Industrial Research Assistance Program
Repayable Contribution Agreement
Project No.: 379684
This Agreement is made in duplicate -
Between: National Research Council Canada
200 Town Centre Court, Suite 1101
Scarborough, Ontario
M1P 4X8
(herein called the NRC)
And: Energy Ventures Inc. (Canada)
43 Fairmeadow Ave,
Toronto, Ontario
M2P 1W8
(herein called the Firm)
1. This Agreement comes into effect on the March 20, 2000 and terminates
on the March 31, 2009, unless extended in accordance with the Basis of
Payment and Repayment.
2. The NRC agrees to contribute up to a maximum of $495,000 for the
performance of work undertaken by the Firm as described in the
attached Statement of Work (SW) (hereafter referred to as "the Work")
and in accordance with the Basis of Payment and Repayment (BP) and
Conditions of Contribution (CC).
3. The Firm agrees to undertake the Work and understands and accepts all
the Conditions of Contribution.
4. Subject to the Conditions of Contribution (CC), the Firm agrees to pay
to NRC the amounts required to be paid by the Firm under the Basis of
Payment and Repayment (BP) plus any applicable administrative costs
and interest penalties specified therein.
5. This Agreement shall become null and void if not signed and returned
to NRC within thirty (30) days of the signature date of the authorized
officer of the NRC.
National Research Council Canada
-------------------------------
________________________________ Date
Energy Ventures Inc. (Canada)
--------------------------------
________________________________ Date
Mr. Wayne Hartford,
President
Project No.:
Project Title: Development of Nickel Zinc and Zinc Carbon-Bromine Secondary
Batteries
Description of the Work
Following are the major development tasks for this project.
Nickel Zinc:
The pre-commercialization plan is centered on setting the recipe for the
design of this technology and developing the process for engineering the
manufacturing. It also is heavily focused on life cycle testing, product
verification, safety testing, manufacturability and large volume testing.
Under this plan the company must manufacture large volumes of cells by hand
for testing by potential licensees and partners. EVI has the first
generation product in the lab at this time and is working to improve the
long-term capacity and cycle life of the cell for second and third
generations.
1. To set the recipe for the first generation of product in AAA, AA, C and D
sizes. The company will manufacture by hand large numbers of batteries for
performance testing. The company has a need to increase its ability to
cycle these batteries by purchasing one or more battery cycler machines.
This program is required so that the company will have comfort in its
design. This will be an iterative process whereby modifications will be
made to the battery design based on its long-term performance. The company
will increase its staff for this project since there is a significant
amount of effort in making the batteries and collecting the data from
product cycling.
2. To complete the engineering to allow high-speed production of these cells
on existing alkaline battery lines. Hand production of the cells will
provide information about the manufacturability of the end product. Again,
the process is iterative, since a particular technique that leads to
improved battery performance may not be possible in a high-speed
manufacturing line or may add significant cost to the product.
3. At the stage when EVI is confident about the formula and manufacturability
of the battery based on hand production it must move to automated
production. A low-speed production line will be built or leased to verify
that the battery can be manufactured in a continuous process. EVI may
undertake this step of the commercialization process independently or with
a joint venture partner.
Note: The company is considering the acquisition of a manufacturing company
that will give it control of a battery manufacturing plant in Canada.
Should this acquisition take place, EVI will be in an excellent position to
validate the production process on a full-scale production line.
4. The company will determine the product and process economics using the
information from steps 1, 2 and 3. This can only be accomplished when
making large volumes of cells.
5. The company will produce large volume (100 cells) samples for distribution
to potential licensees and OEMs.
