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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 1, 2000.
CLEAN DIESEL TECHNOLOGIES, INC.
(Exact name of Registrant as Specified in Charter)
0-27432
(Commission File Number)
Delaware 06-1393453
(State or Other Jurisdiction (IRS Employer
Of Incorporation) Identification No.)
300 Atlantic Street
Stamford CT 06901
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (203) 327-7050
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Item 5. On February 2, 2000 the Registrant issued the press release attached as
Exhibit 1.0 to this Report on Form 8-K relating to the licensing of technology
and sale of assets to RJM Corporation ("RJM") for products associated with the
Registrant's ARIS(TM) 2000 System (the "System"). The license is for application
of the technology to stationary diesel engines in North, South and Central
America. The System is a urea based selective catalytic reduction method of
reducing oxides of nitrogen in flue gas. The licensing of this technology was
pursuant to a license agreement of January 31, 2000 executed February 1, 2000
between the Registrant and RJM, a copy of which is attached hereto as Exhibit
1.1. The sale of assets was pursuant to an assets purchase agreement of January
31, 2000 executed February 1, 2000 between the Registrant and RJM, a copy of
which is attached hereto as Exhibit 1.2. The technology license agreement
provides for a maximum of $1.3 million in "earn-out" royalties and certain
running royalties on net sales. The asset purchase agreement provided for the
sale of $99,600 worth of assets and the transfer to RJM of two of Registrant's
employees.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned
hereunto duly authorized.
CLEAN DIESEL TECHNOLOGIES, INC.
Dated: February 15, 2000 By /s/ C. W. Grinnell
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Secretary
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Exhibit 1.0
CLEAN DIESEL TECHNOLOGIES CLOSES ARIS(TM) 2000
LICENSE AGREEMENT FOR STATIONARY, MARINE
AND RAILROAD NOx CONTROL
STAMFORD, CT (February 2, 2000)...Clean Diesel Technologies, Inc. (EBB:CDTI)
announced today that it has finalized the previously announced license agreement
with Ridgefield, CT-based RJM Corporation. RJM is a design, engineering and
project management company providing innovative high technology solutions to
energy and emissions problems for utility and industrial clients. Under the
agreement, RJM will sell CDT's ARIS(TM) 2000 NOx control system for all
stationary, marine and locomotive applications in North, Central and South
America.
The agreement calls for CDT to transfer its stationary NOx business and
inventory along with two technical staff to RJM. In return, CDT will receive an
initial $350,000 payment for license rights and ARIS inventory. The agreement
also provides CDT the opportunity to earn an additional $1,000,000 in license
revenue based on the sales performance of the ARIS 2000 over the next 36 months.
In addition to the license payments, CDT will receive an ongoing royalty on all
future ARIS 2000 sales. CDT retains all rights to the ARIS technology for mobile
applications worldwide as well as stationary applications in all other
territories not licensed to RJM.
According to CDT Chief Executive Officer Jeremy Peter-Hoblyn, "RJM is a
perfect partner to help commercialize the ARIS technology in the licensed
markets. Their engineering and project management capabilities as well as their
intimate knowledge of urea-based NOx control technology will assure end users of
excellence in design and implementation of the ARIS 2000 technology for
reductions in NOx emissions from stationary, marine and locomotive diesel
engines."
Separately the company announced the availability of licenses under its
U.S. and international patent portfolio related to the reduction of NOx from
on-highway and off-road mobile diesel engines using its low cost ARIS 2000
urea-based SCR technology. The company is targeting its licensing efforts at
Tier 1 heavy-duty truck component suppliers, SCR catalyst suppliers or a
consortium of diesel engine manufacturers.
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According to CDT Chief Operating Officer Jim Valentine, "SCR offers
demonstrated NOx reductions of 70-90 percent on both transient and steady state
test cycles."
CDT sees licensing as the quickest way to commercialization of its ARIS
2000 injector technology for vehicle applications.
Valentine added, "Broad application of the patented ARIS 2000 return
flow injector concept could support development of an industry standard for
reagent injectors while allowing competitive features to evolve around vehicle
packaging, integration with engine controls and selection of specific SCR
catalyst by engine and vehicle manufacturers. This would ultimately reduce costs
and simplify field service and maintenance."
CDT was recently granted four U.S. patents and a notice of allowance on
urea-based SCR. U.S. Patent No. 5,976,475 covers a fundamental concept of a
solenoid actuated, return flow urea injector for precise injection of urea-based
reagents into the exhaust gas upstream of a SCR catalyst. The return flow
concept provides cooling of the injector circuit which prevents hydrolysis of
the urea in the injector and lines and prevents plugging. This is accomplished
without the need for a secondary cooling circuit or compressed air.
Several prototypes have been fitted to heavy-duty vehicles and more
than a dozen systems are in durability testing with engine manufacturers and
catalyst companies. U.S. Patent No. 5,968,464 provides an additional enhancement
by converting aqueous-based urea reagent to ammonia gas through use of a
pyrolysis chamber which assists in the decomposition of urea to ammonia in the
exhaust gas stream.
U.S. Patent No. 5,924,280 combines the use of exhaust gas recirculation
(EGR) with urea-based SCR to achieve ultra low NOx emissions with minimum fuel
economy penalty and lower levels of reagent consumption.
The allowed patent application combines the use of a platinum catalyzed
diesel particulate filter with SCR for simultaneous particulate and NOx control.
Recent engine testing on a similar system using the ARIS 2000 and a particulate
filter demonstrated 85 percent NOx and 90 percent particulate reduction.
