GASIFIER PURCHASE AGREEMENT

1.3           “Confidential Information” shall have the meaning set forth in Section 11.1.

 

1.4           “CSE Indemnified Parties” shall have the meaning set forth in Section 10.1.

 

1.5           “Distribution Agreement” shall have the meaning set forth in Section 4.7.

 

1.6           “Force Majeure Event” shall have the meaning set forth in Section 12.1.

 

1.7           “F.O.B.” shall mean “Free on Board” and shall have the meaning ascribed to such term by the International Commercial Terms (“Incoterms”) as published from time to time by the International Chamber of Commerce.

 

1.8           “Gasifier” shall mean a gasifier refinery manufactured by MagneGas based on Plasma Arc Flow technology, as specified on Exhibit A.

 

1.9           “Limited License Agreement” shall have the meaning set forth in Section 6.1.

 

1.10           “List Price” shall have the definition set forth in Section 4.8.

 

1.11           “Losses” shall mean any and all damages, settlement amounts, assessments, fines, dues, penalties and other costs and expenses (including, without limitation, court costs, interest and reasonable fees of attorneys, accountants and other experts) required to be paid to third parties with respect to the claim, suit, or action in question by reason of any judgment, order, decree, stipulation or injunction, or any settlement entered into in accordance with the provisions of this Agreement, together with all documented out-of-pocket costs and expenses incurred in complying with any judgments, orders, decrees, stipulations. and injunctions that arise from or relate to such claim, suit, or action.

 

1.12           “MagneGas Indemnified Party” shall have the meaning set forth in Section 10.2.

 

1.13           “Mexico” shall mean the United Mexican States.

 

1.14           Notice of Completion” shall have the meaning set forth in Section 4.2.

 

1.15           “Other Revenues” shall mean any revenue derived from the use of a Gasifier or the sale or trade of any by-product or output thereof, whether such revenues are derived from services rendered (such as waste disposal), Products manufactured and sold, or other activity.

 

1.16           “Person” or “person” shall mean any natural person, corporation, partnership, limited liability company, proprietorship, association, trust, or other legal entity.

 

 

1.17           “Product” shall mean the fuels or byproducts manufactured by a MagneGas Gasifier.

 

1.18           “Progress Payment” shall have the meaning set forth in Section 4.2.

 

1.19            “Reports” shall have the meaning set forth in Section 8.2.

 

1.20           “Royalties” shall have the meaning set forth in the Distribution Agreement.

 

1.21           “Territory” shall mean the United Mexican States (on an exclusive basis pursuant to Section 2.1 of the Distribution Agreement), and the rest of Latin America (on a non-exclusive basis pursuant to Section 2.2 of the Distribution Agreement); provided that the exclusive Territory is subject to change in accordance with the Distribution Agreement.

 

2.           TERM

 

2.1           Term. The term of this Agreement will be effective from the date first set forth above and will remain in effect thereafter for five (5) years from its effective date (the “Term”).

 

2.2           Renewal.  Any renewal terms of this Agreement shall be negotiated by the Parties.

 

2.3           Terms of Other Documents Incorporated by Reference.  Notwithstanding anything stated herein, the terms of the Distribution Agreement or Limited License Agreement are set forth in each such document, and shall be independent of the Term contemplated for this Purchase Agreement by Section 2.1, except as specifically provided in the Distribution Agreement or Limited License Agreement, as applicable.

 

3.           PURCHASE AND SALE  COMMITMENT

 

3.1           Subject to the terms and conditions herein, MagneGas will sell to CSE, and CSE will purchase from MagneGas, one (1) or more Gasifiers.  Upon execution of this Agreement, CSE commits to the purchase of one (1) Gasifier.  MagneGas commits to supplying up to 5 additional Gasifiers during the Term, upon CSE’s issuance of a purchase order for any additional Gasifiers. For the avoidance of doubt, CSE has no obligation to purchase any additional Gasifiers beyond the one (1) unit ordered.  MagneGas agrees that during any period of exclusivity, MagneGas shall not sell or otherwise provide Gasifiers to any third party in any exclusive Territory.

 

3.2           The purchase price for the first Gasifier is Two Million Seven Hundred Thousand U.S. Dollars and no/100 (U.S. $2,700,000.00) plus Royalties as set forth in the Distribution Agreement (the “Purchase Price”).  The Purchase Price for the second and additional Gasifiers shall be as provided in Section 4.8.

