EXHIBIT 10.1
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") is entered into
as of this 6th day of September, 2005 (the "Effective Date") by and between ISE
CORPORATION, a California corporation, maintaining its principal place of
business at 12302 Kerran Street Poway, CA 92064 ("ISE") and ENCORE CLEAN ENERGY,
INC., a Delaware Corporation, with its principal place of business at 375 Water
Street, Suite 610, Vancouver, British Columbia, Canada V6B 5C6 ("Encore"). ISE
and ENCORE may be individually referred to as a "Party" or collectively as the
"Parties" under this Agreement.
RECITALS
A. ISE is engaged in the business of, among other things, developing
technology for use in electric and hybrid-electric propulsion systems.
B. Encore is engaged in the business of, among other things,
commercializing a MPG System (defined below).
C. Encore desires to (i) engage ISE to develop a MPG System according to
Encore's specifications and (ii) license the Licensed Technology (defined below)
to ISE.
D. ISE desires to (i) develop a MPG System according to Encore's
specifications and (ii) license the Licensed Technology from Encore.
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and other terms and conditions contained herein, and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS. All definitions below or elsewhere in this Agreement apply to
both their singular and plural forms, as the context may require. The terms
"herein", "hereunder", and "hereof" and similar expressions refer to this
Agreement. Unless otherwise expressly provided herein, the term "including" as
used herein means "including without limitation", and the term "days", as used
herein, means "calendar days", unless otherwise stated. The following terms as
used in this Agreement will have their respective meanings set forth below:
"Affiliate" means any entity which directly or indirectly owns or controls, is
owned or controlled by, or is under common control or ownership of fifty percent
(50%) or more of a Party.
"Claim" has the meaning set forth in Section 10.1.
"Deliverables" collectively means the items or materials to be delivered by ISE
to ENCORE pursuant to the Development Plan.
"Development Plan" means the DEVELOPMENT PLAN FOR MPG SYSTEM attached hereto as
Exhibit A.
"Developed Technology" means any and all (i) Inventions and (ii) Intellectual
Property Rights in the Inventions (including without limitation Program
Patents).
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"Documentation" collectively means user manuals, training materials, help text,
sample documents, tutorials, graphics, status reports and other written or
graphic materials of ISE that describe the operation of the MPG System.
"Encore Field" means all fields of use other than the Field.
"Encore Know-How" means tangible or intangible know-how, trade secrets and
inventions (whether or not patentable), data, other information, and any
physical or chemical material, which Encore owns, controls, or has a license to
use (with the right to sublicense) at any time during the Term.
"Encore MPG Products" means stand-alone MPG Products that are commercialized by
Encore for sale to third parties.
"Encore Patents" means all patents, both foreign and domestic, including without
limitation all substitutions, extensions, reissues, re-examinations, renewals
and inventors certificates, issued as of, and patents issuing from applications
(including provisionals, divisionals, continuations, and continuations-in-part)
pending as of, the Effective Date, which Encore owns, controls or has a license
to use other than the under this Agreement, including without limitation the
Hunt Patent.
"Field" means the Heavy Duty Vehicle market.
"Heavy Duty Vehicle" means any Vehicle that is greater than 8,500 pounds in
weight.
"Hunt Patent" means the provisional patent application filed with the USPTO on
April 1, 2005 entitled "ACCELERATED Magnetic pellet generator THAT PROVIDES
SELF-COMPRESSION" in the form attached hereto as Exhibit B (patent application
number unavailable as of the Effective Date).
"Intellectual Property" or "Intellectual Property Rights" collectively means any
and all patents, patent registrations, patent applications, business processes,
copyrights, data rights, trademarks, trade names, service marks, service names,
trade secrets, mask works, moral rights, know-how or any other similar
proprietary right arising or enforceable under the laws of the United States,
any other jurisdiction, or any bi-lateral or multi-lateral treaty regime.
"Inventions" has the meaning set forth in Section 6.2.
"ISE Drive System" means any drive system manufactured or sold by ISE.
"ISE Intellectual Property" means any and all Intellectual Property developed,
used, acquired or licensed by ISE or its Affiliates (i) before the Effective
Date or (ii) at any time, whether before, during or after the Term, which is not
conceived, reduced to practice or otherwise made or developed under and pursuant
to this Agreement.
"ISE MPG Products" means stand-alone MPG Products that are commercialized by ISE
for sale to third parties.
"ISE Vehicle" means any Vehicle sold by ISE that contains an ISE Drive System.
"Licensed Know-How" means all Encore Know-How that is necessary or useful to the
development, manufacture, use or sale of any Licensed Product.
"Licensed Patents" means all Encore Patents that would be infringed by the
making, having made, manufacture, use, offering for sale, sale or importation of
any Licensed Product, but for the license granted herein.
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"Licensed Products" means and includes any product that utilizes or incorporates
Licensed Technology.
"Licensed Services" means services utilizing Licensed Technology.
"Licensed Technology" means the Developed Technology, the Licensed Patents, and
the Licensed Know-How.
"Linear Generators" means a device that generates electricity through the linear
motion of a magnetic "piston" traveling through a series of coils also arranged
in a linear fashion, in a manner the same as or substantially the same as that
described in the Hunt Patent.
"List Prices" means ISE's suggested retail prices of MPG Products sold by ISE,
as determined in ISE's sole discretion and published by ISE from time to time.
"Manufacturing Costs" means, as applicable, (i) out-of-pocket costs incurred by
a Party or an Affiliate of such Party to manufacture a MPG Product (including
cost of materials, direct labor, and shipping fees paid to vendors) or (ii) the
total invoice price paid to a third-party supplier for the manufacture of a MPG
Product.
"Milestone" means a development milestone set forth in the Development Plan.
"Minimum Value" has the meaning set forth in Section 4.3.
"MPG Products" means all Licensed Products except for (i) ISE Drive Systems or
(ii) ISE Vehicles.
"MPG System" means a linear magnetic pellet generator system.
"Net Revenues" means all revenues actually received by ISE and its Affiliates
from the sale of MPG Products after the deduction of: (i) delivery and insurance
charges; (ii) commissions, discounts, credits allowed for defective, returned or
recalled products, and other allowances actually paid or allowed (including, but
not limited to, prompt payment and volume discounts, charge backs from
wholesalers and other allowances granted to the end commercial user of the
products, whether in cash or trade); and (iii) sales and other taxes, but not
including taxes assessed on income derived from such sales.
"Phase A Milestones" means Milestones 1 - 8 as set forth in the Development
Plan.
"Phase B Milestones" means Milestones 9 -12 as set forth in the Development
Plan.
