMANCE OBLIGATIONS). 

3.2     The Government retains a paid-up, royalty-free, nontransferable, worldwide, irrevocable license to practice Licensed Patents by or on behalf of the Government. The Government has certain other rights under 35 U.S.C. §§  200-212 and applicable regulations. 

3.3     THE REGENTS reserves all rights not otherwise granted in this Agreement and the right to use THE REGENTS' Patent Rights for educational and research purposes. 

4.        SUBLICENSING RIGHTS AND OBLIGATIONS 

4.1     The sublicensing rights granted to LICENSEE by THE REGENTS are set forth in Exhibit B, Paragraph B.2. 

4.2     LICENSEE will provide THE REGENTS with an executed copy of each sublicense within thirty (30) days after execution of the agreement. 

4.3     LICENSEE must include in any sublicense all the rights and obligations due THE REGENTS and the Government set forth in this Agreement. 

4.4     LICENSEE will promptly forward to THE REGENTS any reports and statements it receives from sublicensees under Article 4.3. 

4.5     LICENSEE must include in all sublicenses the notice that (a) upon termination of this Agreement for any reason, THE REGENTS will automatically succeed to all rights of LICENSEE arising from sublicenses granted under this Agreement; and (b)THE REGENTS may, at its sole discretion, cancel any or all such sublicenses. 

3

 

4.6      LICENSEE will require its sublicensees to provide LICENSEE with progress reports, first commercial sale reports, royalty reports, and audited statements of royalty accounts as required of LICENSEE under this article. LICENSEE will collect and promptly deliver to THE REGENTS all reports due from its sublicensees in the same manner as required by LICENSEE in Article 7 (PROGRESS AND ROYALTY REPORTS), and Article 8 (BOOKS AND RECORDS). 

If a sublicensee has not sold or used any Licensed Products or Licensed Methods during a royalty-reporting period, LICENSEE will so state in its royalty report. 

5.         FEES, ROYALTIES AND PAYMENTS 

5.1      As partial consideration for rights granted to LICENSEE, LICENSEE will pay to THE REGENTS an issue fee as set forth in Exhibit C (FEES AND ROYALTIES). 

5.2      As further consideration for rights granted to LICENSEE, LICENSEE will pay to THE REGENTS a minimum annual royalty and an earned royalty based on Net Sales as set forth in Exhibit C. 

5.3      LICENSEE will pay royalties to THE REGENTS according to the schedule specified in Article 7 (PROGRESS AND ROYALTY REPORTS). 

5.4      LICENSEE will pay all fees and royalties in U.S. dollars collectible at par in San Francisco, California. When Licensed Products are sold for currencies other than U.S. dollars, earned royalties will first be determined in the foreign currency of the country in which the Licensed Products were sold and then converted into equivalent U.S. dollars. The exchange rate is that rate quoted in the Wall Street Journal on the last business day of the reporting period and is quoted as local currency per U.S. dollar. LICENSEE will be responsible for all bank transfer charges. 

5.5      Notwithstanding the provisions of Article 25 (FORCE MAJEURE), if at any time legal restrictions would prevent LICENSEE from making payment of part or all of any royalties in any country outside the U.S. from LICENSEE'S source of funds outside the U.S., LICENSEE will convert the amount owed to THE REGENTS into U.S. funds and pay THE REGENTS directly from LICENSEE'S U.S. source of funds. No royalties are due on Sales of Licensed Products to the Government or for Government purposes. LICENSEE will reduce the amount charged for such sales by an amount equal to the royalty otherwise due THE REGENTS. 

6.        PERFORMANCE OBLIGATIONS 

6.1      LICENSEE, upon execution of this Agreement, will diligently proceed with the development, manufacture, and sale of Licensed Products and use of Licensed Methods, and earnestly and diligently endeavor to market the same as specified in Exhibit B (RIGHTS GRANTED AND PERFORMANCE OBLIGATIONS). 

6.2      During the term of this Agreement, LICENSEE will demonstrate a continuing effort to commercialize and sell Licensed Products and use Licensed Methods to meet market demand. 

6.3      If LICENSEE does not meet the performance obligations specified in Exhibit B, THE REGENTS may at its sole option: (a) convert the limited exclusive license for Licensed Patents to a nonexclusive license; (b) negotiate with LICENSEE a new schedule and conditions for continuation of a limited exclusive license; or (c)terminate this Agreement. 

