Exhibit 10.12
DEVELOPMENT AGREEMENT
Subcontract No. 32162-SV
BETWEEN
THALES COMMUNICATIONS, INC.
AND
NEAH POWER SYSTEMS INC.
December 19, 2003
THIS AGREEMENT, effective as of the last date of signature hereto, by and
between Thales Communications, Inc. of 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxxxxx
00000, hereinafter called "Thales", "TCI" or "Buyer", and Neah Power Systems,
Inc. of 00000 00xx Xxxxxx XX, Xxxxx 000, Xxxxxxx, XX 00000, hereinafter called
the "Neah", "Seller" or "Subcontractor", collectively called the "Parties."
WITNESSETH THAT
Whereas, Neah is an expert engaged in the development of small fuel cells for
portable devices based upon silicon technology and desires to enter a business
arrangement with TCI to develop a tactical fuel cell version for use with TCI's
XXXX portable applications;
Whereas, TCI is a Government and defense contractor in the business of
developing, producing and selling XXXX portable radios and desires to enter into
a business arrangement with Neah to have Neah develop a tactical fuel cell power
source for use with TCI's products;
Whereas, in consideration of the mutual promises, covenants, and agreements set
forth herein, the Parties agree that the Neah shall perform all the services and
deliver all of the products required by this Agreement, for the consideration
calculated in accordance with this Agreement. This Agreement, hereinafter
referred to as the "Agreement" or "Subcontract". The rights and obligations of
the Parties shall be governed by this Agreement, the Supplemental Provisions and
any other documents or specifications attached hereto or referenced herein or
within a document so referenced.
Now therefore, the parties agree as follows:
1. DEVELOPMENT PHASE I - PRICES AND DELIVERY SCHEDULE:
For a price of $344,000, Seller agrees to use commercially reasonable efforts to
develop proof-of-concept fuel cell power source prototypes in accordance with
the Statement of Work (SOW) and Specification shown in Attachment 1. The
deliverables for Phase I are as follows:
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Description Quantity Due Date
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Fuel Cell Prototype in accordance with SOW and Specification 2 9 Months from date of
Agreement
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Non-Functioning Space Models in Phase 2 Form Factor 2 9 Months from date of
Agreement
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Draft Phase 2 Fuel Cell Requirements 1 9 Months from date of
Document and Not to Exceed Production Price Agreement
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Test and Evaluation Support As required As Required
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Status Reports /Conference Calls Bi-weekly as Required As Agreed
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Meetings/Reviews 3 Minimum As Agreed
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For purposes of administration and payment, a separate Purchase Order(s) may be
issued pursuant to this Agreement. In such an event, any purchase order issued
shall make reference to this Agreement and all terms and conditions contained
herein shall apply to the purchase orders. To the extent that such purchase
orders include terms which are in conflict with, or which are not included in,
this Agreement, they shall be subject to acceptance by Neah.
PHASE I PAYMENT SCHEDULE
Payments shall be made to Seller based an the fallowing Milestone Schedule:
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Milestone Payment Event/Criteria Payment Amount Estimated Schedule
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1 Execution of Agreement $153,000 N/A
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2 Critical Design Review $78,000 6 Months from date of this
Agreement
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3 Delivery of Draft Phase 2 Product $113,000 9 Months from date of this
Development Specification, two Phase 1 Agreement
prototypes and two Phase 2 space models,
and Not-to-Exceed Production Price.
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Payments are due by Buyer net 30 days after receipt of a valid invoice from
Seller.
2. OPTION XXXXXXXXXXX XXXXX 0 - PRICES AND DELIVERY SCHEDULE:
The Buyer shall have 3 months following final delivery of all deliverables by
Seller and acceptance thereof by buyer under development Phase 1 to exercise the
Phase 2 option, at which time Buyer shall provide Seller with the finalized
physical farm factor far Phase 2. The buyer shall have an option to purchase an
additional 3 months of decision time at a cost of $40,000. The total price for
Phase 2, if successful, is $1,402,000. Seller agrees to use commercially
reasonable efforts to develop fuel cell power sources in accordance with the
Statement of Work (SOW) and Specification shown in Attachment 1. The
deliverables for Phase 2 are as follows:
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Description Quantity Due Date
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Fuel Cell Prototype including fuel cells and fuel cartridges. 5 units qualified per 12 Months after
Table 6, Attachment 4B option exercise
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Fuel Cell Documentation 1 lot Per SOW
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Test and Evaluation Support As Required As Required
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Status Reports/Conference Calls Bi-weekly as Required As Agreed
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Meetings/Reviews 4 Minimum As Agreed
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Phase 3 Production Price and Delivery Proposal 1 15 Months after
option exercise
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For purposes of administration and payment, a separate Purchase Order(s) may be
issued pursuant to this Agreement. In such an event, any purchase order issued
shall make reference to this Agreement and all terms and conditions contained
herein shall apply to the purchase orders. To the extent that such purchase
orders include terms which are in conflict with, or which are not included in
this Agreement, they shall be subject to acceptance by Xxxx.
