EXHIBIT 10.4
MASTER AGREEMENT
This Master Agreement (the "Agreement"), made this 27th day of March,
1995, by and between Noise Cancellation Technologies, Inc., a Delaware
corporation, having its principal place of business at 000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000 ("NCT"), and QuietPower Systems, Inc. (formerly
Active Acoustical Solutions, Inc.), a Delaware corporation, having its principal
place of business at 0000 Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000
("QuietPower").
W I T N E S S E T H:
WHEREAS, QuietPower and NCT have previously entered into a series of
marketing and distribution agreements pursuant to which NCT, among other things,
has granted certain exclusive licenses and non-exclusive marketing rights to
QuietPower;
WHEREAS, QuietPower and NCT desire to expand the scope of their current
relationship;
WHEREAS, it is the intent of both QuietPower and NCT to make QuietPower
the development and distribution channel for active noise control products for
the electric and gas power generation, transmission, distribution, and supply
industries.
NOW, THEREFORE, in consideration of the covenants set forth herein, the
parties hereto agree as follows:
1. Definitions.
1.1 Active System. Active System shall mean all components of an
Exclusive Product, including non-electronic components, such as brackets and
other mounting devices, cable and other equipment, the purpose of which is
integral to the functioning of a system which reduces noise and/or vibration.
1.2 Actual Cost. Actual Cost shall mean direct out-of-pocket costs
of (a) labor (plus associated fringe benefits); and (b) materials.
1.3 Affiliate. Affiliate shall mean, with respect to each party, any
corporation or other legal entity that directly or indirectly controls, is
controlled by, or is under common control with, the party, but only for so long
as such control continues. For purpose of this definition, "control" means the
power, whether or not normally exercised, to direct the management and affairs
of another corporation or other legal entity, directly or indirectly, whether
through the ownership of voting securities, by contract, or otherwise.
1.4 Exclusive Products. Exclusive Products shall mean all products
to which QuietPower has received an exclusive license from NCT. Exclusive
Products shall include the products and applications described in Section 2.1
hereof (i.e., transformer quieting products and steam and gas turbine quieting
products), the Funded Products, and the New Products described in Section 2.2(b)
hereof.
1.5 Far East. The Far East shall mean China, Indonesia, Japan,
Korea, Malaysia, Singapore, Thailand, and Taiwan.
1.6 Funded Product. Funded Product shall mean any New Product to
which QuietPower commits to provide Funding as set forth in Section 4.2 hereof.
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1.7 Funding. Funding shall mean all amounts necessary to develop and
commercialize the Transformer Quieting Products, the Turbine Quieting Products,
and a New Product as set forth in the applicable Development Schedule.
1.8 Gross Revenues. Gross Revenues shall mean, for the purposes of
determining the commissions and other amounts due and payable under this
Agreement, the revenues received by a party net of packing and transportation
costs, insurance costs, applicable sale, excise, value-added, and other taxes
not based on income, applicable customs duties, fees, and charges, but not net
of commissions or fees payable to other parties under agreements between NCT or
QuietPower, as the case may be, and any such other party. "Revenues", for
purposes of Gross Revenues, may include, without limitation, product sale
revenues, license fees and royalties.
1.9 Industry. Industry shall mean the electric and gas power
generation, transmission, distribution, and supply industries, including (a)
electric and gas utilities; (b) independent power producers; (c) cogeneration
facilities; (d) commercial entities that produce, transmit, distribute, or
supply power for their own internal usage; (e) engineering firms servicing the
power industry; and (f) distributors and manufacturers selling products directly
to the power industry.
1.10 Licensed Patents. Licensed Patents shall mean all patents and
patent applications, together with any continuations or continuations in part
thereof, and all patents issuing thereon including reissues, patents of
addition, and any registration or confirmation patents corresponding thereto,
that are now or hereafter owned or controlled by NCT or its Affiliates, to the
extent such patents and patent applications relate to the Active Systems.
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1.11 Licensed Products. Licensed Products shall mean, collectively,
the Exclusive Products and the Non-Exclusive Products.
1.12 New Product. New Product shall mean any product or application
that has not been identified and covered in this Agreement that has application
within the Industry.
1.13 Non-Exclusive Products. Non-Exclusive Products shall mean all
of NCT's active noise and vibration control products or applications, other than
(a) Exclusive Products; (b) active headsets; (c) active mufflers/silencers; and
(d) products to which NCT has granted or will grant exclusive licenses to third
parties.
1.14 Technical Information. Technical Information shall mean all
information and know-how now or hereafter owned or controlled by NCT or any of
its Affiliates relating to the Active Systems.
1.15 Transformer Quieting Product. Transformer Quieting Product
shall mean a multiple input multiple output active noise and vibration control
system designed to quiet the low frequency tonal hum of stationary electrical
equipment such as transformers. The method of control is either through direct
alteration of the surface vibration patterns or through the coupling of
anti-noise with propagating acoustic waves that are generated by surface
deflections. The system is typically comprised of three components: sensors
monitoring the transformer tones, digital controller software which processes
the sensor information and computes an opposite signal for cancellation, and
actuators which physically produce the anti-noise.
1.16 Turbine Quieting Product. Turbine Quieting Product shall mean a
multiple input multiple output active noise control system designed to quiet the
tonal and broad band noise associated with the inlet and outlet fans of bypass
turbofan engines. Control is
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achieved with the coupling of sound from the noise source with anti-noise waves.
The system typically has five main components: an inflow control device,
reference sensors, an algorithm with filters to generate the control signals,
control sources in the form of speakers or other transducers mounted on the
inlet of the engine or in the far field, and error sensors which provide
feedback on the residual noise.
2. Grant of Licenses.
2.1 Grant of Exclusive License. NCT hereby grants to QuietPower the
exclusive and worldwide license under the Licensed Patents and to the Technical
Information to manufacture (to the extent set forth in Section 5.2 hereto),
market, sell, and distribute the following products and applications for use
within the Industry:
(a) Transformer Quieting Products (including all upgrades and
improvements thereto); provided, however, that NCT shall, solely with Japanese
owned companies, maintain the right to manufacture, market, sell, and license
Transformer Quieting Products in the Far East, and, provided further, that
QuietPower shall otherwise have the exclusive license to manufacture, market,
sell, and distribute Transformer Quieting Products in the Far East; and
(b) Turbine Quieting Products (including all upgrades and
improvements thereto), to the extent of NCT's current rights therein. Schedule
2.1 sets forth a list of all rights of entities other than NCT in the Turbine
Quieting Products as of the date hereof.
2.2 Right to Obtain Exclusive License.
(a) Funded Products. NCT shall grant to QuietPower the
exclusive and worldwide license under the Licensed Patents and to the Technical
Information to manufacture
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(to the extent set forth in Section 5.2 hereof), market, sell, and distribute
all Funded Products. The Funding for each New Product shall constitute the
entirety of all payments by QuietPower to NCT necessary to obtain the licenses
for such Funded Product, and no additional license fees shall be required by
NCT.
(b) Products That NCT Does Not Develop. In the event that (i)
NCT chooses not to, or is unable to, develop a New Product as described in
Section 4.2(b) hereof; or (ii) NCT and QuietPower fail to agree on the cost or
other material terms of developing the Transformer Quieting Products or the
Turbine Quieting Products as described in Section 4.1(c) hereof or a New Product
as described in Section 4.2(e) hereof, then NCT shall grant to QuietPower the
exclusive and worldwide license under the Licensed Patents and using the
Technical Information to develop, manufacture, market, distribute, and sell such
product to the Industry.
