Exhibit 10.1
Development and License Agreement
This Development and License Agreement (the "Agreement") is entered
into as of November 15, 2003 (the "Effective Date") by and between C and T Co.
Inc., ("C&T") a corporation incorporated under the laws of the Province of
Ontario with its principal offices located at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxx, Xxxxxx, X0X 0X0; and AXION POWER CORPORATION ("Axion"), a corporation
incorporated under the laws of the Province of Ontario with offices located at
000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx, Xxxxxx, X0X 0X0.
RECITALS
WHEREAS, C&T has developed to the laboratory stage the technology, know-how and
prototypes for a hybrid lead-carbon battery/capacitor, sometimes referred to as
the E3Cell, as more particularly described and defined on Schedule A (the
"Technology");
AND WHEREAS, Axion has been established in order to bring the Technology to the
market, and to do so, it is necessary for Axion to obtain from C&T sole
exclusive world-wide licenses to the Technology so that Axion, , may (a) Develop
(as such term is hereinafter defined), manufacture and distribute, and (b)
sublicense assembly or manufacturing of, a commercial version of the Technology
(the "Axion Battery"), and C&T is willing to grant to Axion such licenses on the
terms and conditions set forth in this Agreement;
AND WHEREAS, Axion desires to engage C&T to perform additional research and
development work in order to develop enhancements and refinements to the
Technology (the "Enhancements"), and collaborate with Axion in the development
and Technical Commercialization of the Axion Battery, incorporating enhanced
versions of C&T's Technology Intellectual Property and lab prototypes, and C&T
is willing to perform such development services, and grant to Axion additional
licenses to use the Enhancements, on the terms and conditions set forth in this
Development Agreement;
AND WHEREAS, C&T has developed and, under the Development Effort, will be
developing know-how, tools, techniques, processes and methods to support
Technical Commercialization of the Base C&T Technology and the Enhancements and
Axion desires to obtain such Technical Commercialization Know-How from C&T by
way of technology transfer and C&T is willing to engage in such technology
transfer on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other valuable consideration, the receipt and sufficiency of
which the parties hereby acknowledge, the parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, including the recitals and definitions:
1.1 "Affiliate" of a party means any entity directly or indirectly controlling,
controlled by, or under common control with such party, where "control" means
(a) ownership of more than fifty percent (50%) of the equity or beneficial
interests of such entity or party, or (b) , actual control of the day-to-day
operations of such entity or party.
1.2 "Application Areas" has the meaning set out in Schedule A.
1.3 "Axion Battery" means a Business Commercialized version of the
Technology.
1.4 "Axion Documentation" means the Documentation accompanying or
pertaining to the Axion Know-How developed by or on behalf of Axion.
1.5 "Axion Know-How" means the know-how, trade secrets, applications,
processes, techniques and methods Developed by or on behalf of Axion.
1.6 "Axion Project Manager" has the meaning set out in Section 4.1(d)
1.7 deleted .
1.8 "Base C&T Technology" means the Technology, as existing as of the Effective
Date, any existing Derivatives thereof and, for more certainty, the Technology,
which is currently in the laboratory stage and which contains all of the base
elements for future Technical Commercialization.
1.9 "Beta End Date" means completion of the key milestone of the initial Project
Plan when the Technology is Commercializable.
1.10 "Beta Testing" means a process by which a testing party identifies problems
with a particular product by confirming or validating that it works in
accordance with the applicable Specifications (which specifications are to be
agreed upon within sixty (60) days of this Agreement) as it was intended in
situations appropriate to its targeted operating environment..
1.11 "Business Commercialization" means the efforts of Axion in such areas as
marketing, contractual negotiations, sales and production, to bring the
Technology to the marketplace.
1.12 "C&T Documentation" means the Documentation accompanying or pertaining to
the Base C&T Technology, the Enhancements, and the Technical Commercialization
Know-how.
1.13 "C&T Key Scientists" means those scientists whose names and details are
set out on Schedule E.
1.14 "C&T Know-How" means all proprietary inventions, technology, trade secrets,
research notes, records and test results, all primary and secondary reference
materials, including those authored by third parties, in all forms, including in
electronic format, and any physical, chemical or biological material, or other
information, owned or acquired with right to sublicense by C&T or any Affiliate
of C&T, which, , are necessary or useful to Axion in the development,
formulation, manufacture, use or sale of the Axion Battery.
1.15 "C&T Patent Rights" mean the rights under patents and patent applications,
both foreign and domestic, which cover hybrid lead-carbon battery/capacitor
technology, its manufacture, formulation or use, including intermediates for the
manufacture or use thereof, (b) are based on an invention made at any time and
(c) are owned by or licensed to C&T or any C&T Affiliate with the right to
sublicense. A list of C&T Patent Rights as of the Effective Date is set out on
Schedule F.
1.16 "C&T Project Manager" has the meaning set out in Subsection 4.1(c).
1.17 "C&T Trade-marks" means the trade-names, trade-marks, trade dress, brands,
designs, graphics, logos and other commercial symbols and other indicia of
origin whether registered or not and any goodwill associated therewith owned or
licensed by C&T.
1.18 "Commercializable" means, with respect to the Technology, when Axion has
the know-how to produce "Evaluation Batteries" that produce good beta-test
results and stable characteristics without any exceptional performance defect or
requirement for maintenance; and said Evaluation Batteries consist of components
which have been made via bulk-reproducible formulations, sources, processes and
technologies; and said formulations, sources, processes and technologies produce
consistent results; and all salient aspects of said formulations, sources,
processes and technologies can be identified in terms of quantification,
qualification and procedure.
1.19 "Confidential Information" means confidential, secret or proprietary
information of a party, including data, technical information (including
systems, processes, plans and procedures), software (including source code,
executable code and related Documentation), financial and business information
(including pricing and business plans), relationships and agreements (including
this Agreement) and information related to suppliers, licensors, licensees,
customers or prospective customers, whether in oral, written, graphic,
electronic or other form.
1.20 "Deliverable" means each item (listed as such in the Project Plan) to be
provided by C&T to Axion hereunder.
1.21 "Derivatives" means, with respect to any Technology Intellectual Property
or Documentation(collectively, "Base Work"), any and all tangible information,
documents and other materials, in any medium, format, use, or form (whether now
known or later discovered), that are based upon or derived from such Base Work
or that use or incorporate such Base Work or any part or aspect thereof,
including (a) any enhanced, modified, revised, updated, or upgraded version
thereof; (b) any revision, or other form in which the same may be recast,
transformed, or adapted; and (c) any improvement thereon, all of which is
prepared exclusively by C & T based on a separate remuneration to be agreed upon
by the parties hereto.
1.22 "Development Effort" has the meaning set out in Section 4.1.
1.23 "Development" means any research, modification, addition, adjustment or
improvement which does not alter the Base C & T Technology.
1.24 "Development Effort" has the meaning set out in Section 4.1.
1.25 "Development Period" has the meaning set out in Section 4.6.
1.26 "Documentation" means all technical documentation (whether written or in
electronic form) for the applicable Technology Intellectual Property. Such
Documentation may include any and all flowcharts, descriptions, procedures for
maintenance and modification, testing data and similar material relating to the
design, structure and implementation of the Technology.
1.27 "Enhancements" means the enhancements and refinements to the Base C&T
Technology developed by C&T under this Agreement, including, any Derivatives of
the Enhancements furnished to Axion by C&T.
1.28 "Evaluation Batteries" means small, multi-cell batteries which are
predominantly used for comparative individual and statistical testing of new
formulations of the Technology; are not built in a commercial size or form
factor, but which are large enough to show the interplay between cells, yet
small enough to be cycled relatively quickly and in bulk; are manufacturable via
commercial techniques in moderate batch quantities, within C&T's current R&D
facilities; are designed for easy manual or machine assembly, and for the use of
testing probes, and for dissection; and are usable, via external wiring and
grouping, as a reasonable analog of commercial-sized forms of the Technology;.
1.29 "Error" means a failure of the Base C&T Technology, or the Enhancements or
the Technical Commercialization Know-how, as applicable, to (a) conform to the
Specifications in all material respects, (b) operate in accordance with the C&T
Documentation in all material respects, or (c) provide consistent results.
1.30 "Intellectual Property Rights" means all current and future world-wide
patents, other patent rights, copyrights, trade secrets, trade-marks, trade
names, service marks (in applicable jurisdictions), moral rights and all other
intellectual property rights, including all applications and registrations with
respect thereto
1.31 "Lab Support Amount" means an amount, calculated in respect of a monthly
period, based on a budget, mutually agreed to by the parties; the initial such
mutually agreed budget being attached as Schedule K.
1.32 "Liquidity Event" means the conversion of Axion into a company with shares
publicly traded on a major North American securities exchange.
1.33 "Project Plan" means the written plan for the Development Effort, including
a list of all Deliverables and the Specifications, and a schedule for delivery
of such Deliverables, developed and approved by the parties pursuant to this
Agreement, which initially consists of the initial plan to be set out in
Schedule C, as the same may be jointly agreed to in writing by the parties no
later than twenty one (21) days from the date hereof, (with time to be of the
essence), as the same may be jointly updated or revised in writing by the
parties from time to time, and any subsequent additional plans, as the same may
be jointly agreed to in writing by the parties
1.34 "Shareholders' Agreement" means that certain shareholders' agreement,
initially made as of the Effective Date, among all the current shareholders of
Axion.
1.35 "Technical Commercialization" means the process of development of Base C &
T Technology, such that the production of the Axion Battery may be automated,
industrialized or further adapted to various applications, including, but not
limited to, mass production..
1.36 "Technical Commercialization Know-how" means the Technology Intellectual
Property, and all tools, techniques, methods and processes developed and to be
developed by C&T, to support Technical Commercialization of the Base C&T
Technology and the Enhancements.
1.37 "Technology" means a hybrid lead-carbon battery/capacitor technology
developed by C&T and limited to certain Application Areas all as more
particularly described in Schedule A.
1.38 "Technology Intellectual Property" means patents issued, pending and
planned, world-wide, current and future, which relate to the Technology, and
which are owned or controlled by C&T, together with unpublished trade secrets
and product-specific know-how related to the performance, production techniques,
and variant possibilities of the Technology, and trade secrets and such
proprietary know-how information relating to the design and manufacturing of the
Technology.
1.39 "Specifications" means the written specifications for the Base C&T
Technology provided by C&T to Axion and the written specifications for the
Deliverables and the Enhancements developed and approved by the parties pursuant
to this Agreement, including the initial approved specifications set out in
Schedule C, attached to this Agreement, as the same may be jointly updated or
revised by the parties in writing from time to time.
2. GRANT OF RIGHTS, TECHNOLOGY TRANSFER
2.1 LICENSE GRANT. C&T hereby grants to Axion a sole and exclusive, irrevocable,
perpetual (subject to termination in circumstances specified herein), worldwide
license to the Technology, (including under the C&T Patent Rights and the C&T
Know-How) for the development, manufacture, use, distribution, offer for sale,
and sale (directly to end-users, or through distributors), of the Axion Battery.
2.2 AXION SUBLICENSES. C&T hereby grants to Axion the right to grant sublicenses
to third parties, including Axion's Affiliates, for the manufacturing or
assembly of the Axion Battery, with the approval of C&T, which approval shall
not be unreasonably withheld or delayed, provided that sub-licensees are bound
by those restrictions concerning trade secrecy, reverse engineering, and no
further sub-licensing, as set out on Schedule G. Axion assumes full
responsibility for the performance of all obligations so imposed on such
sublicensee and will itself pay and account to C&T for all royalties due under
this Agreement by reason of the operations of any such sublicensee.