XXXXX 0 PAYMENT SCHEDULE
Payments shall be made to Seller based on the following Milestone Schedule:
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Milestone Payment Event/Criteria Payment Amount Estimated Schedule
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1 Exercise of Option 2 and $100,000 2 weeks after exercise of
Delivery of Draft Engineering option
Procedures (SOW 8.2.1)
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2* Delivery of Final Phase 2 $100,000 8 weeks after exercise of
Product Design Specification option
and Status Meeting
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3 Preliminary Design Review $100,000 17 weeks after option
exercise
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4* Preliminary Working unit $100,000 26 weeks after option
Demonstration (to be defined at exercise
PDR) and Status Meeting
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5 Critical Design Review, to $100,000 34 weeks after option
include Xxxx of Materials, exercise
Production Costs and Updated
Not to Exceed Production
Pricing and Price Targets
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6* Delivery of Qualification Test $120,000 43 weeks after option
Plan and Procedures exercise
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7* Physical Configuration Audit $100,000 47 weeks after option
exercise
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8* Delivery of five (5) prototypes $682,000 52 weeks after option
(qualified per Table 6, Attachment 4B),
delivery of qualification documentation
and test data and quality system
implementation plan, together with
escrow of the engineering and
manufacturing data package (upon
acceptance of prototypes)
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*Completion of this milestone requires TCI approval of this item prior to
payment. Such approval shall not be unreasonably withheld or delayed.
Additional Phase 2 prototypes may be obtained at Neah's documented fully
burdened cost, not to exceed $10,000 per unit, leadtime = approximately 4 weeks
Seller will submit an invoice for each payment milestone following completion,
and acceptance when required, of the milestone. Payments are due by Buyer net 30
days after receipt of a valid invoice from Seller, provided that for milestones
which are subject to acceptance payment shall be due net 10 days after the date
of acceptance and receipt of valid invoice in accordance with Clause 9 below.
3. PRODUCTION PHASE 3:
A. At the conclusion of Development Phase 2, Buyer shall have the option
(the "Production Phase Option") to elect to proceed to the production
phase of this Agreement (the "Production Phase"), which must be
exercised by written notice to Seller within ninety (90) days
following the date of receipt by Buyer of reasonable approvals by the
United States Government for sale of the products developed under this
Agreement, but in no event later than one hundred eighty (180) days
following the completion of Development Phase 2. In the event that
Buyer elects to exercise the production phase of this Agreement, the
parties agree to negotiate an amendment to this Agreement which adds
all of the necessary provisions for a production type contract (the
"Production Phase Amendment"). These terms shall include at a minimum,
pricing (which shall not be higher than the not to exceed pricing
established under Milestone 5 of Phase 2 for one year after the first
production order), quantity break pricing, price escalation formula or
index, delivery schedules, inspection and acceptance requirements,
quality assurance program requirements, product warranty, Government
flow-down clauses and any other appropriate provisions.
B. In the event that the parties are unable to agree upon a Production
Phase Amendment within ninety (90) days following the date of exercise
of the Production Phase Option by Buyer, the terms of the Production
Phase Amendment shall be established pursuant to the dispute
resolution procedures set forth in Clause 29 below, unless Buyer
rescinds its exercise of the Production Phase Option by written notice
prior to the commencement of such procedures.
4. EXCLUSIVITY PROVISIONS
Seller hereby grants Buyer limited exclusivity with respect to the fuel
cell technology being developed under this Agreement as described in
Attachment 3, License and Exclusivity Provisions.
5. BUYER EQUITY INTEREST
Concurrent with TCI exercising its Option to fund Phase 2, Neah shall grant
TCI a warrant to purchase up to 250,000 shares of Common Stock (as adjusted
for stock splits, etc.) in the form attached as Attachment 6 (the "Common
Warrant"), subject to vesting as provided in the Common Warrant. The
exercise price per share shall be $0.12 (as adjusted for stock splits,
etc.), which equals the most recent valuation of the Common Stock by the
Board of Directors prior to the signing of this Agreement. Neah expressly
acknowledges that Section 4 of the Common Warrant requires Neah to give TCI
the notice of any stock transactions currently required to be given to
holders of preferred stock under Article 4B(2)c(iii) of Neah's Articles of
Incorporation.
