Exhibit 10.4
VALCENT PRODUCTS INC.
420-475 Howe Street
Vancouver, BC
V6C 2B3
Tel: 604-606-7977
October 2, 2006
GLOBAL GREEN SOLUTIONS INC . (“GGS”)
880-609 Granville Street
PO Box 10321
Vancouver, BC V7Y 1G5
Pagic LP (“PAGIC”)
(Formerly MK Enterprises LLC)
1057 Doniphan Park Circle
Suite H El Paso Texas 79922
WEST PEAK VENTURES OF CANADA LIMITED (“WPK”)
420-475 Howe Street
Vancouver BC V6C 2B3
Dear Sirs:
Re:
Development and commercial exploitation of a BIO MASS PRODUCTION
SYSTEM
The purpose of this letter is to establish a Letter of Agreement
between our respective companies pursuant to which we will jointly
participate in the development of the intellectual property,
knowhow, confidential processes, modifications and derivative works
(the “Licensed Item”) arising out of a patent pending
for the development of a Bio Mass System employed to produce
hydrocarbons while sequestering CO2 from the environment by growing
certain algae. The Bio Mass System and certain modifications and
derivative works related thereto are herein sometimes referred to
as the “Licensed Items”.
This Letter of Agreement will be the basis for a contract
between Valcent Products Inc.(Licensor) and Global Green Solutions
Inc., (Licensee) which shall be the governing document for their
joint participation in the Venture. The contract will be signed by
the Licensor and Licensee on or before the last day of June 2007
which shall include amongst other things, the basic terms of this
Letter of Agreement.
Valcent represents to you the following:
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1)
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It has conditionally received an exclusive world wide license
known as the PAGIC/WPK License to develop the Licensed Items and to
manufacture, market, promote, develop and distribute the Licensed
Item on a world wide basis subject to a royalty of 4.5% of gross
revenues due and payable to PAGIC and WPK as detailed in the
attached Schedule “A”.
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2)
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The Licensee is required to complete the following in order for
Valcent to maintain its License in good standing:
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a)
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Use its best efforts in the research and development of the
Technology in order to deliver a working prototype of the Invention
on or before July 1, 2007 ; and
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b)
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Use its best efforts to achieve the commercial exploitation of
the Technology on or before December 31, 2007; and
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3)
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The Licensor has agreed to provide product support, Research and
Development personnel, know how, office, warehouse, and lands
during the initial R&D phase at its cost and when required,
provide similar services during the future commercial exploitation
phase.
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GGS as evidenced by this Letter of Agreement has agreed to enter
into a commercial venture with Valcent for the purpose of
completing the research and development of the Licensed Item, to
construct a working prototype of the Bio Mass System and to develop
the Licensed Item to the commercial exploitation stage by providing
capital of up to US$3,000,000 conditional upon GGS receiving an
exclusive sublicense (with the exception of Nevada, Ghana, and
Malawi) to the Licensed Items and the additional rights provided
for herein. The sublicense shall be known as the GGS License.
Formation of Venture
Valcent and GGS hereby agree to establish a venture (the
“Venture”) for the purpose of developing, promoting,
licensing, marketing, manufacturing, distributing and selling and
exploiting the Licensed Item, the Bio Mass System and the Licensed
Items.
Term
The term of the Venture shall be for as long as the Licensee
deems it to be a commercial venture with revenues in excess of the
minimum revenues required to keep the PAGIC/WPK License in good
standing.
Funding of Venture
All funds required to complete the research and development
related to the Bio Mass System to a working prototype stage, the
construction of a pilot plant utilizing the Bio Mass System and the
construction and delivery of Licensed Items embodying the Bio Mass
System for exploitation purposes shall be paid for by GGS.
Contributions by Valcent
Valcent shall contribute to the Venture the following:
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1)
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the GGS License;
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2)
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the non-exclusive services of Malcolm Glen Kertz as the inventor
and conceiver of the Licensed Items for support and to provide
know-how and technical expertise as a research
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consultant to the Venture but on a basis sufficient to meet the
R&D and commercial project exploitation schedules;
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3)
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the non-exclusive use of the warehouse and laboratory space
currently maintained by Valcent in El Paso, Texas; but on a
prioritized basis to meet the R&D and commercial project
exploitation schedules;
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4)
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non-exclusive use of a parcel of land located in the County of
El Paso consisting of approximately 6.2 acres of land on which a
working prototype of the Invention can be constructed but on a
prioritized basis to meet the R&D and commercial project
exploitation schedules;
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5)
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other Valcent personnel and office services to be charged to the
venture on a cost basis
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Participating Interests
Before payout of the Licensee’s capital account and
acceptable third party expenses, the Venture interests shall be 80%
in favor of the Licensee and 20% in favor of the Licensor whereby
both interests in total shall be subject to a 0.9% royalty payable
to PAGIC and WPK as detailed in the attached Schedule
“A”. The 20% venture interest held by the Licensor
shall be a carried interest.
After payout of the Licensee’s capital account and
acceptable third party expenses, the venture interest shall be 70%
in favor of the Licensee and 30% in favor of the Licensor whereby
both interests in total shall be subject to a 4.5% royalty payable
to PAGIC and WPK as detailed in the attached Schedule
“A”. At the end of the R&D and pilot plant phase,
Valcent will have the option to purchase an additional 10% interest
for 40% of GGS’s investment.
Additional facilities constructed to exploit the Licensed Item
shall be accounted for as separate and distinct Ventures (the
“Sub-Ventures”) and any distributions made shall be
subject to the same distribution terms as stated above.
The parties anticipate that Venture income will be derived from
the following:
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the sale or lease of plants employing the Licensed Item and the
Bio Mass System;
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the sub-licensing of the Licensed Item;
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the sale of capital assets;
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4)
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the harvesting of by-products derived from the application of
the Licensed Item;
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5)
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green credits
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Note: Any government grants shall be treated as cost
offsets.
Income derived from the above events, less cost of sales and
selling, general and administrative costs shall be included for
distribution purposes. A capital account shall be established for
the Licensee which reflects the amount of money contributed to the
venture or sub venture(s) decreased by any reimbursement(s)
made.
Valcent has the right to develop a sub-venture to commercialize
the Licensed Items for retail/consumer (non-industrial)
applications of this technology/apparatus. For such a sub-venture,
Valcent will be the
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operator, and shall fund all of the
sub-venture investments. GGS shall also have a capita
