Exhibit 10.4
REVENUE SHARING AGREEMENT
THIS REVENUE SHARING AGREEMENT (this "Agreement") is entered into as
of September 4, 2000 by and between BSST, LLC, a Delaware limited liability
company (the "Company"), and XX. XXX X. XXXX (the "Inventor").
RECITALS:
WHEREAS, pursuant to an Assignment and Subscription Agreement dated
September 4, 2000 between the Company and the Inventor (the "Assignment
Agreement"), the Inventor has assigned to the Company all of his right, title
and interest to the Technology (as defined in the Assignment Agreement) in
exchange for Membership Interests in the Company;
WHEREAS, the Inventor has agreed to further develop the Technology for
the Company in order to commercialize products based on the Technology; and
WHEREAS, the Company and the Inventor desire to enter into this
Agreement to allow the Inventor to share in the Company's revenue from the sale
of products resulting from the Basic Technology;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 An "affiliate" of, or person "affiliated with," another person means a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with such other person.
1.2 "Assignment Agreement" has the meaning specified in the first recital
of this Agreement.
1.3 "Basic Technology" means all Technology (as defined in the Assignment
Agreement) and any improvements, modifications, enhancements and derivatives on
or to such Technology that are developed after the date of this Agreement by the
Company. Basic Technology shall not include any technology acquired or licensed
by the Company from a third party.
1.4 "Contract Payment" has the meaning specified in Section 2.1.
1.5 "Covered Product" means a product that incorporates, utilizes or
results from the Basic Technology.
1.6 "Covered Revenue" means the aggregate amount of revenue included on
the income statement of a person from the sale by such person of Covered
Products during a specified period, as determined in accordance with generally
accepted accounting principles.
1.7 "Fiscal Quarter" means a fiscal quarter of the Company for financial
accounting purposes.
1.8 "Fiscal Year" means the fiscal year of the Company for financial
accounting purposes.
1.9 "Holder of a Contract Payment Interest" means a person holding all or
any part of the right to receive the Contract Payment.
1.10 "Inventor's Equity Interest" as of any date means the aggregate amount
of equity securities of the Company and vested options to obtain additional
equity interests in the Company held by Inventor as of such date.
1.11 "Royalty Receivable" means the amount of royalties earned in any
period by the Company from a third party arising from such third party's sale of
Covered Products.
1.12 "Special Events" means any of the following:
(a) any sale or transfer of securities representing 50% or more of
the outstanding voting power of, or economic interests in, the Company;
(b) any consolidation, merger or other business combination of the
Company into any other corporation or entity, whether or not the Company is the
entity surviving such transaction, if, immediately after giving effect to such
transaction (and all other transactions related thereto or contemplated
thereby), the equity holders of the Company immediately prior to such
transaction do not own, directly or indirectly, securities representing more
than 50% of the outstanding voting power of, and economic interests in, the
surviving corporation or entity; and
(c) the consummation of an initial public offering by the Company
(other than pursuant to an employee stock option, stock purchase or similar plan
or pursuant to a Rule 145 transaction under the Securities Act of 1933).
1.13 "Statement" has the meaning specified in Section 2.3.
1.14 "Term" has the meaning specified in Section 2.2.
ARTICLE II
REVENUE SHARING PLAN
2.1 Revenue Sharing Payments. Each Fiscal Quarter, the Company shall pay
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the Inventor, his successors and permitted assigns the following amounts (the
"Contract Payment"):
(a) With respect to Covered Products manufactured by or on behalf of
the Company, 2.5% of the Company's Covered Revenues from such Covered Products.
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(b) With respect to Covered Products manufactured by a third party
which has licensed the Basic Technology from the Company:
(i) If the Company's Royalty Receivable from such Covered
Products is equal to or greater than 5% of such third party's Covered
Revenue from such Covered Products, 2.5% of such Covered Revenue;
(ii) If the Company's Royalty Receivable from such Covered
Products is less than 5% of such third party's Covered Revenue from such
Covered Products, a percentage of such Covered Revenue mutually agreed by
Inventor and the Company; provided, that the Company and Inventor shall
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mutually agree to share any other applicable form of revenue, compensation
or consideration earned or received by the Company from such third party
(including, but not limited to upfront fees and warrants).