"Program Patents" means all patents, both foreign and domestic, including
without limitation, all substitutions, extensions, reissues, renewals, and
inventors certificates covering Inventions.
"Securities Acts" means the Securities Act of 1933 and the Securities Exchange
Act of 1934.
"Specifications" means the functional and other specifications for the MPG
System that are specified in the Development Plan.
"Term" shall have the meaning set forth in Section 12.1.
"Territory" means the United States and Canada.
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"Valid Claim" means any claim of an issued and unexpired patent within the
Licensed Technology which has not been held unenforceable or invalid by a court
or other governmental agency of competent jurisdiction in an unappealed or
unappealable decision, and which has not been disclaimed or admitted to be
invalid or unenforceable.
"Vehicle" means any type of land-based vehicle that is used for transportation,
including without limitation, buses, trucks, trams, railed vehicles, tanks and
other military vehicles.
2. DEVELOPMENT SERVICES
2.1 Development. ISE agrees to use commercially reasonable efforts to
complete the development of the MPG System in accordance with the terms of the
Development Plan and this Agreement.
2.2 Delivery. Upon completion of each Milestone, ISE will deliver all
applicable Deliverables to Encore, if any.
2.3 Payment for Development Services.
2.3.1 Phase A Milestones. Encore agrees to pay the aggregate amount of
$264,780 to ISE as a deposit for the development fees of the Phase A
Milestones (the "Phase A Deposit") in three installment payments as
follows: (i) Encore shall pay to ISE the first installment payment of
$100,000 within sixty (60) days of the Effective Date; (ii) Encore shall
pay to ISE the second installment payment of $100,000 within one hundred
twenty (120) days of the Effective Date; and (iii) Encore shall pay to ISE
the third installment payment of $64,780 within one hundred eighty (180)
days of the Effective Date. The applicable portion of the Phase A Deposit
(as set forth in the Development Plan) will be deemed to be earned by ISE
upon initiation of development work by ISE for each Phase A Milestone. ISE
will be not obligated to perform development work on any Phase A Milestone
until payment in full is made to ISE for such Phase A Milestone.
2.3.2 Phase B Milestones. After successful completion of all Phase A
Milestones and before initiation of development work on any Phase B
Milestone, ISE shall provide Encore with a written invoice for the
development fee of such Phase B Milestone (as set forth in the Development
Plan). Encore agrees to pay the development fee of each Phase B Milestone
to ISE within ten (10) days of receipt of written invoice from ISE;
provided, however, Encore shall not be obligated to pay such development
fee in the event this Agreement is terminated by either Party pursuant to
Section 12.4 of this Agreement. ISE will be not obligated to perform
development work on any Phase B Milestone until payment in full is made to
ISE for such Phase B Milestone. Payment for each Phase B Milestone will be
deemed to be earned by ISE upon receipt by ISE.
2.4 Cessation of Services. Notwithstanding anything to the contrary express
or implied herein, ISE has the absolute right to cease any or all development
work, at any time without liability, in the event ISE does not receive payment
as provided in Section 2.3 above.
2.5 Use of Subcontractors. Encore agrees that ISE may delegate any of its
obligations under this Agreement to third parties.
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2.6 Changes to Development Plan. The Parties acknowledge that changes to
the terms of the Development Plan may become prudent due the uncertainty created
by the research component of the development services to be provided by ISE.
Either Party may request a change to the Development Plan at any time by
providing written notice to the other Party regarding the proposed changes,
along with a statement regarding the expected effects on cost and timing. The
receiving Party is under no obligation to accept the recommended changes.
Notwithstanding anything to the contrary expressed or implied in this Agreement,
the Development Plan may be amended or modified only by mutual written agreement
of authorized representatives of the Parties.
2.7 Development Risk. Encore expressly agrees and acknowledges that (i) ISE
does not guarantee that it will be successful in developing a functioning MPG
System, (ii) payments due ISE pursuant to Section 2.3 are not conditioned on ISE
developing a functioning MPG System, and (iii) ISE will have no liability to
Encore under this Agreement for failing to develop a functioning MPG System.
2.8 Scope of Agreement. Notwithstanding any other provision in this
Agreement expressed or implied to the contrary, nothing in this Agreement shall
be deemed to restrict ISE's right or ability, whether during the Term or at any
time thereafter, to: (i) conduct research and development in any field,
including without limitation, the development of cogen systems; or (ii) enter
into any business arrangement of whatever nature or description, including
without limitation arrangements similar to those contemplated in this Agreement;
provided, however, except for the purposes of developing the MPG System under
this Agreement, ISE will not engage in any business or research activities in
the field of Linear Generators for a period of five (5) years after the
Effective Date.
3. LICENSE GRANTS
3.1 Exclusive License. ENCORE hereby grants to ISE an exclusive, perpetual
and irrevocable right and license, with the right to sublicense, under the
Licensed Technology, to develop, make, have made, use, market, sell, offer to
sell, import and otherwise exploit Licensed Products and Licensed Services in
the Field in the Territory.
3.2 Research License to ISE. Subject to the terms and conditions of this
Agreement, ENCORE hereby grants to ISE a nonexclusive, nontransferable (except
as provided in Section 13.4), non-sublicensable (except to ISE's
subcontractors), royalty-free, worldwide license under Encore's interest in the
Licensed Technology solely to develop the MPG System under this Agreement.
4. ROYALTY PAYMENTS.
4.1 Royalty Payments to ENCORE. ISE shall pay royalties to Encore, within
sixty (60) days after the end of each calendar quarter, in connection with the
sale of any ISE MPG Product in any country where a Valid Claim exists, as
follows: (i) if such ISE MPG Product is sold by ISE or its Affiliate to a third
party as a stand-alone product, the greater of (a) [Redacted] % of the Minimum
Value for such ISE MPG Product and (b) [Redacted]% of the Net Revenues received
by ISE or its Affiliate in connection with such sale; or (ii) if such ISE MPG
Product is integrated into a ISE Drive System or ISE Vehicle before sale to a
third party, the greater of (a) [Redacted]% of the Minimum Value for such ISE
MPG Product and (b) [Redacted]% of ISE's then current List Price for such ISE
MPG Product. Royalty payments shall become due and payable to Encore under this
Section 4.1 solely upon the date that ISE actually receives payment in full from
the third party for the sale of the applicable ISE MPG Product.
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4.2 Royalty Term. ISE's obligation to pay royalties under Section 4.1 will
expire on a country-by-country basis in the U.S. and Canada upon the expiration
of the last to expire Valid Claim within the Licensed Technology.