2.3 AXION RIGHT OF FIRST REFUSAL. (a) In respect of any new technology which C&T
has developed, and in respect of any application area which C&T has outside
Axion's existing Application Area, C&T shall inform Axion on an ongoing basis,
of developments concerning potential licensing, sale or rights transfer, so as
to ensure that Axion is able to exercise its right of first refusal; (b): C&T
shall notify Axion in writing, and Axion has a 30-day right of first refusal on
any bona fide arms' length commercial terms third party (i) licensing
arrangement or (ii) offer for effective sale or (iii) transfer of rights to any
such technology. (b) Once Axion has advised C&T that Axion is committed to a
Liquidity Event within a six month time-frame, any such technology cannot be
made available by C&T to any third parties.
2.4 C&T SUBLICENSES. The parties agree that the license granted to Axion in
Section 2.1 includes any future technology which C&T may acquire by license,
with the right to sublicense, which is relevant to the activities defined in
Section 2.1. In the event C&T obtains under license from a third party
technology, the subject matter of which falls under the license granted herein,
C&T shall promptly advise Axion of such license and such technology shall
automatically be sublicensed to Axion hereunder without further consideration to
C&T.
2.5 DISCLOSURE AND TRANSFER OF C&T KNOW-HOW. Following the Effective Date, C&T
shall make available to and shall transfer to Axion, in a full and uninhibited
manner, and on an ongoing basis, the Base C & T Technology and all C&T Know-How.
Without limitation, C&T shall cause all C&T Know-How to be put into form (such
as written descriptions, charts, diagrams, etc.) and deliver same to Axion, and
C&T shall also cause the C&T Key Scientists to meet with Axion personnel, no
less frequently than weekly, to effect this technology transfer on an ongoing
basis. Axion shall have such disclosure and meetings conducted so as to not
unduly detract from the work of the C&T personnel.
(a) For greater clarity, within twenty one (21) days of the date hereof, the
parties hereto shall jointly agree upon a schedule (the "Schedule") of
disclosure and transfer of the Base C & T Technology and C & T Know-How, which
schedule must be completed by the Beta End Date. C & T's consideration, payable
by Axion, for performance of the Schedule is described in paragraph 3.1 hereto.
(b) In conjunction with the transfer of the Base C & T Technology and C & T
Know-How, the Schedule shall incorporate all of the aspects of the Project Plan
and the Technical Commercialization, and C & T's consideration, payable by
Axion, for such Technical Commercialization is described in paragraph 4.2
hereto.
3. COMPENSATION FOR LICENSE GRANT, TECHNOLOGY TRANSFER
3.1 LICENSE FEE
In consideration for the grant of license, the transfer of technology and the
other rights set out in Section 2, Axion shall pay to C&T license fees as
follows:
(a) Cash consideration: A one-time license fee, paid by Axion to C&T,
in the total amount of ONE MILLION FIVE HUNDRED and NINETY FOUR THOUSAND US
DOLLARS (US $1,594,000.00), shall be payable in accordance with the following
schedule:
i) US$1,000,000.00 upon the Beta End Date;
ii) Equal monthly payments for the balance of the US$594,000.00,
payable on the first day of each month, commencing on November
1, 2003 and ending on the Beta End Date, in accordance with
the agreed upon Project Plan and Schedule.
(b) Share consideration: Axion shall issue to C&T common shares in
Axion as of the Effective Date so as to give C&T 12.5% of the common shares in
Axion, in accordance with and subject to the execution by C&T of the
Shareholders' Agreement (which Shareholders' Agreement contains, among other
provisions, certain anti-dilution protection for C&T, and certain rights of C&T
to acquire an additional 12.5% of the common shares in Axion in the event of a
Liquidity Event, all as therein outlined) .
3.2 ROYALTY PAYMENTS
Royalty on Sales of Axion Battery. Axion shall pay to C&T a royalty payment for
each Axion Battery, or any other application utilizing the Technology in any
manner whatsoever, sold by Axion, its Affiliates or sublicensees (the "Royalty")
according to the following rates:
i) A "Base Royalty Rate" of 3.75% of the gross revenue actually
received by Axion on each Axion Battery sold by Axion, its
Affiliates or sublicensees.
(a) Sublicense. In the event Axion sublicenses its right to
assemble or manufacture the Axion Battery, such sublicenses
shall include an obligation for the sublicensee to account for
and report its sales of such Axion Battery on the same basis
as if such sales were sales of Axion Batteries by Axion, and
Axion shall pay the applicable Royalty to C&T.
(b) Payments and Records. Payments and records in respect of
Royalty payments shall be made as provided for under Section 8
of this Agreement.
4. DEVELOPMENT, DELIVERY, TESTING AND ACCEPTANCE
4.1 DEVELOPMENT EFFORT - INITIAL PHASE
(a) General. In a collaborative development program, C&T and Axion will together
follow the most expeditious path to achieve Technical Commercialization of the
Axion Battery, with both parties playing a significant role in the execution of
development activities, and in accordance with the principles of lab operations,
all as described in Schedule D. To that end, the parties will undertake the
Technical Commercialization and development project, outlined in the initial
Project Plan that has been agreed to by the parties and is set out on Schedule
C. C&T, in cooperation with Axion, will develop the Deliverables and the
Enhancements in accordance with the Specifications and deliver same to Axion in
accordance with the schedule in the Project Plan (the "Development Effort").
(b) Development. The Development Effort will be undertaken in multiple phases,
each phase of which, when agreed to by the parties, is to be to be set out in a
Project Plan and attached to this Agreement.
(c) C&T's Responsibilities under the Development Effort. C&T will: (i) dedicate
sufficient qualified and trained personnel (but including, in any event, each of
those C&T Key Scientists identified on Schedule E) to develop and deliver the
Deliverables and the Enhancements to Axion in accordance with the schedule in
the Project Plan; and (ii), appoint a chief scientist or engineer, operating at
a Vice-President level, and who shall be, initially, Xxxxx Xxxxxxx as the
project manager (the "C&T Project Manager") who will be responsible for managing
the execution of the Project Plan in complete coordination with Axion Project
Manager; (iii) maintain a detailed log of all work being done in connection with
the Development Effort; and (iv) do all things necessary to perform the work to
be done by C&T as set out on Schedules C and D.
(d) Axion's Responsibilities under the Development Effort. Axion will: (i)
dedicate sufficient qualified and trained personnel to work with C&T as set
forth in the Project Plan and as otherwise reasonably necessary to perform the
required development work; (ii), appoint a chief scientist or engineer,
operating at a Vice-President level, and who shall be, initially, Xxxxxxxxxx
Xxxxxxxx as the project manager (the "Axion Project Manager") who will be
responsible for managing the execution of the Project Plan in complete
coordination with the C&T Project Manager; (iii) until the Beta End Date, supply
at no charge to C&T working space and facilities, after which time C & T may, at
its sole and absolute discretion, relocate to other working spaces and/or
facilities; and (iv) do all things necessary to perform the work to be done by
Axion as set out on Schedules C and D.
(e) Primary Contacts. The C&T Project Manager and the Axion Project Manager will
serve as the primary contact for his respective party with respect to the
Development Effort. The C&T Project Manager shall co-ordinate with the Axion
Project Manager the delivery of the Deliverables and the Enhancements in
accordance with the Project Plan. The C&T Project Manager and the Axion Project
Manager shall meet no less frequently than weekly (or more frequently as may
reasonably be requested by either party in writing) to discuss, among other
things, the status of the Deliverables.
(f) Delay of Deliverables. If the development of any Deliverable is or may be
delayed, C&T will promptly notify Axion and provide to Axion a revised estimate
of the date such Deliverable may be completed and delivered to Axion.
(g) Xxxxxx Arbitrates. In the event that there is a dispute as to whether agreed
upon Deliverables, and/or milestones or definable objectives, have been
achieved, then the matter is to be arbitrated by Xx. Xxxxxx
4.2 DEVELOPMENT FEES - INITIAL PHASE. During the period of Technical
Commercialization and until Beta End Date, C & T shall devote all of its time
and attention to the success of the Technical Commercialization and Axion shall
pay C &T's budget as provided in Schedule D.
4.3 ACCEPTANCE OF DELIVERABLES. Each Deliverable will be evaluated for its
completeness and/or tested by Axion using appropriate acceptance criteria or
test procedures prepared by Axion, and agreed to by C&T acting reasonably, for a
period of twenty (20) days after receipt of such Deliverable with its associated
Documentation from C&T to verify conformance of the Deliverable to the
applicable Specifications and C&T Documentation. In lieu of or as part of the
foregoing acceptance test, Axion may observe the aforementioned acceptance tests
to be conducted by C&T at C&T's facility. In the event that such acceptance test
establishes that a particular Deliverable does not conform with the applicable
Specifications or C&T Documentation, Axion shall deliver to C&T a written
deficiency report within five (5) days after the end of the test period, in
detail reasonably sufficient to provide C&T with an opportunity to identify the
non-conformance and C&T shall undertake efforts to promptly correct or modify
such Deliverable and deliver the corrected or modified Deliverable to Axion for
re-testing in accordance with the foregoing procedure. If Axion does not deliver
to C&T a written deficiency report within five (5) days after the end of the
test period for the applicable Deliverable or the corrected or modified
Deliverable, Axion shall be deemed to have accepted such Deliverable and such
acceptance of the Deliverable shall constitute acceptance of the applicable
Enhancements.
4.4 DEVELOPMENT EFFORT - SECOND PHASE. The parties will work together prior to
the Beta End Date to identify additional research and development objectives,
with new mutually agreed upon targets and definable objectives, together with a
new funding schedule, for the second phase of the development effort, which
second phase is to take place after the Beta End Date.
4.5 AUTOMATIC LICENSE OF ENHANCEMENTS. For greater certainty, the parties
confirm that: (a) all Enhancements and Deliverables are, on their creation,
automatically licensed to Axion under the license provisions of Section 2; and
(b) the termination of the Development Effort shall have no effect on the
irrevocable and exclusive license and rights granted under Section 2.
4.6 TERM AND TERMINATION OF DEVELOPMENT EFFORT. The term of the initial Project
Plan shall commence on the Effective Date and will continue in effect until the
work described in the Project Plan is completed and the final Deliverable in the
Project Plan has been accepted by Axion (the "Development Period"), or on March
31, 2005, whichever first occurs. The term of the Development Effort may be
extended by the mutual agreement of the parties.
4.7 RESEARCH AND DEVELOPMENT SUPPORT. Prior to the Beta End Date C & T shall
provide research and development support services to Axion with respect to the
Technology and these support services shall be provided at no further cost to
Axion. In the event of termination of the Development Effort or following the
Beta End Date, C&T will continue to make such research and development services
available to Axion for commercially reasonable fees.
4.8 ADDITIONAL SERVICES AND NEW PROJECTS. C&T and Axion may agree from time to
time in writing that, after the Beta End Date, C&T will provide additional
development services or new projects. Such additional development services or
new projects shall be performed in accordance with a statement of work to be
entered into between the parties which shall specify, among other things, the
specifications for the additional development services or new project and/or the
deliverables of such additional development services or new projects, the
schedule for the performance of the additional development services or new
project, and the pricing or cost allocation between the parties for such
additional development services or new project.
5. PATENT FUND.
Axion will provide, as mutually agreed that, and when, it is needed, up to
US$1,000,000.00, to go into a separate account. Upon joint approval by both
parties, such approval not to be unreasonably withheld, these funds are to be
used in support of C&T's filing and acquisition of patents related to the
Technology licensed or licensable by Axion, or, for example, to acquire the
Exin/Esna patents. However, if Axion cannot use the technology, then it can
refuse to fund the patents.
