Sublicense Agreement, dated as of April 14, 2006, by and between Xethanol Corporation and H2Diesel, Inc. SUBLICENSE AGREEMENT
Exhibit
1.4
Sublicense
Agreement, dated as of April 14, 2006, by and between Xethanol Corporation
and
H2Diesel, Inc.
This
Sublicense Agreement (the "Agreement") is made by and between H2Diesel, Inc.,
a
Delaware corporation (hereinafter "Sublicensor") and Xethanol, Inc., a Delaware
corporation (hereinafter "Sublicensee"), as of this 14th day of April, 2006
(the
“Effective Date”). Sublicensor and Sublicensee individually and collectively are
hereinafter referred to as "Party" or "Parties," as the case may
be.
WHEREAS
an
inventor (“Licensor”)
and
Sublicensor entered into an Exclusive License Agreement (hereinafter the
"Exclusive License Agreement") for certain intellectual property rights,
including without limitation Patent Rights (as defined below) to a
certain
chemical additive for use in making bio-fuel for internal combustion engines
(the “Additive”), including to all related formulas, technical specifications,
Know-How (as defined below) and other related proprietary
information;
WHEREAS,
pursuant to and in accordance with the Exclusive License Agreement, Sublicensor
desires to sublicense certain of its rights under the Exclusive License
Agreement to Sublicensee in the Territory (as defined below) on the terms and
conditions set forth herein.
NOW,
THEREFORE,
in
consideration of the mutual covenants and terms expressed herein, Parties hereby
agree, covenant, and undertake as follows:
1. DEFINITIONS.
The
following terms as used in this Agreement shall have the meanings set forth
below:
"Patent
Rights"
as used
in this Agreements, shall mean (i) all claims of patent applications and issued
and non-issued patents that relate to the Additive, which are now owned by
Sublicensor or Licensor in the United States and in foreign countries; (ii)
all
claims of such patent applications and issued patents that relate to the
Additive or the Know-How hereafter filed or issued to which Sublicensor may
acquire rights during the term of this Agreement.
"Know-How"
as used
in this Agreement shall mean all information, including without limitation
trade
secrets, whether or not patentable, relating to, used in, or useful in
connection with, the Additive, or any methods or devices which are claimed
to
result in and be useful in connection with the production of a Product (as
defined below) for internal combustion engines using the Additive.
"Product"
shall
mean any fuel, article, composition, apparatus, substance, chemical, material,
method or services which is made, used, distributed or sold which: (i) is
covered in whole or in part by one or more pending or unexpired claims in the
Patent Rights; (ii) is manufactured using a method or process which is covered
in whole or in part by one or more pending or unexpired claims contained in
the
Patent Rights and/or which utilizes the Know-How; or (iii) the use of which
is
covered in whole or in part by one or more pending or unexpired claims contained
in the Patent Rights. For purposes of this definition, a Product is covered
by a
pending or unexpired claim in the Patent Rights if in the course of manufacture,
use, distribution or sale, it would, in the absence of this Agreement, infringe
one or more claims of a patent which has not been held invalid by a court from
which no appeal can be taken.
"License"
shall
mean the license granted in Section 2 hereof.
“Territory”
shall
mean the geographic areas defined in Annex
A.
“Gallon”
shall
mean a
liquid
unit equal to 4 quarts or 3.785 liters.
2. GRANT
OF SUBLICENSE
2.1
Subject
to the terms and conditions of this Agreement, Sublicensor hereby grants to
Sublicensee a non-transferable, non-exclusive license, with no right to grant
sublicenses, under the Patent Rights and under the Know-How to make, have made,
use, sell or otherwise dispose of, or deal in, any Product in the
Territory.