 

 

3.3           Delivery of each Gasifier will be FOB at MagneGas’s facilities in Tarpon Springs, Florida (Incoterms 2000).

 

4.           DEPOSIT, DELIVERY AND PAYMENT

 

4.1           Acknowledgment of Initial Deposit/Delivery of Fuel Cylinders.  MagneGas acknowledges receipt of CSE’s payment of a non-refundable deposit of One Hundred Thousand and no/100 U.S. Dollars (U.S. $100,000.00).  CSE acknowledges receipt of 500 fuel cylinders shipped by MagneGas on or about August 16, 2012, and included as part of the Gasifier sale hereunder.

 

4.2           Progress Payments/Timing of Payments. With respect to the first Gasifier purchased hereby, a second non-refundable deposit of One Hundred Thousand and no/100 U.S. Dollars (U.S. $100,000.00) shall be due on or before the date which is ten (10) business days following the Effective Date of this Agreement.  If said second payment of $100,000 is not received by such date, this Agreement is automatically null and void without recourse to either party.  Thereafter, a First Progress Payment  of Seven Hundred Sixty-Five Thousand and no/100 U.S. Dollars (U.S. $765,000.00) will be due not later than 15 days after CSE’s receipt of all required permits to operate the Gasifier in Mexico (as determined by CSE) (the “First Progress Payment”).  If the First Progress Payment is not paid within 180 days from the date of execution of this Agreement (subject to extension with the mutual written agreement of the parties),  this Agreement shall be null and void and of without further effect or recourse to either party.   An additional payment of Eight Hundred Sixty-Five Thousand and no/100 U.S. Dollars (U.S. $865,000.00)  will be due at such time that (i) all required permits to operate the Gasifier in Mexico (as determined by CSE) have been received and (ii) MagneGas certifies to CSE that it has completed construction of the Gasifier (a “Notice of Completion”). The final payment of Eight Hundred Seventy Thousand and no/100 U.S. Dollars (U.S. $870,000.00) will be due at such time that (i) all required permits to operate the Gasifier in Mexico (as determined by CSE) have been received and (ii) successful testing of the completed Gasifier has occurred at the facilities of MagneGas in Florida over a period of three weeks following the date of the Notice of Completion, in accordance with Article 5.  Each of the foregoing payments shall be referred to herein as a “Progress Payment”.  Subject to the provisions of Article 5 below, CSE representatives will be required to be on site for such testing.  All amounts owed under this Section 4.2 (with the exclusion of the second $100,000 payment referenced above, the payment of which shall not be subject to a  cure period) shall be paid within five (5) business days of the due date stated herein, time being of the essence for receipt of each of such payments.  If a payment is not received five (5) business days after the due date, and is not disputed in good faith by CSE, MagneGas shall provide written notice to CSE of the payment default, and if not cured within twenty (20) business days after receipt of the written notice from MagneGas, it shall be considered a “Payment Breach” and MagneGas shall not be obligated to continue construction, to perform any testing or to ship the Gasifier, as applicable, and in general reserves the right to withhold any other deliverables under this Agreement until the Payment Breach is cured.  In the event of a Payment Breach, the provisions of Section 4.4 below shall cease to apply to this Agreement and MagneGas’s sole obligation will be to complete performance hereunder upon receipt of the delinquent Progress Payment without effect on MagneGas’s rights to exercise any remedies under Article 7 below.  Notwithstanding anything to the contrary contained in this Agreement, CSE’s failure to make any Progress Payment  due to (i) the failure or revocation of all any required permits to operate the Gasifier in Mexico as manufactured  to issue, or (ii) the failure of the Gasifier to achieve successful testing pursuant to the standards set forth at Section 5.1 below, shall not be deemed a Payment Breach and the sole remedy of the parties hereunder shall be the termination of this Agreement without cause in accordance with Section 7.1 (except that MagneGas shall retain the non-refundable deposits referenced in Sections 4.1 and 4.2).  CSE will not make any of the Progress Payments without having received the required permits and if it does, such Progress Payment shall be non-refundable.

 

4.3           Transfer of Title/Shipment and Delivery.  Title to the Gasifier will transfer to CSE upon completion of all of the Progress Payments required in Section 4.2.  In no event will MagneGas arrange for shipment of the Gasifier out of its facilities to a CSE-designated location until all Progress Payments have been received by MagneGas.