6. Design and build cathode insertion machine for Nickel Zinc batteries.
Zinc Carbon Bromine:
The Pre-Commercialization plan is focused on setting the specifications for
the first generation cell and optimizing the materials for maximum cycle
life and capacity. Manufacturability of the battery will also be proven
along with product economics. Repetitive testing and data acquisition of
manufactured cells will be conducted on battery cycling equipment to
validate the technology and manufacturing process. A continuing focus will
be on improving the battery to have at least fifty or sixty cycles by
identifying a better separator. Since cost and price will be market issues
with this battery, EVI must prove that the system can meet the market
requirements by testing higher rate production volumes. Sample packages of
the battery must be produced for testing by potential licensees. A charging
system must be developed for this system since its charging regime is not
consistent with existing battery products.
1. To set the recipe for the first generation of product in C and D sizes.
The company will manufacture by hand large numbers of batteries for
performance testing. The company has a need to increase its ability to
cycle these batteries by purchasing one or more battery cycler
machines. This program is required so that the company will have
comfort in its design. This will be an iterative process whereby
modifications will be made to the battery design based on its long-term
performance. The company will increase its staff for this project since
there is a significant amount of effort in making the batteries and
collecting the data from product cycling.
2. To complete the engineering to allow high-speed production of these
cells on existing or new battery lines. Hand production of the cells by
EVI staff will provide information about the manufacturability of the
end product. Again, the process is iterative, since a particular
technique that leads to improved battery performance may not be
possible in a high-speed manufacturing line or may add significant cost
to the product.
3. At the stage when EVI is confident about the formula and
manufacturability of the battery based on hand production it must move
to automated production. A low-speed production line will be built or
leased to verify that the battery can be manufactured in a continuous
process. EVI may undertake this step of the commercialization process
independently or with a joint venture partner.
4. The company will determine the product and process economics using the
information from steps 1, 2 and 3. This can only be accomplished when
making large volumes of cells.
5. The company will produce large volume (100 cells) sample kits for
distribution and provide technical support to potential licensees.
6. The company will design, build and test an inexpensive charging system
that will be suitable for these batteries.
Following reflects the product development schedule for Nickel Zinc and Zinc
Carbon Bromine batteries in this project:
TABLE
Summary of total cost of the Work
Salaries $607,413
Services and Contracts $187,429
Travel $56,000
Materials $83,000
Capital Items $170,000
Overheads $394,819
---------
Total $1,498,661
Project No.:
(Note: The Goods and Services Tax (GST), Harmonized Sales Tax (HST), or Quebec
Sales Tax (QST) will not normally be reimbursed by NRC and the Firm must delete
any GST, HST, or QST costs from invoices prior to submission to NRC for payment.
However, if the Firm has paid GST, HST, or QST in relation to allowable costs
incurred (as defined below) and can clearly demonstrate to NRC's satisfaction
that it is not entitled to any input tax credits or other form of rebates for
these taxes, then NRC will consider those taxes paid as an allowable cost. )
1.0 Terms of Payment
1.1 NRC agrees to reimburse the Firm for work performed on the project as
follows:
o Eighty Five percent (85%) of the actual salary costs (excluding
benefits) incurred for company staff, estimated at $495,000.
Note: Overhead costs exceeding 65% of the salary costs directly incurred by
the Firm in the performance of the Work will not be considered by NRC
as costs of the Work without its prior written consent.
Note: NRC's maximum contribution will be the lesser of 33% of the total
costs incurred in the performance of the Work or $495,000.
1.2 The Firm agrees to invoice NRC quarterly in arrears for costs incurred
and as specified in clause 1.1 above.
1.3 The Firm agrees to provide NRC the reports on the dates outlined below.
The Firm acknowledges that failure to comply with these requests will
cause the payments of current and subsequent claims to be delayed or
stopped.
a) a summary of the actual total costs incurred in the
performance of the Work from the start of this Agreement and a
summary of the total forecasted expenditures to complete the
Work must be submitted on September 20, 2000 and March 31,
2001.
b) Firm's unaudited annual financial statements within one
hundred and twenty (120) days of the end of the Firm's fiscal
year end until repayments commence. The first financial
statements must be submitted on or before January 31, 2001.
