Licensing and Joint Development Agreement
This Agreement is made and entered into by and between
Ishikawajima-Harima Heavy Industries Co., Ltd.
2-1, Ohtemachi 2-Chome, Xxxxxxx-xx
Xxxxx 000-0000, Xxxxx,
Hereinafter called "IHI"
and
Turbodyne Systems Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000, XXX
Hereinafter called "Turbodyne"
Whereas IHI is in the business of manufacturing and sales of turbocharging
systems in primarily the automotive industry, and
Whereas Turbodyne is an engineering design and development entity who has
developed patented designs for electrically assisted turbocharging systems, and,
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Whereas IHI is desirous of obtaining a non-exclusive license from Turbodyne on a
number of patents in the field of electrically assisted turbochargers, and
additionally engage Turbodyne to fabricate four prototype units as required
together with system know-how and specifications about the design, electric
motors and electronic components with parts lists and supplier information.
The scope of this agreement is for licensing and development of motor assisted
turbochargers and does not include a generator mode for producing electricity
from the turbocharger.
Therefore the parties to this agreement in consideration of covenants contained
herein, agree as follows:
1. Term of License
-----------------
1.1 The term of the licenses hereby granted is ten (10) years from the date
this Agreement is duly executed by both parties, provided that it may be
extended by mutual agreement.
1.2 (a) If at any time IHI defaults in making payment hereunder at the time and
in the manner herein provided for, Turbodyne shall have the right, at its
option, to terminate this Agreement upon sixty (60) days' written notice of
such termination to IHI, and unless the default is cured prior to the end
of said sixty (60) day period, the rights and licenses granted to IHI under
this Agreement shall immediately terminate and come to an end, except as
otherwise provided herein.
(b) Turbodyne and IHI may terminate this Agreement immediately upon notice
to the other party in the event that:
(i) The other party commits a violation of this Agreement which is
not cured within sixty (60) days after the receipt of written
notice specifying the violation,
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(ii) The other party becomes insolvent or goes into liquidation or
receivership or becomes subject to proceedings for the settlement
of debts or is declared bankrupt; or
(iii) The other party is dissolved other than as an incident to merger
or consolidation.
1.3 Upon the termination of this Agreement, all rights and licenses of IHI
hereunder shall immediately cease except as provided in sub-article 1.4
below and except that IHI may continue to exercise the rights and licenses
granted under article 2 in order to complete and sell or otherwise dispose
of any motor assisted turbochargers then manufactured or in the course of
manufacture. No termination of this Agreement shall relieve IHI of any of
its obligations to make payments or render reports under this Agreement or
relieve IHI of any other of its obligations including those under article
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1.4 Upon expiration or termination of this Agreement (provided that IHI shall
not then be in violation of this Agreement), IHI shall have an irrevocable,
fully paid-up or free, non-exclusive right to utilize all know-how
disclosed to IHI hereunder. It is understood that this provision shall not
be construed as granting to IHI, by implication or otherwise, a license
under any valid Turbodyne patent after the termination date.
2. Licensed patents
-----------------
The patents hereby licensed on a non-exclusive basis are all the patents issued
or to be issued and effective in the Territories during the term of this License
Agreement and corresponding to the following U.S. patents.
