Exhibit 10.1
EXCLUSIVE PATENT LICENSE
AGREEMENT
This License
Agreement (“ Agreement ”) is made as of the 17th
day of June, 2009 (“ Effective Date ”), by and
between American Power Group, Inc., an Iowa corporation, having a
principal place of business at 61 Smith Circle, Algona Iowa, 50511
(“ Licensor ”) and GreenMan Technologies, Inc.,
a Delaware corporation, with a principal place of business at 205
South Garfield, Carlisle, Iowa 50047 (“
Licensee ”), each referred to herein individually as a
“ Party ” and collectively as the “
Parties ”.
RECITALS
Licensor is the owner of certain Patent Rights (defined below) and
desires to grant a license of those Patent Rights to Licensee in
connection with the commercial development, manufacture,
distribution and sale of Products and Processes (defined
below).
Licensee has the capability to commercially develop, manufacture,
distribute, and sell Products and Processes as contemplated herein
and desires to license such Patent Rights.
For good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Parties hereby agree as follows:
1. CERTAIN DEFINITIONS
As used in this
Agreement, the following terms shall have the following meanings,
unless the context requires otherwise.
1.1 “
Affiliate ” with respect to either Party shall mean
any corporation or other legal entity other than that Party in
whatever country organized, controlling, controlled by or under
common control with that Party. The term
“control” shall mean direct or indirect ownership of
fifty percent (50%) or more of the voting securities having the
right to elect directors.
1.2 “
Claim ” shall mean any pending or issued claim of any
Patent Right that has not been permanently revoked, nor held
unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction that is unappealable
or unappealed in the time allowed for appeal.
1.3 “
Distributor ” shall mean any third party entity to
whom Licensee, Licensee Affiliate or a Sublicensee has granted,
express or implied, the right to distribute any Product or Process
pursuant to Section 2.1(b)(ii).
1.4 “
First Commercial Sale ” shall mean the initial Sale of
a Product or Process anywhere in the applicable License
Territory.
1.5 “
License Territory ” shall mean worldwide.
1.6 “
Net Sales ” shall be calculated as set forth in this
Section 1.6.
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Subject to the
conditions set forth below, “Net Sales” shall mean with
respect to each Reporting Period:
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the gross amount
billed or invoiced, or if no such bill or invoice is issued the
amount received, whichever is greatest, by Licensee and its
Affiliates for or on account of Sales of Products and
Processes;
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less the
following amounts, to the extent separately stated on the bill or
invoice, actually paid by Licensee and its Affiliates in effecting
such Sale:
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amounts repaid or
credited by reason of rejection or return of applicable Products or
Processes;
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reasonable and
customary trade, quantity or cash rebates or discounts to the
extent allowed and taken;
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amounts for
outbound transportation, insurance, handling and shipping, but only
to the extent separately invoiced in a manner that clearly
specifies the charges applicable to the applicable Products;
and
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taxes, customs
duties and other governmental charges levied on or measured by
Sales of Products or Processes, to the extent separately invoiced,
whether paid by or on behalf of Licensee so long as
Licensee’s price is reduced thereby, but not franchise or
income taxes of any kind whatsoever.
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Specifically
excluded from the definition of “Net Sales” are amounts
attributable to any Sale of any Product or Process between or among
Licensee and any Licensee Affiliate and/or SubLicensee, unless the
transferee is the end purchaser, user or consumer of such Product
or Process.
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No deductions shall
be made for any commissions paid to any individuals or for any
costs or expenses of collections.
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Net Sales shall be
deemed to have occurred and the applicable Product or Process
“Sold” on the earliest of the date of billing,
invoicing, delivery or payment or the due date for payment.
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If any Product or
Process is Sold at a discounted price that is lower than the
customary price charged, or for non-cash consideration (whether or
not at a discount), Net Sales shall be calculated based on the
non-discounted cash amount charged to an independent third party
for the Product or Process during the same Reporting Period or, in
the absence of such transaction, on the fair market value of the
Product or Process.
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1.7 “
Patent Rights ” shall mean the U.S. Patent number
6,003,478, issued on December 21, 1999 or the equivalent of such
patent including any divisional, continuation and
continuation-in-part thereof, to the extent the claims of any such
continuations-in-part are directed to subject matter described in
the predicate issued patents or any foreign patent application or
Letters Patent or the equivalent thereof issuing thereon or
reissue, reexamination or extension thereof, as may be further
described in Appendix A . The term “Patent
Rights” shall also include any patent in the field of dual
fuel generational development involving hydrogen, methane, and/or
other alternative fuels, which patent issues or for which
application is filed during the Term of this Agreement, it being
understood that any such patent is included in, and covered by, the
license and rights granted to Licensee herein.