Audited revenue or financial statement should be submitted
annually within one hundred and twenty (120) days of the
Firm's fiscal year end, during the repayment period, and until
the end of this agreement. The first audited revenue or
financial statement is due on January 31, 2004.
c) Financial Review on or before May 30, 2000
d) Financial and technical review on or before August 31, 2000,
December 31, 2000 and March 31, 2001.
e) A final technical report due on March 31, 2001.
2.0 Sources of Funding for the Work
2.1 The Firm agrees that the following table fairly represents the
anticipated sources of funds for the Work.
Source Amount Percent
This contribution $495,000 (33%)
Tax credits $ ( %)
Other government assistance $ ( %)
Firm's internal resources $1,003,661 (67%)
Other private sector funding $ ( %)
------------------
Total Cost of the Work $1,498,661 (100%)
2.2 The Firm acknowledges that securing any other funding for the Work is
entirely a matter between it and the other sources of funds and that
NRC cannot give any assurance about eligibility, suitability, terms, or
amounts.
3.0 Summary of NRC's Support by Fiscal Year
The following table summarizes the maximum contribution to be made by
NRC in each given NRC fiscal year (April 1 to March 31).
Fiscal Year 1999/2000 (13 March 2000 to 31 March 2000) up to: $5,000.
Fiscal Year 2000/2001 (1 April 2000 to 31 March 2001) up to:$490,000.
Claims for payment, in accordance with clause 1.1, for project costs
incurred in a given fiscal year must be submitted by April 10 of the
following fiscal year. The maximum amount per fiscal year cannot be
exceeded without prior written approval of NRC.
No unclaimed portion of these maximum annual amounts will be added to
subsequent fiscal year limits without the express written consent of
NRC.
4.0 Supporting Documentation
a) The Firm agrees to provide proofs of costs incurred when
requested by NRC.
b) Each claim is to be accompanied by a brief report, in a manner
specified by NRC, of the Work completed during the claim
period.
c) Payment of claims for payment by NRC is contingent upon
receipt of any required reports.
5.0 Repayment
5.1 Beginning on July 1, 2003 and at the beginning of every quarter
thereafter up to and including April 1, 2006 the Firm shall pay to NRC:
One point seven percent (1.7%) of the Firm's gross revenues for the
quarter preceding the repayment. Gross revenues are defined as all
revenues, receipts, monies and other considerations of whatever nature
earned or received by the Firm, whether in cash, or by way of benefit,
advantage, or concession, without deductions of any nature, net of any
returns or discounts actually credited and any sales, excise, ad
valorem or similar taxes paid but without deduction for bad debts or
doubtful accounts, as determined in accordance with generally accepted
accounting principles, applied on a consistent basis.
If by April 1, 2006 the total amount paid to NRC is less than the NRC
contribution to the Firm, the Firm will continue to make payments to
NRC under the same terms until the earlier of the full repayment of the
NRC contribution or ten years after the start of the repayment period.
If at any time during the life of this Agreement the total amount paid
to NRC pursuant to this article equals or exceeds $742,500, the Firm
shall cease to have any further obligation to make payments to NRC
pursuant to this article.
5.2 The Firm agrees to provide to NRC a report of gross revenues for the
repayment period defined in 5.1, above. This repayment and report are
due within 60 days from the end of the applicable period.
5.3 The Firm agrees to provide to NRC within one hundred and twenty (120 )
days of the end of each Firm fiscal year, an audited report of gross
revenues for that fiscal year, until the end of the contract.
5.4 The Firm agrees that in its revenue reports to NRC, all transactions
with related persons (as that term is defined in the Income Tax Act)
will be reported, treated and valued at the greater of the typical
recent price for sales by the Firm, or by any company related to the
Firm, of the product or service in question to unrelated third parties
or of the fair market value (defined as the highest price obtained for
a similar product in a preceding calendar year).