2.2 Sublicensee
shall be jointly and severally obligated and liable to Licensor for all of
the
obligations of Sublicensor under the Exclusive License Agreement, to the extent
that such obligations arise from or relate to the exercise by Sublicensee of
the
rights granted to it in this Agreement; provided, however that the amount of
any
obligation in respect of payments due under the Exclusive License Agreement
shall be reduced by any amounts payable to Sublicensor by Sublicensee in respect
of its royalty obligations actually paid by Sublicensee under this Agreement.
3. ROYALTIES
3.1 In
consideration of the grant of License hereunder, Sublicensee agrees to pay
to
Sublicensor a royalty of ten U.S. cents ($0.10) per Gallon of Product sold
by
Sublicensee, its agents, affiliates, and subsidiaries (the “Royalties”).
3.2 In
the
first fifteen (15) months from the Effective Date of this Agreement, Sublicensee
must sell at least twenty million (20,000,000) Gallons of Products (the “Initial
Mandatory Minimum Sales”). In each subsequent twelve (12) month period during
the Term or any Renewal Term of this Agreement, Sublicensee must sell at least
ten million (10,000,000) Gallons of Products (the “Follow-On Mandatory Minimum
Sales”). Sublicensee’s failure to achieve the Initial Mandatory Minimum Sales or
the Follow-On Mandatory Minimum Sales shall be cause for termination pursuant
to
Section 9.2, unless Sublicensee shall pay the difference between the amount
actually due for such period under this Agreement for such period and the amount
that would have been due had Sublicensee sold the minimum amounts set forth
above during that period, within the time provided herein for payment of
Royalties for such period (the “Cure Right”). Sublicensee’s obligation to pay
Royalties on the Initial Mandatory Minimum Sales is irrevocable, whether or
not
Sublicensee actually achieves such Initial Mandatory Minimum Sales.
3.3 All
Royalties shall be paid by Sublicensee to Sublicensor on a quarterly basis
within thirty (30) days after the end of each calendar quarter in which such
Royalties are accrued. Each such payment shall be accompanied by an accounting
statement, which shall include:
(i)
the
quantity and class of Products sold; and
(ii)
the
total of all Royalties payable to Sublicensor.
3.4 Sublicensee
shall keep proper books of account showing sales of Products. Sublicensor's
designated auditing firm shall have access to the books and records of
Sublicensee at all reasonable times to independently determine the amount of
Royalties payable hereunder, but for no other purpose. All information obtained
by Sublicensor and its auditing firm shall be kept strictly confidential by
Sublicensor and its auditing firm.
4. RETENTION
OF RIGHTS.
Notwithstanding any other provisions herein, Licensor, Sublicensor and
Sublicensor's other sublicensees will have the absolute, nontransferable right
to use the technology covered by the Patent Rights and Know-How and all
improvements thereof, for conducting research and for any other purposes
permitted pursuant to the Exclusive License Agreement or any valid sublicense
agreements.
5. PATENT
PROSECUTION. Sublicensor,
and not Sublicensee, shall be responsible for prosecuting all United States
patent applications, and foreign patent applications in such foreign
jurisdictions as Sublicensor chooses, included within the Patent Rights, and
for
taking action at its discretion as shall perfect or effect its title to the
Patent Rights. If Sublicensor shall elect not to take any action to perfect,
effect or maintain any Patent Right, it shall give Sublicensee prompt (and
in
any event not less that thirty days prior to the last date on which such action
may be taken) notice of its election not to do so, and Sublicensee may take
such
action, at its own expense. Sublicensor shall cooperate with Sublicensee in
all
respects as Sublicensee may reasonably request in connection with the taking
of
any such action .
6. PATENT
INFRINGEMENT.
Sublicensee shall promptly notify Sublicensor of all claims, allegations and
notifications of infringement of third party patents. Sublicensor shall have
no
obligation or liability in the event that legal action is brought against
Sublicensee for patent infringement. Such obligation and liability shall be
borne by Sublicensee. Sublicensee may choose legal counsel and defend the patent
infringement lawsuit.
7. PATENT
MARKING.