2.2 Term of Payments. Subject to Section 3.5, commencing on the date of
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this Agreement, the Company shall make the Contract Payment specified in Section
3.1 for each Fiscal Quarter for a period of twenty-five years (the "Term"),
provided that the Company's obligation to make such Contract Payments shall
terminate in the event the Inventor (i) after 30 days notice from the Company of
a default in the performance of or compliance with Sections 1.1 and 1.2 of the
Assignment Agreement and the failure by the Inventor to cure the default within
such 30 day period, (ii) engages in the same or similar type of business as the
Company or engages in a thermoelectric business competitive with the Company or
(iii) contests the validity or enforceability of the assignment of the
Technology under the Assignment Agreement except in connection with the
Inventor's reversionary rights under the Assignment Agreement upon the
liquidation or winding up of the Company.
2.3 Timing of Payments. The Contract Payment payable to the Inventor (or
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the persons designated by the Inventor under Section 4.1), his successors, heirs
and permitted assigns shall be paid in arrears by the Company within 45 days
after the end of each Fiscal Quarter during the Term of this Agreement,
notwithstanding the termination of Inventor's employment with Company or any of
its affiliates for any reason whatsoever, including death of the Inventor. The
Company shall accompany the Contract Payment with a reasonably detailed
statement of calculation of the Contract Payment amounts (a "Statement").
2.4 Option to Receive Contract Payment in Equity. If the Company licenses
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any of its Basic Technology to a third party and the Company receives common
stock or other equity interests of the third party in satisfaction of a Royalty
Receivable, the Company and the Inventor shall mutually agree as to any Contract
Payment applicable to such Royalty Receivable payable in equity and, in lieu of
such agreement, the Inventor shall receive the Contract Payment in the form of a
pro rata share of such Royalty Receivables payable in equity.
2.5 Special Events. Notwithstanding any other provisions of this
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Agreement, the aggregate amount of Contract Payments in any Fiscal Year shall be
subject to the limitations set forth in this Section 2.5. Upon the occurrence
of any Special Event, if the Inventor's Equity Interest has an aggregate fair
market value (as deemed to be the value as determined by the Board of Directors
of the Company in the good faith exercise of its business judgment, irrespective
of the accounting treatment thereof) on the closing date of the Special Event
of:
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(a) at least $25,000,000, but less than $50,000,000, then (i) from
such date forward, the aggregate amount of Contract Payments in any Fiscal Year
shall not exceed $5,000,000 and (ii) the Term of this Agreement shall be revised
to be the shorter of (A) ten years from such date or (B) the period from such
date through the end of the Term of this Agreement specified in Section 2.2;
(b) at least $50,000,000, but less than $100,000,000, then from such
date forward, the aggregate amount of Contract Payments in any Fiscal Year shall
not exceed $2,500,000 and (ii) the Term of this Agreement shall be revised to be
the shorter of (A) ten years from such date or (B) the period from such date
through the end of the Term of this Agreement specified in Section 2.2; or
(c) equal to or greater than $100,000,000, then as of such date the
Company's obligation to make Contract Payments to the Inventor shall terminate
and have no further force and effect and this Agreement shall be terminated;
provided, that the Company shall pay the Inventor any Contract Payments accrued
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but unpaid to the Inventor as of such date.
2.6 Certain Approval Rights. The Inventor shall have the right to
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approve, prior to execution, the Royalty Receivables in any license, agreement,
contract or similar arrangement entered into with a third party by the Company
in which Royalty Receivables will be less than 5% of the third party's Covered
Revenue from Covered Products. The Company shall provide to the Inventor for
his approval the proposed terms of such Royalty Receivables (including, if
applicable, the types of equity interests described in Section 2.4 which may be
received) no later than 10 business days prior to the proposed execution of such
license, agreement, contract or similar arrangement for the Inventor's approval
shall not be unreasonable withheld.