5.5 The Firm agrees that if it licenses the production and sale of any of
its products or services to a third party, that it will pay to NRC an
amount equal to the amount it would have paid to NRC had it made the
sales itself in the repayment period in question.
5.6 Interest at one percent (1%) per month compounded monthly (annual rate
of 12.68%), must be paid on overdue amounts. An amount is overdue if
unpaid 30 days after the repayment is due according to article 5.0. NRC
may revise that rate upon 2 months' notice. The Firm shall pay an
administrative charge of $25 for any cheque that is refused payment by
the Firm's bank or financial institutions.
5.7 The amount paid by the Firm to NRC pursuant to article 5.1 does not
include interest charges or penalties or any other amounts paid or owed
by the Firm to NRC whether related to this Agreement or not.
5.8 Payments must be made by cheque payable to "Receiver General -
National Research Council of Canada" and addressed to:
Finance Branch,
National Research Council,
1200 Montreal Road,
Ottawa, Ontario. K1A OR6
6.0 Special Conditions
None
Conditions of Contribution
This Agreement is conditional upon the Firm's adherence to all conditions set
out below. A breach of any of the following conditions, or a submission to NRC
of false or misleading information, is grounds for suspension or immediate
termination of NRC's financial assistance for the Work, in addition to any other
action permitted by law. NRC will notify the Firm, in writing, of any such
suspension or termination. Termination of this Agreement due to breach of any of
these conditions by the Firm will render the total amount of all contribution
payments made by NRC to the Firm pursuant to this Agreement immediately due and
payable to the Receiver General - National Research Council of Canada. Failure
on the part of NRC to act on any breach does not constitute a waiver of NRC's
right to act on that or any other breach of the following conditions.
1. The Firm must undertake the Work. Any significant change proposed in
relation to anything that is written in the Statement of Work or the
Basis of Payment and Repayment requires an amendment to this Agreement
signed by both the Firm and NRC.
2. The Firm must abide by all of the provisions of the Basis of Payment and
Repayment and the Conditions of Contribution of this Agreement.
Failure to do so constitutes a breach of the conditions of this
Agreement.
3. The Firm must notify NRC in writing if it seeks or receives financial
assistance for the Work from any level of government, beyond that
indicated in the Basis of Payment and Repayment. In such cases, NRC
reserves the right to reduce the amount of its contribution.
4. The Firm must maintain adequate records and accounts related to its
performance of the Work, in accordance with generally accepted accounting
practices. The Firm must make such records available to authorized
representatives of NRC for inspection, auditing, or copying and must
permit authorized representatives of NRC to have access to the Firm's
facilities and personnel for the purpose of inspection and interviewing.
This clause 4 remains in effect for three years after the end of the
repayment period of this Agreement.
5. The Firm must maintain data relating to the economic and job creation
benefits traceable to this Agreement for its duration and must provide
NRC with such data upon request.
6. The Firm must demonstrate, to the satisfaction of NRC, acceptable
performance of the Work, and the capability of continuing the Work. The
Firm must permit NRC to inspect the facilities used by the Firm in the
performance of the Work, and to discuss the Work with NRC
representatives.
7. The Firm must contribute its agreed portion of the total cost of the
Work. If it is found upon the completion of the Work that the Firm has
not contributed its agreed share of the total cost of the Work, as
mentioned in the Basis of Payment and Repayment, NRC may require the Firm
to repay NRC the overpayment of the contribution within 30 days. The
remaining part of the contribution will be repaid to NRC in accordance
with the Basis of Payment and Repayment .
8. The Firm must make reasonable efforts to protect and exploit the results
arising from the Work supported under this Agreement in a manner
appropriate to the achievement of the economic and job-creation benefits
outlined in the Firm's proposal to NRC and must report to NRC on its
efforts as requested by NRC. If, based on these reports, NRC is of the
opinion that the Firm is not exploiting the results in a manner conducive
to the achievement of the benefits in the Firm's proposal, NRC may require
the Firm to license the technology developed under this Agreement to a
third party of NRC's choosing upon reasonable commercial terms and
conditions, failing which the Firm shall grant NRC a non-exclusive,
perpetual, royalty-free license to use the results and associated
intellectual property in Canada for any purpose, which license shall
include the right to grant sublicenses.