Sublicensee shall use reasonable efforts to place all appropriate patent and
other intellectual property notices, markings and indicia on product and
marketing literature for any Products as needed to protect the patent and other
intellectual property rights of Sublicensor and right for damages for
infringement thereof.
8. TERM
OF THE AGREEMENT. The
Term
of this Agreement shall be three (3) years commencing on the effective date
of
this Agreement (the "Term"), unless earlier terminated pursuant to Section
9.
The Term shall automatically renew for additional one (1) year periods ("Renewal
Term") provided neither Party is in default under this Agreement and neither
Party has given notice of termination in accordance with Section 9.
9. TERMINATION
9.1 Sublicensee
may terminate this Agreement at any time, for any reason, by providing
Sublicensor not less than thirty (30) days prior written notice
thereof.
9.2 Sublicensor
may terminate this Agreement on thirty (30) days written notice upon the
occurrence of any of the following:
(i) A
default
in the payment of Mandatory Minimum Royalties or any Royalties when due and
payable, or a failure to submit to Sublicensor when due a true and complete
accounting statement pursuant to Section 3.2 of this Agreement, which default
or
failure continues for a period of at least thirty (30) days after Sublicensor
has given to Sublicensee written notice of such default or failure.
(ii) Subject
to Sublicensee’s Cure Right contained in Section 3.2, Sublicensee’s failure to
achieve the Initial Mandatory Minimum Sales or the Follow-On Mandatory Minimum
Sales pursuant to Section 3.2.
(iii) A
material breach of any other obligation of Sublicensee under this Agreement,
which breach shall not have been cured within thirty (30) days after Sublicensor
has given to Sublicensee written notice of such breach, in which notice
Sublicensor shall have specified in reasonable detail the nature of such breach.
For purposes of determining materiality, and provided the nature of the breach
may be measured in monetary terms, a breach shall be deemed "material" if such
breach results in a loss of Royalties exceeding $50,000.
10. REMEDIES.
Sublicensee acknowledges and agrees that any violation of this Agreement by
Sublicensee would result in irreparable harm to Sublicensor. Accordingly,
Sublicensee consents and agrees that, if Sublicensee violates any of the
provisions of this Agreement, Sublicensor shall
be
entitled, in addition to other remedies available to it, to an injunction to
be
issued by any court of competent jurisdiction restraining Sublicensee from
committing or continuing any violation of this Agreement, without the need
for
posting any bond or any other undertaking.
11. NOTICES,
REPORTS AND PAYMENTS. Any
notice, report or payment permitted or required under this Agreement shall
be in
writing, and shall be sent or delivered to the receiving party at the address
set forth below or at such address as either Party may from time to time
designate in writing.
|
If
Sublicensor to: H2Diesel, Inc.
|
If
to Sublicensee: Xethanol, Inc.
|
|
00000
Xxxxxxxxxx Xxxx
|
0000
Xxxxxx xx xxx Xxxxxxxx, 00xx
Xxxxx
|
|
Xxxx
Xxxxx, Xxxxxxx 00000
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
Attention:
Xxx Xxxxx, CEO
|
Attention:Xxxxxxxxxxx
x'Xxxxxx-Xxxxxx, CEO
|
|
Telephone:
(000) 000-0000
|
Telephone:
(000) 000-0000
|
|
Facsimile:
(000)
000-0000
|
Facsimile:
(000)
000-0000
|
12. SEVERABILITY.
If
any
provision of this Agreement is held invalid under any law applicable to the
Parties, Licensor, other sublicensees and/or assignees, that provision shall
be
considered severable and its invalidity shall not affect the remainder of this
Agreement, which shall continue in full force and effect.
13. CONTROLLING
LAW, JURISDICTION AND VENUE.
13.1 In
the
event of a dispute between the parties arising out of, or relating to this
Agreement, its interpretation or performance hereunder, the parties shall exert
their commercially reasonable efforts to resolve the dispute amicably through
negotiations.