 

4.4           Construction Completion Deadline.  MagneGas will complete the first Gasifier not later than 90 days from its receipt of the first Progress Payment (the “Completion Date”).  To the extent that the first unit is not completed by the Completion Date, the Purchase Price will be reduced by $5,000 per completed week that transpires after the Completion Date up until the actual date on which the first unit is completed, up to a maximum reduction of $150,000.00, subject to CSE’s right to terminate this Agreement for cause in accordance with Section 7.2.  If CSE terminates this Agreement due to delays in accordance with this Section 4.4, MagneGas shall promptly refund all amounts paid by CSE hereunder (except for the two non-refundable deposits referenced in Sections 4.1 and 4.2 above).

 

4.5           Shipping and Delivery Terms.

 

(i)           Each Gasifier will be packed and shipped in a commercially reasonable manner mutually agreed by the parties, consistent with industry standards, and in compliance with applicable law.  MagneGas shall, at its sole cost and expense, be solely responsible for and will prepare all documentation necessary for compliance with U.S. requirements for the exportation of the Gasifers to Mexico, including obtaining any export licenses for the Gasifier and Products if any are required.  In this connection, CSE will cooperate fully with MagneGas with respect to any information that may be required for MagneGas compliance with U.S. laws, including but not limited to information on end-user, purpose, or background check.

 

 

(ii)           CSE will prepare all documentation necessary for importation of the Gasifiers and Products to the Territory, subject to MagneGas approval.  MagneGas will not be held responsible for delays or costs related to the importation of said Gasifiers to Mexico, as long as MagneGas has used good faith efforts to provide technical information or documentation that may be required by CSE or CSE’s attorneys in a timely manner.

 

4.6           Manner of Payment: Currency. All payments for the Purchase Price of the Gasifiers or otherwise in connection therewith shall be calculated and paid in U.S. Dollars. All payments shall be paid by cash wire transfer to an account in the name of MagneGas at SunTrust Bank pursuant to wire instructions that MagneGas will provide to CSE.

 

4.7           Exclusive Appointment.  MagneGas shall grant to CSE exclusive distribution rights in Mexico, and non-exclusive distribution rights in the rest of Latin America in accordance with the terms and conditions hereof and of that certain Distribution Agreement of even date herewith, a copy of which is appended as Exhibit B hereto and incorporated herein by reference (the “Distribution Agreement”).  This right is granted subject to MagneGas’s explicitly reserved right to terminate this exclusive distribution right if no additional Gasifiers are purchased on or before the third anniversary of the Commissioning Date of the first Gasifier, and to convert it to a non-exclusive distribution right as provided in the Distribution Agreement.

 

 

4.8           Purchase of Subsequent Refineries.  The timing and structure of the Progress Payments for any additional Gasifiers purchased under this Agreement shall follow the same structure as provided in Sections 4.1 and 4.2 for the first Gasifier, except that no additional non-refundable deposits will be required and that the  payment due dates for each Progress Payment will be calculated from the date of the purchase orders for such Gasifiers.  Accordingly, the first Progress Payment (equivalent to approximately one-third of the List Price) for any such Gasifier will be due not later than 60 days from the date of the purchase order for such Gasifier, the second Progress Payment will be due when the Notice of Completion is issued by MagneGas, and the third Progress Payment of will be due when successful testing of the Gasifier is completed.   The price of each Gasifier shall be calculated by reference to  the “List Price”.  “List Price” shall be the reference price at which a Gasifier is sold in any given year to a purchaser who is not purchasing subject to any discounts, and MagneGas reserves the right to raise such List Price at any time, provided that such List Price shall not exceed $2,900,000, except in the event of a material increase in material component costs (defined as at least 15%).  Subject to special discounts in connection with bulk orders as provided under Section 4.9 below, the following provisions shall govern the calculation of Gasifier prices for additional Gasifiers purchased during the Term hereof  (after the initial Gasifier purchase order submitted with this Agreement and in addition thereto) and other relevant terms of purchase:

 

