Exhibit 10
JOINT STRATEGIC AGREEMENT
THIS JOINT STRATEGIC AGREEMENT (the "Agreement") is made as of
November 8, 2002, by and between Chapeau, Inc., a Utah corporation (the
"Company") and Southern California Gas Company, a California corporation
("SCG").
RECITALS
A. SCG proposes to establish one or more "showcase centers" at a SCG
customer (the "Customer") site located in SCG's service territory.
B. SCG and the Company have agreed that each such showcase center
will feature the Company's 260 kw Lean-One System for Cogeneration and
Power Generation (the "System").
C. The Company and SCG have further agreed that SCG will showcase
the System to its customers and anyone else of its choosing, as set
forth in this Agreement.
D. In consideration for SCG's showcase efforts with respect to the
System, the Company shall pay SCG a royalty on System sales as set
forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, and intending to
be legally bound, the Company and SCG hereby agree as follows:
1. Investment in Showcase Center.
(a) SCG shall identify site selection for a commercial location
where SCG and a Customer have agreed upon an economic partnership to
showcase, among other things, the Company's System (a "Showcase Center").
Site selection shall be deemed complete when (i) SCG has identified a site
for a Showcase Center, (ii) the Customer has agreed that its site shall be
a Showcase Center and (iii) the Company has received a purchase order for a
System from such Customer on terms agreeable between the Company and such
Customer (and the Company has notified and forwarded to SCG copies of same)
including, but not limited to the following terms: (1) the Customer
obtaining all local and air quality permits required in connection with the
operation of such System at the Showcase Center, with assistance from the
Company, if requested,(2) the Customer making arrangements for the
installation and connection/commissioning of such System at the Showcase
Center, with reasonable assistance from the Company if necessary, and (3)
the Customer obtaining a maintenance contract with a responsible provider
acceptable to the Company for each System installed at the Showcase Center.
(b) Upon completion of site selection for the initial Showcase
Center, SCG shall fund an amount in cash agreeable between SCG and the
Customer in the Showcase Center. The amount of cash invested by SCG in
such Showcase Center shall be confirmed to the Company in writing to
establish the aggregate investment amount for purposes of the royalty
calculation in Section 4(b) of this Agreement. The amount so invested will
hereinafter be referred to as the "Eligible Investment."
(c) SCG may, at its option, select additional sites for Showcase
Centers for a period of twenty-four (24) months from the date of this
Agreement and invest up to an aggregate maximum of one million dollars
($1,000,000) (the amounts so invested will be aggregated with and included
as part of the Eligible Investment) under the same terms and conditions of
this Agreement.
2. Responsibilities of SCG and the Customer. SCG hereby covenants
and agrees with the Company as follows:
(a) The Company shall be the exclusive supplier of natural gas
reciprocating engine cogeneration equipment at each Showcase Center as
identified in Section 1 of this Agreement for the term of this Agreement.
Each Showcase Center as identified in Section 1 of this Agreement may
include other non-reciprocating engine cogeneration technologies. SCG may,
however, at its election, create other showcase centers utilizing competing
natural gas reciprocating engine cogeneration equipment independent of the
Showcase Center site(s) identified in Section 1 of this Agreement.
(b) SCG shall use commercially reasonable efforts to maintain a
log of all interested parties who visit Showcase Centers and have given SCG
permission to pass along contact information to the Company for follow-up.
Such contact information should include name of entity, name of
individual(s) reviewing such Showcase Center, address, phone number, etc.
SCG will forward to the Company, only with permission of each interested
party, such contact information.
(c) SCG shall provide on a commercially reasonable basis "pass-
through" of the Company's Lean-One System marketing materials (stored on
site) to Showcase Center demonstration participants, should a participant
request such material or information regarding the Company's products.
3. Responsibilities of the Company. The Company hereby covenants
and agrees with SCG that it shall do the following:
(a) it shall provide a factory-tested System to the Customer at
each Showcase Center, F.O.B. Reno, Nevada.
(b) it shall provide factory start up services for the Customer
for each System installed at a Showcase Center.