2.3 Non-Exclusive Marketing Rights. QuietPower's non-exclusive and
worldwide rights to market, sell, and distribute the Non-Exclusive Products
shall be governed by the Marketing Agreement, dated the date hereof (the
"Marketing Agreement").
2.4 Term of Licenses. Each of the licenses granted under Sections
2.1 and 2.2 hereof shall terminate upon expiration of NCT's intellectual
property rights in the Licensed Patents or upon the events set forth in Section
12 hereof.
2.5 Sublicense Rights. The licenses granted under Sections 2.1 and
2.2 hereof include the right of QuietPower to grant sublicenses to Affiliates of
QuietPower, and to unaffiliated third parties with the written consent of NCT,
which consent shall not be unreasonably withheld. Any sublicense agreement shall
be consistent with the terms of this Agreement.
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2.6 Retention of Property Rights. QuietPower acknowledges that all
right, title and interest in, to, and under the Licensed Patents and the
Technical Information shall remain the property of NCT, and QuietPower shall
have no right or interest therein other than as set forth in this Agreement.
2.7 Certain Bankruptcy Issues. QuietPower and NCT hereby agree that
(a) the Licensed Patents are protected patents under title 00, Xxxxxx Xxxxxx
Code; (b) the Licensed Patents and Technical Information constitute
"intellectual property" as that term is used in Section 101(35A) of title 11,
United States Code; and (c) this Agreement is governed by Section 365(n) of
title 11, United States Code, in the event that NCT files or is subject to a
case under title 11, United States Code.
3. Fees and Payments.
3.1 Exclusivity Fee. In order to obtain and maintain its exclusive
license to the Exclusive Products, QuietPower shall pay to NCT a non-refundable
exclusivity fee of $750,000 (the "Exclusivity Fee") of which $250,000 was paid
by QuietPower in June 1994 in connection with the Marketing, Engineering
Services and Distribution Agreement, relating to Retrofit Transformer Products,
dated May 15, 1993. The balance of $500,000 shall be payable in 30 equal monthly
installments of $16,666.67, commencing on the first day of the month succeeding
the execution of this Agreement; provided, however, that such $500,000 (or, such
lesser amount remaining after any payment of monthly installments) shall be
payable within 90 days of the closing date of an initial public offering or
private placement of QuietPower's securities in an amount in excess of
$2,000,000 (but not including the currently contemplated bridge/private
placement through Redstone Securities).
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3.2 Royalties to NCT.
(a) Exclusive Products Generally. Subject to Sections 4.1(c),
4.1(d), 4.2(b), 4.2(e), 4.2(h), and 5.2(a) hereof, QuietPower shall pay to NCT a
royalty of (i) 6% on Gross Revenues received by QuietPower from the sale by
QuietPower of Active Systems; or (ii) 50% on Gross Revenues received by
QuietPower from the sublicense by QuietPower of its rights under this Agreement;
provided, however, that a royalty shall be paid only after QuietPower has
recouped out of its pre-tax profits 150% of the Funding payments relating to the
Active System (it being understood that there shall be no duplication of
recoupment of Funding payments); and, provided, further, however, that
QuietPower shall deduct from Gross Revenues relating to Transformer Quieting
Products the amount of royalties QuietPower pays on NCT's behalf to certain
utilities (based upon agreements between NCT and such utilities) in return for
the funding such utilities provided to research and develop the Transformer
Quieting Products. The royalty obligations set forth in Sections 4.1(c), 4.1(d),
4.2(b), 4.2(e), and 4.2(h) hereof shall be in lieu of any royalty obligations
set forth in this Section 3.2(a).
(b) Payment Terms. Within 30 days following the end of each
quarter during the term of the Agreement, QuietPower shall (i) provide a
quarterly statement to NCT setting forth the amount of royalties payable to NCT
from the transactions described and referred to in this Section 3.2 during the
prior quarter as well as an analysis of the method by which such calculations
were made; and (ii) pay such amounts set forth in the quarterly statement to
NCT.
(c) No Duplication of Royalties. Except as set forth in
Section 5.2(a) hereof, for each Active System sold by QuietPower, NCT shall be
entitled to no more than one royalty of 6% on Gross Revenues received by
QuietPower. NCT shall be entitled to no more
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than one royalty of 50% on Gross Revenues received by QuietPower for the
sublicense by QuietPower of its right under the Agreement.
3.3 Royalties to QuietPower.
(a) Transformer Quieting Products in the Far East. NCT shall
pay to QuietPower a royalty of (i) 6% on Gross Revenues received by NCT from
sales of Transformer Quieting Products in the Far East; and (ii) 50% on the
Gross Revenues received by NCT from licensing Transformer Quieting Products in
the Far East, as described in Section 2.1(a) hereof.
(b) Exclusive Products Applicable Outside Industry. QuietPower
shall receive a royalty of (i) 6% on Gross Revenues received by NCT for
Exclusive Products (or products substantially similar to Exclusive Products,
regardless of operating environment) sold by NCT, and (ii) 50% of the Gross
Revenues received by NCT through the licensing of Exclusive Products (or
products substantially similar to Exclusive Products, regardless of operating
environment), outside the Industry to parties other than QuietPower, as
described in Section 4.4(b) hereof. Simultaneously with its approval of the
Development Schedule for an Exclusive Product applicable outside the Industry,
QuietPower shall elect whether or not to obtain non-exclusive marketing rights
to sell and/or license such Exclusive Product outside the Industry. If
QuietPower obtains the non-exclusive marketing rights in accordance with Section
2.3 hereof, then QuietPower shall receive the royalties payable by NCT set forth
in the first sentence of this Section 3.3(b) only until QuietPower has recouped
out of its pre-tax profits 150% of the Funding payments relating to such
Exclusive Product. If QuietPower does not obtain non-exclusive marketing rights,
then QuietPower shall receive royalties payable by NCT set forth in the first
sentence of this Section 3.3(b) only until QuietPower has recouped out of its
pre-tax profits 300% of the Funding payments related to such Exclusive Product.
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(c) Payment Terms. Within 30 days following the end of each
quarter during the term of this Agreement, NCT shall (i) provide a quarterly
statement to QuietPower setting forth the amount of royalties payable to
QuietPower from the transactions described in this Section 3.3 during the prior
quarter as well as an analysis of the method by which such calculations were
made; and (ii) pay such amounts set forth in the quarterly statement to
QuietPower.
(d) No Duplication of Royalties. For each product sold by NCT,
QuietPower shall be entitled to no more than one royalty of 6% on Gross Revenues
received by NCT. For each product licensed by NCT, QuietPower shall be entitled
to no more than one royalty of 50% of the Gross Revenues received by NCT.
3.4 Additional Payment Terms.
(a) Currency. Amounts payable under this Agreement shall be
paid in U.S. dollars or in such other currency as the parties may agree upon in
writing. Such payments shall be subject to applicable law and regulations
existing at the place of remittance. Sales of Licensed Products not denominated
in U.S. dollars and any amounts payable thereon shall first be determined in the
currency in which such Licensed Products were sold and shall then be converted
into the equivalent number of U.S. dollars at (i) the official closing rate, two
days prior to the date of payment under this Agreement, established by the
official central bank or by the exchange control authority in each such country;
or (ii) if no such official rate is available or if conversion pursuant to such
official rate cannot be effectuated by NCT or QuietPower, as the case may be,
two days prior to the date of payment hereunder, at the rate established by The
Chase Manhattan Bank.
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(b) Place of Payment. All payments under this Agreement shall
be made to NCT or QuietPower, as the case may be, at their respective addresses
as set forth above, or to such other address as either party shall hereafter
specify in accordance with Section 13.1 hereof.