1.8 “
Process ” shall mean any process, method or service
the use or performance of which, in whole or in part:
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absent the license
granted hereunder would infringe, or is covered by, one or more
Claims of Patent Rights; or
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employs, is based
upon or is derived from Technological Information.
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1.9 “
Product ” shall mean any article, device, or
equipment, the manufacture, use, or sale of which, in whole or in
part:
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absent the license
granted hereunder would infringe, or is covered by, one or more
Claims of Patent Rights; or
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employs, is based
upon or is derived from Technological Information.
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1.10 “
Reporting Period ” shall mean each three month period
ending March 31, June 30, September 30 and December 31.
1.11 “
Sublicense Income ” shall mean consideration in any
form received by Licensee and/or Licensee’s Affiliate(s) in
connection with or otherwise attributable to a grant of a
sublicense or any other right, license, privilege or immunity
(regardless of whether such grantee is a “SubLicensor”
as defined in this Agreement) to make, have made, use, have used,
Sell or have Sold Products or Processes, but excluding
consideration included within Net Sales. Sublicense
Income shall include without limitation any license signing fee,
license maintenance fee, unearned portion of any minimum royalty
payment, distribution or joint marketing fee, research and
development funding in excess of the cost of performing such
research and development, and any consideration received for an
equity interest in, extension of credit to or other investment in
Licensee or Licensee’s Affiliates to the extent such
consideration exceeds the fair market value of the equity or other
interest received as determined by agreement of the Parties or by
an independent appraiser mutually agreeable to the Parties.
1.12 “
SubLicensor ” shall mean any sublicensor of rights
granted in accordance with Section 2.1(a)(ii). For
purpose of this Agreement, a Distributor of a Product or Process
shall not be included in the definition of SubLicensor unless such
Distributor (i) is granted any right to make, have made, use or
have used Products or Processes in accordance with Section
2.1(a)(ii), or (ii) has agreed to pay to Licensee or its
Affiliate(s) royalties on such Distributor’s sales of
Products or Processes, in which case such Distributor shall be a
SubLicensor for all purposes of this Agreement.
1.13 “
Sell ” (and “ Sale ” and “
Sold ” as the case may be) shall mean to sell or have
sold, to lease or have leased, to import or have imported or
otherwise to transfer or have transferred a Product or Process for
valuable consideration (in the form of cash or otherwise), and
further in the case of a Process to use or perform such Process for
the benefit of a third party.
1.14 “
Technological Information ” shall mean research data,
designs, formulae, process information and other information
pertaining to the invention(s) claimed in the Patent Rights that is
created and owned by Licensor and is not confidential information
of or otherwise obligated to any third party and which Licensor
knows and reasonably believes is necessary in order for Licensee to
utilize the licenses granted hereunder, as further described in
Appendix B .
2. LICENSE
2.1
Grant of License .
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Subject to the
terms of this Agreement and Licensor’s rights in Patent
Rights, Licensor hereby grants to Licensee in the License
Territory:
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an exclusive
(against the Licensor and against all third parties),
royalty-bearing license under its rights in Patent Rights to make,
have made, use, have used, Sell and have Sold Products and
Processes;
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the right to grant
sublicenses under the rights granted in Section 2.1(a)(i) to
SubLicensors, provided that in each case Licensee shall be
responsible for the performance of any obligations of SubLicensors
relevant to this Agreement as if such performance were carried out
by Licensee itself, including, without limitation, the payment of
any royalties or other payments provided for hereunder, regardless
of whether the terms of any sublicense provide for such amounts to
be paid by the SubLicensor directly to Licensor; and
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the exclusive
(against the Licensor and against all third parties) right to use
Technological Information disclosed by Licensor to Licensee
hereunder in accordance with this Agreement.
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The license granted
in Section 2.1(a) above includes:
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the right to grant
to the final purchaser, user or consumer of Products the right to
use such purchased Products in a method coming within the scope of
Patent Rights within the License Territory; and
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the right to grant
a Distributor the right to Sell (but not to make, have made, use or
have used) such Products and/or Processes for or on behalf of
Licensee, its Affiliates and SubLicensees in a manner consistent
with this Agreement, provided, however, that a Distributor (as that
term is used in this Section 2.1(b)(ii)) cannot be an Affiliate of
the Licensee without the Licensor’s prior written
consent.