CDT also intends to offer for license its U.S. Patent No. 5,809,775
which covers the use of solid urea and ammonia reagents; and, a pending
application on converting liquid urea to ammonia gas for injection into diesel
engine exhaust.
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Separate development licenses are being offered for CDT's LOE NOx(TM)
diesel/water emulsion technology and "enhanced" emulsion technology which
expands on the use of an emulsion to carry urea or ammonia based reagents. These
technologies provide low cost NOx reductions of 15-30 percent from diesel
engines. Under U.S. Patent Nos. 5,404,841, 5,584,894 and 5,535,708 the emulsion
containing reagent is directly combusted in the engine with the water serving
both to drop the peak cylinder temperature and to protect the reagent. In
another U.S. Patent No. 5,809,774 the reagent is separated out from the fuel and
injected into the exhaust upstream of a SCR catalyst.
For further information on license opportunities, contract Jim
Valentine of CDT at [email protected] or by calling the CDT office in
Stamford. CT.
Clean Diesel Technologies, Inc. is a development-stage company with
patent-protected products that reduce emissions from diesel engines while
simultaneously improving fuel economy and power. R&D efforts and products are
grouped into two categories: Platinum Plus fuel catalysts and NOx Reduction
Systems. Platinum Plus is a registered trademark of Clean Diesel Technologies,
Inc.
Certain statements in this news release constitute "forward-looking statement"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known or unknown risks, including those
detailed in the Company's filings with the Securities and Exchange Commission,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.
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EXHIBIT 1.1
License Agreement
Clean Diesel Technologies, Inc. -- RJM Corporation
AGREEMENT entered into as of this 31st day of January, 2000 between Clean Diesel
Technologies, Inc., a Delaware corporation ("Licensor") of 300 Atlantic Street,
Stamford CT 06901 and RJM Corporation, a Connecticut corporation, of 10 Roberts
Lane, Ridgefield, CT 06877.
Recitals
Licensor has developed and owns its patented "ARIS(TM) 2000" method of reducing
emissions of oxides of nitrogen from diesel engines (the "System"), which is
inclusive of its entire circulation components, injectors, controls, sensors,
pumps and valves, tankage and other storage components, catalyst and the costs
of engineering and installation.
Licensee desires to enter the business of manufacturing and selling Systems in
the stationary and marine and railroad diesel engine sectors.
Accordingly, Licensor and Licensee agree, all on the terms and conditions
provided below, that Licensor shall license exclusively its ARIS 2000 NOx
reduction technology to Licensee for the uses and in the territories provided
below (the "License") and Licensee accepts the License and shall make the
payments provided below to Licensor.
Article I
Definitions
1.01 "Cost of Sales" shall mean, in relation to Earn Out Royalties under
ss.4.01.1 of this License, all materials purchased and all costs incurred under
subcontracts for labor and services directly attributable to sales of all
components of Aris 2000 Systems by Licensee or its sublicensees and, for this
purpose, including all costs of storage and tankage, catalyst and third party
engineering and installation costs, but excludes costs of Licensee's in-house
engineering.
1.02 "Effective Date" means the date first written above in this Agreement.
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1.03 "Federal Rate" shall mean the monthly rate of interest as published by the
Internal Revenue Service pursuant to Internal Revenue Code Section 7520.
1.04 "Fields of Use" shall mean application of the Technology to stationary
diesel engines, and, with respect to mobile diesel engines, marine and railroad
uses only.
1.05 "Gross Profit" shall mean, in relation to Earn Out Royalties under
ss.4.01.1 of this License, the full and entire invoice value of Aris 2000
Systems sold by Licensee or its sublicensees (including within the meaning of
"System" for this purpose without limiting the generality of the foregoing, the
invoice value of storage, tankage, catalyst, engineering and installation) less
taxes, freight for delivery to customers, Cost of Sales and Running Royalties
payable to Licensor under ss.4.01.2 of this License.
1.06 "Improvement" means any new invention or change in the Technology made,
conceived or first reduced to practice hereunder by Licensor or Licensee,
whether patented or not, which results in better products or a more efficient or
less expensive means of manufacturing or installing or using products, provided,
however, that the Technology after the improvement is substantially similar to
the Technology as originally licensed hereunder.
1.07 "Intellectual Property" means:
(a) All United States and foreign patent applications (including United States
provisional applications and all PCT patent applications), any and all patents
issuing therefrom or otherwise corresponding thereto, letters patent, and all
divisions, continuations, continuations-in-part, reissues, and extensions
thereof, describing and/or claiming any rights with respect to the System and as
set forth on Schedule A attached hereto and made a part hereof or any amendment
thereof; and
(b) All trademarks and applications or registrations thereof relating to the
System and set forth on Schedule A attached hereto and made a part hereof or any
amendment thereof.
1.08 "Term" means the period from the Effective Date until the date of
expiration of the last of the patents on Schedule A to expire, unless sooner
terminated pursuant to the terms of this License or extended by agreement of the
parties.
1.09 "Licensor Representatives" means those employees of Licensor identified
herein who shall be responsible for transfer and disclosure of the Technology to
Licensee.
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1.10 "Licensee Representatives" means those employees of Licensee identified
herein who shall be responsible for receipt of the transfer and disclosure of
the Technology on behalf of Licensee.