ARTICLE III
PAYMENT DISCLAIMER AND REALLOCATION; PERMITTED ASSIGNMENTS
3.1 Payment Disclaimer and Reallocation. The Inventor shall have the
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right, no later than 15 days prior to the beginning of each Fiscal Quarter, to
deliver a written notice to the Company disclaiming the Inventor's right to
receive all or any part of the Contract Payment to be paid at the end of such
Fiscal Quarter (other than the share of the Contract Payment to be paid to
Inventor's permitted assigns). Upon approval of the Board of Directors of the
Company of such a disclaimer, which approval shall not be unreasonably withheld,
the Inventor shall have the right to reallocate the amount of Contract Payment
disclaimed by the Inventor to current or former officers, employees, consultants
and contractors of the Company. If the Inventor fails to instruct the Company,
then the Contract Payment payable at the end of such Fiscal Quarter shall be
paid to the Inventor.
3.2 Payment Assignments. The Inventor shall have the right to sell,
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transfer or hypothecate ("assign") all or any part of the Inventor's right to
receive the Contract Payment. Any such assignment shall be irrevocable and
subject to all pertinent laws and governmental regulations and to the rights of
the Company under this Agreement. In the event of any such irrevocable
assignment by the Inventor, the Inventor shall deliver a written notice to the
Company detailing the name and address of the assignee and the amount of the
Contract
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Payment that should be paid to the assignee. Following any such assignment, the
Inventor shall have no further right or interest in the assigned portion of the
Contract Payment and the assignee shall become a Holder of a Contract Payment
Interest and treated as "Inventor" for all purposes hereunder with respect to
his or her applicable percentage of the Contract Payment (other than with
respect to Section 2.6). If the Inventor assigns all of his right to receive the
Contract Payment, the Inventor shall cease to be a Holder of a Contract Payment
Interest. For purposes of this Section 3.2, the Company may rely on any written
notice believed by it to be genuine and to have been signed or presented by the
Inventor. The Company need not investigate any fact or matter stated in the
written notice.
ARTICLE IV
AUDIT RIGHTS; OWNERSHIP; SALE OF TECHNOLOGY
4.1 Accounting Records re Exploitation; Audit Rights.
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(a) The Company shall keep books of account relating to its
operations, together with records supporting the same (all of which are
hereinafter referred to as "records"). The Inventor may audit the applicable
records at the place where the Company maintains the same in order to verify
Statements rendered hereunder. Any such audit shall be conducted by a reputable
public accountant during reasonable business hours in such manner as not to
interfere with the Company's normal business activities. In no event shall an
audit with respect to any Statement commence later than 24 months from end of
the Fiscal Quarter to which such Statement relates; nor shall audits be made
hereunder more frequently than once annually; nor shall the records supporting
any Statement be audited more than once. All Statements rendered hereunder shall
be binding upon the Inventor and not subject to objection for any reason if the
Inventor has not commenced an audit thereof within 24 months from the end of the
Fiscal Quarter to which a Statement relates. If the Company, as a courtesy to
the Inventor, shall include cumulative figures in any Statement, the time within
which the Inventor may commence any audit or make any objection in respect of
any statement shall not be enlarged or extended thereby. Subject to Section
4.1(c), the fees and expenses incurred by the public accountant retained by the
Inventor in connection with any audit under this Section 4.1(a) shall be divided
evenly between the Company and the Inventor, provided that the Company shall not
be obligated to pay more than $25,000 of such fees and expenses per audit.
(b) If the Inventor contests any computations made in connection with
a Statement, the Inventor shall provide written notice to the Company stating
each item as to which the Investor takes exception, specifying reasonable detail
the nature and extent of any such exception. If a proposed change is disputed
by the Company, then the Company and the Inventor shall negotiate in good faith
to resolve such dispute. If, after a period of 20 days following the date on
which the Inventor gives the Company notice of any proposed change which remains
disputed, then the Company and the Inventor shall choose any independent firm of
public accountants of nationally recognized standing other than the auditor of
Amerigon Incorporated or the Company at such time to resolve any remaining
dispute. The accounting firm shall act as an arbitrator to determine, based
solely on presentations by the parties and not by independent review, only those
issues still in dispute. The decision of the accounting firm shall be final and
binding. All of the fees and expenses of the accounting firm shall be paid
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equally by the Company and the Investor; provided, however, that if the
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accounting firm determines that either party's position is totally correct, then
the other party shall pay 100% of the costs and expenses incurred by the
accounting firm in connection with any such determination. Any disputes other
than computational errors shall be settled in accordance with Sections 5.6 and
5.7.