6. INTELLECTUAL PROPERTY RIGHTS
6.1 PROSECUTION OF PATENTS. C&T Patents shall be prosecuted (including the
handling of interferences) and maintained by C&T. C&T shall furnish Axion with
copies of draft submissions to the relevant patent authorities and will consider
Axion's comments. If Axion does not provide C&T with comments within thirty (30)
days of receipt of a draft, C&T shall be free to proceed with its submission or
other contemplated action. Further, C&T shall always be entitled to proceed with
any submission or other contemplated action if it determines time is of the
essence, provided that C&T makes reasonable efforts to inform Axion as early as
practicable and to consider its comments where possible. In the event that C&T
elects not to maintain any issued patent within the C&T Patents or not to file
any patent term extensions to the C&T Patents which Axion believes are
appropriate to obtain an extended period of market exclusivity for the Axion
Battery, Axion shall have the right to elect to have C&T or its licensors
maintain such patents or file for such patent term extensions.
6.2 INFRINGEMENT OF PATENTS BY THIRD PARTIES
(a) Notification. Each party shall promptly notify the other in writing
of any alleged or threatened infringement of the C&T Patent Rights of which it
becomes aware.
(b) C&T Patent Rights. C&T shall have the right, but not the
obligation, to bring, at C&T's expense and in its sole control, an appropriate
action against any person or entity infringing a C&T Patent Right directly or
contributorily. If C&T does not bring such action within thirty (30) days of
notification thereof to or by Axion, Axion shall have the right, but not the
obligation, to bring, using the Patent Fund monies, and in Axion's sole control,
such appropriate action. The party not bringing an action under this paragraph
(b) shall be entitled to separate representation in such matter by counsel of
its own choice and at its own expense, but such party shall cooperate fully with
the party bringing such action.
6.3 AXION'S OWNERSHIP RIGHTS. As between Axion and C&T, Axion retains all right
title and interest (including all Intellectual Property Rights) in and to the
Axion Know-How made by or on behalf of Axion. In the event that C&T acquires any
right title or interest (including any Intellectual Property Rights) in or to
the Axion Know-How made by or on behalf of Axion during the term of this
Agreement or as a result of the services performed under this Agreement, C&T
hereby irrevocably assigns to Axion, all such right title or interest,
(including all Intellectual Property Rights) in and to the Axion Know-How.
Without limiting the generality of the foregoing, (a) C&T shall not disclose
Axion Know-How to any third party without the express prior written approval of
Axion; and (b) Axion retains all right, title and interest (including all
Intellectual Property Rights) in and to Axion's business plan
6.4 USE OF AXION TRADE-MARKS. C&T will not use any Axion trade-marks, service
marks, trade names, or logos in any advertising, brochures, or promotional
materials without Axion's prior written approval.
7. OTHER OBLIGATIONS OF THE PARTIES
7.1 JOINT RESPONSIBILITIES
(a) Cooperation concerning accounting and document review. C&T and Axion shall,
from the Effective Date forward, each provide to the other party full and
uninhibited access to all accounting, corporate records and documents.
(b) Workplace Rules. Each party will cause its personnel to co-operate fully
with the working hours, working rules and non-discrimination, and safety and
security policies established by the other party and all applicable laws when
such personnel are on other party's premises.
(c) Compliance with Applicable Laws. Each party in the course of exercising its
rights and performing its obligations under this Agreement shall comply with all
applicable federal, provincial, state and municipal laws, regulations, by-laws,
orders, rulings and ordinances, including without limitation consumer protection
and trade practices laws and export control laws.
(d) Adverse Activities. Neither party shall engage in any deceptive, unfair or
unethical trade practices with respect to the Base C&T Technology, the
Enhancements or the Axion Know-How nor make any false or misleading
representations about the other party or the products or services of the other
party.
7.2 DELIVERY OF DUE DILIGENCE INFORMATION. Within two weeks of the Effective
Date, C&T will deliver to Axion all the information and documentation requested
in the Due Diligence Request List, as set out on Schedule I and Axion shall
deliver a reciprocal set of information and documentation to C & T, as regards
Axion and any other related entity.
7.3 AXION RESPONSIBILITY FOR BUSINESS COMMERCIALIZATION. In addition to the work
that is to be performed by Axion as outlined in Section IV of Schedule D, Axion
shall be responsible, on an ongoing basis, for Business Commercialization. It is
Axion's obligation to make reasonable efforts to have the funding necessary to
comply with the terms of this Agreement and to have a Liquidity Event or
commercial sales of the Axion Battery commence no later than six (6) months
after the Beta End Date.
8. PAYMENTS; RECORDS;
8.1 PAYMENT; REPORT. All amounts payable under this Agreement shall be paid in
U.S. dollars. Each payment of royalties owing to C&T shall be paid within 30
days of the end of each calendar quarter or as otherwise specifically provided
herein, and shall be accompanied by a statement, on a country-by-country basis,
of the amount of gross sales, an itemized calculation showing any adjustments
during such quarter, the amount of aggregate worldwide gross sales, during such
quarter and on a cumulative basis for the current year, and the amount of
Royalty or other payments due on such sales.
8.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. For purposes of computing
payments due hereunder from time to time in U.S. Dollars, the sales of Axion
Batteries in countries other than the United States shall be converted into U.S.
Dollars, using the average monthly rate of exchange at the time for such
currencies as retrieved from the Reuters System. Notwithstanding the foregoing,
if by reason of any restrictive exchange laws or regulations, Axion shall be
unable to convert to U.S. Dollars the amount, determined as above, equivalent to
the amount due by Axion hereunder, then Axion shall so notify C&T promptly and
provide an explanation of the circumstances. In such event, Axion shall make all
such payments or the balance thereof due hereunder and which is not paid in
foreign currency as provided below, in U.S. Dollars as soon as reasonably
possible after and to the extent that such restrictive exchange laws or
regulations are lifted so as to permit Axion to pay amounts due hereunder in
U.S. Dollars. Axion shall promptly notify C&T if such restrictions are so
lifted. At its option C&T shall meanwhile have the right to request the payment
(to it or to its nominee), and, upon request, Axion shall pay or cause to be
paid amounts due (or such portions thereof as are specified by C&T) in the
currency of any other country designated by C&T and legally available to Axion
under the then- existing laws of regulations. Any payments shall be payable to
C&T by wire transfer at such bank in Ontario as C&T shall specify from time to
time. Not less than one (1) business day prior to such wire transfer, the
remitting party shall fax the receiving party advising it of the amount and of
the payment to be made
8.3 RECORDS AND AUDIT. Axion shall keep, and shall cause its Affiliates and
sublicensees to keep, complete and accurate records pertaining to the sale or
other disposition of Axion Batteries and of the Royalty and other amounts
payable under this Agreement in sufficient detail to permit C&T to confirm the
accuracy of all payments due hereunder. At C&T's request, Axion will cause its
independent certified public accountants to prepare abstracts of Axion's
relevant business records for review by C&T's independent certified public
accountants. If, based on a review of such abstracts, C&T reasonably believes
that a full audit of said business records would be necessary for the
confirmation of the accuracy of all payments due hereunder, C&T's independent
certified public accountants shall have full access to review all work papers
and supporting documents pertinent to such abstracts, and shall have the right
to discuss such documentation with Axion's independent certified public
accountants. Such audit rights may be exercised no more often than once a year,
within three (3) years after the payment period to which such records relate,
upon notice to Axion and during normal business hours. C&T will bear the full
cost of such audit unless such audit discloses an underpayment of more than five
percent (5%) from the amount of royalties due. Axion shall promptly make up any
underpayment. The terms of this Section 8.3 shall survive any termination or
expiration of this Agreement for a period of three (3) year
8.4 WITHHOLDING TAXES. Any and all taxes levied on account of royalty payments
paid or owed from a country in which provision is made in the law or by
regulation for withholding will be deducted from royalty payments made to C&T
hereunder. Axion shall cooperate with C&T to claim exemption from such
deductions or withholdings under any double taxation or similar agreement in
force from time to time. In addition, Axion shall cooperate with C&T in all
proper respects to minimize any taxes on royalties hereunder. If Axion makes any
payment without reduction for withholding and it later transpires that an amount
of tax should have been withheld on such royalty payment ("underwithheld tax"),
Axion shall be entitled to recover the underwithheld tax by an additional
withholding from any payment due to C&T under this Agreement. Similarly, if
Axion withholds an amount of tax which is later determined to have not been due,
Axion shall reimburse C&T for such over withheld amounts.
9. WARRANTIES
9.1 C&T WARRANTIES. C&T represents and warrants to Axion as follows, and
confirms that Axion is relying upon the accuracy of each of such representations
and warranties in connection with the transactions contemplated by this
Agreement:
(a) Corporate Power. C&T is duly organized and validly existing under the laws
of Ontario, has full power and authority to enter into this Agreement, and to
carry out its obligations under this Agreement.
(b) No violation. The execution and delivery of this Agreement by C&T and the
performance by C&T of its obligations under this Agreement does not violate any
agreement, instrument or understanding, oral or written, to which C&T is a party
or by which C&T is otherwise bound, nor violate any law, regulation or ruling of
any court, governmental body or administrative or other agency having authority
over it.
(c) Binding Agreement. When executed and delivered by C&T, this Agreement will
constitute a legal, valid and binding obligation of C&T, enforceable against C&T
in accordance with its terms.
(d) No infringement. As of the Effective Date, the Base C&T Technology, the
Technical Commercialization Know-how, the C&T Documentation, the Deliverables
and the Enhancements, do not violate or infringe any issued patent, trade
secret, copyright, trade-xxxx, or other such proprietary right of any third
party.
(e) No claims. As of the Effective Date, there are no claims in progress,
pending or threatened asserting that the Base C&T Technology, the Technical
Commercialization Know-how, the C&T Documentation, the Deliverables and the
Enhancements, violates or infringes any patent, trade secret, copyright,
trade-xxxx or other such proprietary right of any third party.
(f) Key Scientists. Schedule E contains a complete list of the names, ages,
salaries, academic credentials, immigration status, employment authorization to
date and other relevant details of all of the scientists currently working for
C&T in its Ontario premises. The scientists listed on Schedule E are the only
individuals whose expertise is required to accomplish the technology transfer
and Development Effort contemplated by this Agreement. Each of the C&T Key
Scientists have signed binding employment, non-compete and confidentiality
agreements with C&T, and that these agreements confirm their commitment to
remain in Toronto working for C&T until the Beta End Date. None of the C&T Key
Scientists are bound or affected by any prior employment, non-disclosure or
non-compete agreements, or any immigration, visa or other matters (with the
exception of the provisions of the Immigration and Refugee Protection Act, as
amended from time to time, and the regulations thereto) that could interfere
with their right and ability to accomplish the technology transfer and
Development Effort contemplated by this Agreement, or that could affect the C&T
Patent Rights.
(g) Title to the C&T Patent Rights and C&T Background Technology. C&T has good
and valid title to, and the exclusive right to, the C&T Patent Rights and the
Base C&T Technology, free and clear of any encumbrances. C&T has not granted to
any other person or entity any license or other rights to the C&T Patent Rights
and the Base C&T Technology, and without limiting the generality of the
Liquidity Event merger provisions of Section 12, the C&T Patent Rights and the
Base C&T Technology would be part of the assets of a merged entity.
(h) Base C&T Technology Commercializable. Upon completion of the Development
Effort - Initial Phase, as described in this Agreement, the Technology will be
Commercializable.
