Exhibit 10.1
Larry Shultz
2934-1/2 Beverly Glen Circle
Suite 301
Bel Air, CA 90077 Re: Letter of Agreement for certain MPG Rights
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Dear Larry,
This document will formalize our discussions and confirm our mutual
agreement, effective as of July 5, 2005, in regards to your personal ownership
rights in the Magnetic Piston (also known as "Pellet") Generator ("MPG")
invention and its commercialization in association with a certain
California-based hybrid vehicle integrator ("HybridCo"), a certain
California-based geothermal developer ("GeoCo"), and a certain California
Geothermal Power Generator ("CalPowerCo"), all of whom you introduced to Encore.
Encore (`the Company") acknowledges that over the last six months you
("Shultz") have been intimately involved and instrumental in the development of
the Magnetic Piston Generator (the "MPG") invention with Robert Hunt; that you
invested your own money in the MPG and contributed your own design ideas and
applications to the MPG (including but not limited to motor vehicle, hybrid
vehicle, solar thermal and natural gas pipeline pressure recovery applications),
for which you may be entitled to ownership of certain intellectual property,
patent rights and related business interests with HybridCo, GeoCo and
CalPowerCo, all of which are not currently assigned to Encore, nor covered under
Encore's existing license agreement with Mr. Robert Hunt under the "Encore Hunt
License Agreement".
The Company further acknowledges the value of your original idea, business
strategy and efforts to develop a joint venture company with HybridCo to
engineer and build MPG units for global hybrid vehicle applications (the
"HybridCo Venture"), as well as the value of the technological credibility that
HybridCo's involvement brings to the MPG technology and, in turn, to the
Company. Furthermore, the Company recognizes the value of your original idea,
business strategy and efforts to develop the MPG for global geothermal
applications by securing the cooperation of the CalPowerCo to demonstrate the
MPG in one of their geothermal wells in California; and the value of your
introducing various geothermal veterans, with GeoCo, to the Company which
initiated the Company's entry into the geothermal business (the "GeoCo
Venture").
Accordingly, Encore desires to enter into this Agreement with you to assign
ownership to the Company of any and all such rights that you may own in and to
the MPG and the HybridCo and GeoCo Ventures, so that will be no future doubt as
to the Company owning control of all such rights in and to the MPG and the
HybridCo and GeoCo Ventures, subject to the terms of the Encore Hunt License
Agreement and this Agreement herein.
Subject to the following terms and conditions, the Company desires you to
assign, and you hereby agree to assign to the Company, any and all of your past,
present or future rights in and to the MPG technology, to the GeoCo Venture and
to the HybridCo Venture of your own creation and pro-active implementation.
Accordingly, the Company and you hereby agree as follows:
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1. In consideration of the warrants being issued to you, you hereby assign
and transfer all of your rights, title and interest to the Company in and to the
Geothermal and HybridCo Ventures and in and to any and all intellectual property
with regard to MPG technology in which you have any interest and you agree to
execute assignments of such technology or of your interest in the ventures or
any other documentation of such assignments and transfer as Company may
reasonably request from time to time in order to document and establish in
writing such assignment and transfer. In addition to assigning any and all
rights that you may own in and to the MPG technology, and to the Geothermal and
HybridCo Ventures, you also hereby assign and transfer your ownership rights to
the Company of the following U.S. Trademark and Website addresses or Uniform
Resource Locators ("URL's") relating to various MPG applications:
A. Trademark: HeatSeeker / US Trademark Class 7 - Electric Generators.
B. Websites:
i. WWW.RooftopEnergy.com
i. WWW.HybridMPG.com
ii. WWW.MPGenergy.com
iii. WWW.MPGhybrid.com
iv. WWW.MPGvehicle.com
You agree to execute assignments of the above items or any other documentation
of such assignments and transfer as Company may reasonably request from time to
time in order to document and establish in writing such assignment and transfer.
2. As partial consideration for transferring all of your interests in and
to the above named assets to Encore ("the company"), you will accept, and the
Company will pay you, One Million Five Hundred Thousand (1,500,000) Encore share
purchase warrants exercisable at Twenty-Cents ($0.20) per share, exercisable for
a period of seven (7) years (the "Warrant Agreement") and issuable within thirty
(30) days of the execution of this agreement. The Warrant Agreement will be
subject to your acknowledgement that the Company does not currently have
sufficient Common Stock authorized to issue this warrant and is not able to
issue such Common Stock. The Company will undertake at its next Shareholder
meeting to seek the approval of an amendment to its Articles of Incorporation to
increase the authorized number of share of Common Stock to be able to honor all
such conversions and warrant exercises. If such amendment is not passed for any
reason, the Company will issue, in lieu of such Common Stock, a series of
preferred stock with rights and preferences materially identical to Common Stock
(but with each preferred share representing a multiple number of shares of
Common Stock), until such time as Common Stock can be issued by the Company. It
is understood that if any of shares acquired upon the exercise of the warrants
are issued as restricted shares, then the Company shall, subject to any SEC
regulations or restrictions, offer you "piggy-back registration rights" and,
upon filing a registration statement (SB-2, or otherwise), be obligated to
register the Securities at the same time and at the sole cost and expense of the
Company (other than brokerage fees and commissions), in the same registration
statement, upon the same terms and conditions, as the Securities being offered
by the Company in said registration statement. Such "piggyback" rights shall be
subject to a right by an underwriter in an underwritten public offering to
exclude such stock from the underwritten offering and Consultant acknowledges
that in the event of such an underwritten offering, Consultant may be required
to "lock up" Consultant's stock for some period after such offering is
completed.