1.11 "Net Sales" means, in relation to Running Royalties under ss.4.01.2 of this
License, the gross sales price as billed by Licensee or its sublicensees of
Products, less discounts and allowed credits, returns, customs duties, excise
taxes, sales or value added taxes, transportation, crating and insurance
charges, if any of such items shall be included in the gross sales price. A
Product shall be deemed to be sold when the buyer has made payment for such
Product.
1.12 "Product" means any object or device manufactured in whole or in part by
means of the Technology for the System but excludes tankage, storage, catalyst,
ductwork and costs of engineering and installation.
1.13 "Proprietary Information" means information, or other material, regardless
of its form, (a) designated by a party as "confidential," or "proprietary,"
whether or not owned or developed by the party making such designation, and, (b)
regardless of whether it has been specifically designated as "confidential" or
proprietary (x) proprietary to a party or (y) not generally available to the
public about the business, products, plans, financial condition, customers,
methods of marketing, business systems or methods, proposals, policies, or trade
secrets of the party.
1.14 "Technology" means the Intellectual Property and any and all data and
information (in whatever format and whether or not subject to proprietary rights
protection and embodied in whatever media) relating to the System.
1.15 "Territory" means the United States of America, its possessions and
territories, and each other country in North, South and Central America.
Article II
Grant of License
2.01 Grant of License. Licensor hereby grants to Licensee for the Term the
exclusive right to receive the Technology and to make, use and sell Systems,
Products and/or services under or embodying or incorporating the Technology in
the Territory and within the Fields of Use.
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2.02 Sub-Licenses. Licensee may sublicense the Technology to other parties for
the Fields of Use in the Territory on a non-exclusive basis so long as Licensee
shall ensure that the applicable sublicense agreements shall require
sublicensees to report sales and to be subject to audit both to and by Licensor
or Licensee, as the case may be, on the same terms as provided in this Agreement
(including payment directly or indirectly to Licensor of the same running
royalties on Net Sales by sublicensees as would be payable to Licensor if such
Net Sales were made by Licensee) and Licensee shall report each such
sublicensing to Licensor furnishing a copy of the applicable sublicense to
Licensor. Sublicensees may not sublicense (except for customers to use Products)
or assign the Technology.
2.03 Non-Exclusivity. If the total annual Running Royalties due and payable
under ss.4.01.2 hereunder in the third, fourth, fifth and any subsequent year do
not amount to at least $150,000, $200,000, and $250,000, respectively, this
License shall become non-exclusive, if in its discretion Licensor by notice to
Licensee amends this License to be non-exclusive. Licensee may, however, make
voluntary payments to maintain exclusivity notwithstanding that royalties are
not due and payable in the amounts provided above.
2.04 Licensee Restriction. In order to ensure commercial development of the
System, Licensee shall not during the Term, except where the parties may
otherwise agree, make use or sell competing systems to the System for
application to diesel engines of less than 3,000 H.P.
2.05 Purchase of Injectors. Unless Licensee shall otherwise consent in writing,
Licensee shall acquire injectors for use or sale in connection with the System
from AMBAC International, Inc. ("AMBAC") for all of its requirements until
November 3, 2002. Licensor hereby consents to AMBAC's sale of injectors to
Licensee. Licensee shall include in reports furnished to Licensor under ss.5.02
below, the number of injectors purchased quarterly by Licensor or its
sublicensees. Licensee shall have the right to purchase injectors from third
parties, if AMBAC is unable to provide them.
2.06 Right of First Offer. Licensor shall promptly notify Licensee of Licensor's
intention to seek licensees for geographical territory additional to that agreed
in this License, stipulating the terms and conditions thereof. Licensee may by
notice to Licensor not later then thirty (30) days after such notice to it from
Licensor accept such license for additional territory and on the same terms and
conditions as described in the notice from Licensor.
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2.07 Cancellation. Licensee may in its sole discretion at any time after the
first anniversary hereof cancel and terminate this License on ninety (90) days
notice to Licensor, provided, however, that Licensee shall have made payment to
Licensor of all amounts accrued and unpaid and due to Licensor through the
effective date of cancellation.
Article III
Technical Transfer and Assistance
3.01 Undertaking to Transfer. (a) Promptly upon the Effective Date Licensor at
its sole cost and expense shall commence disclosure and transfer to Licensee of
the Technology. Such transfer and disclosure shall be effected by Licensor's
providing to Licensee copies of data and information relating to the System, by
reasonable consultation with Licensee's personnel at the offices of Licensor or
Licensee, by visits and consultations at the offices of Licensee's customers and
by the transfer to Licensee of certain employees, if they shall desire to be
employed by Licensee. To the extent practicable Licensor's Representatives may
from time to time satisfy Licensor's obligations of disclosure hereunder by
telephone, fax and e-mail.
(b) With respect to the technical transfer, Licensor's Representative shall be
J. M. Valentine and Licensee's Representative shall be Robert W. Monro.
(c) Licensor shall undertake to substantially complete the transfer of the
Technology to Licensee within sixty (60) days of the Effective Date and shall
certify by notice to Licensee when such transfer has been substantially
completed. Licensee shall cooperate with Licensor so as to effectively receive
the Technology during such time period and, if, within ten (10) days of
Licensor's notice of completion, Licensee does not object thereto by notice
specifying deficiencies in detail, the transfer shall for all purposes be deemed
to be completed.
3.02 Marketing Assistance. Throughout the Term Licensor and Licensee shall
consult from time to time as to methods of marketing to OEM customers of
Licensee. On Licensee's request on reasonable notice during the Term, Licensor
shall at Licensor's expense at its offices or the offices of Licensee or
Licensee's customers, assist Licensee in such marketing activities, including
visits to and consultation with OEM customers. Licensor and Licensee shall
inform one another promptly of potential customers for stationary applications
of Systems and Products in the Territory of the other.