(i)           If CSE purchases a second Gasifier on or before the third anniversary of the Commissioning Date of the first Gasifier, then the Progress Payments for such second Gasifier and all additional Gasifiers will be subject to a 35% discount off the List Price of such Gasifier at the time of the purchase  PLUS an additional discount of $100,000.00 if CSE provides its own MagneGas-approved compressor for the Gasifier.  Such discount shall be deducted solely from the final two Progress Payments and shall be split evenly between such payments. Accordingly, if the second Gasifier is ordered within calendar year 2013 and there are no material increases in material component costs, the price for such second Gasifier will be $1,885,000, based on a List Price of $2,900,000 (or $1,785,000.00 if CSE provides its own qualifying compressor that is approved by MagneGas).   Based on the foregoing prices, and by way of example, if a Purchase Order for a second Gasifier is sent to MagneGas (and assuming for this example that CSE does not use its own compressor), the first Progress Payment for such order will be $628,333.33, the second Progress Payment will be $628,333.33, and the  third Progress Payment will be  $628,333.34.

 

(ii)           If CSE fails to order the second Gasifier and make at least one Progress Payment in respect thereof by the third anniversary of the Commissioning Date on the first Gasifier purchased hereunder, as MagneGas’s sole remedy therefor, CSE shall be deemed to have elected to convert its exclusive distribution rights in Mexico to non-exclusive distribution rights, as provided in the Distribution Agreement, and all other provisions of this Agreement will remain in full force and effect for the Term hereof.  Notwithstanding anything stated herein, MagneGas’s obligation to provide Gasifiers under this Section 4.8 is subject to the delivery and sale of such Gasifier not being contrary to then applicable laws or regulations.

 

(iii)           The terms of Section 4.2 with respect to CSE’s failure to make any Progress Payments shall also apply to additional Gasifiers.

 

4.9           Additional Discount for Order of Multiple Gasifiers.    In the event that CSE orders multiple Gasifiers at a time the following additional discounts will apply: (A) at 3 or more Gasifiers, 50% discount from the List Price shall apply, and (B) orders in excess of 5 units at a time shall be subject to a 60% discount from the List Price if made within 5 years from the Effective Date of this Agreement.  An additional $100,000 discount applies per unit if CSE provides its own compressors.

 

 

4.10           Extension of Term of Exclusivity.  Subject to the provisions of the Distribution Agreement (and in accordance with the example shown in the Distribution Agreement), each additional Gasifier purchased hereunder shall extend the term of exclusivity under the Distribution Agreement by three (3) years.  To the extent that CSE completes the purchase of all six (6) Gasifiers contemplated by this Agreement within the Term, CSE’s status as an exclusive distributor in Mexico shall be deemed to be perpetual, subject to compliance with any minimum sales requirements set forth under the Distribution Agreement, as such may be amended from time to time (as long as the Distribution Agreement is not otherwise terminated).

 

4.11           Termination for Failure to Purchase Additional Gasifiers. Should CSE fail to order any additional Gasifiers under the terms of this Agreement after completing the purchase of the first Gasifier, this Agreement shall terminate without further obligation between the Parties except as may be provided in the Distribution Agreement.  Notwithstanding the foregoing, to the extent that any purchase orders for any Gasifiers are issued by CSE under the terms of this Agreement, the Parties shall have the obligation to complete such purchase and sale pursuant to the outstanding purchase order, regardless of whether the Term expires before the pending transaction is completed.

 

5.           ADDITIONAL OBLIGATIONS OF THE PARTIES

 

5.1           Testing.  CSE will send two technicians, at CSE’s sole expense, to participate in the testing of the Product at MagneGas’s facilities in Florida.  The CSE technicians will be required to remain on site at MagneGas’s facility during the full 3 weeks of the test period.  The test procedures, criteria and requisite standards for approving test results and certifying the Gasifier as having passed all tests are set forth on Exhibit C.

 

5.2           Training.

 

(i)           At its sole expense, MagneGas shall provide at least one and up to 10 members of CSE personnel with training relating to the operation of the Gasifiers at CSE’s facility in Mexico.  For such purpose, subsequent to shipment of the first Gasifier to CSE, MagneGas will provide the services of one MagneGas technician to CSE for a period of two (2) continuous weeks to provide training at CSE’s site, as may be required, and commissioning of the Gasifier.  Upon completion of such period, MagneGas will certify the Gasifier as operational in accordance with such standards as the parties have accepted as set forth on Exhibit C (the “Commissioning Date”).

