Exhibit 10.1
EXCLUSIVE LICENSE
AGREEMENT
THIS EXCLUSIVE
LICENSE AGREEMENT (this “Agreement”) is entered into on
this 20th day of March, 2006, by and between Ferdinando Petrucci,
an individual residing at Via Stazione, 133A, Arce [Frosinone],
Italy (“Licensor”), and H2Diesel, Inc., a Delaware
corporation having its principal offices located at 17698
Foxborough Lane, Boca Raton, Florida 33496 (the
“Licensee”), on behalf of which Mr. Lee Rosen is
authorized to sign this Agreement.
RECITALS
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Licensor is the
first and sole inventor of a certain chemical additive for use in
making bio-fuel for internal combustion engines, including all
related formulas, technical specifications, know-how and other
related proprietary information (collectively, the
“Product”) and is the exclusive owner of all
intellectual property other proprietary rights with respect to
same.
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Licensee
desires to obtain an exclusive license from Licensor to make, use
and sell the Product in the Territory comprising North America,
Central America and Caribbean nations as further specified in
Schedule A attached hereto as well as other regions that may
be added by mutual agreement of the parties (collectively, the
“Territory”), and Licensor desires to grant such
license to Licensee on the terms and conditions set forth
herein.
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NOW, THEREFORE, in consideration for the mutual
covenants and promises contained in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1.
GRANT OF EXCLUSIVE RIGHTS;
CONSIDERATION.
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Exclusive
License . Subject to the
other terms and conditions set forth in this Agreement, Licensor
hereby grants to Licensee the exclusive right and license to make,
cause to be made, use, distribute, sell, offer related services,
sublicense others to do the same and otherwise to commercialize and
exploit the Product, as well as any and all modifications,
enhancements, variations, improvements and related technology
developed by or for Licensor in the future, including under the
claims of any patents owned by Licensor now or in the future in and
throughout the Territory. Licensor shall not himself or through
third parties (other than Licensee) exercise any such rights within
the Territory while this Agreement is in effect. In furtherance of
same, Licensee shall have the right to engage subcontractors to
manufacture and/or distribute part or all of the Product and, as
between Licensor and Licensee, Licensee shall be responsible for
all production, storage, distribution, order processing and
fulfillment, billing and collection activities with respect to
sales of the Product in the Territory.
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Consideration . In consideration of the rights granted to
Licensee in Section 1.a. above, Licensee agrees to pay to Licensor,
while this Agreement is in effect and provided that Licensor
performs its obligations hereunder, the following
consideration:
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(i) Eleven Million Dollars ($11,000,000) payable as
follows:
A. One and One-Half Million Dollars ($1,500,000)
due and payable within three (3) business days after execution and
delivery of this Agreement;
B. One Million Dollars ($1,000,000) due and
payable no later than one hundred eighty (180) days after the
Effective Date (as defined in Section 6 (a) below);
C. One and One-Half Million Dollars ($1,500,000)
due and payable no later than three hundred sixty-five (365) days
after the Effective Date;
D. One Million Dollars ($1,000,000) on each
subsequent anniversary of the Effective Date for the seven (7)
years thereafter; and
(ii) a twelve and one-half percent (12.5%) equity
ownership interest in Licensee, to be issued to Licensor within
sixty (60) days after the Effective Date/other], provided that
Licensor executes and delivers to Licensee an investor
representations letter in a form to be provided by Licensee
including customary investor representations together with a
written joinder to Licensor’s stockholders agreement agreeing
to be bound by the terms thereof.
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Option to
Acquire Exclusive Rights in South America; Requirements Regarding
Paraguay Licensee .
Licensee is hereby granted the exclusive option to acquire the
exclusive right and license to make, cause to be made, use,
distribute, sell, offer related services, sublicense others to do
the same and otherwise to commercialize and exploit the Product in
and throughout South America, excluding Paraguay, said option being
exercisable by Licensee within the first six (6) months after the
Effective Date by providing written notice thereof to Licensor, in
exchange for payment of an additional Ten Million Dollars
($10,000,000) as follows:
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(i) One and One-Half Million Dollars ($1,500,000)
due and payable upon exercise of said option;
(ii) One and One-Half Million Dollars ($1,500,000)
due and payable no later than one hundred eighty (180) days after
exercise of said option; and
(iii) One Million Dollars ($1,000,000) due and
payable on or before each subsequent anniversary of the exercise
date of said option for the seven (7) years thereafter.
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Licensor shall
require its licensee in Paraguay to sell the Product and/or any
components thereof at prices not lower than the lowest prices
offered by Licensee for same in any part of the
Territory.
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Other
Expansion of the Territory . The Territory may be further expanded by
mutual agreement of the parties, and should Licensor desire to
grant any rights to third parties in the future with respect to the
Product not already granted to Licensee (excluding Italy), Licensor
shall provide written notice via fax thereof to Licensee and offer
same to Licensee first before offering to others. In the event that
the parties are unable to agree in principle with respect to the
material terms of such proposed grant of additional rights within
thirty (30) days after Licensee’s receipt of such notice from
Licensor, Licensor may then offer such rights to third parties,
provided that the terms offered by Licensor are the same as those
that were offered to Licensee.