6. MANUFACTURING RIGHTS; LICENSE
In the event that the materials held in Escrow are released to Buyer in
accordance with Clause 13 of this Agreement, Seller grants full
manufacturing rights to Buyer in accordance with Attachment 3, License and
Exclusivity Provisions. A full manufacturing data package sufficient to
allow Buyer to have an independent third party produce the final product
(including, but not limited to, product design documentation, xxxx of
materials, manufacturing process design and production instructions, and
source development documentation) shall be placed into escrow as provided
for in Clause 13 of this Agreement.
7. INTELLECTUAL PROPERTY RIGHTS
A. All Intellectual Property developed by either party prior to the term
of this Agreement will be the property of the developing party.
B. All Intellectual Property developed by either party during the term of
this Agreement independently of the other party will be the property
of the developing party, subject to the following mandatory licenses
with respect to Intellectual Property related solely to the
interaction between fuel cells and portable radios ("Fuel Cell/Radio
IP"):
1. Fuel Cell/Radio IP developed independently by Seller during the
term of this Agreement shall be owned by Seller, subject to a
perpetual, world-wide, royalty free license to Buyer to make,
have, made, use, sell and import products based on such
Intellectual Property.
2. Fuel Cell/Radio IP developed independently by Buyer during the
term of this Agreement shall be owned by Buyer, subject to a
perpetual, world-wide, royalty bearing license to Seller to make,
have made, use, sell and import products based on such
Intellectual Property on terms agreed upon by Buyer and Seller
or, failing agreement within a reasonable time following request
by Seller, as determined pursuant to Clause 29 below.
C. All Intellectual Property developed jointly by the parties during the
term of this Agreement shall be jointly owned, except for Fuel
Cell/Radio IP. Jointly developed Fuel Cell/Radio IP shall be owned by
Seller, subject to a perpetual, world-wide, royalty free license to
Buyer to make, have made, use, sell and import products based on such
Intellectual Property.
D. The licenses granted to Buyer pursuant to this Clause 7 shall be
limited for use with respect to Buyer's own products, and such rights
may not be sublicensed by Buyer except in connection with the
manufacture and sale of Buyer's products.
E. Each Party agrees to execute such documents and take such other
reasonable actions as the other Party may request in connection with
evidencing or perfecting its rights in Intellectual Property in
accordance with this Clause 7.
F. TCI acknowledges that Neah's technology, and all copyrights, patents
and other intellectual property rights relating to Neah's technology
are the exclusive property of Neah or its licensors, and that nothing
herein shall be construed as granting TCI any right, title, license
in, or interest to Neah's technology or in the intellectual property
this relating to Neah's technology other than as specifically set
forth in this Agreement, inclusive of the licenses granted pursuant to
Attachment 3.
G. Neah acknowledges that TCI's technology, and all copyrights, patents
and other intellectual property rights relating to TCI's technology
are the exclusive property of TCI or its licensors, and that nothing
herein shall be construed as granting Neah any right, title, license
in, or interest to TCI's technology or in the intellectual property
rights relating to TCI's technology other than as specifically set
forth in this Agreement, inclusive of Attachment 3.
8. CUSTOMER FURNISHED PROPERTY
In the event that Buyer delivers f to Seller, or Seller acquires for Buyer
using funding provided in this Agreement, any Customer Furnished Property
(CFP), including products, material, equipment or tooling, the following
terms apply:
A. CFP received by Seller shall be in a condition suitable for its
intended use. If it is not so, Seller shall immediately notify Buyer.
B. Title to all CFP shall be retained by Buyer while in the possession of
Seller.
C. Seller shall be liable, responsible and accountable for all CFP
provided, including loss, damage, or destruction, with the exception
of reasonable wear and tear.
D. CFP shall be returned or disposed of by Seller as directed by Buyer.
9. INSPECTION AND ACCEPTANCE
A. Notwithstanding any prior preliminary inspection and/or acceptance,
including source inspection(s), final inspection and acceptance of all
deliverables shall be made at the Buyer's facility in XXXX. Final
acceptance of any supplies or services shall not be deemed a waiver of
any warranties contained herein.
B. With respect to Milestones 2, 4, 6 and 7 under Phase 2, Buyer shall be
deemed to have accepted the deliverables unless it provides Seller
with written notice within thirty (30) days following receipt of the
deliverable setting forth any perceived issues. The parties shall
attempt in good faith to agree within twenty (20) days thereafter upon
a plan for resolving the issues, specifically addressing the impact
upon program schedule. Payment of amounts owing to Seller by Buyer
with respect to each such milestone shall be due within ten (10) days
following the date of acceptance.