(i) C&T Documentation and C&T Know-how available. Subject to the Schedule and
the Project Plan, the C&T Documentation and C&T Know-how, including all personal
and corporate laboratory notebooks, reports, test method specifications, and the
like, are available and can be duplicated and provided to Axion within two weeks
of the Effective Date as part of the technology transfer process.
(j) Safety Data. C&T has informed Axion about all significant known information
in its possession or control concerning side effects, injury and toxicity with
respect to the use of the Technology.
(k) Patent Matters. As of the Effective Date, C&T has no knowledge of the
existence of any patent owned or controlled by a Third Party (other than the
Exin patents) which covers the Technology that would prevent Axion from making,
using, selling or sub-licensing such Technology. As of the Effective Date, C&T
is not in possession of information that would render invalid and/or
unenforceable claims directed specifically to the Technology.
(l) Employee Inventions. All discoveries, designs, research materials, and all
other information which is proprietary in nature and relating to the Technology,
resulting from the efforts and or knowledge or expertise of any employee,
contractor, agent or principal of C&T, is, as of the Effective Date, the sole
and exclusive property of C&T. Attached hereto as Schedule J are true copies of
all agreements entered into between C&T and its employees, contractors and all
other parties, which agreements provide that all discoveries, designs, research
materials, and all other information which is proprietary in nature remain the
property of C&T. C&T further warrants, represents and covenants that it shall
ensure that all discoveries, designs, research materials, and all other
information which is proprietary in nature and relating to the Technology,
resulting from the efforts and or knowledge or expertise of any employee,
contractor, agent or principal of C&T, is and will continue to be the sole and
exclusive property of C&T and that this will continue to be given effect in
writing with such parties.
(m) No Other Agreements. Save and except for the Xxxxxx matter, as disclosed to
Axion, no person has any agreement, option, understanding or commitment, or any
right or privilege capable of becoming an agreement, option or commitment, for
the licensing or acquisition of any interest in the Base C & T Technology or any
derivatives thereof, or for the acquisition of shares or assets of C&T.
9.2 AXION WARRANTIES. Axion represents and warrants to C&T as follows, and
confirms that C&T is relying upon the accuracy of each of such representations
and warranties in connection with the transactions contemplated by this
Agreement:
(a) Corporate Power. Axion is duly organized and validly existing under the laws
of Ontario, has full power and authority to enter into this Agreement, and to
carry out its obligations under this Agreement.
(b) No violation. Save and except for the Xxxxxx matter, as disclosed to C&T,
the execution and delivery of this Agreement by Axion and the performance by
Axion of its obligations under this Agreement does not violate any agreement,
instrument or understanding, oral or written, to which Axion is a party or by
which Axion is otherwise bound, nor violate any law, regulation or ruling of any
court, governmental body or administrative or other agency having authority over
it.
(c) Binding Agreement. When executed and delivered by Axion, this Agreement will
constitute a legal, valid and binding obligation of Axion, enforceable against
Axion in accordance with its terms.
(d) Axion Documentation. Subject to the Schedule and the Project Plan, all of
Axion's and any related entity's documentation, including personal and corporate
notebooks, reports, agreements, financial statements and the like are available
and can be duplicated and provided to C & T within two weeks of the Effective
Date.
(e) No Other Agreements. No person has any agreement, option, understanding or
commitment, or any right or privilege capable of becoming an agreement, option
or commitment, for the licensing or acquisition of any interest in the licenses
granted to Axion hereunder.
(f) Non-Disclosure / Non-Competition. Due to the sensitive and proprietary
nature of the Base C & T Technology and C & T Know-How, Axion shall enter into
non-disclosure and non-competition agreements, subject to approval and review by
C & T, such approval not to be unreasonably withheld or delayed, with each and
every one of its management and employees.
9.3 TRUTH OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Both parties represent
that the representations, warranties and covenants contained in this Agreement
or in any Schedule hereto or in any certificate or other documents delivered or
given pursuant to this Agreement shall be true and correct as of the Effective
Date with the same force and effect as if such representations, warranties and
covenants had been made on and as of such date. Before, on or after the
Effective Date, the parties shall provide to the other such evidence as may be
reasonably required as to the truth of such representations, warranties and
covenants, provided however, that the receipt of such evidence and the
completion of this Agreement shall not constitute a waiver of any of the said
representations, warranties and covenants, all of which shall survive the
Effective Date of this Agreement and shall be of full force and effect.
9.4 REMEDIAL WARRANTIES. If within ten (10) days after the delivery of a
Deliverable, or Enhancement by C&T to Axion under this Agreement, Axion
identifies and reports to C&T an Error or C&T otherwise becomes aware of any
such Error, C&T will, at its own expense and at no charge, use best efforts to
correct such Error. C&T shall not be responsible to correct such Error if the
Error is caused by Axion.
10. LIABILITY LIMITATIONS
10.1 Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY, ITS CUSTOMERS OR ANY THIRD PARTY FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS. HOWEVER, THIS SECTION
10.1 SHALL NOT APPLY TO EXCLUDE DAMAGES THAT A COURT OF COMPETENT JURISDICTION
FINALLY AWARDS TO A THIRD PARTY AGAINST EITHER PARTY WHERE SUCH DAMAGES ARE
WITHIN THE SCOPE OF THE INDEMNITIES IN SECTIONS 11.2, 11.3 OR 11.4.
10.2 Limit of Liability. EXCEPT AS PROVIDED IN SECTIONS 11.2 AND 11.4 EACH PARTY
AGREES THAT THE OTHER PARTY'S TOTAL AGGREGATE LIABILITY FROM ALL CLAIMS ARISING
IN ANY MANNER UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE
TOTAL AMOUNT OF THE LICENSE FEES AND DEVELOPMENT FEES PAID BY AXION TO C&T UNDER
THIS AGREEMENT.
11. INDEMNIFICATION
11.1 GENERAL INDEMNITY. Each party will indemnify and hold the other party, its
Affiliates, and their respective officers, directors and employees harmless from
all damages, liabilities, losses, costs, and expenses (including the reasonable
fees and expenses of lawyers, consultants, and expert witnesses) arising out of
or connected with any personal injury or property damage to the extent such
injury and/or damage results from the negligence or willful misconduct of the
first party or its employees, agents or contractors. Neither party will consent
to any judgment, attachment of any lien or any other act adverse to the interest
of the other party in connection with any such claim without the express written
consent of the other party, which consent shall not be unreasonably withheld or
delayed
11.2 INDEMNIFICATION BY C&T. C&T hereby agrees to indemnify, hold harmless and
defend Axion against any and all expenses, costs of defense (including the
reasonable fees and expenses of lawyers, consultants, and expert witnesses,
damages, judgments, fines and amounts paid in settlement) and any amounts Axion
becomes legally obligated to pay because of any claim or claims against it to
the extent that such claim or claims (i) arise out of the breach or alleged
breach of any representation or warranty by C&T hereunder, or (ii) are due to
the negligence or misconduct of C&T; provided that (a) Axion provides C&T with
prompt notice of any such claim and the exclusive ability to defend (with the
reasonable cooperation of Axion) and settle any such claim and (b) such
indemnities shall not apply to the extent such claims are covered by Axion's
indemnity set forth in Section 11.3 below
11.3 INDEMNIFICATION BY AXION. Axion hereby agrees to indemnify, hold harmless
and defend C&T against any and all expenses, costs of (including the reasonable
fees and expenses of lawyers, consultants, and expert witnesses, damages,
judgments, fines and amounts paid in settlement) and any amounts C&T becomes
legally obligated to pay because of any claim or claims against it to the extent
that such claim or claims (i) arise out of the breach or alleged breach of any
representation or warranty by Axion hereunder, or (ii) are due to the negligence
or misconduct of Axion; provided that (a) C&T provides Axion with prompt notice
of any such claim and the exclusive ability to defend (with the reasonable
cooperation of C&T) or settle any such claim and (b) such indemnities shall not
apply to the extent such claims are covered by C&T's indemnity set forth in
Section 11.2 above.
11.4 INFRINGEMENT INDEMNITY. C&T will indemnify and hold Axion, its Affiliates
and their respective officers, directors and employees harmless from all
damages, liabilities, losses, costs, and expenses (including the reasonable fees
and expenses of lawyers, consultants, and expert witnesses) incurred by Axion,
its Affiliates and their respective officers, directors and employees that are
attributable to any claim that the Base C&T Technology, the Enhancements, the
Technical Commercialization Know-how or the C&T Documentation infringes any
third party patent, trade secret, copyright, trade-xxxx, or other such
proprietary right, anywhere in the world, provided that Axion notifies C&T
promptly in writing of any such claim of which Axion becomes aware. Axion will
permit C&T, upon C&T's written request and at C&T's sole expense, to control and
direct the investigation and the defense or settlement of such claim; provided
that (a) Axion will provide C&T with such information and assistance as is
reasonably requested by C&T in connection with such investigation, defense, or
settlement; (b) C&T will keep Axion informed of, and consult with Axion in
connection with, the progress of such investigation, defense, or settlement; and
(c) C&T will have the right to settle or compromise any such claim.
12. SPECIAL PROVISIONS
..
12.1 Liquidity Event Merger.
(a) In the event of and prior to a Liquidity Event, C&T and Axion will "merge",
such that either through an asset acquisition or a share exchange, Axion shall
(for no further consideration, other than as provided in 12.1(b)) acquire all
C&T technologies, staff contracts and assets, canceling all royalties,
non-dilution, etc.
(b) Upon "merger", C&T shareholders will receive an additional 12.5% of Axion
shares just prior to the change of status. (By way of example, if prior to the
merger, as a result of dilution, C&T held 10% of the shares of Axion, after
"merger", C&T shareholders would hold (10 + 12.5=) 22.5% of the shares of
Axion.)
(c) The parties agree that, upon Axion providing written notice to C&T of a
Liquidity Event to occur within a reasonable time-frame, both parties will
promptly do all acts and things and execute and deliver such further and other
papers and documents and pass all resolutions of both the shareholders and
Directors and enact such by-laws as may be necessary and desirable or reasonably
required by a party hereto to carry out the intent and purpose of and give full
effect to this merger.
13. TERM AND TERMINATION
13.1 Term. The term of this Agreement will begin on the Effective Date
and, unless earlier terminated as
provided in Section 13, shall be for a perpetual term
13.2 Termination for Axion's Breach. C&T shall have the right to terminate this
Agreement and its obligations hereunder on ninety (90) days' written notice to
Axion, if Axion fails to pay the License Fees or the Royalty payments due
hereunder, and such non-payment has not been remedied at the end of such ninety
(90) days, except where provided in this Agreement that a specific remedy is in
lieu of such payment. In the event C&T terminates this Agreement pursuant to
this Section 13.2, the licenses granted to Axion under this Agreement shall
terminate.
13.3 Termination for C&T's Breach. Axion party shall have the right to terminate
this Agreement and its obligations hereunder on ninety (90) days' written notice
to C&T, if C&T commits a material breach of this Agreement which is capable of
remedy but which has not been remedied at the end of such ninety (90) days,
except where provided in this Agreement that a specific remedy is in lieu of any
other remedy. In the event Axion terminates this Agreement pursuant to this
Section 13.3, all licenses granted to Axion under this Agreement shall survive,
subject to Axion's continued obligation to pay Royalties to C&T hereunder.
13.4 Termination Due to C&T Bankruptcy or Insolvency. In the event that C&T
makes an assignment for the benefit of its creditors, files or has filed against
it a petition under any bankruptcy, insolvency, or similar law, appoints or has
appointed against it a trustee or receiver for any of its property or commences
or has commenced against it (by resolution or otherwise) the liquidation or
winding-up of its affairs, then all rights of C&T to the Technology shall be
transferred to Axion, without restriction as to Application Areas, and at no
further cost to Axion, and this Agreement shall be terminated.
