UNITED STATES

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): October 1, 2012

 

VIASPACE INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction

of incorporation)

333-110680

(Commission File Number)

76-0742386

(IRS Employer Identification No.)

 

 

382 N. Lemon Ave., Suite 364

Walnut, CA 91789

(Address of principal executive offices, including zip code)

 

131 Bells Ferry Lane, Marietta, Georgia 30066

(former address if applicable)

 

Registrant's telephone number, including area code: (626) 768-6310

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 1.01. Entry into a Material Definitive Agreement

 

Recapitalization Agreement

 

Effective as of September 30, 2012, VIASPACE Inc. (the “Registrant”), VIASPACE Green Energy, a British Virgin Islands corporation (“VGE”), Stephen Muzi, Carl Kukkonen (Muzi and Kukkonen are referred to as “Former Employees”), Sung Chang (“SC”) and Changs, LLC, a limited liability company controlled by Chang (“Chang”) entered into the Recapitalization Agreement (“Recap Agreement”).

 

Prior to the Recap Agreement, Chang held a promissory note granted by the Registrant in the principal amount of approximately $5.3 million (“Chang Note”). VIASPACE held 6,503,920 shares of VGE common stock (“VGE Shares”) and was its largest shareholder. In connection with the Recap Agreement, the Registrant agreed to transfer all of the VGE Shares to VGE which would then be cancelled. VGE would then deliver 6,503,920 newly-issued VGE Shares to Chang. Chang agreed that the Chang Note and the related Stock Pledge Agreement, Security Agreements and Guaranty Agreement (collectively “Note Ancillary Documents”) would be subject to a “covenant not to sue” and Chang would be unable to enforce any of its rights under such promissory note unless Chang or any of its members, officers and managers (collectively “Chang Indemnified Parties”) were sued; provided that neither the Chang Note nor any of the Note Ancillary Documents may be used as the basis to recover any claims against the Registrant or either of the Former Employees.

 

Under the Recap Agreement, Chang was granted a right to purchase any or all of its “Pro Rata Portion” of newly-issued common stock or other equity securities offered by the Registrant other than certain excluded securities. The “Pro Rata Portion” meant that Chang had the right to purchase that portion of such offering that equaled Chang’s percentage interest of all Registrant common stock.

 

So long as Chang, together with its related parties, held at least 200 million shares of Registrant common stock, Chang was granted rights to attend all Registrant Board of Director meetings as a non-voting observer.

 

The Registrant and VGE agreed jointly and severally, to indemnify, defend and hold harmless each of Chang and related parties (“Chang Indemnified Parties”) from and against any and all losses, liabilities, claims, obligations, damages, costs, expenses, for, resulting from, relating to or arising in connection with any such person having served in the capacity of director, officer, employee, note-holder or equity holder of the Registrant or any person who or which is or was an affiliate thereof arising prior to or in connection with the recapitalization, except, however, that with respect to Sung Chang as an Indemnified Party, the Registrant and each such affiliate thereof shall indemnify Sung Chang in his former capacity as a member of the board of directors, employee and officer thereof to the fullest extent permitted by law and otherwise under the organizational documents for the Registrant. the Registrant also agreed to maintain in full force and effect (with VGE maintaining thereafter its own separate such policy) either (a) that certain directors and officers policy of insurance as was in effect as of the date on which Sung Chang resigned from the Registrant Board (the “Existing Policy”) or (b) such other policy as shall extend no less coverage to Sung Chang as that which is extended to any other director, but in no event less than that which was extended to Sung Chang under the Existing Policy, either of which being at the sole cost and expense of the Registrant. The Registrant agreed to reimburse VGE for a pro-rata portion of any down payment regarding the Existing Policy.

 

Mutual Limited Release

 

In connection with the Recap Agreement, the parties executed a Mutual and Limited Release Agreement (“Mutual Release”) in which the parties, except for claims relating to certain excluded obligations (which by definition were not included within the meaning of the released claims), for and on behalf of itself and, as applicable, each of its shareholders, partners or members, as the case may be, hereby and forever released and discharges (each, a “Releasing Party”) each of the other Parties and each shareholder, officer, director, employee, Affiliate, successor and assign thereof (collectively, the “Released Parties”) from any and all claims. Certain obligations were excluded from this Mutual Release, including among other things, the Chang Note (which was subject to the covenant not to sue described above) and certain registration rights that Chang had with respect to shares of Registrant common stock; provided that shares sold under the exercise of certain demand registration rights were subject to certain “leak-out” obligations).

 

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Lock-Up Agreement

 

Also in connection with the Recap Agreement, SC, Chang, other parties affiliated with Chang and Dr. Kevin Schewe (“Schewe”), a member of the Registrant Board of Directors, agreed not to sell, contract to sell, pledge or otherwise dispose of their Registrant securities for a period of 180 days after the closing of the transactions described in the Recap Agreement.

 

License Agreement

 

VGE entered into a license agreement with its wholly-owned subsidiary, Guanzhou Inter-Pacific Arts Corp with respect to Giant King Grass effective as of September 30, 2012.

 

Effective of as September 30, 2012, the Registrant and VGE entered into a Supply, License and Commercialization Agreement (“License Agreement”) pursuant to which VGE, in turn, granted to the Registrant for the term of such agreement, a nontransferable, royalty-bearing exclusive license to commercialize Giant King Grass within the world other than China and Taiwan (such area that the Registrant could commercialize GKG is referred to as the “Territory”) and to use the GKG intellectual property and VGE tradename, including, without limitation, to reproduce and publicly display the VGE and GKG tradenames solely in connection with its license to commercialize Giant King Grass and as otherwise provided in such Agreement.

 

The Registrant agreed that it would not, during the term of the License Agreement and a three-year period thereafter, (i) manufacture, commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass (a “Competitive Product”), except that upon the prior written consent of VGE during the term of such agreement, for purposes of crop biodiversity; or (ii) solicit for such prohibited purposes any customer, supplier or other vendor or employee with which VIASPACE had a relationship during the term for the research, development, manufacture or commercialization of Giant King Grass or any Competitive Product.

 

The Registrant also agreed it would provide VGE with an executed copy thereof and agree to enforce a business protection agreement with each of its employees pursuant to which each such individual agrees to substantially the same restrictions and to the reasonable satisfaction of VGE, with VGE being a third party beneficiary thereof. The Registrant and each of Dr. Kukkonen and Mr. Muzi executed such business protection agreements.

 

The Registrant agreed to use commercially reasonable efforts to commercialize Giant King Grass throughout the Territory, which efforts would include, without limitation, providing appropriate incentives consistent with its normal and lawful business practices to sales representatives involved in the commercialization of Giant King Grass.

 

VGE agreed to provide the Registrant with Giant King Grass seedlings that will be filled at an agreed upon price as set forth in the License Agreement.

 

The Registrant agreed to pay VGE for and during the Term a royalty of eight percent (8%) on net sales (the “Running Royalty”) made in the Territory. VGE had certain audit and reporting disclosure rights of Registrant financial information with respect to this royalty.

 

VGE granted the Registrant an exclusive license that would last for two years. VGE could terminate the agreement after such period expired, provided that the License Agreement would be automatically renewed if certain renewal terms were satisfied.

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As a condition to the right to renew the first two-year term (“initial term”), for years three and four following the Effective Date (the “First Renewal Term”), the Registrant shall have achieved during the initial term the following milestones as a condition to any such renewal:

 

• One or more fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the Initial Term, pursuant to which the Registrant is to be paid the aggregate amount of at least $200,000 within that 24 consecutive monthly period following the signing (the “Initial Sales Milestone”); and

 

• Two or more, third party growing locations of at least 10 hectares in total shall have been obtained and planted during the Initial Term, which shall be subject to the reasonable satisfaction of VGE.

 

As a condition to the right to renew the First Renewal Term (for years five and six) of the License Agreement, the Registrant shall have achieved during the First Renewal Term the following milestones as a condition to any such renewal:

 

• A total of least three or more (including the above) fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the First Renewal Term, pursuant to which the Registrant is to be paid the aggregate amount of $400,000, with not less than $100,000 of the Initial Sales Milestone having been paid during the First Renewal Term and with the remaining unpaid balance of the Initial Sales Milestone being paid within six months of the Second Renewal Term (e.g., in the fifth year) and the Second Sales Milestone being paid in full within that 24 consecutive monthly period following the signing of any such third contract; and

 

• A total of at least three or more (including the two above) growing locations of at least 30 hectares in total shall have been obtained and planted during the Second Renewal Term, which shall be subject to the reasonable satisfaction of VGE.

 

As a condition to the right to renew the Second Renewal Term (for years seven and eight) of the License (the “Third Renewal Term”), the Registrant shall have achieved during the Second Renewal Term the following milestones as a condition to any such renewal:

 

• A total of least four or more (including the above) fully-executed third party sales contracts for the sale of Giant King Grass shall have been entered into, pursuant to which the Registrant is to be paid the aggregate amount of $1,000,000, with not less than $500,000 having been paid prior to renewal;

 

• A total of at least four or more (including the above) growing locations of at least 40 hectares in total shall have been obtained and planted, which shall be subject to the reasonable satisfaction of VGE.

 

As a condition to the right to renew after the Third Renewal Term (for years 9 and 10) of the License Agreement (the “Fourth Renewal Term”), the Registrant shall have achieved during the Third Renewal Term the following milestones as a condition to any such renewal:

 

• A total of least five or more (including the above) fully-executed third party sales contracts for the sale of Giant King Grass shall have been entered into, pursuant to which the Registrant is to be paid the aggregate amount of $1,500,000, with not less than $750,000 having been paid prior to renewal; and

  

• A total of at least five or more (including the above) growing locations of at least 50 hectares in total shall have been obtained and planted, which shall be subject to the reasonable satisfaction of VGE

 

If after the Fourth Renewal Term, provided the Registrant delivered a Renewal Notice to VGE at least three (3) months prior to the expiry of the then Renewal Term, the License Agreement would automatically renew on the same terms and conditions hereof for consecutive two (2) year periods thereafter without any further act on the part of either party (each, an “Evergreen Renewal Term”); provided, however, that in no event would the term of the License Agreement be renewed for the succeeding Evergreen Renewal Term if and to the extent either party delivered to the other written notice of its intent to not so renew this Agreement (the “Notice of Nonrenewal”) at least sixty (60) days prior to the end of any such Evergreen Renewal Term (as the case may be)(together, the Conditional Renewal Term and Evergreen Renewal Term shall be referred to as the “Renewal Terms”); provided, further, that in no event would either party have the right to deliver a Notice of Nonrenewal if and to the extent the Registrant’s net sales exceed Five Million Dollars ($5,000,000) during the first applicable Evergreen Renewal Term; Eight Million Dollars ($8,000,000) during the second applicable Evergreen Renewal Term and Ten Million Dollars ($10,000,000) during the third and subsequent Evergreen Renewal Terms, and to the extent any such Notice of Nonrenewal is delivered by VGE, the Commercial License shall convert to a nonexclusive license in those countries in which VIASPACE is engaged actively in the commercialization of GKG.

 

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Loan Agreement and Related Documents

 

Effective as of September 30, 2012, the Registrant and Schewe entered into a Loan Agreement pursuant to which Schewe agreed, subject to satisfaction of certain conditions, including among other things, Schewe’s satisfaction with the use proceeds of past loans, to provide loans of up to $1,000,000 as required by the Company for a five-year period. The loans would be evidenced by a Secured Convertible Note. The Note (as with all subsequent notes) accrued interest at 6% per annum, were secured by all assets of the Registrant pursuant to a Security Agreement (“Security Agreement”) and would be convertible into shares of Registrant common stock at a price equal to 80% of the average closing price for the 20 trading days prior to the issuance of the loan. Each note would mature on the second anniversary of the issuance date of such note.

Schewe made an initial loan to the Registrant of $50,000 on September 28, 2012 (“Initial Note”).

 

The descriptions of the Recap Agreement, the Mutual Release, the Lock-up Agreement, the License Agreement, the Loan Agreement, the Note and the Security Agreement are each qualified in its entirety by reference to such agreement attached hereto as Exhibits 10.1 through 10.7, respectively.

 

Item 2.01. Completion of Acquisition or Disposition of Assets

 

Effective as of September 30, 2012, pursuant to the terms of the Recap Agreement, the Registrant returned all of the capital stock it owned in VGE to VGE.

 

Item 3.02 Unregistered Sales of Equity Securities

 

Effective as of September 28, 2012, in connection with the Loan Agreement, the Registrant issued a secured convertible note to Dr. Schewe in the principal amount of $50,000. The note is convertible into shares of the Registrant common stock. The Registrant relied upon Section 4(2) of the Securities Act of 1933, as amended, for the offer and sale of its stock. It believed that Section 4(2) was available because the offer and sale was not a public offering of its securities and there was not general solicitation or general advertising involved in the offer or sale.

 

Item 5.01 Changes in Control of Registrant

 

Changs controlled a share of Series A Preferred Stock of the Registrant (“Preferred Share”), entitling it with voting control of 50.1% of the outstanding votes of the Registrant’s capital stock. Effective as of September 30, 2012, and pursuant to an Agreement to Grant Voting Rights and Transfer Preferred Share executed by Changs and Schewe, Changs granted Schewe an irrevocable proxy that permitted Schewe to vote the Preferred Share. This proxy lasts so long as the License remained exclusive to the Registrant. Upon the earlier of (i) the expiration of five years or (ii) the date when the Registrant reached a market capitalization of at least $50 million, the proxy would be cancelled as the Preferred Share would be transferred from Changs to Schewe.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit Number   Exhibit Title or Description
     
10.01   Recapitalization Agreement dated September 30, 2012 by and among the Registrant, VIASPACE Green Energy Inc. (“VGE”), Sung Chang, Changs LLC, Carl Kukkonen and Stephen Muzi.
     
10.02   Supply License and Commercialization Agreement dated September 30, 2012 by and among the Registrant and VGE
     
10.03   Loan Agreement dated September 30, 2012 by and between the Registrant and Dr. Kevin Schewe
     
10.04   Form of Secured Convertible Note;
     
10.05   Security Agreement dated September 30, 2012 by and between the Registrant and Dr. Kevin Schewe
     
10.06   Mutual Limited Release dated September 30, 2012 by and among the Registrant, VGE, Schewe, Kukkonen, Muzi, Chang and the other parties listed therein.
     
10.07   Lock-up Agreement dated September 30, 2012 by and among VIASPACE and the other parties listed therein.

  

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

VIASPACE INC.

(Registrant)

 

Date: October 05, 2012  
   
  By: /s/ Carl Kukkonen                       
           Chief Executive Officer

Exhibit 10.1

 

RECAPITALIZATION AGREEMENT

 

 

By and Among

 

 

VIASPACE INC., VIASPACE GREEN ENERGY INC.

AND CERTAIN OTHER PARTIES

 

 

Dated as of September 30, 2012

 

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RECAPITALIZATION AGREEMENT

 

THIS RECAPITALIZATION AGREEMENT (the “Agreement”) is made effective as of September 30, 2012 (the “Effective Date”), by and among VIASPACE Inc., a Nevada corporation (the “VIASPACE”), VIASPACE Green Energy Inc., a British Virgin Islands corporation (“VGE”), and certain other parties who are signatories to this Agreement (collectively, with VIASPACE and VGE, the “Signatories”). Except as otherwise provided in this Agreement, capitalized terms and phrases shall have the meaning ascribed thereto in Section 1 hereof.

 

BACKGROUND

 

On or about the 10th day of May 2010, VIASPACE issued to Sung Chang a long-term debt instrument in the principal amount of $5,331,025 (the “Original Secured Note”), the payment of which is secured by the Security Documents. Since its original issuance, the Original Secured Note was amended by the parties to extend the due date for payment of each respective installment by one year (together with such amendment, the “Secured Note”), with the first installment being due and payable thereafter on May 14, 2012 (the “First Installment”). As part of such amendment, the Secured Note was assigned by Sung Chang to Chang, LLC “(Chang”), a limited liability company of which Sung Chang is a member.

 

Although an initial payment of $200,000 was made, Eight Hundred Sixty Six Thousand Two Hundred and Five Dollars ($866,205.00) of the First Installment remains unpaid and is and continues to past due as of the date of this Agreement, along with the Accrued Interest. Neither VIASPACE nor any one of its various subsidiaries, including VGE or its two lower tier subsidiaries, has the financial wherewithal to satisfy the Secured Note as and to the extent due and owing. Given the insolvency of VIASPACE on a consolidated basis, the Parties have expressed a desire to cooperate in the recapitalization of VIASPACE and VGE upon the terms and conditions described in this Agreement and in accordance with Code Section 368(a)(1)(E).

 

SECTION I

DEFINITIONS

 

The following the terms and phrases shall have the meaning ascribed thereto in this Section:

 

Accrued Interest ” shall mean that amount of interest that has accrued, but remains unpaid on the Secured Note, which amount as of the Effective Date equals $626,402.37.

 

" Accredited Investor " has the meaning set forth in Regulation D under the Securities Act.

 

Agreement " means this Recapitalization Agreement, including all Schedules and Exhibits hereto, as this Recapitalization Agreement may be from time to time amended, modified or supplemented.

 

Cancelled VGE Shares” shall mean all of the VGE Shares issued to and owned by or in which rights are held by VIASPACE, including, without limitation, the 6,356,000 shares of VGE Common Stock represented by share certificates 1, 2, 72, 73, 74, 77, 79, 80, 81, and 82 and issued to VIASPACE and the 147,920 VGE Shares held by Glendale Securities, which together total 6,503,920 VGE Shares.

 

Chang ” shall have the meaning ascribed to such term in the first paragraph above, entitled “Background.”

 

 

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Chang Indemnified Parties ” shall mean Chang and each owner, manager, officer, director, employee, agent thereof, Sung Hsien Chang, Hsiu Fen Su, Chun Hao Chang and Jay Chang, Green Solutions Group Ltd., a British Virgin Islands company (“Green Solutions”), Sam Chen, JJ International, Inc. and such other parties to-be-named by Chang.

 

Closing Date " shall have the meaning set forth in Section 2 of this Agreement.

 

Code " means the Internal Revenue Code of 1986, as amended.

 

Commission " means the Securities and Exchange Commission of the United States of America or any other federal agency then administering the Securities Act.

 

Covenant Not to Sue ” shall have the meaning ascribed thereto in Section 4.3.2 of this Agreement.

 

Director ” shall mean any individual who has been elected to serve as director of the VIASPACE Board in accordance with the applicable Organizational Documents.

 

Entity Signatories ” shall mean each of the Signatories other than Individual Signatories.

 

Exchange Act " means the Securities Exchange Act of 1934 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same will then be in effect.

 

Exhibits " means the several exhibits referred to and identified in this Agreement.

 

Former Employees ” shall mean Carl Kukkonen and Stephen Muzi.

 

Governmental Authority ” means any federal or national, state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.

 

Guaranty Agreement ” shall mean that agreement pursuant to which each of VGE, IPA BVI and IPA China guaranteed the Secured Promissory Note.

 

Indemnified Signatory ” shall mean each of the Signatories who are entitled to be indemnified under Section 5.2 of this Agreement.

 

Indemnifying Signatory ” shall mean each Signatory who is obligated to indemnify the Indemnified Signatories under Section 5.2 of this Agreement.

 

Individual Signatories ” shall mean each of those Signatories who are individuals.

 

IPA BVI ” means Inter-Pacific Arts Corp., a British Virgin Islands international business company.

 

IPA China ” means Guangzhou Inter-Pacific Arts Corp., a Chinese wholly-owned foreign enterprise registered in Guangdong province.

 

Knowledge ” means, in the case of an individual, actual knowledge without any independent investigation or due diligence and, in the case of a Person other than an individual, the actual knowledge without any independent investigation of the members of such Person’s governing board and its officers as each such Person is defined in such Person’s Organizational Documents.

 

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Laws " means, with respect to any Person, any U.S. or non-U.S. federal, national, state, provincial, local, municipal, international, multinational or other law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.

 

Lien " means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.

 

Lock-up Agreement ” means that Agreement pursuant to which the Signatories have agreed not to sell, encumber, pledge or transfer shares of VIASPACE common stock for 180 days from the date of the Closing.

 

Order " means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Authority.

 

Organizational Documents ” means (a) the articles or certificate of incorporation and the bylaws or code of regulations of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) the articles or certificate of formation and operating agreement of a limited liability company; (e) any other document performing a similar function to the documents specified in clauses (a), (b), (c) and (d) adopted or filed in connection with the creation, formation or organization of a Person; and (f) any and all amendments to any of the foregoing.

 

Person " means all natural persons, corporations, business trusts, associations, companies partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivisions.

 

Proceeding " means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority.

 

Regulation S " means Regulation S under the Securities Act, as the same may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

 

Rule 144 " means Rule 144 under the Securities Act, as the same may be amended from time to time, or any successor statute.

 

Schedules " means the several schedules referred to and identified herein, setting forth certain disclosures, exceptions and other information, data and documents referred to at various places throughout this Agreement.

 

SEC Documents " has the meaning set forth in Section 3.2.9.

 

Secured Note ” shall have the meaning ascribed thereto in the first paragraph above, entitled “Background.”

 

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Securities Act " means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same will be in effect at the time.

 

Security Agreement ” shall mean that agreement pursuant to which each of VGE, IPA BVI and IPA China pledged as collateral its respective assets for the Secured Note.

 

Security Documents ” shall mean the Secured Note, Stock Pledge Agreements, Security Agreements and Guaranty Agreement.

 

Stock Pledge Agreement ” shall mean that agreement pursuant to which each of VIASPACE pledged the VGE Shares, VGE pledged its ownership interest in IPA BVI, and IPA BVI pledged its ownership interest in IPA China as collateral for the Secured Note.

 

Transaction Documents " means, collectively, all agreements, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement, including, without limitation, this Agreement, the Lock-up Agreement and the VSPC/Chang Mutual Limited Release.

 

U.S. " means the United States of America.

 

U.S. Person " has the meaning set forth in Regulation S under the Securities Act.

 

VGE Shares ” shall mean that number of shares of VGE Common Stock as shall equal Eight Million, Three Hundred Eighty Four Thousand, Three Hundred and Twenty (8,384,320), which shares shall be evidenced by share certificate issued by VGE.

 

VGE Common Stock ” shall mean those shares of common stock, $0.001 par value, authorized for issuance by VGE.

 

“VGE Parties” shall mean VGE, IPA BVI and IPA China, collectively.

 

“VIASPACE Board” shall mean the duly elected and constituted board of directors of VIASPACE and any Affiliate thereof.

 

“VIASPACE Common Stock " means the VIASPACE Inc., common stock, par value $0.001 per share.

 

" VSPC/Chang Mutual Limited Release " shall mean that certain agreement entitled “VSPC/Chang Mutual Limited Release,” which is to be fully executed and made effective by the parties thereto of even date herewith, a form of which is attached hereto and marked as Exhibit “A.”

 

SECTION II

RECAPITALIZATION

 

2.1 Deliverables at Closing . As of the Closing, each of the following transactions shall occur:

 

2.1.1         The Signatories thereto shall enter into and deliver the Lock Up Agreement, VSPC/Chang Mutual Release to each of the Released Parties (as such term is defined therein);

 

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2.1.2         Properly and fully executed UCC Termination Statements shall be delivered by Chang to VIASPACE to enable VIASPACE to thereafter cause the termination of the UCC’s filed in connection with the Secured Note and related Security Documents;

 

2.1.3         VIASPACE shall contribute, transfer, assign and convey to VGE all of its right title and interest in and to the Cancelled VGE Shares, by endorsing over and delivering a fully executed stock power to VGE in connection with Certificates #1, 2, 72, 73, 74, 77, 79, 80, 81, and 82 and the 147,920 VGE Shares held by Glendale Securities, which shares shall be accepted, received and canceled of record by VGE upon and coincident therewith;

 

2.1.4         VGE shall issue and deliver to Chang and Chang shall accept the VGE Shares;

 

2.1.5         VGE shall have paid one-half (or approximately $1,500) of the premium on the directors and officers insurance policy last due and owing from June 25, 2012 and the full amount of the down payment in the amount of $10,187.70 on the renewal of such directors and officers insurance policy (the “Down Payment”); provided , however , that upon and coincident with Closing, VIASPACE shall reimburse VGE for that pro-rata portion of the Down Payment attributable to the remaining annual period following Closing;

 

2.1.6         The delivery of a mutually agreed upon Press Release relating to the signing of the Transaction Documents;

 

2.1.7         All material consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by any or all Signatories, including, without limitation, the Entity Signatories, for the authorization, execution and delivery of this Agreement and the consummation by such Person of the transactions contemplated by this Agreement, shall have been obtained and made thereby, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a material adverse effect on such Person; and

 

2.1.8         Each Entity Signatory shall deliver (1) a Secretary's Certificate, dated the Closing Date, certifying (i) attached copies of such Person’s Organizational Documents, (ii) resolutions of its governing board in which are approved the Transaction Documents and the transactions contemplated hereby and thereby, and (iii) the incumbency of each member of such governing board and authorized officer thereof signing this Agreement and any other agreement or instrument contemplated hereby to which such Person is a party, and (2) a certificate, dated as of the Closing Date, executed by an officer thereof, certifying the satisfaction of the conditions specified therein.

 

2.2              The Closing . The closing (the "Closing") of the transactions contemplated under this Agreement and the other Transaction Documents will occur at the offices of McDaniel Law Group, PC in Atlanta, Georgia, commencing at noon local time on the Effective Date.

