EXHIBIT 10.9
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TIETEK ROYALTY AGREEMENT
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This Agreement ("the TieTek Royalty "Agreement") is made and entered into
the ____ day of ____________, 2003 (the "Effective Date"), by and between
TieTek, Inc., a Delaware corporation (and subsidiary of North American
Technologies Group, Inc. ("NATK"), hereinafter referred to as "Payor" and
Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, and J. Xxxxx Xxxxxxx as Co-Trustees for
the benefit of Dune Holdings, L.L.C., assignee of Gaia Holdings, Inc. ("Dune"),
and Thor Ventures, L.L.C. ("Thor"), hereinafter collectively referred to as
"Payee."
RECITALS
1. Payor is the new owner of the "Technology" as hereinafter described.
2. Payee recognizes Payor as the sole and exclusive owner of the
Technology, and approves and consents to the assignment of the rights
to the Technology to Payor.
3. Payee was a party to that certain TieTek Royalty Agreement dated as of
December 30, 1997, which was amended by that certain Royalty
Settlement Agreement dated as of June 8, 2000. Payee is the only party
entitled to any royalty under these prior agreements.
4. Payee is a party to a separate agreement with NATK executed
contemporaneously herewith ("the NATK Royalty Agreement") providing
for various other payments that may relate to the Technology; however,
the parties hereto agree and acknowledge that any such agreement
between Payee and NATK is separate and distinct from this Agreement,
and any obligations or agreements contained therein or any breach or
default with respect thereto shall have no effect whatsoever on this
Agreement or the obligations of Payor and Payee contained herein.
5. The parties desire to enter into this new Agreement for the payment of
royalties relating to the Technology with this Agreement superseding
any prior royalty agreements.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
Article I
DEFINITIONS
The following terms shall have the following meanings for purposes
of the Agreement:
1.1. "Net Revenues From Product Sales" means the gross revenue generated
by the sale or transfer for value of Products less:
(i) refunds, rebates or allowances to customers resulting from
defects, failures, or malfunctions not in excess of the
original selling price of the products, and
(ii) governmental sales taxes, tariffs, duties, and similar charges
added to the selling price of the Products and paid by the
selling party to a government or quasi-governmental entity,
but excluding any taxes based on income, capital gains,
property, franchise, or any other tax.
1.2 "Net Revenues From Technology Sales" means the gross revenue
generated by the licensing, rental, or sale of the Technology, less
governmental sales taxes, tariffs, duties, and similar charges added
to the amount of such revenue and paid by the owner of the
Technology to a government or quasi-governmental entity, but
excluding any taxes based on income, capital gains, property,
franchise, or any other tax
1.3 "Products" means railroad or transit authority ties manufactured
through the use or benefit of the Technology, as well as other items
manufactured through the use or benefit of the Technology, to
produce structural composite parts, including by way of example,
marine pilings, mining support timbers, and roofing materials.
Products would not include plastic-wood lumber, plastic extrusion
shapes, or unrelated businesses.
1.4 "Technology" shall mean (a) United States Patent Number 5886078
issued March 23, 1999, [and any international counterparts] and
United States patent Published Application No. 20020123553 with
Application Date of March 5, 2001 [and any international
counterparts], which have been acquired by Payor, together with any
modifications, improvements, corrections, or substitutions thereto,
and (b) the trade secrets, designs, and know-how developed, owned,
conceived, and/or reduced to practice by Payor (or its predecessor)
for materials, processes, and methods to be used in the production,
manufacture, or refinement of railroad or transit authority ties and
other composite parts.
Article II
ROYALTIES
2.1 Payment of Royalties. Payor shall pay to Payee the following
"Royalties":
(a) Royalties Payable in Years 1 and 2:
(i) One and one-quarter percent (1.25%) of all Net Revenue
from Product Sales received by Payor with respect to
Products
manufactured by Payor during the period beginning
January 1, 2004, and ending December 31, 2005; and
(ii) One and one-quarter percent (1.25%) of all Net Revenue
from Technology Sales received by Payor during the
period beginning January 1, 2004, and ending December
31, 2005.