 

(ii)           At CSE’s request, MagneGas will provide the services of a senior commercial representative to CSE to assist in training and commercial activities at the location designated by CSE in Mexico, once a month for the initial three (3) months following completion of the initial on-site training required by Section 5.2(i) above, and thereafter once a quarter for the following six (6) months.  CSE will pay all pre-approved, reasonable travel, lodging, and meal costs and expenses of such commercial representative(s).  MagneGas will not charge CSE for the time of the senior commercial representative(s) designated to provide the services contemplated by this subsection 5.2 (ii).

 

 

5.3           Service and Repair.  MagneGas shall provide CSE with a service kit containing the items identified on Exhibit A with each Gasifier, to support two (2) years of component failures, at no additional cost to CSE.

 

5.4           Compliance with Law; Licenses and Approvals.  Each Party shall comply in all material aspects with all laws, rules, regulations, and other governmental requirements applicable to such Party’s performance or obligations under this Agreement, and shall obtain and maintain all material governmental permits, licenses, and consents required in connection therewith.

 

5.5           Solicitation and Sales Outside the Territory. Unless otherwise permitted by the terms of the Distribution Agreement, CSE shall not purposefully solicit orders for sales of Products from persons other than customers in the Territory. For purposes of this Agreement, solicitations for sales of Products that are accessible to persons outside of the Territory, but that are not specifically directed towards such persons, shall not constitute solicitations for sales of Products outside of the Territory.

 

5.6            Other Activities of MagneGas. Subject to the terms of the Distribution Agreement, nothing in this Agreement shall be construed to prohibit or limit MagneGas’s ability to promote, offer, purchase, or sell Gasifiers or Products to any person outside of the Territory (or in any non-exclusive country in the Territory, should CSE lose its right to exclusivity), nor shall it limit MagneGas’s ability to engage in any other type of activity that does not include the sale of Products or Gasifiers in or out of the Territory.

 

5.7           Independent Contractors. Neither Party is, nor will be deemed to be, an agent, legal representative, joint venturer, partner, or employee of the other Party for any purpose.  Neither Party will be entitled to (a) enter into any contracts in the name of or on behalf of the other Party, (b) pledge the credit of the other Party in any way or hold itself out as having authority to do so, or (c) make commitments-or incur any charges or expenses for or in the name of the other-Party.  Each Party shall be solely responsible for payment of all compensation owed to its personnel (and all tax withholding with respect thereto), including payment, if any, of employment-related taxes and worker’s compensation insurance premiums.  The Parties are and shall be independent contractors.

 

 

5.8           Operations and Expenses. Subject to the express provisions of this Agreement, the Distribution Agreement and the Limited License Agreement, the detailed operations and activities of CSE in acting as distributor for the Products under this Agreement are subject to the sole control and management of CSE.

 

6.           TRADEMARKS AND PROMOTIONAL MATERIALS

 

6.1           License to Use MagneGas Trademarks. Simultaneously with the execution of this Agreement, the Parties are executing a Limited License Agreement in the form of Exhibit D hereto (the “Limited License Agreement”), the terms of which are hereby incorporated by reference.

 

6.2           Promotional Materials. Subject to any provisions of the Distribution Agreement, CSE shall design and create its own promotional materials and sales literature for the Products manufactured by the Gasifiers, including appropriate information about the Gasifiers (collectively, the “Promotional Materials”) for use by CSE if CSE so chooses, in promoting sales of Products in the Territory.   Notwithstanding the foregoing, all such Promotional Materials shall use the MagneGas trademark, name and logos only in accordance with the provisions of the Limited License Agreement.

 

7.           TERMINATION

 

7.1           Termination Without Cause.  Notwithstanding anything stated herein, this Agreement may be terminated without cause only on the following terms:

 

(i)           By either Party, if a court of competent jurisdiction or governmental authority, regulatory, or administrative agency or commission shall have enacted any law, statute, rule, or regulation, or issued any final and non-appealable order or decree that permanently restrains, enjoins, or otherwise prohibits either Party from substantially performing under this Agreement; or

 

(ii)           By either Party in the event of a Payment Breach due to (i) the inability of (i) CSE to receive all required permits to operate the Gasifier  in Mexico (as determined by CSE) or the revocation of such permits prior to the shipment of the Gasifier, or (ii) the failure of successful testing of the completed Gasifier.

