SECOND AMENDMENT TO DEVELOPMENT AND LICENSE AGREEMENT
SECOND
AMENDMENT TO
THIS
AGREEMENT is made,
entered into and effective as of the 18th day of March 2005 between and among
Axion Power International, Inc. (“Axion”), a
corporation organized under the laws of the State of Delaware, C and T Co. Inc.,
(“C&T”) a
corporation organized under the laws of the Province of Ontario, Canada, and the
persons who collectively own 100% of the issued and outstanding common stock of
C&T (“C&T
Shareholders”).
WHEREAS, between
November 15, 2003 and January 9, 2004 Axion and its wholly owned subsidiary
negotiated a series of agreements to purchase all of the issued and outstanding
common stock of C&T, free and clear of all encumbrances and corporate
obligations of C&T, in exchange for a consideration that included $1,794,000
in cash that would be payable in installments and 1,562,900 capital warrants
that would each represent the two-year right to purchase one Axion share at a
price of $2.00 per share; and
WHEREAS,
after
giving effect to the required warrant issuances and cash payments, Axion owes
$1,100,500 for balance of the purchase obligations and the parties have agreed
to settle and fully satisfy the remaining obligations for a consideration
consisting of $100,500 in cash and 100,000 shares of Axion’s 8% Convertible
Senior Preferred Stock; and
WHEREAS,
C&T,
the C&T Shareholders and C&T’s directors, officers and affiliates have
agreed to acknowledge and memorialize their continuing obligations to deliver
certain intellectual property to Axion and assist in efforts to develop and
commercialize the E3Cell
Technology;
NOW
THEREFORE, in
consideration of the mutual covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the Parties agree as follows:
ARTICLE
I
INTEGRATION
OF AGREEMENTS BETWEEN THE PARTIES
1.1 Integration
of Agreements. This
Agreement is an amendment, continuation and extension of a business relationship
established between November 15, 2003 and January 9, 2004. The documents
identified below (collectively the “Prior Agreements”) establish and define the
terms of the parties’ relationship with each other:
| · |
A
Development and License Agreement between C&T and Axion dated November
15, 2003; |
| · |
A
letter of clarification from Axion to C&T dated November 15,
2003; |
| · |
A
letter of amendment from Axion to C&T dated November 17,
2003; |
| · |
A
First Amendment to Development and License Agreement dated January 9,
2004; and |
| · |
A
Dispute Resolution Memorandum dated January 25,
2005. |
Except to
the extent that the terms of any Prior Agreements are amended by the express
terms of a later agreement, such Prior Agreements are intended to continue in
full force and effect. In the event of an inconsistency between the Prior
Agreements and this Agreement, the contracts shall be interpreted in a manner
that will give fair application to all agreements between the parties. If
provisions of any agreements between the parties are inconsistent with the terms
of an earlier agreement, the terms of the later agreement shall be given
priority. To the extent possible, the agreements between the parties are to be
interpreted as an integrated whole and if any terms are held to be invalid; the
remainder shall not be affected thereby. By execution of this Agreement, C&T
and Axion expressly affirm their mutual intention to fully comply with all
applicable requirements of the Prior Agreements.
ARTICLE
II
SATISFACTION
OF CERTAIN OBLIGATIONS
2.1 Delivery
of Cash Payment. Upon
execution of this Agreement, Axion shall pay $100,500 to such account or
accounts as may be designated by C&T in final satisfaction of all debts owed
to C&T under the Development and License Agreement and the prior amendments
thereto.
2.2 Issuance
of Preferred Stock. Upon
execution of this Agreement, Axion shall issue 100,000 shares of its 8%
Convertible Senior Preferred Stock (the “Preferred Stock”) to C&T’s
creditors and shareholders in such numbers as C&T may direct. The Preferred
Stock is more fully described in Axion’s Private Placement Memorandum dated
February 16, 2005, copies of which have been provided to C&T and each person
who is entitled to receive shares of Preferred Stock pursuant to the provisions
of this paragraph. As a condition to the distribution of the shares of Preferred
Stock pursuant to the requirements of this paragraph, each creditor and each
C&T Shareholder shall be required to complete and execute a Stock Purchase
Agreement and Investment Representation Letter in the form attached as Exhibit C
to the memorandum.
2.3 Release
of Security Interest. Subject
only to the payment of the cash balance specified in paragraph 2.1, the issuance
and delivery of certificates for the Preferred Stock specified in paragraph 2.2,
C&T declares that the purchase money security interest specified in
paragraph 3.1 of the First Amendment to Development License Agreement dated
January 9, 2004 has been satisfied by Axion and is hereby released by C&T.