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Technical
Information Regarding the Product . Within twenty (20) days after the Effective
Date of this Agreement, Licensor shall disclose to Licensee any and
all technical information and know-how then within the knowledge or
possession of Licensor which was not already disclosed to Licensee
and which would be helpful to Licensee in the manufacture, use or
sale of the Product. Licensor further agrees to provide continued
disclosure of same to Licensee with respect to any future
developments, modifications, enhancements, new products and related
technology developed or otherwise acquired by Licensor while this
Agreement is in effect. The disclosure shall take place either at
Licensee’s offices or telephonically, or as otherwise agreed
to by the parties. Licensor shall, while this Agreement is in
effect, cause its employees and any third parties who are employed
or engaged to do research, development or other inventive work
relating to the Product to disclose all inventions, discoveries,
know-how and other work product resulting therefrom to Licensor and
to assign to Licensor all rights with respect to same to Licensor
such that Licensee shall receive, by virtue of this Agreement, the
exclusive license with respect thereto throughout the Territory as
agreed hereunder.
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2.
LICENSEE UNDERTAKINGS;
PRODUCT TESTING.
a. Patent Notices . Licensee agrees to mark, as appropriate, the
following with appropriate patent pending notices and/or patent
numbers, as applicable, in conformity with applicable
law:
(i) all packaging or dispensers for the Product
made or sold by or for Licensee; and
(ii)
all brochures, manuals, and
documents describing the Product.
b. Export Control . Licensee shall not export or allow the export
or re-export of the Product without compliance with applicable
export laws and regulations of the U.S. Department of Commerce and
all other U.S. agencies and authorities, including without
limitation, the Export Administration Regulations of the U.S.
Department of Commerce Bureau of Export Administration (as
contained in 15 C.F.R. Parts 730-772), and, if applicable, relevant
foreign laws and regulations.
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Regulatory
Compliance . Licensee
acknowledges that certain regulatory licenses and approvals may be
required to be obtained with respect to the Product from
appropriate government authorities in the Territory from time to
time during the term of the Agreement. Licensee will obtain and
maintain all such licenses and approvals at its own expense.
Licensor will make available to Licensee information and assistance
as requested by Licensee and/or necessary to complete all
applications and requests for approval.
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Registration
Statement for Licensee Securities . Licensee shall undertake commercially
reasonable efforts to cause a registration statement to be filed
with the Securities and Exchange Commission with respect to
Licensee’s securities within one hundred eighty (180) days
after the Effective Date.
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Product
Testing . Licensee shall
have the right, at its expense, to cause to be performed tests to
evaluate and measure the performance and commercial viability of
the Product for use as a fuel additive or component including,
emission tests, tests relating to fuel consumption, engine
performance, calorimetric energy yield, stability sight and
formula
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analysis.
Licensee may engage third parties in connection with such testing
and shall have the right to disclose the Product to such third
parties for such purposes. Andrea Festuccia shall be part of
Licensor’s scientific committee to assist Licensee in the
management of such testing and improvement of the technology in the
Territory.
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3.
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF LICENSOR.
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Representations and Warranties
. Licensor represents and warrants
to Licensee and its affiliates that:
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(i)
Licensor is the sole owner of all
rights, title and interest, including all intellectual property
rights in and to the Product, free and clear of liens, claims or
other encumbrances of any kind, other than previously granted
licenses outside the Territory;
(ii)
Licensor’s execution and
delivery of this Agreement does not require any third party consent
or approval that has not already been obtained;
(iii)
Licensor has sufficient rights to
grant the rights granted hereunder to Licensee;
(iv)
Licensor has the legal power and
authority to grant the rights and licenses to Licensee as set forth
in this Agreement;
(v)
this Agreement and all other
agreements to be executed by Licensor in connection herewith
constitute the valid and binding obligations of Licensor,
enforceable against Licensor in accordance with their respective
terms;
(vi)
the Product does not infringe or
otherwise violate any third party intellectual property or other
right, no third party license is required in order for Licensee to
exercise the rights granted to it hereunder throughout the
Territory, and no suit, action, or claim has been instituted or
threatened by any third party involving the Product or any of the
rights licensed hereunder or infringement of any third party
intellectual property or other right;
(vii)
Licensor is the first and sole
inventor of the Product and that the Product is patentable
throughout the Territory;
(viii)
the Product will meet all stability
sight and other performance test standards undertaken with respect
to same;
(ix)
the Product can be mass produced
without loss of performance qualities;
(x)
bio-fuel that is merchantable and
commercially fit for usage in internal combustion engines and
provides equal performance as compared to normal diesel fuel can be
made in accordance with the following formulas: for multi-jet new
generation diesel engines: [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]; and for
traditional diesel engines: [CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION];
(xi)
the Product can be used for fuels
for automobiles and other internal combustion engine-powered
devices without requiring modification of such devices
(excluding
possible change
of fuel filter). The Licensor has verified that the Product has not
caused any damage to such devices installed on two cars (one with a
traditional diesel engine, and the other with a JTD (MUTI-JET))
engine over a distance of 140,000 km; and
(xii)
Licensor has not made and will not
make any commitments to others inconsistent with or in derogation
of Licensee’s rights.