13.5 Termination Due to Axion Bankruptcy or Insolvency. In the event that Axion
makes an assignment for the benefit of its creditors, files or has filed against
it a petition under any bankruptcy, insolvency, or similar law, appoints or has
appointed against it a trustee or receiver for any of its property or commences
or has commenced against it (by resolution or otherwise) the liquidation or
winding-up of its affairs, this Agreement shall by terminated and all of Axion's
license to the Technology under this Agreement shall be revoked.
13.6 Other Relief. Except as otherwise provided in Section 13,
termination of this Agreement shall be without prejudice to any other right,
remedy or recourse to which either party may be entitled hereunder
13.7 Survival. Sections of the Agreement that are intended to survive, or that
by necessary implication should survive, termination of this Agreement, will
continue in full force and effect following termination of the Agreement.
14. CONFIDENTIALITY; PUBLICITY
14.1 Confidentiality.
(a) Non Disclosure. Each party recognizes that Confidential Information of the
other party and its Affiliates used or disclosed in the performance of such
party's obligations hereunder is invaluable to the owner of such information.
Each party shall, and shall instruct and cause its employees and Affiliates to,
hold in confidence any and all Confidential Information of the other party and
its Affiliates to which they may have access or which may be disclosed or
described to them and to otherwise comply with this Section 14.1. Neither party
shall use, or attempt to use, any Confidential Information of the other party or
its Affiliates except in the performance of its obligations hereunder. Each
party shall exercise at least the same degree of care in safekeeping all
Confidential Information of the other party and its Affiliates which may in any
manner come into its possession as it exercises with respect to its own
Confidential Information, shall disclose or grant access thereto only to those
employees having a need to know for the performance by such party of its
obligations hereunder, and shall promptly surrender to the other party all
written or otherwise reproducible records and evidences of any Confidential
Information of the other party and its Affiliates in its possession upon the
termination or expiry of this Agreement or any prior request of the owner of
such Confidential Information.
(b) Exceptions. The provisions of Sections 14.1(a) shall not apply to any
Confidential Information: (i) which is known to the receiving party or its
Affiliates prior to the time of disclosure by the disclosing party without an
obligation of confidentiality; (ii) which at the time of disclosure by the
disclosing party, or thereafter, is or becomes publicly known or available
through no fault of the receiving party or its Affiliates; (iii) which is
disclosed in writing to the receiving party or its Affiliates by a third party
who has the legal right to make the disclosure; (iv) the disclosure of which is
expressly consented to in advance and in writing by the disclosing party; (v) is
independently developed by the receiving party without access to the
Confidential Information of the disclosing party as evidenced by written records
and documentation; or (vi) the disclosure of which is required by applicable law
provided that the receiving party shall have notified the disclosing party prior
to such disclosure and assisted the disclosing party in any attempts by the
disclosing party to obtain a protective order for such information.
(c) Survival of Confidentiality Provisions. The provisions of this Section 14.1
shall survive the termination or expiration of this Agreement.
14.2 Publicity. Upon execution of this Agreement, Axion and C&T will jointly
prepare a mutually acceptable press release and a mutually acceptable
description of their business relationship as contemplated by this Agreement. No
other public release, announcement or description concerning the transactions
contemplated by this Agreement will be issued by either party without the prior
written consent of the other party. Notwithstanding the foregoing, nothing in
this Section 14.2 is intended to prevent (a) either party from disclosing the
transactions contemplated by this Agreement in any prospectus, disclosure
documents or other regulatory filings as may be required by any securities
commission in Canada or the United States, or (b) Axion from disclosing this
Agreement, and the transactions contemplated by this Agreement, to any
prospective or actual investors in Axion, or any of Axion's prospective or
actual funders, lenders or grantors, whether in connection with a due diligence
process, or otherwise.
15. GENERAL
15.1 Export Regulations. Both parties agree to comply with all applicable
laws, regulations and governmental orders, including without limitation
applicable export laws.
15.2 Severability. In the event that any of the provisions of this Agreement is
held by a court or other tribunal of competent jurisdiction to be invalid,
illegal, or unenforceable, such provision will be deemed and construed to extend
only to the maximum permitted by law and the remaining portions of this
Agreement will remain in full force and effect.
15.3 Governing Law. The internal substantive laws (as distinguished from the
choice of law rules) of the Province of Ontario applicable to contracts made and
performed entirely in the Province of Ontario will govern (i) the validity and
interpretation of this Agreement, (ii) the performance by the parties of their
respective obligations hereunder, and (iii) all other causes of action (whether
based in contract, tort or otherwise) arising from or relating to this
Agreement.
15.4 Dispute Resolution; Arbitration.
(a) The parties recognize that disputes as to certain matters may from time to
time arise during the term of this Agreement which relate to either party's
rights and/or obligations hereunder or thereunder. It is the objective of the
parties to establish procedures to facilitate the resolution of disputes arising
under this Agreement in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the parties agree to follow
the procedures set forth if and when a dispute arises under this Agreement. (b)
In the event of disputes between the parties, including disputes between the C&T
Project Manager and the Axion Project Manager which such project managers are
unable to resolve, a party seeking to resolve such dispute will, by written
notice to the other, have such dispute referred to their respective executive
officers designated below or their successors, for attempted resolution by good
faith negotiations within seven (7) days after such notice is received. Said
designated officers are as follows: (I) For Axion: Xxxx Xxxxxxx (ii) For C&T:
Xxxx Xxxxxxxxx.
(c) In the event the designated executive officers are not able to resolve such
dispute, either party may at any time after the 7 day period invoke the
arbitration provisions hereinafter provided for the resolution of any dispute,
controversy or claim arising out of or relating to the validity, construction,
enforceability or performance of this Agreement. The rules governing such
arbitration are set out on Schedule H.
15.5 Injunctive Relief. If either party breaches or violates Section 14.1 or if
either party infringes any Intellectual Property Rights of the other party not
licensed hereunder, the other party will be entitled, in addition to any other
remedies that it may have at law or in equity and notwithstanding Section 15.4,
to seek immediate injunctive relief or an order of specific performance.
15.6 Legal Proceedings. The parties hereby consent and submit to the
non-exclusive jurisdiction of the courts of the Province of Ontario in
connection with any action. The prevailing party in any such proceeding will be
entitled to recover its reasonable fees and expenses of lawyers, consultants,
and expert witnesses incurred in connection with such proceeding.
15.7 Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
non-compliance by the other party under this Agreement shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach, default or non-compliance, or any acquiescence therein, or of or in any
similar breach, default or non-compliance thereafter occurring. All remedies
under this Agreement shall be cumulative and not alternative.
15.8 Independent Contractors. Axion and C&T are independent contractors. Except
as otherwise provided for in this Agreement, neither party will have the right,
power, or implied authority to create any obligation or duty on behalf of the
other party.
15.9 Force Majeure. Each party will be excused from the performance of
obligations under this Agreement to the extent that such performance is
prevented due to events or circumstances beyond the control of such party such
as fires, floods, earthquakes, war, riots, and the actions or omissions of third
parties that are not under the supervision or control of such party, provided
that the party affected by such events or circumstances promptly notifies the
other party in writing of its inability to perform due to such events or
circumstances and uses commercially reasonable efforts to resume performance as
soon as possible.
15.10 Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to C&T or Axion at
their respective addresses specified above (in the case of Axion, to the
attention of ******, with a copy to: "General Counsel" ******** and in the case
of C&T, to the attention of (Xxxx Xxxxxxxxx), with a copy to Xxxxxxx Xxxxxxxxxxx
(Legal Counsel), Xxxxx 000 0000 Xxxxxxx Xxxxxx, X. Xxxxxxx, Xxxxxxx, X0X 0X0; or
to such other address as C&T or Axion may designate by ten (10) days' advance
written notice to the other party hereto.
15.11 Assignment. This Agreement is not assignable by either party without the
prior written consent of the other party, except that without securing such
prior consent, Axion will have the right to assign this Agreement and its rights
and obligations hereunder to any (a) direct or indirect parent, subsidiary, or
Affiliate or (b) successor by way of merger or consolidation or the acquisition
of all or substantially all of the business and assets of Axion. Any other
assignment of any of the rights, duties, or obligations of this Agreement
without such consent will be void and of no effect.
15.12 Construction. The titles of the sections and subsections of the Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement. For the purposes of this Agreement, the term "including" means
"including but not limited to" unless otherwise expressly indicated.
15.13 Counterparts. This Agreement may be executed in counterparts, by manual or
facsimile signature, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
15.14 Entirety; Modifications. This Agreement (including the Schedules attached
or to be attached hereto) together with the Shareholders' Agreement, constitute
the entire agreement between the parties with respect to the subject matter
hereof, and all prior agreements, representations, statements and undertakings
are hereby expressly cancelled. This Agreement can be modified only by a formal
written agreement signed by persons duly authorized to sign agreements on behalf
of the parties
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
C AND T CO. INC. AXION POWER CORPORATION
By: /s/ By: /s/
----------------------- ----------------------
Name: Name:
----------------------- ----------------------
Title: Title:
----------------------- ----------------------
-----------------------
List of Schedules
Schedule A: Definition of the Technology and its Application Areas
-----------
Schedule B: Intentionally deleted
Schedule C: Initial Project Plan, listing Deliverables, Specifications,
Schedule, Milestones,
-----------
Schedule D: Axion Project Management and Operating Budget
Schedule E: C&T Key Scientists necessary to Plan
-----------
Schedule F: C&T Patent Rights
Schedule G: Restrictions (against reverse engineering, etc.) for
Sub-licensees
-----------
Schedule H: Rules Regarding Arbitration
Schedule I: Due Diligence Request List
Schedule J: Copies of all agreements between C&T and its employees,
contractors, etc
-----------
Schedule K: Operating Budget: See Schedule D
Schedule A: The Technology and its Application Areas
The Technology
The "Technology" means a hybrid lead-carbon battery/capacitor technology
developed by C&T, and limited to certain Application Areas as described herein.
The Parties acknowledge that the Technology is currently in lab prototype state,
having received little development as a commercial product or process.
The Technology includes:
a) Intellectual property which is described in US patent <########> and in
related patents pending or planned, and such as has been demonstrated to
Axion;
b) The trade secrets and other such proprietary know-how information relating
to the design and manufacturing of the Technology which are owned or
controlled by C&T;
c) Unpublished trade secrets and product-specific know-how related to the
performance, production techniques, and production variants of the
Technology;
d) All Enhancements or improvements by C&T to the Technology;
e) Other such intellectual property created by C&T whose creation is funded by
Axion; and f) Other intellectual property as may be included, formally, by
the mutual consent of the Axion and C&T.
Applications Areas
The use of the Technology is limited to the following Application Areas, any or
all of which may or may not require customization:
(a) back-up power or uninterruptible power supply (UPS);
(b) accumulation of electric power for subsequent peak shaving,
co-generation, distribution, and/or replacement of network
electric power in utility, industry, business and/or residential
markets;
(c) accumulation or buffering of electric power from alternative
energy stationary sources (such as wind, fuel cells, solar,
biomass, geothermal, hydroelectricity, etc.);
(d) other application areas that are not related to motive, traction
or recuperative products, or which do not integrate the Technology
with traditional portable consumer power products (such as cell
phones, "palm pilots", power tools, flashlights, lap-tops, etc);
(e) Mobile configurations of the foregoing which are used in a
stationary manner (such as a large, but easily transportable power
buffer unit that can be moved to troubled locations within a power
grid); and
(f) Other such application areas as may be included, formally, by the
mutual consent of Axion and C&T.
