Exhibit 10.1
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
TECHNOLOGY AND PATENT RIGHTS
LICENSE AGREEMENT
This Technology and Patent Rights
License Agreement, (the “Agreement”), is made and
entered into effective the 25 th day of October, 2005
(the “Effective Date”), by and between Broin and
Associates, Inc., a South Dakota corporation located at 2209
East 57 th Street North, Sioux Falls, South Dakota 57104
(“Licensor”) and Northern Lights Ethanol, LLC, a South
Dakota limited liability company, located in Grant County, South
Dakota (“Licensee”).
RECITALS:
A.
Licensee owns and operates a dry
mill fuel ethanol plant near Big Stone City, South Dakota, for the
production and marketing of fuel ethanol and ethanol
co-products.
B.
Licensee entered into with Manager
the Management Agreement.
C.
Licensor is in the business of
designing and building dry mill fuel ethanol plants.
D.
Licensor licensed to Licensee the
Existing Technology pursuant to the terms set forth in the Original
License Agreement.
E.
Licensor has developed certain new
technologies described as the “Raw Starch Technology and
Patent Rights,” as set forth in the Raw Starch Technology and
Patent Rights Addendum dated the same date as this Agreement (the
“Raw Starch Addendum”).
F.
Licensee desires to license from
Licensor, and Licensor is willing to license to Licensee, the Raw
Starch Technology and Patent Rights, pursuant to the terms and
conditions of this Agreement and the Raw Starch
Addendum.
G.
Licensor owns, and continues to
research and develop certain New Technology.
H.
Licensee is willing to pay to
Licensor a fee for research and development of New
Technology.
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
NOW, THEREFORE, in consideration of
the mutual promises and conditions set forth in this Agreement,
Licenser and Licensee hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1
“Affiliate” or
“Affiliates” of Licensor means Jeffrey S. Broin, Robert
L. Broin, Todd R. Broin, one or more members of their respective
Immediate Families, Broin Enterprises, Inc., Broin Management,
LLC, Ethanol Products, LLC, or any other present or future company
of which ten percent (10%) or more of the outstanding securities
are owned or controlled by Licensor or one or more
Affiliates.
1.2
“Application” means an
application for the protection of an invention or an industrial
design; reference to an “Application” shall include
applications for patents for inventions (including utility and
provisional applications), reissue applications, inventors’
certificates, utility certificates, utility models, patents or
certificates of addition, inventors’ certificates of
addition, utility certifications of addition, design patents, and
industrial design registrations, foreign or domestic, including the
Applications identified in Exhibit B, if any.
1.3
“Confidentiality
Agreement” means the Confidentiality and Nondisclosure
Agreement dated April 20, 2005, between Licensee and Licensor,
and/or any amendment, modification or replacement agreement between
Licensee and Licensor with respect to the protection and
nondisclosure of Confidential Information.
1.4
“Confidential
Information” means the Confidential Information of Licensor
and its Affiliates, as defined in the Confidentiality Agreement,
and any other information now or later identified by Licensor and
its Affiliates as being confidential and subject to nondisclosure
obligations. Confidential Information does not include the
Licensee’s financial information to the extent that it is
required to be disclosed pursuant to federal securities laws,
rules, regulations and orders, and membership
information.
1.5
“Ethanol Plant” means
the ethanol production facility owned and operated by Licensee near
Big Stone City, South Dakota.
1 .5A
“Existing Technology”
means all of “Licensor’s Technology” as defined
in the Original License Agreement and currently utilized in the
production of the Licensed Products at the Ethanol Plant using the
cook/fermentation process described in the Original License
Agreement.
1.6
“Gross Income” means
gross income as determined under generally accepted accounting
principles, applied on a consistent basis.
2
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
1.7
“Immediate Family” or
“Immediate Families” means respectively and
collectively the spouse, children, grandchildren and parents of
Jeffrey S. Broin, Robert L. Broin and Todd R. Broin.