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3. Joint Venture or Subsidiary Transactions. The Company agrees to use its
best efforts to license or sub-license, on a worldwide exclusive basis, any and
all patent, copyright or other such intellectual property rights that the
Company has in the MPG to a minimum of three separate Companies, Limited
Liability Corporations (LLC), Limited Liability Partnerships (LLP), Joint
Ventures (JV) or Subsidiary entities (collectively, the "Subsidiary Companies")
that the Company will form with you, and others, to exploit the MPG for the
following exclusive "Fields of Use":
(a) Heavy Duty Motor Vehicles (weighing over 8,500 pounds),
(b) Passenger & Light Truck Motor Vehicles (weighing less than 8,500
pounds), and
(c) Solar Thermal ("rooftop solar and "concentrated solar" systems).
The Company agrees to pay you an equity, stock, member or ownership
interest equal to fifteen percent (15%) of the total amount of any equity,
stock, member or ownership interest in any such Subsidiary Companies formed to
exploit the MPG in the Fields of Use of Heavy Duty Motor Vehicles, Passenger &
Light Truck Motor Vehicles and Solar Thermal applications. Your initial
ownership interest of fifteen percent (15%) shall not be subject to dilution
until after the first round(s) of financing aggregating not less than $1 million
per Subsidiary Company by the Company or Investors in any Subsidiary Company. At
a minimum, you and the Company shall each be entitled to one seat on the board
of directors or board of managers of any Subsidiary Company formed under this
Paragraph 3 subject to such requirements as may be imposed by the other
Investors.
The Company shall own all rights to exploit the MPG technology without any
encumbrance by or obligations to you in all other Fields of Use and applications
of the MPG, including but not limited to geothermal, ocean thermal, power plant
and industrial waste heat recovery, compressed air, compressed gas and other
pressure recovery applications, to which you disavow any ownership interest,
subject to the terms and conditions of this Agreement.
If for any reason the Company is unable to convince other Investors to invest in
the three Subsidiary Companies as needed in separate entities as contemplated
above, the Company shall, in good faith, work with you to structure alternate
transactions/structures that will result in your having substantially the same
rights to economic returns as are anticipated by the above three "Subsidiary
Company" structure.
4. Furthermore, for a maximum of five (5) Subsidiary Companies formed by
the Company or its affiliates in the Fields of Use of Heavy Duty Motor Vehicles,
Passenger & Light Truck Motor Vehicles and Solar Thermal applications, you shall
be appointed as a Consultant to and paid, upon suitable financing of the
venture, a Minimum Consulting Fee of ten thousand dollars ($10,000.00) per month
by each such Subsidiary Company for a term of five (5) years, provided that such
consulting agreements shall be subject to such terms and conditions as may be
reasonably required by third party Investors in light of usual and customary
practice, including but not limited to rights to terminate if certain
performance levels are not obtained, minimum time commitments and
non-competition limitations. You shall receive the title of "Senior Consultant"
and will give management advice and counsel to the board of directors, board of
managers or management committees approved to manage such Subsidiary Companies.
If such Minimum Consulting Fee is not paid by, or out of the budgets allocated
to a Subsidiary Company formed to exploit the MPG in its given field of use or
application, then the Minimum Consulting Fee shall be paid directly by the
Company separately and in addition to any other monies payable to you by the
Company under other agreements, if any, then in effect between you and the
Company, but only to the extent that the Company is in fact receiving cash flow
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from each applicable Subsidiary Company sufficient to make such payments with
respect to such Subsidiary Company. If you cease to receive a consulting fee
from a Subsidiary Company as a result of its termination in accord with the
terms of that consulting agreement, the Company shall not be required to pay any
consulting fee with respect to that Subsidiary Company.
The parties acknowledge and agree that Larry Shultz is a member of the
Encore Board of Directors, an Encore stockholder and a signatory to the Encore
Clean Energy, Inc. Code of Ethics Agreement (the "Encore Ethics Agreement"). The
material facts of Shultz's contributions, relationship with the parties named
herein and his contemplated interests (ownership, financial, management and/or
otherwise) in related businesses and ventures have been disclosed and are known
to the Encore Board of Directors. A majority of the disinterested members of the
Board of Directors of Encore, constituting a majority of the members of the
Board of Directors of Encore, deemed it to be in the best interests of Encore to
enter into this Agreement with Shultz and to waive compliance by Shultz with the
Encore Ethics Agreement.
Our signatures below constitute the basic terms of the Agreement between
you and Encore. The terms outlined in this letter, as well as all necessary SEC
or other such regulatory filings, will be prepared and formalized by the
Company's lawyers within 30 business days of execution.
Sincerely,
Encore Clean Energy, Inc. Accepted and Agreed to this 29th Day of August, 2005
Dan Hunter /s/ Larry Shultz
CEO ----------------------
Larry Shultz
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