4.3 Determination of Minimum Value. Solely for the purposes of determining
the minimum royalty to be received by Encore pursuant to Section 4.1, Encore and
ISE shall perform a cost analysis of all ISE MPG Products to determine the
Minimum Value (defined below) of such ISE MPG Products. "Minimum Value" for an
ISE MPG Product means the Manufacturing Costs of such ISE MPG Product at the
time the cost analysis is performed pursuant to this Section 4.3. The Minimum
Value for each ISE MPG Product will be determined by the Parties before the sale
of any ISE MPG Product to a third party and thereafter upon the written request
of either Party; provided, however, unless the Parties otherwise agree in
writing, the Minimum Value for any ISE MPG Product may not be reassessed more
than once in any twelve (12) month period.
5. SUPPLY AGREEMENT
5.1 Supply by ISE. In the event ISE commercializes ISE MPG Products and
upon Encore's request, Encore and ISE will negotiate in good faith for a period
of no more than six (6) months, or such longer period as may be agreed to in
writing by the Parties, to enter into a supply agreement with the following
terms: (i) ISE MPG Products will be sold to Encore at a price equal to ISE's
Manufacturing Costs plus an amount equal to [Redacted] percent ([Redacted]%) of
such costs; (ii) Encore will have the nonexclusive right to market and sell the
ISE MPG Products solely in the Encore Field; (iii) ISE's standard terms and
conditions of sale for ISE MPG Products then in effect will apply; and (iv) upon
such other reasonable commercial terms mutually agreed upon by the Parties.
5.2 Supply by Encore. In the event Encore commercializes Encore MPG
Products and upon ISE's request, Encore and ISE will negotiate in good faith for
a period of no more than six (6) months, or such longer period as may be agreed
to in writing by the Parties, to enter into a supply agreement, with the
following terms: (i) Encore MPG Products will be sold to ISE at a price equal to
Encore's Manufacturing Costs plus an amount equal to [Redacted] percent
([Redacted]%) of such costs; (ii) ISE will have the exclusive right to use or
sell the Encore MPG Products in the Field and Territory; (iii) Encore's standard
terms and conditions of sale for Encore MPG Products then in effect will apply;
and (iv) upon such other reasonable commercial terms mutually agreed upon by the
Parties.
6. INTELLECTUAL PROPERTY
6.1 ISE Intellectual Property. ISE and its licensor(s) are and shall remain
the sole and exclusive owners of all rights, title and interest in and to the
ISE Intellectual Property. Notwithstanding anything to the contrary expressed or
implied in this Agreement, the Parties agree that this Agreement does not grant
to Encore any license right, title or interest of any kind in ISE Intellectual
Property. All rights in Intellectual Property not expressly granted to Encore
under this Agreement are reserved by ISE (or its licensors) and no additional or
other rights (including without limitation implied licenses) are granted to
Encore under this Agreement.
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6.2 Encore Intellectual Property. All products, inventions, ideas,
discoveries, designs, methods, formulas, software, trade secrets, developments,
processes, techniques, and related know-how directly resulting from ISE's
services to develop a MPG System under this Agreement during the Term (each an
"Invention" and collectively "Inventions"), will be the sole and exclusive
property of Encore, and, to the extent permitted by law, will be "works made for
hire." ISE hereby assigns and agrees to assign to Encore or its designee,
without further consideration, its entire right, title, and interest in and to
all Inventions. ISE will reasonably cooperate with Encore (at Encore's expense)
in securing and perfecting such ownership and assignment.
7. PATENTS
7.1 Prosecution of Program Patents.
7.1.1 Primary Responsibility. Encore shall be responsible for and
shall control, at its expense, the preparation, filing, prosecution, grant
and maintenance of any Program Patents. Encore will use reasonable efforts
to obtain patent coverage for the Inventions that are as broad in scope as
possible, and at a minimum in the following countries: United States and
Canada.
7.1.2 Cooperation. Encore shall consult with ISE on, and give ISE a
reasonable opportunity to review, all filings and activities involving the
Program Patents. ISE shall be kept informed of all substantive matters
relating to the preparation and prosecution of all Program Patents, and
shall be provided with copies of all patent prosecution and maintenance
documentation and correspondence so that ISE will be currently and promptly
informed of the continuing prosecution and maintenance of the Program
Patents. ISE shall have the right, but not the obligation, to review and
comment on such documentation and correspondence, as well as
specifications, claims and responses to office actions prior to their
submission to the relevant government patent office.
7.1.3 Elective Termination of Rights. In the event Encore desires to
discontinue the prosecution or maintenance of any Program Patent filed in
any country, Encore will promptly give notice of such intention to ISE. ISE
will have the right, but not the obligation, to assume responsibility for
the prosecution of any such Program Patent on a country-by-country basis at
its own expense, by giving notice to Encore of such intention within sixty
(60) days of receipt of notice from Encore pursuant to this Section 7.1.3.
If ISE assumes responsibility for the prosecution of any Program Patent
pursuant to this Section 7.1.3, Encore agrees to assign to ISE all of
Encore's right, title and interest in and to such Program Patent in the
applicable jurisdiction.
7.2 Infringement of Licensed Patents
7.2.1 Notice. Each Party shall promptly notify the other in writing of
any alleged or threatened infringement of the Licensed Patents with may
adversely impact the rights of ISE under this Agreement, of which it
becomes aware.
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7.2.2 Enforcement Action. In the event that the Parties become aware
of any alleged or threatened infringement of the Licensed Patents which may
adversely impact the rights of ISE under this Agreement, Encore shall take
appropriate action against any person or entity directly or contributorily
infringing on such Licensed Patents. In the event Encore fails to institute
an infringement suit or take other reasonable action within sixty (60) days
of becoming aware of such alleged or threatened infringement, ISE shall
have the right to institute such suit or take other reasonable action in
its own name, Encore's name, or both. Regardless of which Party brings the
action, the other Party hereby agrees to cooperate reasonably in any such
effort, including the furnishing of a power of attorney to ISE if required
to enable ISE to bring the action, and the other Party shall have the right
to participate in such action at its own expense with its own counsel. Any
funds obtained by settlement or otherwise shall be dispersed as follows:
(i) first, each Party shall first recover any reasonable expenses incurred
in such action (including reasonable attorneys' fees) and (ii) second, (a)
if Encore initiates and prosecutes the infringement suit or claim, then
Encore shall receive 100% of the remaining funds or (b) if ISE initiates
and prosecutes the infringement suit or claim, then Encore shall receive
30% of the remaining funds and ISE shall receive 70% or the remaining
funds. Neither Party shall enter into any settlement that affects the other
Party's rights and interests without such other Party's written consent,
which consent will not be unreasonably withheld.
