Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS
DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
PRODUCT PURCHASE AGREEMENT
This Agreement is made this 24th day of May 2000 ("Effective Date") by
and between Innovative Magnetic Technologies Inc. dba CalNetix, a California
corporation, with offices located at 000 Xxx Xxxx Xxx, #000, Xxxxxxxx Xxxxxxxxxx
("Seller") and Q Power, Inc., a Delaware corporation, with offices located at
000 Xxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx ("Buyer") collectively known as the
("Parties"),
WITNESSETH THAT
WHEREAS, Seller is in the business inter alia of designing,
manufacturing and selling magnetic bearings; and
WHEREAS, Buyer has invented and has filed a provisional patent for a
new flywheel system [**] and is desirous of completing development and
commercially producing the new flywheel system for sale to its customers; and
WHEREAS, Buyer requires a magnetic bearing supplier having the
technical capability and willingness to support Buyer's development efforts; and
WHEREAS, Seller is developing [**] which will meet Buyer's requirements
(the "Product"); and
WHEREAS, Seller and Buyer desire that Seller will supply Buyer with all
of Buyer's requirements for Products, and Seller desires that Buyer will procure
all of its requirements for Products from Seller on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
and representations herein contained, the Parties agree as follows:
1. Development of the Product
The Parties shall work together during a development period to complete
development of the Product (the "Development Period"). The Development Period
shall include the time from the end of the activity undertaken by Seller [**] to
the conclusion of testing of a first flywheel system produced by the Parties
that is supported on a Product and ready for commercial introduction. The costs
of developing the Product
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and the flywheel system incorporating the Product shall be borne by Buyer on
terms to be negotiated by the Parties.
2. Qualification of Products
Buyer and Seller shall cooperate in the performance of certain
qualification tests to demonstrate the capability of the Product to meet Buyer's
performance requirements, environmental survival and endurance requirements as
set forth in a performance specification yet to be written. Seller shall provide
engineering design data pertaining to the Product as installed in Buyer's
flywheel system as Buyer requires to complete design, installation in the
flywheel system and testing, and shall support testing by Buyer as required to
assist Buyer in obtaining whatever approvals are needed for commercial sale of
Buyer's flywheel system. Buyer shall be responsible for all costs of testing and
approval, under terms to be agreed in a purchase order from Buyer.
3. Exclusive Purchase of Buyer's Requirements
Buyer agrees to purchase Products only from Seller for use in its
flywheel systems, and that it will not purchase Products for use in its flywheel
systems except from Seller as long as the exclusive supply arrangement in
Article 4 remains in effect.
4. Exclusive Supply of Buyer's Requirements
Seller agrees to sell Products [**] only to Buyer, and that it will not
sell Products [**] during the term of this Agreement except to Buyer as long as
Buyer meets the minimum purchase requirements of Article 5 below. If Buyer does
not meet the minimum purchase requirements of Article 5 and Seller intends to
sell Products for use in flywheel systems as provided in Article 5, it shall so
advise Buyer prior to entering any agreement for such sale so that Buyer will
know it is released from its obligations in Article 3.
5. Minimum Purchase Requirements
During the term of this Agreement, Buyer's exclusive right to purchase
Products for flywheel systems from Seller, and Seller's agreement to sell
Products only to Buyer for flywheel systems, as set forth in Articles 3 and 4
above, are conditioned upon purchase by Buyer of the following number of
Products from Seller during the periods indicated. A purchase shall be deemed to
have been accrued by Seller's actual receipt of the purchase order.
Time Period:
[**]
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In the event Buyer fails to purchase the minimum number of Products for
the applicable period, Buyer's exclusive rights with respect to the sale and
distribution of the Products for use in flywheel systems, may, at Seller's
option, become non-exclusive for the remaining term of the Agreement; provided,
however, that Buyer shall have the right prior to the termination of any
applicable period to pay Seller an amount equal to ten percent (10%) of the
purchase price for the additional number of Products required to be purchased by
Buyer during the applicable period to retain exclusivity.
6. Manufacture by Buyer
a) Seller shall be the exclusive manufacturer of Products purchased by
Buyer as set forth above, however, Buyer shall have the right to manufacture the
Products or have others manufacture the Products for Buyer in the event that
during the term of this Agreement:
i) Seller dissolves, or terminates its operations, or
ii) Seller is unable to supply Products meeting
performance requirements, on time and of acceptable
quality per mutually agreed quality assurance
standards.
b) If Seller fails to supply Products as set forth in paragraph a)ii)
above, Buyer will notify Seller in writing of the failure and Seller will have
45 days to cure. Should Seller be unable to cure, or unwilling to supply
Products, Buyer shall have a non-exclusive world-wide license to make, have
made, modify and sell the Products, as original and replacement elements of
Buyer's flywheel systems, and Seller shall furnish Buyer with a complete set of
data required to make the Products for a reasonable fee, covering reproduction
and transmittal. This data shall include as a minimum detail manufacturing
drawings, operating system software, electrical schematics, process
specifications, and other data required for manufacture of the Products.
c) Should the Buyer notify Seller in writing of deficiencies in the
Product and Seller is unable to correct these deficiencies within 30 days,
Seller will deposit into an escrow account, the costs of which will be borne by
Buyer, all drawings, specifications and other data required for manufacture of
the Products. Upon expiration of the deficiency period set forth in paragraph b)
above, Seller will instruct escrow holder to release the data package to the
Buyer.