C. With respect to Milestone 8 under Phase 2, Buyer shall be allowed
eight (8) weeks following the date of delivery of final deliverables
to determine, in Buyer's sole discretion, compliance with acceptance
criteria, and shall be deemed to have accepted the deliverables unless
it provides Seller with written notice within such period setting
forth any perceived issues. The parties shall thereafter work in good
faith to resolve the issues, and Seller shall use commercially
reasonable efforts to correct any deficiencies, after which the
testing and problem resolution procedures and schedule shall be
repeated.
10. RELEASE OF INFORMATION
Neither party, nor any of its subcontractors, shall make any public release
of information (except for reasonable disclosures to the U.S. Government),
including photographs and films, public announcements, or the nature and
existence of a business relationship or Agreement between the parties (or
confirmation of same), without prior approval in writing from the other
party.
11. QUALITY ASSURANCE
At the conclusion of Phase 4, Seller shall deliver to Buyer a Quality
System Implementation Plan, which will include Seller's plans for achieving
an acceptable quality assurance program for Production Phase 3. The
Production Phase Amendment shall include a Quality Assurance Plan, and
failure of Seller to comply with such plan shall constitute a material
breach of this Agreement. Subsequent to the Phase 2
development, Seller (or Seller's designated and Buyer approved
manufacturer) agrees to maintain a quality control system in compliance
with ISO-9001, or equivalent, which is approved by Buyer, and any
requirements contained within the Statement of Work, Specification(s) and
other requirements shown in this Agreement. Seller further agrees:
A. To provide access to the Seller's facilities and those of its lower
tier suppliers for periodic witnessing and inspection by the Buyer
and/or Government representatives during all phases.
B. To provide a Quality Plan which addresses design verification,
configuration management, inspection and testing, process controls,
requirements verification and other quality elements to Buyer for
approval during Production Phase 3.
C. To provide Qualification Test Plans and Procedures to Buyer for
approval during Development Phase 2. Hollowing approval of these
documents and completion of Phase 2 development, Seller shall provide
a Qualification Test Report which demonstrates full compliance with
the Statement of Work and Specifications.
D. To comply with the following requirements during the Production Phase
3 of this Agreement:
1. The first piece of each product produced shall be inspected for
all characteristics by Seller. The detailed results of this
inspection shall be supplied to Buyer with each first article
piece. Buyer reserves the right to witness the first article
inspection at Seller's facility or the facility of Seller's
lower-tier supplier.
2. Acceptance Test Procedures (ATP) to be used in the execution of
this order, for any changes to previously approved ATPs, shall be
submitted to Buyer for approval prior to the commencement of any
acceptance testing.
3. Buyer reserves the right to inspect all materials that are used
in the manufacture of product under this Agreement.
4. All products shall be delivered by Seller with a Certificate of
Conformance (C of C) signed by the responsible quality official.
The C of C shall be a written statement certifying that the
product(s) have been subjected to the required test(s) to verify
conformance to the applicable drawing(s) and/or specification
requirement(s). Test and visual inspection results shall be
maintained on file by Seller and subject to examination for three
(3) years following completion of all deliveries under this
Agreement.
5. Any changes to Engineering, Material, or Processes must be
approved by Buyer.
6. Request for information on any departures from Drawings,
Specifications, Special Processes, including repairs and design
changes, or other requirements must be reported on a Vendor
Information Request (VIR) form. Formal disposition of the VIR
must be obtained prior to shipment and a copy of the VIR must
accompany each shipment.
7. If applicable, workmanship of bare Printed Wire Boards shall
conform to the requirements of IPC-A-600, Class II. Workmanship
of Circuit Card Assemblies shall conform to the requirements of
IPC-A-610 and ANSI/J-STD001, Class 11.
12. PLACE OF PERFORMANCE
The Seller shall perform the work under this Agreement at its facilities
located in Bothell, Washington, and at such other locations as may be
approved in writing by the Buyer. Such approval shall not be unreasonably
withheld.