7.3 Claims of Third Parties
7.3.1 Joint Strategy. In the event that the development, manufacture,
use, sale, importation, or offer for sale of a Licensed Product
commercialized by ISE (or its Affiliate or licensee) becomes the subject of
a claim of infringement of a patent, copyright or other propriety right,
and such claim is based, or based in part, on the utilization by ISE (or
its Affiliate or licensee) of Licensed Technology, and without regard to
which Party is charged with such infringement, the Parties shall promptly
confer to discuss the claim.
7.3.2 Defense. Unless the Parties otherwise agree, ISE shall assume
the primary responsibility for the conduct of the defense of any such claim
covered by Section 7.3.1. In any event, Encore shall have the right, but
not the obligation, to participate in any such suit at its own expense.
Each Party shall reasonably cooperate with the Party conducting the defense
of the claim including, if required to conduct such defense, furnishing a
power of attorney. Neither Party shall enter into any agreement, license or
settlement that affects the other Party's rights or interests without such
other Party's written consent, which consent shall not be unreasonably
withheld.
7.3.3 ISE Payment Credit for Claims arising out of Licensed
Technology. ISE may fully credit against royalties otherwise due Encore
under Section 4.1 of this License Agreement, all payments made or expenses
incurred by ISE under this Section 7.3 on claims against either or both
Parties to the extent that such claims arise out of their use of Licensed
Technology.
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8. CONFIDENTIALITY
8.1 Disclosure. It is expected that the Parties will disclose to each other
certain confidential information ("Confidential Information") pursuant to this
Agreement and each Party recognizes the value and importance of the protection
of the other's Confidential Information. All Confidential Information of one
Party (the "Disclosing Party") that is disclosed to the other Party (the
"Recipient") shall remain the sole property of the Disclosing Party (or its
licensors), which shall own all rights (including Intellectual Property Rights),
title, and interest in and to such Confidential Information. Only information
which is identified as confidential pursuant Section 8.2 shall be deemed to be
"Confidential Information" hereunder.
8.2 Designation of Confidential Information. A Disclosing Party may
designate information disclosed pursuant to this Agreement as confidential by:
(i) marking written information or other tangible media as "Confidential" or
with a similar legend prior to disclosure; (ii) indicating in the visual display
of information that such information is confidential; (iii) identifying oral
information as confidential at the time of disclosure to Recipient and provides
such Confidential Information, in writing to Recipient within thirty (30) days
following the original disclosure; or (iv) notifying the Recipient in writing
prior to disclosure that certain specifically identified types of information
are considered to be confidential.
8.3 Procedures. Each Recipient agrees that, except as otherwise expressly
contemplated herein, at all times and notwithstanding any termination or
expiration of this Agreement it will: (a) hold in strict confidence and not
disclose to any third party Confidential Information of the Disclosing Party;
(b) use the Confidential Information of the Disclosing Party only for the
purpose of performing the Recipient's obligations under this Agreement; and (c)
take all reasonable steps necessary to protect the Confidential Information of
the Disclosing Party, which steps will include at least those taken by Recipient
to protect Recipient's own confidential information of like kind, but in not
event less than reasonable care. Without derogating from the generality of the
foregoing, Recipient shall: (i) keep the Disclosing Party's Confidential
Information in a safe and secure location; and (ii) only permit such access to
Confidential Information of the Disclosing Party to those of Recipient's
employees or authorized representatives having a need to know and who, prior to
obtaining such access, are bound by a written confidentiality agreement, with
provisions to protect the Disclosing Party's Confidential Information at least
as restrictive as those contained herein. Each Party shall be responsible for
any breach of this Section 8.3 by such Party's employees or authorized
representatives.
8.4 Exceptions. Each Recipient's obligations under this Agreement with
respect to any portion of the Disclosing Party's Confidential Information shall
terminate or not apply when Recipient can prove that it: (i) is or subsequently
becomes publicly available without breach of any obligation of confidentiality
by Recipient; (ii) became known to the Recipient prior to the Disclosing Party's
disclosure of such information to the Recipient; (iii) became known to the
Recipient from a source other than the Disclosing Party, and without breach of
any obligation of confidentiality owed to the Disclosing Party; (iv) was
developed by Recipient entirely independently of and without any reference to or
use of any information communicated to the Recipient by the Disclosing Party;
(v) is used by the Recipient to the limited extent necessary to make use of the
licenses granted under this Agreement or to enforce any of Recipient's rights,
claims or defenses under, or as otherwise contemplated in, this Agreement; or
(vi) it was communicated in response to a valid order by a court or other
governmental body, was otherwise required by subpoena, law, order, or rules of
the U.S. Securities and Exchange Commission or other applicable stock exchange
or any other non-US authority.
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8.5 Termination. Upon termination or expiration of the Agreement for any
reason, Recipient shall promptly return to the other all documents and other
tangible materials representing the Disclosing Party's Confidential Information
and all copies thereof, and purge all electronic copies or other representations
thereof that are under Recipient's direct or indirect control; provided,
however, that ISE shall be entitled to retain any Confidential Information that
is necessary or useful for the exercise of ISE's rights under Section 3.1 for
the duration of ISE's rights thereunder.
8.6 Ownership. Confidential Information shall not be reproduced or used in
any form or for any purpose except as required to implement this Agreement. Any
reproduction of any Confidential Information of the Disclosing Party by either
Party shall remain the property of the Disclosing Party and shall contain any
and all confidential or proprietary notices or legends which appear on the
original, unless otherwise authorized in writing by the Disclosing Party.
8.7 Public Announcements. Except as expressly provided herein, neither
Party may disclose the existence of terms of this Agreement without the prior
written consent of the other Party; provided, however, that either Party may
make such disclosure to the extent required by law (including, without
limitation, the Securities Acts) and that either Party may make a disclosure of
the existence and terms of this Agreement to its attorneys, advisors, investors,
bankers, prospective investors, lenders and other financing sources, strategic
partners and licensees, under circumstances that reasonable ensure the
confidentiality thereof.
9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Encore. Encore covenants, represents
and warrants to ISE that:
9.1.1 Corporate Power. Encore is duly organized and validly existing
under the laws of the State of Delaware and has full corporate power and
authority to enter into this Agreement and to carry out the provisions
hereof.
9.1.2 Due Authorization. Encore is duly authorized to execute and
deliver this Agreement and to perform its obligations under this Agreement.
9.1.3 Binding Agreement. This Agreement is a legal and valid
obligation of Encore and enforceable in accordance with its terms. The
execution, delivery, and performance of this Agreement by Encore does not
conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it is bound, nor violate any material
law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it.
9.1.4 Validity. Encore is aware of no action, suit or inquiry or
investigation instituted by any governmental agency which questions or
threatens the validity of this Agreement.