 

SECTION III

REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS

 

3.1              The Individual Signatories . As of the Effective Date, each of the Individual Signatories, individually and severally, and not jointly and severally, hereby represents and warrants to each other Signatory the following:

 

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3.1.1         Authority . Signatory has the right, power, authority and capacity to execute and deliver this Agreement and each of the Transaction Documents to which Signatory is a party, to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which Signatory is a party, and to perform Signatory's obligations under this Agreement and each of the Transaction Documents to which Signatory is a party. This Agreement has been, and each of the Transaction Documents to which Signatory is a party will be, duly and validly authorized and approved, executed and delivered by Signatory. Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties thereto other than Signatory, this Agreement is, and as of the Closing each of the Transaction Documents to which Signatory is a party will have been, duly authorized, executed and delivered by Signatory and constitute or will constitute the legal, valid and binding obligation of Signatory, enforceable against Signatory in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

3.1.2         No Conflict . Neither the execution or delivery by Signatory of this Agreement or any Transaction Document to which Signatory is a party, nor the consummation or performance by Signatory of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which Signatory is a party or by which the properties or assets of Signatory are bound; or (b) contravene, conflict with, or result in a violation of, any Law or Order to which Signatory, or any of the properties or assets of Signatory, may be subject.

 

3.1.3         Litigation . To the Knowledge thereof, there is no pending Proceeding against any other Signatory that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement and no such Proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such Proceeding other than that which could be asserted under any Transaction Document or Security Document.

 

3.1.4         No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against any other Signatory for any commission, fee or other compensation as a finder or broker, or in any similar capacity.

 

3.2              The Entity Signatories . As of the Effective Date, each of the Entity Signatories, individually and severally, and not jointly and severally, hereby represents and warrants to each other Signatory the following:

 

3.2.1         Organization and Qualification . Entity Signatory is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, except where the failure to be so organized, existing and in good standing, or to have such authority and power, governmental licenses, authorizations, consents or approvals would not have a material adverse effect. Entity Signatory is duly qualified, licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned, held or operated makes such qualification, licensing or domestication necessary, except where the failure to be so duly qualified, licensed or domesticated and in good standing would not have a material adverse effect.

 

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3.2.2         Organizational Documents . True, correct and complete copies of the Organizational Documents of such Entity Signatory have been made available to each other Signatory immediately prior to the execution of this Agreement, and no action has been taken to amend or repeal such Organizational Documents at any time during that one year period immediately preceding the Effective Date. Entity Signatory is not in violation or breach of any of the provisions of its Organizational Documents.

 

3.2.3         Authorization . Entity Signatory has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to enter into this Agreement and each of the Transaction Documents to which Entity Signatory is a party, to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which Entity Signatory is a party and to perform its obligations under this Agreement and each of the Transaction Documents to which Entity Signatory is a party. The execution, delivery and performance by Entity Signatory of this Agreement and each of the Transaction Documents to which Entity Signatory is a party have been duly authorized by all necessary corporate action and do not require from Entity Signatory Board or the stockholders of Entity Signatory any consent or approval that has not been validly and lawfully obtained. The execution, delivery and performance by Entity Signatory of this Agreement and each of the Transaction Documents to which Entity Signatory is a party requires no authorization, consent, approval, license, exemption of or filing or registration with any Governmental Authority or other Person other than such customary filings with the Commission for transactions of the type contemplated by this Agreement, if required.

 

3.2.4         No Violation . Neither the execution or delivery by Entity Signatory of this Agreement or any Transaction Document to which Entity Signatory is a party, nor the consummation or performance by Entity Signatory of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the Organizational Documents of Entity Signatory; (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, or result in the imposition or creation of any Lien under, any agreement or instrument to which Entity Signatory is a party or by which the properties or assets of Entity Signatory are bound; (c) contravene, conflict with, or result in a violation of, any Law or Order to which Entity Signatory, or any of the properties or assets owned or used by Entity Signatory may be subject; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations, approvals, franchises or other rights held by Entity Signatory or that otherwise relate to the business of, or any of the properties or assets owned or used by, Entity Signatory, except, in the case of clause (b), (c), or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a material adverse effect.

 

3.2.5         Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by all other Signatories who or which are parties thereto other than Entity Signatory, this Agreement has been, and as of the Closing each of the Transaction Documents to which Entity Signatory is a party will be, duly authorized, executed and delivered by Entity Signatory and constitutes or will constitute, as the case may be, the legal, valid and binding obligations of Entity Signatory, enforceable against Entity Signatory in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

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3.2.6         Compliance with Laws . Except as would not have a material adverse effect, the business and operations of Entity Signatory has been and are being conducted in accordance with all applicable Laws and Orders. Entity Signatory has not received notice of any violation (or any Proceeding involving an allegation of any violation) of any applicable Law or Order by or affecting Entity Signatory or, to Entity Signatory’s Knowledge, no Proceeding involving an allegation of violation of any applicable Law or Order is threatened or contemplated. Entity Signatory is not subject to any obligation or restriction of any kind or character, nor is there, to the knowledge of Entity Signatory, any event or circumstance relating to Entity Signatory that materially and adversely affects in any way its business, properties, assets or prospects or that prohibits Entity Signatory from entering into the Transaction Documents or would prevent or make burdensome its performance of or compliance with all or any part of the Transaction Documents or the consummation of the transactions contemplated hereby or thereby.

 

3.2.7         Certain Proceedings . There is no pending Proceeding that has been commenced against Entity Signatory and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. To the knowledge of Entity Signatory, no such Proceeding has been threatened.

 

3.2.8         No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against Entity Signatory for any commission, fee or other compensation as a finder or broker, or in any similar capacity.

 

3.3              VIASPACE . As of the Effective Date, VIASPACE hereby represents and warrants to VGE and the Chang Indemnified Parties as follows: (a) VIASPACE owns of record and beneficially, and has valid and indefeasible title to and the right to transfer to VGE the Cancelled VGE Shares, free and clear of any and all Liens, other than the Liens created under the Security Documents; (b) upon and coincident therewith, the Cancelled VGE Shares are and shall be free and clear of any and all Liens, other than the Liens created under the Security Documents; (c) there are no options, rights, voting trusts, stockholder agreements or any other contracts or understandings to which VIASPACE is a party or by which the Cancelled VGE Shares are bound with respect to the issuance, sale, transfer, voting or registration of the Cancelled VGE Shares, other than the Liens created under the Security Documents; and (e) to VIASPACE’s Knowledge, there are no options, rights, voting trusts, stockholder agreements or any other contracts or understandings to which VGE is a party or by which the VGE Shares are bound with respect to the issuance, sale, transfer, voting or registration of such equity interests.

 

3.4              VIASPACE and Former Employees . As of the Effective Date, VIASPACE and each of the Former Employees hereby represent and warrant to VGE that prior to the Effective Date, VIASPACE and each of the Former Employees have (a) delivered to VGE any and all books, records and other information (including, without limitation, all hard and electronic copies thereof) of, about or otherwise relating to VGE and its operations and each subsidiary thereof, including, without limitation, any and all such information relating to Giant King Grass (“GKG”); and (b) disclosed and assigned, transferred and conveyed pursuant to a fully executed assignment and assumption agreement to VGE all right, title and interest in any and all intellectual property rights relating to GKG or any derivative thereof and the manufacture, growing or production thereof or other process relating thereto in which or to which VIASPACE or any such Person may have acquired rights, including, without limitation, any and all rights in licenses, registrations or patents (and any applications thereof) that may have been obtained, filed or otherwise secured in the name of VIASPACE.

 

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3.5              VGE . As of the Effective Date, VGE hereby represents and warrants to Chang that after the Closing and issuance thereof, the VGE Shares shall equal not less than eighty percent (80%) of the total combined voting power of all classes of VGE capital stock entitled to vote and at least 80 percent of the total number of shares of all other classes of VGE stock, as determined on a fully diluted basis immediately following the Closing.

 

3.6              Chang . As of the Effective Date, Chang hereby represents and warrants to VGE as follows:

 

3.6.1         Restricted Securities . Chang is acquiring the VGE Shares for Chang’s own account (and not for the account of others) for investment and not with a view to the distribution thereof. Chang acknowledges that such shares will not be registered pursuant to the Securities Act or any applicable state securities laws, such shares will be characterized as “restricted securities” under federal securities laws, and that under such laws and applicable regulations such shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom. In this regard, Chang is familiar with Rule 144 promulgated under the Securities Act ( which can be found at http://www.sec.gov/investor/pubs/rule144.htm ) , as currently in effect, and understands the resale limitations imposed thereby and by the Securities Act; and Chang agrees not to sell or otherwise dispose of such shares without such registration or an exemption therefrom.

 

3.6.2         Accredited Investor; Non-U.S. Person . Chang is an “Accredited Investor” as that term is defined in Rule 501 of Regulation D of the Securities Act or is not a “U.S. Person” as such term is defined by Rule 902 of Regulation S of the Securities Act. Chang is able to bear the economic risk of acquiring VGE Shares pursuant to the terms of this Agreement, including a complete loss of investment in such shares.

 

SECTION IV

COVENANTS

 

4.1              Character of the Exchange Transaction .  Chang hereby exchanges all of the rights under the Secured Note and Security Agreement not otherwise reserved under this Agreement (the “Exchanged Rights”) for the VGE Shares and VIASPACE’s contribution of the Cancelled VGE Shares, the VSPC/Chang Mutual Limited Release; and VGE hereby issues to Chang in exchange for the Exchanged Rights, the VGE Shares and accepts and cancels of record the VIASPACE Cancelled VGE Shares (together, the “Exchange”). Each of the Signatories to this Agreement hereby agree to treat the Exchange as a tax-free recapitalization of VGE and VIASPACE within the meaning of Section 368(a)(1)(E) of the Code. For purposes of this Agreement, each of the Signatories hereby agrees that VIASPACE on a consolidated basis (which includes, without limitation, each of the VGE Parties immediately prior to the Effective Date) is insolvent. In no event shall any Signatory to this Agreement make any filings with any Governmental Authority that is inconsistent with the agreements set forth in this Section 4.1.

 

4.2              Continued Use of “VIASPACE” Tradename . At its sole cost and expense, either VIASPACE or VGE (or both) may elect to change its name as of and coincident with or at any time following the Closing; provided , however , that in the case of VIASPACE, in no event shall any such new name contain or reflect any reference to GKG or any similar reference thereto.

 

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4.3              Covenants With Respect to Chang.

 

4.3.1      Right of First Offer . Chang is hereby granted the irrevocable and exclusive first option (the “First Option”) to purchase all or any part of its Pro Rata Portion (as defined below) of any New Securities (as defined below) that VIASPACE may propose to issue and sell; subject , however , to any such offer and sale being made in compliance with applicable securities laws (the “Right of First Offer”).

 

(a)               Notices With Respect to Proposed Issuance of New Securities. In the event VIASPACE proposes to undertake an issuance and sale of New Securities, it shall give Chang at least ten (10) days prior written Notice (the “Offer Notice”) of any such intention, describing in detail the type of New Securities, and the price and terms upon which VIASPACE proposes to issue and sell such New Securities. Chang shall have ten (10) consecutive calendar days from the date of delivery of the Offer Notice within which to return to VIASPACE its written agreement to purchase up to its Pro Rata Portion of New Securities under the price, terms and conditions specified in the Offer Notice and Chang must state therein the quantity of New Securities to be purchased.

 

(b)              VIASPACE’s Right to Complete Proposed Issuance of New Securities to the Extent Rights of First Offer are Not Exercised. In the event Chang fails to exercise the Right of First Offer with respect to Chang’s Pro Rata Portion of any New Securities within ten (10) calendar days from delivery of the Offer Notice, Chang’s Right of First Offer shall terminate. VIASPACE shall thereafter have the right to issue or enter into an agreement to issue the New Securities not elected to be purchased by Chang. The price and terms with respect to this Agreement shall be no more favorable than those specified in the Offer Notice.

 

(c)               Definitions. For purposes of this Section, the following terms and phrases shall have the meanings ascribed thereto:

(i) “New Securities” shall mean any (1) VIASPACE Common Stock; (2) options, warrants or other rights or agreements to purchase any such Common Stock (the “Stock Rights”); or (3) securities of any type whatsoever that are, or may become, convertible into VIASPACE Common Stock (the “Convertible Securities”); provided , however , that the term “New Securities” does not include:

 

(1) VIASPACE Common Stock or other securities issued pursuant to any Stock Rights or Convertible Securities, including, without limitation, convertible notes, warrants and options, (A) outstanding as of the Effective Date; or (B) issued pursuant to any agreements or other rights entered into or granted after the Effective Date, provided that the Right of First Offer applied to any such agreements or other rights;

 

(2) VIASPACE Common Stock or other securities issued pursuant to the acquisition of another corporation or other entity by VIASPACE;

 

(3) VIASPACE Common Stock, Stock Rights or Convertible Securities issued to employees, officers, directors and/or consultants as an incentive or compensation for services rendered or to be rendered for and on behalf of VIASPACE or any Affiliate thereof pursuant to any incentive plan, agreement or arrangement approved by the VIASPACE Board;

 

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(4) VIASPACE Common Stock, Stock Rights or Convertible Securities issued or issuable (1) in a firm commitment, underwritten public offering pursuant to an effective registration statement under the Securities Act, or (2) upon exercise of warrants or rights granted to parties in connection with such a public offering;

 

(5) VIASPACE Common Stock or other securities issued pursuant to any Stock Rights or Convertible Securities issued to Kevin Schewe or his designees pursuant to a loan agreement entered into on or prior to the date of this Agreement; or

 

(6) VIASPACE Common Stock, Stock Rights or Convertible Securities issued pursuant to any distribution, stock split, combination, reclassification, recapitalization or similar transaction by VIASPACE of any of its securities.

 

(ii) “ Pro Rata Portion ” shall mean that number of shares of New Securities as is equal to the product of the total number of New Securities proposed to be issued multiplied by a fraction, (1) the numerator of which is the sum of (A) the number of shares of VIASPACE Common Stock held by Chang the date of the Offer Notice (as defined below) and (B) the number of shares of VIASPACE Common Stock issued or issuable to Chang upon the exercise of any Stock Rights or conversion of Convertible Securities held by Chang on the date of the Offer Notice, and (2) the denominator of which is the number of Stock held by all holders of VIASPACE Common Stock on a fully diluted basis on the date of the Offer Notice.

 

(e) Waiver . The observance of any term relating to the Right of First Offer may be amended, waived or removed either generally or in a particular instance (and either retroactively or prospectively) only with the consent of Chang, which consent may be withheld, delayed, denied or conditioned in Chang’s sole discretion, and VIASPACE.

 

4.3.2         Covenant Not to Sue . Following the Effective Date, Chang and its members, officers and managers, agrees they shall not institute any action for suit-at-law or action against all or any of VIASPACE or its shareholders, officers, directors, employees, Affiliates, successors and assigns thereof, nor institute, prosecute, or in any way aid in the institution or prosecution of any claim for damages, costs, loss of services, expenses, or compensation for or on account of any damage, loss or injury, either to person or property or both, whether developed or undeveloped, resulting to or to result, known or unknown, past, present, or future, arising out of (the “Claims”) the Security Documents (the “Covenant Not to Sue”), provided , however , that such Security Documents may be used in any event as a defense, setoff, recoupment or other counterclaim to any such Claim or other action brought against any one of the Chang Indemnified Parties; except , however , that neither the Note nor such other Security Documents may be used by Chang as the basis on which to recover the Claims from VIASPACE or either one of the Former Employees following the Closing.

 

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4.3.3         Board Observation Rights . For so long as the Chang Indemnified Parties own together at least 200 million shares of VIASPACE Common Stock, VIASPACE hereby grants to Chang the right to appoint two individuals to serve as non-voting observers (each, a “Non-Voting Observer”) to the VIASPACE Board and any committee thereof.  In the event of a vacancy caused by the resignation or other cessation of service of any Non-Voting Observer, Chang shall have the right to appoint a new Non-Voting Observer in substitution thereof.  Any Non-Voting Observer shall be permitted to attend meetings of each of the VIASPACE Board and each such committee in person or telephonically, at the option of the Non-Voting Observer.  Each Non-Voting Observer shall be entitled to be present at all meetings of the VIASPACE Board and each committee thereof and such observer shall be notified of any meeting of the VIASPACE Board or committee, including such meeting’s time and place, in the same manner as Directors, and shall have the same access to information (including any copies of all materials disseminated to the Directors or members of the committees thereof), including, without limitation, with respect to the business and operations of VIASPACE, and at the same time as the Directors, and shall be entitled to participate in discussions and consult with, and make proposals and furnish advice to, the Directors or committee without voting. The VIASPACE Board hold at least one meeting (each a “ Quarterly Meeting ”) on a date during each fiscal quarter.  Within a reasonable time after each Quarterly Meeting, VIASPACE shall cause minutes of such Quarterly Meeting to be delivered to the Directors and each Non-Voting Observer. VIASPACE will notify each Non-Voting Observer of each meeting of the VIASPACE Board reasonably in advance of, and in any event, at least ten (10) business days prior to, any such meeting, unless such meeting is convened to address an emergency matter requiring immediate attention of the VIASPACE Board, in which case the notice of such meeting may be given within the time period provided for such notices in the governing Organizational Documents (but in no event less than 48 hours prior to such meeting). The Non-Voting Observer will agree to comply with VIASPACE’s confidentiality and insider trading policy applicable to all directors. Notwithstanding the foregoing, the Non-Voting Observer will be excluded from meetings, and the right of the Non-Voting Observer to receive materials will be restricted, (x) to the extent that the Non-Voting Observer’s presence or receipt of information would affect the attorney client privilege with its outside counsel and (y) to enable the directors to hold confidential communications concerning VIASPACE’s interactions with Chang, VGE or any of its Affiliates, all of which communications will be segregated and held separately from other matters brought before the Board.

 

4.4              Restrictive Legends . Each certificate representing VGE Shares, and any other securities issued in respect of shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event (except as otherwise permitted by the provisions of this Section ), shall be stamped or otherwise imprinted with the following legend, together with any other legends required by applicable securities laws:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

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THESE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973 AND WILL BE ISSUED AND SOLD IN RELIANCE ON THE EXEMPTIONS PROVIDED IN SECTIONS 10-5-9(13) AND 10-5-9(16) OF SUCH ACT. THE SECURITIES OFFERED HEREBY CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 

4.5              Rule 144 Reporting.

 

4.5.1 With a view to making available to VGE's stockholders the benefit of certain rules and regulations of the Commission that may permit the sale of VGE Common Stock to the public without registration from and after the Closing Date, VGE agrees to:
     

(a)               Make and keep public information available, as those terms are understood and defined in Rule 144; and

 

(b)              File with the Commission, in a timely manner, all reports and other documents required of VIASPACE under the Exchange Act.

 

4.5.2 With a view to making available to VIASPACE’s stockholders the benefit of certain rules and regulations of the Commission that may permit the sale of VIASPACE Common Stock to the public without registration from and after the Closing Date, VIASPACE agrees to:
     

(a)               Make and keep public information available, as those terms are understood and defined in Rule 144; and

 

(b)              File with the Commission, in a timely manner, all reports and other documents required of VIASPACE under the Exchange Act.

 

SECTION V

INDEMNIFICATION; REMEDIES

 

5.1              Survival . All representations, warranties, covenants, and obligations in this Agreement shall survive the Closing and expire thereafter upon and coincident with the period of limitations applicable thereto (the "Survival Period"). The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations.

 

5.2              Indemnification . From and after the Closing until the expiration of the Survival Period, each Signatory shall indemnify and hold harmless each of the other Signatories from and against any damages arising, directly or indirectly, from or in connection with:

 

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5.2.1         Any breach of any representation or warranty made by such Indemnifying Signatory in this Agreement or in any certificate delivered by such Person pursuant to this Agreement; or

 

5.2.2         Any breach by the Indemnifying Signatory of any covenant or obligation of such Person in this Agreement required to be performed thereby on or prior to the Closing Date.

 

5.3              Special Indemnity and Covenant Not to Sue .

 

5.3.1         Cross Entity Indemnification . Should neither VIASPACE nor VGE elect to forego changing its name such that the word “VIASPACE” or any derivative thereof is a part of such name, then each of VIASPACE and VGE (each an “Indemnifying Entity”) shall indemnify the other (the “Indemnified Entity”) for any claims brought against such Indemnified Entity solely on account of confusion created by the Indemnified Entity’s continued use of such word in its name and not on account of the Indemnified Entity’s involvement in or with the underlying claims being asserted.

 

5.3.2         Chang Indemnification . Notwithstanding any provision in this Agreement to the contrary, VIASPACE and VGE, jointly and severally, shall indemnify, defend and hold harmless each of the Chang Indemnified Parties from and against any and all losses, liabilities, claims, obligations, damages, costs, expenses (including, without limitation, reasonable attorneys’ fees, disbursements and court costs), for, resulting from, relating to or arising in connection with any such Person having served in the capacity of director, officer, employee, note-holder or equity holder of VIASPACE or any Person who or which is or was an Affiliate thereof arising prior to or in connection with the Recapitalization, except , however , that with respect to Sung Chang as an Indemnified Party, VIASPACE and each such Affiliate thereof shall indemnify Sung Chang in his former capacity as a member of the board of directors, employee and officer thereof to the fullest extent permitted by law and otherwise under the Organizational Documents for VIASPACE and each such Affiliate thereof and, as a condition of the Covenant Not to Sue, VIASPACE shall maintain in full force and effect (with VGE maintaining thereafter its own separate such policy) either (a) that certain directors and officers policy of insurance as was in effect as of the date on which Sung Chang resigned from the VIASPACE Board (the “Existing Policy”) or (b) such other policy as shall extend no less coverage to Sung Chang as that which is extended to any other Director, but in no event less than that which was extended to Sung Chang under the Existing Policy, either of which being at the sole cost and expense of VIASPACE; provided , however , that in no event shall such agreement include indemnification for any liability incurred by any Indemnified Party for such Person’s taxes incurred in connection with the Recapitalization.

 

5.4              Breach by Parties . Nothing in this Section 5 shall limit any Signatories' right to pursue any appropriate equitable remedy against another Signatory (the “Defaulting Party”) in respect to any damages arising, directly or indirectly, from or in connection with: (a) any breach by such Defaulting Party of any representation or warranty made by such Defaulting Party in this Agreement or in any certificate delivered by such Defaulting Party pursuant to this Agreement or (b) any breach by such Defaulting Party of its covenants or obligations in this Agreement.

 

 

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5.5              Indemnification Procedure . If any third party shall notify any Indemnified Signatory with respect to any matter (a "Third-Party Claim") which may give rise to a claim for indemnification against any an Indemnifying Signatory under this Section 5, then the Indemnified Signatory shall promptly notify each Indemnifying Signatory thereof in writing. Any Indemnifying Signatory will have the right to assume and thereafter conduct the defense of the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Signatory; provided, however, that the Indemnifying Signatory will not consent to the entry of any judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Signatory (not to be unreasonably withheld) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Signatory. Unless and until an Indemnifying Signatory assumes the defense of the Third-Party Claim as provided in this Section above, however, the Indemnified Signatory may defend against the Third-Party Claim in any manner it may reasonably deem appropriate. In no event will the Indemnified Signatory consent to the entry of any judgment on or enter into any settlement with respect to the Third-Party Claim without the prior written consent of each of the Indemnifying Parties (not to be unreasonably withheld).

 

SECTION VI

GENERAL PROVISIONS

 

6.1              Expenses . Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives, counsel, and accountants. Notwithstanding the foregoing, VIASPACE shall pay for the fees and expenses, including attorneys’ fees, not to exceed $40,000 charged by McDaniel Law Group and Nelson Mullins incurred by Chang or VGE or any other Affiliate thereof in connection with the negotiation and preparation of Transaction Documents and the License Term Sheet and the agreements and other documents relating contemplated therein (the “Transaction Costs”), which Transaction Costs shall be paid by VIASPACE in accordance with the terms and conditions of that certain license agreement entered into by and between VGE and VIASPACE of even date hereof.

 

6.2              Public Announcements . Subject to Chang’s prior review and approval, VIASPACE and VGE may, but no later than three business days following the effective date of this Agreement, issue a mutually-agreed press release, but only if issued jointly, disclosing the transactions contemplated hereby. Chang, VIASPACE and VGE shall consult with each other in issuing any other press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or stock market or trading facility with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which case the disclosing party shall provide the other party with prior notice of such public statement, filing or other communication and shall incorporate into such public statement, filing or other communication the reasonable comments of the other party.

 

6.3              Notices . All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by written notice to the other parties):

 

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If to VIASPACE :

 

VIASPACE Inc.

382 N. Lemon Ave., Suite 364

Walnut, CA 91789

Telephone: 626-768-3360

Facsimile: 626-578-9063

 

With a copy to:

 

LKP Global Law LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Telephone: 424-239-1890

Facsimile: 424-239-1882

Attn: Ryan Hong

 

If to the Chang Indemnified Parties :

 

Mr. Sung Chang

131 Bells Ferry Lane

Marietta, Georgia 30066

With a copy to:

 

McDaniel Law Group, PC

PO Box 681235

Marietta, Georgia 30068-0021

Attn: Frank McDaniel, Esq.

 

6.4              Jurisdiction and Venue . As between the Parties, the transactions contemplated in the Transaction Documents shall be governed as to validity, interpretation, construction, effect, and in all other respects by the laws of the State of Georgia, without regard to the conflicts of laws principals thereof. Each of the Signatories irrevocably submits to the exclusive jurisdiction of the courts of the State of Georgia located in the County of Cobb and the United States District Court in and for the Northern District of Georgia for the purpose of any suit, action, proceeding or judgment relating to or arising out of the Transaction Documents and the transactions contemplated hereby and thereby. Each of the Signatories hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each Signatory hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE SIGNATORIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

6.5              Further Assurances . The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

 

17
 

 

6.6              Waiver . The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

6.7              Entire Agreement and Modification . This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party against whom the enforcement of such amendment is sought.