From and after the payment of the referenced consideration Axion shall be the
sole and exclusive owner of all right title and interest in the patents,
know-how and other intellectual property embodied in the E3Cell
Technology, including:
| · |
All
rights to exploit the Intellectual property for any purpose and in any
market worldwide; |
| · |
All
rights, powers and privileges that C&T has or may have under any
pre-existing license or other agreements that grant any person other than
Axion any right to exploit all or any part of the Intellectual Property
for any purpose; and |
| · |
All
rights to fixed or contingent license fees, royalties or other payments of
any nature that C&T has or may have under any pre-existing license or
other agreements that grant any person other than Axion any right to
exploit all or any part of the Intellectual Property for any
purpose. |
ARTICLE
III
IMPLEMENTATION
OF ASSET TRANSFER
3.1 Assignment
of Patents and Patent Applications. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T shall promptly transfer to Axion by
appropriate assignments all patents and all patent applications owned by C&T
that relate in any way to the E3Cell
Technology.
3.2 Warranty
of Title. C&T
hereby warrants that with the exception of:
| (a) |
any
rights previously conveyed to Xxxx Xxxxxx in Trust under the terms of a
Joint Venture Agreement dated December 23, 1999, which was amended on
November 26, 2000 and subsequently terminated by C&T on June 24, 2003;
and |
| (b) |
any
rights previously conveyed to Mega-C Technologies, Inc. and Mega-C Power
Corporation under the terms of an Agreement of Association dated April 2,
2002 which was subsequently terminated by C&T on June 24,
2003; |
it has
clear and unencumbered title to the patents, know-how and other intellectual
property embodied in the E3Cell
Technology; it has not granted any license or other rights to the patents,
know-how and other intellectual property embodied in the E3Cell
Technology to any other person or entity; and it has not conveyed or transferred
any ownership interest in the patents, know-how and other intellectual property
embodied in the E3Cell
Technology to any person or entity. C&T further warrants that the agreements
referred to in subparagraphs (a) and (b) above, complete copies of which have
previously been provided to Axion, fairly represent all material terms of the
agreements between the parties thereto and have not been amended in any
respect.
3.3 Assignment
of Other Assets. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T shall promptly assign, transfer, convey and
deliver to Axion, all right, title, interest and benefit, including all of
C&T’s right, title, interest and benefit, of whatever kind and nature, real,
personal and mixed, tangible and intangible, whether or not reflected on
C&T’s books and records, known or unknown, accrued, absolute, contingent or
otherwise, in and to the assets, properties and rights owned by C&T, free
and clear of and expressly excluding all debts, liabilities, obligations, taxes,
liens and encumbrances of any kind, character or description, whether accrued,
absolute, contingent or otherwise (and whether or not reflected or reserved
against in the balance sheets, books of account and records of C&T) (the
foregoing collectively referred to as "Encumbrances") including, without
limitation:
| (a) |
all
interests of C&T as tenant under any leases or subleases of real
estate, including any leasehold improvements owned by C&T, and any and
all amendments, modifications, supplements, renewals and extensions
thereof; |
| (b) |
all
of the equipment owned by C&T and used in the operation of its
business including, but not limited to laboratory equipment, office
equipment, office furnishings and other tangible personal property owned
by C&T, provided that the foregoing conveyance shall not extend to
certain tangible personal property owned by C&T Labs, Inc., an
affiliate of C&T, which will be the subject of a separate
contract; |
| (c) |
all
rights of C&T under any contracts and agreements with technical
development partners, employees and consultants, but only to the extent
that such rights would or might otherwise preclude the establishment of
new relationships between Axion and the counterparties to such contracts
and agreements, it being expressly understood that Axion is assuming no
duty or responsibility to any such counterparty by virtue of this
agreement and shall have no duty of performance with respect
thereto. |
| (d) |
all
patents, copyrights, trademarks, trade names and service marks used by
C&T, whether registered or unregistered, including but not limited to
any and all rights C&T may have or be able to assert with respect to
Axion’s pending trademark registrations for the word “E3Cell”
and all of the rights associated therewith, including any and all
applications, registrations, extensions and renewals
thereof; |
| (e) |
all
engineering specifications, laboratory notebooks, laboratory and technical
reports, plans, drawings, diagrams, computer media and other books and
records of any form or nature owned by C&T and relating to the
E3Cell
Technology or the prior operations of C&T, provided, however, that
Axion agrees to give C&T’s authorized representatives reasonable
access, at C&T's expense, to all of C&T’s tax returns and
financial records for a period of three years from the date
hereof; |
All of
the foregoing assets, properties and contract rights to be transferred to Axion
hereunder are collectively referred to as the “Other Assets.” Anything in the
foregoing to the contrary notwithstanding, there shall be excluded from the
Other Assets (i) cash and cash equivalents held by C&T on the date of this
Agreement or received by C&T pursuant to the provisions of paragraph 2.1;
(ii) accounts receivable for services provided by C&T to Axion prior to the
date of this Agreement; and (iii) the specific items of tangible personal
property identified in Schedule A attached hereto.