9.1.5 Grant of Rights. Encore has not, and will not, grant any right
to any third party which would conflict with the licenses and other rights
granted to ISE under this Agreement.
9.1.6 Ownership. Encore owns or holds licenses to the Encore Patents
and the Encore Know-How and has sufficient rights and power to grant the
licenses to ISE which it purports to grant herein.
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9.1.7 Third Party Rights. Encore has, as of the Effective Date, no
knowledge of any third-party patent right which would be infringed upon by
the use or commercialization of Licensed Products as contemplated in this
Agreement.
9.2 Representations and Warranties of ISE. ISE covenants, represents and
warrants to Encore that:
9.2.1 Corporate Power. ISE is duly organized and validly existing
under the laws of the State of California and has full corporate power and
authority to enter into this Agreement and to carry out the provisions
hereof.
9.2.2 Due Authorization. ISE is duly authorized to execute and deliver
this Agreement and to perform its obligations under this Agreement.
9.2.3 Binding Agreement. This Agreement is a legal and valid
obligation of ISE and enforceable in accordance with its terms. The
execution, delivery, and performance of this Agreement by ISE does not
conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it is bound, nor violate any material
law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it.
9.2.4 Validity. ISE is aware of no action, suit or inquiry or
investigation instituted by any governmental agency which questions or
threatens the validity of this Agreement.
9.2.5 Development Services. The development services performed by ISE
pursuant to Section 2 will be performed in a diligent and professional
manner in accordance with industry standards.
9.3 WARRANTY DISCLAIMER. The Parties acknowledge that the research and
development activities contemplated under this Agreement are experimental, and
that he Development Plan may not be successful. EXCEPT FOR THE EXPRESS
WARRANTIES SET FORTH IN THIS SECTION 9, NEITHER ISE NOR ITS LICENSORS OR
SUPPLIERS MAKE ANY OTHER WARRANTY, EXPRESS, IMPLIED OR STATUTORY, TO ENCORE OR
ANY THIRD PARTY REGARDING THE DEVELOPED TECHNOLOGY, THE DELIVERABLES UNDER THIS
AGREEMENT, OR OTHER SUBJECT MATTER OF THIS AGREEMENT. ISE AND ITS LICENSORS AND
SUPPLIERS EXPRESSLY EXCLUDE ANY IMPLIED WARRANTY OF NONINFRINGEMENT, FITNESS FOR
A PARTICULAR PURPOSE, MERCHANTABILITY, VALIDITY OF TECHNOLOGY, VALIDITY OF
PATENT CLAIMS (ISSUED OR PENDING) AND ANY OTHER WARRANTY THAT MIGHT ARISE FROM
COURSE OF DEALING OR USAGE OF TRADE WITH RESPECT TO ANY AND ALL DEVELOPED
TECHNOLOGY, DOCUMENTATION AND DELIVERABLES UNDER THIS AGREEMENT.
10. INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 Indemnification of Encore. ISE agrees that, at its sole expense, its
shall indemnify, defend, and hold Encore, and its shareholders, officers,
directors, members, employees, agents, successors and assigns, harmless from any
and all liabilities, losses, costs, damages and expenses, including reasonable
attorneys' fees, that Encore suffers or incurs in connection with any suit,
claim, action or demand (a "Claim") by a third party arising from or relating to
(i) any breach or alleged breach by ISE of the representations, warranties or
obligations contained this Agreement or (ii) the use, development, testing,
production, manufacture, promotion, import, sale or use by any person of a
Licensed Product that is manufactured or sold by ISE or by an Affiliate,
sublicensee, distributor or agent of ISE; provided, however, that ISE will not
11
be required to provide indemnification under this Section 10.1 to the extent
that (a) such Claim results from the gross negligence or willful misconduct of
Encore or (b) Encore is required to provide indemnification to ISE for such
Claim pursuant to Section 10.2 below.
10.2 Indemnification of ISE. Encore agrees that, at its sole expense, its
shall indemnify, defend, and hold Encore, and its shareholders, officers,
directors, members, employees, agents, successors and assigns, harmless from any
and all liabilities, losses, costs, damages and expenses, including reasonable
attorneys' fees, that Encore suffers or incurs in connection with any Claim by a
third party arising from or relating to (i) any breach or alleged breach by
Encore of the representations, warranties or obligations contained this
Agreement, (ii) the use, development, testing, production, manufacture,
promotion, import, sale or use by any person of any product incorporating or
using the Developed Technology that is manufactured or sold by Encore or by an
Affiliate, sublicensee, distributor or agent of Encore, (iii) the infringement
by any Licensed Product of any third-party intellectual property rights by
virtue of the use of, or the inclusion of the Developed Technology therein; or
(iv) assertions by such third party that it has been granted rights by Encore
that are infringed by the exercise of ISE or its Affiliates, or any sublicensee
of ISE or its Affiliates, of any rights granted to ISE by Encore pursuant to
this Agreement; provided, however, that Encore will not be required to provide
indemnification under this Section 10.2 to the extent that such Claim results
from the gross negligence or willful misconduct of ISE.
10.3 Mechanics of Indemnity. The Party claiming indemnification under this
Section 10 (the "Indemnified Party") shall promptly notify the other Party (the
"Indemnifying Party") when it has knowledge of circumstances likely to result in
an indemnification obligation or when any Claim is pending or threatened that is
covered by this Section 10. Upon request, and to the maximum extent permitted by
applicable law, the Indemnifying Party shall have the right, in its discretion,
to defend, settle, or compromise any such suit or proceeding, at its own
expense, provided that no settlement shall be made which imposes any obligations
on the Indemnified Party (other than the payment of money which is made by the
Indemnifying Party on behalf of the Indemnified Party), or is prejudicial to,
the Indemnified Party, without the prior written consent of the Indemnified
Party. The Indemnified Party shall cooperate with the Indemnifying Party in the
defense of any such suit or proceeding, and the Indemnifying Party shall
reimburse the Indemnified Party for its expenses with respect thereto, including
counsel of its choice. Failure by the Indemnified Party to promptly notify the
Indemnifying Party as required by this Section 10.3 shall not invalidate the
claim for indemnification, unless such failure has a material adverse affect on
the settlement, defense, or compromise of the matter that is the subject of the
claim for indemnification. In addition, the Indemnified Party shall be
responsible for any Claims or losses which could have been avoided or mitigated
by prompt notice as required by this Section 10.3.