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3.03 Mobile Applications Assistance. On Licensor's request on reasonable notice
during the Term and on mutually acceptable commercial terms, Licensee shall at
the offices of Licensor, Licensee or Licensor's customers, provide reasonable
advice and assistance to Licensor with respect to mobile applications of the
System. Licensee shall promptly inform Licensor of potential customers for
mobile applications or for stationary applications used for mobile development.
3.04 Parties Independent. This Agreement is not intended in any manner to create
the relationship of principal and agent between Licensor on the one hand and
Licensee on the other. This Agreement shall not be deemed to have established a
partnership or joint venture. Neither party hereto shall act or attempt to act
or represent itself, directly or by implication, as having the power to bind the
other party or in any manner to assume or create any obligation on behalf of the
other party.
Article IV
Royalties
4.01 Royalties. In consideration of the rights granted hereunder, Licensee shall
pay to Licensor Earn Out Royalties and Running Royalties, as follows:
4.01.1 Earn Out Royalties. Earn Out Royalties shall be a payment in the amount
of $260,000 on signing this License and further amounts paid within thirty (30)
days after the first, second and third anniversaries of this License equal to
fifty percent (50%) of Gross Profit in excess of *, *, and * for such first,
second and third anniversary years, respectively, such Earn Out Royalties,
however, not to exceed the aggregate of $1,300,000.
4.01.2 Running Royalties. Running Royalties shall be payments with respect to
Net Sales of Products by Licensee or its sub-licensees as set out on Schedule B.
4.02 Royalty Review. Licensor and Licensee shall in good faith review the
Running Royalty amounts set out on Schedule B on the second anniversary of the
Effective Date and every two (2) year
*Information omitted pursuant to a request for confidential treatment;
such information has been filed separately.
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anniversary thereafter of the Effective Date with a view toward adjusting such
amounts either up or down based on current market conditions. The maximum
increase or decrease per adjustment period, however, shall be limited to 5% of
the royalties set forth on Schedule B, as adjusted. Any increase or decrease in
the per unit royalty fee shall not cause any adjustment in the minimum royalty
payments stipulated in ss.2.03 above.
4.03 Royalty Payments. Royalties shall be paid to Licensor in U.S. dollars
within forty-five (45) days, with respect to Running Royalties, after each of
Licensee's fiscal quarters with respect to Net Sales in that fiscal quarter,
and, with respect to Earn Out Royalties, after the end of the anniversary years
stipulated in ss.4.01.1 above. Such payments shall be made to Licensor's address
set out above or to such other address or by wire transfer to Licensor's bank
account as may be designated by notice hereunder.
4.04 No Withholding. Licensee shall pay the full amount of Royalties due
hereunder regardless of a withholding tax, if any, which may from time to time
be levied, assessed or required to be withheld and paid for the account of
Licensor and Licensee shall itself bear the cost of such withholding tax.
Licensee shall at the time of royalty payments to Licensor provide to Licensor
appropriate documentary evidence of the payment by it of such withholding tax,
if any, applicable to such royalty payment.
4.05 Late Payments. In the event that payment is not made within thirty (30)
days of the date when any amount is due to Licensor hereunder, Licensee shall
pay interest quarterly to Licensor on such amount at the Federal Rate at the
place and in the manner required for the payment of royalties.
4.06 Non Payment and Termination. Sixty (60) days after notice to Licensee of
Licensee's failure to pay Licensor amounts due hereunder, Licensor may by notice
to Licensee terminate this Agreement whereupon this Agreement shall be of no
force and effect except for the obligation of Licensee to pay to Licensor such
amounts as have accrued hereunder through such termination.
Article V
Accounting, Reports and Audit
5.01 Books and Records. Licensee shall keep at its principal place of business
full and accurate books of account and supporting records containing all
particulars necessary for computing accurately the amounts to be paid to
Licensor hereunder, all in accordance with generally accepted accounting
principles.
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5.02 Reports. Each payment of royalties by Licensee shall be accompanied by a
statement signed by the chief accounting officer of Licensee or other duly
authorized officer containing such information as may be necessary for
computation of the amount payable to Licensor hereunder and setting forth
separately with respect to each sale sold by Licensee or sub-licensee during the
respective quarter, the customer, date and invoice number, quantity and sales
price. The form of such report may be provided by Licensor from time to time. If
no sales shall be made during any quarter, a negative report shall be submitted.
5.03 Audits. Licensee during the Term shall upon seven (7) days notice make the
books and records referred to in Section 5.01 above available for inspection by
duly authorized representatives of Licensor and for three (3) years thereafter.
Moreover, Licensor may, not more often than once in any twelve-month period,
elect to have such books and records audited at Licensor's expense by a
certified independent public accountant or accounting firm selected by Licensor
and approved by Licensee (which approval shall not be unreasonably withheld) who
may examine and make such extracts from such books and records as may be
necessary to verify the computation of any amount payable to Licensor hereunder.
Such accountant or accounting firm shall not have performed regular services to
either of Licensor or Licensee and may be licensed by any state. Nothing herein
shall be interpreted to mean that Licensor shall have access to or the right to
examine other business records of Licensee. Licensor shall treat as confidential
any information obtained pursuant to this Section 5.03 and its accountant or
accounting firm shall undertake to do the same. If any such audit shall
determine that the amounts payable to Licensor have been understated by the
lesser of (i) ten percent (10%) thereof or (ii) $5,000, Licensee shall reimburse
Licensor the cost of such audit.