4. Exclusive Products.
4.1 Transformer Quieting Products and Turbine Quieting Products.
(a) Development Schedule. NCT shall submit to QuietPower for
its review and approval, which approval shall not be unreasonably withheld, a
schedule (the "Development Schedule") setting forth in reasonable detail (i) a
development plan and timetable for the Transformer Quieting Products and the
Turbine Quieting Products, including a schedule of milestones within each
quarter that are readily measurable; and (ii) a schedule of all monthly costs,
including, but not limited to, itemized personnel and facilities costs to be
applied to each respective product, of implementing the development plan and
timetable, which shall be on the basis of Actual Cost, plus overhead as agreed
by the parties.
(b) Cost of and Resources Dedicated to Development. In the
event that QuietPower determines that (i) the cost of implementing the
development plan as set forth in the Development Schedule submitted by NCT is
unreasonably high; (ii) the timetable set forth in the Development Schedule is
unduly long; or (iii) the personnel, materials, or facilities set forth in the
Development Schedule are inadequate to implement the development plan,
QuietPower shall so notify NCT, and QuietPower and NCT shall thereupon enter
into good faith negotiations in an effort to produce a mutually agreeable
Development Schedule.
(c) Failure to Agree. In the event that, after a six month
period commencing from the date QuietPower informed NCT that the Development
Schedule was
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unacceptable, such issues have not been resolved, then (i) NCT shall assign to
QuietPower the exclusive and worldwide license to develop, manufacture, market,
distribute, and sell such Transformer Quieting Product or Turbine Quieting
Product to the Industry, provided that QuietPower agrees to fund its development
using its internal resources or through a third party; (ii) QuietPower shall pay
a royalty to NCT of (A) 6% on Gross Revenues received by QuietPower from the
sale of such product, or (B) 50% on Gross Revenues received by QuietPower from
the sublicense by QuietPower of its rights under the Agreement; provided,
however, that a royalty relating to such product shall be paid only after
QuietPower has recouped out of the pre-tax profits relating to such product 150%
of all costs incurred by QuietPower in the development of such product (it being
understood that there shall be no duplication of recoupment of costs incurred);
and (iii) after the Transformer Quieting Product or the Turbine Quieting Product
has been commercially developed, NCT shall have no obligation to manufacture
components for use with such product or supply such components (unless such
components are then-currently commercially available) pursuant to Section 5.2(c)
hereof.
(d) Funding Payments to NCT; Missed Milestones. Prior to the
commencement of each quarter as set forth on the applicable Development
Schedule, QuietPower shall pay NCT in advance the quarterly Funding payment as
set forth in the Development Schedule. NCT shall, within seven days from the end
of each quarter as set forth in the Development Schedule, notify QuietPower
whether or not it has completed the milestones scheduled for such quarter. If
NCT has not completed all of the milestones as scheduled, QuietPower shall
nonetheless pay the next quarterly Funding payment, and shall notify NCT that
NCT is not in compliance with the Development Schedule. If NCT fails to complete
all such milestones by the end of the next quarterly period as set forth in the
Development Schedule,
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other than a failure by NCT primarily caused by inappropriate action of
QuietPower, then QuietPower shall, immediately effective upon written notice to
NCT, have the right to develop and commercialize such product itself or engage
an entity other than NCT to develop and commercialize such product, and in such
event (i) NCT shall no longer be entitled to the applicable Funding payments;
and (ii) QuietPower shall pay a royalty to NCT of (A) 6% on Gross Revenues
received by QuietPower from the sales of such product, and (B) 50% on Gross
Revenues received by QuietPower from the sublicense by QuietPower of its rights
under this Agreement; provided, however, that a royalty relating to such product
shall be paid only after QuietPower has recouped out of the pre-tax profits
relating to such product 150% of all costs incurred by QuietPower in the
development of such product (it being understood that there shall be no
duplication of recoupment of costs incurred). In the event that QuietPower
exercises such right, NCT shall deliver to QuietPower all partially completed
products and applications and work-in-process, including full title thereto,
including all models, drawings, parts, molds, designs, papers, files, notes,
processes, test data, data, information in any form, plans, renderings, computer
hardware, software and programs, contained in documentary form or electronic
medium relating to such product.
(e) Obligations of NCT. Except as set forth in Section 4.1(c),
NCT shall, until the Transformer Quieting Products and Turbine Quieting Products
are fully commercialized, provide the necessary personnel, materials, and
facilities to fully develop and commercialize the Transformer Quieting Products
and the Turbine Quieting Products in accordance with the applicable Development
Schedule.
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4.2 Funded Products.
(a) Identification of New Products. From time to time, either
QuietPower or NCT may identify a New Product. In the event that a party
identifies a New Product, such party shall submit to the other party a proposal,
describing the New Product and the proposed market for such New Product.
(b) NCT's Decision Not to or Inability to Develop New Product.
After the receipt of a New Product proposal from QuietPower, NCT shall promptly
inform QuietPower of its decision to develop such New Product. In the event that
NCT chooses not to develop a New Product, or is unable to satisfactorily
demonstrate its ability to develop a New Product, due to financial, legal,
physical, or technological constraints, then NCT shall assign to QuietPower the
exclusive and worldwide license to develop, manufacture, market, distribute, and
sell such New Product to the Industry, provided that QuietPower agrees to fund
its development using internal resources or through a third party, and
QuietPower shall pay a royalty to NCT of (A) 6% on Gross Revenues received by
QuietPower from the sales of such New Product, and (B) 50% on Gross Revenues
received by QuietPower from the sublicense by QuietPower of its rights under
this Agreement; provided, however, that a royalty relating to such New Product
shall be paid only after QuietPower has recouped out of the pre-tax profits
relating to such New Product 150% of all costs incurred by QuietPower in the
development of such New Product (it being understood that there shall be no
duplication of recoupment of costs).
(c) Development Schedule. In the event that NCT chooses to
develop the New Product, NCT shall promptly submit to QuietPower for its review
and approval, which approval shall not be unreasonably withheld, a Development
Schedule setting forth in reasonable detail (i) a development plan and timetable
for the New Product, including a schedule of
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milestones within each quarter that are readily measurable; and (ii) a schedule
of all monthly costs, including, but not limited to, itemized personnel and
facilities costs to be applied to each respective product, of implementing the
development plan and timetable, which shall be on the basis of Actual Cost, plus
overhead as agreed by the parties.
(d) Cost of and Resources Dedicated to Development. In the
event that QuietPower determines that (i) the cost of implementing the
development plan as set forth in the Development Schedule submitted by NCT is
unreasonably high; (ii) the timetable set forth in the Development Schedule is
unduly long; or (iii) the personnel, materials, or facilities set forth in the
Development Schedule are inadequate to implement the development plan,
QuietPower shall so notify NCT, and QuietPower and NCT shall thereupon enter
into good faith negotiations in an effort to produce a mutually agreeable
Development Schedule.
(e) Failure to Agree. In the event that, after a six month
period commencing from the date QuietPower informed NCT that the Development
Schedule was unacceptable, such issues have not been resolved, then (i) NCT
shall assign to QuietPower the exclusive and worldwide license to develop,
manufacture, market, distribute, and sell such New Product to the Industry,
provided that QuietPower agrees to fund its development using its internal
resources or through a third party; (ii) QuietPower shall pay a royalty to NCT
of (A) 6% on Gross Revenues received by QuietPower from the sales of such New
Product, or (B) 50% on Gross Revenues received by QuietPower from the sublicense
by QuietPower of its rights under this Agreement; provided, however, that a
royalty relating to such New Product shall be paid only after QuietPower has
recouped out of the pre-tax profits relating to such New Product 150% of all
costs incurred by QuietPower in the development of such New Product (it being
understood that there shall be no duplication of recoupment of costs incurred);
and (iii) after the
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New Product has been commercially developed, NCT shall have no obligation to
manufacture components for use with a New Product or supply such components
(unless such components are then-currently commercially available) pursuant to
Section 5.2(c) hereof.