10.4 LIMITATION OF LIABILITY. TO THE MAXIMUM EXTENT ALLOWED UNDER
APPLICABLE LAW, EXCEPT WITH RESPECT TO LIABILITY FOR BREACH OF SECTIONS 3, 6.1
OR 8, OR TO SATISFY THE INDEMNIFICATION OBLIGATIONS UNDER THIS SECTION 10:
(A) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY
OTHER PERSON OR ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR
PUNITIVE DAMAGES, HOWEVER CAUSED, ARISING OUT OF OR RESULTING FROM THIS
AGREEMENT OR THE PRODUCTS OR SERVICES DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT, REGARDLESS OF THE FORM OF ACTION, WHETHER FOR BREACH OF CONTRACT,
BREACH OF WARRANTY, TORT, NEGLIGENCE, STRICT PRODUCT LIABILITY OR OTHERWISE
(INCLUDING DAMAGES BASED ON LOSS OF PROFITS, DATA, FILES, OR BUSINESS
INTERRUPTION OR OPPORTUNITY), AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY
FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN; AND,
12
(B) IN NO EVENT SHALL EITHER PARTY'S AGGREGATE LIABILITY TO THE OTHER PARTY
OR ANY THIRD PARTY FOR ALL CLAIMS ARISING FROM OR RELATING TO THIS AGREEMENT,
WHETHER IN CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY, EXCEED THE AGGREGATE
AMOUNT PAID BY ENCORE TO ISE HEREUNDER. THIS LIMITATION OF LIABILITY SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED
HEREIN.
11. ARBITRATION
11.1 Arbitration Procedure. The Parties will attempt, in good faith, to
resolve any controversy, claim, or dispute arising out of this Agreement through
negotiations. Except as provided in Section 11.2 below, in the event that
negotiations are not successful within fifteen (15) days of the initiation by
either party, the controversy, claim or dispute will, upon written demand of any
party, be settled solely, exclusively, and finally by binding arbitration in San
Diego, California. The arbitration shall be pursuant to the Commercial
Arbitration Rules then in effect of the American Arbitration Association. The
merits of the dispute shall, in each and all cases, be resolved in accordance
with the laws of the State of California. The Parties expressly intend that the
United Nations Convention on Contracts for the International Sale of Goods shall
not apply to this Agreement or their rights or obligations thereunder. The
arbitration shall be conducted by an arbitration panel consisting of three (3)
arbitrators, each of whom shall be knowledgeable in the subject matter hereof.
Each Party shall select one of the arbitrators, and the two selected arbitrators
shall select the third arbitrator. The arbitrators will provide a written
explanation to the parties of any arbitration award. Any decision rendered by
the arbitration panel shall be binding, final and conclusive upon the parties,
and a judgment thereon may be entered in, and enforced by, any court having
jurisdiction over the Party against which an award is entered or the location of
such party's assets, and the parties hereby irrevocably waive any objection to
the jurisdiction of such courts based on any ground, including improper venue or
forum non-conveniens. Except where clearly prevented by the subject matter of
the dispute, both Parties shall continue performing their respective obligations
under this Agreement while this dispute is being resolved. The Parties and the
arbitration panel shall be bound to maintain the confidentiality of this
Agreement, the dispute and any award, except to the extent necessary to enforce
any such award or as required by applicable law. The prevailing party, if a
Party is so designated in the arbitration award, shall be entitled to recover
from the other Party its costs and fees, including attorneys' fees, associated
with such arbitration.
11.2 Equitable Relief. Notwithstanding the foregoing, each Party, at any
time, shall be entitled to seek injunctive or other equitable relief, wherever
such party deems appropriate, in order to preserve or enforce such Party's
rights under Sections 3.1, 6 and 8.
12. TERM AND TERMINATION.
12.1 Term. This Agreement shall be effective as of the Effective Date and
shall expire on the royalty expiration date provided in Section 4.2 of this
Agreement, unless earlier terminated under Section 12.2, 12.3 or 12.4 (the
"Term").
13
12.2 Termination for Cause. If, during the Term, either Party is in
material breach of this Agreement, the non-breaching Party may give written
notice of such breach to the breaching Party and the breaching Party shall have
an opportunity to cure the breach within thirty (30) days of such notice. If
such breach is not cured within such thirty (30) day period, the non-breaching
Party may immediately terminate this Agreement by subsequent written notice to
the Party in breach. For the avoidance of doubt, the Parties hereby agree that
the failure of Encore to pay to ISE any of the installment payments or
development fees when required by Section 2.3 will be deemed to be a material
breach of this Agreement.
12.3 Termination for Insolvency. This Agreement may be terminated by
written notice from a Party to the other Party: (i) upon the institution by or
against the other Party of insolvency, receivership or bankruptcy proceedings or
any other proceeding for the settlement of the other Party's debts, and in the
case of any such proceeding that is involuntary, if such proceeding is not
terminated within thirty (30) days thereafter; (ii) upon the other Party making
an assignment for the benefit of creditors; or (iii) upon the other Party's
dissolution or ceasing to do business.
12.4 Termination for Unfeasible Development Plan. This Agreement may be
terminated at any time by written notice to the other Party if (i) either Party
determines in good faith that it is not reasonably possible to develop the MPG
System as provided in the Development Plan or within the development budget and
(ii) the Parties are unable to agree on a mutually acceptable modification of
the Development Plan or the development budget within thirty (30) days after
notice of such determination is given to the other Party.
12.5 Effect of Termination. Upon any termination or expiration of this
Agreement: (i) the exclusive license granted to ISE pursuant to Section 3.1 will
survive any such termination or expiration of this Agreement (ii) the research
license granted to ISE pursuant to Section 3.2 shall terminate and (iii) each
Party shall return the Confidential Information of the other Party as provided
in Section 8.5, and certify in writing to the other Party that it has complied
with the terms of this Section 12.5 and Section 8.5.
12.6 Surviving Obligations; Accrued Rights. The terms of Sections 1, 3.1,
4, 6, 7, 8, 10, 11, 12.5, 12.6 and 13 shall survive any termination or
expiration of this Agreement for any reason. Termination or expiration of this
Agreement for any reason will not affect any accrued rights of either Party.
13. GENERAL.
13.1 Export. Both Parties agree to comply with the export control laws of
the United States, and not to export or authorize the exportation therefrom of
any data, information or material to any restricted person or destination
without first obtaining all necessary licenses and approvals from the United
States government. With respect to any export transactions under this Agreement,
both Parties will cooperate in any reasonable manner to effect compliance with
all applicable export regulations.
13.2 Corrupt Practices. Neither Party shall, directly or indirectly, make,
offer or agree to make or offer on behalf of the other Party, any loan, gift,
donation or other payment, directly or indirectly, whether in cash or in kind,
for the benefit of or at the direction of any candidate, committee, political
party, political function or government or government subdivision, or any
individual elected, appointed or otherwise designated as an employee or officer
thereof, for the purposes of influencing any act or decision of such entity or
individual or inducing such entity or individual to do or omit to do anything in
14
order to obtain or retain business or other benefits in violation of the United
States Foreign Corrupt Practices Act.
