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EXHIBIT 10.3
CONFIDENTIAL TREATMENT
AER ENERGY RESOURCES, INC.
LICENSE AND DEVELOPMENT AGREEMENT
ACKNOWLEDGMENT REGARDING CONFIDENTIAL INFORMATION:
AER Energy Resources, Inc. (the "Company") acknowledges that certain
confidential information is contained throughout this License and Development
Agreement and therefore such confidential information has been omitted from the
copy filed with this Quarterly Report on Form 10-Q and an asterisk (*) has been
inserted indicating such omission at the exact place in the Agreement where such
confidential information has been omitted. A copy of this Agreement without any
omission of confidential information has been filed separately with the
Secretary of the Commission as an attachment to a request for confidentiality
with respect to the omitted information.
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CONFIDENTIAL
AER ENERGY RESOURCES, INC.
LICENSE AND DEVELOPMENT AGREEMENT
AER Energy Resources, Inc. Rayovac Corporation
4600 Highlands Parkway 601 Rayovac Drive
Suite G Madison, Wisconsin 53711
Smyrna, Georgia 30082 ("RAYOVAC")
("AER")
BACKGROUND STATEMENT
AER is engaged in the design and manufacture of rechargeable and
primary zinc-air cells and batteries and possesses certain technical
information, knowledge, know-how, patents, experience and expertise related to
the design and manufacture of those zinc-air cells and batteries, and also has
developed a portfolio of patents and patent licenses related to zinc-air battery
technology. RAYOVAC is a leading battery manufacturer and marketer and has
developed, among other technologies, certain proprietary technology relating to
the design and manufacture of zinc-air batteries and cells. AER and RAYOVAC wish
to explore the possibilities for incorporating elements of AER's proprietary
technology,[ * ], into RAYOVAC's proprietary zinc-air battery technology,[ * ].
To that end, the parties wish to undertake a design and development program to
explore the feasibility of these products, and RAYOVAC wishes to obtain a
license from AER to utilize AER's proprietary technology and patents in the
design and manufacture of primary zinc-air batteries resulting from the parties'
collaborative efforts.
STATEMENT OF AGREEMENT
In consideration of the mutual agreements contained herein, AER and
RAYOVAC agree as follows:
ARTICLE 1: DEFINITIONS
"AER Common Stock" means the common stock, no par value, of AER.
[*]
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"AER Stock Price" means the lesser of:
(i) the average of the closing prices for AER Common Stock as
reported on the OTCBB (or such national securities exchange or quotation system
on which AER Common Stock is then listed or quoted) for the thirty (30) trading
days ending on and including the trading day immediately prior to the Phase III
Notice Date; or
(ii) $1.50 per share of AER Common Stock, subject to appropriate
adjustment in the event of a recapitalization, reclassification or
reorganization (including stock splits, reverse stock splits, stock dividends,
mergers, consolidations or otherwise).
"AER Technology" means any and all Intellectual Property (including
Patents that subsequently issue on any unpatented invention included with the
AER Technology) owned or held by or licensed to AER or its Affiliates and in
existence as of the Effective Date and related to zinc-air batteries[ * ],
including but not limited to (i) the Patents set forth on Exhibit A attached
hereto and incorporated herein by reference, and (ii) all of AER's rights to
technology of Dreisbach Electromotive, Inc., and Michael Cheiky, pursuant to
AER's license agreement with such persons.
"Affiliate" means, with respect to a specified Person, another Person
that controls, is controlled by, or is under common control with, the specified
Person. The word "control" means ownership of 50% or more of the voting
securities of a Person or the ability otherwise to direct the management and
policies of the Person.
"Agreement" means this License and Development Agreement, as it may be
amended from time to time.
"Air Manager" means AER's proprietary system (which is included within
the AER Technology) for controlling the exposure of a zinc-air battery cell or
cells to the changing ambient air conditions encountered during the useful life
of the cell or cells. Components of an Air Manager include but are not limited
to air movement devices, isolation tubes, battery cases, electrical control
circuits and air isolation passageways.
"Air Manager Design Guide" means the design guide prepared by AER to
facilitate the translation of AER Technology into battery products, as updated
from time to time. RAYOVAC acknowledges that AER considers the information
contained in the Air Manager Design Guide, as updated from time to time, to be
Trade Secret information for purposes of this Agreement (provided that to the
extent that such Air Manager Design Guide embodies any Program Technology, all
Intellectual Property Rights in such Program Technology shall continue to be
owned by RAYOVAC).
[*]
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"Consumer Aftermarket" means the market for replacement batteries or
cells to power consumer electronic products, where sales are made for ultimate
purchase by end-user consumers. "Consumer Aftermarket" shall not include the
sale of batteries or cells directly to manufacturers for inclusion with consumer
products.