Schedule C:
Initial Project Plan, Deliverables, Schedule, Milestones
TO BE PREPARED AND AGREED WITHIN 21 DAYS FROM THE EFFECTIVE DATE
Schedule D: Axion Project Management and Operating Budget (to be attached)
Schedule D: Axion Project Management and Operating Budget.
Definitions and overview.
There is a project being done by C&T and Axion: "The Axion Project". It is
expected to continue for years. The purpose of the project plan is to make the
battery, to adapt the battery, to improve the battery, and to set up conditions
which will allow us all profit from the battery technology.
The Axion Project will at all times be defined by the Axion Project Plan (the
"APP") which will be continuously revised and supervised primarily by two senior
technical staff - Xxxxx Xxxxxxx and Xxxxxxxxxx Xxxxxxxx (the "Technical
Managers"), who will be operating at the VP level of authority. The initial APP
will be defined in Schedule C
There are other projects being done by C&T that are not part of this project,
thus there are two classes of project work being done by C&T staff. At all
times, and in an above-board manner, the management of C&T and the management of
Axion will maintain a distinction in both terms of ownership, control and
financial support between these two classes of project.
NOTE:
See additional clarifications as to how this Schedule D works, set out at end
of this Schedule
Summary.
o Axion proposes to pay for all costs associated with their project, i.e.
equipment costs, materials costs, travel costs, and technical staff
costs.
o Axion proposes to pay for all facilities and support staff costs.
o Axion proposes to make available 25% of the time of all key project
staff for C&T. Non-key staff will be available as per C&T's needs.
o Axion proposes to pay C&T a management surcharge amount equal to 50% of
the technical staff salaries (including bonuses) used on the Axion
project.
o Axion proposes simple accounting, flexible planning, and joint oversight of
the project.
o Axion proposes C&T will have a technical manager with VP-level
authority within Axion in addition to its Board representation within
Axion.
Overview Issues.
1. Axion is providing ongoing support for the project of
further-developing the licensed technologies. In doing this, it is
providing funds for engineers and scientists alike, and for their
support infrastructures, during periods of research and periods of
development.
2. This must be done in a professional and accountable way. The agreed
basis is a plan, and a budget, with regular meetings to guide the plan,
and full disclosure at all times.
3. Axion also wishes to provide a stable and agreeable R&D environment.
The elements of this include both flexibility and stringent clarity on
issues of funding and planning, and stable, happy work arrangements for
all, especially including technical staff.
4. C&T has additional R&D that it wishes to conduct in areas that may not
be related to the licensed technology. Examples of this include
developing porosimetry devices and developing the recuperative battery.
C&T needs the resources and flexibility to conduct this research,
funded by its own cash.
5. Both companies have a large stake in the success of this technology and
in Axion's successful commercialization of the technology. Both
companies will have oversight into each other's activities at the Board
level. Potentially, both companies may be merged together.
Management surcharge.
1. Axion will provide funds for C&T's management oversight of the technical
staff on the following basis:
C&T will receive, without requirement for further accounting, a surcharge
in the amount of 50% over the actual technical staff salaries consumed by
the project, and also over any salary-bonuses paid to them by Axion.
General funding.
1. Axion will pay for all facilities costs, with very few exceptions.
Facilities costs are the building, its insurance, heat, ventilation,
power, and other "backbone" services. Telephones usage charges are
probably separate.
2. Axion will pay for the entire support staff salaries of C&T, these
staff being Nadia, Xxxxxxx and Xxxxx.
Axion Project Staff.
1. Certain C&T scientific staff, possibly at times all of them, will be
accepted as "Axion Project Staff" ("APS"). There are qualifying
conditions for this designation, and significant benefits to this
designation.
2. In order to qualify as Axion Project Staff:
o They must be accepted as such by the Technical Managers.
o They must follow the project plan, as supervised by the Technical
Managers. In deference to their skills, they will probably have
significant input to this plan.
o They must make available, with priority to the Axion Project, 75% of
their time. Time accounting will be done daily, with little overhead.
There will be considerable flexibility on this rule, provided that the
Axion project gets general priority.
o Axion Project staff shall provide weekly progress reports, written
from daily notes.
3. Axion will pay for 100% of the APS salaries.
4. Axion will provide excellent health care benefits to APS staff.
5. Axion will provide a rolling 3-month window of job security to each APS
staff member, subject to notice to C&T and to the APS staff, subject to
work being done in good faith and without a terminal breach of this
accord by the APS staff member.
6. Axion will expect a five-day work week, with all Canadian statutory
holidays paid.
7. Axion will pay for 6 weeks of paid vacation per year for non-resident
staff, accruing daily.
8. Axion will pay for up to three round trip air fares per year for the
non-resident staff, home trips only.
9. Axion will provide bonuses for work of merit, recognition in any
patents generated.
Part-time technical staff.
1. Certain C&T technical staff will be casual or part-time workers on the Axion
Project.
2. In order to qualify as Casual workers:
o They must be accepted as such by the Technical Managers.
o They must follow the project plan, as supervised by the Technical
Managers. In deference to their skills, they will probably have
significant input to this plan.
o They must make time available to the Axion Project on a scheduled
basis, pre-approved. Time accounting will be done daily, with little
overhead.
o Axion Project staff shall provide daily notes.
3. Axion will not provide health care benefits.
4. Axion will provide a monthly estimate of casual staff use requirements.
5. Axion provide pay only for hours worked, plus the C&T surcharge.
Supplementary funding.
1. Axion will pay for materials consumed in the Axion project.
2. Axion will pay for travel expenses consumed in the Axion project.
3. Axion will pay for equipment required by the Axion project.
4. Axion will pay for consultants required by the Axion project. These
include Xx. Xxxxxx et al, and other consultants who may be needed from
time to time.
5. Axion will provide enhanced working conditions for the staff of the
Axion project, and for other ancillary technical staff. These are
detailed herein.
6. Axion will support the operating culture that is now in place in order
to provide stability and comfort.
Budget Management.
1. Axion, solely, will provide a budget for all work on the project,
subject to a general discussion with C&T and with the APS staff, and as
proposed in detail by the Technical Management.
2. The Technical Management will administer the supplementary budget funds
on a purchase order/approval basis, with regular accounting and review
by Axion.
3. C&T management will administer staff salaries and services. All
claw-back costs from the project staff will be subject to an open-books
audit. The management surcharge will be paid monthly.
4. There will be a weekly review meeting, dealing with the budget, and the
activities of both Axion and C&T. Minutes of this meeting will be
available to Axion and to C&T.
Development Budgets.
1. In addition to all the foregoing, there will exist an experimental
process development budget, whose planning and execution will be a
coordinated by the Technical Management.
2. In further addition, there will be an experimental manufacturing
development budget, which will be administered by the VP Technology.
Project and Staff Management.
1. C&T will manage all their staff in order to keep them available for the
Axion project or for their own projects, and will administer to their
personal needs and financial obligations. C&T will administer their own
projects separately.
2. Axion will administer the Axion Project plan in consultation with C&T,
and in daily and close consultation with the Technical Management.
3. In the following chart, there are two key technical managers, one from
each company. These staff, who are qualified scientists and managers,
will maintain the project
ATTACH CHART!
Additional clarifications as to how this Schedule D works.
All sums of money payable to C & T, pursuant to Schedule D are net to C & T and
do not include taxes or other deductions payable to government authorities. All
other taxation liabilities pursuant to this Agreement are subject to review and
approval by the mutual consent of tax counsel for both of the parties hereto.
Payments made according to this Schedule D are based on the financial model
hereto [provided by Xxxx] (the "Model"), which Model represents approximate
monthly expenses for C & T. The minimum monthly expenses represented on the
Model, with the exclusion of the Supplementary Budget, shall be paid by Axion on
a monthly basis. Any Supplementary Budget fees will be paid by Axion as they
arise.
Xxxx and Xxxxxx will meet on a weekly basis to discuss the C & T expenses and
Supplementray Budget in order to determine the amount of money payable to C & T.
Amounts for the month are to be finalized within 5 days of the end of the month
and paid promptly within two business days following this.
In the event of a disagreement regarding any weeks expenses, payment shall be
made in accordance with the previous agreed upon period's payment, subject to
later adjustment when the disagreement is resolved.
Payments of C & T expeses begin as of November 1, 2003
(in advance).
Schedule E: List of C&T Key Scientists
Name
Acad. Degree
Specialty
Months w/C&T
Age
Salary p.a.
Immigration status
Employment authorization to date
- 20 -
Schedule F: C&T Patent Rights
Schedule G: Restrictions (against reverse engineering, etc.) for Sub-licensees
A. Sub-Licensee's Rights, Representations And Obligations
1. Subject to Sub-Licensee's payment of the appropriate license fees, Axion
hereby grants and Sub-Licensee hereby accepts a non-exclusive, non-transferable,
right and license within the Territory, in accordance with the User
Documentation and this Agreement and only in conjunction with the Technology for
the specified Applications to:
(a) assemble or manufacture Products;
(b) allow such rights to Affiliates who have agreed to be bound by provisions of
this Agreement provided that Sub-Licensee guarantees the obligations of such
Affiliates.
2. assembly or manufacture of the Products is restricted to (a) the number of
units for which license fees have been paid; or (b) such other restriction based
on use, volume or other measurement to which the parties have agreed in writing.
3. Except as specifically permitted by this Agreement, Licensee shall not
directly or indirectly (a) use any Confidential Information of Axion to create
any technology which is substantially similar to any Product; (b) reverse
engineer, or otherwise attempt to derive the proprietary info with respect to
any Product; (c) rent, or lease the rights or licenses granted by this
Agreement; (d) use, distribute, copy, adapt, create derivative works of, or
otherwise modify any Product or other Confidential Information of Axion; or (e)
permit anyone to engage in the foregoing.
4. Licensee does not have, and shall not claim that it has, any right in or to
any of the Products or the Confidential Information received from Axion other
than as specifically granted by this Agreement. Licensee shall promptly notify
Axion of any actual or suspected unauthorized use of the Products or use or
disclosure of the Confidential Information received from Axion, and shall
provide reasonable assistance to Axion (at Axion's expense) in the investigation
and prosecution of such unauthorized use or disclosure.
5. Licensee shall comply with the Export Laws. Licensee hereby assures Axion
that it will not export or re-export directly or indirectly any part of the
Product(s) or any Confidential Information to any country for which a validated
license is required under the Export Laws without first obtaining a validated
license.
Schedule H: Rules Regarding Arbitration
The following rules and procedures govern any arbitration pursuant to this
Agreement.
1.1 Commencing an Arbitration
(a) A party (the "Claimant") may commence an arbitration by giving notice to
the other party (the "Respondent"), specifying particulars of the issue in
dispute and proposing the name of a single arbitrator. The Respondent shall
be deemed to have accepted the arbitrator proposed by the Claimant unless
the Respondent notified the Claimant within 10 days of receiving notice of
the arbitration that the proposed arbitrator is unacceptable and an
alternate arbitrator is suggested by the Respondent. If the parties do not
agree upon an arbitrator within 10 days after the date signifying the end
of the such 10-day notification period of the Respondent, either party may
apply to a judge of the Superior Court of Justice under the Arbitration
Act, 1991 (Ontario), as amended or substituted for from time to time, for
the appointment of a single arbitrator who must be a person at arm's length
(i.e., independent) to each of the parties. The arbitrator accepted by the
parties or appointed by the judge (the "Arbitrator") shall then conduct the
arbitration.