 

 

7.2           Termination For Cause.  This Agreement may be terminated for cause on the following terms:

 

(i)           by either Party if the other Party breaches or fails to comply with any material term, condition, or obligation required to be performed or complied with by such other Party under this Agreement, the Distribution Agreement or the Limited License Agreement, and such material breach or failure is not cured within forty-five (45) days following written notice thereof by the terminating Party;

 

(ii)            by either Party if the other Party (a) institutes any insolvency, receivership, or bankruptcy proceedings, or any other proceedings for the settlement of its debts, (b) has any such proceedings instituted against it, which proceedings are not dismissed or otherwise resolved in its favor within one hundred and twenty (120) days thereafter, (c) makes a general assignment for the benefit of its creditors, or (d) is dissolved or permanently ceases to conduct business in the ordinary course; or

 

(iii)           By MagneGas in the event of a Payment Breach other than as described in Section 7.1 above.

 

7.3           Rights and Obligations on Expiration or Termination.

 

(i)           Upon and after the expiration or termination of this Agreement, CSE shall remain entitled to sell Products exclusively within the Territory (unless the rights to exclusivity have been relinquished pursuant to Section 4.7 hereof), in accordance with the Distribution Agreement, as manufactured from such Gasifier or Gasifiers as CSE may have purchased hereunder, without use of the Marks.  Any continuing rights to distribution of Products shall be governed by the terms of the Distribution Agreement.

 

(ii)           In the event of a Termination for Cause, the terminating Party may also be entitled to damages subject to the limitation of Article 9.  To the extent termination is in connection with a Payment Breach (that is not otherwise excused due to the events in Section 7.1, MagneGas may, at its option, make demand for the sums due and owing or reclaim any other Gasifier on site as liquidated damages.  In the event of a termination for cause by CSE, MagneGas shall repurchase the Gasifiers on a straight-line depreciation basis.

 

(iii)           In the event of a Termination Without Cause, MagneGas shall promptly refund all amounts paid it by CSE under this Agreement (subject to retention of the deposits in accordance with the last two sentences of Section 4.2).

 

 

7.4           Survival. The following Sections and Articles, as well as any payment obligations of MagneGas, shall survive the expiration or termination of this Agreement:  Sections 8, 9, 10 and 11, provided that Sections 8 and 10 shall only survive for the duration of the Distribution Agreement.

 

 

8.1           By Both Parties.  Each Party represents and warrants to the other Party that (a) it has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, (b) it is not a party to any agreement or understanding, and knows of no law or regulation, that would prohibit it from entering into and performing its obligations under this Agreement, or that would conflict with this Agreement, and (c) when executed and delivered by it, this Agreement will constitute a legal, valid and binding obligation of it, enforceable against it in accordance with the terms hereof.

 

8.2           Additional Warranties of MagneGas. MagneGas additionally represents and warrants to CSE that (a) it owns or has sufficient rights to manufacture and sell the Gasifiers that are or will be supplied pursuant to this Agreement, (b) title to all such Gasifiers will be conveyed to CSE free and clear of any liens or encumbrances, (c) it has sufficient manufacturing capacity and access to sufficient quantities of raw materials and component parts, materials and ingredients to produce and provide the number of Gasifiers to which it has committed hereunder, (d) such Gasifiers are protected by patents issued by the US Patent and Trademark Office (the “USPTO”) or are otherwise covered by patents pending with the USPTO, and to the best knowledge of MagneGas do not infringe on the intellectual property of any third party in the United States; (e) MagneGas is in the process of applying for a supplemental/additional patent with the USPTO in connection with the Gasifier and, at such time, will file for patent protection in Mexico under the applicable regulatory scheme and, to the best  knowledge of MagneGas but without the benefit of having conducted a search of the records of the Instituto Mexicano de la Propiedad Industrial (Mexican Patent and Trademark Office),  the Gasifiers will not, at the time of shipment, infringe or misappropriate any enforceable patent, copyright, trade secret, or other intellectual property or proprietary rights of any third party in the Territory, (e) such Gasifiers, at the time of shipment, and for a period of one year thereafter, will conform in all material respects with the agreed-upon specifications for such Gasifiers as set forth on Exhibit A, (f) such Gasifiers shall be fit for their intended purpose, reasonably safe for use in accordance with the instructions provided to CSE in writing, and free from any defects in design or manufacturing, and (g) that as of the date hereof the use of the Gasifiers to make Products complies with the applicable laws and regulations of the United States and Florida,  and that MagneGas has provided or made available to CSE all third party reports received by it certifying or relating to such compliance or to the content of emissions from the Gasifiers during the processing or manufacturing of Products (the “Reports”).  MagneGas makes no representation as to the Gasifiers’ compliance with the laws and  regulations of any country other than the United States of America, and has not undertaken to determine whether use of the Gasifier in the Territory is compliant with local laws and regulations.  MagneGas also provides the specific warranties contained in Exhibit E hereto.