 

6.8              Assignments, Successors, and No Third-Party Rights . No party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns.

 

6.9              Severability . If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

6.10           Section Headings, Construction . The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms.

 

6.11           Governing Law . This Agreement will be governed by the laws of the State of Georgia without regard to conflicts of laws principles.

 

6.12           Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

 

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IN WITNESS WHEREOF , the Signatories who have affixed such Person’s signature below has agreed to become a party to, be bound by the terms of and delivered this Agreement as of the date first written above.



SIGNATORIES

 

VIASPACE:

VIASPACE Inc.

Signed: /s/ Carl Kukkonen          

Printed Name: Carl Kukkonen
Title: CEO

 

Signed: /s/ Sung Chang                
Name: Sung Hsien Chang

     

VGE

VIASPACE Green Energy, Inc.

Signed: /s/ Sam Chen              

Printed Name: Sam Chen
Title: Authorized Director

 

/s/ Carl Kukkonen                  

Carl Kukkonen

     

CHANG

Chang, LLC

Signed: /s/ Sung Chang          

Printed Name: Sung Chang
Title: Authorized Member

 

/s/ Steve Muzi                       

Steve Muzi

     

 

 

19

Exhibit 10.2

 

SUPPLY AND COMMERCIALIZATION AGREEMENT

BY AND BETWEEN

VIASPACE GREEN ENERGY INC.
AND

VIASPACE INC.

 

 

 

 

 

September 30, 2012

 

 

1
 

 

SUPPLY, LICENSE AND COMMERCIALIZATION

AGREEMENT

 

THIS SUPPLY, LICENSE AND COMMERCIALIZATION AGREEMENT (the “Agreement”) is entered into as of the 30th day of September 2012 (the “Effective Date”) by and between VIASPACE Green Energy, Inc., a British Virgin Islands company (“VGE”) and VIASPACE Inc., a corporation organized under the laws of the State of Nevada, with offices located within the State of California (“VIASPACE”). VGE and VIASPACE are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” Except as otherwise defined within the text, capitalized terms and phrases shall have the meaning ascribed thereto in Article 1 of this Agreement.

 

RECITALS:

 

VGE controls certain know-how and other rights related to Giant King Grass. Through its stock ownership in VGE through the Effective Date, VIASPACE has garnered considerable knowledge and experience in promoting and marketing Giant King Grass. VGE and VIASPACE believe that a license and supply arrangement regarding Giant King Grass would be desirable and beneficial to both Parties. On and subject to the terms and conditions set forth herein, VGE and VIASPACE therefore desire to provide for the supply and commercialization of Giant King Grass as described herein.

 

NOW, THEREFORE , in consideration of the covenants and conditions set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby enter into this Agreement:

 

ARTICLE 1

DEFINITIONS

 

For the purpose of this Agreement, the following expressions shall have the meanings ascribed thereto as follows, unless the context expressly requires otherwise:

 

Action ” shall mean any claim, action, cause of action or suit (whether in contract or tort or otherwise), litigation (whether at law or in equity, whether civil or criminal), assessment, arbitration, investigation, hearing, charge, complaint, or other legal proceeding.

 

“Affiliate ” shall mean any entity that controls, is controlled by, or is under common control with a Party. Without limiting the generality of the foregoing, a Person shall be regarded as in control of another Person if it, directly or indirectly, owns, controls or otherwise possesses: (a) in excess of fifty percent (50%) of the voting stock or other applicable ownership interest thereof of the other Person or (b) the power to direct or cause the direction of the management and policies of such other Person.

 

Business Day ” shall mean a day on which banking institutions in both Atlanta, Georgia and Los Angeles, California are open for business.

 

Commercial License ” shall have the meaning ascribed thereto in Section 2.1(a) of this Agreement.

 

Commercialization ” or “ Commercialize ” shall mean to import, grow, sell, market and distribute a product, plant or material.

 

Competitive Product ” shall have the meaning ascribed thereto in Section 2.2 of this Agreement.

 

2
 

 

Confidential Information ” shall mean any and all technical, financial, business and other information, including, without limitation, Trade Secrets, that is (a) of tangible or intangible value to the Disclosing Party or of any Affiliate thereof or any Business Contact of Disclosing Party or any such Affiliate, or (b) otherwise clearly marked by such Party or Affiliate thereof as confidential at the time of disclosure or, if disclosed orally or visually, is stated to be confidential and is subsequently documented in writing or other tangible form with such conspicuous designation that is delivered to the Receiving Party within a reasonable period of time following any such disclosure, which information shall be deemed to include, without limitation, financing structures and proposals, proprietary technology, concepts, designs, ideas, inventions, research, development, compounds, biological materials, patent applications, know-how and other intellectual property rights; the work product; business contacts and other customers and suppliers and agreements or understanding with any of them; pricing information and strategy; business practices, procedures, processes, methodologies, plans, techniques and strategies; standard operating procedures; product specifications (including, without limitation, the genetic or biologic composition or makeup thereof) and testing results, financial information (such as tax returns, financial statements, accounting records, audit letters, work papers, expert opinions); counsel and other advisory opinions; and all other information relating thereto, along with this Agreement and any term or condition hereof, and any and all such information of any Third Party that is provided to us under restrictions on either disclosure or use (or both). Notwithstanding the foregoing, Confidential Information shall not include information that (a) is known to the Receiving Party at the time of the disclosure, as evidenced by its written records; (b) is disclosed to the Receiving Party by a Third Party lawfully in possession of such information and not under an obligation of nondisclosure; (c) is or becomes patented, published or otherwise part of the public domain through no fault of the Receiving Party; (d) is developed by or for the Receiving Party independently of Confidential Information disclosed hereunder as evidenced by Receiving Party’s written records or other competent evidence; or (e) is required by law to be disclosed by Receiving Party, provided that the Receiving Party gives the Disclosing Party hereto prompt notice of such legal requirement such that such Disclosing Party shall have the opportunity to apply for confidential treatment of such Confidential Information. For purposes of this Agreement, the following information shall be deemed to constitute the Confidential Information of VGE: any and all proprietary technology, concepts, designs, ideas, inventions, research, development, compounds, biological materials, patent applications, know-how and other intellectual property rights; work product; procedures, processes, methodologies, plans, techniques and strategies; standard operating procedures; product specifications (including, without limitation, the genetic or biologic composition or makeup thereof) and testing results for, relating to or arising out of the VGE IP, including, without limitation, GKG and GKG IP.

 

Contract Year ” shall mean a period consisting of twelve (12) consecutive calendar months commencing on the Effective Date or anniversary thereof of each year.

 

Control ” or “ Controlled ” shall mean, shall mean, with respect to any intellectual property right or other intangible property, the ability of a Party or its Affiliates to grant to any other Person a license or sublicense to use such rights without violating the rights of any Third Party.

 

Deliver ” or “ Delivery ” shall mean delivery to VIASPACE’s designated carrier in the People’s Republic of China of a product described in a VIASPACE Purchase Order issued to VGE pursuant to this Agreement.

 

Designated Representatives ” shall mean those officers, directors, employees and agents of Receiving Party, who are provided Confidential Information and other proprietary information on a “need to know” basis only and are directed and required in writing by such Receiving Party to both maintain the disclosed information in strict confidence and exclusively use such information solely in connection with performing such Party’s obligations under this Agreement.

 

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Disclosing Party ” shall mean that Party that is making a disclosure of its Confidential Information or Trade Secrets (or both) to the Receiving Party.

 

Dollar ” and the symbol “$” mean lawful money of the United States of America.

 

Exclusive Period ” shall mean that period of time as measured from the Effective Date through to the date on which (a) the Term of this Agreement shall expire, (b) this Agreement is converted to a non-exclusive license, if ever; or (c) VIASPACE commences any research, development or commercialization of a grass similar or otherwise having competitive properties to Giant King Grass (or attempting such actions) or otherwise engages in any other act or omission in breach of this Agreement, whichever date or event is first to occur.

 

Final Product Transfer Price ” or “ FPTP ” shall mean the actual cost of Manufacturing, along with the fully allocated overhead associated therewith, for Giant King Grass Delivered to VIASPACE under this Agreement, which cost shall be determined in accordance with GAAP and fixed for the first Contract Year and then increased thereafter by 15% for each succeeding Contract Year or such greater costs and expenses to the extent the same are substantiated to VIASPACE. For example, as of the Effective Date, the FPTP for 45,000 GKG nodes is $1,800.

 

First Commercial Launch ” shall mean the date on which occurs the first commercial sale of the Product or Process in each country within the VIASPACE Territory.

 

GAAP ” shall mean United States generally accepted accounting principles applied on a consistent basis. Unless otherwise defined or stated, financial terms shall be calculated by the accrual method under GAAP.

 

GKG IP ” shall mean the GKG Tradename and the customer list relating to Giant King Grass and the contact information identified therein.

 

GKG Tradename ” shall mean the name “Giant King Grass,” “GKG” or any other derivative thereof.

 

Giant King Grass ” or “GKG” shall mean the high yield, non-genetically modified, natural hybrid grass that was received and licensed by VGE from IPA China under the VGE License.

 

Improvements ” shall mean any and all procedures, processes, developments, modifications, derivatives, uses or other inventions or discoveries on or relating to Giant King Grass.

 

Intellectual Property Rights ” or “ IP ” shall mean patents, patent applications, trademarks, trademark applications, trademark registrations, tradenames, service marks, copyright, copyright applications and registrations, Trade Secret and all other such intellectual property rights.

 

IPA China ” shall mean Guangzhou Inter-Pacific Arts Corp., a Chinese wholly-owned foreign enterprise registered in Guangdong province.

 

Legal Fees ” shall mean the fees and expenses (including attorneys’ fees) not to exceed $40,000 incurred by Sung Chang or VGE or any other Affiliate thereof (as determined after the Effective Date) in connection with the negotiation and preparation of this Agreement and all documents relating thereto and the recapitalization of VGE and any and all documents relating thereto.

 

4
 

 

Manufacturing ” or “ Manufacture ” shall mean activities directed to planting, growing, harvesting, producing, manufacturing, processing, filling, finishing, packaging, storage and quality assurance testing of a product, plant or material, whether in bulk or finished goods or otherwise.

 

Net Sales ” means, for any period, the aggregate gross amounts invoiced for sales of a Product or any Improvement thereon or Process relating thereto in the VIASPACE Territory (“Gross Sales”), less good faith estimates of the following deductions to the extent specifically relating to sales and normal and customary for a product of the nature of Giant King Grass and evidenced by independent substantiation, which shall be adjusted to actual on a periodic basis (no less frequently than annually):

 

(a)               Credits or allowances actually granted for damaged Giant King Grass, returns or rejections of Giant King Grass, chargebacks, price adjustments and billing errors taken within 12 months of the initial sale to which they relate, each to the extent consistent with a Party’s usual course of dealing for its products other than Giant King Grass;

 

(b)              Normal and customary trade, cash and quantity discounts, allowances and credits, in amounts customary in the trade not to exceed Seven Percent (7%) of the invoice amount actually paid or granted in respect of each such sale, each to the extent consistent with a Party’s usual course of dealing for its products other than Giant King Grass;

 

(c)               Commissions;

 

(d)              Sales taxes, VAT and other taxes applied to the sale of Giant King Grass to the extent included in the gross amount invoiced; and

 

(e)               An allowance for bad debt, which shall in no event be greater than an amount reasonably approved by VIASPACE’s independent auditors.

 

Person ” shall mean an individual, corporation, company, partnership, organization or any similar entity.

 

Pick Up Date ” shall mean the date on which Delivery is made in accordance with Article 5 of this Agreement.

 

Process ” shall mean any process relating to a Product that is developed, made or manufactured from VGE Confidential Information, which, as the case may be, has not been made the subject of a public disclosure or that has not otherwise become available to the public, except through the issuance of a patent.

 

Product ” shall mean any material, plant, or product comprised, in whole or in part, of Giant King Grass.

 

Receiving Party ” shall mean the Party that is in receipt of the Confidential Information delivered to it by the Disclosing Party.

 

Term ” shall mean the term of this Agreement as defined in Section 10.1 hereof.

 

Third Party ” shall mean any Person other than a Party under this Agreement.

 

5
 

 

Trade Secrets ” shall mean each respective Party’s know-how and other proprietary information (including, but not limited to business information, technical or non-technical data, financial data, financial plans, lists of customers or suppliers) that: (a) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. To the extent that applicable law mandates a definition of “trade secret” inconsistent with the foregoing definition, then the foregoing definition shall be construed in such a manner as to be consistent with the mandated definition under applicable law. For purposes of this Agreement, the following Confidential Information shall be deemed to constitute the Trade Secrets of VGE: any and all proprietary technology, concepts, designs, ideas, inventions, research, development, compounds, biological materials, patent applications, know-how and other intellectual property rights; work product; procedures, processes, methodologies, plans, techniques and strategies; standard operating procedures; product specifications (including, without limitation, the genetic or biologic composition or makeup thereof and parent plants) and testing results for, relating to or arising out of the VGE IP, including, without limitation, GKG and GKG IP.

 

VGE IP ” shall have the meaning ascribed thereto in Section 8.1 of this Agreement.

 

VGE License ” shall mean that certain license entered into by and between VGE and IPA China.

 

VGE Territory ” shall mean the People’s Republic of China and Taiwan and each respective territory and possession thereof.

 

VIASPACE Territory ” shall mean the world other than the VGE Territory.

 

ARTICLE 2

GRANT OF LICENSE

AND

APPOINTMENT OF DISTRIBUTOR

 

2.1              Commercialization License. Subject to the terms and conditions of this Agreement, including, without limitation, the payment of the FPTP, royalties and any and all other fees, costs and expenses described in and Section 8.2 of this Agreement, VGE hereby grants to VIASPACE for the Term a nontransferable, royalty-bearing exclusive license to Commercialize Giant King Grass within the VIASPACE Territory and to use the GKG IP and VGE Tradename, including, without limitation, to reproduce and publicly display the VGE Tradename and GKG Tradename solely in connection with its license to Commercialize Giant King Grass and as otherwise provided in this Agreement (the “Commercial License”). The Commercial License granted under this Agreement is personal to VIASPACE, with no right whatsoever to assign, sublicense or otherwise grant any interest therein to any Third Party, without the prior written consent of VGE, which consent will not be unreasonably withheld, delayed or conditioned. VIASPACE shall use the VGE Tradename and GKG IP only for the purposes set forth in this Agreement and in compliance with applicable laws. VIASPACE agrees that it will do nothing inconsistent with VGE’s ownership of the VGE Tradename or GKG IP, with its use thereof inuring to the benefit of and be on behalf of VGE as the licensor. VIASPACE shall use the VGE Tradename and GKG Tradename in such manner that it creates a separate and distinct impression from any other trademark, tradename or service mark and maintain at all times during the Term the good name and reputation of VGE and such tradenames.

 

2.2              VIASPACE Restrictive Covenants.

 

(a)               Competing Giant King Grass. From and after the Effective Date and for three (3) years following the earlier of the expiration or termination of the Agreement, VIASPACE shall not and shall cause its Affiliates to not, directly or indirectly, including, without limitation, through a third party:

 

6
 

 

(i)                Manufacture (to include, without limitation, the planting, growing, harvesting and processing of seedlings and producing of pellets therefrom), Commercialize or otherwise engage in any research or development of a grass or any other product or material having similar or otherwise competitive properties to Giant King Grass (a “Competitive Product”), except that upon the prior written consent of VGE during the Term of this Agreement, for purposes of crop biodiversity; or

 

(ii)              Solicit for such prohibited purposes any customer, supplier or other vendor or employee with which VIASPACE had a relationship during the Term for the research, development, Manufacture or Commercialization of Giant King Grass or any Competitive Product.

 

(b)              No Sales Outside of VIASPACE Territory. Without the prior written consent of VGE, in no event shall VIASPACE, directly or indirectly, (1) attempt to Commercialize or Commercialize Giant King Grass outside of the VIASPACE Territory or knowingly supply Giant King Grass within the VIASPACE Territory for resale or use within the VGE Territory during the Term of this Agreement; (2) make any use of Giant King Grass or VGE Confidential Information, including, without limitation, the composition or other genetic makeup of Giant King Grass, for any purpose or otherwise disclose any of the same to any Person whatsoever other than as is expressly permitted under this Agreement during the Term; or (3) reverse engineer, decode or otherwise attempt to determine or determine or modify or improve on the composition or genetic makeup of Giant King Grass or otherwise create any derivative or hybrid thereof, unless any such activities are disclosed in advance and in writing to VGE and the results thereof are owned by and assigned to VGE upon and coincident with any such notice (or failing notice, demand by VGE following it actually becoming aware thereof)(the “Results”), in which event such Results shall be licensed to VIASPACE at its election upon mutually agreed terms and conditions.

 

(c)               Business Protection Agreement. Consistent with the foregoing, VIASPACE shall enter into, provide VGE an executed copy thereof and agree to enforce a business protection agreement with each of its employees pursuant to which each such individual agrees to substantially the same restrictions and to the reasonable satisfaction of VGE, with VGE being a third party beneficiary thereof. A form of the Business Protection Agreement is attached hereto and marked as Exhibit “A.”

 

(d)              Conditions to Commercial License. As conditions precedent to the Commercial License, each of the following shall have been fully executed as of the Effective Date:

 

(i)                That certain Lock Up Agreement shall have been entered into by all parties thereto; and

 

(ii)              That certain Funding Agreement entered into by and between VIASPACE and Kevin Schewe, MD.

 

7
 

 

2.3              VGE’s Restrictive Covenants . As of the Effective Date and for the Exclusive Period, VGE will refrain from directly or indirectly, including, without limitation, through a third party, (a) attempting to commercialize or commercialize Giant King Grass in the VIASPACE Territory, or (b) the Manufacture, Commercialization or research or development of a grass similar or otherwise having competitive properties to Giant King Grass (or attempting such actions) in the VIASPACE Territory; or (c) knowingly supplying GKG or otherwise licensing GKG IP within the VGE Territory for resale or use of GKG within the VIASPACE Territory.

 

ARTICLE 3

RESERVATION OF RIGHTS

 

Except as expressly granted under the Commercial License, VGE reserves to itself any and all rights to the Giant King Grass and the VGE IP. Consistent with the foregoing, nothing in this Agreement, subject to Section 2.3(c) above, shall be deemed to restrict or otherwise impair or impede the right or ability of VGE or any Affiliate or sublicensee thereof to market, sell, distribute, package, label or appoint additional Persons as licensees of Giant King Grass, subcontract any such rights to, or otherwise enter into any arrangement whatsoever with any Person with respect to Giant King Grass or otherwise deal in or with Giant King Grass within the VGE Territory.

 

ARTICLE 4

COMMERCIALIZATION

 

4.1              In General. VIASPACE, at its sole cost and expense, shall use commercially reasonable efforts to Commercialize Giant King Grass throughout the VIASPACE Territory, which efforts shall include, without limitation, providing appropriate incentives consistent with its normal and lawful business practices to sales representatives involved in the Commercialization of Giant King Grass. Without limiting the foregoing, VIASPACE shall (a) prepare and provide VGE for its prior review and approval all promotional, sales and marketing materials that are intended to be used or otherwise relied upon for the Commercialization (the “Marketing Materials”) of Giant King Grass within the VIASPACE Territory, which shall in all events be in consistent and compatible with the marketing materials used by VGE, if any, for Commercialization of Giant King Grass within the VGE Territory and otherwise in compliance with applicable laws; provided , however , that if VGE shall not have either approved or disapproved of such Marketing Materials within ten days of its receipt thereof, then such Marketing Materials shall be deemed approved by it and in any event VGE shall not unreasonably withhold its approval of such materials; (b) not extend any written or oral warranty or guarantee or make any representation or claims with respect to any aspect of Giant King Grass, without VGE’s express prior written consent, which consent shall not be unreasonably delayed or denied; and (c) not make any modifications or additions to Giant King Grass, without VGE’s express prior written consent, which consent shall not be unreasonably delayed or denied. S ubject to any limitations imposed by applicable law, all such Marketing Materials and all documentary information and oral presentations (where practicable) regarding the marketing and promotion of Giant King Grass in countries of the VIASPACE Territory shall acknowledge VIASPACE’s distribution and license arrangement. Copies of all Marketing Materials used in the VIASPACE Territory will be archived by VIASPACE in accordance with applicable law. VIASPACE shall be responsible, at its sole cost and expense, for the preparation and printing of the Marketing Materials for Commercialization of Giant King Grass in the VIASPACE Territory.

 

4.2              Sales and Distribution . VIASPACE shall be responsible for booking sales, warehousing and distributing Giant King Grass in the VIASPACE Territory. If VGE receives any orders for use of Giant King Grass in the VIASPACE Territory, it shall refer such orders to VIASPACE. If VIASPACE receives any orders for use of Giant King Grass in the VGE Territory, it shall refer such orders to VGE. VIASPACE shall be solely responsible for handling all returns and all aspects of order processing, invoicing and collection, distribution, inventory and receivables of Giant King Grass as such matters pertain to its Commercialization within the VIASPACE Territory. If Giant King Grass sold in the VIASPACE Territory is returned to VGE, it shall be shipped at VIASPACE’s sole cost and expense to a facility designated by VIASPACE.

 

8
 

 

4.3              Reporting of Sales. VIASPACE shall provide to VGE detailed written reports within thirty (30) days following the last day of each calendar quarter (commencing with the first calendar quarter during a Contract Year in which the First Commercial Sale is made of any Giant King Grass in the VIASPACE Territory), which reports shall account for unit volume, gross sales price and any and all reductions or adjustments thereto, Net Sales and Giant King Grass inventories, which records shall be maintained for the period described in Section 6.4(a) of this Agreement.

 

ARTICLE 5

SUPPLY OF PRODUCTS

 

5.1             In General. VIASPACE purchase orders for Giant King Grass seedlings will be filled at the Final Product Transfer Price, plus any amounts described in Section 6.8, below, with any all such amounts being paid by VIASPACE to VGE on or before Delivery.

 

5.2             Growing Costs . VGE will pay the ongoing expenses for Giant King Grass currently growing in the Guangdong province, and VIASPACE will pay the expenses for any other test plots grown at VIASPACE’s request and approved by VGE. Consistent with such efforts, upon reasonable prior notice, VGE will allow VIASPACE, at VIASPACE’s sole cost and expense, to visit the Giant King Grass location and test plots controlled by VGE or any Affiliate thereof in the Guangdong province with current and potential customers upon reasonable prior notice, and VGE will be allowed to visit all such locations and growing locations controlled by VIASPACE or any Affiliate thereof or any customer distributor or such other vendor of VIASPACE or any such Affiliate.

 

5.3             Forecasts. Not later than the tenth (10th) day of each calendar month during each Contract Year (the “Forecast Date”), VIASPACE shall provide VGE, a rolling, good-faith, twelve (12) month written forecast of expected purchases by VIASPACE of Giant King Grass, and the corresponding expected required Pick Up Dates (the “Forecast”) in order to assist VGE in its Delivery planning. The first four (4) months of the Forecast shall be binding on VIASPACE (the “Binding Forecast”), whereas the remaining eight (8) months shall constitute a non-binding estimate of such Giant King Grass requirements. In the event VIASPACE fails to furnish a Forecast within five (5) days after any Forecast Date, the then current Forecast shall apply until changed at a subsequent Forecast Date (on a ‘rolled-forward’ basis, with the new twelfth (12th) month of the Forecast being the quantity of the ‘rolled-forward’ eleventh (11th) month). During the Term, with respect to each month that is added as the fourth (4 th ) month to a Forecast, the quantities and types of Giant King Grass forecasted for such fourth (4 th ) calendar month may not fluctuate (up or down) by more than five percent (5%) from the quantities and types of Giant King Grass forecasted for such month when it was the fifth (5th) month of a Forecast.

 

5.4             Purchase Orders. VIASPACE shall submit to VGE purchase orders for Giant King Grass (“Purchase Orders”) for purchase of the Product at the FPTP consistent with the Forecast at least sixty (60) days before Delivery, which date shall be set forth in the Forecast and Purchase Order. Each Purchase Order shall be in writing and shall specify (a) the quantity of Giant King Grass to be delivered; (b) VIASPACE’s required Pick Up Date of such Giant King Grass, provided , however , that in no event shall the Pick Up Date be sooner than sixty (60) days after the date of the Purchase Order; and (c) the name, address and phone number of the person to receive the notice of receipt.

 

9
 

 

5.5              Acceptance of Purchase Orders. Provided that VIASPACE has complied with Sections 5.3 and 5.4, VGE shall accept and use its commercially reasonable efforts (subject to Section 12.1 of this Agreement; e.g. , the failure of GKG to grow in the winter months) to fulfill the Purchase Orders for the quantities set forth in the Binding Forecast. In the event that VGE wishes to reject a Purchase Order due to a failure by VIASPACE to comply with Sections 5.3 or 5.4, it shall notify VIASPACE of its decision to do so within ten (10) Business Days after VGE’s receipt of the Purchase Order with an explanation of the reasons for the rejection.

 

5.6              Purchase Order Changes. If VIASPACE requests changes to any Purchase Order prior to the Pick Up Date of Giant King Grass, VGE will attempt to accommodate such changes within its reasonable distribution capabilities and efficiencies. VGE shall advise VIASPACE of its fully burdened costs associated with making any such change and VIASPACE shall be deemed to have accepted the obligation to pay VGE for such costs if VIASPACE directs VGE in writing to proceed to make the change after receiving notice of such costs.