7. Joint Patents
a) In the course of efforts undertaken by the Parties individually or
together in the course of the Feasibility Study and the Development Period to
produce the Product, the Parties shall freely and openly cooperate. Inventions
pertaining to Products developed by the Parties jointly or individually during
the Development Period
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(the "Inventions") shall be owned jointly and equally, and use of these
Inventions shall be allocated as follows:
i) Buyer shall have exclusive use of the Inventions for use in
flywheels;
ii) Seller shall have exclusive use of the Inventions for magnetic
bearings which it manufactures for its customers for
applications other than flywheels; and
iii)The Parties shall share equally all royalties earned as a
result of licensing the Inventions for applications outside of
the above areas of exclusivity. No licenses shall be granted
during the term of this Agreement by either Party without
agreement by the other Party, other than cross-licenses as
necessary to permit the foregoing exclusive uses.
b) The Parties shall advise each other seasonally of Inventions as a
result of developing Products they make during the Feasibility Study and
Development Period. Buyer shall be initially responsible for procuring and
paying all costs relating to patents on the Inventions. If Buyer concludes that
any particular Invention does not warrant the cost of obtaining a patent, it
shall so advise Seller who shall then be free to procure a patent on that
Invention.
8. Notices
All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, given by prepaid telegram or mailed first class,
postage prepaid, by registered, certified or express mail, or other express
delivery service as follows:
If to Seller:
Xxxxxxx XxXxxxxx, Vice President
CalNetix
000 Xxx Xxxx Xxx, Xxxx 000
Xxxxxxxx XX 00000
If to Buyer:
Xx. Xxxxxxxxxxx X. Xxxxxx, President
Q Power, Inc.
000 Xxxxxxxx Xxxxx
Xxxx, XX 00000
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9. Limitations of Liability
In no event shall either party be liable to the other for special
incidental, punitive or consequential damages arising out of or related to this
Agreement, its termination or expiration, or the manufacture, sale, delivery,
resale, or use of any Products covered by this Agreement. This limitation
applies regardless of whether the damages or other relief are sought based on
breach of warranty, breach of contract, negligence, strict liability in tort, or
any other legal or equitable theory. This limitation does not apply to direct
damages caused by breach of a material obligation under this Agreement or to
claims for personal injury by a third party.
10. Governing Law
Jurisdiction for claims by one party against the other under this
Agreement shall be exclusively in the State of residence of the party against
whom the claim is asserted. The rights and obligations of the Parties under this
Agreement shall be governed by and construed in accordance with the substantive
law in force in that State, without recourse to other laws or conflicts of laws.
11. Enforceability
In the event any part or parts of this Agreement are found to be
invalid, illegal or unenforceable in any respect, the remaining provisions shall
nevertheless be binding and shall in no way be affected or impaired.
12. Sole Understanding
This Agreement is the entire and sole understanding of the Parties with
respect to the subject matter hereof and supersedes all other prior agreements,
understandings, discussions and other communications, whether oral or written.
13. Term of Agreement
This Agreement shall remain in force, unless altered or canceled in
writing by mutual consent of both Parties or as otherwise provided herein, until
the tenth (10th) year anniversary of the Effective Date.
14. Assignment
Neither party shall assign, transfer or convey, this Agreement or any
rights or obligations hereunder or attempt to do any of the foregoing, without
the express prior written consent of the other, except as otherwise provided
herein.
15. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties
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hereto and their permitted successors and assigns.
16. Arbitration
In the event of any dispute arising hereunder, either party may submit
the dispute to binding arbitration in accordance with the rules of the American
Arbitration Association.
17. Fair Pricing
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18. Patent Rights
This Agreement shall constitute a mutual cross-license of certain
rights relating to the Inventions which rights shall commence upon the date of
this Agreement, shall survive any termination of this Agreement, and shall
expire upon the expiration of any patents on the Inventions (the "License
Term"). Specifically:
a) Seller hereby grants to Buyer the rights specified in Article
7(a)(i) for use within the License Term;
b) Buyer hereby grants to Seller the rights specified in Article
7(a)(ii) for use within the License Term;
c) Each party confirms to the other the royalty rights specified in the
first sentence of Article 7(a)(iii) during the License Term.
IN WITNESS WHEREOF, the duly authorized representatives of the Parties
have executed this Agreement.
Q Power, Inc. CalNetix
By: /s/ Xxxxxxxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
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Name typed: Xxxxxxxxxxx Xxxxxx Name typed: Xxxxxx Xxxxxxxx
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Title: President Title: President & Chief Executive Officer
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Date: May 24, 2000 Date: May 24, 2000
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