(c) If any audit of the Company's records by the Inventor reveals
that the Company has failed to properly account for and pay the Inventor the
Contract Payment that should have been paid for any Fiscal Quarter, and the
amount of any Contract Payment which the Company has failed to properly account
and pay for in aggregate in any Fiscal Year exceeds by 5% or more, the amount of
Contract Payment actually accounted for and paid to the Inventor for such Fiscal
Year, the Company shall, in addition to paying the Inventor such overdue
percentage of Contract Payment, pay the Inventor an additional 10% of the
Contract Payment that should have been paid for that Fiscal Year and reimburse
the Inventor for his direct, reasonable out-of-pocket expenses incurred in
conducting such audit.
(d) Any license, agreement, contract or similar arrangement entered
into Company with a third party in which Royalty Receivables are receivable by
the Company shall contain usual and customary rights to audit such third party.
The Inventor shall have access to all records received by the Company from such
third parties supporting Royalties Receivable and Covered Revenues received from
such third party for which a Contract Payment is payable to the Inventor. The
Inventor shall further have the right to request the Company to exercise the
Company's audit rights with respect to third parties under any license,
agreement, contract or similar arrangement entered for which Royalty Receivables
are receivable and the Company shall reasonably comply with such request.
4.2 Ownership. The Inventor expressly acknowledges that the Inventor has
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and will have no right, title or ownership interest of any kind or character
whatsoever in or to the Basic Technology, or to the literary, scientific or
engineering material upon which the Basic Technology is based, or from which it
may be adapted, and no lien thereon or other rights thereto, except as expressly
provided herein and any reversionary rights upon a liquidation or winding up of
the Company; and that the same shall be and remain the Company's sole and
exclusive property. Subject to the Inventor's rights hereunder, including,
without limitation, the Inventor's rights under Section 2.6, the Company shall
have the sole and exclusive right to utilize, sell, license or otherwise dispose
of all or any part of its rights in the Basic Technology or such literary,
scientific or engineering material. The Company shall not be obligated to
segregate Contract Payment from its other funds, it being the intent and purpose
hereof that Contract Payment is referred to herein merely as a measure in
determining the time and manner of payment to Inventor. The Contract Payment is
unfunded by the Company and subject to the claims of the Company's creditors.
4.3 Exploitation. As between the Inventor and the Company, subject to
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Section 2.6, the Company shall have complete authority to exploit the Basic
Technology and license the incorporation and use thereof throughout the world.
The Company shall have the broadest possible latitude in the exploitation of the
Basic Technology, and the exercise of its judgment in good faith in all matters
pertaining thereto shall be final. The Company has not made any express or
implied representation, warranty, guarantee or agreement as to the amount of
proceeds
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which will be derived from the exploitation of the Basic Technology, nor has the
Company made any express or implied representation, warranty, guarantee or
agreement that there will be any sums payable to Inventor hereunder, or that the
Basic Technology will be favorably received by manufacturers or consumers, or
will be exploited continuously. In no event shall the Company incur any
liability based upon any claim that the Company has failed to realize receipts
or revenue which should or could have been realized. Subject to Section 2.6, the
Company may exploit the Basic Technology itself or through such licensees,
sublicensees and other parties as the Company may, in its uncontrolled
discretion, determine, upon such terms and conditions as the Company may deem
advisable, and the Company may refrain from exploiting the Basic Technology in
any territory for any reason whatsoever.
4.4 Sale of Technology. The Company shall have the right at any time to
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sell, transfer or assign all or any of its rights in and to the Basic
Technology. Any such sale, transfer or assignment shall be subject to the
Inventor's rights hereunder, and upon the purchaser, transferee or assignee
assuming performance of this Agreement in place and stead of the Company, the
Company shall be released and discharged of and from any further liability or
obligation hereunder. No part of any sales price or other consideration
received by, or payable to, the Company shall be included in the Company's
Covered Revenues and the Inventor shall have no rights under this Agreement in
respect of any thereof.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Governing Law. This Agreement and the rights and obligations of the
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parties hereunder shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of the State of California, without regard to
conflicts of laws principles, and of the United States.