13. ESCROW
Upon acceptance of the final Phase 2 deliverables, TCI and NEAH agree to
establish and administer an Escrow Agreement. Such Escrow Agreement shall
be placed with a mutually agreed upon escrow agent within the metropolitan
area, containing all information necessary to build the Neah fuel cell
battery developed under this Agreement, including all design and
manufacturing documentation associated with any of the Neah Technology
("Escrow Materials") within 30 days after Phase 2 has been completed. The
information contained in the Escrow Agreement shall as a minimum provide
that TCI shall gain possession of and the right to use any of the
information contained therein to manufacture and sell the Phase 2 Neah
Technology fuel cell in the event (Release Event) that (i) Neah ceases
doing business and its business is not continued by another corporation or
entity that acquires the business in connection with a merger or sale as
described in Clause 25 below and agrees in writing to be bound by the terms
of this Agreement; (ii) Neah makes a general assignment for the benefit of
creditors; (iii) Neah suffers or permits the appointment of a receiver for
it, business or assets which is not removed within a period of sixty (60)
days (provided that temporary access to the Escrow Materials may be
obtained if reasonably necessary during such period); (iv) Neah avails
itself of any proceeding under the Federal Bankruptcy Act and is unable to
continue to supply and support TCI in a timely manner during the term of
this Agreement; or (v) Neah is unwilling or unable to manufacture the
Product for TCI in accordance with the terms of the Production Phase
Amendment.
When the Escrow Materials are placed in escrow, TCIshall have the right to
conduct one review of those materials in the presence of a Neah employee.
No copies of any of the Escrow Materials shall be made by TCI and none of
the Escrow Materials, or any portion thereof, shall be taken or removed by
TCI during that review or at any other time prior to
a Release Event. Neah agrees to keep the Escrow Materials updated and
current in the event of subsequent changes to the design, test or
manufacturing documentation.
The Escrow Agreement shall provide that, in the event that Neah in good
faith disputes whether a Release Event has occurred, the Escrow Materials
shall not be released from escrow until the dispute has been resolved by
binding arbitration as provided in Clause 29 of this Agreement.
After a Release Event, TCI shall have a license as provided in Attachment 3
to the Neah Technology for purposes of manufacturing and selling the
products developed pursuant to this Agreement.
TCI shall pay all fees and costs associated with the escrow.
14. TERMINATION
A. If either party ceases doing business and its business is not
continued by another corporation or entity that acquires the business
in connection with a merger or sale as described in Clause 25 below
and agrees in writing to be bound by the terms of this Agreement, or
if any proceeding under the bankruptcy, insolvency or reorganization
laws is brought by or against a party and it is unable to provide
reasonable assurances that it will be able to continue to perform its
obligations under this Agreement, at if a party suffers or permits the
appointment of a receiver for its business or assets which is not
removed within a period of sixty (60) days, the other party may
terminate this Agreement in whole or in part without liability.
B. Buyer reserves the right to terminate this Agreement for its
convenience even though Seller is not in default hereunder. In such
event a mutually satisfactory and equitable adjustment of the terms
hereof shall be made. Buyer shall pay for allowable, allocable costs
and non-cancelable commitments reasonably incurred (if any) prior to
the date of termination, and fair and allowable closeout costs. Upon
receipt of notice pf such termination, Seller shall, unless such
notice otherwise directs, immediately discontinue all work on this
Agreement and deliver, if and as directed to Buyer all completed and
partially complete articles, work in process and materials purchases
or acquired for performance of this Agreement. Seller shall take all
reasonable steps to minimize termination costs. In no event, however,
shall Buyer be obligated to pay the Seller any amount in excess of the
total purchase order price at the time of termination of the work.
C. If the Buyer does not exercise the Production Phase Option within the
period set forth in Clause 3A above, this Agreement shall
automatically terminate one year thereafter.
D. In the event that either Party breaches any material term of this
Agreement, the other Party may terminate this Agreement by written
notice to the other Party, provided that such breach bas not been
cured within thirty (30) days following the date of such notice (or,
if cure is not reasonably possible within such period, provided that
the defaulting party has not taken reasonable steps to effect a cure
within such period).
E. Neither Buyer nor Seller shall be considered in default in performance
of its obligations hereunder if performance of such obligations is
prevented or delayed by acts of God or government, labor disputes,
failure or delay of transportation, or any other similar cause or
causes beyond their reasonable control.
F. The provisions of this Agreement which by their nature require
performance following termination of this Agreement shall survive such
termination, including without limitation Clauses 4, 7, 8, 10, 13, 17,
18, 19, 20, 23, Attachments 2, 3 and 6.
G. Notwithstanding the foregoing: (i) in the event that Buyer terminates
this Agreement pursuant to Clause 14B or 14C above, or Seller
terminates this Agreement pursuant to Clause 14A or 14D above, all
licenses granted to Buyer pursuant to this Agreement shall terminate
except for rights related to products already sold and licenses with
respect to jointly developed Fuel Cell/Radio IP granted pursuant to
Clause 7 above; and (ii) in the event that Buyer terminates this
Agreement pursuant to Clause 14A or 14D above, all licenses granted to
Seller pursuant to this Agreement shall terminate.