(f) Timing of QuietPower's Decision to Fund. Upon the
determination of the market for the New Product, as supported by a Development
Schedule approved by each of QuietPower and NCT, QuietPower shall have six
months from the date the Development Schedule has been approved by QuietPower to
elect to obtain the exclusive license and to commit to provide Funding for such
New Product.
(g) Third Party Proposals. If a third party approaches NCT
with a proposal to develop a New Product that is applicable only to the
Industry, then NCT shall not accept such proposal, and shall refer the third
party to QuietPower. If a third party approaches NCT with a proposal to develop
a New Product whose primary use is in the Industry, then, if NCT decides to seek
development of such New Product, NCT shall promptly submit a Development
Schedule to QuietPower, which shall then have six months to elect to commit to
provide Funding for such New Product. If QuietPower decides not to provide
Funding for such New Product, NCT shall then have six months from the date
QuietPower informed NCT of its decision to substantially commence development of
such New Product itself or through a third party; provided, however, that NCT
must have a genuine intent to develop the New Product in good faith. If NCT does
not substantially commence development during such six month period, and if NCT
wishes to pursue such development, NCT shall then again submit the Development
Schedule for such New Product to QuietPower, and QuietPower's right to develop
the New Product as set forth above shall be reinstated.
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(h) Funding Payments to NCT; Missed Milestones. Prior to the
commencement of each quarter as set forth on the applicable Development
Schedule, QuietPower shall pay NCT in advance the quarterly Funding payment as
set forth on the Development Schedule. NCT shall, within seven days from the end
of each quarter as set forth in the Development Schedule, notify QuietPower
whether or not it has completed the milestones as scheduled. If NCT has not
completed all of the milestones as scheduled, QuietPower shall nonetheless pay
the next quarterly Funding payment and shall notify NCT that NCT is not in
compliance with the Development Schedule. If NCT fails to complete all of such
milestones by the end of the next quarterly period as set forth in the
Development Schedule, other than a failure by NCT primarily caused by
inappropriate action of QuietPower, then QuietPower shall, immediately effective
upon written notice to NCT, have the right to develop and commercialize such
product itself or engage an entity other than NCT to develop and commercialize
such product, and in such event (i) NCT shall no longer be entitled to the
applicable Funding payments; and (ii) QuietPower shall pay a royalty to NCT of
(A) 6% on Gross Revenues received by QuietPower from the sale of such product,
and (B) 50% on Gross Revenues received by QuietPower from the sublicense of its
rights under this Agreement; provided, however, that a royalty relating to such
product shall be paid only after QuietPower has recouped out of the pre-tax
profits relating to such product 150% of all costs incurred by QuietPower in the
development of such product (it being understood that there shall be no
duplication of recoupment of costs incurred). In the event that QuietPower
exercises such right, NCT shall deliver to QuietPower all partially completed
products and applications and work-in-process, including full title thereto,
including all models, drawings, parts, molds, designs, papers, files, notes,
processes, test data, data, information in any form, plans, renderings, computer
hardware,
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software and programs, contained in documentary form or electronic medium
relating to such Funded Product.
(i) Obligations of NCT. Subject to Sections 4.2(b) and (e)
hereof, NCT shall, throughout the term of this Agreement, provide the necessary
personnel, materials, and facilities to fully develop and commercialize each
Funded Product in accordance with the applicable Development Schedule.
4.3 Loss of Exclusive License.
(a) Failure to Pay Exclusivity Fee. In the event that
QuietPower fails to pay an installment of the Exclusivity Fee when due, and such
failure is not corrected within 60 days after written notice by NCT of such
failure has been delivered to QuietPower, then:
(i) QuietPower shall lose its exclusive license to the
Exclusive Products (except to the extent as had been granted pursuant to the
Marketing, Engineering Services and Distribution Agreement dated May 15, 1993);
(ii) All Exclusive Products (other than Retrofit
Transformer Products) shall become Non-Exclusive Products; and
(iii) QuietPower shall be entitled to receive
commissions pursuant to the Marketing Agreement.
(b) Failure to Make Funding Payments. In the event that
QuietPower fails to make a scheduled Funding payment when due, and such failure
is not corrected within 60 days after written notice by NCT of such failure has
been delivered to QuietPower, then, as sole remedy for such failure:
(i) QuietPower shall lose its exclusive license to such
Exclusive Product;
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(ii) QuietPower shall receive a non-exclusive right to
market, sell, and distribute such product or application (i.e., such Exclusive
Product shall become a NonExclusive Product pursuant to the Marketing
Agreement);
(iii) QuietPower shall be entitled to receive
commissions pursuant to the Marketing Agreement; and
(iv) After NCT has recouped 100% of its Actual Cost
incurred in the development and commercialization of such product, NCT shall pay
to QuietPower (A) 3% of the Gross Revenues received by NCT from the sale of each
such product or application, and (B) 1/3 of the Gross Revenues received by NCT
from the license of each such product or application, until QuietPower has
received 100% of the Funding payments made by QuietPower relating to such
product or application.
4.4 Rights of NCT in Exclusive Products.
(a) Product Only Applicable to Industry. To the extent an
Exclusive Product is only applicable to the Industry, NCT shall not sell or
license for sale such Exclusive Product other than through QuietPower.
(b) Product Applicable Outside Industry. To the extent an
Exclusive Product may also be utilized outside the Industry, (i) NCT shall not
market such Exclusive Product directly to companies or other entities in the
Industry; and (ii) with respect to sales or fees obtained by NCT for Exclusive
Products sold or licensed by NCT outside the Industry to parties other than
QuietPower, NCT shall pay a royalty to QuietPower in accordance with Section
3.3(b) hereof.
19
5. Manufacturing Exclusive Products.
5.1 Manufacture by NCT. Except as set forth in Section 5.2(a)
hereof, NCT shall manufacture or cause to be manufactured the Exclusive
Products.
5.2 Manufacture by QuietPower.
(a) QuietPower's Right to Manufacture. Notwithstanding Section
5.1 hereof, QuietPower shall have the right to manufacture the Active System
itself or sublicense the manufacture of the Active System in the following
circumstances:
(i) in the event NCT does not participate in the
development of a Transformer Quieting Product or a Turbine Quieting Product as
described in Section 4.1(c) hereof or a New Product as described in Sections
4.2(b) and (e) hereof;
(ii) in the event that NCT does not desire to
manufacture or have manufactured, or is not financially able to manufacture or
have manufactured, the Active System;
(iii) in the event that QuietPower exercises its right
to develop and commercialize a Transformer Quieting Product or a Turbine
Quieting Product as described in Section 4.1(d) hereof or a New Product as
described in Section 4.2(h) hereof; or
(iv) at any time; provided, however, that if QuietPower
elects to exercise its right to manufacture the Exclusive Product pursuant to
this Section 5.2(a)(iv), then QuietPower shall, in addition to the royalty set
forth in Section 3.2(a) hereof, pay to NCT a royalty of 6% of the alternatively
manufactured cost; provided, further, however, that NCT shall be entitled to
this additional royalty only if NCT in good faith attempted to provide
acceptable product manufacturing.
20
(b) No Additional Royalties. Except as set forth in Section
5.2(a)(iv) hereof, NCT shall not be entitled to any additional royalties, other
than the royalties described in and referred to in Section 3.2(a) hereof, if
QuietPower exercises its right to manufacture an Active System itself or
sublicense its manufacture.