9. The Firm agrees to obtain prior written consent from NRC if, at any time
during the life of this Agreement or within five years after the end of
this Agreement, the Firm intends: (a) to enter into third party agreements
that would limit the Firm's control of the results derived from the Work,
(b) to do part of the Work outside Canada, (c) to manufacture using the
results of the Work outside Canada, (d) to license, sell, assign, or
otherwise grant any right in or transfer title to intellectual property
arising out of the Work to any person or organization outside Canada, or to
any government other than the Government of Canada (e) to undertake any
action that would adversely impact its ability to achieve the economic
benefits and benefits to Canada outlined in its proposal to NRC or that
would materially affect its ability to meet its repayment obligations
described in the Basis of Payment and Repayment.
10. The Firm must indicate in writing, or by a clear label, the confidentiality
of any specific information which it wishes to be treated as confidential
by NRC. Protection from third party access to confidential business
information supplied to NRC is provided by the federal Access to
Information Act.
11. No Member of the House of Commons shall be admitted to any share or part of
this Agreement or to any benefit to arise therefrom. No person will receive
a direct benefit from this contract if that person is subject to, and not
in compliance with, a Conflict of Interest and Post-Employment Code, either
the one for Public Office Holders, for the Public Service, or for NRC
Employees. (NOTE: post-employment rules mainly affect persons in the NRC
"MG" category, the federal public service categories "Senior Manager" and
above, ministerial staff, and Governor in Council appointees.)
12. The Firm warrants that:
a) it has not, nor has any person on its behalf, offered or promised to
any official or employee of Her Majesty the Queen in right of Canada
any bribe, gift or other inducement for or with the view to obtaining
this Agreement; and
b) it has not employed anyone on its behalf to solicit or secure this
Agreement for a commission, contingency fee or other consideration.
13. Nothing in this Agreement shall be construed as creating a partnership,
joint venture or agency relationship between NRC and the Firm.
14. In its performance of the Work, the Firm must maintain adequate
environmental protection measures, including those for biohazardous
materials, to satisfy the requirement of all relevant regulatory bodies. If
the Work directly involves human subjects or animals, the Firm must meet
the conditions set, by one of NRC's Research Ethics Boards or by a Local
Animal Care Committee (ACC) operating in accordance with the IRAP Terms of
Reference for Local ACCs.
15. This Agreement terminates immediately if the Firm ceases operations,
assigns its rights under this Agreement, enters into receivership, or
becomes insolvent or bankrupt. Upon such termination, the total amount of
all payments made by NRC to the Firm under this Agreement become a debt due
to the Receiver General - National Research Council of Canada.
16. The Firm shall indemnify NRC in respect of any claim against NRC by a third
party resulting directly or indirectly from the Firm's performance of the
Work or use by the Firm or a third party of the results arising from the
Work funded under this Agreement. The Firm shall not take action against
NRC for failure or delay in performance caused by circumstances beyond
NRC's reasonable control or for incorrectness of data supplied, advice
given, or opinions expressed in relation to the Work.
17. Either party may terminate this Agreement for any reason, by giving the
other party at least sixty days' notice in writing. The Firm shall have no
obligation to NRC to perform the Work after notice is given or received,
and NRC shall not reimburse costs incurred subsequent to the termination
date, nor any costs incurred at a rate greater than the typical rate before
the notice was given. Within the termination notice period given by a
party, either party may request the other party to consider an amendment to
the amount and terms of repayment. If within the termination notice period
the parties do not enter into negotiations or do not agree to an amendment,
the amount and manner of repayment specified in the Agreement will apply.
Any termination is without prejudice to the rights and obligations of the
parties that have accrued before termination.
[END]