BSST Revenue Sharing Agreement

Exhibit 10.4


REVENUE SHARING AGREEMENT


THIS REVENUE SHARING AGREEMENT (this "Agreement") is entered into as of September 4, 2000 by and between BSST, LLC, a Delaware limited liability company (the "Company"), and DR. LON E. BELL (the "Inventor").


RECITALS:


WHEREAS, pursuant to an Assignment and Subscription Agreement dated September 4, 2000 between the Company and the Inventor (the "Assignment Agreement"), the Inventor has assigned to the Company all of his right, title and interest to the Technology (as defined in the Assignment Agreement) in exchange for Membership Interests in the Company;


WHEREAS, the Inventor has agreed to further develop the Technology for the Company in order to commercialize products based on the Technology; and


WHEREAS, the Company and the Inventor desire to enter into this Agreement to allow the Inventor to share in the Company's revenue from the sale of products resulting from the Basic Technology;


NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties agree as follows:


ARTICLE I


DEFINITIONS


1.1 An "affiliate" of, or person "affiliated with," another person means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with such other person.


1.2 "Assignment Agreement" has the meaning specified in the first recital of this Agreement.


1.3 "Basic Technology" means all Technology (as defined in the Assignment Agreement) and any improvements, modifications, enhancements and derivatives on or to such Technology that are developed after the date of this Agreement by the Company. Basic Technology shall not include any technology acquired or licensed by the Company from a third party.


1.4 "Contract Payment" has the meaning specified in Section 2.1.


1.5 "Covered Product" means a product that incorporates, utilizes or results from the Basic Technology.


1.6 "Covered Revenue" means the aggregate amount of revenue included on the income statement of a person from the sale by such person of Covered Products during a specified period, as determined in accordance with generally accepted accounting principles.


1.7 "Fiscal Quarter" means a fiscal quarter of the Company for financial accounting purposes.


1.8 "Fiscal Year" means the fiscal year of the Company for financial accounting purposes.


1.9 "Holder of a Contract Payment Interest" means a person holding all or any part of the right to receive the Contract Payment.


1.10 "Inventor's Equity Interest" as of any date means the aggregate amount of equity securities of the Company and vested options to obtain additional equity interests in the Company held by Inventor as of such date.


1.11 "Royalty Receivable" means the amount of royalties earned in any period by the Company from a third party arising from such third party's sale of Covered Products.


1.12 "Special Events" means any of the following:


(a) any sale or transfer of securities representing 50% or more of the outstanding voting power of, or economic interests in, the Company;


(b) any consolidation, merger or other business combination of the Company into any other corporation or entity, whether or not the Company is the entity surviving such transaction, if, immediately after giving effect to such transaction (and all other transactions related thereto or contemplated thereby), the equity holders of the Company immediately prior to such transaction do not own, directly or indirectly, securities representing more than 50% of the outstanding voting power of, and economic interests in, the surviving corporation or entity; and


(c) the consummation of an initial public offering by the Company (other than pursuant to an employee stock option, stock purchase or similar plan or pursuant to a Rule 145 transaction under the Securities Act of 1933).


1.13 "Statement" has the meaning specified in Section 2.3.


1.14 "Term" has the meaning specified in Section 2.2.


ARTICLE II


REVENUE SHARING PLAN


2.1 Revenue Sharing Payments. Each Fiscal Quarter, the Company shall pay
------------------------ the Inventor, his successors and permitted assigns the following amounts (the "Contract Payment"):


(a) With respect to Covered Products manufactured by or on behalf of the Company, 2.5% of the Company's Covered Revenues from such Covered Products.


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(b) With respect to Covered Products manufactured by a third party which has licensed the Basic Technology from the Company:


(i) If the Company's Royalty Receivable from such Covered
Products is equal to or greater than 5% of such third party's Covered
Revenue from such Covered Products, 2.5% of such Covered Revenue;


(ii) If the Company's Royalty Receivable from such Covered
Products is less than 5% of such third party's Covered Revenue from such
Covered Products, a percentage of such Covered Revenue mutually agreed by
Inventor and the Company; provided, that the Company and Inventor shall
--------
mutually agree to share any other applicable form of revenue, compensation
or consideration earned or received by the Company from such third party
(including, but not limited to upfront fees and warrants).


2.2 Term of Payments. Subject to Section 3.5, commencing on the date of
---------------- this Agreement, the Company shall make the Contract Payment specified in Section 3.1 for each Fiscal Quarter for a period of twenty-five years (the "Term"), provided that the Company's obligation to make such Contract Payments shall terminate in the event the Inventor (i) after 30 days notice from the Company of a default in the performance of or compliance with Sections 1.1 and 1.2 of the Assignment Agreement and the failure by the Inventor to cure the default within such 30 day period, (ii) engages in the same or similar type of business as the Company or engages in a thermoelectric business competitive with the Company or (iii) contests the validity or enforceability of the assignment of the Technology under the Assignment Agreement except in connection with the Inventor's reversionary rights under the Assignment Agreement upon the liquidation or winding up of the Company.


2.3 Timing of Payments. The Contract Payment payable to the Inventor (or
------------------ the persons designated by the Inventor under Section 4.1), his successors, heirs and permitted assigns shall be paid in arrears by the Company within 45 days after the end of each Fiscal Quarter during the Term of this Agreement, notwithstanding the termination of Inventor's employment with Company or any of its affiliates for any reason whatsoever, including death of the Inventor. The Company shall accompany the Contract Payment with a reasonably detailed statement of calculation of the Contract Payment amounts (a "Statement").


2.4 Option to Receive Contract Payment in Equity. If the Company licenses
-------------------------------------------- any of its Basic Technology to a third party and the Company receives common stock or other equity interests of the third party in satisfaction of a Royalty Receivable, the Company and the Inventor shall mutually agree as to any Contract Payment applicable to such Royalty Receivable payable in equity and, in lieu of such agreement, the Inventor shall receive the Contract Payment in the form of a pro rata share of such Royalty Receivables payable in equity.


2.5 Special Events. Notwithstanding any other provisions of this
-------------- Agreement, the aggregate amount of Contract Payments in any Fiscal Year shall be subject to the limitations set forth in this Section 2.5. Upon the occurrence of any Special Event, if the Inventor's Equity Interest has an aggregate fair market value (as deemed to be the value as determined by the Board of Directors of the Company in the good faith exercise of its business judgment, irrespective of the accounting treatment thereof) on the closing date of the Special Event of:


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(a) at least $25,000,000, but less than $50,000,000, then (i) from such date forward, the aggregate amount of Contract Payments in any Fiscal Year shall not exceed $5,000,000 and (ii) the Term of this Agreement shall be revised to be the shorter of (A) ten years from such date or (B) the period from such date through the end of the Term of this Agreement specified in Section 2.2;


(b) at least $50,000,000, but less than $100,000,000, then from such date forward, the aggregate amount of Contract Payments in any Fiscal Year shall not exceed $2,500,000 and (ii) the Term of this Agreement shall be revised to be the shorter of (A) ten years from such date or (B) the period from such date through the end of the Term of this Agreement specified in Section 2.2; or


(c) equal to or greater than $100,000,000, then as of such date the Company's obligation to make Contract Payments to the Inventor shall terminate and have no further force and effect and this Agreement sha ...