a. U.S. Patent No.: 5,560,208 Issued 10/01/96
"Motor Assisted Variable Geometry Turbocharging System"
b. U.S. Patent No.: 5,870,894 Issued 02/16/99
"Motor Assisted Supercharging Devices For Internal Combustion Engines"
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c. U.S. Patent No.: 5,605,045 Issued 02/25/97
"Turbocharging System With Integral Assisting Electric Motor And Cooling
System Therefore"
d. U.S. Patent No.: 5,025,629 Issued 06/25/91
"High Pressure Ratio Turbocharger"
e. U.S. Patent No.: 5,094,587 Issued 03/10/99
"Turbine For Internal Combustion Engine Turbochargers"
f. U.S. Patent No.: 5,906,098 Issued 05/25/99
"Motor Generator Assisted Turbocharging System For Use With Internal
Combustion Engines, And Control Method Therefore"
g. U.S. Patent No.: 4,565,505 Issued 01/21/86
"Combination Flow Turbine For Internal Combustion Engine
Turbochargers"
h. U.S. Patent No.: 5,857,332 Issued 01/12/99
"Bearing System For Motor Assisted Turbochargers For Internal
Combustion Engines"
Turbodyne represents and warrants to IHI that Turbodyne owns all rights, title
and interest in and to all the technology, that is, system know-how and
specifications, design data, with which it provides IHI under this License
Agreement.
3. Territories
-----------
3.1 Territories covered under this License Agreement are Asia and Europe.
3.2 Registration of patents. Regarding the patents, upon prior consent of
Turbodyne (which will not be unreasonably withheld), IHI may register the
authorized patent licenses (which are called as the 'Tsujo-Jisshiken' in
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the case of Japan) with the pertinent patent office of the country, where
applicable, in the Territories.
4. Sub-License
-----------
4.1 IHI is allowed to sub-license the technology hereby licensed to IHI
Charging Systems International GmbH (hereinafter called "ICSI") in Germany
and Italy and IHI Turbo (Thailand) Co., Ltd (hereinafter called "ITT") in
Thailand and Jiang Su Ishi Turbo Co., Ltd (hereinafter called "JIT") in
China. ICSI and ITT and JIT are subsidiary companies of IHI.
4.2 IHI is granted the right to sub-license the technology to IHI Turbo America
CO. (herein after called "ITA") in USA at a later date for an additional
license fee to be mutually agreed upon between the parties. ITA is wholly
owned subsidiary of IHI.
5. Mass Production Stage
-----------------------
After completion of test and evaluation by IHI of engineering sample units as
supplied by Turbodyne in accordance with article 8, IHI will decide whether to
enter into mass production of the motor assisted turbochargers under the license
from Turbodyne by paying the additional license fee set forth in article 6.2.
Before the decision and payment, however, IHI may renegotiate terms and
conditions of this license agreement with Turbodyne based on the results of the
test and evaluation.
6. License Fees and Royalties
-----------------------------
6.1 Initial License Fee.
---------------------
The initial license fee payable upon the execution of this agreement is Eight
Million (8,000,000) Japanese Yen.
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6.2 Additional License Fee
------------------------
An additional license fee of Twenty Million (20,000,000) Japanese Yen is payable
to Turbodyne upon decision by IHI to enter into mass production and delivery to
IHI by Turbodyne of complete, design, engineering drawings, specifications and
parts lists.
6.3 Royalties
---------
1) Up to first 200,000 units sold aggregately by IHI and its
sub-licensees per calendar year, a royalty of three percent (3%) of
selling price is payable quarterly for the licensed components
computed as 3% X number of units per quarter X (sales price of motor
assisted turbocharger less price of conventional turbocharger). It is
understood by the parties that the bracketed term above is made so as
to represent the difference of values between the motor assisted
turbocharger and the conventional turbocharger.
2) Over 200,000 units sold aggregately by IHI its sub-licensees per
calendar year the royalty for any units will be reduced to 1% of
selling price of each unit, payable quarterly computed as 1% X number
of units over 200,000 per year X (sales price of motor assisted
turbocharger less price of conventional turbocharger).
3) It is also agreed by the parties that IHI may renegotiate the royalty
rates set forth above with Turbodyne when IHI has made extensive
improvements of its own to its motor assisted turbochargers and the
rate of IHI's dependence on Turbodyne's original technology in
relation to its motor assisted turbochargers has, in the opinion of
IHI, become smaller.
4) The currency for all royalty payments shall be Japanese Yen and the
exchange rate shall be the official exchange rate published by the
Bank of Tokyo-Mitsubishi at the date of computation of royalties.