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The foregoing
license grant shall include the grant of such license to any
Affiliate of Licensee, provided that such Affiliate shall assume
the same obligations as those of Licensee and be subject to the
same terms and conditions hereunder; and further provided that
Licensee shall be responsible for the performance of all of such
obligations and for compliance with all of such terms and
conditions by Affiliate.
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2.2
Sublicenses . Each sublicense granted hereunder
shall be consistent with and comply with all terms of this
Agreement, shall incorporate terms and conditions sufficient to
enable Licensee to comply with this Agreement, shall prohibit any
further sublicense or assignment by a SubLicensor without Licensor
consent and shall provide that Licensor is a third party
beneficiary thereof. Upon termination of this
Agreement or any license granted hereunder for any reason, any
sublicenses shall be addressed in accordance with Section
10.6. Any sublicense which is not in accordance with the
forgoing provisions shall be null and void.
2.3
Disclosure of Technological Information . As of
the Effective Date, and thereafter as reasonably required to update
the same, Licensor shall use reasonable efforts to disclose to
Licensee in confidence the Technological Information licensed
hereunder.
(a) Each
Party shall maintain in confidence the Confidential Information
(including Technological Information) of the other Party, shall not
use or grant the use of the Confidential Information of the other
Party except as expressly permitted hereby, and shall not disclose
the Confidential Information of the other Party except on a
need-to-know basis to such Party's directors, officers and
employees, and to such Party's consultants working on such Party's
premises, to the extent such disclosure is necessary in connection
with such Party's activities as expressly authorized by this
Agreement. To the extent that disclosure to any person
is authorized by this Agreement, prior to disclosure, a Party shall
obtain, or shall have obtained prior to the date of this Agreement,
written agreement of such person to hold in confidence and not
disclose, use or grant the use of the Confidential Information of
the other Party except as expressly permitted under this
Agreement. Each Party shall notify the other Party
promptly upon discovery of any unauthorized use or disclosure of
the other Party's Confidential Information.
(b) For
purposes of this Agreement, the term “ Confidential
Information ” shall not include information that was (i)
entered the public domain other than by breach of this Agreement;
(ii) known to a Party on a non-confidential basis at the time of
first receipt from the other Party, or thereafter became known to
the Party on a non-confidential basis, prior to such disclosure,
from a source other than the other Party or its representatives;
provided that such source was not known (or reasonably
knowable) by the Party to be bound by a duty of confidentiality to
the other Party with respect to such information; or (iii)
independently developed by the Party without the developing
person(s) having access to any of the other Party’s
Confidential Information.
3. PAYMENTS AND ROYALTIES
3.1
License Fee . As of the date of
this Agreement, Licensee shall pay Licensor, or its
designee(s), a non-refundable license fee by issuing and delivering
to the transfer agent for the Licensee’s Common Stock
irrevocable instructions to issue two million (2,000,000) shares of
Licensee’s Common Stock, $.01 par value (the “
Shares ”). One million five hundred thousand
(1,500,000) of such Shares shall be registered in the name of
Licensor or its designee(s); and five hundred thousand (500,000) of
such Shares (the “ Escrow Shares ”) shall
be registered in the name of Morse, Barnes-Brown & Pendleton,
P.C. (the “ Escrow Agent ”). The Escrow Shares
shall be held by the Escrow Agent in escrow pursuant to an escrow
agreement, in substantially the form attached as Appendix C
to this Agreement (the “ Escrow Agreement ”) as
security for the indemnification obligations of the Licensor
pursuant to this Agreement. In the event that the Escrow Shares are
insufficient to pay all indemnification claims of the Licensee
under this Agreement, including by virtue of the expiration of the
escrow period, the Licensor shall be liable for all additional
indemnification claims in excess of such value.
3.2
Royalty Fees and Sublicensee Income . In further
consideration of the rights granted under this Agreement, Licensee
shall make the following payments to Licensor upon the occurrence
of each of the following:
(a) ten
percent (10%) of all Product and Product installation Net
Sales;
(b) five
percent (5%) of all Product design and nonrecurring Product or
Process Net Sales; and
(c) five
percent (5%) of all Product or Process service agreement Net Sales;
and
(d) thirty percent (30%) of all Sub-license Income
received by Licensee from any SubLicensor pursuant to any
SubLicensor Agreement entered into by Licensee; and
(e) thirty percent (30%) of all Net Sales wherein Net
Sales includes consideration resulting from formal written
agreements between Licensee and end user customers with respect to
the splitting of any cost efficiencies achieved by the end user
customer in the form of fuel or utility cost savings that are
derived from the end user customer’s use of the Products,
Processes or Patent Rights, as the case may be.