(c) Option to Purchase Components. In the event that
QuietPower manufactures an Active System itself or utilizes a third party
manufacturer, QuietPower shall have the option to purchase from NCT, and NCT
shall sell to QuietPower, some or all of the electronic and/or other integral
components that it has then-currently commercially available at the same
discount or price available to any other customer of NCT purchasing the same
volume of components. If NCT has more than one discount or price, QuietPower
shall be entitled to the best such discount or price.
(d) Integrated Systems. In certain applications, the Active
System may not be a stand-alone product. It may be combined with other
technologies, or be comprised of a series of components that are retrofitted or
in some way attached to an existing noise source, or be one component of a much
larger complex system whose primary function is not the attenuation of noise or
vibration. In such event, QuietPower shall, at its option, fabricate or
manufacture this larger integrated system itself or through a third party,
including any components, such as special brackets and mounts or other
components that facilitate the integration of the Active System into the larger
integrated system. In such an event, NCT shall maintain its rights to
manufacture the active components subject to Section 5.1 and this Section 5.2.
21
6. Patent Filing, Maintenance, and Extension.
6.1 Patent Filing. NCT shall (a) prosecute all patent applications
constituting Licensed Patents at NCT's sole cost and expense; (b) keep
QuietPower fully and promptly informed of the status of the prosecution of such
applications; and (c) consult with QuietPower on all aspects of the prosecution
of such applications.
6.2 NCT's Failure to Prosecute. In the event that NCT fails to
prosecute any of the aforementioned patent applications, QuietPower shall have
the right to prosecute such application on behalf of NCT.
6.3 Patent Maintenance. During the term of this Agreement, NCT shall
take all steps and pay all expenses necessary to maintain all Licensed Patents
for the full lives thereof. If NCT decides not to do so, NCT shall inform
QuietPower of such decision in writing as soon as practicable, and QuietPower
shall have the right, but not the obligation, to take such steps on behalf of
NCT, at the cost and expense of QuietPower.
7. Patent Infringement.
7.1 Infringement Action by a Third Party.
(a) Right of NCT to Defend. In the event that any infringement
action is brought by a third party against any party, or the Affiliates,
licensees, or distributors of any party, on account of the manufacture,
marketing, sale, or distribution of the Licensed Products, such party shall
promptly notify the other party of such action. NCT shall then have the initial
right to manage solely the defense against any such action. If NCT elects to
exercise such right, (i) QuietPower shall, at NCT's request, take all
appropriate or necessary actions to assist in the defense of such action; (ii)
QuietPower shall be reimbursed by NCT for the reasonable external out-of-pocket
expenses paid to attorneys and consultants retained in connection with taking
such
22
requested actions; and (iii) NCT shall bear its own internal and external legal
and other costs and expenses (including, without limitation, the costs
associated with management of the defense of the action), together with all
other costs and expenses associated with the action (including, without
limitation, court costs).
(b) Right of QuietPower to Defend. If NCT does not elect to
exercise its right to manage solely the defense against an infringement action
pursuant to Section 7.1(a) hereof, or if NCT fails to take appropriate and
diligent action with respect to such defense, then QuietPower shall have the
right to assume such defense, at its own cost and expense.
7.2 Infringement Action Against a Third Party.
(a) Rights of NCT to Prosecute. If any third party shall, in
the reasonable opinion of any party, infringe any of the Licensed Patents, such
party shall promptly notify the other party. NCT shall then have the initial
sole right to bring a legal action for infringement against the third party,
together with the right to enforce and collect any judgment thereon. If NCT
elects to exercise such right, (i) QuietPower shall, at NCT's request, take all
appropriate or necessary actions to assist in the prosecution of such action;
(ii) QuietPower shall be reimbursed by NCT for the reasonable external
out-of-pocket expenses paid, with NCT's authorization, to attorneys and
consultants retained in connection with taking such requested actions and (iii)
NCT shall bear its own internal and external legal and other costs and expenses
(including, without limitation, the costs associated with management of the
prosecution of the action), together with all other costs and expenses
associated with the action (including, without limitation, court costs).
(b) Rights of QuietPower to Prosecute. Should NCT not take
appropriate and diligent action with respect to any such infringement, then
QuietPower shall
23
have the right to take such action, at its own expense, in its own name or in
the name of one of its Affiliates, and the right to enforce and collect any
judgment thereon, any such judgment to be divided equally between NCT and
QuietPower.
7.3 Ownership of New Patents.
(a) Generally. NCT and QuietPower understand that new products
and techniques may be developed pursuant to, or in the course of the
effectuation of, this Agreement (the "Inventions"). Each of the parties shall
reasonably promptly notify the other of any Inventions.
(b) Patents Not Relating to Active Noise. Inventions relating
to and arising from Funded Product activity and not relating to the attenuation,
isolation, control, and/or cancellation of noise and/or vibrations shall be the
property of and patentable by QuietPower; provided, however, that NCT shall have
a sub-licensable non-exclusive license to make, have made, use and sell such
Inventions insofar as they relate to Active Systems, and no additional
compensation shall be due QuietPower except as provided in this Agreement.
(c) Patents Relating to Active Noise. Inventions relating to
the attenuation, isolation, control, and/or cancellation of noise and/or
vibrations shall be the property of and patentable by NCT.
8. Representations of NCT. NCT represents and warrants the following:
(a) Power and Authority; No Breach. NCT has the power and authority
to execute, deliver, and perform its obligations under this Agreement, and
neither the execution nor delivery nor the performance of its obligations under
this Agreement shall constitute a breach of the terms or provisions of any
contract or violate the rights of any third party. This Agreement has been duly
executed and delivered by NCT and constitutes a legal, valid, and binding
obligation of NCT, enforceable in accordance with its terms, subject to
24
applicable bankruptcy, reorganization, insolvency, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally from time to time
in effect, and subject to equitable principles.
(b) Grant of Licenses. NCT has the full right and power to
grant to QuietPower the licenses under the Licensed Patents and to the Technical
Information, and there are no outstanding agreements, assignments, or
encumbrances inconsistent with the provisions of this Agreement.
9. Other Covenants.
9.1 Covenants of NCT.
(a) Use of Funding Payments. NCT shall utilize the Funding
payments exclusively for the purposes of developing and commercializing the
Transformer Quieting Products, the Turbine Quieting Products, and the Funded
Products, as applicable.
(b) Patent Status. Within 10 days of the date hereof, NCT
shall provide QuietPower with a list of countries in which NCT has filed to date
for Patent protection. Thereafter, NCT shall provide QuietPower with a revised
and updated list of such countries within 10 days of a request by QuietPower.
(c) Progress Reports. NCT shall submit to QuietPower a
quarterly report of its progress in the development and commercialization of the
Transformer Quieting Products, the Turbine Quieting Products, and the Funded
Products relating to the applicable Development Schedule.
9.2 Covenants of Both Parties.
(a) Further Assurances. The parties hereto shall do or cause
to be done or performed all such further acts and things and shall execute and
deliver all such other
25
agreements, certificates, instruments, and documents as the other party hereto
may reasonably request in order to carry out the intent and accomplish the
purpose of this Agreement.
(b) Record Keeping and Inspection. During the term of this
Agreement and for a period of three years thereafter, each of the parties hereto
shall keep complete, legible, and accurate books and records with respect to its
financial obligations under this Agreement, all in accordance with standard
accounting and control procedures. Each party may carry out an inspection at its
expense of those books and records of the other party which pertain to the
determination of the commissions and other amounts payable under this Agreement
at reasonable intervals and during normal business hours, in order to determine
and verify the performance by the other party of its obligations under this
Agreement.