(b) Royalties Payable in Years 3-10:
(i) Two and one-half percent (2.50%) of all Net Revenue from
Product Sales received by Payor with respect to Products
manufactured by Payor during the period beginning
January 1, 2006, and ending December 31, 2013; and
(ii) Two and one-half percent (2.50%) of all Net Revenue from
Technology Sales received by Payor during the period
beginning January 1, 2006, and ending December 31, 2013.
2.2 No Minimum Royalty. There will be no minimum royalty.
2.3 Annual Royalty Cap. Once the Royalty payable in a calendar year
reaches $1,000,000, Payor's commitment will be capped at $1,000,000
per year.
Article III
ACCOUNTING MATTERS
3.1 Royalty Statements. Within 90 days after the end of each calendar
quarter during which royalties are due, Payor will deliver to Payee
a statement certified by an appropriate officer of Payor which
accurately sets forth in reasonable detail the Net Revenues From
Product Sales and the Net Revenues From Technology Sales upon which
royalties are to be paid under Article 2.1 during said quarter, and
will contemporaneously therewith pay any royalties due.
3.2 Record of Payor. All of Payor's accounting records related to the
calculations of Net Revenues From Product Sales and the Net Revenues
From Technology Sales and payment of royalties hereunder shall be
maintained in accordance with generally accepted accounting
principles, objectively applied. All books of account, records,
sales slips, invoices, purchase orders, franchise tax returns, and
federal income tax returns relating to Payor's operations will be
retained by Payor for a period of three (3) years after preparation,
and will be open to inspection by Payee (or Payee's representative)
at all reasonable times.
3.3 Audit Rights of Payee. Payee may, at any time or times during normal
business hours, and upon five (5) business days' prior written
notice to Payor conduct an audit of any royalty statement delivered
pursuant to Section 3.1, and may examine
relevant records for the calendar quarter covered by the royalty
statement. Acceptance of any royalty tendered by Payor shall not
prejudice their rights to contest a royalty statement.
3.4 Prohibited Transaction. Without Payee's consent, Payor shall not
transfer the title or ownership of the Technology or any party
thereof, provided, however, that this prohibition does not impair
Payor's rights to grant licensing agreements so long as in the case
of an exclusive licensing agreement, such agreement is not the
substantive equivalent of a transfer of all or substantially all of
the ownership of the Technology. Any transfer made in violation of
the foregoing sentence shall be void. Payor shall not transfer any
commercial quantities of products to any third party or consent to
such transfer by any licensees, except in transactions for a fair
market price or in arms length transactions where the value received
has been established in good faith.
Article IV
MISCELLANEOUS
4.1 Governing Law. The construction and interpretation of this Agreement
shall be in accordance with the laws of the state of Texas and the
applicable laws of the United States of America.
4.2 Notice. Any payment, report, communication, request or notice
required or permitted by this Agreement shall be in writing and
shall become effective at the time of receipt thereof and shall be
addressed to the parties as follows:
(a) If to Payor:
With a copy to:
(b) If to Payee:
With a copy to :
Notice may be effected by hand delivery, U.S. Mail or telecopy. Each
party shall have the continuing right to change its address for
notice at any time or times by giving ten (10) days' notice in the
manner hereinafter described. Notices shall be deemed given only
upon actual receipt; however, notice sent by U.S. mail, postage
prepaid, certified, return receipt requested shall be deemed
received three business days after deposited with the U.S. Postal
Service.
4.3 Amendments. This Agreement shall not be modified, amended or
otherwise varied by any oral agreement or representation and all
modifications, amendments, and variations shall be by an instrument
in writing executed by the parties hereto.
4.4 Successors and Assigns. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their successors and
assigns.
4.5 No Partnership. Nothing in this Agreement shall in any way be
construed to make the parties partner, joint venturers, agents,
servants or employees of one another, and no such relationship is
intended.