3.3
Payment . All payments due to Licensor under
Section 3.2 shall be due and payable by Licensee within thirty (30)
days after the end of each Reporting Period, and shall be
accompanied by a report as set forth in Sections 4.2 and 4.3,
respectively.
3.4
Third Party Payments/Right of Offset
. Notwithstanding anything herein to the contrary, in
the event that Licensee is legally required to (i) make royalty
payments to one or more third parties in order to practice the
Patent Rights, or (ii) incur warranty costs arising out of claims
pertaining to design flaws in Products that are the subject of the
Patent Rights (in whatever form other than those due to defective
Product installation claims), Licensee may offset up to one hundred
percent (100%) of such third-party payments or incurred warranty
costs against any royalty payments that are due under Section 3.2
to Licensor.
3.5
Taxes . All payments due hereunder shall be paid
in full in United States dollars without deduction of taxes or
other fees that may be imposed on Licensee by any government and
which shall be paid by Licensee.
4. REPORTS
AND RECORDS
4.1
Sales Reports . Following the First Commercial
Sale, Licensee shall deliver reports to Licensor within thirty (30)
days after the end of each Reporting Period. Each report
under this Section 4.1 shall have substantially the format outlined
in Appendix D , shall be certified as correct by an officer
of Licensee and shall contain at least the following information as
may be pertinent to a royalty accounting hereunder for the
immediately preceding Reporting Period:
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the number of
Products and Processes Sold by Licensee, its Affiliates and
SubLicensees in the License Territory;
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the amounts billed,
invoiced and received by Licensee, its Affiliates and SubLicensees
for each Product and Process and total billings or payments due or
made for all Products and Processes;
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calculation of Net
Sales for the applicable Reporting Period, including an itemized
listing of permitted offsets and deductions;
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total royalties
payable on Net Sales in U.S. dollars, together with any applicable
exchange rates used for conversion; and
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any other payments
due to Licensor under this Agreement.
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If no amounts are
due to Licensor for any Reporting Period, the report shall so
state.
4.2
Sublicense Income Reports . Licensee shall, along
with delivering payment as set forth in Section 3.2, report to
Licensor within thirty (30) days of receipt the amount of all
Sublicense Income received by Licensee, and Licensee’s
calculation of the amount due and paid to Licensor from such
income, including an itemized listing of the source of income
comprising such consideration, and the name and address of each
entity making such payments in substantially the format outlined in
Appendix D .
4.3
Audit Rights . Licensee shall maintain, and shall
cause each of its Affiliates and SubLicensees to maintain, complete
and accurate records relating to the rights and obligations under
this Agreement and any amounts payable to Licensor in relation to
this Agreement, which records shall contain sufficient information
to permit Licensor and its representatives to confirm the accuracy
of any payments and reports delivered to Licensor and compliance in
all other respects with this Agreement. Licensee shall
retain and make available, and shall cause each of its Affiliates
and SubLicensees to retain and make available, such records for at
least three (3) years following the end of the calendar year to
which they pertain, to Licensor and/or its representatives and upon
at least five (5) days’ advance written notice, for
inspection during normal business hours, to verify any reports and
payments made and/or compliance in other respects under this
Agreement. If any examination conducted by Licensor or
its representatives pursuant to the provisions of this Section show
an underreporting or underpayment of five percent (5%) or more in
any payment due to Licensor hereunder, Licensee shall bear the full
cost of such audit and shall remit any amounts due to Licensor
within thirty (30) days of receiving notice thereof from
Licensor.
5. PATENT PROSECUTION, IMPROVEMENTS, AND
PAYMENTS
5.1
Patent Prosecution . The filing, prosecution and
maintenance of all patents and applications shall be the
responsibility of Licensor and Licensor has sole discretion
concerning the management of the prosecution thereof; provided,
however, Licensee shall cooperate with Licensor, at
Licensor’s expense, in such prosecution, filing and
maintenance. Licensor, in its reasonable discretion, may elect to
abandon any patent or patent application; provided, however, that
if it elects to do so, it shall provide at least thirty (30) days
advanced notice thereof to Licensee and allow Licensee to elect to
be assigned and assume control over these patents, at
Licensee’s entire expense. Licensee shall be
relieved of the obligation to pay ro
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