3.4 Instruments
of Transfer. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T will deliver Axion (i) such deeds, bills of
sale, assignments, endorsements, checks and other good and sufficient
instruments of sale, transfer and conveyance, in such form and substance as
Axion shall reasonably request and consistent with all applicable law, as shall
be effective to vest in Axion all right and title to, and interest in, the
E3Cell
Technology and the Other Assets free and clear of all encumbrances; and (ii) all
contracts and commitments, instruments, books and records and other data being
conveyed hereunder and relating to the E3Cell
Technology and the Other Assets, and, simultaneous with such delivery, C&T
will take such steps as may be reasonably required to put Axion in actual
possession and operating control of the E3Cell
Technology and the Other Assets. At any time and from time to time thereafter,
on Axion’s reasonable request, C&T will execute, acknowledge and deliver
such further deeds, assignments and transfers and take such actions as may be
required in conformity with this Agreement for the adequate assignment,
transfer, and grant to Buyer of the E3Cell
Technology and the Other Assets.
ARTICLE
IV
CONTINUING
OBLIGATIONS OF THE PARTIES
4.1 Obligations
Respecting Certain Contracts. Upon
execution of this Agreement C&T shall terminate all employment and
consulting agreements with its scientific, research, administrative and
management personnel. In connection therewith, C&T will use its best efforts
to encourage all former C&T employees and consultants who either work at 000
Xxxxxx Xxxxxx or are necessary for the proper development of the E3Cell
Technology to become direct employees of or consultants to Axion. Without
limiting the generality of the foregoing, C&T will cooperate fully in
transitioning all necessary scientists, technicians and management over to a
formal status as Axion employees; and the benefit of all secrecy agreements
previously signed by C&T employees and consultants that relate in any way to
the E3Cell
technology or the intellectual property embodied therein will be assigned to
Axion.
4.2 Obligations
Respecting Technology Transfer. The
execution of this Agreement and the performance of the obligations set forth
herein shall not in any manner reduce C&T’s continuing obligation to
completely transfer the intellectual property embodied in or necessary for the
effective use of the E3Cell
Technology to Axion. Without limiting the generality of the foregoing, the
technology transfer and information delivery obligations of C&T specified in
the Development and License Agreement shall continue in full force and effect
until all engineering specifications, laboratory notebooks, laboratory and
technical reports, plans, drawings, diagrams, computer media and other books and
records of any form or nature owned by C&T and relating to the E3Cell
Technology have been delivered to Axion, the required technology transfer has
been successfully completed and Axion has actual and effective possession of all
experience, know-how and other intellectual property owned by C&T. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of paragraph 2.2 shall agree that he
will, to the extent deemed reasonably necessary by Axion, actively participate
and fully cooperate and use his best efforts to cause all other necessary
parties to actively participate and fully cooperate in the transfer of all such
property to Axion.
4.3 Obligations
Respecting Technology Development. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of 2.2 shall agree that he will, to
the extent deemed reasonably necessary by Axion, actively participate and fully
cooperate and use his best efforts to cause all other necessary parties to
actively participate and fully cooperate in the future development of the
E3Cell
technology until the E3Cell is
“commercializable,” as that term is defined in the Development and License
Agreement.
4.4 Obligations
Respecting Non-employee Consultants. If and
to the extent that the technology transfer obligations of paragraph 4.2 or the
technology development obligations of 4.3 require the services of one or more
former C&T employees who have not been retained as continuing Axion
employees, then Axion shall be obligated to hire such individuals as independent
consultants and to pay them for services actually and necessarily rendered at an
hourly rate that is determined by current market conditions and scales for
similar work as determined by Human Resources and Skills Development Canada. In
connection therewith, C&T will use its best efforts to encourage all former
C&T employees to enter into appropriate consulting agreements with Axion and
cooperate fully in Axion’s efforts to ensure that such consultants provide the
required services in a timely and cost effective manner.