4.6 Confidentiality. During the performance of each party's obligation
under this Agreement, each party may obtain information of various
types from the other party. Each party agrees that all such
information, whether technical, financial, business or other nature
shall be held in confidence and not used to the detriment of the
disclosing party by the non-disclosing party nor disclosed to any
third party by the non-disclosing party. This Section 4.6 shall not
apply to any information which (a) can be shown by a party to have
been in that Party's possession prior to the date hereof; b) is now
or hereafter (by operation of law) becomes information in the public
domain; (c) can be shown by a party to have been received on a
non-confidential basis from a third party who did not acquire same,
directly or indirectly, from the other Party; (d) can be shown by a
Party to have been developed without access to any confidential
information otherwise covered by this Section 4.6; (e) is required
to be disclosed as a matter of law; or (f) is required to be
disclosed pursuant to a written agreement between the parties.
4.7 Payee Representatives. Payor shall only be required to rely on
instruments and directives from Xxxxxxx X. Xxxxxxx, Xxxxx X.
Xxxxxxxx, and J. Xxxxx Xxxxxxx, or their successors, as Co-Trustees,
acting in a majority or unanimously, which instructions and
directives, if required by Payor, shall be in writing. If, at any
time, Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, and J. Xxxxx Xxxxxxx,
or their successors, as Co-Trustees, unanimously notify the Payor in
writing (a) that the rights to receive Royalty have been assigned or
otherwise transferred to Dune and Thor; and (b) of the portion of
the total Royalty to be paid to each Dune and Thor, then Payor shall
thereafter, and until future notice from the President of either
Dune and/or Thor; (c) distribute such Royalty as directed; and (d)
only be required to rely on instruction and directives from the
President of Dune and/or Thor with respect to their respective pro
rata share of Royalty. In the event that Dune or Thor should
dissolve or, alternatively, the rights to receive Royalty should
otherwise be distributed to the members of Dune or Thor (as the case
may be), then Payor may rely on (a) a duly executed copy of the
Agreement, Plan, and/or Articles of Dissolution of Dune or Thor (as
the case may be, in the case of dissolution), or (b) a duly executed
assignment (in the case of distribution) to determine the ownership
of the rights to receive Royalty. In addition, the members of Dune
and/or Thor shall each, unanimously, designate among themselves
representatives, and thereafter Payor shall only be required to rely
on instructions and directives from such representatives. Payor
shall have the right to request and rely on instruction from each
such representative, provided such instructions do not impair the
rights of any members represented by the other representatives.
4.8 Integration and Release. This new TieTek Royalty Agreement
supersedes the Royalty Agreement referenced in paragraph 3 of the
Recitals and, except for the NATK Royalty Agreement executed
contemporaneously herewith, any other royalty arrangements or
agreements involving the Technology, all of which are deemed
terminated. This Agreement represents the final agreement between
the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements by the parties with
respect to the subject matter of this Agreement. There are no
unwritten oral agreements between the parties.
By the execution of this Agreement, Payee releases all claims to
royalties due under superseded royalty agreements or for any
breaches of such agreements and acknowledges full satisfaction.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate by duly authorized persons.
"PAYOR"
TIETEK, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxx February 5, 2004
Name: Xxxxx X. Xxxxxxxx Date
Title: President
"PAYEE"
Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx,
and J. Xxxxx Xxxxxxx, Co-Trustees for
the Benefit of Dune Holdings, L.L.C.
(assignee of Gaia Holdings, Inc.) and
Thor Ventures, L.L.C., one certain
Trust Agreement dated December 29,
1995, by and among them.
By: /s/ Xxxxxxx X. Xxxxxxx February 5, 2004
Xxxxxxx X. Xxxxxxx Date
Co-Trustee
By: /s/ Xxxxx X. Xxxxxxxx February 5, 0000
Xxxxx X. Xxxxxxxx Date
Co-Trustee
By: /s/ J. Xxxxx Xxxxxxx February 5, 2004
J. Xxxxx Xxxxxxx Date
Co-Trustee