4

6.4      THE REGENTS will notify LICENSEE if THE REGENTS is approached by a third party seeking a license to make, use, or sell Licensed Products in LICENSEE'S Field of Use because commercial demand is not then being met. LICENSEE will negotiate in good faith with that third party to grant a sublicense for any Licensed Patents in the market for which LICENSEE and existing sublicensees are not meeting commercial demand. The determination to grant a sublicense may be based on LICENSEE'S business interests. LICENSEE will provide THE REGENTS with justification for denying any such sublicense. 

During the term of this Agreement, LICENSEE will conduct normal, continuous business operations. If LICENSEE seeks protection under any United States bankruptcy proceedings during the term of this Agreement, LICENSEE will notify THE REGENTS in writing no later than seventy-two (72) hours after the bankruptcy filing. THE REGENTS has the option to terminate this Agreement upon a bankruptcy filing by the LICENSEE. 

7.        PROGRESS AND ROYALTY REPORTS 

7.1     Semi-Annual Progress Report: LICENSEE will submit to THE REGENTS semi- annual progress reports according to the following schedule: The progress report must cover LICENSEE'S activities in meeting the performance obligations set forth in Article 6 (PERFORMANCE OBLIGATIONS) and Exhibit B (RIGHTS GRANTED AND PERFORMANCE OBLIGATIONS), and must include at a minimum the following information:

	License number 

	Name of Licensee 

	Date of report Reporting period Summary of work completed

	Summary of work in progress Current schedule of anticipated events or milestones

	Description of Licensed Products or Licensed Methods under development Licensed patents practiced or incorporated into each Licensed Product and Licensed Method under development Anticipated market introduction date of Licensed Products/Methods 

	Commercial name of Licensed Products/Methods

	A summary of resources (dollar value) spent in the reporting period on commercialization efforts 

	Name and summary of activities of sublicensees, if any 

	Change in small entity status (see Article 1) 

	Addition of and/or participation in an affiliate 

	Existence of and/or participation in a joint venture 

7.2      First Commercial Sale: Within thirty (30) days following the first commercial sale of each type of Licensed Product in the U.S. and each country outside the U.S. by LICENSEE, LICENSEE will report to THE REGENTS, at a minimum, the following information: 

	License number 

	Name of Licensee 

	Date of report 

	Date of first commercial sale or lease 

	Place of first commercial sale or lease 

	Description of Licensed Products/Methods sold or leased 

	Licensed Patents practiced or incorporated 

	Country of manufacture 

5

7.3      Quarterly Written Royalty Reports: After the first commercial sale of Licensed Products anywhere in the world by LICENSEE, LICENSEE will submit quarterly written royalty reports to THE REGENTS as follows: 

	
    Due date 
	
For previous period 

	
February 28 
	
October 1-December 31 

	
May 31 
	
January 1-March 31 

	
August 31
	
April 1-June 30 

	
November 30
	
July 1-September 30 

If LICENSEE has not sold or used any Licensed Products or Licensed Methods during the reporting period, LICENSEE will so state in the royalty report.

 

The quarterly royalty report must include at a minimum the following information: 

	License number 

	Name of Licensee 

	Date of report 

	Reporting period 

	Report of sales: 

	For each type of Licensed Products/Methods: 

Name/description of each type of product or process 

A. Domestic sales: 

	Description of Licensed Products/Methods 

	Unit price (sale, lease, and/or use) 

	Units sold in U.S. 

	Units leased in U.S. 

	Gross sales in U.S. 

	Net Sales in U.S. 

	Accrued royalties 

	If Government approval requirements apply to sale/use of the Licensed Product/Method (see Article 23, GOVERNMENT APPROVAL OR REGISTRATION), provide details. 

	Country of manufacture 

B. Foreign sales: 

	Country of sales 

	Description of Licensed Products/Methods 

	Unit price (sale, lease, and/or use) 

	Units sold in each country 

	Units leased in each country 

	Gross sales in each country 

	Net Sales in each country 

6

  

	Monetary exchange rate 

	Accrued royalties in $U.S. 

	If foreign government approval/registration requirements apply to sale/use of the Licensed Product/Method (see Article 23, GOVERNMENT APPROVAL OR REGISTRATION), provide details. 