5.2 Notices. Any notice or other communication provided for in this
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Agreement shall be in writing and sent to the address listed under each party's
signature hereto or at such other address a party may from time to time in
writing designate. Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified pursuant to this Section and a confirmation of transmission is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
5.3 Amendments. No amendment, modification, termination or waiver of any
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provision of this Agreement, shall be effective unless the same shall be in
writing and signed by Inventor and, on behalf of the Company, by a senior
executive officer after approval thereof by the Board of Directors. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
5.4 Severability. If any provision of this Agreement is held invalid or
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unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular circumstances, it shall
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nevertheless remain in full force and effect in all other circumstances, to the
fullest extent permitted by law.
5.5 Integration. This Agreement, together with any exhibits and schedules
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hereto, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
5.6 Dispute Resolution. Except as otherwise provided in Section 4.1(b),
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the parties shall attempt in good faith to resolve any disputes or future
agreements arising out of or relating to this Agreement (including any Contract
Payments to be mutually agreed to under Section 2.1). In particular, those
executives of the respective parties who have authority to settle the
controversy and have direct responsibility for administration of the
relationships established pursuant to this Agreement shall attempt in good faith
to negotiate a settlement pursuant to the following process:
(a) Any party having a dispute or claim shall give the other party
written notice stating the nature of the matter in reasonable detail. Within
five business days after delivery of the notice, the receiving party shall
submit to the other a written response also in reasonable detail. Within five
business days after delivery of the written response, decisionmakers from both
parties shall meet (in person or by telephone) at a mutually acceptable time and
place (including telephonic conference), and thereafter as often as they
reasonably deem necessary, to attempt to resolve the matter. All reasonable
requests for information made by one party to the other shall be honored.
(b) If the matter has not been resolved by the persons referred to
above within ten days of the first meeting of such persons, the matter shall be
referred to more senior executives of each party who have authority to settle
the matter and who shall likewise meet (in person or by telephone) to attempt to
resolve the matter. Within five business days after the referral of the matter
to more senior executives of each party, the senior executives of both parties
shall meet at a mutually acceptable time and place (including telephonic
conference), and thereafter as often as they reasonably deem necessary, to
attempt to resolve the dispute.
(c) If the matter has not been resolved within ten days from the
referral of the matter to such senior executives, then the parties may pursue
arbitration in accordance with Section 5.7.
5.7 Arbitration. Except as otherwise provided in Section 4.1(b), any
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controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, other than a
controversy or claim arising out of or relating to a calculation pursuant to any
of its provisions, shall be submitted to arbitration, to be held in Los Angeles
County, California in accordance with California Civil Procedure Code Sections
1282-1284.2. Any controversy or claim arising out of or relating to a
calculation pursuant to any provision of this Agreement shall be resolved
pursuant to Section 4.1(iii). Inventor shall have a right to submit such
resolution to arbitration in accordance with the provisions of this Section 5.7
governing arbitration of any controversy or claim not arising out of or relating
to a calculation under this Agreement. In the event either party institutes
arbitration under this Agreement, the party prevailing in any such
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arbitration shall be entitled, in addition to all other relief, to reasonable
attorneys' fees relating to such arbitration. The nonprevailing party shall be
responsible for all costs of the arbitration, including but not limited to, the
arbitration fees, court reporter fees, etc.
5.8 Further Assurances. Each party hereto agrees to execute, acknowledge
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and deliver any and all further instruments, and to do any and all further acts,
as may be necessary or appropriate to carry out the intent and purpose of this
Agreement, and each party will use its best efforts to obtain any and all third
party consents or approvals necessary or useful for the consummation of the
transactions contemplated by this Agreement.
5.9 Headings. The Article headings in this Agreement are for convenience
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only, and shall not be considered a part of, or affect the interpretation of,
any provision of this Agreement.
5.10 Counterparts. This Agreement may be executed in one or more
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counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: BSST, LLC
By: ____________________________
Its: ___________________________
Notice address:
INVENTOR: XX. XXX X. XXXX
_______________________________
Notice address:
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