 

5.7              Standard Terms. It is understood that each Party may, for convenience, use its own standard pre-printed forms of the Purchase Orders, acknowledgements, acceptances or invoices in the performance of its obligations hereunder; provided , however , that any terms, conditions or provisions in such pre-printed forms which are inconsistent with or which modify or supplement this Agreement shall be null and void.

 

5.8              Invoicing and Delivery of Giant King Grass. VGE shall invoice VIASPACE upon or as soon as reasonably practicable following its receipt and acceptance of a Purchase Order for the Delivery of Giant King Grass. Except as otherwise provided in VGE’s invoice, VIASPACE shall pay the invoiced amount in no event later than the Pick Up Date. Each order of Giant King Grass under a VIASPACE Purchase Order may be picked up by VIASPACE after the Pick Up Date, but in no event prior to the date on which VIASPACE shall have paid in full the invoiced amount, with Delivery being deemed accepted by VIASPACE upon and coincident with the Pick Up Date. Delivery shall be made EXW (Incoterms 2010) at the Guangdong airport location for VIASPACE’s designated common carrier in the Peoples Republic of China, with VGE having no responsibility to VIASPACE for any losses, damages, costs or expenses for or resulting from Delivery on or after the Pick Up Date or for failure to Deliver or failure to timely Deliver Giant King Grass due to an event described in Section 12.1 of this Agreement.

 

ARTICLE 6

PURCHASE PRICE, MILESTONE

AND

ROYALTY PAYMENTS

 

6.1              Transaction Legal Fees . VIASPACE shall pay to Sung Chang or his designee the Legal Fees not later than the date immediately preceding the second anniversary of the Effective Date.

 

6.2              Final Giant King Grass Transfer Price. VIASPACE shall pay to VGE on or before the Pick Up Date the per unit FPTP for the Giant King Grass Delivered by VGE in accordance with each respective or applicable Purchase Order as provided in Article 5 above.

 

6.3              Royalty Payments. In consideration for the Commercial License, VIASPACE shall pay to VGE the royalties on its Net Sales of Giant King Grass as set forth on that Exhibit “B,” entitled “Royalty Payments.”

 

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6.4              Royalty Reports; Payment Due Dates .

 

(a)               In General. VIASPACE shall maintain its customary form of records reasonably required, which records shall (i) be complete, true and accurate in all material respects, (ii) reflect the computation of the amounts due and owing to VGE, on a country-by-country basis, including, without limitation, the Royalty Report below, (iii) be in sufficient detail so as to enable VGE to confirm compliance by VIASPACE of its obligations under this Agreement and (iv) be maintained for at least three (3) years after the end of each Contract Year during the Term.

 

(b)              Royalty Report. In addition to the reports to be provided to VGE under Section 4.3 of this Agreement, VIASPACE shall provide VGE a non-binding royalty estimate within fifteen (15) days after close of each calendar quarter. VIASPACE will provide to VGE, at the same time as each royalty payment is made, a complete, true and accurate written report showing: (i) the gross sales made for purposes of calculating Net Sales and the calculation of Net Sales determined from such gross sales for and during the applicable calendar quarter period, along with any and all reductions from such gross sales; (ii) the calculation of the royalty due and payable for such reporting period; (iv) the First Commercial Launch date(s) of the Product or Process in each country within the VIASPACE Territory; and (v) any other information reasonably requested by VGE to verify the accuracy of the royalty payments hereunder.

 

(c)               VGE’s Right to Audit. VIASPACE shall, not more than one time per Contract Year, during normal business hours, permit auditors designated by VGE, at VGE’s expense and upon thirty (30) days written notice, full rights of inspection and audit of VIASPACE’s books, records and operations, including, without limitation, any and all of the manufacturing, sales and growing locations of VIASPACE and any customer, affiliate, distributor or other such vendor thereof.

 

(d)              Handling of Underpayment. In the event that the audit contemplated in this paragraph reveals any underpayment, VIASPACE shall remit promptly, but in no event later than thirty (30) days following the date on which any such audit results are presented to VIASPACE, to VGE the amounts thereof, and if VIASPACE fails to remit payment within such 30 day period, VGE shall be permitted to pursue all legal and equitable remedies available to it pursuant to this Agreement as well as all applicable laws. In the event that the underpayment is more than five percent (5%) of the amount due for the period audited, VIASPACE shall also remit to VGE the entire reasonable and documented cost of such audit.

 

6.5              Payment Terms . All payments to be made pursuant to this Agreement shall be made by VIASPACE to VGE in United States Dollars. All late payments shall accrue interest from the date owing until paid in full at a rate equal to the lower of fifteen percent (15%) per annum or the highest rate permitted by applicable law.

 

6.6              Foreign Exchange. With respect to Net Sales invoiced or expenses incurred in United States Dollars, the Net Sales or expense amounts and the amounts due to VGE under this Agreement shall be expressed in United States Dollars. With respect to Net Sales invoiced or expenses incurred in a currency other than United States Dollars, the Net Sales or expense shall be expressed in the currency in which such Net Sales were invoiced or such expense was incurred, together with the United States Dollar equivalent, calculated using the average of the spot rate on the first and last Business Days of the Calendar Quarter in which the Net Sales were made or the expense was incurred. The 12:00 Noon Buying Rates, as certified by the NY Federal Reserve Bank (currently and historical rates can be found on their website at www.ny.frb.org), shall be used as the source of spot rates.

 

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6.7              Blocked Payments. In the event that, by reason of applicable laws or regulations in any country, it becomes impossible or illegal for VIASPACE or any Affiliate or sublicensee thereof, to transfer, or have transferred on its behalf, fees or other payments due to VGE under this Agreement, VIASPACE shall promptly notify in writing VGE of the conditions preventing such transfer and such fees or other payments shall be deposited in local currency in the relevant country to the credit of VGE in a recognized banking institution designated by VGE or, if none is designated by VGE within a period of thirty (30) days, in a recognized banking institution selected by VIASPACE or its Affiliate or sublicensee, as the case may be, and identified in a written notice delivered to VGE.

 

6.8              Taxes. Any federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, value-added tax or any other tax assessment (other than that assessed against income), license, fee or other charge lawfully assessed or charged on the Manufacture, sale or transportation of Giant King Grass sold to VIASPACE by VGE pursuant to this Agreement (“Taxes”) shall be the responsibility of VIASPACE. Should VIASPACE be obligated by law to withhold any Taxes on payments made to VGE for product invoiced under this Agreement, the payment due hereunder shall be increased such that after the withholding of the appropriate amount, VGE receives the amount that would have been paid but for the Taxes withheld. VIASPACE shall pay all such Taxes in a timely manner and promptly provide VGE with a receipt evidencing such payment. Should VGE be obligated to pay such Taxes, and such Taxes were not satisfied by way of withholding, VIASPACE shall promptly reimburse VGE for such payment, in an amount such that after the payment of the Taxes, VGE has received the same amount that it would have received had such Taxes not been payable. Such taxes shall be reflected on the invoices as provided in the Article 5 of this Agreement.

 

ARTICLE 7

[Reserved.]

 

ARTICLE 8

INTELLECTUAL PROPERTY

 

8.1              VGE’s Ownership of Giant King Grass . As between the parties, VGE owns and shall retain all right, title and interest in and to Giant King Grass, the VGE Tradename and the GKG IP and any and all other intellectual property relating thereto, whether in or outside of the VIASPACE Territory, including any and all modifications, improvements and other Results relating to Giant King Grass, whether created, invented or otherwise developed by VIASPACE or any Affiliate thereof or any director, employee, contractor or agent of either VIASPACE or any such Affiliate thereof (the “VGE IP”). All registrations, trademarks, domain names and other Intellectual Property right relating to VGE IP shall be registered in the name of VGE, and any VGE IP in the name or possession of VIASPACE will immediately be assigned, transferred or returned to VGE as a condition to the Commercial License.

 

8.2              VGE Intellectual Property . This Agreement, to include, without limitation the Commercial License, is a sublicense and, as such, is subject to and expressly limited by the terms and conditions of the VGE License, that certain license, which itself is a sublicense, entered into by and between IPA China and its licensor (the “Parent License”) and that certain license entered into by and between the licensee under the Parent License and the original licensor (the “Grandparent License”), and notwithstanding any provision of this Agreement to the contrary, VGE grants no right and makes no covenant to VIASPACE that is broader than or otherwise exceeds the scope of rights and covenants granted to VGE under either (or both of) the Parent License or Grandparent License, as the case may be. To the knowledge of VGE, no act or omission has occurred since the 30th day of July 2012 that would have a material adverse effect on the Parent License. VGE hereby agrees to use commercially reasonable efforts to maintain the Parent License in accordance with its terms and condition.

 

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8.3              Review of Use. VGE shall have the right to review and approve in advance VIASPACE’s use of the VGE Tradename and GKG Tradename, which approval shall not be unreasonably withheld, delayed or conditioned. VIASPACE shall make as soon as reasonably practicable all changes to the usage of either the VGE Tradename or GKG Tradename on any documents and materials containing either such tradename as reasonably requested by VGE.

 

8.4              Inspection. VGE shall have the right, at its expense, to inspect at reasonable times, either itself or through its duly authorized representatives, all or any portion of VIASPACE’s books, records, properties and facilities, and advertising and marketing documents. To the extent applicable, such inspection shall be made in accordance with Section 6.4 (c). VIASPACE agrees to cooperate fully with any such inspection by VGE and make VIASPACE’s employees available to answer VGE’s questions as part of such inspection.

 

8.5              VGE Intellectual Property. VIASPACE shall promptly notify VGE of all VGE Intellectual Property of which it becomes aware. VIASPACE hereby assigns and shall assign to VGE all of VIASPACE’s right, title and interest in and to the VGE Intellectual Property. VIASPACE shall provide VGE with reasonable assistance, at VGE’s cost (except as set forth in this Section), to obtain, perfect and enforce all rights, title and interest in the VGE Intellectual Property, including, without limitation, the execution of any patent applications and assignment agreements as and to the extent VGE elects to obtain, perfect, prosecute or enforce any such applications and assignments. In the event VGE is unable to secure VIASPACE’s signature on any document hereunder, VIASPACE designates and appoints VGE and its duly authorized representatives as its agents and attorneys-in-fact to act for and on its behalf to execute such documents. Consistent with the forgoing, VGE will be responsible for, at VGE’s sole election, cost and expense, the filing and prosecution of any and all Intellectual Property Rights in the VIASPACE Territory with respect to Giant King Grass or any VGE IP.

 

8.6              Notice, Enforcement and Defense of Intellectual Property Infringement. VIASPACE agrees to promptly notify VGE of any conflicting use or any suspected act of infringement, passing-off or unfair competition involving the VGE Intellectual Property by any Third Party, or any allegations that the sale or use of the VGE Intellectual Property within the VIASPACE Territory infringe upon the Intellectual Property Rights of any Third Party, of which VIASPACE may become aware. VGE shall have the sole and exclusive right, at VGE’s sole discretion, to prosecute, maintain and enforce all VGE IP and prosecute or defend any and all infringement actions against any Person infringing Giant King Grass or any Intellectual Property right relating to the VGE IP, including, without limitation, to engage in any and all court proceedings necessary to protect its rights in the VGE Intellectual Property or to settle any disputes involving such unauthorized acts or such allegations relating thereto, with VGE retaining any and all recoveries; provided that if VGE fails to enforce the GKG IP, then VIASPACE shall have, to the extent permitted under applicable law, the right and power, at its sole cost and expense to do so. Further, VIASPACE agrees to fully cooperate with VGE at VGE’s request (and at VGE’s cost) to help terminate such activities by Third Parties, but shall not, without the express written consent of VGE, engage in any court proceedings against, enter into any settlement discussions with or in any other way attempt to terminate said activities by Third Parties.

 

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ARTICLE 9

CONFIDENTIALITY

 

9.1              Confidentiality. Except as and to the extent related to the discharge of its duties and obligations under this Agreement, the Receiving Party agrees that all Confidential Information disclosed by the Disclosing Party or any Affiliate thereof to VIASPACE hereunder shall be received and maintained by the VIASPACE in strict confidence, shall not be used for any purpose whatsoever, and shall not be disclosed to any Third Party (including, without limitation in connection with any publications, presentations or other disclosures) other than its Designated Representatives for the Term of this Agreement and for a period of five (5) years following the termination or expiration of this Agreement; except , however , that in the case of Confidential Information that otherwise constitutes a Trade Secret, the Disclosing Party hereby agrees that it shall in no event disclose any such information to Third Parties other than its Designated Representatives for the period during which any such information shall continue to constitute a trade secret under applicable law.

 

9.2              Return of Confidential Information. The Receiving Party shall keep the Confidential Information owned or in which rights are held by the Disclosing Party or any Affiliate thereof in appropriately secure locations. Upon the expiration or termination of this Agreement, any and all such Confidential Information possessed in tangible form by the Receiving Party, shall, upon written request, be immediately returned to the Disclosing Party (or destroyed if so requested) and not retained by the Receiving Party.

 

9.3              Ancillary Agreement . This Article 9 shall be construed as an agreement ancillary to the other provisions of this Agreement, and the existence of any claim or cause of action of one party against the other, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of this Article.

 

ARTICLE 10

TERM; TERMINATION

 

10.1           Term. Unless sooner terminated as otherwise provided in this Agreement, the term of this Agreement shall:

 

(a)               The Initial Term. Commence on the Effective Date and shall continue in full force and effect until the second (2nd) anniversary of the Effective Date (the “Initial Term”); and

 

(b)              Renewal Term. Subject to VIASPACE otherwise being in full compliance with this Agreement (including, without limitation, the timely payment of any and all amounts due hereunder) prior to the delivery of any Notice of Renewal and the commencement of each then applicable Renewal Term, this Agreement may be renewed on the same terms and conditions hereof:

 

(i)                Provided that VIASPACE shall have first satisfied the conditions for any such renewal as set forth in Exhibit “B” for each such applicable renewal, VIASPACE shall have the option to renew the term of this Agreement for four (4) consecutive and subsequent terms, each being for a two (2) year period (for a total of ten (10) years from the Effective Date assuming each renewal is elected)(each, a “Conditional Renewal Term”) by providing written notice of its election to renew such term (each, a “Renewal Notice”) to VGE at least three (3) months prior to the expiry of the then current Initial Term or Conditional Renewal Term, as the case may be; and

 

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(ii)              Provided it delivers a Renewal Notice to VGE at least three (3) months prior to the expiry of the then Renewal Term, this Agreement shall automatically renew on the same terms and conditions hereof for consecutive two (2) year periods thereafter without any further act on the part of either Party (each, an “Evergreen Renewal Term”); provided , however , that in no event shall the term of this Agreement be renewed for the succeeding Evergreen Renewal Term if and to the extent either Party delivers to the other written notice of its intent to not so renew this Agreement (the “Notice of Nonrenewal”) at least sixty (60) days prior to the end of any such Evergreen Renewal Term (as the case may be)(together, the Conditional Renewal Term and Evergreen Renewal Term shall be referred to as the “Renewal Terms”); provided , further , that in no event shall either Party have the right to deliver a Notice of Nonrenewal if and to the extent VIASPACE’s Net Sales exceed Five Million Dollars ($5,000,000) during the first applicable Evergreen Renewal Term; Eight Million Dollars ($8,000,000) during the second applicable Evergreen Renewal Term and Ten Million Dollars ($10,000,000) during the third and subsequent Evergreen Renewal Terms, and to the extent any such Notice of Nonrenewal is delivered by VGE, the Commercial License shall convert to a nonexclusive license in those countries in which VIASPACE is engaged actively in the commercialization of GKG.

 

10.2           Grounds for Termination.

 

(a)               Termination by Mutual Agreement . This agreement may be terminated by mutual written agreement of the Parties.

 

(b)              Termination For Cause . Either Party may terminate this Agreement for cause if the other party materially breaches this Agreement, which breach is not cured to the reasonable satisfaction of the non-breaching party within thirty (30) days after written notice from the non-breaching Party specifying the material breach; provided , however , that in the case of a breach of this Agreement on account of any failure to pay timely by VIASPACE, the period for cure of any such breach shall be ten (10) days, with VIASPACE having the right to cure any such payment default not more than once during any twelve (12) consecutive calendar monthly period. Consistent with the foregoing, VGE shall have the right, in its sole and absolute discretion, to cease Delivery of any Giant King Grass until VIASPACE has cured any such material breach for which it is given notice under this Agreement; provided , however , that if and to the extent VIASPACE shall have fully paid for finished product that is the subject of an invoice, then VGE will nevertheless Deliver such product in accordance with Article 5.

 

(c)               Termination for Insolvency . To the extent permitted by applicable laws, either Party may terminate this Agreement upon written notice to the other Party on or after the occurrence of any of the following events: (i) the appointment of a trustee, receiver or custodian for all or substantially all of the property of the other Party, which appointment is not dismissed within ninety (90) days, (ii) the filing of a petition for relief in bankruptcy by the other Party on its own behalf, or the filing of any such petition against the other Party if the proceeding is not dismissed or withdrawn within ninety (90) days thereafter, or (iii) insolvency, dissolution or liquidation of or an assignment for the benefit of creditors by a Party.

 

(d)              Termination of Parent or Grandparent License. If by virtue of any termination of either the Parent License or Grandparent License, VGE is unable to otherwise perform its material obligations hereunder, this Agreement may be terminated by either Party upon ten (10) days written notice.

 

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10.3           Consequences of Termination.

 

(a)               Termination of Agreement . Upon any termination or other expiration of this Agreement, among other things, the Commercial License shall terminate and VIASPACE shall forthwith terminate and cease its use of Giant King Grass and the VGE IP and any further Commercialization of Giant King Grass in the VIASPACE Territory. Immediately upon any such termination or expiration, all rights of VIASPACE to the VGE IP, including, without limitation, the Giant King Grass and GKG IP, along with any and all other Intellectual Property relating thereto, shall terminate and revert to VGE.

 

(b)              Conversion To Nonexclusive License . In lieu of terminating this Agreement under Section 10.2(b) above, VGE may, in its sole discretion, elect to convert this Agreement and the rights hereunder to a nonexclusive license for the remainder of the applicable Initial Term or Renewal Term, in which event such nonexclusive license shall be subordinate to the grant thereafter by VGE of any rights therein to a Third Party and the provisions of Section 2.3 of this Agreement shall upon and coincident therewith be and become thereafter null and void as and to the extent otherwise applicable to VGE or any Affiliate thereof or any third party acting for and on behalf of VGE or any such Affiliate.

 

(c)               Return of VGE Property . Promptly upon, but in no event later than 15 consecutive calendar days thereafter, the expiration or earlier termination of this Agreement, VIASPACE, at VIASPACE’s sole cost and expense, shall transfer, assign and otherwise deliver unconditionally and irrevocably to VGE all of the GKG IP, including, without limitation, the GKG Tradename, and any and all books, records, reports, files, documents and other information relating thereto, and the VGE IP and any and all other VGE property relating to Giant King Grass and the Commercialization thereof. VIASPACE acknowledges and agrees that all rights, title and interest in and to the foregoing shall remain exclusively with VGE following termination of this Agreement.

 

(d)              Reports . VIASPACE shall render an accounting to VGE of any royalties and other payments that may be due to VGE under the terms of this Agreement.

 

(e)               Sublicenses of Licensed Technology . Upon the expiration or earlier termination of this Agreement, any and all sublicenses, if any, granted under this Agreement shall terminate except as and to the extent expressly permitted otherwise thereunder.

 

(f)               Bankruptcy or Termination for Cause . In the event this Agreement is properly terminated under Section 10.2 above by (i) VIASPACE account of either (1) a material uncured default on the part of VGE pursuant to Section 10.2(b) of this Agreement, or (2) Bankruptcy on the part of VGE or (ii) either party pursuant to Section 10.2(d) of this Agreement, then and in either such case, the obligations of Section 2.2(a) as and to the extent the same shall relate to a Competing Product shall terminate upon and coincident with the effective date of any such termination.

 

10.4           Survival. The following Articles and Sections of this Agreement shall survive termination or expiration of this Agreement: Sections 2.2, 4.3 and Articles 3, 5, 6, 8, 9, 10, 11 and 12 and any other provision which by its nature would continue past such expiration or termination.

 

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ARTICLE 11

REPRESENTATIONS AND WARRANTIES;

INDEMNIFICATION; LIMITATION ON LIABILITY

 

11.1           Compliance with Laws. VIASPACE shall comply in all material respects with all laws, regulations and standards applicable to the Commercialization of Giant King Grass, including, without limitation, the handling, storage, marketing, distribution and sale thereof, in the VIASPACE Territory. VGE shall comply in all material respects with all applicable laws regulating the Manufacture GKG under this Agreement. VGE shall not, and it shall cause its Affiliates and sublicensee, if any, to not, do anything that would materially adversely affect the reputation of Giant King Grass within the VGE Territory.

 

11.2           VGE Representations and Warranties. As of the Effective Date, VGE makes the following representations and warranties to VIASPACE:

 

(a)               Status . VGE is a corporation duly organized and validly existing under the laws of the British Virgin Islands. No action has been taken by the directors, officers or stockholders of VGE to dissolve VGE. VGE has the corporate power and authority to enter into this Agreement and to perform all its obligations hereunder.

 

(b)              All Necessary Proceedings . VGE has taken all necessary corporate actions and proceedings to enable it to enter into this Agreement.

 

(c)               No Violation . Subject to Section 8.2 of this Agreement, the execution, delivery and performance of this Agreement by VGE: (i) does not and will not violate or conflict with, in any material respect, any applicable law or any provision of its certificate of incorporation or bylaws; and (ii) does not and will not, in any material respect, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default under, any agreement or obligation between it and any Third Party.

 

11.3           VIASPACE Representations and Warranties. As of the Effective Date, VIASPACE makes the following representations and warranties to VGE:

 

(a)               Status . VIASPACE is a corporation duly organized and validly existing under the laws of the State of Nevada. No action has been taken by the directors, officers or shareholders of VIASPACE to dissolve VIASPACE. VIASPACE has the corporate power to enter into this Agreement and to perform all its obligations hereunder.

 

(b)              All Necessary Proceedings . VIASPACE has taken all necessary corporate actions and proceedings to enable it to enter into this Agreement.

 

(c)               No Violation . The execution, delivery and performance of this Agreement by VIASPACE: (i) does not and will not violate or conflict with, in any material respect, applicable law, or any provision of its articles of incorporation or by-laws; and (ii) does not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of Giant King Grass or its property or assets pursuant to any agreement or obligation between it and any Third Party.

 

(d)              Compliance . VIASPACE has and shall continue to comply with all applicable laws relating to Commercialization, including, without limitation, to the handling, storage, distribution and sale, of Giant King Grass in the VIASPACE Territory. VIASPACE shall not, and it shall cause its Affiliates and sublicensee, if any, to not, do anything that would materially adversely affect the reputation and goodwill of VGE or of VGE’s Affiliates or materially adversely affect the reputation of Giant King Grass or the VGE Tradename.

 

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11.4           Indemnification by VIASPACE. VIASPACE shall indemnify and hold harmless VGE and each of its Affiliates and each director, officer, employee, agent, successor and assign of VGE and each such Affiliate (collectively, the “VGE Indemnified Parties”), from, against and in respect of any and all Actions and any liabilities, losses, costs (including costs of investigation, defense and enforcement of this Agreement), damages, fines, penalties, expenses or amounts paid in settlement (in each case, including reasonably and actually incurred attorneys' and experts fees and expenses) of any such Actions asserted by a Third Party against any of the VGE Indemnified Parties as a result of, arising out of or relating to, directly or indirectly, any one or all of the following: (i) Giant King Grass, including, without limitation, the manufacturing, supply, marketing, sale, distribution or other Commercialization of any Product, Improvement or Process thereof; (ii) any breach of, or inaccuracy in, any representation or warranty made by VIASPACE under this Agreement; or (iii) any breach or violation of any covenant or agreement by VIASPACE or other VIASPACE Indemnified Party (including under this Section) under or pursuant to this Agreement.

 

11.5           Indemnification by VGE . VGE shall indemnify and hold harmless VIASPACE and each of its Affiliates and each director, officer, employee, agent, successor and assign thereof (collectively, the “VIASPACE Indemnified Parties”), from, against and in respect of any and all Actions and any liabilities, losses, costs (including costs of investigation, defense and enforcement of this Agreement), damages, fines, penalties, expenses or amounts paid in settlement (in each case, including reasonably and actually incurred attorneys' and experts fees and expenses) of any such Actions asserted by a Third Party against any of the VIASPACE Indemnified Parties as a result of, arising out of or relating to, directly or indirectly, any one or all of the following: (i) any breach of, or inaccuracy in, any representation or warranty made by VGE in this Agreement; or (ii) any material breach or violation of any covenant or agreement of VGE or other VGE Indemnified Party (including under this Section) under or pursuant to this Agreement.

 

11.6           Indemnification Claims.

 

(a)               A person entitled to indemnification under this Section (an “Indemnified Party”) shall give prompt written notification to the person from whom indemnification is sought (the “Indemnifying Party”) of the commencement of any action, suit or proceeding relating to a Third Party claim for which indemnification may be sought or, if earlier, upon the assertion of any such claim by a Third Party (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a Third Party claim as provided in this Section shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually prejudiced as a result of such failure to give notice).

 

(b)              Within thirty (30) days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such action, suit, proceeding or claim. If the Indemnifying Party does not assume control of such defense, the Indemnified Party shall control such defense.

 

(c)               The Party not controlling such defense may participate therein at its own expense; provided , however , that if the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding or claim, the Indemnifying Party shall be responsible for the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith; provided , further , that in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one counsel in any one jurisdiction for all Indemnified Parties.

 

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(d)              The Party controlling such defense shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto.