(c) Compliance With Laws. Neither party shall take any action
which would, or fail to take any action when such failure would directly or
indirectly, result in or constitute a violation by either party of any
applicable law, treaty, ruling, or regulation, including, without limitation,
laws and regulations relating to the import, export, resale, and distribution of
the Licensed Products.
10. Covenant Not to Compete and Non-Disclosure.
10.1 Covenant Not To Compete. QuietPower shall not, at any time
during the term hereof, represent, in any capacity, producers, distributors or
sellers of any product which compete with commercially developed products
relating to the attenuation, isolation, control and/or cancellation of noise
and/or vibrations then being marketed by NCT, nor shall QuietPower introduce,
offer for sale, or otherwise market or sell as principal, agent, employee,
consultant, independent contractor or otherwise any such product; provided,
however, that QuietPower may sell or incorporate any passive methods into its
products to control noise and/or
26
vibration problems, and QuietPower may sell any commercially available active
system that NCT has not commercially developed, is not in the process of
commercially developing and declines QuietPower's request to develop (with
QuietPower funding) pursuant to this Agreement. Notwithstanding the foregoing,
QuietPower may license from a third party any patent or patents that relate to
the attenuation, isolation, control and/or cancellation of noise and/or
vibrations so long as such license is offered, on terms substantially equivalent
to those obtained by QuietPower, to NCT for use in products outside of the
Industry.
10.2 Non-Disclosure.
(a) QuietPower. QuietPower agrees that it shall not during the
term of this Agreement, and for a period of five years following the termination
of this Agreement, for any reason, disclose to any third party any information,
document, or material pertaining to the specifications, development, manufacture
and technical methods relating to the Licensed Products, the Licensed Patents,
or Technical Information or any other information, document, or material
concerning the business affairs of NCT or any information related to the
pricing, marketing, or sale of any of the Licensed Products.
(b) NCT. NCT agrees that it shall not, during the term of this
Agreement, and for a period of five years following the termination of this
Agreement, for any reason, disclose to any third party any information,
documents, or material disclosed by QuietPower to NCT, or obtained by NCT in the
course of its performance under this Agreement, that is intended to be kept
confidential.
(c) Exemptions. The obligations of Sections 10.2(a) and (b)
hereof shall not apply to information that is (i) in the public domain; (ii)
disclosed through no breach of this Agreement by QuietPower or NCT, as the case
may be, in the course of performing their
27
duties under this Agreement; (iii) disclosed to a licensee, distributor, or
agent under a confidentiality agreement with provisions essentially the same as
contained in this Agreement; or (iv) disclosed pursuant to a court order or with
respect to any litigation between the parties hereto or with third parties.
11. Indemnification.
11.1 Indemnification by QuietPower. QuietPower shall indemnify,
defend, and hold NCT harmless from and against any and all claims, damages,
loss, liabilities, payments, costs, obligations, and expenses (including,
without limitation, all reasonable legal fees and disbursements) (the "Damages")
to the extent the Damages arise out of:
(a) any breach or violation of any covenant, agreement, or
undertaking made by QuietPower in this Agreement; or
(b) any negligence or willful misconduct committed by
QuietPower.
11.2 Indemnification by NCT. NCT shall indemnify, defend, and hold
QuietPower harmless from and against any and all Damages to the extent the
Damages arise out of:
(a) any inaccuracy or breach of any representation or warranty
of NCT contained in this Agreement;
(b) any breach or violation of any covenant, agreement or
undertaking made by NCT in this Agreement; or
(c) any negligence or willful misconduct committed by NCT.
28
12. Termination.
(a) Events of Termination. NCT or QuietPower, as applicable,
shall each have the right to terminate this Agreement upon the occurrence of any
of the following events with respect to the status or actions of the other:
(i) A decree or order shall have been entered by a court
of competent jurisdiction adjudging NCT or QuietPower, as the case may be,
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, readjustment, arrangement, composition, liquidation, or similar
relief for NCT or QuietPower, as the case may be, under any bankruptcy law or
any other similar applicable statute, law or regulation, or a decree or order of
a court of competent jurisdiction shall have been entered for the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of
NCT or QuietPower, as the case may be, or a substantial part of its property, or
for its property, or for the winding up or liquidation of its affairs;
(ii) NCT or QuietPower, as the case may be, shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy petition against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement,
composition, liquidation or similar relief under any bankruptcy law or any other
similar applicable statute, law or regulation, or shall consent to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of a substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall be unable to pay its debts
generally as they become due, or shall cease the active conduct of its business,
or shall take any corporate action in furtherance of any of the foregoing; or
29
(iii) Either NCT or QuietPower shall commit a material
breach of the terms of this Agreement and the same and all of its effects shall
not be remedied, including reimbursement to the other party of any losses
occurred on account thereof, within 60 days after written notice thereof is
given by the other party to such defaulting party. Notwithstanding the
foregoing, in the event that QuietPower fails to make a scheduled Funding
payment when due, and such failure is not corrected within 60 days after written
notice by NCT of such failure has been delivered to QuietPower, then NCT may
terminate this Agreement only as to the specific product relating to such late
Funding payment, and the Agreement shall continue in full force and effect as to
all other products; and, provided, further, however, that in the event that NCT
or QuietPower shall commit a material breach of the terms of any other agreement
relating to a specific product, this Agreement shall nevertheless continue in
full force and effect.
(b) Procedure for Termination. The party desiring to terminate
this Agreement upon the occurrence of an event of termination described in
Section 12(a) hereof and the expiration of the applicable remedial period
without the elimination or correction of the event of termination shall do so by
giving written notice thereof to the other, which notice shall specifically
identify the reason for such termination. This Agreement shall terminate
effective immediately upon the giving of such notice, or such later time as the
notice of termination may specify, subject to the terms and conditions and the
obligations of the parties hereunder.
13. Miscellaneous.
13.1 Notices. All notices, requests, demands, and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by overnight mail, transmitted by telex or
30
facsimile transmission device, or sent by registered mail, return receipt
requested, postage pre-paid, to the parties hereto at their respective addresses
as set forth above, or to such other address as either party hereto shall
hereafter specify by notice similarly given.
13.2 Modifications and Waivers. This Agreement may not be modified
or amended, nor may any right hereunder be waived, except by an instrument
signed by an authorized officer of the party against whom the same is sought to
be enforced. A waiver by any party hereto or a breach of any term or provision
of this Agreement shall not be construed as a waiver of any subsequent breach.
13.3 Entire Agreement. The Agreement (including any Schedules and
Exhibits thereto) constitutes the entire agreement between the parties and
supersedes all prior agreements, understandings, and arrangements, oral or
written, with respect to the subject matter hereof, including (a) the Agreement
in Principle dated October 4, 1994; (b) the Marketing, Engineering Services and
Distribution Agreement, relating to Retrofit Transformer Products, dated May 15,
1993; (c) the Marketing Agreement, relating to Non-retrofit Utility Products,
dated May 15, 1993; (d) the Marketing Agreement, relating to Feeder Bowls, dated
May 15, 1993; and (e) the Teaming Agreement, dated September 29, 1993, each of
which shall be deemed void and of no further force or effect upon the execution
of this Agreement, but excluding the Marketing Agreement, the Distribution
Agreement, relating to Active Headsets, dated October 7, 1994 and the Marketing
Agreement, relating to Active Industrial Silencers, between Xxxxxx Noise
Cancellation Technologies and QuietPower, dated May 9, 1994, neither of which
shall be deemed to be superseded by this Agreement.
13.4 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of
31
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or effecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction.