4.5 Obligations
Respecting Patent Matters. All
obligations of C&T relating to the diligent pursuit of patent protection for
the inventions and other intellectual property embodied in the E3Cell
Technology; cooperation in connection with the filing of additional patent
applications; cooperation in connection with future patent litigation and
cooperation in connection with Axion’s efforts to acquire other complementary or
competitive technology in order to solidify Axion’s intellectual property
platform shall survive the execution of this Agreement and the performance of
the conditions herein set forth for a period of five years. Without limiting the
generality of the foregoing, each director, officer or employee of C&T who
is entitled to receive shares of Preferred Stock pursuant to the provisions of
2.2 shall agree that he will, to the extent deemed reasonably necessary by
Axion, actively participate and fully cooperate and use his best efforts to
cause all other necessary parties to actively participate and fully cooperate in
Axion’s efforts to acquire any competitive or complimentary technologies or
patents that are or may be more readily available to such persons.
4.6 Obligations
Respecting Representations and Warranties. All
representations and warranties of Axion (Ontario) and C&T as specified in
the Development and License Agreement shall survive the execution of this
Agreement and the performance of the conditions herein set forth for a period of
two years.
4.7 Obligations
Respecting Competitive Activities. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of paragraph 2.2 shall agree, in
connection with the distribution of such shares to him, that for a period of
five years from the date of this Agreement he will not, without disclosure to
and approval of Axion, which may not be unreasonably withheld, directly or
indirectly, assist or have an active interest in (whether as a principal,
stockholder, lender, employee, officer, director, partner, joint venture
partner, consultant or otherwise) any firm, partnership, association,
corporation, business organization, entity or enterprise that is engaged in a
business that is directly competitive with Axion.
4.8 Obligations
Respecting Indebtedness. Axion
shall not assume any responsibility for any existing debts or obligations of
C&T that are not specifically enumerated herein. All such debts and
obligations shall be the sole responsibility of and paid by C&T. Each of the
directors, officers and employees of C&T who are entitled to receive shares
of Preferred Stock pursuant to the provisions of paragraph 2.2 shall indemnify
and hold Axion harmless from and against
any and all losses, claims, damages and liabilities of any
nature, including attorney’s fees, associated with or arising from the separate
indebtedness of C&T.
4.9 Obligations
Respecting Litigation. Axion,
C&T and certain of their respective directors, officers and affiliates have
been named as co-defendants in certain pending lawsuits and Axion is presently
paying all of the costs associated with or arising from such litigation. Axion
will continue paying the reasonable costs of a common defense for so long as the
activities necessary for the proper preparation and presentation of C&T’s
case are not materially different from the activities necessary for the proper
preparation and presentation of Axion’s case. Axion and C&T expressly
acknowledge that no information delivered to their joint legal counsel in
connection with the pending litigation can be treated as confidential so far as
any of the other parties are concerned and that, if a conflict develops which
cannot be resolved, their joint legal counsel may not be able to continue to act
for all of them and may have to withdraw completely. In the event of such a
conflict, no matter what that conflict may consist of, Axion may, in its
absolute discretion instruct the parties joint counsel to cease acting for
C&T or any of its directors, officers and employees and continue to act as
counsel for Axion and the remaining parties. If any party is disqualified from
participating in a joint defense, then all of the costs arising from the
retention of separate counsel shall be the sole responsibility of the
disqualified party. To the extent that new claims are asserted against C&T,
any its directors, officers and employees or the E3Cell
technology, but not against Axion, then Axion shall have the right but not the
duty to assume principal responsibility for the defense of such new claims.
Notwithstanding its payment of the costs of a common legal defense, Axion shall
not be required to indemnify C&T or any of its directors, officers and
employees unless Axion’s board of directors subsequently determines such
indemnification is both permissible and proper under the totality of the
circumstances.
IN
WITNESS WHEREOF the
Parties have executed this Agreement as of the date set forth
above.
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INDIVIDUAL
C&T SHAREHOLDERS: | |||
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By: |
/s/ Xxxxxxx Mazzacato |
By: |
/s/
Xxxx Xxxxxxxxx |
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Authorized
Officer: Xxxxxxx
Mazzacato |
XXXX
XXXXXXXXX, Attorney-in-fact for all | ||
|
I
have power to bind the corporation |
C&T
Shareholders under duly executed and | ||
|
acknowledged
powers of attorney | |||
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C
AND T CO. INC. |
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By: |
/s/ Xxxxxx Malitskiy | ||
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Authorized
Officer: Xxxxxx
Malitskiy |
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|
I
have power to bind the corporation |