 

(e)               The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed, denied or conditioned. The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto or that imposes any liability or obligation on the Indemnified Party without the prior written consent of the Indemnified Party.

 

11.7           Insurance. Each Party shall, at its sole cost and expense, obtain and keep in force for the duration of this Agreement general liability insurance. Upon written request, each Party shall furnish to the other Party a certificate of insurance signed by an authorized representative of such Party’s insurance underwriter evidencing the insurance coverage required by this Agreement and providing, to the extent feasible, for at least thirty (30) days’ prior written notice to the other Party of any cancellation, termination, material change or reduction of such insurance coverage.

 

11.8           Disclaimers. EXCEPT AS EXPRESSLY WARRANTED IN THIS AGREEMENT, INCLUDING THIS ARTICLE, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PRODUCTSS, EXPRESS OR IMPLIED, IN ANY MANNER AND EITHER IN FACT OR BY OPERATION OF LAW, AND SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COURSE OF DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE OR NONINFRINGEMENT. Without limiting the foregoing, both Parties acknowledge that they have not and are not relying upon any implied warranty of any kind or upon any representation or warranty except as expressly warranted in this Agreement.

 

11.9           Limitation on Liability. EXCEPT TO THE EXTENT ARISING OUT OF ANY (a) VIOLATION OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, (b) CRIMINAL VIOLATION OF APPLICABLE LAWS, (c) GROSS NEGLIGENCE, FRAUD OR INTENTIONAL OR WILFUL MISCONDUCT (d) OR DISCLOSURE OF CONFIDENTIAL INFORMATION IN BREACH OF THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR EXEMPLARY, INCIDENTAL, INDIRECT, PUNITIVE, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY TYPE OR AMOUNT (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) ARISING OUT OF ITS BREACH OF ANY PROVISION IN THIS AGREEMENT (INCLUDING WITHOUT LIMITATION, THE PERFORMANCE OR FAILURE TO PERFORM HEREUNDER), EVEN IF SUCH DAMAGES WERE FORESEEABLE AND WHETHER SUCH DAMAGES ARISE IN TORT, IN CONTRACT OR OTHERWISE. VGE’S AGGREGATE LIABILITY TO VIASPACE ARISING FROM THIS AGREEMENT, WHETHER IN CONTRACT OR TORT, WILL NOT EXCEED THE AMOUNTS PAID BY VIASPACE FOR THE PURCHASE OF PRODUCTS THAT IT IS UNABLE TO SELL WITHIN THE TERRITORY.

 

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ARTICLE 12

MISCELLANEOUS

 

12.1           Force Majeure. Other than the performance obligations under Articles 6 and 9 and Section 12.14 of this Agreement, any delay in the performance of any of the duties or obligations of either Party shall not be considered a breach of this Agreement and the time required for performance shall be extended for a period equal to the period of such delay, provided that such delay has been caused by or is the result of any (a) acts of a public enemy, insurrections, riots, embargoes, failures or delays by vendors, labor disputes, including strikes, lockouts, job actions, boycotts, fires, explosions, floods, shortages of material or energy so long as all such acts are without the fault or negligence of and beyond the reasonable control of the Party claiming such excuse from performance or (b) acts of God. The Party claiming any such excuse shall give prompt notice to the other Party of such cause, and shall promptly take whatever reasonable steps are necessary to relieve the effect of such cause.

 

12.2           Notices. All notices hereunder shall be delivered as follows: (a) by facsimile and confirmed by first class mail (postage prepaid); (b) by registered or certified mail (postage prepaid); or (c) by overnight courier service, to the following addresses of the respective Parties:

 

If to VIASPACE, to:

 

VIASPACE, Inc.

382 N. Lemon Ave., Suite 364

Walnut, CA 91789

Telephone: 626-768-3360

Facsimile: 626-578-9063

 

With a copy to:

 

LKP Global Law LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Telephone: 424-239-1890

Facsimile: 424-239-1882

Attn: Ryan Hong

If to VGE, to:

 

VIASPACE Green Energy, Inc.

Mr. Sung Chang

131 Bells Ferry Lane

Marietta, Georgia 30066

ATTN: President

With a copy to:

 

McDaniel Law Group, PC

P.O. Box 681235

Marietta, Georgia 30068

Attn: Mr. Frank McDaniel, Esq.

 

 

 

Notices shall be effective upon receipt if delivered personally or by facsimile and confirmed by first class mail, on the third Business Day following the date of registered or certified mailing or on the first Business Day following the date of delivery to the overnight courier. A Party may change its address listed above by written notice to the other Party.

 

12.3           Governing Law. The laws of the State of Georgia, United States of America shall govern this Agreement; except , however , that with respect to any dispute that may arise under this Agreement in connection with a Party’s Intellectual Property Rights, including, without limitation, the enforceability of restrictive covenants with respect thereto, such dispute shall to the extent it may be otherwise governed by the laws of the various states, shall in such a case be governed by the laws of the State of Georgia, disregarding such states’ conflict of law provisions. The Parties disclaim application of the United Nations Convention on Contracts for the International Sale of Goods.

 

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12.4           Alternative Dispute Resolution. Both Parties will attempt to settle any claim arising out of this Agreement through good-faith negotiation. The following process will be used to resolve disputes. The Parties will submit the dispute in writing to a senior executive from each Party. If those attempts fail, either Party may demand non-binding mediation, the cost of which will be shared equally by the Parties, except that each Party will pay its own attorney’s fees. Within thirty (30) days after written notice demanding mediation, the Parties will in good faith choose a mutually acceptable mediator. If the dispute cannot be resolved through mediation within ninety days, either Party may submit the dispute to a court of competent jurisdiction. Use of any dispute resolution procedure will not be construed under the doctrines of laches, waiver, or estoppel to adversely affect the rights of either Party. Either Party may resort to judicial proceedings for intellectual property disputes or if interim relief is necessary to prevent serious and irreparable injury.

 

12.5           Venue and Jurisdiction. The transactions contemplated in this Security Agreement shall be governed as to validity, interpretation, construction, effect, and in all other respects by the laws of the State of Georgia, without regard to the conflicts of laws principals thereof. Each of the Parties irrevocably submits to the exclusive jurisdiction of the courts of the State of Georgia located in the County of Cobb and the United States District Court in and for the Northern District of Georgia for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated thereby. Each Party irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court, irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts, and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

12.6           Waiver of Jury Trial . EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

 

12.7           Claim for Attorneys Fees In the event any attorney is employed by any Party to this Agreement with regard to any legal action, arbitration or other proceeding brought by any Party to this Agreement for the enforcement of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, then the prevailing Party, whether at trial or upon appeal, and in addition to any other relief to which the prevailing Party may be granted, shall be entitled to recover from the losing Party all costs, expenses, and a reasonable sum for attorney fees incurred by the prevailing Party in bringing or defending such action, arbitration, or proceeding, and in enforcing any judgment granted therein, all of which costs, expenses and attorneys fees shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such matter shall contain a specific provision providing for the recovery by the prevailing Party of attorney fees, costs, and expenses incurred in enforcing such judgment. For purposes of this Section, attorney fees shall include, without limitation, fees incurred in the following: post-judgment motions; contempt proceedings; garnishment, levy, and debtor and third Party examinations; discovery; and bankruptcy litigation.

 

12.8           Assignment. Neither this Agreement nor any of the rights or obligations of VIASPACE may be assigned, encumbered, sublicensed or otherwise transferred by VIASPACE, without the prior written consent of VGE, in its discretion; provided , however , that VIASPACE, without such consent, may assign this Agreement in connection with the transfer or sale of substantially all of its business or assets to which this Agreement pertains or in the event of its merger or consolidation with another company, except , however , that in no event shall this Agreement to assigned to any Person who is engaged in business activities involving any Competitive Product. Any permitted assignee of VIASPACE shall assume all obligations of VIASPACE under this Agreement. No assignment shall relieve VIASPACE of responsibility for the performance of any accrued obligation which VIASPACE then has hereunder. Any attempted assignment in violation of this provision is void. This Agreement may be assigned by VGE in its sole discretion without prior notice.

 

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12.9           Successors. This Agreement and the provisions hereof shall inure to the benefit of and be binding upon each Party and its successors and assigns.

 

12.10        Entire Agreement; Amendments. Unless the Parties otherwise agree in writing, this Agreement and the attached Exhibits represent the Parties’ entire understanding, and supersede all previous and contemporaneous agreements between the Parties, with respect to the subject matter contained herein. Each attached Exhibit is incorporated into this Agreement by reference. There are no promises, terms or conditions, oral or written, expressed or implied, other than those contained in this Agreement and/or the attached Exhibits. Except as expressly provided in this Agreement, this Agreement and each Exhibit may be modified or amended only by the Parties’ written agreement.

 

12.11        Exhibits. All Exhibits or descriptions referred to in this Agreement are expressly incorporated herein by reference and set forth in full, whether or not attached hereto.

 

12.12        Waiver; Severability. No delay or waiver (or single or partial exercise) on the part of either Party on any one or more occasions in exercising any right, power or privilege hereunder shall operate as a waiver thereof or of any other right, power or privilege hereunder. Any such waiver shall be made in writing. If any provision of this Agreement or any Exhibit is held to be invalid or unenforceable to any extent, then: (a) such provision shall be interpreted, construed or reformed to the extent reasonably required to render it valid, enforceable and consistent with the Parties’ original intent underlying such provision and (b) such invalidity or unenforceability shall not affect any other provision of this Agreement or any other agreement between the Parties.

 

12.13        Equitable Relief. Each party hereby acknowledges that its breach of this Agreement would cause irreparable harm and significant injury to the other party that may be difficult to ascertain and that a remedy at law would be inadequate. Accordingly, each party shall have the right to seek and obtain injunctive relief to enforce obligations under the Agreement in addition to any other rights and remedies it may have, with the defending Party in such case waiving the right it may otherwise have to requiring the posting of a bond; provided, however, each party, shall have the right to immediately seek and obtain injunctive relief without any written notice to the other party or if such breach is of a nature that is not subject to cure or is otherwise based on any violation of applicable law or a breach of any covenant pursuant to which a Party agrees to refrain from any act under this Agreement, including, without limitation, Article 2, 9 or Section 12.15 of this Agreement.

 

12.14        Independent Contractor. The Parties are independent contractors and nothing contained in this Agreement shall be construed to place them in the relationship of partners, principal and agent, employer/employee or joint venturer. Neither Party shall have power or right to bind or obligate the other, nor hold itself out as having such authority.

 

12.15        No Third Party Beneficiaries. This Agreement is not intended to confer upon any person other than the Parties hereto any rights or remedies hereunder; provided , however , that Sung Chang or his designee shall be a third party beneficiary under this Agreement for purposes of the right and enforcement thereof the to be paid timely by VIASPACE the Legal Fees as set forth in Section 6.1 of this Agreement.

 

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12.16        Restrictive Covenant. Neither Party (nor any of its Affiliates) shall, except with the prior written consent of the other, during the Term and for a period of two (2) years thereafter, solicit, employ or hire any employee then employed by the other Party, or any employee that has been in the other Party’s employ ninety (90) days prior to the date of expiration or termination of this Agreement.

 

12.17        Construction; Headings. This Agreement and all attached Exhibits shall be deemed to have been drafted by both Parties and shall not be construed against either Party as the draftsperson hereof. All section titles or headings contained in this Agreement and any Exhibit are for convenience only, shall not be deemed a part hereof or thereof and shall not affect the meaning or interpretation of this Agreement or any Exhibit. In this Agreement, the words “including” and “includes” shall be deemed to be followed by the phrase “without limitation.”

 

12.18        Counterparts. This Agreement and any amendment hereto, may be executed in multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute a single Agreement, by and among each of the Parties hereto.

 

IN WITNESS WHEREOF , the Parties have executed this Agreement as of the Effective Date.

 

VIASPACE

VIASPACE Inc.

By: /s/ Carl Kukkonen               

Name: Carl Kukkonen

Title: CEO

VGE

VIASPACE Green Energy, Inc.

By: /s/ Sung Chang                    

Name: Sung Chang

Title: President

 

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EXHIBIT “A”

 

VIASPACE, INC.

BUSINESS PROTECTION AGREEMENT

WITH [EMPLOYEE][CONSULTANT]

 

THIS BUSINESS PROTECTION AGREEMENT (the “Agreement”) is made and entered into as of the __ day of September 2012 (the “Effective Date”), by and between VIASPACE, Inc., a Nevada corporation doing business within the State of [____] (the “Company”) and [_____________], an individual residing in the State of [______] (“[Consultant][Employee]”). Company and [Consultant][Employee] are sometimes individually referred to in this Agreement as a “Party” and collectively as the “Parties.”

 

Each of the Parties hereby acknowledges that it has entered into, is entering into or as soon as reasonably practicable will enter into [a consulting or other independent contractor relationship][an employment relationship], pursuant to which [Consultant][Employee] will be engaged by Company to render certain services for and on behalf of Company and its Affiliate (the “[Consulting][Employment] Relationship”). Except as otherwise provided in this Agreement, (a) the terms and conditions for such [Consulting][Employment] Relationship ( e.g. , scope of services, compensation and the duration for which such services shall be rendered) are to be evidenced in a separate agreement, whether oral or in writing (the “Services Agreement”) and (b) capitalized terms and phrases shall have the meaning ascribed thereto in that certain attachment entitled “Attachment 1, Definitions,” which attachment is made a part hereof and incorporated herein.

 

In consideration of the benefits each Party is to receive or receives as a result of the [Consulting][Employment] Relationship, the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound by this Agreement, hereto hereby agree as follows:

 

1. Restrictive Covenants .

 

(a)     Nondisclosure .

 

(i)     In General. [Consultant][Employee] acknowledges that it may be exposed to certain Confidential Information and Trade Secrets and the Intellectual Property Rights thereto during the Term, and its unauthorized use or disclosure of such information, data or rights could cause immediate and irreparable harm to Company or an Affiliate or a Business Client thereof. Accordingly, except to the extent that it is required to use such property, information, technology or data to perform its obligations under the [Consulting][Employment] Relationship, [Consultant][Employee] agrees [and agrees to cause its Designated Representatives (as defined below)] to strictly maintain the confidentiality, including, without limitation, to refrain, directly or indirectly, from releasing, publishing, revealing or otherwise disclosing to any other Person, any and all such Confidential Information during the Term and for a period of (1) in the case of Confidential Information, [five (5)] years immediately thereafter and (2) in the case of Trade Secrets, for the entire period during which, if longer than five years, such information shall continue constitute a Trade Secret, without the express and duly authorized written consent of Company, which consent may be withheld, delayed, denied or conditioned in Company’s sole and absolute discretion.

 

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(ii)   [Consultant Disclosure to Designated Representatives. Without limiting the generality of the foregoing, Consultant may disclose the Confidential Information to only (1)(A) its directors, officers or employees who prior to any such disclosure shall have agreed in writing to the terms and conditions of this Agreement (or are otherwise obligated to be subject to such terms and conditions), pursuant to which, among other things, such Persons have agreed to both maintain such Confidential Information in strict confidence and exclusively use such Confidential Information solely for the Consulting Relationship and (B) agents who are obligated to Consultant under fiduciary standards of confidentiality ( i.e. , attorneys, licensed accountants and CPA’s)(collectively, the “Designated Representatives”) and (2) who are thereafter provided such Confidential Information only on a “need-to-know” basis for the [Consulting][Employment] Relationship. Consultant agrees to and shall be responsible for any breach of this Agreement by itself or any Person to whom it may have made a disclosure of the Confidential Information of Company or an Affiliate, including, without limitation, any of its Designated Representatives.]

 

(iii)   Exception to Confidentiality Obligation. The confidentiality obligations hereunder shall not apply to information that can be demonstrated by [Consultant][Employee] to:

 

(1)     Have been developed independently of Company or any Affiliate by or known to [Consultant][Employee] prior to the earlier of (1) the Effective Date of this Agreement or (2) the [Consulting][Employment] Relationship, and not otherwise assigned, transferred or otherwise conveyed to Company or any Affiliate under this Agreement or any other agreement;

 

(2)     Have been rightfully received by [Consultant][Employee] in accordance with this Agreement after disclosure to Company by a third party who did not require Company or any Affiliate or [Consultant][Employee] to hold it in confidence or limit its use and who did not acquire it, directly or indirectly, from the Company or any Affiliate under a continuing obligation of confidence; or

 

(3)     Have been in the public domain as of the date of this Agreement, or comes into the public domain during the term of this Agreement through no fault of [Consultant][Employee].

 

(iv)   Procedure for Compelled Disclosure. In the event Consultant or its Designated Representatives are legally required or compelled by law, regulation or other legal process to disclose any of the Confidential Information of Company or an Affiliate, Consultant shall and shall cause its Designated Representative to: (1) provide prompt prior written notice of such requirement to Company, (2) afford Company an opportunity to oppose, limit or secure confidential treatment for such disclosure, and (3) if Company is unsuccessful in its efforts pursuant to clause (2), furnish only that portion of the Confidential Information, which it is legally required to disclose as advised by its legal counsel.]

 

(b)     Limitations on Use . Except to the extent it is otherwise required to use the Intellectual Property of Company or any Affiliate in the performance of its obligations under the [Consulting][Employment] Relationship, [Consultant][Employee], directly or indirectly, shall not and shall not attempt to, use or modify for use or otherwise reverse engineer or decompile, for any purpose whatsoever or for any Person any of the Intellectual Property (including, without limitation, any process, procedure, software, hardware, firmware or other technology programs) of Company or any Affiliate during the Term of this Agreement or at any time thereafter, without the express and duly authorized written consent of Company, which consent may be withheld, delayed, denied or conditioned in Company’s sole and absolute discretion. As between the Parties, [Consultant][Employee] further agrees that any and all Intellectual Property of Company or any Affiliate shall remain the sole and exclusive property of Company, and [Consultant][Employee] shall not have or acquire any ownership or other interest or rights therein.

 

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(c)     Limitation on Solicitation of Business Clients and Personnel . Without the prior written consent of Company, which consent may be withheld, delayed, denied or conditioned in Company’s sole and absolute discretion, [Consultant][Employee] shall not, directly or indirectly, alone or in conjunction with any other Person, during the Term and for a period of two (2) years immediately thereafter:

 

(i)      Solicit any Business Client (1) to which Company or any Affiliate is providing or actively seeking to provide services or products and (2)(A) with whom or which [Consultant][Employee] had material contact during the Term or (B) with respect to whom or which [Consultant][Employee] was provided Confidential Information or Trade Secrets by Company or any Affiliate during the Term, for the purpose of providing such Business Client products or services that are substantially similar to or competitive with the Restricted Business;

 

(ii)     Solicit any Business Partner with whom or which [Consultant][Employee] had material contact during the Term or with respect to whom or which [Consultant][Employee] was provided Confidential Information or Trade Secrets by Company or any Affiliate during the Term, for the purpose of encouraging such Person to sever its employment or other contractual relationship, whether oral or written, with Company or an Affiliate, or

 

(iii)      Hire, engage or otherwise retain (1) an Company Service Partner or (2) any Person who was an Company Service Partner within that six (6) consecutive calendar month period immediately preceding the Termination Date, to perform services of a nature substantially similar to that which such Company Service Partner performed for Company or any Affiliate within that one (1) year period prior to any such hiring, engagement or other retention or attempted hiring, engagement or other retention by [Consultant][Employee].

 

(d)     Non-Disparagement . During the Term and for a period of two (2) years immediately following the Termination Date, [Consultant][Employee] shall not engage in the public or private disparagement or criticism, including, without limitation, by way of preparing or publishing (or both) articles or other written materials, of or about Company or any Affiliate or any business methods, practice, operation, program, product or service or any officer, director, employee, consultant, or agent thereof.

 

(e)     Duty to Provide Notice . Company or any Affiliate shall have the right to inform any other third-party that Company or any such Affiliate believes that such third party to be contemplating or participating with [Consultant][Employee] in the use of or receiving from [Consultant][Employee] services or information in violation of this Agreement or the rights of Company or any Affiliate hereunder, and that participation by any such third-party with [Consultant][Employee] in activities in violation of this Agreement may give rise to claims by Company or an Affiliate against such third-party.

 

2. Assignment of Work Product .

 

(a)    Work for Hire . [Consultant][Employee] further acknowledges that all original works of authorship that are made by it (solely or jointly with others) during the Term and within the scope of the [Consulting][Employment] Relationship shall constitute, as between the Parties, the sole and exclusive property of Company and protectable by it under applicable copyright laws. As between the Parties, Company owns and shall own, and [Consultant][Employee] hereby agrees to assign and assigns to Company any and all of such Work Product to the fullest extent allowable by law, and [Consultant][Employee] shall promptly disclose, but in no event later than ten (10) consecutive business days following creation, invention or discovery thereof, all such Work Product to Company. In no event shall [Consultant][Employee] use in connection with the [Consulting][Employment] Relationship or otherwise disclose to Company or any Affiliate or any Business Partner all or any part of the confidential information, trade secrets or Intellectual Property owned or in which rights are held to the exclusion of Company by either [Consultant][Employee] (including, without limitation, the Excluded Property) or any third-party, without the prior written consent of Company, which consent may be withheld, delayed, denied or conditioned in its sole and absolute discretion.

 

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(b)    Moral Rights . To the extent [Consultant][Employee] retains any Moral Rights in and to any Work Product, [Consultant][Employee] hereby waives such Moral Rights and consents to any action with respect to such Moral Rights by or authorized by Company or any Affiliate and specifically grants to Company or any Affiliate the right to alter such Work Products. [Consultant][Employee] will confirm any such waivers and consents from time to time as requested by Company or any Affiliate.

 

3.              Assistance in Securing Intellectual Property Rights .

 

(a)    In General . [Consultant][Employee] will assist Company or any Affiliate (or both) in every proper way to obtain and from time to time enforce United States and foreign Intellectual Property Rights relating to Work Product in any and all countries. To that end, [Consultant][Employee] will execute, verify, and deliver such documents and perform such other acts (including appearances as a witness) as Company or any Affiliate may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such Intellectual Property Rights and the assignment thereof. In addition, upon the request of Company or any Affiliate, [Consultant][Employee] shall execute, verify, and deliver assignments of such Intellectual Property Rights to Company or its designee. [Consultant][Employee]’s obligation to assist Company or any Affiliate (or both) with respect to Intellectual Property Rights relating to such Work Product in any and all countries shall continue beyond the Termination Date.

 

(b)    Limited Power of Attorney . In the event Company or any Affiliate is unable for any reason, after reasonable effort, to secure [Consultant][Employee]’s signature on any document needed in connection with the actions specified in the preceding paragraph, [Consultant][Employee] hereby irrevocably designates and appoints Company and its duly authorized officers and agents as its agent and attorney in fact, coupled with an interest, to act for and on its behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph thereon with the same legal force and effect as if executed by [Consultant][Employee] . [Consultant][Employee] hereby waives and quitclaims to Company any and all claims, of any nature whatsoever, that [Consultant][Employee] now or may hereafter have for infringement of any Intellectual Property Rights assigned hereunder to Company.

 

4.                 No Conflicting Obligation . [Consultant][Employee] represents that its performance of its obligations under this Agreement and under the [Consulting][Employment] Relationship does not and will not breach any agreement between it and any other Person. [Consultant][Employee] has not entered into, and it agrees it will not enter into, any agreement either written or oral in conflict herewith. [Consultant][Employee] shall, during the Term of the [Consulting][Employment] Relationship, diligently promote the interests of Company and each Affiliate. [Consultant][Employee] shall serve Company and each Affiliate to the best of its ability, faithfully, honestly, diligently, efficiently and professionally and in compliance with any and all applicable rules, regulations and laws.

 

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5.                 Company Property . Upon the earlier to occur of any request by Company or any Affiliate (or both) or the Termination Date, [Consultant][Employee] shall promptly deliver, but in no event later than ten (10) consecutive business days, to Company all drawings, Work Product and other Intellectual Property owned by or in which rights are held by Company or any Affiliate (and regardless of whether any of the foregoing is kept in physical or electronic form), including, without limitation, any Confidential Information and Trade Secrets. [Consultant][Employee] further agrees that it has no right in or to any property owned, licensed, or otherwise controlled by Company or any Affiliate, whether such property is situated on the premises of Company or any Affiliate or otherwise and, in particular, has no right of privacy or expectation thereof in or to any computer provided by Company to [Consultant][Employee] or any disks and other storage media relating thereto, filing cabinets or other work areas, all of which being subject to inspection by Company personnel at any time with or without notice.

 

6.                 Notices . Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given on the date of service if personally served or if telecopied (if telecopied on a business day and during business hours at the place of receipt and if receipt is confirmed) or three (3) days after mailed if mailed by reputable international overnight delivery service, postage prepaid and in any event addressed to the address set forth in the signature clause to this Agreement or to such other address as shall be designated by written notice issued pursuant hereto.

 

7.                 Remedies; Damages, Injunctions and Specific Performance .

 

(a)    Ancillary Agreement . This Agreement shall be construed as an agreement ancillary to the Services Agreement, written or oral, entered into by and between the Parties otherwise evidencing the [Consulting][Employment] Relationship, and the existence of any claim or cause of action of [Consultant][Employee] against Company or any Affiliate, whether predicated on the Services Agreement or otherwise, shall not constitute a defense to the enforcement by Company of this Agreement.

 

(b)    Survival . It is expressly understood and agreed that the covenants, agreements and services to be rendered and performed by [Consultant][Employee] under this Agreement shall survive any termination or expiration of this Agreement, whether voluntary or involuntary, with or without cause, and are special, unique, and of an extraordinary character.