Article VI
Improvements
6.01 Disclosure of Improvements. Licensor and Licensee shall during the Term
hereof disclose and explain to one another all Improvements.
6.02 Title and License to Improvements. That party hereto who or whose employees
or agents shall have invented or developed such Improvement shall have title and
ownership of such Improvement and the other party shall have a perpetual,
world-wide, non-exclusive, royalty free right and license to make, use and sell
such Improvement.
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6.03 No License Implied to Other Technology. The title and license to
Improvements provided in Section 6.02 above to the parties shall in itself imply
no right or license whatsoever in any party to any other Technology required to
practice such Improvement even though the lack of such right or license may
render the Improvement valueless in the hands of a party.
Article VII
Representations and Warranties
7.01 General Representations and Warranties. Each party represents and warrants
to the other that (a) it is a corporation in good standing under the laws of the
state of its incorporation and it has all corporate power and authority to
conduct its business as now being conducted; (b) that the execution and delivery
of this Agreement is duly authorized; (c) when executed and delivered this
Agreement shall be binding on each party and enforceable according to its terms,
excepting as laws relating to bankruptcy, insolvency and equitable remedies may
affect such enforceablity; and (d) neither this Agreement nor the performance
thereof is, or will be, in violation of any agreement or any order, decree or
award of any court or other forum to which a party is subject or by which it is
bound.
7.02 Representations as to Intellectual Property. Licensor hereby makes the
following representations, warranties and covenants, and acknowledges that
Licensee has relied thereon in entering upon this Agreement:
(a) Licensor is the sole and exclusive owner of the Technology, has the
right to grant the license granted hereunder and has executed no agreement or
taken any action in conflict herewith or in derogation of the rights granted
hereunder;
(b) To Licensor's knowledge, the Technology does not infringe any
patents or rights of any third party;
(c) To Licensor's knowledge, no circumstances of any sort exist that
could in any way restrict Licensor from licensing the Technology to Licensee and
there is no (i)unauthorized use of the Technology (ii) circumstance which
prevents Licensee from utilizing the Technology for the purposes provided for
herein or diminishes the value to Licensee of the license to the Technology; and
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(d) Licensor has not and will not enter into any agreement or
commitment which might in any way limit, restrict or prevent Licensor from
entering into and performing its obligations under this Agreement.
7.03 Disclaimer of Warranties. Except as otherwise set forth above in this
Article VII of this Agreement, the parties disclaim any warranties whatsoever
whether express or implied, including any warranty of merchantability or fitness
for a particular purpose with respect to the Technology or that the Technology
may be able to be effectively utilized in Licensee's business.
Article VIII
Protection and Maintenance of Intellectual Property
8.01 Maintenance Expense. Licensor shall be responsible at its own expense for
all fees, annuities and legal expense (excepting legal expense which is or might
be associated with any litigation including any judicial, arbitral,
administrative or investigative proceeding) reasonably required to obtain or
maintain in force the United States patent applications and patents and the
trademark on Schedule A. As to non United States patent applications and patents
on Schedule A, the parties shall share on an equal basis the costs of obtaining
and maintaining in force such non United States patents and patent applications,
provided, however, that if one party does not choose to so share in such
expense, then the other party may obtain or maintain in force such patent
applications and patents at its sole expense.
8.02 Patent Applications. In the event that either party with respect to
Improvements as to which it has the right to acquire title, seeks patent
protection for such Improvements, it will do so at its own expense (including
any annuities or other maintenance fees) and it will receive the cooperation of
the other party in the prosecution of such patent application. When granted, the
applicant shall have title to such patent, subject to the rights, if any, of the
other party hereunder.
8.03 Trademarks. Licensor does not intend to obtain any trademark with respect
to the Technology other than the trademark set forth on Schedule A. If Licensee
desires to obtain a mark or marks with respect to its products in association
with the Technology it shall consult with Licensor prior to applying at
Licensee's expense for such a mark or marks. When granted Licensee shall have
title to such marks. In the event that this License shall terminate for any
reason, Licensor shall have the right and option to purchase and take an
assignment of any such mark at its then amortized cost on the books of Licensee.
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8.04 Pending Applications. For any Intellectual Property that is during the Term
the subject of any pending application, the parties shall take no action to
jeopardize ongoing prosecution or the final issuance of such pending
Intellectual Property.
8.05 Third Party Infringements. (a) During the Term Licensee shall, at its cost
and expense, prosecute all infringements within its licensed rights so long as
it shall have exclusive rights hereunder, but, if Licensee shall fail or cease
to prosecute such infringements or shall not have exclusive rights hereunder,
Licensor may but shall not be required to prosecute such infringements. Licensor
and Licensee shall provide to one another such information and assistance as may
reasonably be requested in the course of any such prosecution. In the event that
Licensee shall prosecute such infringements, Licensor shall reimburse Licensee
for legal fees and expenses of suit but not more in any fiscal year of Licensee
than fifty percent (50%) of the amount of Running Royalties which shall accrue
to Licensor in such year.
(b) If Licensee's licensed rights hereunder shall become non-exclusive, the
parties shall consult as to the most appropriate manner in which to deal with
infringements.
(c) During the Term each party shall immediately inform the other party, if it
becomes aware of any actual or potential infringement of the Technology, and the
parties shall consult with one another concerning such infringement.