13.3 Independent Contractor Relationship. ISE's relationship with Encore is
solely that of an independent contractor, and nothing in this Agreement is
intended, or shall be construed, to create a partnership, agency, joint venture,
franchise, or employment relationship between the Parties. Neither Party will or
is authorized to make any commitment, by contract or otherwise, binding upon the
other Party or represent that it has any authority to do so.
13.4 Assignment. Neither Party may assign this Agreement or any rights or
obligations under this Agreement without the written consent of the other Party,
which consent may not be unreasonably withheld or delayed. Notwithstanding the
foregoing, ISE may assign this Agreement, without such consent: (i) to an
Affiliate of ISE; or, (ii) to a third party in connection with any merger,
acquisition, consolidation, reorganization, change of control of or by ISE, or
the sale of all, substantially all or a majority of ISE's assets or voting
securities. Any attempted delegation, transfer, or assignment not in accordance
with this Section 13.4 shall be void and have no force or effect.
13.5 Governing Law; Venue; Equitable Relief. This Agreement and the
Parties' rights and obligations thereunder shall for all purposes be solely and
exclusive governed by, and construed and enforced under, the laws of the State
of California, without reference or giving effect to any conflict of laws or
other principles which would result in the application of a different body of
law. The Parties hereby submit to the jurisdiction of the courts located in the
County of San Diego. Each Party, at any time, shall be entitled to seek
injunctive or other equitable relief, wherever such Party deems appropriate, in
order to preserve or enforce such Party's rights under this Agreement.
13.6 Waiver; Amendment; Modification. No term or provision hereof will be
considered waived by either Party, and no breach excused by either Party, unless
such waiver or consent is in writing signed by such Party. The waiver by either
Party of, or consent by either Party to, a breach of any provision of this
Agreement by the other Party, shall not operate or be construed as a waiver of,
consent to, or excuse of any other or subsequent breach by such other Party.
This Agreement may be amended or modified only by mutual written agreement of
authorized representatives of the Parties.
13.7 Headings. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such paragraph or in any way affect such
paragraph.
13.8 Counterparts. This Agreement may be executed in counterparts, all of
which taken together shall constitute one single agreement between the Parties.
Execution of this Agreement via facsimile is permitted hereunder, provided that
each Party promptly sends the signed original pages by courier to the other
Party.
13.9 Construction. This Agreement has been negotiated by the Parties and
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against any Party. Any ambiguity will not be interpreted against the drafting
Party.
13.10 Force Majeure. Except for any payment obligation of a Party
hereunder, neither Party shall be liable for nonperformance or delays, under any
circumstances, which occur due to any causes beyond its reasonable control.
These causes shall include, but shall not be limited to, acts of God, wars,
15
terrorism, riots, strikes, fires, storms, floods, earthquakes, shortages of
labor or materials, shortages or unavailability of utilities (including electric
power), labor disputes, vendor failures, transportation embargoes, acts of any
government or agency thereof and judicial actions. In the event of any such
delay or failure of performance, the date of delivery or performance shall be
deferred for a period equal to the time lost by reason of the delay.
13.11 Notice. Any notice required or permitted by this Agreement must be in
writing, in the English language, and shall be delivered as follows, with notice
deemed given as indicated: (i) by Federal Express or other overnight courier,
upon written verification of receipt as evidenced by the courier's delivery
record; (ii) by telecopy or facsimile transmission, upon acknowledgment of
receipt of electronic transmission; or (iii) by certified or registered mail,
return receipt requested, upon verification of receipt; provided, however,
electronic mail may be used for written notices given in connection with
delivery of Deliverables. Notice shall be sent to the addresses set forth below
or to such other address as either Party may specify in writing.
If to ISE: ISE Corporation
12302 Kerran Street
Poway, CA 92064
Attention: David M. Mazaika, CEO
Facsimile: 858.413.1733
With a copy to: ISE Corporation
12302 Kerran Street
Poway, CA 92064
Attention: Justin Spragg, General Counsel
Facsimile: 858.413.1731
If to Encore: Encore Clean Energy, Inc.
375 Water Street, Suite 610
Vancouver, British Columbia
Canada V6B 5C6
Attention: Daniel Hunter
Facsimile: 604.801.5575
With a copy to: Encore Clean Energy, Inc.
2934 Beverly Glen Circle, Suite 301
Bel Air, CA 90077
Attention: Larry Shultz
Facsimile: 310.246.0346
13.12 Severability. If one or more provisions in this Agreement are ruled
entirely or partly invalid or unenforceable by any court or governmental
authority of competent jurisdiction, then: (i) the validity and enforceability
of all provisions not ruled to be invalid or unenforceable shall remain
unaffected; (ii) the effect of such ruling shall be limited to the body making
the ruling; (iii) the provision(s) held wholly or partly invalid or
unenforceable shall be deemed amended, and the Parties shall reform the
provision(s) to the minimum extent necessary to render them valid and
enforceable in conformity with the Parties' intent as manifested herein; and
(iv) if the ruling, or the controlling principle of law or equity leading to the
ruling, is subsequently overruled, modified, or amended, then the provision(s)
in question, as originally set forth in this Agreement, shall be deemed valid
and enforceable to the maximum extent permitted by the new controlling principle
of law or equity. WITHOUT LIMITING THE FOREGOING, IT IS UNDERSTOOD AND AGREED
16
THAT EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES LIMITATION OF
LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES IS INTENDED BY THE
PARTIES TO BE ENFORCEABLE TO THE MAXIMUM ALLOWED BY APPLICABLE LAW, SEVERABLE
AND INDEPENDENT OF ANY OTHER SUCH PROVISION, AND TO BE ENFORCED AS SUCH. IT IS
EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE EVENT ANY REMEDY HEREUNDER IS
DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY
AND EXCLUSIONS OF DAMAGES SET FORTH HEREIN SHALL REMAIN IN EFFECT TO THE MAXIMUM
ALLOWED BY APPLICABLE LAW.
13.13 Entire Agreement. This Agreement and Exhibit A attached hereto, which
is hereby incorporated herein by reference, constitute the sole, complete, final
and entire agreement between the Parties relating to their subject matter and
supersede and terminate all prior or contemporaneous oral or written agreements,
discussions and representations concerning such subject matter.
IN WITNESS WHEREOF, the duly authorized representative of each Party has
executed this Agreement as of the Effective Date and the person signing below
represents and warrants that he/she is duly authorized to sign for and on behalf
of the respective Party.