 

(c)    Remedies . In the event of any default, breach or threatened breach by [Consultant][Employee] of this Agreement, Company shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either at law or in equity, and shall be entitled to such relief as may be available to it pursuant hereto, at law or in equity, including, without limitation: (i) damages for any breach of this Agreement; (ii) an order for the specific performance hereof by [Consultant][Employee]; or (iii) an order enjoining [Consultant][Employee] from breaching such provisions, without bond and without prejudice to any other rights and remedies that Company or any Affiliate may have for a breach of this Agreement.

 

(d)    Tolling . [Consultant][Employee] hereby expressly acknowledges and agrees that in the event the enforceability of any of the terms of this Agreement shall be challenged in court or pursuant to arbitration and [Consultant][Employee] is not enjoined (either temporarily or permanently) from breaching any of the restraints set forth in this Agreement, then if a court of competent jurisdiction or arbitration panel finds subsequently that the challenged restraint is enforceable, the time period of the restraint shall be deemed tolled upon the filing of the lawsuit challenging the enforceability of the restraint until the dispute is finally resolved and all periods of appeal have expired.

 

 

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(e)    Recovery of Attorney’s Fees . In the event of any litigation arising from or relating to this Agreement, the prevailing party in such litigation proceedings shall be entitled to recover, from the non-prevailing party, the prevailing party’s reasonable costs and attorney’s fees, in addition to all other legal or equitable remedies to which it may otherwise be entitled.

 

(f)     Governing Law; Waiver of Jury Trial and Election of Venue .

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [_____] APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

 

BECAUSE DISPUTES ARISING IN CONNECTION WITH COMMERCIAL MATTERS, INCLUDING UNDER THIS AGREEMENT, ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES (IF ANY) BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR MATTERS RELATED HERETO.

 

THE PARTIES HEREBY AGREE TO SUBMIT TO THE VENUE AND JURISDICTION OF THE SUPERIOR COURTS IN AND FOR THE COUNTY OF [_____], STATE OF [_____], USA, OR THE FEDERAL DISTRICT COURT IN AND FOR THE ______ DISTRICT OF ______, USA, IN WHICH ANY LEGAL ACTION BY EITHER PARTY TO ENFORE OR DEFEND RIGHTS UNDER THIS AGREEMENT SHALL BE BROUGHT AND WHICH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OVER ANY SUCH LEGAL ACTION.

 

8.     Miscellaneous . This Agreement, together with the Services Agreement, if any, contains the complete agreement concerning the [Consulting][Employment] Relationship between Company or any Affiliate and [Consultant][Employee] as of the date hereof. The waiver by any party to this Agreement of a default or breach of any Section, subsection or provision of this Agreement shall not operate or be construed as a waiver of any prior or subsequent default or breach of the same or of a different Section, subsection or provision by any party hereto. Should any provision of this Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party that itself, or through its agent, prepared the same, and it is expressly agreed and acknowledged that Company and [Consultant][Employee] and each of it and its [Consultant][Employee]s, legal and otherwise, have participated in the preparation hereof. All Sections, subsections, paragraphs, terms and provisions of this Agreement are severable, and the unenforceability or invalidity of any of the terms, provisions, Sections, subsections or paragraphs of this Agreement shall not affect the validity or enforceability of the remaining terms, provisions, Sections, subsections or paragraphs of this Agreement, but such remaining terms, provisions, Sections, subsections or paragraphs shall be interpreted and construed in such a manner as to carry out fully the intention of the Parties. The Section headings in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute one and the same instrument. The rights and obligations of Company or any Affiliate under this Agreement shall inure to the benefit of and shall be binding upon any affiliate, successor or assign of or to the business of Company or any Affiliate. Neither this Agreement nor any rights or obligations of [Consultant][Employee] shall be transferable or assignable by [Consultant][Employee] without Company's prior written consent, and any attempted transfer or assignment hereof by [Consultant][Employee] not in accordance herewith shall be null and void.

 

29
 

 

IN WITNESS WHEREOF , the Parties hereto have caused this Agreement to be executed on the date first set forth above.

 

Company

 

 

VIASPACE, Inc.

Signature:                            

Printed Name: Mr. __________

Title: President

Address:

[CONSULTANT][EMPLOYEE]

 

 

[_________]

Signature: ____________________________

Printed Name:

Address:

 

 

 

30
 

 

ATTACHMENT 1

TO

BUSINESS PROTECTION AGREEMENT

 

DEFINITIONS

 

For purposes of this Agreement, the following terms and phrases shall have the meaning ascribed thereto:

 

Affiliate” means, with respect to Company, a Person, directly or indirectly, whether before, as of or following the Effective Date, that controls, is controlled by or is under common control with Company. For purposes of this definition, “control” shall mean beneficial ownership (direct or indirect) of more than 50% of the outstanding voting stock or other voting rights entitled to elect directors (or in the case of an entity that is not a corporation the election or appointment of the corresponding managing authority).

 

“Business Client” shall mean any Person who or that is an actual or prospective purchaser of either the services or products offered by Company or an Affiliate ( i.e. , a client or customer).

 

“Business Partner” shall mean any Business Client, vendor, supplier, investor, lender, Service Partner with which Company or any Affiliate maintains or undertakes to develop or maintain a business relationship.

 

“Company Service Partner” shall mean any Person other than [Consultant][Employee] who rendered services as either an consultant or independent contractor, whether under the terms of an agreement substantially similar to this Agreement or otherwise, for and on behalf of Company or any Affiliate and with whom [Consultant][Employee] has material contact during the Term of this Agreement.

 

Confidential Information” shall mean any and all Intellectual Property or other tangible or intangible property owned, licensed or otherwise controlled by Company or any Affiliate or any Business Client and the Intellectual Property Rights thereto, which is of tangible or intangible value to Company or any Affiliate or any Business Client and is not public information or is not generally known or available to the competitors of either Company or any Affiliate or of an Business Client, but is known only to Company or any Affiliate or any Business Client or any [Consultant][Employee], independent contractor or agent thereof to whom such information must be confided in order to apply it to the uses intended.

 

“Developments” shall mean any ideas, compositions, concepts, inventions, modifications, discoveries, designs, developments, improvements, processes, specifications, drawings, work of authorships, algorithms, documentations, formulae, data, techniques, know-how, source codes and object codes and other computer codes and software programs and related documentation, technologies, research and other Intellectual Property any and all Intellectual Property Rights therein or thereto (whether or not patentable or registerable under copyright, trademark or similar statutes or subject to analogous protection); provided , however , that in no event shall the term “Developments” include the Excluded Property.

 

“Excluded Property” shall mean those items of personal property either owned by [Consultant][Employee] or to which [Consultant][Employee] has exclusive rights and listed on Schedule “1,” entitled “Excluded Property,” which is attached hereto and made a part hereof.

 

31
 

 

Intellectual Property ” shall mean all of the following in any jurisdiction throughout the world: (a) all Developments (whether patentable or unpatentable and whether or not reduced to practice) and all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof; (b) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate names, Internet domain names, and rights in telephone numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith; (d) all mask works and all applications, registrations, and renewals in connection therewith; (e) Work Product and Moral Rights; (f) all business plans, methods, practices, concepts and opportunities, whether actual or prospective; business and financial information and records, including, without limitation, accounting records, tax returns, financial statements, projections, forecasts or other budgets, other financial data or plans, business plans and strategies; advertising and promotional materials, products and product plans, pricing or other strategies, whether implemented or not; (g) Health Information (as defined in Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)); (h) the identity of any and all Business Partners and the compilation of any identifying information relating thereto ( e.g. , contact lists); actual or prospective Business Partner-related information, whether received from or otherwise pertaining to such Business Partners; (i) computer or data-base files; passwords or other access codes; software programs, language, algorithms codes; reports; analyses; notes; interpretations; formulae, processes, technology, inventions, patents; (j) the terms of this Agreement and any other agreement between the Parties; and (k) the Intellectual Property Rights to any and all of the foregoing and all copies and tangible embodiments thereof (in whatever form or medium).

 

“Intellectual Property Rights” shall mean any and all rights in and to Intellectual Property, including, without limitation, patent rights, copyrights, sui generis rights, trade secrets, mask work rights and other such rights, throughout the world.

 

“Moral Rights” shall mean all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist's rights,” “droit moral rights,” or the like.

 

“Person” shall mean any individual, partnership, limited partnership, limited liability partnership, limited liability company, corporation, trust, association, non-profit or charitable organization or other entity, or an unincorporated organization, a governmental entity or any department or agency thereof.

 

“Restricted Business” shall mean, directly or indirectly, ________________________________.

 

“Term” shall mean that period (a) commencing with the earlier of the (i) Effective Date or (ii) the date on which the [[Consulting][Employment] Relationship][Employment Relationship] first commenced and (b) the ending with the Termination Date.

 

“Termination Date” shall mean the date that coincides with the day on which services are last performed by [Consultant][Employee] for or on behalf of Company or any Affiliate under the [[Consulting][Employment] Relationship][Employment Relationship].

 

“Trade Secrets” shall mean information, including, but not limited to, Confidential Information, that: (a) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (to the extent that applicable law mandates a definition of “trade secret” inconsistent with the foregoing definition, then the foregoing definition shall be construed in such a manner as to be consistent with the mandated definition under applicable law).

 

“Work Product” shall mean any and all Developments (and all Intellectual Property Rights with respect thereto), whether or not patentable or registerable under copyright or similar statutes, that were or are developed, made, conceived or reduced to practice or learned by [Consultant][Employee], either alone or jointly with others, during the Term or within twelve (12) months following the Termination Date and any and all of [Consultant][Employee]’s][Employee’s] right, title, and interest, if any, therein or thereto.

 

32
 

 

SCHEDULE 1

TO

BUSINESS PROTECTION AGREEMENT

 

 

Listing of Excluded Property

 

 

None.

 

 

33
 

 

EXHIBIT “B”

 

ROYALTY PAYMENTS

 

Running Royalty:

 

VIASPACE shall pay VGE for and during the Term a royalty of eight percent (8%) on Net Sales (the “Running Royalty”) made in the VIASPACE Territory. Payment of the Running Royalty shall be due and owing thirty (30) days following the end of the first calendar quarter during which such Net Sales are made and each calendar quarter thereafter, with each such calendar quarter beginning on January 1 st , April 1 st , July 1 st and October 1st.

 

Conditions for Conditional Renewal Terms.

 

The First Renewal Term : As a condition to the right to renew the Initial Term, for years three and four following the Effective Date (the “First Renewal Term”), VIASPACE shall have achieved during the Initial Term the following milestones as a condition to any such renewal:

 

· One or more fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the Initial Term, pursuant to which VIASPACE is to be paid the aggregate amount of at least $200,000 within that 24 consecutive monthly period following the signing (the “Initial Sales Milestone”); and
     
· Two or more, third party growing locations of at least 10 hectares in total shall have been obtained and planted during the Initial Term, which shall be subject to the reasonable satisfaction of VGE.

 

The Second Renewal Term : As a condition to the right to renew the First Renewal Term (for years five and six) of the License, VIASPACE shall have achieved during the First Renewal Term the following milestones as a condition to any such renewal:

 

· A total of least three or more (including the above) fully-executed, third party sales contracts for the sale of Giant King Grass shall have been entered into during the First Renewal Term, pursuant to which VIASPACE is to be paid the aggregate amount of $400,000, with not less than $100,000 of the Initial Sales Milestone having been paid during the First Renewal Term and with the remaining unpaid balance of the Initial Sales Milestone being paid within six months of the Second Renewal Term (e.g., in the fifth year) and the Second Sales Milestone being paid in full within that 24 consecutive monthly period following the signing of any such third contract; and
     
· A total of at least three or more (including the two above) growing locations of at least 30 hectares in total shall have been obtained and planted during the Second Renewal Term, which shall be subject to the reasonable satisfaction of VGE.

 

 

 

34
 

 

Third Renewal Term : As a condition to the right to renew the Second Renewal Term (for years seven and eight) of the License (the “Third Renewal Term”), VIASPACE shall have achieved during the Second Renewal Term the following milestones as a condition to any such renewal:

 

· A total of least four or more (including the above) fully-executed third party sales contracts for the sale of Giant King Grass shall have been entered into, pursuant to which VIASPACE is to be paid the aggregate amount of $1,000,000, with not less than $500,000 having been paid prior to renewal;
     
· A total of at least four or more (including the above) growing locations of at least 40 hectares in total shall have been obtained and planted, which shall be subject to the reasonable satisfaction of VGE.

 

Fourth Renewal Term : As a condition to the right to renew the Third Renewal Term (for years nine and 10) of the License (the “Fourth Renewal Term”), VIASPACE shall have achieved during the Third Renewal Term the following milestones as a condition to any such renewal:

 

· A total of least five or more (including the above) fully-executed third party sales contracts for the sale of Giant King Grass shall have been entered into, pursuant to which VIASPACE is to be paid the aggregate amount of $1,500,000, with not less than $750,000 having been paid prior to renewal; and
     
· A total of at least five or more (including the above) growing locations of at least 50 hectares in total shall have been obtained and planted, which shall be subject to the reasonable satisfaction of VGE

 

 

35

Exhibit 10.3

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (this " Agreement "), is executed as of September 30, 2012, by and between VIASPACE Inc., a Nevada corporation (the " Company "), and Kevin Schewe, an individual (the " Lender ").

 

WHEREAS, in order to fund the Company’s operations for the near future, the Company wishes to borrow up to $1,000,000 from the Lender as a secured convertible note (“ Aggregate Loan Limit ”); and

 

WHEREAS, the Lender is willing to provide such financing on terms and conditions as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Lender, intending to be legally bound, agree as follows:

 

ARTICLE 1
definitions

 

1.1             Defined terms . Certain capitalized terms used in this Agreement shall have the specific meanings defined below:

 

Additional Loan Closing Date ” shall mean the date upon which any Additional Loan is made to the Company.

 

Business Day ” shall mean a day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required by law to close.

 

Initial Loan Closing Date ” shall mean the date upon which the Initial Loan is made to the Company.

 

Interest Rate ” shall mean six percent (6%) per annum.

 

Maturity Date ” shall mean the second anniversary of the date of the issuance of the Note.

 

Principal Market ” shall be the principal trading exchange or market on which the Company’s Common Stock is traded, including without limitation, American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock Exchange.

 

“Average Trading Price” shall mean the average closing price of the Common Stock on the principal trading exchange on which the Company’s Common Stock is traded.

 

1
 

 

 

ARTICLE 2
the loans

 

2.1             Initial Loan . According to the terms and subject to the conditions of this Agreement, the Lender shall make a single-installment loan to the Company on the Initial Loan Closing Date in the amount of $50,000 (the " Initial Loan "), and may advance additional Loans, upon the Company’s request and accordance with the terms set forth in Section 2.2, in the amount up to $950,000 (the " Additional Loans ") (the Initial Loan and the Additional Loan, if any, shall be referred to collectively as the " Loans "). The Loans shall be each evidenced by a secured convertible promissory note in the form attached hereto as Exhibit A (" Note "), duly executed on behalf of the Company and dated as of the Initial Loan Closing Date. The Note shall be convertible, upon Lender’s request, into shares of Company common stock at a price per share equal to eighty percent (80%) of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note.

 

2.2             Additional Loans . Provided there is no Event of Default under this Agreement and within sixty (60) months of this Agreement, the Company may notify the Lender in writing at any time after 30 days from the most recent Closing Date that the Company after reviewing its working capital requirements and its annual budget with its Board of Directors, has determined that it needs to borrow an Additional Loan. Subject to the conditions set forth in Section 3.2, the Lender may make the Loan, which shall be no less than $16,667 per Additional Loan, within 15 days of the request for the Additional Loan but after the conditions in Article 3 have been satisfied. Each Additional Loan shall be evidenced by a Note, duly executed on behalf of the Company and dated as of each Additional Loan Closing Date. The aggregate amount of the Loans under the Initial Loan and the Additional Loans shall not exceed the Aggregate Loan Amount.

 

2.3             Interest . The Loan shall bear interest (" Interest ") from the date of payment by the Lender until the Maturity Date at the Interest Rate (calculated on the basis of the actual number of days elapsed over a year of 360 days). Interest is payable by the Company on a monthly basis in arrears on the first Business Day of the month.

 

2.4             Prepayment of the Loan . The Company may from time to time prepay all or any portion of the Loan without premium or penalty of any type. The Company shall give the Lender at least three Business Days’ prior written notice of its intention to prepay the Loan, specifying the date of payment and the total amount of the Loan to be paid on such date.

 

2.5             Maturity Date . The Loan shall be due on the applicable Maturity Date.

 

2.6             Use of Proceeds . The proceeds of the Loan shall be used for working capital purposes of the Company related to commercialization of the Giant King Grass business.

 

ARTICLE 3
conditions precedent to the loan

 

3.1             Conditions on the Initial Loan Closing Date . The obligation of the Lender to make the Initial Loan pursuant to Section 2.1 shall be subject to the satisfaction, on or before the Initial Loan Closing Date, of the conditions set forth in this Section. If the conditions set forth in this Section are not met on or prior to the Initial Loan Closing Date, the Lender shall have no obligation to make the Initial Loan.

 

2
 

 

(a)              The Company shall have duly executed and delivered to the Lender the Note representing the Initial Loan.

 

(b)             The Company shall have duly authorized, executed, and delivered to the Lender a security agreement in the form attached hereto as Exhibit B (the “ Security Agreement ”) to secure the repayment of each Loan and granting the Lender a continuing security interest in all presently existing and hereafter acquired assets and property of the Company.

 

3.2             Conditions on the Additional Loan Closing Date . The obligation of the Lender to make the Additional Loan(s) pursuant to Section 2.2 shall be subject to the satisfaction, on or before the date on which such Loan is made, of the conditions set forth in this Section. If the conditions set forth in this Section are not met on or prior to such date, the Lender shall have no obligation to make the Additional Loan.

 

(a)              The Company shall have duly executed and delivered to the Lender the Note representing the Additional Loan.

 

(b)             The Company shall have used the proceeds from prior Loans and allocated resources in a manner that is reasonably satisfactory to the Lender.

 

(c)              In the Lender’s sole opinion, neither the Lender’s financial condition shall have suffered a material adverse effect nor his other financial commitments or obligations shall have materially increased.

 

ARTICLE 4
representations and warranties

 

4.1             Due Incorporation and Good Standing . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with full and adequate power to carry on and conduct its business as presently conducted, and is duly licensed or qualified in all foreign jurisdictions wherein the failure to be so qualified or licensed would reasonably be expected to have a material adverse effect on the business of the Company.

 

4.2             Due Authorization . The Company has full right, power and authority to enter into this Agreement, to make the borrowings hereunder and execute and deliver the Note as provided herein and to perform all of its duties and obligations under this Agreement and the Note.

 

4.3             Enforceability . This Agreement has been validly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company enforceable against it in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ right and to the availability of the remedy of specific performance.

 

3
 

 

ARTICLE 5
default

 

5.1             Events of Default . The occurrence of any of the following events (each an “ Event of Default ”), not cured in the applicable cure period, if any, shall constitute and Event of Default of the Company:

 

(a)              the failure to make when due any payment described in this Agreement or the Note, whether on or after the Maturity Date, by acceleration or otherwise; and

 

(b)             (i) the application for the appointment of a receiver or custodian for the Company or the property of the Company, (ii) the entry of an order for relief or the filing of a petition by or against the Company under the provisions of any bankruptcy or insolvency law, (iii) any assignment for the benefit of creditors by or against the Company, or (iv) the Company becomes insolvent.

 

5.2             Effect of Default . Upon the occurrence of any Event of Default that is not cured within any applicable cure period, the Lender may elect, by written notice delivered to the Company, to take any or all of the following actions: (i) declare this Agreement terminated and the outstanding amounts under the Note to be forthwith due and payable, whereupon the entire unpaid Loan, together with accrued and unpaid Interest thereon, and all other cash obligations hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Company, anything contained herein or in any of the Note to the contrary notwithstanding, and (ii) exercise any and all other remedies provided hereunder or available at law or in equity upon the occurrence and continuation of an Event of Default. In addition, during the occurrence of any Event of Default, the Company shall not pay make any payment on any other outstanding indebtedness of the Company (other than indebtedness of the Company to which the Lender has agreed in writing to subordinate this Agreement and the Note hereunder).

 

ARTICLE 6
Miscellaneous

 

6.1             Successors and Assigns . Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. This Agreement may be assigned solely by the Lender.

 

6.2             Titles and Subtitles . The titles and subtitles of the Sections of this Agreement are used for convenience only and shall not be considered in construing or interpreting this agreement.

 

6.3             Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed electronically) or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with return receipt requested, addressed as follows:

 

4
 

 

if to the Company, to :

 

VIASPACE Inc.

382 N. Lemon Ave., Suite 364

Walnut, CA 91789

Attn: Chief Executive Officer

Fax: (626) 578-9063

 

if to the Lender, to :

 

Kevin Schewe

380 Fillmore St.

Denver, CO 80206

Fax: (720) 420-3301

 

 

Either party hereto may change the above specified recipient or mailing address by notice to the other party given in the manner herein prescribed. All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally or by facsimile, provided that any such facsimile is received during regular business hours at the recipient's location) or on the day shown on the return receipt (if delivered by mail or delivery service).

 

6.4             Governing Law . This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Colorado without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado.

 

6.5             Waiver and Amendment . Any term of this Agreement may be amended, waived or modified with the written consent of the Company and the Lender.

 

6.6             Remedies . No delay or omission by the Lender in exercising any of its rights, remedies, powers or privileges hereunder or at law or in equity and no course of dealing between the Lender and the undersigned or any other person shall be deemed a waiver by the Lender of any such rights, remedies, powers or privileges, even if such delay or omission is continuous or repeated, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise thereof by the Lender or the exercise of any other right, remedy, power or privilege by the Lender. The rights and remedies of the Lender described herein shall be cumulative and not restrictive of any other rights or remedies available under any other instrument, at law or in equity.

 

* * * * *

 

5
 

 

IN WITNESS WHEREOF, the Company has caused this Loan Agreement to be signed in its name on the date first set forth above.

 

 

  VIASPACE INC.
   
  By:  /s/ Carl Kukkonen
    Carl Kukkonen
Chief Executive Officer
     
     
     
  KEVIN SCHEWE
     
  /s/ Kevin Schewe
     
     

 

 

 

6
 

 

 

Exhibit A
SECURED CONVERTIBLE promissory note

 

 

 

See attached.

 

 

7
 

 

exhibit b
security agreement

See attached.

 

 

 

8

 

Exhibit 10.4

 

NEITHER THE ISSUANCE AND SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR OTHER EXEMPTION UNDER SAID ACT.

 

THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS PROHIBITED EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.

 

VIASPACE INC.

SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

 

$50,000.00   September 28, 2012

FOR VALUE RECEIVED, VIASPACE INC., a Nevada corporation (“ Company ”), promises to pay to Kevin Schewe (“ Holder ”), or its registered assigns, in lawful money of the United States of America the principal sum of FIFTY THOUSAND Dollars ($50,000.00), or such other amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to six percent (6.0%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. Unless converted into Common Stock of Company as set forth in Section 3 and/or Section 8 below, all unpaid principal, together with any then unpaid and accrued interest, shall be due and payable on the earlier of (i) September 28, 2014 (the “ Maturity Date ”), (ii) upon prepayment of all amounts due and payable under this Note in accordance with the terms hereof, or (iii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof. Immediately prior to the issuance of this Note by Company, Holder acknowledges that it has delivered to Company the sum of FIFTY THOUSAND Dollars ($50,000.00) reflecting the principal amount under this Note.

 

This Note is one of a series of notes (the “ Notes ”) having like tenor and effect (except for variations necessary to express the name of the holder, the principal amount of each of the Notes and the date on which each Note is funded) in an aggregate principal amount of up to $1,000,000 issued or to be issued by Company on or about the period from September 2012 to August 2017 (or such other period as agreed upon by the Company and the Holder) pursuant to the terms of a Loan Agreement, dated as of September 30, 2012, by and between Company and the Holder (or his designees) of the Notes (the “ Loan Agreement ”). The Notes shall rank equally without preference or priority of any kind over one another, and all payments on account of principal and interest with respect to any of the Notes shall be applied ratably and proportionately on the outstanding Notes on the basis of the principal amount of the outstanding indebtedness represented thereby.

 

1
 

 

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Company by issuance of this Note, and Holder by the acceptance of this Note, agree:

 

1.                Definitions . As used in this Note, the following capitalized terms have the following meanings:

 

(a)              Common Stock ” shall mean the Company’s Common Stock, par value $0.001.

 

(b)             Collateral ” has the meaning given in Section 4 hereof.

 

(c)              Company ” includes the corporation initially executing this Note and any Person which shall succeed to or assume the obligations of Company under this Note.

 

(d)             Conversion Notice ” has the meaning given in Section 8(e) hereof.

 

(e)              Conversion Period ” shall mean the period from the date of the Note and ending on the Maturity Date.

 

(f)              Conversion Price ” has the meaning given in Section 8(b) hereof

 

(g)             Event of Default ” has the meaning given in Section 6 hereof.

 

(h)             Holder ” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note. “ Holders ” shall mean the Persons collectively specified in the introductory paragraph of this Note and the other Notes or any Persons who shall at the time be the registered holders of this Note and the other Notes.

 

(i)               Majority Holders ” shall mean Holders holding a majority of the aggregate principal amount of the Notes then outstanding.

 

(j)               Note ” shall mean this Senior Secured Convertible Promissory Note.

 

(k)             Obligations ” shall mean and include all loans, advances, debts, liabilities and obligations owed by Company to Holder of every kind and description, now existing or hereafter arising under or pursuant to the terms of this Note including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by Company hereunder.