13.5 Assignability. This Agreement may be assigned (a) by any party
upon the written consent of the other party, which consent shall not be
unreasonably withheld; and (b) by any party to any Affiliate of such party. In
the event that NCT or QuietPower files or is subject to a case under title 11,
United States Code, each of QuietPower and NCT agree that in order to provide
"adequate assurance of future performance" of this Agreement for purposes of
Section 365(f) of title 11, United States Code, any assignee of such party must
assume such party's obligations under this Agreement and must have the technical
and financial ability to perform the obligations under this Agreement.
13.6 Force Majeure.
(a) Except for the obligation to pay for products already
delivered or services already rendered, either party shall be relieved from
liability thereunder for any failure to perform its obligations hereunder, from
the time and to the extent such failure to perform is due to a force caused by
war or acts of the public enemy, insurrection, riot, action of any governmental
authority, embargo, strike, lockout, flood, explosion, fire or other casualty,
accident, act of God, shortage of labor, materials or fuel, delay or
interruptions in transportation, epidemic or quarantine, compliance with any
kind or character reasonably beyond the control of the party failing to perform,
whether similar to or dissimilar from the enumerated causes.
(b) If either party is unable to carry out its obligations
under this Agreement as a result of the foregoing force majeure situations,
other than to make payments
32
due hereunder, such party shall give notice and full particulars, including the
expected duration of such force majeure, in writing to the other party not later
than three days after the occurrence relied upon, and upon the giving of such
notice the obligations of the party giving such notice, so far as they are
affected by such force majeure, shall be suspended during the continuation of
any inability so caused but for no longer, and such cause shall be so far as
possible remedied with all possible dispatch. Notwithstanding the above, neither
party shall be required to resolve a strike, lockout or other labor problem in a
manner which, in the exercise of its sole discretion it deems improper or
inadvisable for it.
(c) Upon the cessation of the cause or causes of any such
failure or delay, performance hereof shall be resumed, but such delay shall not,
except by mutual agreement, operate to extend the term of this Agreement.
13.7 Relationship of Parties. It is understood and agreed that this
Agreement does not create any relationship of association, partnership, or joint
venture between the parties, or create any implied license, or constitute either
party as the agent or legal representative of the other for any purpose
whatsoever. Neither party is granted any right or authority to create any
obligation or responsibility, express or implied, on behalf or in the name of
the other, or to bind the other in any manner whatsoever.
13.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of laws thereof.
13.9 Section Headings. The section headings contained in the
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
33
13.10 Counterparts. The Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
NOISE CANCELLATION TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
QUIETPOWER SYSTEMS, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------
34
Schedule 2.1
List of Third Party Rights In Turbine Quieting Products
Memorandum
DATE: March 28, 1995 REF: 503281
TO: Xxxxxxxx Xxxxxx, President, QuietPower Systems, Inc.
FROM: Xxxxx Xxxxxxx, CFO, NCT
RE: Amendment Number 1 to the Master Agreement Dated March 27,
1995 Between NCT and QPS
CC: Xxx Xxxx, X. Xxxxxxxx, X. Xxxxx, X. Xxxxxxx
In connection with the Master Agreement signed March 27, 1995 between QuietPower
Systems, Inc. (QPS) and Noise Cancellation Technologies, Inc. (NCT), the
following are binding terms relative to that agreement:
1) Within two weeks of closing their bridge financing, in no event later than
May 15, 1995, QPS agrees to pay to NCT the full amount of outstanding
billed account receivables. As of February 28, NCT approximates billed
accounts receivable to be $500,000 and unbilled accounts receivables to be
$70,000. Simultaneously, NCT will repay any amounts owing to QPS,
currently approximated at $40,000 by QPS. The amounts above are subject to
final review and approval by both parties.
2) In the event that QPS does not pay the receivables above prior to or on
May 15, 1995, NCT may, at its sole option, void the Master Agreement
anytime thereafter, regardless of partial payments.
3) Until NCT and QPS have agreed to the first development schedule, QPS will
fund the salary, benefits and overhead costs of up to three people to work
on the transformer development program. These costs will become part of
that development schedule. NCT will not commit to expend any interim
funding without the express written consent of QPS.
4) These terms are Amendment Number 1 to the Master Agreement dated March 27,
1995, referenced above.
Agreed to on this 28th Day of March by:
/s/ Xxxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
--------------------------------- --------------------------------
Xxxxxxxx Xxxxxx, QPS, Inc. (Seal) Xxxxxxx X. Xxxxxxx, NCT, Inc. (Seal)
_____________________ ___________________
Date Date
April 21, 1995
Xx. Xxx Xxxx
Noise Cancellation Technologies, Inc.
c/o Xxxxxx Xxxxxx Xxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xxx:
Pursuant to our discussions regarding the retirement of our Noise
Cancellation Technologies, Inc. ("NCT") Warrants in exchange for a reduction of
the license fee payable under the Master Agreement (the "Master Agreement")
dated March 27, 1995 between NCT and QuietPower Systems, Inc. ("QuietPower"),
and a deferral of outstanding payables owing to NCT, the following represents
the terms agreed upon:
1. QuietPower shall surrender for cancellation its five year warrants to
purchase 750,000 shares of the Common Stock, par value $.01, of NCT
exercisable at $3.00 per share, that were issued pursuant to Section 3(j)
of the Marketing Agreement (Non-retrofit Utility Products) dated May 15,
1993 between QuietPower and NCT.
2. The $500,000 exclusivity fee payable pursuant to Section 3.1 of the Master
Agreement shall be reduced to $250,000. Payment shall commence 90 days
from the signing of this agreement in thirty (30) monthly installments of
$8,333.33 each.
3. The schedule of debt payment to NCT by QuietPower, as prescribed by the
letter agreement dated March 28, 1995 between NCT and QuietPower (the
"Debt"), shall be amended. The revised payment date shall be the earlier
of i) May 15, 1996, or ii) upon the closing of a financing (public or
private) to the extent that such financing exceeds $1.5 million.
4. The Debt shall be evidenced by a promissory note (the "Note"), bearing
annual interest at 6%. The interest and principal shall be paid based upon
item (3) above. Non-payment under the terms of the Note shall constitute
an event of termination as defined in Section 12(a) of the Master
Agreement.
Please sign in space provided below to indicate your acceptance of these terms.
Xx. Xxx Xxxx
April 21, 1995
Page 2
Sincerely,
/s/ Xxxx Xxxxxxxx
--------------------------
Xxxx Xxxxxxxx
Vice President and
Chief Financial Officer
Agreed to and accepted as of the date first above written:
Noise Cancellation Technologies, Inc.
By: /s/ Xxx Xxxx
---------------------------
Xxx Xxxx, Chairman
May 21, 1996
Xx. Xxxxxxxx Xxxxxx
QuietPower Systems, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Dear Xxxxxxxx:
This letter, when countersigned by you on behalf of QuietPower Systems, Inc.
("QuietPower"), will constitute a further amendment to the Master Agreement
dated March 27, 1995 as amended by the memorandum signed by you on behalf of
QuietPower on March 29, 1995, and Xxxxxxx X. Xxxxxxx on behalf of Noise
Cancellation Technologies, Inc. ("NCT") on March 28, 1995, and the Letter
Agreement dated April 21, 1995 (collectively the "Master Agreement").
1. The exclusivity fee payable to NCT pursuant to Section 3.1 of the Master
Agreement shall be paid as follows:
(a) $25,000.00 shall be paid at the closing of the first $200,000.00 tranche
of financing to be provided by Sundance Venture Partners ("Sundance") to
QuietPower, and
(b) all outstanding arrearages under the payment schedule set forth in the
April 21, 1995 Letter Agreement shall be paid at the closing of the second
$300,000.00 tranche of the Sundance financing.