8.06 Infringement Claims. In the event of any claim, demand, suit, action or
proceeding brought against either or both of Licensor or Licensee, by any
person, firm or corporation, alleging or claiming that the Technology (in itself
and not in combination with other technology or art of Licensee or a
sublicensee) as practiced by Licensee or its sublicensees, infringes on any
patent right or misappropriates any trade secret of such claimant:
(a) Licensee shall promptly notify Licensor of any such claim, demand,
suit, action, or proceeding brought against Licensee.
(b) Licensor shall thereupon, at its own expense, and in its discretion
either (i) render the Technology non-infringing, (ii) procure a license or right
from the claimant to enable Licensee to practice the patent or trade secret of
such claimant, or (iii) settle or defend on behalf of itself and Licensee, its
affiliates and their agents, employees, directors and permitted assigns such
claim, demand, suit, action or proceeding, and, in the event any judgment or
<PAGE>
settlement is rendered against either or both of Licensor or Licensee, its
affiliates and their agents, employees, directors and authorized assigns for
damages in any such suit, action or proceeding, Licensor shall indemnify and
save harmless Licensee, its affiliates and their agents, employees, directors
and authorized assigns from all such costs and damages, but only in this regard
only in any fiscal year of Licensee to the extent of fifty percent (50%) of
Running Royalties accruing to Licensor in such year.
(c) If Licensor fails to timely dispose of the above mentioned claims,
demands, suits, actions, or proceedings as provided in sub-section (b) above,
Licensee shall have the right, upon notification to Licensor, but not the
obligation, to take all necessary action on behalf of itself and Licensor, and
deduct up to in any fiscal year not more than fifty percent (50%) of reasonable
costs, expenses and damages arising in this regard in such year from Running
Royalties payable to Licensor by Licensee.
Article IX
Confidentiality
9.01 Nondisclosure Obligations. (a) Each party understands that the other
party's Proprietary Information constitutes valuable property rights. Therefore,
each party coming into possession of Proprietary Information of the other party
agrees not to provide or otherwise make available, nor permit or otherwise allow
any of its employees to provide or otherwise make available, the whole or any
portion of the other party's Proprietary Information, in any form, to any person
other than such party's employees solely for purposes of carrying out the
rights, duties and obligations of such party pursuant to this Agreement. Each
party agrees that it will notify its employees permitted access to the
Proprietary Information of the other party of their obligations under this
Agreement with respect to use, reproduction, protection and security of the
other party's Proprietary Information and cause its employees having access
thereto to execute written nondisclosure and confidentiality agreements with
such party, prohibiting such employees from further disclosure of the other
party's Proprietary Information or use of such Proprietary Information for the
benefit of any person other than Licensor or Licensee.
<PAGE>
(b) Notwithstanding the foregoing, each party shall have the right to disclose
the other party's Proprietary Information to its outside consultants, if any,
having a need to know such Proprietary Information for purposes of carrying out
the rights, duties and obligations of such party under this Agreement; subject,
however, to the conditions that any such outside consultants execute written
nondisclosure and confidentiality agreements with such party, prohibiting such
outside consultants from further disclosure of the other party's Proprietary
Information or use of the other party's Proprietary Information for the benefit
of any person other than Licensor and Licensee.
(c) Each party will appropriately safeguard all documents, items of work in
process and work products that embody Proprietary Information of the other
party. A party having knowledge of loss or theft of the other party's
Intellectual Property or Proprietary Information shall immediately notify the
other party thereof.
9.02 Survival of Confidentiality Obligations. Each party agrees that its
nondisclosure obligations set forth in Section 9.01 above will continue after
the termination of this Agreement for any reason whatsoever, and until such time
as the other party, its licensors, successors or assigns hold no patent,
copyright, trade secret or any other proprietary right in such other party's
Proprietary Information, or any portion thereof.
9.03 Exceptions to Non-Disclosure Obligations. The confidentiality and
nondisclosure obligations of Section 9.01 above shall not apply with respect to
the other party's Proprietary Information that falls within the scope of the
following:(a) any such Proprietary Information that is in the public domain at
the time of disclosure to the receiving party; (b) any such Proprietary
Information that subsequently becomes public, through no fault of the receiving
party; or (c) any such Proprietary Information that is subsequently disclosed to
the receiving party by third parties having no obligation to the disclosing
party, or to any other parties to maintain the confidentiality of such
Proprietary Information. With respect to public use, however, the parties
understand and agree that Proprietary Information of a party shall not be deemed
to be in public use or publicly available merely because it may be embraced by a
more general disclosure, or merely because it may be derived from combinations
of disclosures in public use.
<PAGE>
Article X
Government Approvals
10.01 Approvals. Licensee shall at its own expense apply in a timely manner for
all government approvals, if any, which may be required for the execution of the
transactions contemplated by this Agreement. and shall furnish evidence of such
approvals to Licensor or shall advise Licensor that no such approval is
required.
10.02 Export Controls. Licensee acknowledges that the further transfer of the
Technology or the sale of Products by Licensor to persons outside of the United
States may from time to time be governed by the export control laws and
regulations of the United States and Licensee agrees to comply with such laws
and regulations at its own expense and from time to time to obtain such
consents, if any, as may be required to enable Licensee to so comply.