 

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(l)               Person ” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

 

(m)           Prepayment Amount ” has the meaning given in Section 3 hereof

 

(n)             Prepayment Notice ” has the meaning given in Section 3 hereof.

 

(o)             Sale Transaction ” shall mean a transaction or series of related transactions involving (i) the consolidation or merger of Company with another Person, (ii) a sale of all or substantially all of the assets of Company, (iii) a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of capital stock of Company, (iv) the consummation of a stock purchase agreement or other business combination with another Person whereby such other Person acquires more than the 50% of the outstanding capital stock of Company.

 

(p)             Securities Act ” has the meaning given in Section 5(b) hereof.

 

(q)             Loan Agreement ” has the meaning in the second introductory paragraph of this Note.

 

(r)              Successor Entity ” has the meaning given in Section 10 hereof.

 

Capitalized term not otherwise defined shall have the meaning set forth in the Loan Agreement.

 

2.                Interest . Unless converted into Common Stock of Company as set forth in Section 8 below, or unless prepaid or converted as set forth in Section 3 below, accrued interest on this Note shall be payable on the Maturity Date.

 

3.                Prepayment . During the Conversion Period, Company may, at any time and from time to time, prepay all or any portion of the principal due under this Note, together with accrued interest, without penalty. Company shall effect such prepayment by providing Holder twenty (20) days written notice prior to the date of such prepayment (such notice, a “ Prepayment Notice ”) indicating the amount of principal and accrued interest Company desires to prepay (the “ Prepayment Amount ”). Notwithstanding the foregoing, Holder shall have 10 days following receipt of such Prepayment Notice to notify Company in writing of its election to convert the Prepayment Amount into shares of Common Stock, in which case such Prepayment Amount shall be converted into shares of Common Stock in accordance with the conversion procedures set forth in Section 8(e) hereof (provided that, with respect to conversions effected pursuant to this Section 3, any references to the Conversion Amount in Section 8(e) shall refer to the Prepayment Amount). Should Holder elect to convert the Prepayment Amount into shares of Common Stock, the number of shares of Common Stock into which such Prepayment Amount will be converted shall be determined by dividing the Prepayment Amount by the then applicable Conversion Price.

 

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4.                Security Interest . As security for the payment and performance of the Obligations under this Note and the other Notes, Company hereby grants to the holder of this Note and of the other Notes a first lien security interest in all of Company’s right, title and interest in, to and under all of its personal property, wherever located and whether now existing or owned or hereafter acquired or arising, including all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment (including all fixtures), general intangibles, intellectual property (including all patents and patent applications, all copyrights and applications for copyright, all state (including common law), federal and foreign trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, and all trade secrets), instruments, inventory, investment property, letter-of-credit rights, money and all products, proceeds and supporting obligations of any and all of the foregoing (collectively, the “ Collateral ”). Notwithstanding the foregoing, the security interest granted herein shall not extend to any property, rights or licenses to the extent the granting of a security interest therein would be contrary to applicable law.

 

5.                Representations and Warranties of Holder . Holder represents and warrants to Company as follows:

 

(a)              Binding Obligation . Holder has full legal capacity, power and authority to execute and deliver this Note and to perform his obligations hereunder. This Note is a valid and binding obligation of Holder, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

 

(b)             Securities Law Compliance . Holder has been advised that this Note has not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Holder is aware that Company is under no obligation to effect any such registration with respect to this Note, or the Common Stock issuable or issued pursuant to the conversion of this Note, or to file for or comply with any exemption from registration. Holder has not been formed solely for the purpose of making this investment and is purchasing this Note for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof. Holder has such knowledge and experience in financial and business matters that Holder is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time.

 

(c)              Accredited Investor . Holder is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D of the Securities Act, as presently in effect.

 

(d)             Restricted Securities . Holder understands that this Note is a “restricted security” under the federal securities laws inasmuch as it is being acquired from Company in a transaction not involving a public offering and that under such laws and applicable regulations such Note may be resold without registration under the Securities Act only in certain limited circumstances. In the absence of an effective registration statement covering the Note or an available exemption from registration under the Securities Act, the Note must be held indefinitely. Holder represents that it is familiar with SEC Rule 144, and understands the resale limitations imposed thereby and by the Securities Act.

 

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(e)              Access to Information . Holder acknowledges that Company has given Holder access to the corporate records and accounts of Company and to all information in its possession relating to Company, has made its officers and representatives available for interview by Holder, and has furnished Holder with all documents and other information required for Holder to make an informed decision with respect to the purchase of this Note.

 

6.                Events of Default . The occurrence of any of the following shall constitute an “ Event of Default ” under this Note:

 

(a)              Failure to Pay . Company shall fail to pay (i) when due any principal or interest payment on the due date hereunder or (ii) any other payment required under the terms of this Note on the date due, and (in either case) such payment shall not have been made within twenty (20) days of Company’s receipt of Holder’s written notice to Company of such failure to pay;

 

(b)             Failure to Perform . Company fails to perform any obligation under this Note and does not cure that failure within twenty (20) days of Company’s receipt of Holder’s written notice to Company of such failure to perform; or

 

(c)              Voluntary Bankruptcy or Insolvency Proceedings . Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing; or

 

(d)             Involuntary Bankruptcy or Insolvency Proceedings . Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement.

 

7.                Rights of Holder upon Default . Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 6(c) and 6(d)) and at any time thereafter during the continuance of such Event of Default, the Majority Holders may, by written notice to Company, declare all outstanding Obligations payable by Company under the Notes to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default described in Sections 6(c) and 6(d), immediately and without notice, all outstanding Obligations payable by Company under the Notes shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right power or remedy permitted to him by law, either by suit in equity or by action at law, or both.

 

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8.                Conversion .

 

(a)              Conversion . Holder shall have the right to convert, at any time during the Conversion Period, all or any portion of the principal amount, together with any unpaid and accrued interest, then outstanding under this Note into fully paid and non-assessable shares of Common Stock at a conversion price per share equal to the Conversion Price (as defined below). The number of shares of Common Stock into which such principal and interest then outstanding under this Note will be converted shall be determined by dividing the amount of principal, together with all unpaid and accrued interest, then outstanding under this Note to be converted (the “ Conversion Amount ”) by the Conversion Price.

 

(b)             Conversion Price . Subject to Section 8(c), the “ Conversion Price ” shall be equal to 80% of the Average Trading Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note .

 

(c)              Adjustments to Conversion Price . The Conversion Price shall be subject to proportional adjustments for stock splits, stock dividends, combinations, consolidations, reclassifications and the like.

 

(d)             Conversion Procedure . Before Holder shall be entitled to convert the Conversion Amount then outstanding under this Note into shares of Common Stock, Holder shall surrender this Note at the office of this Company, and shall give written notice (a form of which is attached to this Note, the “ Conversion Notice ”) to Company at its principal corporate office, of the election to convert the same and shall state therein the total Conversion Amount. Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless (i) Holder executes and delivers to Company the Conversion Notice for the converted shares and (ii) this Note is delivered to Company. Company shall, as soon as practicable after such delivery, issue and deliver certificates (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to Company and required by this Note and the Loan Agreement), representing the number of fully paid and non-assessable shares of the Common Stock into which the Conversion Amount will be converted in accordance with the provisions herein, and a new promissory note having like tenor as this Note for the principal amount and interest then outstanding under this Note that are not being so converted. Any conversion pursuant to this Section 8 shall be deemed to have been made immediately prior to the close of business on the date of Company’s receipt of the Conversion Notice, so that the rights of Holder under this Note to the extent of the Conversion Amount shall cease at such time and Holder shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time.

 

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(e)              Fractional Shares; Effect of Conversion . No fractional shares shall be issued upon conversion of this Note. In lieu of Company issuing any fractional shares to Holder upon the conversion of this Note, Company shall pay to Holder an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of the amounts specified in this Section 9(f), Company shall be forever released from all its obligations and liabilities under this Note.

 

(f)              Reservation of Stock Issuable Upon Conversion . Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of this Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of this Note.

 

9.                Reserved

 

10.             Effect of Sale Transaction . Upon the occurrence of any Sale Transaction, the Successor Entity (as defined below) shall succeed to, and be substituted for the Company (so that from and after the date of such Sale Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Sale Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of the Sale Transaction, in lieu of the shares of the Common Stock purchasable upon the conversion of the Notes prior to such Sale Transaction, such shares of common stock (or other securities, cash, assets or other property) of the Successor Entity. The provisions of this Section shall apply similarly and equally to successive Sale Transactions and shall be applied without regard to any limitations on the conversion of this Note. As used in this Section 10, “ Successor Entity ” means the Person, which may be the Company, formed by, resulting from or surviving any Sale Transaction, or the parent entity of such Person, as applicable.

 

11.             Successors and Assigns . Subject to the restrictions on transfer described in Sections 12 and 13 below, the rights and obligations of Company and Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

12.             Waiver and Amendment . Any term of this Note may be amended or waived only with the written consent of Company and the Majority Holders; provided, however, that any such amendment or modification which by its terms would not apply equally to all holders of the Notes shall not be applicable to any holder whose rights under the Notes would be adversely affected by such amendment or modification in a different manner than other holders thereof without such adversely affected holder’s written consent.

 

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13.             Transfer of this Note or Securities Issuable on Conversion Hereof . With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Holder will give written notice to Company prior thereto, describing briefly the manner thereof, together with a written opinion of Holder’s counsel, or other evidence if reasonably satisfactory to Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to Company. If a determination has been made pursuant to this Section 12 that the opinion of counsel for Holder, or other evidence, is not reasonably satisfactory to Company, Company shall so notify Holder promptly after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for Company such legend is not required in order to ensure compliance with the Securities Act. Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of Company. Prior to presentation of this Note for registration of transfer, Company shall treat the registered Holder hereof as the owner and Holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and Company shall not be affected by notice to the contrary.

 

14.             Notices . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be to the respective addresses or facsimile numbers of the parties as set forth in the Loan Agreement, or at such other address or facsimile number as such parties shall have furnished in writing.

 

15.             Usury . In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

16.             Waivers . Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

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17.             Governing Law and Forum . This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Colorado, United States of America, without regard to the conflicts of law provisions of the State of Colorado, or of any other state. All disputes or controversies relating to or arising from this Note shall be adjudicated in the state and federal courts located in the state of Colorado. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS NOTE AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. The Convention on Contracts for the International Sale of Goods shall not apply to this Note.

 

[ Remainder of Page Intentionally Left Blank ]

 

 

 

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IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date first written above and Holder agrees to the terms and conditions of this Note.

 

 

  VIASPACE INC.
   
  By:/s/ Carl Kukkonen
  Name:
  Its:
   
   
  KEVIN SCHEWE
   
  /s/ Kevin Schewe
   

 

 

 

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NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert the Note)

 

The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by VIASPACE Inc. on [ ] into Shares of Common Stock of VIASPACE Inc. (the “Borrower”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion:_____________________________________________________________

 

Conversion Price:________________________________________________________________

 

Shares To Be Delivered:__________________________________________________________

 

Signature:______________________________________________________________________

 

Print Name:___________________________________________________________________

 

Address:_______________________________________________________________________

 

___________________________________________________________________________

 

 

 

11

Exhibit 10.5

 

SECURITY AGREEMENT

 

1. GRANT OF SECURITY INTEREST . To secure the payment of all present and future indebtedness of VIASPACE, Inc., a Nevada corporation (“Debtor”) to Kevin Schewe (“Schewe”) evidenced by one of more promissory notes (the "Notes") issued in connection with that Loan Agreement made by Debtor and Schewe and payable to the order of Schewe as specified in the Notes (the "Indebtedness"), and as a condition to the closing of each Note made by Debtor to Schewe, Debtor hereby grants and transfers to Schewe a first priority security interest in all of the following property of Schewe (collectively, the "Collateral"):

 

(a) all accounts, deposit accounts, contract rights, chattel paper, instruments, documents, general intangibles and other rights to payment of every kind now existing or at any time hereafter arising;

 

(b) all inventory, goods held for sale or lease or to be furnished under contracts for service, or goods so leased or furnished, raw materials, component parts, work in process and other materials used or consumed in Debtor’s business, now or at any time hereafter owned or acquired by Debtor, wherever located, and all products thereof, whether in the possession of Debtor, any warehousemen, any bailee or any other person or entity, or in process of delivery, and whether located at Debtor’s place of business or elsewhere;

 

(c) all warehouse receipts, bills of sale, bills of lading and other documents of every kind (whether or not negotiable) in which Debtor now has or at any time hereafter acquires any interest, and all additions and accessions thereto, whether in the possession or custody of Debtor, any bailee or any other person or entity for any purpose;

 

(d) all right, title and interest of Debtor under licenses, guaranties, warranties, management agreements, marketing or sales agreements, escrow contracts, indemnity agreements, insurance policies, service agreements, maintenance agreements and other similar contracts of every kind in which Debtor now has or at any time hereafter shall have an interest;

 

(e) all of Debtor’s goods, tools, machinery, furnishings, furniture and other equipment and fixtures of every kind now existing or hereafter acquired, and improvements, replacements, accessions and additions thereto, wherever located, including without limitation, any of the foregoing now or at any time hereafter located at or installed on the land or in the improvements at any of the real property owned or leased by Debtor, and all such goods after they have been severed and removed from any of said real property; and

 

(f) all of Debtor’s motor vehicles, trailers, mobile homes, boats, other rolling stock and related equipment of every kind now existing or hereafter acquired and all additions and accessories thereto, whether located on any property owned or leased by Debtor or elsewhere;

 

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(g) all present and future general intangibles, all tax refunds of every kind of nature to which Debtor now or hereafter may become entitled, however arising, all other refunds, and all deposits, goodwill, choses in action, trade secrets, computer programs, software, customer lists, trademarks, trade names, patents, licenses, copyrights, technology, processes, proprietary information and insurance proceeds relating to or arising out of its business;

 

(h) all present and future books and records, including, without limitation, books of account and ledgers of every kind and nature, all electronically recorded data relating to Debtor or the business thereof, all receptacles and containers for such records, and all files and correspondence relating to or arising out of its business;

 

(i) all present and future accessions, appurtenances, components, repairs, repair parts, spare parts, replacements, substitutions, additions, issue and/or improvements to or of or with respect to any of the foregoing;

 

(j) all other tangible and intangible property of Debtor relating to or arising out of the Collateral, including but not limited to the name "Debtor Circuits";

 

(k) all rights, remedies, powers and/or privileges of Debtor with respect to any of the foregoing; and

 

together with whatever is receivable or received when any of the foregoing or the proceeds thereof are sold, leased, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, all rights to payment, including without limitation returned premiums, with respect to any insurance relating to any of the foregoing, and all rights to payment with respect to any cause of action affecting or relating to any of the foregoing (collectively, " Proceeds ").

 

2. TERMINATION . This Agreement shall terminate and be of no further force and effect upon the indefeasible payment in full of the Indebtedness, and Schewe shall promptly upon the request of Debtor execute any and all termination statements and other instruments reasonably necessary to terminate and release the security interests in the Collateral created hereunder.

 

3. WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY . Debtor acknowledges that this Agreement is absolute and unconditional, there are no conditions precedent to the effectiveness of this Agreement, and this Agreement is in full force and effect and is binding on Debtor as of the date written below, regardless of whether Schewe obtains collateral or any guaranties from others or takes any other action contemplated by Debtor. Debtor waives the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof and agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to its liability hereunder.

 

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4. REPRESENTATIONS AND WARRANTIES . Debtor represents and warrants to Schewe that:  (a) Debtor is the Debtor and has possession or control of the Collateral and Proceeds; (b) Debtor has the right to grant a security interest in the Collateral and Proceeds; (c) all Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created hereby, or as heretofore disclosed by Debtor to Schewe in writing pursuant to Schedule 1 ; (d) all statements contained herein and, where applicable, in the Collateral are true and complete in all material respects; (e) where Collateral consists of rights to payment, all persons or entities appearing to be obligated on the Collateral and Proceeds have authority and capacity to contract and are bound as they appear to be, all property subject to chattel paper has been properly registered and filed in compliance with law and to perfect the interest of the applicable Debtor in such property, and all such Collateral and Proceeds comply with all applicable laws concerning form, content and manner of preparation and execution, including where applicable federal and any state consumer credit laws; and (f) where the Collateral consists of equipment, Debtor is not in the business of selling goods of the kind included within such Collateral, and Debtor acknowledges that no sale of any such Collateral, including without limitation any such Collateral which the applicable Debtor may deem to be surplus, has been consented to or acquiesced in by Schewe, except as specifically set forth in writing by Schewe.

 

5. COVENANTS OF DEBTOR.

 

(a) Debtor agrees in general:  (i) to indemnify Schewe against all losses, claims, demands, liabilities and expenses of every kind caused by property subject hereto; (ii) to pay all costs and expenses, including without limitation reasonable attorneys' fees and costs, incurred by Schewe in the perfection and preservation of the Collateral or Schewe's interest therein and/or the realization, enforcement and exercise of Schewe's rights, powers and remedies hereunder; (iii) to permit Schewe to exercise its powers; (iv) to execute and deliver such documents as Schewe deems necessary to create, perfect and continue the security interests contemplated hereby; and (v) not to change Debtor’s chief executive office or the places where Debtor keeps any of the Collateral or any of Debtor’s records concerning the Collateral and Proceeds without first giving Schewe written notice of the address to which Debtor is moving same.

 

(b) Debtor agrees with regard to the Collateral and Proceeds, unless Schewe agrees otherwise in writing:  (i) where applicable, to insure the Collateral with Schewe as loss payee, in form, substance and amounts, under agreements, against risks and liabilities, and with insurance companies reasonably satisfactory to Schewe; (ii) where applicable, to operate the Collateral in accordance with all applicable statutes, rules and regulations relating to the use and control thereof, and not to use any Collateral for any unlawful purpose or in any way that would void any insurance required to be carried in connection therewith; (iii) not to remove the Collateral from Debtor’s premises, except (A) for deliveries to buyers in the ordinary course of Debtor’s business and (B) Collateral which consists of mobile goods as defined in the California Uniform Commercial Code, in which case Debtor agrees not to remove or permit the removal of such Collateral from its state of domicile for a period in excess of thirty (30) calendar days; (iv) to pay prior to delinquency all license fees, registration fees and other charges in connection with any Collateral; (v) to permit Schewe to inspect the Collateral at any reasonable time; (vi) to keep complete and accurate records regarding all Collateral and Proceeds, and to permit Schewe to inspect the same and make copies thereof at any reasonable time; (vii) after the occurrence and during the continuance of any Event of Default, if requested by Schewe, to receive and use reasonable diligence to collect Collateral consisting of accounts and other rights to payment and Proceeds, in trust and as the property of Schewe, and to immediately endorse as appropriate and deliver such Collateral and Proceeds to Schewe daily in the exact form in which they are received together with a collection report in form satisfactory to Schewe; (viii) not to commingle Collateral or Proceeds, or collections thereunder, with other property; (ix) to give only normal allowances and credits and to advise Schewe thereof immediately in writing if they affect any rights to payment or Proceeds in any material respect; (x) from time to time, when requested by Schewe, to prepare and deliver a schedule of all Collateral and Proceeds subject to this Agreement and after the occurrence and during the continuance of any Event of Default, to assign in writing and deliver to Schewe all accounts, contracts, leases and other chattel paper, instruments, documents and other evidences thereof; (xi) after the occurrence and during the continuance of any Event of Default, in the event Schewe elects to receive payments of rights to payment or Proceeds hereunder, to pay all expenses incurred by Schewe in connection therewith, including without limitation expenses of accounting, correspondence, collection efforts, reporting to account or contract debtors, filing, recording, record keeping and expenses incidental thereto; and (xii) to provide any service and do any other acts which may be reasonably necessary to maintain, preserve and protect all Collateral and, as appropriate and applicable, to keep all Collateral in good and saleable condition, to deal with the Collateral in accordance with the standards and practices adhered to generally by users and manufacturers of like property, and to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims.

 

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6. POWERS OF SCHEWE . Debtor appoints Schewe its true attorney in fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Schewe's agents, or any of them, whether or not Debtor is in default:  (a) to perform any obligation of Debtor’s hereunder in Debtor's name or otherwise which Debtor has failed to perform after reasonable notice or after the occurrence and during the continuance of any Event of Default; (b) to give notice to account debtors or others of Schewe's rights in the Collateral and Proceeds, and after the occurrence and during the continuance of an Event of Default (as defined below) to enforce the same and make extension agreements with respect thereto; (c) after the occurrence and during the continuance of any Event of Default, to release persons or entities liable on Collateral or Proceeds and to give receipts and acquittances and compromise disputes in connection therewith; (d) after the occurrence and during the continuance of any Event of Default, to release security; (e) after the occurrence and during the continuance of any Event of Default, to resort to security in any order; (f) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, financing statements, continuation statements, termination statements, statements of assignment, applications for registration or like papers to perfect, preserve or release Schewe's interest in the Collateral and Proceeds; (g) after the occurrence and during the continuance of an Event of Default, to receive, open and read mail addressed to Debtor; (h) to take cash, instruments for the payment of money and other property to which Schewe is entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry of obligors thereon, or otherwise, in its own name or a fictitious name; (j) after the occurrence and during the continuance of an Event of Default, to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to Proceeds; (k) to prepare, adjust, execute, deliver and receive payment under insurance claims, and to collect and receive payment of and endorse any instrument in payment of loss or returned premiums or any other insurance refund or return, and to apply such amounts received by Schewe, at Schewe's sole option, toward repayment of the Indebtedness or replacement of the Collateral; (1) after the occurrence and during the continuance of an Event of Default, to exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto; (m) at reasonable times to enter onto Debtor's premises in inspecting the Collateral; (n) after the occurrence and during the continuance of an Event of Default, to make withdrawals from and to close deposit accounts or other accounts with any financial institution, wherever located, into which Proceeds may have been deposited, and to apply funds so withdrawn to payment of the Indebtedness; (o) to preserve or release the interest evidenced by chattel paper to which Schewe is entitled hereunder and to endorse and deliver evidences of title incidental thereto; and (p) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Schewe as necessary, proper and convenient in connection with the preservation, perfection or enforcement of his rights hereunder.

 

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7. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS . Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Schewe at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Schewe shall be obligations of Debtor to Schewe, due and payable immediately upon demand, together with interest at a rate of 10% per year, and shall be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement.

 

8. EVENTS OF DEFAULT . The occurrence of any of the following shall constitute an " Event of Default " under this Agreement:  (a) any event defined as an Event of Default, under the Note, subject to any applicable grace or cure rights; (b) any representation or warranty made by Debtor herein shall prove to be incorrect in any material respect when made; or (c) Debtor shall fail to observe or perform any obligation or agreement contained herein and fail to cure any such default within thirty (30) days after written notice thereof from Schewe.

 

9. REMEDIES . Upon the occurrence of any Event of Default, Schewe shall have, and may exercise without demand, any and all rights, powers, privileges and remedies granted to a secured party upon default under the California Uniform Commercial Code or otherwise provided by law, including without limitation the right to contact all persons or entities obligated to Debtor on any Collateral or Proceeds and to instruct such persons or entities to deliver all Collateral and/or Proceeds directly to Schewe. All rights, powers, privileges and remedies of Schewe shall be cumulative. No delay, failure or discontinuance of Schewe in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by Schewe of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. It is agreed that public or private sales, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auction, are all commercially reasonable since differences in the sales prices generally realized in the different kinds of sales are ordinarily offset by the differences in the costs and credit risks of such sales. While an Event of Default exists:  (a) Debtor will deliver to Schewe from time to time, as requested by Schewe, current lists of all Collateral and Proceeds in its possession; (b) Debtor will not dispose of any of the Collateral or Proceeds (other than inventory sold to third parties in the ordinary course of business) except on terms approved by Schewe; (c) at Schewe's request, Debtor will assemble and deliver all Collateral and Proceeds, and books and records pertaining thereto, to Schewe at a reasonably convenient place designated by Schewe; and (d) Schewe may, without notice to any Debtor, enter onto each Debtor's premises and take possession of the Collateral. With respect to any sale by Schewe of any Collateral subject to this Agreement, Debtor hereby expressly grants to Schewe the right to sell such Collateral using any or all of Debtor's trademarks, trade names, trade name rights and/or proprietary labels or marks.

 

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10. DISPOSITION OF COLLATERAL AND PROCEEDS . Any proceeds of any disposition of any of the Collateral or Proceeds, or any part thereof, occurring after the occurrence of any Event of Default, may be applied by Schewe to the payment of expenses incurred by Schewe in connection with such disposition, including without limitation reasonable attorneys' fees and costs, and the balance of such proceeds may be applied by Schewe toward the payment of the Indebtedness in such order of application as Schewe may from time to time elect.

 

11. NOTICES . All notices, requests and demands required under this Agreement must be in writing, addressed each party at the address set forth under the Loan Agreement or to such other address as either party may designate by written notice to the other party, and shall be deemed to have been given or made as follows:  (a) if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by email, upon receipt.

 

12. COSTS, EXPENSES AND ATTORNEYS' FEES . Debtor shall pay to Schewe promptly upon demand (and in any event within 10 days of demand) the full amount of all payments, advances, charges, costs and expenses, including without limitation reasonable attorneys' fees and costs, expended or incurred by Schewe in exercising any right, power, privilege or remedy conferred by this Agreement or in the enforcement thereof, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Schewe or any other person or entity) relating to Debtor or in any way affecting any of the Collateral or Proceeds or Schewe's ability to exercise any of its rights or remedies with respect thereto. All of the foregoing shall be paid by Debtor with interest from the date of demand until paid in full at the rate of 6.0% per year.

 

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13. SUCCESSORS . This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties.