 

 

8.3           Additional Warranties of CSE.  CSE additionally represents and warrants to MagneGas that neither CSE nor any of its representatives will intentionally make any oral or written representations which vary materially from the specifications, warranties, or representations by MagneGas with respect to the Gasifiers or the Products as stated in  packaging or written documentation provided in writing by MagneGas to CSE relating to the Gasifiers or Products.  CSE acknowledges receipt of the Reports and that CSE is solely responsible for ensuring compliance with Mexican laws, including, but not limited to, all environmental laws and regulations and all applicable laws and regulations at the federal, state and local levels in the Territory, during the use of the Gasifiers for the manufacture of the Products.  CSE further warrants and covenants that it will not reverse engineer, grant access to the Gasifiers to third parties for the purpose of reverse engineering, or otherwise  misappropriate the Gasifier technology.   CSE acknowledges that the foregoing covenant is particularly important pending MagneGas’s filing for patent protection in Mexico and that MagneGas is relying on this covenant and on the confidentiality provisions of Section 11 hereof in order to enter into this Agreement.  CSE will further promptly notify MagneGas if and when it becomes aware of any apparent infringement of the MagneGas technology in the Territory.

 

8.4           Disclaimer of Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER. PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER, AND ALL SUCH OTHER WARRANTIES, EXPRESS OR IMPLIED, ARE HEREBY DISCLAIMED.

 

8.5           Warranty Remedies.    IN THE EVENT OF ANY BREACH OF ANY OF THE GASIFIER WARRANTIES CONTAINED HEREIN, CSE MAY REQUIRE THE REPAIR OR   REPLACEMENT OF THE DEFECTIVE GASIFIER OR PART, OR RETURN OF THE PRICE PAID BY CSE.

 

9.            LIMITATIONS OF LIABILITY

 

9.1           Limitation on Certain Damages. EXCEPT TO THE EXTENT ARISING OUT OF A THIRD PARTY CLAIM AS SET FORTH IN SECTION 10 BELOW, IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, PUNITIVE, OR. CONSEQUENTIAL DAMAGES OF ANY KIND (INCLUDING, WITHOUT LIMITATION, LOST PROFITS, BUSINESS, OR GOODWILL) IN CONNECTION WITH THE GASIFIERS, THE PRODUCTS OR ANY OTHER MATTER COVERED BY THIS AGREEMENT, REGARDLESS OF WHETHER SUCH LIABILITY IS BASED ON BREACH OF CONTRACT, TORT, STRICT LIABILITY, BREACH OF WARRANTY, OR ANY OTHER THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF LIABILITY REFLECTS A DELIBERATE AND BARGAINED FOR ALLOCATION OP RISKS BETWEEN CSE AND MAGNEGAS AND IS INTENDED TO BE INDEPENDENT OF ANY EXCLUSIVE REMEDIES AVAILABLE UNDER THIS AGREEMENT, INCLUDING ANY FAILURE OF SUCH REMEDIES TO ACHIEVE THEIR ESSENTIAL PURPOSE.

 

 

9.2           EXCEPT TO THE EXTENT ARISING OUT OF A THIRD PARTY CLAIM AS SET FORTH IN SECTION 10 BELOW, EACH PARTY’S TOTAL LIABILITY FOR ANY AND ALL LOSSES AND DAMAGES ARISING OUT OF ANY CAUSE WHATSOEVER ARISING FROM THE PARTIES’ RELATIONSHIP HEREUNDER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL BE LIMITED TO ACTUAL OUT-OF-POCKET DAMAGES, INCLUDING BUT NOT LIMITED TO ANY GOVERNMENTAL FINES, BUT IN NO EVENT SHALL EXCEED THE PURCHASE PRICE (INCLUDING ROYALTIES PAID UNDER THE DISTRIBUTION AGREEMENT) OF THE REFINERIES IN RESPECT TO WHICH SUCH CAUSE ARISES.  IN THE EVENT THAT THE LIABILITY FOR LOSS AND/OR DAMAGE ARISES IN CONNECTION WITH THE MALFUNCTION OF A GASIFIER OR PART THEREOF, AT MAGNEGAS’s OPTION, MAGNEGAS MAY INSTEAD REPAIR OR REPLACE SUCH PRODUCTS, BUT, EXCEPT TO THE EXTENT ARISING OUT OF A THIRD PARTY CLAIM AS SET FORTH IN SECTION 10 BELOW, IN NO EVENT SHALL MAGNEGAS BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES RESULTING FROM ANY PRODUCT DEFECT.