(xiii)
Licensor does not make any
representations or warranties with regard to any tests other than
those referred to in Section 2(e) above, except as may be otherwise
agreed by the parties;
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Maintenance
of Exclusivity . Licensor
represents and warrants to Licensee that it has not, and covenants
to Licensee that during the term of this Agreement, it will not,
grant any other license for sale, use or manufacturing of the
Product within the Territory or elsewhere other than in compliance
with this Agreement.
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Provision of
Information for Regulatory Approvals . Licensor shall provide to Licensee all
pertinent and necessary information in order for Licensee to apply
for and obtain any required safety or other regulatory approvals to
commercially market and sell the Product.
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Maintenance
of Intellectual Property Rights . Licensor shall permit and cooperate with
Licensee to maintain all patent and other intellectual property
rights in and to the Product and Licensor will not abandon or
permit the expiration of any such patent before its full term has
elapsed, unless so directed by a court of law.
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Scientific
Committee . Given his
technical competence and his personal capabilities, Andrea
Festuccia, a chemical engineer, will direct, with complete autonomy
and with all powers necessary, the Licensor’s Scientific
Committee. The purpose of the Scientific Committee is to manage,
coordinate, and oversee all the technical inspections and
scientific tests for the verification and improvement of the
Product. Upon Licensee’s advance written authorization,
Andrea Festuccia will cooperate with Licensee to arrange for the
development of the testing activities for the Product, cited above.
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On account of
his technical-commercial competence and his personal capabilities,
Mr. Dante Lucchetti will undertake to direct and coordinate on
Licensor’s behalf, in full autonomy and with all powers
necessary, all commercial relations developed in the future outside
of the Territory, remaining the sole individual responsible on
Licensor’s behalf for this aspect.
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4.
INFRINGEMENT BY THIRD
PARTIES.
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Notification
of Infringements . Should
Licensor or Licensee become aware of any infringement or alleged
infringement of any patents covering any portion of the Product,
misappropriation of trade secrets or any other infringement or
violation of the intellectual property rights relating to the
Product, that party shall immediately notify the other party in
writing of the name and address of alleged infringer, the alleged
acts of infringement, and any available evidence of
infringement.
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Enforcement
of Rights . Licensee
shall have primary responsibility for enforcing any patent, trade
secret or other intellectual property rights relating to the
Product, whether on
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behalf of
Licensor or as Licensor’s exclusive licensee, against any
third parties and shall have the right to bring legal action
against such third parties to enforce such rights. If Licensee
fails to take action against any such third parties within one
hundred eighty (180) days of being notified regarding same,
Licensor may, at Licensor’s option, bring legal action
against such third parties in the name of Licensor to enforce such
rights. In the event that any such litigation results in a damage
award favoring the party bringing action to enforce any such
rights, such a damage award shall be the property of the party that
pursued such litigation.
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5.
INDEMNIFICATION.
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Indemnification by Licensor
. Licensor shall, at its expense,
indemnify, defend and hold harmless Licensee, its affiliates,
sublicensees and subcontractors, and their respective employees,
officers and agents (each, a “Licensee Indemnified
Party” and collectively, the “Licensee Indemnified
Parties”) from and against any and all claims and causes of
action of any nature made or lawsuits or other proceedings filed or
otherwise instituted against any of the Licensee Indemnified
Parties arising from or relating to any breach by Licensor of any
of its representations, warranties or obligations hereunder.
Licensor shall be responsible for and shall pay all costs and
expenses related to such claims and proceedings, including, but not
limited to, the payment of all attorney’s fees and costs of
litigation, defense and/or settlement of same. In the event that
the Product, in part or as a whole, infringes or is accused of
infringing a third party’s intellectual property rights, in
addition to the foregoing indemnification obligations, Licensor
shall either (a) procure for Licensee and its sublicensees the
right to continue making, using and selling the Product, (b)
provide Licensee and its sublicensees with a functionally
equivalent, non-infringing replacement for the Product, or (c)
refund all fees paid by Licensee hereunder, and assign back to
Licensee the equity interest in Licensee granted to Licensor
pursuant to Section 1.b. (ii) above.
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Indemnification Procedures
. In claiming any indemnification
hereunder, Licensee shall promptly provide Licensor with written
notice of any claim that Licensee believes falls within the scope
of the foregoing paragraph. Licensee may, at its own expense,
assist in the defense if it so chooses, in which case Licensee may
elect to control such defense and all negotiations relative to the
settlement of any such claim and further provided that any
settlement intended to bind Licensor shall not be final without
Licensor’s written consent, which shall not be unreasonably
withheld.
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Set-Off
Right . Licensee shall
have the right to deduct and set-off any damages, costs or expenses
(including, without limitation, legal fees and exp
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