15. CHANGES
A. Buyer shall have the unilateral right from time to time to propose
changes within the general scope of the work in any of the following
areas: 1) drawings, designs, or specifications; 2) method of shipping
or packing; 3) quantities, period of performance, delivery schedule;
4) place or time of delivery; 5) amount or type of Customer Furnished
Property; 6) tasks to be performed; 7) place of inspection and/or
acceptance; and 8) acceptance criteria. If any such change causes an
increase or decrease in the cost of, or the time required for, the
performance of any part of the work being performed under this
Agreement, an equitable adjustment in contract price or delivery
schedule, or both, shall be made. Any claim bys the Seller for
adjustment under this Article must be submitted in writing within
thirty (30) days from the date of receipt of the change notification
by Seller. In the event that the parties are unable to mutually agree
to an equitable adjustment within thirty (30) days following the
presentment of such claim, either party may submit the dispute for
resolution pursuant to Clause 29 below. Failure to mutually agree to
any equitable adjustment shall not excuse the Seller from proceeding
with the work as changed.
B. Buyer may at any time, by written order to the Seller, require the
Seller to stop all, or any part of the work called for by this
Agreement, for a period of up to ninety eighty (90) days after the
Stop Work Order is delivered to the Seller, and for any further period
to which the parties may agree. Any such order shall be specifically
identified as a Stop Work Order issued pursuant to this Clause 15.
Upon receipt of such a Stop Work Order, the Seller shall forthwith
comply with its terms and take all reasonable steps to minimize the
incurrence of costs allocable to the work covered by the order during
the period of work stoppage. Within a period of ninety (90) days after
a Stop Work Order is delivered to the Seller, or within any extension
of that period to which the parties shall have agreed, Buyer shall
either (1) cancel the Stop Work Order; or (2) terminate or cancel the
work covered by such Stop Work Order. If any such Stop Work Order
causes an increase or decrease in the cost of, or the time required
for, the performance of any part of the work being performed under
this Agreement, an equitable adjustment in contract price or delivery
schedule, or both, shall be made in accordance with Clause 15A above.
16. NOTICE OF DELAY
Whenever any other actual or potential event is delaying or threatening to
delay delivery of the supplies ordered pursuant to this Agreement, the
Seller shall as soon as possible give notice thereof to the Buyer,
17. SEVERABILITY AND GOVERNING LAW
If any part, term or provision of this Agreement shall be held void,
illegal, unenforceable, or in conflict with any law of a federal, state or
local Government having jurisdiction over this Agreement, the validity of
the remaining portions or provisions shall not be affected thereby. Any
litigation resulting from disputes shall be governed by the laws of XXXX.
18. TAXES
All sales and use taxes relating to the goods and services to be provided
by Seller pursuant to this Agreement shall be payable by Buyer, and may be
added to the amounts invoiced by Seller pursuant to this Agreement. The
parties shall use reasonable efforts to cooperate to minimize any such
taxes, including making all shipments F.O.B. destination.
19. WARRANTY DISCLAIMERS
A. Neah warrants that there are no legal actions pending against Neah
relating to Neah's right to develop, manufacture, sell and or use the
Neah Technology and that as of the date of this Agreement, to the
knowledge of Neah, the manufacture, sale and/or use of the Neah
Technology does not infringe on the intellectual
property rights of any third party. Neah warrants that it has the
right and authority to enter and execute this Agreement.
B. THE FOREGOING ARE THE ONLY WARRANTIES OFFERED BY NEAH PURSUANT TO THIS
AGREEMENT, AND NEAR HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
C. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT,
EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
20. NON-DISCLOSURE AGREEMENT
The parties agree to abide by tile terms of the "Non-Disclosure Agreement"
included in this Agreement as Attachment 1, provided that in the event of
any conflict between the terms of the Non-Disclosure Agreement and this
Agreement, the terms of the Agreement shall control.
21. COMPLIANCE WITH LAWS
Each party shall comply with, all applicable federal, state, and local
laws, rules and regulations, specifically including the Foreign Corrupt
Practices Act, the Anus Export Control Act, the International Traffic in
Arms Regulations (ITAR) and all United States export laws and regulations.
Each party further agrees not to engage in any deceptive or unauthorized
practices. Each party agrees to hold the other party harmless from all
liability resulting from failure to so comply.
22. TERM OF AGREEMENT
This Agreement shall commence, as of the last date of signature of this
Agreement, and shall be in force until the earlier if (i) one year
following the failure of Buyer to exercise the Production Phase Option
within the period specified in Clause 3A, (ii) termination as provided in
Clause 14 above, or (iii) the expiration of the Production Phase Amendment.