Article XI
Miscellaneous
11.01 Assignment. Neither this Agreement nor the Technology nor any right or
obligation hereunder is assignable or transferable by either party in whole or
in part without the prior written consent of the other party and any such
purported assignment without such consent shall be void, except, however, upon a
sale or transfer by a party of all or substantially all of its business as a
going concern wherein the purchasing or acquiring party assumes and agrees to
perform all of the obligations of the assigning party under this Agreement.
11.02 Successors and Assigns. This Agreement shall benefit and bind the parties
and their permitted successors and assigns.
11.03 Integration. This Agreement and the related Assets Purchase Agreement
between the parties of the same date contain a complete statement of all
arrangements between the parties relating to their subject matter and supersede
all existing agreements or understandings related thereto.
11.04 Modifications; Amendments. This Agreement may only be modified or a
provision hereof waived by a writing signed by the parties which refers to this
Agreement and states that it is an amendment or waiver of a provision thereof.
The failure of a party to insist on strict adherence to any provision hereof
shall not be construed as a waiver thereof.
11.05 Force Majure. Neither party shall incur any liability to the other party
on account of any loss or damage resulting from any delay or failure to perform
all or any part of this Agreement, where such delay or failure is caused
principally by events, occurrences or causes beyond the reasonable control of
the parties.
11.06 Invalid Provisions. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibited or unenforceable provision
shall be valid in any other jurisdiction.
<PAGE>
ll.07 Section Headings. The section headings used in this Agreement are for
convenience of reference only and are not to effect the construction or to be
taken into consideration in the interpretation hereof.
11.08 Law. This Agreement and the rights and obligations of the parties under
this Agreement shall be governed by, and construed and interpreted in accordance
with the internal substantive laws of the State of Connecticut with respect to
contracts to be performed in that jurisdiction.
11.09 Arbitration. This Agreement and all questions of its interpretation or any
claims or disputes with respect to any of the transactions contemplated herein
shall be determined exclusively in binding arbitration before a single neutral
arbitrator under the rules then in force of commercial arbitration of the
American Arbitration Association ("AAA"). The location of the arbitration shall
be Stamford, Connecticut. Any award in such arbitration may be entered in or an
order of enforcement obtained from any court having jurisdiction. No arbitrator
acting hereunder shall have the power to award consequential, statutory,
exemplary or punitive damages. Prior to the commencement of any arbitration
proceeding, the parties agree to engage in mediation under the AAA rules then in
effect. The parties agree to share equally the costs of the AAA and of any
mediator or arbitrator and otherwise to bear their own costs. Notwithstanding
the foregoing, claims or disputes between the parties hereto shall be determined
judicially when such claims or disputes arise from a judicial proceeding brought
by a third party against either one or both of the parties hereto and one party
hereto seeks or may seek reimbursement or indemnity from the other party hereto
for the claims asserted by such third party in such judicial proceeding.
11.10 Notices. All notices hereunder shall be deemed effective when made in
writing (a) upon receipt when delivered by hand or by facsimile transmission and
acknowledged electronically or by air courier and the courier records delivery
or (b) three days after deposit in the U.S. mail when transmitted by postage
pre-paid certified or registered mail return receipt requested, in either case
to the addresses for the parties set out herein and to the attention of the
person signing below for such party or to such other address and person as may
by such notice be given.
11.11 Counterparts. This Agreement may be executed in any number of counterparts
and each counterpart will be considered for all purposes as an original
agreement, but all such counterparts shall in the aggregate constitute a single
agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date by their officers thereunto duly authorized.
CLEAN DIESEL TECHNOLOGIES, INC. RJM CORPORATION
By:/s/ James M. Valentine By:/s/ R. Gifford Broderick
---------------------- ------------------------
Name: James M. Valentine Name: R. Gifford Broderick
Title: Chief Operating Officer Title: Vice President
<PAGE>
SCHEDULE A
LICENSED PATENTS/APPLICATIONS
1. U.S. Patent No. 5,924,280; Reducing NOx Emissions from an Engine while
Maximizing Fuel Economy; Tarabulski; July 20, 1999.
2. U.S. Patent No. 5,976,475; Reducing NOx Emissions from an Engine By
Temperature Controlled Urea Injection for Selective Catalytic Reduction;
Peter-Hoblyn et.al., November 2, 1999.
3. *
4. *
5. *
6. *
Trademark
1. U.S. PTO No. 75/687774 "ARIS 2000" applied for.
*Information omitted pursuant to a request for confidential treatment;
such information has been filed separately.
<PAGE>
SCHEDULE B
ROYALTY FEES
Standard ARIS 2000 stationary unit (1 injector) *
2 Injector ARIS stationary unit *
3 Injector ARIS 2000 stationary unit *
(Includes required control upgrade)
4 Injector ARIS 2000 stationary unit *
Spare Injector *
Royalties on field-engineered systems will be * per injector plus * of net sales
on all other ARIS 2000 components including controls, sensors, pumps and valves.
Net sales should mean gross sales less crating, freight, insurance and other
shipping costs and returns and sales or VAT taxes. In no event shall "Net Sales"
be an amount less than twice RJM's manufactured cost of goods sold of commercial
sales. Such royalties shall be grossed up for any applicable withholding taxes
which may be imposed so that CDT shall receive the full * thereof.
*Information omitted pursuant to a request for confidential treatment;
such information has been filed separately.
<PAGE>
EXHIBIT 1.2
January 31, 2000
Gifford Broderick
Vice President
RJM Corporation
10 Roberts Lane
Ridgefield CT 06877
Re: NOx Reduction Assets Purchase Agreement
---------------------------------------
Dear Giff:
The following constitutes an agreement between Clean Diesel Technologies, Inc.