5) All payments of license fees and royalties under articles 5,6, and 7
shall be made by bank-to-bank cable transfer to the designated account
of
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Turbodyne. All payments of initial license fee and initial engineering
samples which are payable upon the execution of this agreement are
payable immediately upon execution of this agreement. Royalty payments
shall be made against invoices made by Turbodyne and within forty (40)
days of the receipt by IHI of the invoice. The invoices for royalties
shall be made based on the quarterly sales report made and rendered to
Turbodyne by IHI.
6) Turbodyne shall have the right to inspect IHI records of sales and
shipments by an independent accountant acceptable to IHI at a
reasonable time for the only purpose of verification of royalty
payments only in the event that Turbodyne may question the amount of
royalties. IHI shall provide to Turbodyne a quarterly summary of sales
and shipments of the motor assisted turbochargers covered by this
Agreement within thirty (30) days from the end of each quarter, so
that Turbodyne will have a record of such shipments and only in the
event of a disagreement with the numbers Turbodyne may ask for such
verification.
7 Trademarks
Turbodyne hereby grants IHI the non-exclusive right to use the Turbodyne
registered trademark Dynacharger(TM). IHI has no obligation to use this
trademark on its motor assisted turbochargers.
8 Engineering Sample Units
--------------------------
8.1 Upon execution of this agreement IHI shall pay to Turbodyne the amount of
Two Million (2,000,000) Japanese Yen for manufacturing by Turbodyne of 4
engineering sample units to meet specific requirements of IHI for the
purpose of test and evaluation by IHI. This payment is considered as
advance payment for the manufacture and supply of the four (4) sample
units. Delivery up to the designated factory of IHI in Japan is made at the
cost and responsibility of Turbodyne.
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8.2 Upon execution of this agreement, IHI will immediately supply to Turbodyne
its requirements for the size and performance of the sample together with
IHI turbocharger information. Turbodyne shall attempt to incorporate as
much as possible components of IHI bearing system into its design.
8.3 Upon completion of design and approval by IHI, Turbodyne will fabricate the
electric motor and electronic components and IHI will supply at its cost
and responsibility the conventional turbocharger components to Turbodyne
for final assembly and testing by Turbodyne and delivery of four samples of
the same performance to IHI, for evaluation.
8.4 Each engineering sample unit shall consist of a complete turbocharger unit,
electric motor, electronic controller, electric wiring and connections,
sensor cables and connections, together with all necessary hardware and
instructions for installation and operation of the units.
The engineering sample units will not operate in a generator mode.
9 Additional Samples
-------------------
Turbodyne agrees to provide upon request of IHI additional engineering samples
of the same performance and based on the same procedure as article 8 above at a
price of Five Hundred Thousand (500,000) Japanese Yen each.
10 Taxes
-----
All taxes, duties and similar levies, whether national, provincial, local or
otherwise and whether payable directly in respect of this Agreement or directly
or indirectly in respect of monies payable or receivable under this Agreement by
Turbodyne or IHI, shall be borne by the party who has incurred such taxes,
duties or similar levies arise, provided that any income tax required to be
withheld under Japanese tax laws in connection
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with any and all payments due to Turbodyne under this Agreement shall be borne
by Turbodyne and shall be withheld by IHI from the payments for the purpose of
paying the income tax to the Japanese tax authorities on behalf of Turbodyne
(provided that, if Turbodyne has obtained all necessary approvals under the laws
of the State of California, IHI shall withhold at the reduced rate under the
income tax treaty between the United States of America and Japan applicable at
the time of payment to Turbodyne). The certificate of income tax payment issued
by the Japanese tax authorities shall be delivered by IHI to Turbodyne in due
course.