 

9.3           Essential Part of the Bargain. The Parties acknowledge that the limitations of liability set forth in this Article 9 are an essential element of this Agreement between the Parties, and that the Parties would not have entered into this Agreement but for such limitations of liability.

 

10.           INDEMNIFICATION

 

10.1           Indemnification by MagneGas.  MagneGas shall defend and/or settle any and all third party claims, suits, and actions asserted against CSE, its Affiliates, or their respective its employees, officers, directors, managers, shareholders, members, agents, Affiliates, successors, and assigns (each, a “CSE Indemnified Party”), to the extent such claims, suits or actions arise from or are based on (i) any breach by MagneGas of any of its representations, or warranties set forth in Article 8 or (ii) an actual or alleged claim of infringement or misappropriation of a patent, copyright, trademark or trade secret of any third party. All settlements under this Section 10.1 shall be subject to discussion with CSE and shall require the prior written consent of both Parties.   CSE (and the applicable CSE Indemnified Parties) shall at all times have the option, at its own expense, to participate in the defense or settlement of the claim, suit, or action (including, without limitation, through counsel of its own selection). In addition, MagneGas shall indemnify and hold harmless the CSE Indemnified Parties from and against any and all Losses suffered or incurred by any of them in connection with any such claims, suits, or actions.

 

 

10.2           Indemnification by CSE.  CSE shall defend and/or settle any and all third party claims, suits, and actions asserted against MagneGas, its Affiliates, or their respective its employees, officers, directors, managers, shareholders, members, agents, Affiliates, successors, and assigns (each, a “MagneGas Indemnified Party”), to the extent such claims, suits or actions arise from or are based on any breach by CSE of any of its representations or warranties set forth in Article 8 or any material modification of the Gasifiers not approved by MagneGas, except to the extent caused by or arising out of the tortious acts or omissions of MagneGas or any MagneGas Indemnified Party. All settlements under this Section 10.2 shall be subject to discussion with MagneGas and shall require the prior written consent of both Parties.   MagneGas (and the applicable MagneGas Indemnified Parties) shall at all times have the option, at its own expense, to participate in the defense or settlement of the claim, suit, or action (including, without limitation, through counsel of its own selection). In addition, CSE shall indemnify and hold harmless the MagneGas Indemnified Parties from and against any and all Losses suffered or incurred by any of them in connection with any such claims, suits, or actions.

11.           CONFIDENTIALITY

 

11.1           Confidential Information. As used in this Agreement, “Confidential Information” means any material or information disclosed by either Party to the other Party, in writing, orally or by inspection of tangible objects (including, without limitation, material or information relating to such Party’s research, development, customers, prospective customers, markets, finances, or other business interests or trade secrets), which is designated in writing as “Confidential,” “Proprietary” or some similar designation. “Confidential Information” does not include the Promotional Materials or any other items or materials intended to be disclosed to any customers in connection with the promotion of the Products by CSE in the Territory hereunder.

 

11.2           Confidentiality and Non-Use. Each Party shall treat as confidential all Confidential Information of the other Party, shall not use such Confidential Information except to exercise its rights and perform its obligations under this Agreement, and shall not disclose such Confidential Information to any third party, except to its attorneys and other advisors provided that such third party agrees in writing to abide by restrictions on confidentiality and non-use that are substantially the same as those set forth herein. Without limiting the foregoing, each Party shall use at least the same degree of care it uses to prevent the disclosure of its own confidential information of like importance, which care shall be no less than reasonable care, to prevent the disclosure of Confidential Information of the other Party. Each Party will promptly notify the other Party of any actual or suspected misuse or unauthorized disclosure of the other Party’s Confidential Information.

 

 

 

Manufacturer hereby warrants that the Refinery will be delivered as identified in the Purchase Agreement to which this Exhibit A is attached and will have the performance specified in this Exhibit A and the Agreement.

 

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