	Place of manufacture 

C. Government sales: 

	Description of Licensed Products/Methods 

	Unit price (sale, lease, and/or use) 

	Units sold 

	Units leased 

	Gross sales 

	Net Sales in each country 

	Country of manufacture 

Provide information A through C for each type of product or process sold 

D. Royalties due THE REGENTS: 

	
Minimum royalty paid this calendar year
	
Total accrued royalties to date for this calendar year
	
 Royalties due 

7.4       LICENSEE will provide THE REGENTS with an annual audited statement of royalty accounts within sixty (60) days after the end of each calendar year. THE REGENTS will protect such statements as Proprietary Information and not disseminate them unless required by law. 

8.        BOOKS AND RECORDS 

8.1      LICENSEE will keep books and records accurately showing the manufacture (including the location of manufacture), use, and sale of all Licensed Products and Licensed Methods, and compliance with other terms under this Agreement. LICENSEE will preserve such books and records for at least five (5) years after the date of the royalty payment to which they apply. Such books and records will be open for inspection by representatives or agents of THE REGENTS at all reasonable times, with reasonable notice given. 

8.2      THE REGENTS will pay the costs incurred by its representatives or agents to examine LICENSEE'S books and records. However, if there is an error adverse to THE REGENTS in LICENSEE'S royalty accounting of more than five percent (5%) of the total royalties due for any year, then LICENSEE will pay THE REGENTS within ten (10) days the amount necessary to correct such error and will pay the costs incurred by THE REGENTS' representatives and agents for such examination. 

8.3     LICENSEE will provide THE REGENTS with an annual audited financial statement of LICENSEE, including at a minimum a balance sheet and operating statement or LICENSEE'S annual report. Such statement will be due to THE REGENTS within one hundred twenty (120) days following the close of LICENSEE'S fiscal year to which such statement relates. 

7

 

9.        TERM 

The term of this Agreement will commence on the Effective Date and, unless terminated by  operation of law or by acts of the Parties under this Agreement, will remain in effect until the expiration or abandonment of all Licensed Patents. 

10.      TERMINATION AND DISPOSITION OF LICENSED PRODUCTS 

10.1   If LICENSEE fails to perform any material term or covenant of this Agreement, THE REGENTS may give written notice to LICENSEE that if LICENSEE has not cured such failure within sixty (60) days after the effective date of receipt of the notice, this Agreement will terminate at the end of such sixty- (60) day period or at the end of such longer period as may be set forth in THE REGENTS' notice. 

10.2    LICENSEE may terminate this Agreement by giving at least thirty (30) days prior written notice to THE REGENTS. 

10.3    Termination of this Agreement will not relieve LICENSEE of any obligation or liability accrued hereunder prior to such termination, nor rescind any payments due or paid to THE REGENTS prior to the time such termination becomes effective. Such termination will not affect, in any manner, any rights of THE REGENTS arising under this Agreement prior to such termination. Any and all obligations of the Parties under this Agreement will remain in effect until properly fulfilled or otherwise discharged, notwithstanding the completion or early termination of this Agreement. 

10.4    Within thirty (30) days after termination of this Agreement by either Party, LICENSEE will provide THE REGENTS with a written inventory of all Licensed Products in process of manufacture or in stock on the date of termination. LICENSEE may complete Licensed Products in the process of manufacture at the time of termination, and may dispose of Licensed Products for sixty (60) days after the date of termination provided that LICENSEE pays royalties to THE REGENTS on such dispositions. At the conclusion of the sixty- (60) day period, LICENSEE will destroy any remaining Licensed Products in stock or in process of manufacture and certify such destruction to THE REGENTS. 

10.5    LICENSEE may not practice Licensed Methods after the date of termination of this Agreement except as necessary to complete the manufacture of Licensed Products as permitted under Article 10.4. 

10.6    This Agreement will terminate, effective thirty (30) days after the effective date of notice by THE REGENTS, if LICENSEE ceases to carry on its business. 

11.       PATENT PROSECUTION AND MAINTENANCE 

11.1    THE REGENTS will prosecute U.S. patent applications and maintain U.S. patents licensed under this Agreement at THE REGENTS' expense, unless otherwise agreed by the Parties. 

11.2    LICENSEE may request foreign rights in Licensed Patents, if such rights are available. LICENSEE must request such rights in writing, and specify the countries in which it wants rights, within seven (7) months after the filing date of the U.S. applications. Failure to request such rights will be considered an election not to seek foreign rights. THE REGENTS may file patent applications at its own expense in any country in which LICENSEE has not elected to secure foreign rights, and LICENSEE has no rights to any such foreign applications and resultant patents. 