11 Technology Transfer
--------------------
Turbodyne shall provide technical know-how, manufacturing techniques, computer
simulations, test results, data, engineering drawings, parts lists, supplier
information and prices and any other information and knowledge at its disposal
to IHI necessary for IHI's expedient and successful commercialization of the
technology, both before and after IHI decision for mass production, and in no
event will Turbodyne withhold such technical support.
The methods of transfer shall include engineering drawings in both electronic
and hard copy formats, consultations and meetings, as well as sample parts.
Turbodyne will additionally make available its facilities to IHI for the purpose
of visits, meetings, and where applicable training of IHI personnel.
No additional fee shall be charged to IHI for the services it receives from
Turbodyne. All expenses associated with travel by each party shall be the
responsibility of the traveling party.
12 Co-operation Of The Parties And Confidentiality
----------------------------------------------------
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12.1 The parties agree to act in good faith and co-operate in exchange of
information and engineering and evaluation activities for their mutual
benefit.
12.2 All technical information and know-how furnished to IHI by Turbodyne under
designation of confidentiality pursuant to this Agreement except those
listed in the following sub-article 12.3 shall remain the sole and
exclusive property of Turbodyne and shall be held in confidence by IHI for
licensed use only, and IHI shall take all reasonable precautions to prevent
any disclosure of such technical information and know-how to any third
party other than ICSI and ITT during the term of this Agreement and for a
period of three (3) years thereafter unless such technical information
shall have been published or disclosed to others without reservation by
Turbodyne.
12.3 The information listed below included in the technical information supplied
by Turbodyne to IHI shall be out of confidentiality obligation under the
preceding sub-article 12.2
a) information which becomes known or available to IHI from a source
other than Turbodyne without breach of this Agreement
b) information which is within, or later falls within, the public domain
without breach of this Agreement by IHI
c) information disclosed by Turbodyne to others on a non-restricted basis
d) information developed by IHI without using technical information
supplied by Turbodyne
e) information disclosed to a third party with prior written consent of
Turbodyne
12.4 Confidentiality obligation under this article 12 shall also apply
mutatis mutandis to the information supplied from IHI to Turbodyne under
designation of confidentiality and Turbodyne shall keep such information in
confidence as described in the preceding two sub-articles.
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13. Miscellaneous Provisions
-------------------------
13.1 Force Majeure. Notwithstanding any provision contained in this Agreement,
neither party shall be liable under this Agreement on account of any
failure or delay in performance caused by war, civil war, riots or
insurrections, or any laws, proclamations, ordinances, or regulations of
any government, or any strikes, lockouts, floods, fires, explosions or
other catastrophes beyond the reasonable control and without the fault of
such party. This provision shall not, however, release such party from its
obligation to use its best efforts to avoid or remove all such causes and
such party shall continue performance under this Agreement with the utmost
dispatch whenever such causes are removed. Any party having any such excuse
for failure or delay in performance shall give prompt notice thereof to the
other party.
13.2 Applicable law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of California, USA
notwithstanding any law or rule relating to choice of law or conflict of
laws.
13.3 Notices. All formal notices given under this Agreement (other than usual
day-to-day communications which may be conducted by E-mail) shall be
written in the English language and delivered by hand or sent by cablegram,
by telex or facsimile or by registered air mail, and shall be deemed to
have been given on the day when delivered by hand or deposited in the cable
office or transmitted by telex or facsimile, or on the seventh (7th) day
after deposited in the mail, addressed to the party to whom the notice is
given as follows, provided that any party may from time to time change the
address to which notices to it are to be sent by giving written notice of
such change to the other party:
Turbodyne:
Turbodyne Systems Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000, XXX
Attention: Xxxxxx Xxxxx, President & CEO
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IHI:
Ishikawajima-Harima Heavy Industries Co., Ltd.