 

14. AMENDMENT . This Agreement may be amended or modified only in a writing signed by Schewe and Debtor.

 

15. SEVERABILITY OF PROVISIONS . If any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.

 

16. GOVERNING LAW AND CONSENT TO JURISDICTION . This Agreement shall be governed by and construed in accordance with the laws of the State of California. Debtor hereby consents, and submits, to the personal jurisdiction of any state or federal court located in the State of California in connection with any legal action relating to this agreement and waives any right it might have in connection with such action to assert the doctrine of forum non conveniens or to object to venue.

 

Debtor warrants that its chief executive office is located at the following address:

 

VIASPACE, Inc.

382 N. Lemon Ave., Suite 364

Walnut, CA 91789

Telephone: 626-768-3360

Facsimile: 626-578-9063

 

Debtor warrants that the Collateral (except goods in transit) is located or domiciled at the address set forth for above or at one of the addresses set forth below:  

 

1) ___________________________

2) ___________________________

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of September 30, 2012.

 

 

    VIASPACE, Inc.,
    a Nevada corporation
 
  By: /s/ Carl Kukkonen
   
    [Printed Name and Title}
     

 

 

 

 

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SCHEDULE 1

 

EXISTING LIENS

 

 

 

 

 

 

 

8

 

Exhibit 10.6

 

MUTUAL AND LIMITED RELEASE

AGREEMENT

 

THIS MUTUAL AND LIMITED RELEASE (the “Agreement”) is entered into and made effective as of the 30th day of September 2012 (the “Effective Date”) by and among the signatories to this Agreement (each of the signatories shall be referred to singularly as a “Party” and collectively as the “Parties”). Except as otherwise defined herein, capitalized terms and phrases shall have the meaning ascribed thereto in Section 2 of this Agreement.

 

BACKGROUND

 

On or about the 10th day of May 2010, VIASPACE issued to Sung Chang a long-term debt instrument in the principal amount of $5,331,025 (the “Original Secured Note”), the payment of which is secured by the Security Documents. Since its original issuance, the Original Secured Note was amended by the parties to extend the due date for payment of each respective installment by one year (together with such amendment, the “Secured Note”), with the first installment being due and payable thereafter on May 14, 2012 (the “First Installment”). As part of such amendment, the Secured Note was assigned by Sung Chang to Changs, LLC (“Changs”).

 

The First Installment remains unpaid, along with the Accrued Interest. Neither VIASPACE nor any one of its various subsidiaries, including VGE or its two lower tier subsidiaries, has the financial wherewithal to satisfy the Secured Note as and to the extent due and owing. Given the insolvency of VIASPACE on a consolidated basis, Changs, in lieu of exercising its remedies, has expressed a desire to cooperate in the recapitalization of VIASPACE and VGE upon the terms and conditions described in that certain agreement entitled “Recapitalization Agreement (the “Recapitalization”).

 

As a prelude to the Recapitalization, each of the Parties entered into that term sheet entitled “TERM SHEET- VIASPACE & VGE RECAPITALIZATION,” dated as of the 24 th day of July 2012 (the “Recap Term Sheet”), pursuant to which the Parties expressed their desire to negotiate, inter alia , a mutual release in connection with the Recapitalization.

 

NOW, THEREFORE , pursuant to the Recap Term Sheet and in consideration of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Parties agree as follows:

 

AGREEMENT

 

1.                Limited Mutual Releases by and Among All Parties .

 

1.1             The Release . Except for Claims relating to the Excluded Obligations (which by definition are not included within the meaning of the released Claims), each of the Parties, for and on behalf of itself and, as applicable, each of its shareholders, partners or members, as the case may be, hereby and forever releases and discharges (each, a “Releasing Party”) each of the other Parties and each shareholder, officer, director, employee, Affiliate, successor and assign thereof (collectively, the “Released Parties”) from any and all Claims (the “Release”).

 

1.2             Covenant Not to Sue . The Release shall constitute a complete release of the Claims and waiver of and a covenant not to sue under or in connection with any and all such Claims, and each of the Releasing Parties shall be deemed to have fully, finally, and forever settled, discharged, released, waived, and abandoned any and all such Claims any one or all of such Parties may have had or may have, and the Release shall in all respects and in any event and in all cases be deemed to release each of the Released Parties from any injury, damage, liability, responsibility, or obligation all or any one of the Releasing Parties may have suffered or incurred for, as a result of, with respect to or in connection with such Claims.

 

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1.3             Waiver of Unknown Claims . In furtherance of the above-stated intention to bar each and every Claim, except as otherwise agreed in this Agreement, each Releasing Party hereby expressly waives any and all rights or benefits conferred by the provisions of section 1542 of the California Civil Code (“Section 1542”), and by any similar provision of California, other state or federal law now in effect or in effect in the future, and expressly consent that this Agreement shall be given full force and effect according to each and all of its express terms and conditions, including those relating to unknown and unsuspected Claims specified above, if any. Section 1542 provides:

 

A general release does not extend to the claims which the creditor does not know or suspect to exist in his favor at the time of executing a release, which if known by him must have materially affected his settlement with the debtor.

 

The release by each Releasing Party (when and as effective) in this Section shall extend to all unknown claims within the meaning of Section 1542 relating in any way to each of the Released Parties and, as applicable, each respective shareholder, officer, director, Affiliate, successor and assign thereof.

 

1.4             Informed Release . Each Releasing Party acknowledges that it understands the significance and potential consequences of the release of unknown claims and of the specific waiver of its rights under Section 1542. Except as otherwise agreed in this Agreement, each Releasing Party intends that the Claims released by it under this Agreement shall be construed as broadly as possible.

 

2.                Definitions . For purposes of this Agreement, the following terms and phrases shall have the meaning ascribed thereto:

 

“Affiliate” means, with respect to any party to this Agreement, a Person, directly or indirectly, as of or following the Effective Date, that controls, is controlled by or is under common control with such party. For purposes of this definition, “control” shall mean beneficial ownership (direct or indirect) of more than 50% of the outstanding voting stock or other voting rights entitled to elect directors (or in the case of an entity that is not a corporation the election or appointment of the corresponding managing authority); provided , however , that in any country where the local law shall not permit foreign equity participation of more than 50%, then an “Affiliate,” shall further include any company in which such Person shall own or control, directly or indirectly, the maximum percentage of such outstanding stock or voting rights permitted by local law or otherwise exercises control over the management of such company.

 

“Assignment Agreement” shall mean that certain agreement entitled “Delivery, Disclosure, Assignment and Assumption Agreement,” and entered into by and among VGE, VIASPACE and each of the Former Employees as of the _ day of August 2012.

 

“Claim” shall mean any and all causes of action, actions, affirmative defenses, judgments, liens, indebtedness, obligations, damages, losses, claims, liabilities and demands of every kind and character, whether known or unknown, suspected or unsuspected, existing or prospective, from the beginning of time through and including the Effective Date, including, without limitation, any and all claims, including claims based on, arising under or otherwise relating to the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974 , the Americans with Disabilities Act, the Vietnam Era Veterans Readjustment Act, all other federal or state statutes regulating military service leaves, and all amendments thereof or any other relevant or potentially applicable state and federal statutes; past wages or salaries, emotional distress, personal injuries or damages, disability insurance or other benefits (except vested retirement benefits), violation of any express or implied agreement, written or verbal, and any common law duty, including claims for attorney fees; provided , however , that in no event shall the term “Claim” include any Excluded Obligations.

 

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“Excluded Obligations” shall mean each of the following matters:

 

(i)               This Agreement;

 

(ii)             Each of the Former Employee’s Statements of Additional Terms and Conditions; provided , however , that each of the Parties to each such respective agreement hereby agree that Sections 2(c) and (d) thereof following the date of this Agreement shall have no applicability to the performance of services for and on behalf of VIASPACE so long as each such employee thereunder enters into with VIASPACE and executes as an employee of VIASPACE the Business Protection Agreement, a form of which is attached hereto;

 

(iii)           The Assignment Agreement; the Recapitalization Agreement; License Agreement; that certain Lock Up Agreement (as defined in the Recapitalization Agreement); those certain agreements entitled “Consulting Agreement” and “Business Protection Agreement” entered into by and between Stephen Muzi and VGE; those certain agreements entitled “Business Protection Agreements” to be entered into by and between VIASPACE and each of Stephen Muzi and Carl Kukkonen, respectively; that certain agreement entitled “Loan Agreement” to be entered into by and between Kevin Schewe, MD and VIASPACE and the Promissory Note and Security Agreement relating thereto; [that certain initial VIASPACE Purchase Order]; that certain agreement entitled “Agreement to Grant Voting Rights and Transfer Preferred Share” entered into by and between Sung H. Chang and Schewe, along with that certain Exhibit A attached thereto, all of which documents being entered into of even date herewith (other than the Assignment Agreement);

 

(iv)           The Note and Security Documents (as defined in the Recapitalization Agreement), provided , however , that any and all claims under the Note and related Security Documents shall be subject to and limited by the Covenant not to Sue (as defined in the Recapitalization Agreement);

 

(v)             The Registration Rights Agreement, dated as of May 14, 2010, and entered into by and between VIASPACE and Sung Hsien Chang; provided , however , that upon any exercise of the demand registration rights described therein, Chang shall be responsible for the payment of the costs to register the shares subject to such exercise by him that would not otherwise be incurred by VIASPACE in its usual course of business (e.g., Chang will not be responsible for costs of audit fees for any such audit that may otherwise be conducted); provided , further , that Chang (nor any transferees of such shares) may not sell during any calendar quarter more than the greater of either (1) two and one half (2.5) times the volume limitation pursuant to Rule 144(e) promulgated under the Securities Act of 1933, as amended, or (2) forty million (40,000,000) shares (as adjusted for any stock splits, stock dividends, recapitalizations, combinations and the like) of all such shares that are to be registered pursuant to his demand registration rights, without the prior written consent of VIASPACE, which consent shall not be unreasonably delayed, denied, conditioned or withheld (the “Trickle Out”); provided , further , that such Trickle Out does not otherwise undermine or adversely affect the effectiveness of such Registration Statement;

 

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(vi)           The Registration Rights Agreement, dated as of May 14, 2010, and entered into by and among VGE, Sung Hsien Chang, Hsiu Fen Su, Chun Hao Chang, Jay Chang, each individual residents of the State of Georgia, and Green Solutions Group Ltd, a British Virgin Islands company;

 

(vii)         Sections 5.1 through 5.6, and 5.7.4 and the rights associated therewith of the Share Purchase Agreement, dated as of the __ day of April 2010, entered into by VIASPACE and Sung Chang, as amended;

 

(viii)       VIASPACE’s obligation to satisfy the accrued vacation pay earned through the Closing by each of the Former Employees in connection with the performance of employment services for and on behalf of VIASPACE and VGE prior to and through such Closing;

 

(ix)           Claims for which a Released Party is not lawfully permitted to release (the “Preserved Claims”); provided , however , that to the extent that any such Preserved Claims are asserted against any Chang Indemnified Party, then notwithstanding any provision in this Agreement to the contrary, this Agreement and the Covenant Not to Sue (as defined in the Recapitalization Agreement) shall be and become null and void with respect to any such affected Chang Indemnified Party;

 

(x)             VGE’s obligation to satisfy the accrued vacation pay earned through the Closing by Sung Chang in connection with the performance of employment services for and on behalf of VGE prior to and through such Closing; and

 

(xi)           The independent contractor agreement to be entered into by and between VGE and Stephen Muzi (“Muzi”) for the performance by him of certain Chief Financial Officer and Secretarial services for and on behalf of VGE from the effective date of the Recap Term Sheet until November 15, 2012 at $5,000 per month (in order to file the second quarter and third quarter SEC 10-Q's) and for such longer period as the parties may mutually agree and that certain Business Protection Agreement entered into of even date therewith by and between VGE and Muzi (the “Muzi Agreement”).

 

“Expired Employment Agreements” shall mean those certain employment agreements entered into by and between VGE and each of the Former Employees and made effective as of the __ day of August 2010.

 

“Former Employees” shall mean Carl Kukkonen and Steve Muzi.

 

“License Agreement” shall mean that certain license agreement entered into as of the Effective Date by and between VGE and VIASPACE with respect to the license of certain rights in and to Giant King Grass (as defined therein).

 

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“Statement of Additional Terms and Conditions” shall mean that certain addendum entitled “Statement of Additional Terms and Conditions Relating to Employment Agreement,” which statement was attached to and made a part of each of the Expired Employment Agreements.

 

3.                Release-Related Covenants . Each of the Parties hereby agrees that he or it, as the case may be:

 

3.1             No Admission . Acknowledges and agrees that neither anything in this Release nor the offer, execution, delivery, or acceptance thereof shall be construed as an admission by such Party of any kind, and this Release shall not be admissible as evidence in any proceeding; this Release does not constitute an adjudication or finding on the merits and is not, and shall not be construed as, an admission by any such Party of any violation of its policies, procedures, state or federal laws or regulations; this Release may be introduced, however, in any proceeding to enforce its terms and conditions; provided , however , that any such introduction shall be pursuant to an order protecting its confidentiality.

 

3.2             Covenant Not to Sue . Shall never institute any action for suit-at-law or action against all or any of the Released Parties, nor institute, prosecute, or in any way aid in the institution or prosecution of any Claim for damages, costs, loss of services, expenses, or compensation for or on account of any damage, loss or injury, either to person or property or both, whether developed or undeveloped, resulting to or to result, known or unknown, past, present, or future, arising out of any Claim that has been released under this Agreement.

 

3.3             Non-disparagement . Shall neither disparage nor denigrate the reputation, name or goodwill of any Released Party in any communication, verbal or written, with any third-party, commencing with and following the Effective Date.

 

4.                Employment Related Covenants .

 

4.1             Release of Any Age Discrimination Claim . In compliance with the requirements of the Age Discrimination in Employment Act (ADEA), as amended by the Older Workers’ Benefit Protection Act (OWBPA), each of the Former Employees and Sung Chang (“Prior Officers”) hereby acknowledges by his/her signature below that, with respect to the rights and claims waived and released under the ADEA and OWBPA:

 

(a)              Prior Officer has read and understands this Agreement;

 

(b)             Prior Officer was given at least 21 days from the date this Agreement was initially presented to accept the terms of this Agreement;

 

(c)              Prior Officer was advised in writing, via this Agreement, to consult with an attorney before signing this Agreement;

 

(d)             Prior Officer had an opportunity to consult with an attorney before signing this Agreement;

 

(e)              Prior Officer is releasing the each of the Released Parties from, among other things, any claims of age discrimination under the ADEA or OWBPA; and

 

(f)              Prior Officer understands that the release of age discrimination claims contained in this Agreement does not cover any rights or claims that may arise after the Effective Date against each of the Released Parties.

 

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4.2             Revocation of Age Release . Prior Officer may revoke the portion of this Agreement relating to release of age discrimination claims covered by the ADEA or OWBPA within seven (7) calendar days after signing it. To be effective, such revocation must be received in writing by VIASPACE Green Energy, 131 Bells Ferry Lane, Marietta, GA 30066. Revocation can be made by hand delivery, telegram, facsimile, or postmarking before the expiration date of this seven (7) day period.

 

5.                Representations and Warranties .

 

5.1             Warranty of Authority . Each Party whose signature appears below represents and warrants to each other Party that he or it, as the case may be, has been duly authorized and has full authority to execute this Agreement on behalf of himself and the entity or entities for which he represents.

 

5.2             No Assignment of Claims to Third Parties . Each of the Parties hereby represents and warrants to each other Party that he or it, as the case may be, has not assigned or transferred, or purported to assign or transfer, to any Person any Claim released under this Agreement.

 

5.3             No Other Representations and Warranties . No Party has relied on any representations, whether oral or written, not expressly set forth herein when entering into this Agreement.

 

6.                Miscellaneous .

 

6.1             Entire Agreement . This Agreement constitutes and contains the final, complete and exclusive agreement and understanding between the Parties. This Agreement supersedes or replaces all prior negotiations and all agreements, proposed or otherwise, whether written or oral, concerning the subject matter hereof. This is a fully integrated document.

 

6.2             Severability . If any portion of this Agreement or application thereof is held invalid, the invalidity shall not affect other provisions of this Agreement that can be given effect without the invalid provision or application and, to this end, the provisions of this Agreement are declared to be severable.

 

6.3             Construction . Each Party has cooperated in the drafting and preparation of this Agreement. Hence, this Agreement shall not be construed against any Party on the basis that said Party was the drafter of this Agreement. The headings are for the convenience of the Parties and are not to be used in construing the meaning of any provision of this Agreement.

 

6.4             No Waiver of Breach . No waiver by one Party of any breach of any term or provision of this Agreement by the other Party shall be binding unless in writing and signed by the Party waiving the breach.

 

6.5             Legal Advice . The Parties acknowledge that they have been advised by their own legal counsel in connection with this Agreement and enter into this Agreement solely on the basis of that advice and on their own independent investigation of all facts, law and circumstances material to this Agreement or any provision thereof. The Parties hereby acknowledge that they have not entered into this Agreement based upon any statement or omission by the other party, their agents, representatives, or attorneys.

 

6.6             Binding Effect . Each of the Parties understands and expressly agrees that this Agreement shall bind their successors and assigns.

 

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6.7             Notices . All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by written notice to the other parties):

 

If to VIASPACE:

 

VIASPACE Inc.

2102 Business Center Drive

Irvine, CA 92612

Telephone: 626-768-3360

Facsimile: 626-578-9063

 

With a copy to:

_________________________________

_________________________________

_________________________________

 

If to VGE:

 

Mr. Sung Chang

VIASPACE Green Energy Inc.

131 Bells Ferry Lane

Marietta, Georgia 30066

With a copy to:

 

McDaniel Law Group, PC

P.O. Box 681235

Marietta, Georgia 30068

Attn: Mr. Frank McDaniel, Esq.

 

6.8             Jurisdiction and Venue . As between the Parties, the transactions contemplated in this Agreement shall be governed as to validity, interpretation, construction, effect, and in all other respects by the laws of the State of Georgia, without regard to the conflicts of laws principals thereof. Each of the Parties irrevocably submits to the exclusive jurisdiction of the courts of the State of Georgia located in the County of Cobb and the United States District Court in and for the Northern District of Georgia for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby and thereby. Each of the Parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each of the Parties hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

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6.9             Costs and Attorneys’ Fees .

 

(a)              Award to Prevailing Party in Proceeding. In the event any attorney is employed by any Party to this Agreement with regard to any legal action, arbitration or other proceeding brought by any Party to this Agreement for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, then the prevailing Party, whether at trial or upon appeal, and in addition to any other relief to which the prevailing Party may be granted, shall be entitled to recover from the losing Party all costs, expenses, and a reasonable sum for attorney fees incurred by the prevailing Party in bringing or defending such action, arbitration, or proceeding, and in enforcing any judgment granted therein, all of which costs, expenses and attorneys fees shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment.

 

(b)             Judgment or Order Shall Award. Any judgment or order entered in such matter shall contain a specific provision providing for the recovery by the prevailing Party of attorney fees, costs, and expenses incurred in enforcing such judgment. For purposes of this Section, attorney fees shall include, without limitation, fees incurred in the following: post-judgment motions; contempt proceedings; garnishment, levy, and debtor and third party examinations; discovery; and bankruptcy litigation.

 

6.10          Further Assurances . Each of the Parties agrees (a) to furnish upon request to the other Party other such further information, (b) to execute and deliver to the other Parties such other documents, and (c) to do such other acts and things, all as any other Party may reasonably request for the purpose of carrying out the intent of this Agreement.

 

6.11          Counterparts . This Agreement may be executed in counterparts, each of which, when executed, shall be an original, and all of which together shall constitute one and the same agreement. The signatories may execute this Agreement by facsimile counterparts, and a legible facsimile of a signature shall be as effective as an original signature.

 

6.12          Remedies . No remedy conferred by this Agreement is intended to be exclusive of any other remedy and each remedy shall be cumulative and in addition to every other remedy conferred hereunder or at law or in equity.

 

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IN WITNESS WHEREOF , upon and coincident with the Effective Date, this Agreement shall become effective.

 

VIASPACE Inc.


By: /s/ Carl Kukkonen                    
Print Name:
Title:
Date

Signed: ________

 

VIASPACE Green Energy Inc.


By: /s/ Sung Chang                          

Print Name:
Title:
Date Signed: ________

     

/s/ Carl Kukkonen                     

Carl Kukkonen

 

/s/ Sung Chang                            

Sung Hsien Chang

     

/s/ Steve Muzi                         

Steve Muzi

 

/s/ Chun Hao Chang                    

Chun Hao Chang

     

/s/ Kevin Schewe                       

Kevin Schewe, MD

 

/s/ Hsiu Fen Su                         

Hsiu Fen Su

     
   

Changs, LLC

By: /s/ Sung Chang                       

Sung Hsien Chang

Authorized Member

     
   

JJ International, Inc.

By: /s/ Sung Chang                     

Sung Hsien Chang

Authorized Officer

     
   

Green Solutions Group Ltd., a British Virgin Islands company

By: /s/ Sung Chang                     

Sung Hsien Chang

Authorized Officer

 

 

 

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Exhibit 10.6

 

LOCK-UP AGREEMENT

 

September 30, 2012

 

Each Shareholder referenced below:

 

Re: Recapitalization Agreement (“Recap Agreement”) effective as of September 30, 2012, by and among VIASPACE Inc., a Nevada corporation (“VIASPACE”), VIASPACE Green Energy Inc., a British Virgin Islands corporation (“VGE”), Chang LLC and certain other parties who are signatories to this Agreement (collectively, with VIASPACE and VGE, the “Signatories”).

 

Ladies and Gentlemen:

 

Defined terms not otherwise defined in this letter agreement (the “ Letter Agreement ”) shall have the meanings set forth in the Recap Agreement. Pursuant to Section ___ of the Recap Agreement and in satisfaction of a condition of the obligations of the Parties to the Recap Agreement, the undersigned Shareholders (“ Shareholder ”) irrevocably agree with VIASPACE that, from the date hereof (the “Effective Date”) until one hundred and eighty (180) days after the Closing (such period, the “ Restriction Period ”), the undersigned will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any Affiliate of the undersigned or any person in privity with the undersigned or any Affiliate of the undersigned), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any shares of Common Stock or Common Stock Equivalents beneficially owned, held or hereafter acquired by the undersigned (the “ Securities ”). Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. In order to enforce this covenant, VIASPACE shall impose irrevocable stop-transfer instructions preventing the Transfer Agent from effecting any actions in violation of this Letter Agreement.

 

The undersigned acknowledges that the execution, delivery and performance of this Letter Agreement is a material inducement to each Shareholder to complete the transactions contemplated by the Recap Agreement and that VIASPACE (which shall be a third party beneficiary of this Letter Agreement) shall be entitled to specific performance of the undersigned’s obligations hereunder. The undersigned hereby represents that the undersigned has the power and authority to execute, deliver and perform this Letter Agreement, that the undersigned has received adequate consideration therefor and that the undersigned will indirectly benefit from the closing of the transactions contemplated by the Recap Agreement.

 

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This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of each of VIASPACE and each of the Signatories. This Letter Agreement shall be construed and enforced in accordance with the laws of the State of Georgia without regard to the principles of conflict of laws. The undersigned hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Northern District of Georgia and the courts of the State of Georgia located in Cobb County, for the purposes of any suit, action or proceeding arising out of or relating to this Letter Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. The undersigned hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to VIASPACE at the address in effect for notices to it under the Recap Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The undersigned hereby waives any right to a trial by jury. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The undersigned agrees and understands that this Letter Agreement does not intend to create any relationship between the undersigned and each Shareholder and that each Shareholder is not entitled to cast any votes on the matters herein contemplated and that no issuance or sale of the Securities is created or intended by virtue of this Letter Agreement.

 

This Letter Agreement may be executed in multiple counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

By its signature below, the Transfer Agent hereby acknowledges and agrees that, reflecting this Letter Agreement, it has placed an irrevocable stop transfer instruction on all Securities beneficially owned by the undersigned until the end of the Restriction Period. This Letter Agreement shall be binding on successors and assigns of the undersigned with respect to the Securities and any such successor or assign shall enter into a similar agreement for the benefit of the Shareholders.

 

*** SIGNATURE PAGE FOLLOWS***

 

 

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This Letter Agreement may be executed in two or more counterparts, all of which when taken together may be considered one and the same agreement.

 

Signatory Address for Notice Number of Issued Shares of VIASPACE Common Stock as of Effective Date
 
     
     
     

/s/ Kevin Schewe                         

Kevin Schewe, MD

 

100,000,000

     

/s/ Chung Hao Chang                  

Chung Hao Chang

 

7,429,050

     

/s/ Jay Chang                             

Jay Chang

 

7,429,050

     

Inter-Pacific Arts Corp.

 

By: /s/ Sung Hsien Chang                  

Sung Hsien Chang

Authorized Member

 

56,889,650

     

Green Solutions Group

 

By: /s/ Sung Hsien Chang                  

Sung Hsien Chang

Authorized Member

 

4,680,302

     

/s/ Sung Hsien Chang                  

Sung Hsien Chang

 

1,415,060

     

Changs LLC

By: /s/ Sung Hsien Chang                  

Sung Hsien Chang

Authorized Member

 

317,128,598

     

The Chang Family Foundation

 

 

By: /s/ Sung Hsien Chang                

Sung Hsien Chang

Authorized Member

 

30,000,000

 

 

 

 

 

 

 

 

By signing below, VIASPACE agrees to enforce the restrictions on transfer set forth in this Letter Agreement.

 

 

 

By: /s/ Carl Kukkonen                          

Name: Carl Kukkonen

Title: CEO

 

Acknowledged and agreed to

as of the date set forth above:

 

[TRANSFER AGENT NAME]

 

 

By: ____________________________

Name:

Title:

 

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