23. PATENT AND INFRINGEMENT INDEMNITY
Seller agrees to save harmless and protect Buyer and its customers against
all costs and expenses arising out of a claim that any goods or part
thereof furnished by Seller under this Agreement infringes any United
States patent, or misappropriates any third party trade secret, patent or
copyright, if notified in writing promptly by Buyer after Buyer becomes
aware of such claim. Seller agrees to defend at its expense any suits or
proceedings against Buyer based upon a claim that the product(s), software,
data or services furnished hereunder by Seller to Buyer infringes a United
States patent, copyright or other intellectual property right of a third
party, and agrees to pay costs and damages finally awarded, or any amounts
paid to said third party as part of a settlement of such action in any such
suit or proceeding, as well as any attorneys fees or other legal expenses
incurred in connection therewith, provided that Seller is notified promptly
in writing of the suit and, at Seller's request and at its expense, is
given control of said suit and reasonable assistance for defense of the
same.
In the event that Buyer is enjoined from using the product as a result of
such suit, or if the product is likely to become the subject of a claim of
infringement of a United States patent, copyright or other intellectual
property right of a third party, Seller at its own election and expense
shall either (i) procure for Buyer the rights to continue using the
product, or (ii) modify or replace the product so that it becomes
non-infringing while giving equivalent performance. In the event that any
changes made by Seller require requalification testing, Seller shall either
perform such re-qualification testing at no cost to the Buyer, or shall
reimburse Buyer for any re-qualification expenses incurred by Buyer.
This indemnity does not extend to any suit based upon any infringement or
alleged infringement of any patent, copyright or trade secret to the extent
arising out of any specifications or materials supplied by Buyer or by the
modification of the product, software, data or services by or on behalf of
Buyer, and Buyer shall defend, indemnify and hold harmless Seller with
respect to any such suit and all related expenses and damages.
The parties intend to discuss the expansion of the indemnification
provision to be included in the Production Phase Amendment to provide for
coverage with respect to patents outside of the United States, it being the
intention of the parties that the Production Phase Amendment provide for
such indemnification in the countries where the products are being sold
where commercially reasonable.
24. AUTHORIZED BUYER REPRESENTATIVE
During the performance of this Agreement, Seller win not accept from
Buyer's representatives, other than Buyer's authorized procurement
personnel, any verbal or written direction, or other course of conduct,
which changes or can be construed to change the provisions of the contract.
Seller agrees to notify Buyer's procurement representative promptly of any
such unauthorized direction or conduct.
Administrative and official contractual notifications under this
Agreement shall be referred to the following representatives of the
parties:
Seller: Xxxxx Xxxxxx, Director of Product Marketing
Buyer: XXXX, Contracts, XXXX
Technical and programmatic matters under this subcontract shall be
referred to the following representatives:
Seller: Xx. Xxxxxxxx Xxxxxxxx, Director of Systems Integration
Buyer: XXXX, Engineering, XXXX
Each party may change its representatives named in this Article by
written notification to the other party.
25. ASSIGNMENT, DELEGATION AND SUBCONTRACTING
Seller shall not assign any of its rights or interest in this Agreement
without the Buyers' prior written consent, provided that no such consent
shall be required in connection with a merger or other sale of Seller's
business and assets related to this Agreement if the acquiring party
expressly assumes all of Seller's obligations under this Agreement. Buyer
shall not assign any of its rights or interest in this Agreement to any
third party which Seller reasonably considers to be a competitor in the
fuel cell business without Seller's prior written consent. Seller shall not
delegate any of its duties or obligations under this Agreement except as
expressly provided herein or as agreed in writing by Buyer. No assignment,
delegation or subcontracting by either party, with or without the other
party's consents, shall relieve such party of any of its obligations under
this Agreement
26. SELLER EXPERTISE
The Seller acknowledges that it is an expert fully competent in all phases
of the work involved with the Products, Software, Data and/or Services
being procured under this Purchase Agreement, including but not limited to
the designing, testing, manufacturing, and repairing of such Products. The
Seller agrees that Buyer and Buyer's customers are entitled to, and have
relied upon the Seller as an expert and the Seller shall not deny any
responsibility or obligation hereunder on the grounds that Buyer or Buyer's
customers provided recommendations and/or assistance in any phase of the
work, including but not limited to the acceptance by Buyer of the design,
software, data, services or production of the Product.