1.8
“Initial New Technology
Fee” means the initial fee to be paid to Licensor for New
Technology pursuant to any Addendum executed by the
parties.
1.9
“Licensed Products”
means any and all products, machines, manufactures, or compositions
of matter which are covered by or are produced using a process or a
method covered by the Technology and Patent Rights, including but
not limited to ethanol, distillers grain, carbon dioxide and other
ethanol co-products.
1.10
“Licensed Methods” means
any and all methods or processes which are covered by the
Technology and Patent Rights, including but not limited to methods
of producing ethanol, distillers grain, carbon dioxide or other
ethanol co-products.
1.11
“License” or
“Licenses” means the Technology License and/or Patent
Rights License described in Section 2.1
1.12
“Management Agreement”
means the Management Agreement dated April 20, 2005, and/or
any amendment, modification or replacement agreement between
Manager and Licensee for the management and operation of the
Ethanol Plant.
1.13
“Management Bonus” means
the management bonus to be paid to Manager under the terms of the
Management Agreement.
1.14
“Management Fee” means
the management fee paid to Manager pursuant the terms of the
Management Agreement.
1.15
“Management Term” means
from the date of this Agreement until such time as the Management
Agreement expires or is terminated by either Licensee and/or
Manager, pursuant to the terms and conditions of the Management
Agreement.
1.16
“Manager” means Broin
Management, LLC, its successors and assigns.
1.17
(Reserved)
1.18
“New Technology” means:
(i) replacements, improvements, enhancements or modifications
to the Technology and Patent Rights, (ii) new inventions and
discoveries for the construction and operation of the Ethanol
Plant, the manufacture of the Licensed Products and/or use of the
Licensed Methods, (iii) technology in research,
development,
3
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
or testing stage, and technology to
be researched, developed or tested by Licensor subsequent to the
date of this Agreement, and (iv) any processes, systems,
diagrams, information, balances, blueprints, configurations,
manuals, videotapes or any other proprietary rights, patents,
trademarks, copyrights, trade secrets, formulas, research data,
know-how, process control systems, software certifications and
specifications and other technology that is not part of the
Technology and Patent Rights.
1.18A
“Original License
Agreement” means that certain Licensing Agreement dated
November 2, 2000, originally executed by Licensor and Northern
Growers Cooperative, which License Agreement has subsequently been
assigned to Licensee.
1.19
“Patents” means patents,
reissues, renewals, and extensions thereof for inventions,
inventors’ certificates, utility certificates, utility
models, patents or certificates of addition, inventors’
certificate of addition, utility certificates of addition, design
patents, and industrial design registrations.
1.20
“Patent Rights” means:
(i) the Scheduled Patents, and (ii) such Patents and
Applications directed to the construction and operation of the
Ethanol Plant, the manufacture of the Licensed Products and/or use
of the Licensed Methods that Licensor may own or gain rights to
license during the term of this Agreement and which Licensor may
agree to include in the Patent Rights.
1.21
“Patent Rights License”
means a revocable, non-exclusive, indivisible and non-transferable
right and license to use the Patent Rights solely for the Permitted
Purpose, subject to the conditions set forth herein.
1.22
“Permitted Purpose”
means the operation of the Ethanol Plant for the production of the
Licensed Products and/or use of the Licensed Methods at the Ethanol
Plant.
1.23
“Person” means an
individual, partnership, limited partnership, limited liability
company, foreign limited liability company, trust, estate,
corporation, foreign corporation, cooperative, custodian, trustee,
executor, administrator, nominee, representative or any other
individual or entity, however designated.
1.24
“Post-Management term”
means that period of time commencing upon (i) the expiration
of the Management Agreement at the conclusion of its natural term
with no renewal thereof or (ii) Licensee’s termination
of the Management Agreement for cause as defined in the Management
Agreement, and in either event concluding upon the earlier of
(iii) the date that Licensee ceases to use all of the
Technology and/or Patent Rights, or (iv) the annual
anniversary date of the expiration or termination of the
Management
4
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
Agreement occurring at least ninety
(90) days following the giving of notice of termination of the
Licenses, by Licensee pursuant to Section 3.3.