Shin-Ohtemachi Building, 2-1 Ohtemachi 2-chome
Xxxxxxx-xx, Xxxxx 000-0000, Xxxxx
Attention: General Manager, Industrial Machinery
13.4 Entire Agreement. This Agreement sets forth the entire agreement between
the parties and supersedes all prior agreements and understandings between
the parties, and their officers, directors or employees as to the subject
matter hereof. Neither party has relied upon any oral representation or
oral information given to it by any representative of the other party. No
change in this Agreement shall be effective, whether as a result of a
course of conduct or otherwise, other than by a writing duly executed and
delivered by a duly authorized representative of each of the parties
hereto.
13.5 No Waiver. Any failure by either party hereto to assert its rights for or
upon any violation of this Agreement shall not be deemed a waiver of such
rights nor shall any waiver be implied from any act. No waiver in writing
by either party with respect to any right shall extend its effect to any
subsequent violation either of like or different kind.
13.6 Arbitration. All disputes concerning the construction and performance of
this Agreement shall be exclusively and finally settled by arbitration held
in New York and conducted in English Language at which Turbodyne and IHI
shall be represented in accordance with the provisions of this sub-article
13.6. Each party shall appoint one arbitrator each. The two arbitrators so
selected by the parties shall appoint a third arbitrator. The party
requesting arbitration shall include the name of the arbitrator it has
selected in the notification of the request for arbitration to the other
party. Said other party shall in its turn select another arbitrator within
thirty (30) days of its receipt of the notification of the request for
arbitration and the two arbitrators so selected shall select the third
arbitrator within thirty (30) days of their selection. In the event that
the arbitrators do not select the third arbitrator within the time provided
for herein, such third
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arbitrator shall be appointed by the Chairman of the American Arbitration
Association in New York within fifteen (15) days after notice given by
either party that the third arbitrator has not been selected by the
arbitrators.
The Rules of the American Arbitration Association in effect upon the date
that the party requesting arbitration shall have given notification of its
request shall govern with respect to the arbitration procedure, and any
implementing procedural rules shall be designated by the third arbitrator;
provided however, in the event of a conflict between such rules and this
Agreement, this Agreement shall govern.
The arbitration award shall be the award rendered by the third arbitrator,
as approved by a majority vote of the three arbitrators, and such award
shall include apportionment of the expenses of the arbitration. Judgment
upon such award may be entered by any court having jurisdiction, and
application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be.
Each party shall pay the expenses of its arbitrator and the fees and other
costs of the third arbitrator shall be included in the arbitration expenses
and shall be those established from time to time by the American
Arbitration Association. The fees of experts and any traveling expenses of
such experts shall be included in the arbitration expenses. Inasmuch as
information disclosed in any arbitration proceeding may constitute the
proprietary information of a party, the proceedings at the request of any
party shall be private, and the record (except the award) sealed and held
in confidence by the parties and the arbitrators.
13.7 Illegality. In the event that any part or parts of this Agreement shall be
held illegal or null and void by any court or administrative body of
competent jurisdiction, such determination shall not affect the remaining
parts of this Agreement and they shall remain in full force and effect as
if such part or parts determined illegal or void had not been included
herein.
13.8 Assignment. Neither this Agreement nor any rights, benefits or obligations
hereunder shall be assignable or transferable in whole or in part, whether
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by operation of law or otherwise, by either of the parties hereto without
prior written consent of the other party.
13.9 Amendments. This Agreement may be amended by a written agreement executed
by a duly authorized representative of each of the parties hereto.
13.10 Language of Agreement. This Agreement is executed in the English text in
duplicate. Any translations hereof, in Japanese, or otherwise, shall be
solely for the convenience of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
Turbodyne Systems Inc. Ishikawajima-Harima Heavy Industries Co., Ltd
/s/ Xxxxxx Xxxxx /s/ Xxxxxxxxx Xxxxxxxxx
By: ______________________________ By: __________________
Mr. Xxxxxx Xxxxx, President Xx. Xxxxxxxxx Xxxxxxxxx
Managing Director / General Manager,
Industrial Machinery
Date: 8/30/02 Date: 9/5/02
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