ENCORE CLEAN ENERGY, INC.
By: /s/ Daniel Hunter
- ----------------------------
Daniel Hunter, CEO
September 9, 2005
ISE CORPORATION
By: /s/ David M. Mazaika
----------------------
David M. Mazaika, President and CEO
17
EXHIBIT A
DEVELOPMENT PLAN FOR MPG SYSTEM
Background
- ----------
The linear engine is an emerging technology which uses an oscillating piston to
cut magnetic lines of flux and directly generate electricity. Most recently
Encore has brought the "Accelerated Magnetic Pellet Generator" (MPG) to the
attention of ISE. The MPG is an invention of Mr. Robert Hunt, licensed
exclusively in all fields of use on a worldwide basis to Encore.
It is acknowledged that there are numerous groups with experience in linear
generators, among which are:
o Sandia Laboratories, led by Dr. Peter van Blarigan,
o West Virginia University,
o Malaysian Science, Technology and Environment Dept.
Hence there is a body of technical and patent literature that is pertinent and
growing.
This Development Plan is for the evaluation and confirmation of the performance
and advantages of this technology. It will be accomplished through a combination
of technical analyses and the development of demonstration prototypes.
Phase A Development Milestones
- ------------------------------
Milestone 1: Evaluate the current state of technology to ensure our team builds
off the previous expertise and years of investigation into this technology.
Specifically, we will evaluate the work of Peter van Blarigan and, if
appropriate, establish a working consulting relationship. Dr. van Blarigan has
several years of experience in linear engines, and an agreement for magnetic
coupler development with Magnequench. Conversation with Dr. van Blarigan
indicates his interest in such an arrangement, and he has indicated he will
visit ISE. West Virginia and other experts will be consulted and evaluated.
Milestone 2: Review patent and technical literature. ISE will locate known
patents of related technologies to MPG and evaluate their potential interference
and/or utility in achieving a working system. ISE will also locate and secure
technical literature in the public domain and evaluate its applicability.
Milestone 3: Perform a preliminary cycle analysis of the MPG System, with the
objectives of understanding the energy flow and the essential functions of each
component. To be able to develop an optimized system, ISE must understand the
energy cycle analysis in detail. This will be performed in conjunction with Mr.
Hunt to eliminate duplication of effort.
Milestone 4:
Evaluation of key technologies:
(a) Analyze the magnetic coupling from the coils to the free
piston/pellet, and the losses in the pellet, the coils and in
intervening materials. Focus here will be on limitations of
materials and on magnetic coupling and heating.
18
(b) Analyze the technology required to exhaust and re-liquefy the
working fluid.
(c) Evaluate the circuit interface to the coupling coils, and to
develop a model for the coupling of energy flow from the coils to
the bus energy storage and circuitry. Perform a trade study of
piston size vs speed of the magnetic pellet to achieve optimal
useful energy coupling.
(d) To survey operating fluids and select fluids suitable for
engine coolant recovery and of exhaust heat recovery. Although
CO2 has been suggested, other options will be evaluated for
operation both on engine cooling loop (200F) and exhaust (1000+)
operation.
Milestone 5: Design and construct an air driven prototype MPG System. This
device will be capable of using a compressed air source to drive an MPG-like
linear engine. It will be capable of producing electricity and demonstrating
this via some type of display (power meter, lights...). It will not be coupled
to a heat energy source or incorporate re-liquefaction technology.
Milestone 6: Test the air driven prototype and analyze the performance. Power
input vs output measurements will be made to evaluate efficiency. Heat loss and
electrical loss measurements will be taken to evaluate the prototype performance
vs the expected model.
Milestone 7: Design system integration of an MPG System into a heavy duty
vehicle. This will define radiator and other component sizes, heat and energy
flows, and the expected improvement of vehicle efficiency. What will be the size
of an MPG System capable of development of 150kW output, and what will be the
efficiency?
Milestone 8: Generate a report and presentation on all results from Phase A and
present information to Encore. Assist Encore in its evaluation of the merits of
proceeding to Phase B - the design and construction of a full MPG System.
Phase B Development Milestones
- ------------------------------
Milestone 9: Perform design of a model prototype MPG System with heat addition
and closed loop operation. The focus will be on energy flow, with attention to
temperatures of essential components and on lubrication issues. Identification
and test of re-liquefaction of the working fluid will be a key challenge.
Milestone 10: Construct a demonstration prototype MPG System. The objective is
the development of a complete, fully functional MPG System to demonstrate the
operational concept. Undoubtedly, further refinement will be required in future
versions, however it will be capable of demonstrating waste heat to electrical
energy conversion.
Milestone 11: Run the MPG System, record data, and analyze data.
Milestone 12: Generate a report and presentation on all results from Phase B and
present information to Encore. Identify remaining risk areas, if any, and areas
for further technical development. If appropriate, develop a plan for
development of a production model for commercialization. Assist Encore in its
evaluation of the merits of designing and constructing of a production version
of the MPG System.
19
Development Time
- ----------------
This is a research program and unexpected challenges can arise at any time. ISE
will notify Encore of any such challenges and potential resultant delays as
early as possible. ISE understands the time sensitivity of the program and will
make all reasonable attempts to minimize the development time of each Milestone.
It is estimated that Phase A will take 6-9 months and that Phase B will take
9-12 months.
Cost Increases
- --------------
Due to the research nature of this program, unexpected costs may arise at any
time. ISE will notify Encore of any potential cost increases for any Milestone
as they arise.
Development Fee Schedule
- ------------------------
Encore shall pay ISE the following development fees in connection with the
development of the MPG System:
Development
Phase A Milestones Fee ($)
Milestone1-Review of literature 14,680
Milestone 2-Evaluate state of the art 19,720
Milestone 3-Cycle analysis 34,960
Milestone 4-Analyze key technologies 34,200
Milestone 5-Build air driven MPG System 54,200
Milestone 6-Test, analyze performance 43,320
Milestone 7-System Integration of MPG System 45,000
Milestone 8-Report and present 18,700
Phase A Subtotal $264,780
Phase B Milestones
Milestone 9-Design model prototype MPG System 131,000
Milestone 10-Build prototype, test apparatus 244,200
Milestone 11-Run, data reduction, analyze 219,720
Milestone 12-Report and Present 30,900
Phase B Subtotal $625,820
Grand Total $890,600
*****
20
EXHIBIT B
HUNT PATENT
[Provisional patent application filed with the USPTO on April 1, 2005 entitled
"ACCELERATED Magnetic pellet generator THAT PROVIDES SELF-COMPRESSION
REDACTED][
21