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11.3    LICENSEE will pay all costs associated with preparation, filing, prosecution, and maintenance of Licensed Patents in foreign countries in which LICENSEE obtains rights under this Agreement. All Licensed Patents will be held in the name of THE REGENTS and obtained using counsel selected by THE REGENTS. 

11.4    LICENSEE may terminate its license to foreign patent applications or patents, and its obligation to pay any further costs for those foreign rights, upon ninety (90)days written notice to THE REGENTS. THE REGENTS or the Government may, at its sole discretion and expense, continue prosecution and/or maintenance of any patents or applications for which LICENSEE has relinquished rights. 

12.       PATENT INFRINGEMENT 

12.1    If LICENSEE learns of the possible infringement by a third party of any Licensed Patents, LICENSEE will inform THE REGENTS in writing within thirty (30) days and provide all known evidence of the infringement. LICENSEE will not contact such third party concerning the infringement without prior written approval of THE REGENTS. The Parties will use their best efforts to terminate such infringement without litigation. 

12.2    LICENSEE may request in writing that THE REGENTS take legal action against an infringer of any Licensed Patents, which request must include reasonable evidence of the infringement and of potential damages to LICENSEE.Within one hundred (100) days after the date of receipt by THE REGENTS of LICENSEE'S request, if the infringement continues, THE REGENTS will notify LICENSEE in writing that THE REGENTS will either: 

12.2.1  Commence suit on its own account; or 

12.2.2 Refuse to participate in such suit. LICENSEE may thereafter bring suit for patent infringement at its own expense if, and only if, THE REGENTS elects not to commence suit and if the infringement occurred during the period and in a jurisdiction where LICENSEE has exclusive rights under this Agreement. However, in the event LICENSEE elects to bring suit in accordance with this Article, THE REGENTS may thereafter join such suit at its own expense. If THE REGENTS elects to not participate in such suit, LICENSEE may join THE REGENTS in any suit in which THE REGENTS is a necessary party for the suit to proceed, and if so joined the LICENSEE will pay all reasonable costs of THE REGENTS associated with joining the suit as a necessary party to the litigation. 

12.3    Any legal or equitable action brought under Article 12 will be at the expense of the Party bringing such legal or equitable action and all recoveries will belong to such Party. Legal or equitable action brought jointly by THE REGENTS and LICENSEE and participated in by both will be at the joint expense of the Parties in such proportions as are agreed to in writing, and all recoveries will be shared by them in proportion to the expense paid by each Party, or otherwise as they may agree in writing. 

12.4    The Parties will cooperate with each other in legal and equitable proceedings instituted against an infringing third party, but such cooperation by a Party will be at the expense of the Party bringing such legal or equitable action; if both Parties bring the action, the principles of Article 12.3 will apply. Such legal or equitable action will be controlled by the Party bringing the legal or equitable action, except that THE REGENTS may be represented by counsel of its choice in any action brought by LICENSEE. 

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13.       USE OF NAMES AND TRADEMARKS 

Neither Party has any right to use any name, trade name, trademark, or other designation of the other Party (including any contraction, abbreviation, or simulation) in advertising, publicity, or other promotional activities. Unless required by law, the use of the name "Lawrence Livermore National Laboratory," or "The Regents of the University of California," or the name of any University of California campus by LICENSEE is expressly prohibited under California Education Code 5 92000. 

14.      LIMITED WARRANTY 

14.1    THE REGENTS has the right to grant the license granted in this Agreement. 

14.2    THIS LICENSE AND THE ASSOCIATED INVENTIONS ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS AND DOE MAKE NO REPRESENTATION OR WARRANTY THAT LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT. 

14.3    IN NO EVENT WILL THE REGENTS OR DOE BE LIABLE FOR ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTIONS, LICENSED METHODS, OR LICENSED PRODUCTS. 

14.4    Nothing in this Agreement will be interpreted as: 

14.4.1 A warranty or representation by THE REGENTS as to the validity or scope of any of THE REGENTS' Patent Rights; or 

14.4.2 A warranty or representation that anything made, used, sold, or otherwise disposed of under the license granted in this Agreement is or will be free from infringement of intellectual property rights of third parties; or 

14.4.3 Any obligation to bring suit against a third party for patent infringement; or 

14.4.4 Conferring by implication, estoppel, or otherwise any license or rights under any patents of THE REGENTS other than Licensed Patents, regardless of whether such patents are dominant or subordinate to Licensed Patents; or 

14.4.5 An obligation to furnish to LICENSEE or any third party any know-how or improvements. 

15.      INDEMNIFICATION 

LICENSEE will, and will require its sublicensees to, indemnify, hold harmless, and defend THE REGENTS, DOE, their officers, employees, and agents; the sponsors of the research that led to the Inventions; and the inventors against any claims, suits, losses, liabilities, damages, costs, fees, and expenses resulting from or arising out of exercise of this license or any sublicense. LICENSEE will pay any and all costs, including reasonable attorney fees, incurred by THE REGENTS in enforcing this indemnification. 