1.25
“Post-Management Term
Fees” means ** to be
paid by Licensee to Licensor during the Post-Management Term as
provided in any Addendum executed by the parties.
1.26
“Scheduled Patents”
means the Applications and Patents listed in any Addendum executed
by the parties.
1.27
“Technology” means:
(i) all processes, systems, diagrams, information, balances,
blueprints, configurations, manuals, videotapes, proprietary
rights, patents, trademarks, copyrights, trade secrets, formulas,
research data, know-how, process control systems, software
configurations and specifications, and other technology required to
operate the Ethanol Plant, to manufacture the Licensed Products,
and/or use the Licensed Methods, all as identified in
Exhibit A, (ii) means all inventions and discoveries
covered by the claims in the Applications prior to the issuance of,
during the life of, and following the expiration of the Patents,
and (iii) any of the foregoing directed to the manufacture of
the Licensed Products and/or use of the Licensed Methods that
Licensor may own or gain rights to license during the term of this
Agreement, but not including the New Technology until so specified
in an Addendum.
1.28
“Technology and Patent Rights
Fee” means ** to be paid to
Licensor by Licensee during the Management Term for the right to
use the Technology and Patent Rights to produce the Licensed
Products using the Licensed Methods, pursuant to
Section 4.1.
1.29
“Technology License”
means the revocable, non-exclusive, indivisible and
non-transferable right and license to use the Technology solely for
the Permitted Purpose as granted by Licensor to Licensee pursuant
to Section 2.1, but subject to the conditions set forth in
this Agreement.
1.30
“Third Party” means any
Person other than Licensee and its officers and employees having a
reason to know the Technology and Patent Rights.
1.31
“Transfer” means a sale,
assignment, gift, exchange or other disposition of the Technology
and/or the Patent Rights. “Transfer” does not mean or
include a mortgage, pledge or grant of a security interest or other
encumbrance of or in the item in question.
5
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
ARTICLE II
GRANT OF LICENSE
2.1
Non-Exclusive License
. Licensor hereby grants to Licensee
the Technology License and the Patent Rights License (the
“Licenses”). Notwithstanding anything herein to the
contrary, the parties acknowledge and agree that the Original
License Agreement is not being terminated and that Licensee holds a
license to utilize the Existing Technology pursuant to the Original
License Agreement, which license shall continue in full force and
effect notwithstanding the termination of the Management Agreement
or this Agreement.
2.2
Restrictions
. Licensee is prohibited from using
the Technology and/or Patent Rights for any purpose other than the
Permitted Purpose. Licensee is prohibited from disclosing to any
Person the Technology and Patent Rights. Licensee is prohibited
from sublicensing, renting, and/or leasing to any Person the
Technology and/or Patent Rights. Licensee is prohibited from
reverse engineering the Technology and/or Patent Rights. Licensee
is not granted the right to use the Technology and/or Patent Rights
in connection with the design, construction, operation or
maintenance of another ethanol facility.
2.3
New Technology
. The Licenses do not extend to New
Technology until an Addendum is executed by the parties under which
the New Technology becomes subject to the Licenses. If during the
term of this Agreement, Licensor, Licensee and/or Licensee’s
employees, consultants, and contractors develop any New Technology,
or if Licensor becomes the owner of any New Technology, such New
Technology shall be solely owned by Licensor. If Licensee, its
employees, consultants and/or contractors develop any New
Technology, or if any of the foregoing become the owners of any
rights in New Technology, Licensee, its employees, consultants
and/or contractors shall assign to Licensor all right, title and
interest in and to the New Technology. New Technology, in the sole
discretion of Licensor, may be licensed to Licensee. If Licensor
determines that Licensor will make available and license to
Licensee the New Technology, then the New Technology shall become
part of the Technology licensed hereunder upon the execution of an
Addendum identifying and licensing the New Technology. Any charges
and additional compensation to be paid to Licensor during the
Post-Management Term shall be set forth in an Addendum that shall
be executed by the parties.