(c) it shall assist the Customer with any necessary engineering
or installation of a System at a Showcase Center.
(d) it shall provide the Customer with its standard one-year
warranty for each System installed at a Showcase Center, including all
labor and material.
(e) it shall provide the Customer with referrals for factory-
approved firms for service and maintenance of each System installed at a
Showcase Center:
(f) it shall provide the Customer with the names of installation
firms for installation of a System at a Showcase Center, if requested.
4. Royalties.
(a) Royalties payable by the Company to SCG shall be calculated
at a rate of three percent (3%) of net System sales for each System sold
(the "Earned Royalties"). "Net sales" shall mean the sales price of such
System less: (i) any charges for taxes, shipping and insurance charges; and
(ii) allowances for returned or defective goods and trade, quantity and
cash discounts for such System. A System will be considered "sold" when
the full purchase price for such System has been paid, or deemed to have
been paid by whatever means or method, to the Company. Revenue from any
other source including, but not limited to, maintenance services, technical
assistance, spare parts and monitoring services shall be excluded from net
sales in calculating Earned Royalties.
(b) The Company shall pay SCG Earned Royalties of three (3)
times the Eligible Investment upon completion of site selection for each
Showcase Center as identified in Section 1 of this Agreement. The maximum
Earned Royalties payable by the Company to SCG under this Agreement is
three million dollars ($3,000,000).
(c) Earned Royalties shall be due and payable in cash on the
15th day of each April, July, October and January calculated through the
end of the immediately preceding quarter until such time as aggregate
royalties, as set forth above, up to a maximum of three (3) times the
Eligible Investment has been paid by the Company to SCG. Thereafter, the
Company shall have no further obligations to make any payment to SCG under
this Agreement.
5. Term and Termination.
(a) This Agreement shall terminate upon the Company's
satisfaction in full of its payment obligations under Section 4 of this
Agreement, unless sooner terminated by mutual agreement of the parties or
in accordance with this Agreement.
(b) Either party may terminate this Agreement for default if the
other party materially breaches this Agreement; provided, however, no right
of termination due to default shall accrue until fifteen (15) days after
the defaulting party is notified in writing of the material breach causing
such breach and has failed to cure or give adequate assurances of
performance within the fifteen (15) day period after such notice of
material breach.
(c) Sections 7 and 8 shall survive termination of this Agreement
for any reason.
6. Representations and Warranties. The Company and SCG hereby
represent and warrant to the other party follows:
(a) Organization, Good Standing and Qualification. Each such
party is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted.
(b) Authorization. All corporate action on the part of each
such party, and its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of
all obligations of such party hereunder has been taken and the Agreement
constitutes the valid and legally binding obligation of such party,
enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
7. Confidentiality
(a) For the purpose of this Agreement:
(i) "Confidential Information" means information (in any
form or media) regarding a party's customers, prospective customers
(including lists of customers and prospective customers), methods of
operation, engineering methods and processes (include any information which
may be obtained by a party by reverse engineering, decompiling or examining
any software or hardware provided by the other party under this Agreement),
programs and databases, patents and designs, billing rates, billing
procedures, vendors and suppliers, business methods, finances, management,
or any other business information relating to such party (whether
constituting a trade secret or proprietary or otherwise) which has value to
such party and is treated by such party as being confidential; provided,
however, that Confidential Information does not include information that
(i) is lawfully known to the other party without obligation of
confidentiality prior to receipt from the disclosing party hereunder, which
knowledge shall be evidenced by written records, (ii) is or becomes in the
public domain through no breach of this Agreement, or (iii) is received
from a third party without breach of any obligation of confidentiality.
(ii) "Person" shall mean and include any individual,
partnership, association, corporation, trust, unincorporated organization,
limited liability company or any other business entity or enterprise.
(iii) "Representative" shall mean a party's employees,
agents, or representatives, including, without limitation, financial
advisors, lawyers, accountants, experts, and consultants.