27. TIME OF THE ESSENCE
It is understood by Seller that time is of the essence in performance of
all work purchased by Buyer under this Agreement and any related purchase
order(s). Seller acknowledges that a key consideration for Buyer selecting
Seller is schedule criticality.
28. COMPLETE AGREEMENT AND RELATIONSHIP OF THE PARTIES
All paragraphs, attachments and other documents incorporated by reference
in this Agreement, or referenced within those documents, constitute the
complete and entire expression of the parties to the exclusion of any other
documents or representations. The terms and conditions hereof may not be
varied except by a written modification signed by both parties.
Nothing contained in this Agreement shall be deemed or construed as
creating a joint venture or partnership between Neah and Neither party
shall have the power to control the activities and operations of the other
and their status will be that of independent contractor with respect to
each other. Neither party shall have any power or authority to bind or
commit the other.
Except as specifically provided for elsewhere herein, each Party shall be
solely responsible for all its costs, salaries and other expenses incurred
in connection with the performance of its obligations hereunder, and the
other Party shall have no liability, obligation or responsibility
therefore.
29. DISPUTES
All disputes arising under this Agreement shall be resolved by mediation
and binding arbitration in accordance with the following terms. Either
party may commence an action by notifying the other Party and the American
Arbitration Association ("AM"). Unless the parties agree upon a mediator
within thirty (30) days following such notification, AAA will promptly
designate a mediator who is independent, impartial and has relevant
industry experience, and AAA's decision about the identity of the mediator
will be final and binding. The Parties agree to conduct at least eight (8)
consecutive hours of mediated negotiations within 30 days after the notice
is sent. Each Party shall bear its own expenses for the mediation and they
shall each share equally in the expenses and fees of the mediator. If the
dispute is not resolved by negotiation or mediation within thirty (30) days
after the first notice to AAA is sent, then, upon notice by either Party to
the other and to AAA, the controversy or dispute will be submitted to an
independent, impartial, sole arbitrator, who is recognized as an expert in
the fuel cell industry, for binding arbitration in accordance with AAA's
Commercial Arbitration Rules. The arbitrator may be selected by mutual
agreement of the Parties, or either Party may elect to have the AAA select
an arbitrator. The arbitration shall be held at a mutually agreeable
location in the city of Denver, Colorado, USA, and the United States
Arbitration Act will govern the arbitration, 9 U.S.C. Sections 1-16 (or by
the same principles enunciated by such Act in the event it may not be
technically applicable). The Parties agree that they will faithfully
observe this Agreement and will abide by and perform any judgment rendered
by the arbitrator. The judgment of the arbitrator will be final and binding
on the Parties. The Agreements contained herein have been given for
valuable consideration, are coupled with an interest and are not intended
to be executory contracts. The arbitrator shall apportion to each Party all
costs, including without limitation, attorney's fees, incurred in
conducting the arbitration, in accordance with what he or she deems just
and
equitable under the circumstances. Notwithstanding the foregoing, neither
party shall be precluded from seeking injunctive relief from a court of
competent jurisdiction pending the resolution of any dispute in accordance
with this Clause 29.
30. ADDITIONAL SUPPLEMENTAL FLOW-DOWN PROVISIONS DURING PRODUCTION
In the event that Buyer elects to proceed to Production Phase 3, the
Production Phase Amendment will incorporate applicable U.S. Government
flow-down contract terms, FAR and DFAR provisions which are made a part of
the Buyer's prime contract(s). Seller agrees to abide by the terms of those
provisions and to indemnify Buyer in the event of non-compliance.
31. HEADINGS
The capitalized terms used in this! Agreement shall have the meaning set
forth on Attachment 5.
32. ATTACHMENTS
The following attachments are an integral part of this Agreement:
Attachment 1 - Statement of Work
Attachment 2 - Non-Disclosure Agreement
Attachment 3 - License and Exclusivity Provisions
Attachment 0X - Xxxxx 0 Xxxxxxxxxxxxx
Xxxxxxxxxx 0X - Xxxxx 0 Specification
Attachment 5 - Defined Terms
Attachment 6 - Common Warrant
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as shown
below: Neah Power Systems, Inc.
Neah Power Systems, Inc. Thales Communications, Inc.
By:/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxxxx X. Xxxxxxxx
---------------- -------------------------
(Signature) (Signature)
Xxxxx X. Xxxxxxx Xxxxxxxxx X. Xxxxxxxx
------------------------------------ ------------------------------------
(Typed or Printed Name) (Typed or Printed Name)
President & CEO SR. VP and CFO
------------------------------------ ------------------------------------
(Title) (Title)
12-23-03 12-23-03
------------------------------------ ------------------------------------
(Date) (Date)