("CDT") and RJM Corporation ("RJM") for the purchase by RJM from CDT of certain
assets or receipt of certain services relating to CDT's "ARIS(TM) 2000" System
(the "System"). This agreement is separate from but is ancillary to the License
Agreement between CDT and RJM of today (the "License"). If you are in accord,
kindly sign below where indicated.
1. Assets Transfer. RJM hereby purchases from CDT and CDT hereby sells to RJM,
all of the equipment, inventory, including injectors and modules whether in the
possession of CDT or AMBAC International, Inc.("AMBAC"), work in process and
contracts on CDT's books, as of the date hereof associated with the System and
set forth on Schedule A attached hereto and made a part hereof at CDT's cost on
CDT's books as of the date hereof in the amount of $99,600.00, receipt of which
is hereby acknowledged. Excluded from this sale and transfer is CDT's contract
of 17 December 1997 with AMBAC.
2. MAETEP Project. As, if and when RJM shall effect delivery to Advanced Energy
Systems Management Company, Inc. ("MAETEP") pursuant to a proposal or contract
between MAETEP and Fuel Tech, Inc. or MAETEP and RJM, for the MAETEP project
which is the subject of a Fuel Tech, Inc. July 22, 1999 proposal (the
"Project"), RJM shall pay CDT the amount of $25,000 on account of CDT's
completed engineering costs on the Project and RJM shall in addition pay CDT a
royalty of fifteen percent (15%) of the cost to RJM of the injectors delivered
to MAETEP for the Project.
<PAGE>
3. Personnel. (a) CDT approves of and shall encourage CDT's employees Messrs.
Knapper and Tarabulski (the "Employees") to accept the offers of employment RJM
has made to them. CDT has agreed with the Employees that their currently
outstanding stock options for purchase of CDT stock shall be 100% exercisable by
them otherwise according to their terms not later than the first anniversary of
this agreement, provided that the Employees shall be in RJM's employ at such
time. The parties also mutually acknowledge that the Employees are with respect
to both of our respective businesses subject to the terms of confidentiality and
non-use agreements as to matters not the subject of the License.
(b) In the event that (i) the Employees do not accept employment with RJM, then
CDT shall continue the Employees in CDT's employ and furnish their services for
technical transfer under the License to RJM for a period of one year or the
completion of technical transfer, whichever shall be less (the "Transfer
Period"), or, (ii) the Employees, not having accepted employment with RJM, also
do not continue in CDT's employ, then CDT shall furnish to RJM the equivalent
services of persons knowledgeable in the technology relating to the System for
the Transfer Period. In case of either (i) or (ii) above, RJM shall for the
Transfer Period, reimburse CDT not less often than monthly and within fifteen
(15) days of CDT's invoice, for the salary and benefits of the Employees or such
other persons, as the case may be, but only up to amounts which would have been
paid to the Employees by RJM, if the the Employees had accepted employment with
RJM.
4. Further Instruments. CDT undertakes at RJM's election from time to time to
execute and deliver to RJM such further instruments of transfer and assignment
as shall be sufficient to document and perfect the transfers herein.
5. Sales and Use Tax. RJM shall be responsible for procuring and furnishing to
CDT Connecticut sales and use tax exemption certificates with respect to the
foregoing transfers or services to evidence their exemption from such tax. If
any such transfer or service shall not be exempt from such tax, RJM shall pay
the applicable tax, if any, to CDT and CDT shall remit the same to the
Connecticut Department of Revenue Services and provide evidence to RJM of such
remittance.
6. Miscellaneous. The provisions of Article XI of the License are incorporated
by reference herein and shall be applicable to this agreement as if fully set
forth herein.
In Witness Whereof, the parties have signed this agreement as of the date first
above written.
Clean Diesel Technologies, Inc. RJM Corporation
By:/s/ James M. Valentine By:/s/ R. Gifford Broderick
---------------------- ------------------------
Name: James M. Valentine Name: R. Gifford Broderick
Title: Chief Operating Officer Title: Vice President
<PAGE>
Schedule A
Clean Diesel Technologies, Inc.
ARIS 2000 Inventory
For the RJM Agreement
11 ARIS 2000 Stationary units @ $5,500 $60,500
1 ARIS 2000 Demo Stationary @ 50% $ 2,750
9 injectors (AMBAC)* $10,665
25 Coils (AMBAC) $ 1,500
Estimated Spare Parts (AMBAC & CDTI) $ 2,785
6 control boxes ($500) & 12 driver sets ($3,000) $ 6,000
4 pump motors ($300 & 6 micropumps ($200) $ 2,400
4 Demo stands (3 Caterpillar & 1 Cummins) $11,000
3 Demo injectors (2 Caterpillar & 1 Cummins) $ 1,500
-------
- --------------------------------------------------------------------------------
TOTAL Inventory $99,100
- --------------------------------------------------------------------------------
2 IBM Laptops (3 years old) $ 200
1 printer (4 years old) $ 50
1 Fax machine (1 year old) $ 50
Drill set (Purchased in December) $ 200
- --------------------------------------------------------------------------------
Total Physical Assets $ 500
- --------------------------------------------------------------------------------
Total Payable to CDTI $99,600
*Injectors 26,27,28,37,39,41,45,49,50
NOTE:
- ----
Excludes proposed AMBAC contract engineering for multiple injectors of $8,000.
Excludes Demo ARIS systems at SwRI and CDTI Office.
Cell Phones remain at CDTI.