In no event shall such $25,000.00 payment be made any later than June 1, 1996
and in no event shall payment of the full amount of such arrearages be made
later than June 15, 1996. In the event either of such payments have not been
made on or before the applicable date set forth in the immediately preceding
sentence, the Master Agreement and all rights granted to QuietPower shall
immediately terminate and no longer be of any force or effect, and all amounts
to be paid to NCT by QuietPower under the Master Agreement, the Note provided
for therein and this letter which remain unpaid shall be immediately due and
payable in full without further notice or demand.
2. The "Debt" owed to NCT described in paragraph 3 of the April 21, 1995 Letter
Agreement shall be paid as follows:
(a) $25,000.00 shall be paid at the closing of the second tranche of the
Sundance financing described in paragraph 1 above, and
(b) the balance of such Debt and all other indebtedness not hereinbefore
specifically provided for shall be paid in monthly installments of
$15,000.00 each on the first
day of each month commencing with the first day of the month following the
month in which the closing of the second tranche of Sundance financing
occurs. In addition, one half of the total amount of such indebtedness
which remains unpaid at the closing of the contemplated $1,000,000.00
private placement to be managed by Ringhorne, Horn, Konsult AB shall be
paid to NCT at such closing and the full amount thereof shall be paid no
later than thirty (30) days following the closing of QuietPower's
contemplated public offering of securities.
Any default in the timely payment of any of the payments set forth in this
paragraph 2 shall cause the immediate termination of the Master Agreement and
any and all rights and licenses granted to QuietPower thereunder and all amounts
remaining due and payable to NCT by QuietPower under the Master Agreement, the
Note provided for therein and this letter which remain unpaid shall be
immediately due and payable in full without further notice or demand. With
respect to any $15,000.00 monthly installment described in clause (b) above,
payment shall be deemed to have been timely made if received by NCT within ten
(10) days of NCT's notice to QuietPower that such installment has not been
received.
3. Clause (a) of Section 2.1 of the Master Agreement is hereby amended to remove
the qualifications to QuietPower's exclusive rights in the Far East provided,
however, that in the event QuietPower's activities in the Far East give rise to
any claims by third parties for a sales commission, fees or other compensation
or consideration related to such activities whether sought from NCT or
QuietPower, QuietPower shall be solely responsible for the full payment of such
claims.
4. Sections 4.1 and 4.2 of the Master Agreement are amended to provide that
QuietPower is free to fund product development work itself or through a third
party without the precondition of first negotiating with NCT a mutually
acceptable "Development Schedule" as therein defined provided, however, that
nothing in this amendment shall reduce in any way QuietPower's royalty
obligations to NCT.
5. Clause (a)(iv) of Section 5.2 is amended to eliminate QuietPower's obligation
to pay NCT a "royalty of six percent (6%) of the alternatively manufactured
cost" provided for therein and Clause (a)(i) of Section 3.2 is amended to
increase the royalty on the Gross Revenues provided for therein from six percent
(6%) of all such Gross Revenues received by QuietPower to nine percent (9%) of
the first $6,000,000.00 of such Gross Revenues received by QuietPower and six
percent (6%) of all such Gross Revenues received by QuietPower in excess of
$6,000,000.00.
6 It is understood that QuietPower intends to purchase piezo ceramic actuators
for transformer quieting applications from NCT provided NCT can meet the cost,
quality and deliverability requirements of QuietPower.
Kindly signify QuietPower's agreement to the foregoing by executing a
counterpart of this letter in the space provided below and returning it by
facsimile transmission confirmed by delivery of an executed copy of regular
mail.
Sincerely,
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxxx
President
AGREED AND ACCEPTED:
QUIETPOWER SYSTEMS, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxxx X. Xxxxxx, President
April 9, 1997
Xx. Xxxxxxxx Xxxxxx
QuietPower Systems, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Xxxxxxxx:
This letter, when countersigned by you on behalf of QuietPower Systems, Inc.
("QuietPower"), will constitute a further amendment to the Master Agreement
dated March 27, 1995 as amended by the memorandum signed by you on behalf of
QuietPower on March 29, 1995, and Xxxxxxx X. Xxxxxxx on behalf of Noise
Cancellation Technologies, Inc. ("NCT") on March 28, 1995, the Letter Agreement
dated April 21, 1995 and the Letter Agreement dated May 21, 1996 (collectively
the "Master Agreement").
1. As of the date hereof there is an outstanding balance payable by QuietPower
to NCT with respect to the exclusivity fee as provided under Section 3.1 of the
Master Agreement, as amended. This amount shall continue to be paid at the rate
of $8,3333.00 per month, payable on the twenty-first day of each month until
payment in full has been received.
2. As of the date hereof there is an outstanding balance payable by QuietPower
to NCT with respect to the "Debt" owed to NCT described in Paragraph 3 of the
April 21, 1995 Letter Agreement. QuietPower is in arrears with respect to the
payments of the Debt which were to be made under the terms of the April 21, 1995
Letter Agreement. Accordingly, instead of being paid on the dates set forth in
such Letter Agreement, this amount shall be paid to NCT by QuietPower as
follows:
(a) $125,000 shall be paid on or before April 21, 1997
(b) $200,000 shall be paid upon the earlier of: (I) the closing date of the
contemplated initial public offering of QuietPower's common stock
scheduled to occur in June 1997, or (ii) January 1, 1998.
(c) Until both of the payments described in clauses (a) and (b) above have
been received by NCT, QuietPower will pay NCT 15% of all funds received by
QuietPower after April 21, 1997 from all financing activities other than
the public offering referred to in clause (b)(i) and NCT shall credit all
amounts received by it under this clause (c) against the amount owed by
QuietPower with respect to the Debt.
(d) After July 1, 1997, QuietPower shall pay interest to NCT at the rate of
10% per annum on the unpaid balance of the Debt, such interest to be paid
quarterly on the first day of each calendar quarter.
The foregoing amounts do not include the amount of $11,107.55 which QuietPower
owes to NCT for headset products delivered to or for the account of QuietPower
during 1996. This amount (the "Headset Amount") shall be paid to NCT by
QuietPower by April 21, 1997.
3. All payments made to NCT hereunder shall be due on the dates set forth herein
without further notice of being due and shall be made by wire transfer in
accordance with NCT's instructions or by delivery of QuietPower's good,
collectible check, drawn on immediately available New York, New York funds.
4. In the event any payment provided for herein is not received by NCT on the
applicable date and in the form set forth in Paragraph 3 above, NCT shall have
the right to terminate the Master Agreement and all rights granted thereunder to
QuietPower forthwith. Such termination shall be effective at 5:00 p.m. New York,
New York time on the 10th day after the date on which NCT gives QuietPower
notice of termination and all amounts to be paid by NCT by QuietPower under the
Master Agreement with respect to the exclusivity fee, the Debt (in the full
amount outstanding on the date hereof irrespective of the amounts set forth in
Paragraph 2 above) and the Headset Amount which remain unpaid shall be
immediately due and payable in full without further notice or demand. Such
notice shall be in writing and may be delivered by hand, facsimile transmission,
regular mail or overnight delivery service.
5. Upon execution of this Letter Agreement, QuietPower shall be deemed not in
default under the Master Agreement on the date hereof.
Kindly signify QuietPower's agreement to the foregoing by executing a
counterpart of this letter in the space provided below and returning it by
facsimile transmission confirmed by delivery of an executed copy by regular
mail.
Sincerely,
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx, President
AGREED AND ACCEPTED:
QUIETPOWER SYSTEMS, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxxx X. Xxxxxx, President