2.4
Assignments to
Licensee . Licensee shall
require all of Licensee’s current and future employees,
consultants and contractors to assign to Licensee all New
Technology, so as to ensure and facilitate the assignment by
Licensee to Licensor of the same. Licensee’s current and
fixture employees, consultants and contractors shall execute and
deliver to Licensee an Employee, Consultant or Contractor
Confidentiality and Nondisclosure Agreement in the form attached to
the Confidentiality Agreement.
6
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
Licensee shall enforce the terms and
conditions of the Employee, Consultant or Contractor
Confidentiality and Nondisclosure Agreement, and hereby authorizes
Licensor, as a third party beneficiary, to enforce the same, and
agrees to cooperate and assist Licensor in the enforcement of the
same.
2.5
Patent Prosecution
. Licensor shall have full control
over prosecution and maintenance of the Applications and Scheduled
Patents. Licensor shall use, at its sole discretion, reasonable
efforts to establish patent protection for the information,
inventions and discoveries included in the Applications and shall
timely keep Licensee advised of the status of such prosecution and
maintenance thereof. In addition, with respect to the development
of New Technology, Licensee may offer, at its own expense,
assistance to Licensor in the drafting of claims and specifications
for the development of New Technology and/or filing of new
Applications.
2.6
Research and
Development . Licensor
represents to Licensee that it has been conducting substantial
research and engaging in substantial development activities
associated with the production of the Licensed Products. Licensor
agrees to continue such research and development activities for the
purpose of developing New Technology. As consideration for the
research and development activities, Licensee shall pay to Licensor
the Technology and Patents Rights Fee in accordance with the
provisions of Section 4.1.
ARTICLE III
TERM
3.1
Initial Technology License
Term . The Technology
License shall commence on the Effective Date of this Agreement and
shall terminate, unless otherwise terminated as provided herein,
upon the date that Licensee ceases to use all of the Technology. If
Licensor determines, in its reasonable discretion, that the
processes, know-how, and other proprietary information contained in
the Technology infringes or may infringe upon the proprietary
information of any Person, then the Technology License with respect
to said infringing processes, know-how, and other proprietary
information shall terminate upon notice from Licensor to
Licensee.
3.2
Initial Patent Rights License
Term . The Patent Rights
License shall commence on the Effective Date of this Agreement and
shall terminate, unless otherwise terminated as provided herein,
upon the earlier of (i) the date that Licensee ceases to use
all of the Patent Rights, (ii) the conclusion of the
Management Term, or (iii) expiration of the last to expire of
any of the Scheduled Patents issued.
3.3
Post-Management Term
. Upon the commencement of the
Post-Management Term, Licensee shall have the option to continue
the Licenses in full force and effect on a year-to-year basis,
subject to Licensee’s fulfillment of
Licensee’s
7
**Certain information in this
exhibit has been omitted and will be filed separately with
the
Securities and Exchange
Commission pursuant to a confidential treatment
request.
obligations hereunder, including but
not limited to Licensee’s payment of the Post-Management Term
Fees, if required under the terms of any Addendums, and
Licensee’s obligations under any and all Addendums to this
License Agreement. To exercise the option to continue the Licenses,
Licensee shall give Licensor written notice of Licensee’s
election to exercise the option at least ninety (90) days prior to
the expiration of the Management Agreement if it expires at the
conclusion of its natural term or no later than the date that
Licensee gives Manager notice of termination of the Management
Agreement for cause. Thereafter, the Licenses shall renew
automatically on a year-to-year basis, unless Licensee gives
Licensor written notice of Licensee’s election to terminate
the Licenses, which notice shall be given at least ninety (90) days
prior to the anniversary date of the expiration of the Management
Term. If Licensee timely exercises the option to continue the
Licenses, then the Licenses shall continue in full force and effect
during the Post-Management Term.
ARTICLE IV
COMPENSATION
4.1
License Fees During the
Man