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16.       INSURANCE 

16.1    LICENSEE will insure its activities relating to this Agreement at its own cost with an insurance company acceptable to THE REGENTS. LICENSEE will obtain, keep in force, and maintain insurance as follows with an insurance company acceptable to THE REGENTS or an equivalent program of self- insurance: Comprehensive or Commercial Form General Liability Insurance, including contractual liability and product liability, with coverage as follows: 

16.1.1 Each occurrence coverage of not less than One Million Dollars ($1,000,000); and 

16.1.2  Product Liability Insurance: Completed operations aggregate coverage of not less than Five Million Dollars ($5,000,000); and 

16.1.3 Personal and Advertising Injury: Coverage of not less than One Million Dollars ($1,000,000); and 

16.1.4 General Aggregate (Commercial Form Only): Coverage of not less than Five Million Dollars ($5,000,000). 

These coverages do not limit the liability of LICENSEE to THE REGENTS in any way. LICENSEE will provide THE REGENTS, upon request, with certificates of insurance or self-insurance, including renewals, that show compliance with these requirements. LICENSEE'S failure to maintain such required insurance will be considered a material breach of this Agreement. 

16.2    If the required insurance is written on a claims-made form, coverage must provide a retroactive date of placement before or coinciding with the Effective Date of this Agreement. 

16.3    LICENSEE will maintain the general liability insurance specified in this Article 16 during the period that the Licensed Patents of THE REGENTS are being used and/or Licensed Products are being sold or otherwise commercially distributed by LICENSEE, and for a period of not less than five (5) years thereafter. 

16.4    LICENSEE'S insurance coverage must: 

16.4.1 Provide for at least thirty (30) days advance written notice to THE REGENTS of cancellation or any modification; and 

16.4.2  Indicate that DOE, THE REGENTS, and their respective officers, employees, students, and agents, are endorsed on the policy as additional named insureds; and 

16.4.3 Include a provision that the coverage is primary and does not participate with or is in excess of any valid and collectible insurance, program, or self-insurance carried or maintained by THE REGENTS. 

17.     WAIVER 

17.1   No provision of this Agreement is deemed waived and no breach excused unless such waiver or consent is made in writing and signed by the waiving or consenting Party. 

17.2   Failure on the part of either Party to exercise or enforce any right of such Party under this Agreement will not be a waiver by such Party of any right, or operate to bar the enforcement or exercise of the right at any time thereafter. 

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18.      ASSIGNABILITY 

This Agreement is binding on and inures to the benefit of THE REGENTS, its successors and assigns, but is personal to LICENSEE. Any assignment or bankruptcy assumption of this Agreement requires prior written consent of THE REGENTS. 

19.       LATE PAYMENTS 

If THE REGENTS does not receive payments or fees due from LICENSEE hereunder when due, LICENSEE must pay such payments or fees within sixty (60) days plus interest charges at the rate of ten percent (10%) simple interest per annum from the date on which the payment was originally due, or THE REGENTS may terminate this Agreement in accordance with its terms. 

20.        NOTICES 

Any report, payment, notice, or other communication that either Party receives under this Agreement must be in writing and will be properly given and effective on the date of delivery if delivered in person (including delivery by courier service), or the fifth (5th) day after mailing if mailed by first-class certified mail, postage paid, to the addresses given below (or to an address designated by written notice to the other Party), or the date of facsimile with confirmed receipt. 

	
In the case of LICENSEE:
	
POWER AIR TECH, INC. 