(b) The Arbitrator shall be qualified by education and experience to decide the
matter in dispute. The Arbitrator shall be at arm's length from both
parties and shall not be a member of the audit or legal firm or firms who
advise either party, nor shall the Arbitrator be a person who is otherwise
regularly retained by either of the parties.
1.2 Submission of Written Statements
(a) Within 5 days after the appointment of the Arbitrator, the Claimant
shall send the Respondent and the Arbitrator a Statement of Claim,
setting out in sufficient detail the facts and any contentions of law
relied upon, and the relief claimed.
(b) Within 15 days after receiving the Statement of Claim, the Respondent
shall send the Claimant and the Arbitrator a Statement of Defence,
stating in sufficient detail which of the facts and contentions of law
in the Statement of Claim the Respondent admits or denies, on what
grounds, and on what other facts and contentions of law the Respondent
relies.
(c) Within 10 days of receiving the Statement of Defence, the Claimant may
send the Respondent and the Arbitrator a Statement of Reply.
(d) All Statements of Claim, Defence and Reply shall be accompanied by
copies (or, if they are especially voluminous, lists) of all essential
documents relied upon and not previously submitted, and, where
practicable by any relevant samples.
(e) After all Statement have been submitted, the Arbitrator shall give
directions for the further conduct of the arbitration.
Meetings and Hearings
(a) The arbitration shall take place within 10 days from the date on which the
Respondent and the Arbitrator received the Statement of Defence (or, if no
such statement was received, from the date ending the 10-day period
contemplated by paragraph (c) above) in the Municipality of Xxxxxxxxxxxx
Xxxxxxx, Xxxxxxx unless the Claimant and Respondent both agree in writing
to extend the period within which the arbitration must be heard or agree to
hold it in some other place. The arbitration shall be conducted in English
unless both parties and the Arbitrator agree otherwise. Subject to any
adjournments which the Arbitrator allows, the final hearing will be
continued on successive working days until it is concluded.
(b) All meetings and hearings will be in private unless the parties
otherwise agree. Both parties and the Arbitrator shall keep
confidential all documents submitted during the arbitration and all
meetings, hearings and discussions associated with the arbitration,
including the fact that the parties have commenced the arbitration.
(c) A party may be represented at any meetings or hearings by legal
counsel.
(d) Each party may examine, cross-examine and re-examine all witnesses at
the arbitration.
1.3 The Decision
(a) The Arbitrator will deliver a decision in writing and, unless the
parties otherwise agree, will set out the reasons in the decision.
(b) The Arbitrator will send the decision to the parties as soon as
practicable after the conclusion of the final hearing, but in any event
no later than 30 days thereafter, unless that time period is extended
for a fixed period by the Arbitrator on written notice to each party
because of illness or other cause beyond the Arbitrator's control.
(c) The decision shall be final and binding on the parties and shall not be
subject to any appeal or review procedure so long as the Arbitrator has
followed these rules in good faith and has proceeded in accordance with
the principles of natural justice.
1.4 Jurisdiction and Powers of the Arbitrator
(a) By submitting to arbitration under these Rules, the
parties shall be taken to have conferred on the Arbitrator
the jurisdiction and powers set out in this section. The
Arbitrator will exercise jurisdiction and these powers as
provided in these Rules and the relevant law with the
object of ensuring the just, expeditious, economical and
final determination of the dispute referred to
arbitration. The Arbitrator shall not award punitive,
consequential or exemplary damages.
(b) Without limiting the jurisdiction of the Arbitrator at law
and subject to paragraph (a) above, the parties agree that
the Arbitrator shall have jurisdiction to:
(i) determine any question of law arising in the arbitration;
(ii) determine any question as to the Arbitrator's
jurisdiction;
(iii) determine any question of good faith, dishonest or fraud
arising in the dispute;
(iv) order any party to furnish further details of that party's
case, in fact or in law;
(v) proceed in the arbitration even if a party fails or
refuses to comply with these Rules or with the
Arbitrator's orders or directions, or to attend any
meeting or hearing, but only after giving that party
written notice that the Arbitrator intends to do so;
(vi) receive and take into account such written or oral
evidence tendered by the parties as the Arbitrator
determines is relevant, whether or not strictly admissible
in law;
(vii) make one or more interim awards;
(viii) hold meetings and hearings and make a decision (including
a final decision) in Ontario or, if the parties agree,
elsewhere;
(ix) order parties to produce to the Arbitrator, and to each
other for inspection, and to supply copies of, any
documents or classes of documents in their possession or
power which the Arbitrator determines to be relevant;
(x) order the preservation, storage, sale or other disposal of
any property or thing under the control of any of the
parties; and
(xi) make interim orders to secure all or part of any amount in
dispute in the arbitration.
Schedule I:
Due Diligence Request List
PART A: LEGAL DUE DILIGENCE DOCUMENT
REQUEST LIST
The following documents are to be provided for the review of Axion Power
Corporation in connection with our legal due diligence of C and T Co. Inc. (the
"Company").
For purposes of this document request list, "subsidiaries" of the Company should
include each entity in which the Company directly or indirectly owns 10% or
more, of such entity's total assets or owners' equity, and "affiliate" of the
Company should include each entity that owns 10% or more of the Company's
consolidated assets or stockholders' equity or otherwise controls the Company,
is controlled by the Company or is under common control with the Company.
I. Corporate Records
1. Certificate of Incorporation (or other charter document) and bylaws (or
other governing document) of the Company and each of its subsidiaries
including all amendments.
2. List of each subsidiary and affiliate of the Company and its
jurisdiction of incorporation or organization.
3. List of jurisdictions in which the Company and its subsidiaries are
qualified to do business.
4. Minutes of meetings and written resolutions of the Boards of
Directors of the Company and each of its subsidiaries since
their inception. Please include minutes and consents of any
committees of the Board of Directors.
5. Minutes of all shareholders' meetings and written resolutions
of shareholders of the Company and each subsidiary since
inception.
6. Stock ledger or transfer book of the Company and each
subsidiary and all transfer records since inception.
7. Form of stock certificate of the Company.
8. Documents relating to issuances of other equity securities by
the Company and any subsidiaries, including certificates of
designation for issuances of preferred stock, warrants or
other convertible securities (preferably closing binders for
each round of financing along with offering/private placement
memoranda and reports).
9. Agreements between the Company and any of its subsidiaries and
affiliates.
10. Related party agreements between any of the Company and its
subsidiaries on the one hand and any of their affiliates,
shareholders, officers, directors, employees or
representatives on the other hand.
11. List of current shareholders of the Company and their share
ownership on a fully-diluted basis.
12. Documents evidencing outstanding subscriptions, options,
rights, commitments or other agreements relating to the
purchase or registration of the securities of the Company or
any of its subsidiaries.
13. Documents evidencing trusts, (including fiduciary, voting or
otherwise) shareholder/investor agreements transfer or resale
restrictions, registration rights, voting rights and rights of
first refusal, co-sale and pre-emptive rights between the
Company and/or its shareholders.
14. Change of control agreements or provisions.
15. Organizational charts.
16. List of key employees, management and directors of the Company.
II. Periodic Reports and Publicity
1. Annual and interim reports, financial or otherwise, and any other
publications of the Company and its subsidiaries since their inception,
including any audit or accountant's review letters and letters from the
Company's accountants to management or shareholders.
2. Reports, studies and analyses to or of the Company and its
subsidiaries prepared by consultants, accountants, engineers,
rating agencies, marketing consultants, intellectual property
consultants, investment banks or other financial institutions.
3. Press releases of the Company and its subsidiaries since
inception.
4. Corporate plans or similar reports prepared by management
discussing the Company, its business outlook, operations or
projected performance.
5. Budgets, forecasts and projections of the Company, both
internally prepared and prepared by third parties.
III. Government Regulations and Filings
1. Any correspondence and/or filings with any Securities and Exchange
Commission (including documentation of exemptions from registration relied
upon by the Company).
2. Governmental or regulatory permits, licenses, filings or
authorizations of the Company and its subsidiaries with
respect to any federal, provincial, state, local or foreign
governmental entity.
3. Environmental reports, assessment notices and environmental
compliance records since inception of the Company.
4. Correspondence with any governmental entity of or on behalf of
the Company and its subsidiaries since their inception.
IV. Taxes
1. Tax sharing or tax allocation agreements of the Company, any subsidiary
or affiliate.
2. Federal, provincial, state and local income tax returns and
reports of the Company and each non-consolidated subsidiary,
including audits, deficiency assessments, disputes, settlement
agreements, rulings and revenue agents' reports [for the last
five years].
3. Documentation relating to sales tax and property taxes of the
Company and each subsidiary (both real and personal) [for the
last five years].
4. Correspondence between the Company or any subsidiary and any
taxing authority not previously covered above [for the last
five years].
V. Significant Transactions
1. Documentation of any acquisitions of assets or equity, dispositions of
assets or equity, mergers, reorganizations, investments in affiliates or
third parties or any other extraordinary event involving the Company and
its subsidiaries.
2. Alliance agreements and joint undertakings of the Company and each
subsidiary.
3. Memoranda of understanding of the Company and each subsidiary.
4. Confidentiality and standstill agreements of the Company and each
subsidiary.
VI. Marketing
1. Market research of the Company (studies, analyses and reports
prepared in-house or by third parties).
2. Advertising and promotional agreements, plans and other
arrangements of the Company.
3. List of advertisers, sponsors, promoters, resellers and all
current agreements or arrangements of the Company with such
parties.
VII. Intellectual Property
Please see the separate list set out as Part B, below.
VIII. Employment and Labor
1. Labor contracts with unions and non-union workers including union
grievances, strike history and settlement arrangements.
2. Summary of Workmens' Compensation claims over the last three
years and status of each claim.
3. Each employment and consulting agreement of the Company and
its subsidiaries.
4. Any settlement or severance contracts or arrangements between
the Company and its subsidiaries and any former employee,
officer, consultant or director.
5. Independent contractor agreements.
6. Non-competition agreements.
7. Non-disclosure/confidentiality agreements
8. Indemnification agreements between the Company and any other
party.
9. List of loans to employees/officers/directors of the Company
and each subsidiary.
10. Copy of each incentive, welfare and retirement plan of the
Company and its subsidiaries and any one-off arrangements,
including stock bonus and option plans or agreements, deferred
compensation plans, pension and profit sharing plans, medical
and group insurance plans.
11. Actuarial reports prepared for any employee benefit plan of
the Company or any subsidiary.
12. Schedule of any pending, threatened and settled claims with
respect to any employee benefit plan.
IX. Financings
1. Documents and agreements evidencing material long-term and short-term
borrowings, whether secured or unsecured, by the Company or any subsidiary,
including loan and credit agreements, indentures, letters of credit,
promissory notes, lines of credit, guarantees, security agreements and
other evidences of indebtedness currently in effect.
2. Prospectuses, placement memoranda or offering circulars
relating to any offerings of debt securities by the Company or
any subsidiary and any agreements relating to such offerings.
3. Documents and agreements evidencing any other material
financing arrangements of the Company or any subsidiary,
including mortgages, sale and leaseback arrangements or
installment purchases.
4. Correspondence with lenders including waivers and consents,
compliance certificates, schedules or opinions of counsel
prepared by or on behalf of the Company or any subsidiary
showing compliance with any covenants in any of the debt
instruments referred to above.
5. List of material accounts payable including creditor name and
amount.
6. Escrow agreements.
7. List of intercompany debt and debt between the Company and any
affiliate.
8. Agreements or commitments relating to current and planned capital
expenditures.
X. Real and Personal Property
1. List of all material real and personal property owned.
2. List and copies of all real property and equipment leases,
installment contracts or service agreements that provide for
payment or transfer of services in excess of $5,000 per year.