(b) Each party shall have the following obligations of
confidentiality:
(i) In connection with this Agreement, each party
(the "Disclosing Party") may furnish to the other party (the
"Receiving Party") or its Representatives certain Confidential
Information. During the term of this Agreement and for a period
of three (3) years after termination of this Agreement, the
Receiving Party (a) shall maintain as confidential all
Confidential Information heretofore or hereafter disclosed to it
by the Disclosing Party, (b) shall not, directly or indirectly,
disclose any such Confidential Information to any Person other
than those Representatives of the Receiving Party whose duties
justify the need to know such Confidential Information and then
only after each Representative has agreed in writing to be bound
by this Confidentiality Agreement and clearly understands his or
her obligation to protect the confidentiality of such
Confidential Information and to restrict the use of such
Confidential Information and (c) shall treat such Confidential
Information with the same degree of care as it treats its own
Confidential Information (but in no case with less than a
reasonable degree of care).
(ii) The disclosure of any Confidential Information is
solely for the purpose of enabling each party to perform under this
Agreement, and the Receiving Party shall not use any Confidential
Information disclosed by the Disclosing Party for any other purpose.
(iii) Except as otherwise set forth in this Agreement,
all Confidential Information supplied by the Disclosing Party shall remain
the property of the Disclosing Party, and will be promptly returned by the
Receiving Party upon receipt of written request therefor.
(iv) If the Receiving Party or its Representative is
requested or become legally compelled to disclose any of the Confidential
Information, it will provide the Disclosing Party with prompt written
notice. If a protective order or other remedy is not obtained, then only
that part of the Confidential Information that is legally required to be
furnished will be furnished, and reasonable efforts will be made to obtain
reliable assurances of confidentiality.
8. No Rights to Company Intellectual Property. Nothing in this
Agreement shall be construed to grant to either party any license or other
rights to any technology, intellectual property or other proprietary rights
of the other party.
9. Miscellaneous.
(a) Relationship of the Parties. The relationship of the
Company and SCG established by this Agreement is solely that of independent
contractors, and nothing in this Agreement shall be construed to (i) give
either party the power to direct and control the day-to-day activities of
the other or (ii) constitute the parties as joint venturers, co-owners or
otherwise as participants in a joint or common undertaking or (iii) make
either party an agent of the other for any purpose whatsoever.
(b) Expenses. The Company and SCG shall each be responsible for
their own costs and expenses (including, without limitation, legal fees)
incurred by it in connection with the negotiation, execution and delivery
of this Agreement.
(c) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to
agreements among California residents entered into and to be performed
entirely within California.
(d) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
(e) Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given (a) five (5) days after deposit
with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if
delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid, or (d)
one day after the business day of delivery by facsimile transmission, if
deliverable by facsimile transmission, with copy by first class mail,
postage prepaid, and shall be addressed to set forth on the signature page
hereto or at such other address as such party may designate by ten (10)
days' advance written notice to the other party hereto.
(f) Amendments and Waivers; Severability. Any term of this
Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Company and SCG. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
(g) Entire Agreement. This Agreement constitutes the entire
agreement between the Company and SCG with respect to the subject matter
hereof and supersedes all previous agreements, written or oral, covering
the subject matter of this Agreement.
(h) Further Assurances. The parties agree from time to time and
without further consideration, to execute and deliver such further
documents and take such further actions as reasonably may be required to
implement and effectuate the transactions contemplated in this Agreement.
(i) Counterparts; Originals. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement may be executed and delivered by telecopy or facsimile and
execution in such manner shall constitute an original.
IN WITNESS WHEREOF, the Company and SCG have executed this
Agreement as of the date first above written.
THE COMPANY:
CHAPEAU, INC.
By: /s/ Xxx X. Xxxxxxxx
--------------------
Name: Xxx X. Xxxxxxxx
Title: Chief Executive Officer
Address: 0000 Xxxxxxxx Xxxx
Xxxxxxx Xxx, XX 00000
SCG:
SOUTHERN CALIFORNIA GAS COMPANY
By: /s/ Xxxxx Bereokoff
---------------------
Name: Xxxxx Xxxxxxxx
Title: Technology Development Manager
Address: X.X. Xxx 0000
Xxx Xxxxx, XX 00000