13.2 The
validity, construction, and interpretation of this Agreement and all purchase
orders issued hereunder shall be solely and exclusively governed by and
construed in accordance with the laws of the State of New York, USA, excluding
any otherwise applicable rules of conflict of laws.
13.3 The
courts of the state of New York shall have sole and exclusive jurisdiction
over
the parties and subject matter of this Agreement. For implementation of this
Agreement and all its consequences, each party waives such of its rights and
privileges under any other law or legal system, such as the law of the place
of
performance, as is necessary to give effect to the term and conditions hereof.
Each party hereby expressly consents to personal jurisdiction in New York,
and
expressly waives any right to object to such personal jurisdiction, or the
convenience of such forum.
14. NEGATION
OF WARRANTIES
14.1 Nothing
in this Agreement shall be construed as:
(i)
a
warranty or representation by Sublicensor as to the validity or scope of any
of
the Patent Rights; or
(ii)
a
warranty or representation that any Products made, used, sold or otherwise
disposed of under any license granted in this Agreement is or will be free
from
infringement of patents of third parties; or
(iii)
an
obligation to bring or prosecute actions or suits against third parties for
infringement; or
(iv)
conferring the rights to use in advertising, publicity or otherwise any
trademark, trade name, or names or any contraction, abbreviation, simulation
or
adoption thereof, of Licensor or Sublicensor; or
(v)
any
obligation to furnish any know-how not provided by Licensor to Sublicensor.
14.2 SUBLICENSOR
MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, NOR DOES SUBLICENSOR REPRESENT THAT THE RIGHTS GRANTED
HEREUNDER WILL RESULT IN PRODUCTS THAT ARE COMMERCIALLY VIABLE.
14.3
Sublicensee
further agrees that it will nor rely upon technical information provided by
Sublicensor in developing and manufacturing any Products hereunder, but will
independently test, analyze and evaluate all Products prior to manufacture
and
distribution of such Products.
15. INDEMNITY
15.1 Sublicensee
shall defend, indemnify and hold harmless Sublicensor and each of their
partners, employees and agents, and their respective successors, heirs and
assigns (the "Indemnitees"), against all liabilities, demands, losses, costs,
and expenses (including, without limitation, attorneys' fees) incurred by or
imposed upon the Indemnitees or any one of them in connection with any claims,
suits, actions, demands or judgments arising out of any theory of liability
(including but not limited to, actions in the form of tort, warranty, or strict
liability) for death, personal injury, illness, or property damage arising
from
Sublicensee's use, sale, or other disposition of any Products, or
exercise
of
any of
rights under the License; provided, however, that Sublicensee shall not be
obligated to indemnify or hold harmless Sublicensor for any claim based upon
the
infringement by the Products of any patent or other intellectual property right
of a third party.
15.2 Sublicensee
agrees, at its own expense, to provide attorneys reasonably acceptable to
Sublicensor and Licensor to defend against any actions brought or filed against
any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
16. NON-TRANSFERABILITY
16.1 This
Agreement shall not be transferable by Sublicensee by any transaction, including
without limitation sale, merger, or other transfer of assets by Sublicensee,
without the express written consent of Sublicensor.
IN
WITNESS WHEREOF,
the
Parties hereto have executed this Agreement as of the date first above
written.
H2Diesel,
Inc.
By:
/s/
Xxx Xxxxx
Xxx
Xxxxx, CEO
Xethanol,
Inc.
By:
/s/
Xxxxxxxxxxx x’Xxxxxx-Xxxxxx
Xxxxxxxxxxx
x'Xxxxxx-Xxxxxx, CEO
Annex
A
The
Territory
U.S.
states of Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode
Island, New York, Pennsylvania, Delaware, New Jersey, Virginia, West Virginia,
North Carolina, South Carolina, Georgia, Florida, and other areas that may
be
added by written agreement of the parties.