3801 Albert Matthews Rd. 

Columbia, TN 38401 

Attention: H. Dean Haley 

Phone: (931) 388-4891 

Fax: (931) 388-3627 

Attention: President 

In the case of THE REGENTS: 

All correspondence, original progress reports, and royalty reports: 

	 	
Lawrence Livermore National Laboratory 

Industrial Partnerships and Commercialization 

P.O. Box 808, L-795 7000 East Avenue,

 L-795 Livermore, CA 94550 

Attention: Director, IPAC Fax: (925) 423-8988 

	
Payments and copies of corresponding royalty reports:
	
Lawrence Livermore National Laboratory

P.O. Box 5517 Livermore, CA 94551

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21.     DISPUTES AND GOVERNING LAWS 

The Parties will attempt to jointly and promptly resolve any disputes arising from this Agreement. If the Parties are unable to resolve a dispute within a reasonable time from one Party's written notice to the other that dispute resolution has begun, then either Party may commence proceedings in a court of competent jurisdiction. This Agreement will be governed by the laws of the State of California, U.S.A., without regard to such State's conflict of laws provisions. 

22.     PATENT MARKING 

LICENSEE will mark all Licensed Products and their containers that are made, used, sold, or otherwise disposed of under this Agreement in accordance with applicable patent marking laws. 

23.     GOVERNMENT APPROVAL OR REGISTRATION 

If this Agreement or any associated transaction is required by the law of any jurisdiction to be approved, permitted, or registered with any governmental agency, LICENSEE assumes all obligations to do so. LICENSEE will notify THE REGENTS if LICENSEE becomes aware that this Agreement is subject to a United States or foreign government reporting, permitting, or approval requirement. LICENSEE will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting, permitting, or approval process. 

24.      EXPORT CONTROL LAWS 

LICENSEE will comply with all applicable United States and foreign laws and regulations concerning the transfer of Licensed Products and related technical data, including but not limited to International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR). 

25.      FORCE MAJEURE 

The Parties will be excused from any performance required hereunder if such performance is rendered impossible or unfeasible due to any Acts of God, catastrophes, or other major events beyond their reasonable control, including, without limitation, war, riot, and insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes, lock-outs, or other serious labor disputes; and floods, fires, explosions, or other natural disasters. However, either Party will have the right to terminate this Agreement pursuant to this Article upon thirty 

(30)days prior written notice if either Party is unable to fulfill its obligations under this Agreement due to any of the causes mentioned above and such inability continues for a period of one (1)year. 

26.      UNITED STATES PREFERENCE 

LICENSEE agrees that any Licensed Products and Licensed Methods for applications, use, or sale shall be manufactured substantially in the United States. 

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27.     PROPRIETARY INFORMATION 

27.1   THE REGENTS may release to the inventors and senior administrators employed by THE REGENTS the terms of this Agreement upon their request. If such release is made, THE REGENTS will give notice of the proprietary nature of the terms and request that the recipient maintain the confidentiality. If a third party inquires whether a license to Licensed Patents is available, THE REGENTS may disclose the existence of this Agreement and the extent of the grant in Article 3 (LICENSE GRANT) to the third party, but will not disclose the name of LICENSEE or any other terms, except with LICENSEE'S consent or as required under a government audit, the California Public Records Act, the Freedom of Information Act, or other applicable law. 

28.     MISCELLANEOUS 

28.1  The headings of the Articles of this Agreement are for reference only and do not affect the interpretation of this Agreement. 

28.2   Any amendment or modification of this Agreement must be in writing and signed by each Party. 

28.3   This Agreement, with the attached Exhibits A, B, and C, embodies the entire understanding of the Parties with respect to the subject matter of this Agreement, and supersedes all other communications, representations, or understandings, either oral or written, between the Parties with respect to such subject matter. 

28.4   If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect, such provision will be enforced to the extent legally permissible and such invalidity, illegality, or unenforceability will not affect any other provisions of the Agreement, and this Agreement will be construed as if the invalid, illegal, or unenforceable provision, or relevant portion, were never in this Agreement. 

28.5   Neither Party is an agent of the other and neither will have any power to contract for or bind the other Party for any purpose. 

THE REGENTS and LICENSEE hereby execute this Agreement, in duplicate originals, by their respective duly authorized officers. 

	
POWER AIR TECH, INC.

By:

(Signature)
	
THE REGENTS OF THE UNIVERSITY 

OF CALIFORNIA

LAWRENCE LIVERMORE 

NATIONAL LABORATORY

By:

(Signature)

14

	
Name: H. Dean Haley
	
Name: Jeffrey Wadsworth 

	
Title: Chairman & CEO
	
Title: Director Science and Technology 

	
Date signed: March 9, 2001 
	
Date signed: March 13, 2001 

 

 

 

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