3. Contracts for the purchase, lease or servicing of equipment,
including management and maintenance agreements that provide
for payment or transfer of services in excess of $5,000 per
year.
4. Agreements or documents evidencing a lien, restriction,
security interest or other encumbrance on any of the above
items.
5. List of easements and rights-of-way.
XI. Insurance
1. List of insurance policies in effect, coverages and amounts of coverage.
XII. Litigation
1. List of all claims, disputes, litigation, criminal investigations,
sanctions, administrative proceedings, arbitration, mediation, contract
disputes, settlements (outstanding, threatened or concluded) of the
Company, its subsidiaries, their affiliates and representatives since the
inception of the Company, including names of parties, nature of dispute,
name of court or tribunal and current status.
XIII. Other Contracts
1. Contracts or agreements of the Company and its subsidiaries including:
(i) purchase contracts that provide for payments in excess of
$5,000 per year, (ii) service agreements, (iii) joint venture
agreements, (iv) partnership agreements, (v) options, (vi)
barter arrangements, (vii) investment contracts, (viii) sales,
advertising, and marketing agreements, (ix) research and
development arrangements, (x) government contracts, (xi)
agreements relating to supply of services and (xii) guarantees
of obligations or warranties (both as guarantor and as
beneficiary).
Please include any other agreement or arrangement of the Company and its
subsidiaries which in your judgment is material with respect to the Company's
business and its outlook.
PART B: INTELLECTUAL PROPERTY DUE DILIGENCE DOCUMENT
REQUEST LIST
Please supply copies of the following documents and other requested information
for the Company and each of its subsidiaries (or, if appropriate a negative
statement)
Certain questions may be inapplicable or inappropriate. If so, please state this
and explain why. In the interest of conducting a thorough review, however, each
item below be considered and that "nil" responses be provided for inapplicable
items.
Axion will also be relying on the Company and its advisors to bring attention to
materials which are not specifically addressed on the following list, but which
would be properly characterized as "material" and which should be the subject of
due diligence procedures. Finally, please advise of any new information or
amendments to existing information if, as and when it becomes available, and
provide any available additional documentation relating thereto.
A. Patents
Please provide a list of all patents, utility and design, (U.S.,
Canadian and foreign) which are issued and applied for, together with
copies of such patents and patent applications. The list should include
the following information for each issued patent or pending patent
application:
1. Patent numbers.
2. Inventors' names.
3. Date of application.
4. Date of issue for issued patents.
5. Prior owner, if any, and how the patent was acquired by the Company.
6. How have the assignments been recorded? Please provide copies of
recorded assignments.
7. Country.
8. Presence or absence of any security interests.
9. Have all required maintenance fees been paid?
10. Does the Company know of any third party use which may infringe the
patent?
11. Is this a "key" patent? Who was the inventor, and is the inventor still
employed by the Company?
12. Is the Company aware of any potential blocking patents?
13. Are there any invention disclosures not covered by patents or patent
applications?
14. Has the Company received any letters asserting that the Company is
infringing any third party patent rights?
Identify the Company's procedures for identifying and protecting inventions,
including procedures for identifying whether to file for patent
protection, and if so, in what counties.
15. Has the Company enforced its patents in the past and, if so, how?
16. Has the Company conducted any searches or analyses of its competitors'
patents? If so, provide those reports.
17. Are there any imminent bar dates or disclosures of new products that
require new filings to avoid loss of rights?
18. Was the product, which is subject to the patent, sold or disclosed to
the public prior to the date of the application for patent?
19. Please provide all prior art searches, conclusions, reports and
opinions, whether internal or external, that the Company possesses
concerning the validity of its patents, the infringement of its patents
by others, the infringement of third party patents by its products and
the validity of such third party patents.
20. Provide copies of any agreements pursuant to which the Company has
licensed patents.
21. Are any of the patents owned jointly with one or more third parties? If
so, provide details of all joint owners, and copies of all joint
ownership arrangements.
22. A list of currently anticipated patent filings.
B. Trademarks
Please provide a list of all (U.S., Canadian and foreign) registered
trademarks, common law trademarks, service marks, trade names, symbols
and logos, including any applications for or registrations of any of
the foregoing, used, controlled or owned by the Company in connection
with current, past or anticipated operations of the Company's business
("Trademarks") which are issued and applied for, together with copies
any such trademark registrations and applications.
C. Copyrights
Please list all (U.S., Canadian and foreign)registered copyrights in or
for any of the Company's products, and any other significant
copyrighted works.
D. Trade Secrets
1. Please list the principal processes and other proprietary information
considered by the Company to be trade secrets of the Company ("trade
secrets").
2. Are any of the trade secrets owned jointly with one or more third
parties?
3. Please set out the methods, policies and procedures which the Company
uses to protect its own trade secrets and the trade secrets received
from third parties in confidence.
4. Please describe unwritten, and provide copies of written, company
policies and procedures regarding the protection of any trade secrets.
Set out the steps taken to maintain secrecy including:
Internal security procedures.
How the information is disclosed to employees.
How the information is disclosed to outsiders.
Whether the Company has granted any licenses to its trade secrets.
What are the Company's document retention policies and procedures?
What is the Company's e-mail policy?
E. Agreements
Please provide the following documents:
5. List of all active material licenses (whether the Company is licensor
or licensee), sublicenses (whether the Company is licensor or
licensee), settlement agreements, consents, decrees or judgments with
respect to Patents, Trademarks, Copyrights or trade secrets
(collectively, "intellectual property") to which the Company is a
party, indicating whether either party is in default thereunder.
(Standard form of licenses to customers may be listed by Product).
Please include:
All non-standard licenses;
All "license in" agreements for technology used by the Company in the
course of its business;
All "license in" agreements for technology incorporated by the
Company in the Company products or technologies; and
All "license out" agreements pursuant to which the Company has licensed
its technology to third parties.
6. Standard purchase orders, invoices, order acknowledgment and other
forms used by the Company.
7. Distribution and sales representative agreements.
8. Value added reseller (VAR), original equipment manufacturer (OEM), and
other reseller agreements.
9. Any agreements with third party contractors.
10. Standard employee inventions assignment agreements and any material
variations to these agreements.
11. Any loan or other financing documents.
12. Documents relating to material acquisitions and divestitures for the
immediately preceding five years, particularly agreements involving
covenants by or in favour of the Company.
13. Copies of all agreements or arrangements related to the research,
development, manufacturing, testing, marketing, etc. of the Company's
products and technologies, such as joint development agreements,
partnership agreements, technology exchange agreements and agreements
with suppliers and vendors.
14. Copies of all customer (including consulting) contracts, including all
contracts or other agreements with any governmental entity, relating to
the Company's services to such customer.
15. All employment or similar agreements entered into with any employee
(including any officer or director) of the Company.
16. All consulting agreements or similar arrangements between the Company
and any person or entity (including any officer or director).
17. All agreements or forms of agreement between the Company and employees,
consultants, vendors, suppliers, customers and others relating to
nonuse or nondisclosure of the Company's intellectual property,
assignment of rights in the Company's intellectual property,
non-competition, or any combination thereof.
18. Copies of the Company's standard employee confidentiality agreements,
inventions agreements, etc. Copies of all special or nonstandard
confidentiality agreements, invention agreements, etc.
19. Confidentiality or non-competition agreements between employees and
consultants of the Company and their prior employers.
20. All "key person" insurance policies.
21. All agreements dealing with trademarks, such as consent letters, mutual
use agreements, licenses or opposition settlement agreements.
22. For each agreement, please provide the following information (if
applicable):
23. Confirm that all such agreements remain in existence and that there is
no material uncured breach of any such agreements.
24. Are there any provisions creating rights of first refusal or other
priority rights in favour of the Company or the other party to any
agreement (e.g., most favoured customer provisions)?
25. Has the Company had any difficulties in fulfilling its obligations
under the contract?
26. Are there any restrictive covenants (e.g., any exclusivity provisions)?
27. Are there any royalty obligations associated with any intellectual
property licenses?
28. Are there any limits on the Company's activities contained in any past
acquisition or divestiture agreements (e.g., covenants not to compete)?
29. Does the Company rely on any sole-source supplier or licensor of
technology? If so, will the Company have access to the technology, by
escrow or otherwise, and have the rights needed to use the technology
if the supplier breached its obligation to supply?
30. With respect to each "in license" agreements, please provide the
following information:
31. Are the rights exclusive or non-exclusive?
32. Are there prohibitions on the Company's right to sublicense?
33. Are there any other limitations in such agreements which might affect
the Company's freedom in the future?
34. What royalties is the Company required to pay for third party
technology incorporated in its products?
35. Are there any options, reversions and other durational limits in
licenses?
36. Are there territorial limitations and limitations on rights granted to
the Company in the license?
37. With respect to each "license out" agreements, please provide the
following information:
38. What are the provisions of the license?
39. What type of compensation does the Company receive from the license?
40. What is the scope of the intellectual property indemnity which the
Company has given to its customers? Are there any limitations or caps
on the Company's liability? What are the customers' remedies in the
event of a claim of infringement? Are these remedies sole and
exclusive? Does the Company have the right to control the defense and
settlement of any claim?
41. How much exposure does the Company have? Is there a disclaimer of
consequential damages? Is there a cap on liability?
42. Is there a warranty or an effective disclaimer of any warranty? Is the
warranty limited as to time? Does it include a sole and exclusive
remedy? Are implied warranties effectively disclaimed?
43. If the Company writes its own software code, has the Company licensed
its source code, or agreed to escrow its source code? If so, what are
the conditions imposed on the licensee with respect to use?
44. What is the term of the agreement?
F. Intellectual Property Litigation
Please provide information, if applicable, regarding all pending and/or
threatened litigation, governmental proceedings, or claims or assessments,
whether written or oral, whether against or filed on behalf of the Company,
and whether or not formal filings have been made, brought by or against the
Company during the past five years concerning the Company's intellectual
property. As to each litigation or claim thereof, the Company should
identify:
45. Nature of the claim.
46. Dollar value of the claim.
47. The likelihood of an injunction preventing use of equipment, sale or
use of a product or process, requiring a change in the product or its
name, etc.
48. Does the claim have any potential impact on a revenue stream? If so, to
what extent?
49. Does the claim challenge the Company's ownership in an asset which it
has incorporated in products which the Company sells to third parties?
50. Is it possible to settle the claim prior to the closing of the
acquisition and, if so, on what terms?
51. Please identify any office actions or oppositions filed in any
trademark proceedings, and any office actions or interferences filed in
any patent application proceedings.
52. Please provide all copies of any outstanding judgments, decrees or
settlement agreements to which the Company is a party.
53. Provide all correspondence with any third party who has alleged
infringement by the Company of said third parties' rights under
patents, trademarks, copyrights, trade secrets and/or unfair
competition.
54. Provide copies of any opinions provided by counsel for the Company
relating to infringement, validity, right to use or clearance searches
on patents, trademarks and copyrights held by corporate or private
individuals other than the Company.
55. Description of the use of any Intellectual Property of the Company by
any third party which the Company believes may infringe or otherwise
compromise the Company's rights in its Intellectual Property.
G. Security Interests In The Intellectual Property
56. Has the Company granted any securities interests in or to its
intellectual property?
57. Has the Company granted assignments of its intellectual property to any
lender and received a "license back," permitting the Company to
continue to use these property rights?
58. Please provide a description of all liens/or encumbrances on the
Company's intellectual property, or rights of third parties therein.
Schedule J: Copies of all agreements between C&T and its employees,
contractors, etc.
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Schedule K: Budget (further to section 4.2) See Schedule D