"Design Study" means that preliminary study completed by RAYOVAC and
AER on or about February 28, 2001, pursuant to the Letter Agreement.
"Development Plan" is defined in Section 2.2.
"Development Program" is defined in Section 2.
"Device OEM" means a manufacturer of electronic devices that use one or
more batteries or cells.
[*]
"Effective Date" means January 15, 2001, which is the date on which the
parties began working together on the Design Study.
[*]
"Intellectual Property" means any and all tangible and intangible
domestic and international (i) works of authorship, including copyrights, moral
rights, and mask works; (ii) trademarks, service marks, trade names, inventions,
logos, slogans and domain names; (iii) Trade Secrets and confidential
information; (iv) Patents; (v) all other proprietary property (of every kind and
nature throughout the world and however designated), whether arising by
operation of law, contract, license, or otherwise; and (vi) all registrations,
initial applications, renewals, extensions, continuations, divisions or reissues
of the foregoing now or hereafter in force.
"Intellectual Property Rights" means any and all rights in and to
Intellectual Property.
"Joint Inventions" means inventions, discoveries and improvements and
the related Patents and other Intellectual Property conceived by two or more
inventors at least one of which is employed by RAYOVAC and at least one of which
is employed by AER and which would be owned by both RAYOVAC and AER absent the
provisions of this Agreement.
"Letter Agreement" means that letter agreement dated February 15, 2001
related to the commencement of the Design Study.
"Licensor Improvement" means any and all Intellectual Property owned or
held by or licensed to AER or its Affiliates that comes into existence on or
after the Effective Date, including any advance, refinement, improvement or
other enhancement for or with respect to the AER Technology, without regard to
whether such advance, refinement, improvement or other
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enhancement is or may be patentable or subject to a Patent or Patents or is or
may be a Trade Secret, except Intellectual Property as to which AER does not
have the ability to license to RAYOVAC. The term "Licensor Improvement" shall
not include any Program Technology.
"Net Sales Value" means the gross selling price of a [*] when sold by
RAYOVAC or its Affiliates to a third party, less the following: accepted
customer returns and breakage for which RAYOVAC or its Sublicensee or Affiliate
gives credit to its customers, excise or other sales taxes which RAYOVAC or its
Sublicensee or Affiliate has to pay or absorb, customs duties and consular fees,
transportation and insurance charges and packaging paid by RAYOVAC related to
delivery of finished products, sales commissions paid to independent
representatives, and any other commercially acceptable promotional, quantity,
trade or cash discounts or rebates. If RAYOVAC or its Affiliates sells any [*]
together with another product sold by RAYOVAC or its Affiliates, the gross
selling price of the [*]shall be deemed to be the prevailing gross sales price
of that [*]if sold separately to that particular buyer.
"Patents" means patents and patent applications including any legally
enforceable patent rights which may issue on such applications in any country of
the world. For purposes of this Agreement, a device is "covered" by a Patent
when a particular manufacture, use, sale or offer for sale of the device gives
rise to any kind of infringement liability.
"Person" means any natural person, corporation, company, partnership,
limited partnership, limited liability company, firm, association, trust,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Phase III Notice Date" means the date determined pursuant to Section
2.3 below, pursuant to which RAYOVAC's election to commence commercial
production and sale of [*]or to terminate the Development Program and this
Agreement will be determined.
"Program Technology" means Intellectual Property, including without
limitation Joint Inventions, developed under the Design Study or the Development
Program or which result from work conducted under the Design Study or
Development Program, and that are conceived or reduced to practice by AER or
RAYOVAC or both (or their respective Affiliates) during the duration of the
Design Study and the Development Program or within six months following
termination of the Design Study or the Development Program if a result of the
work conducted under the Design Study or the Development Program; provided,
however, that "Program Technology" shall not include any RAYOVAC Excluded
Technology.
"RAYOVAC Battery" means, at any given time, any primary
(non-rechargeable) zinc air battery or cell that is generally commercially
available at such time, and is manufactured by or for RAYOVAC or marketed under
the RAYOVAC brand name.
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[*]
"RAYOVAC Excluded Technology" shall mean any and all existing and
future Intellectual Property owned or held by or licensed to RAYOVAC or its
Affiliates that relates to zinc-air battery cells (including without limitation
battery chemistry and manufacture of zinc-air battery cells, but excluding the
[*] and interfaces with the AER Air Manager), and which is not derived from or
based upon any AER Technology or any Licensor Improvement.
[*]
[*]
[*]
[*]
[*]
"Sublicense" means any agreement by RAYOVAC or AER, as appropriate,
with a Person, which grants to such Person the right to practice, subject to the
terms of this Agreement, all or part of the rights already owned by or already
licensed to RAYOVAC or AER.
"Sublicensee" means the recipient of a Sublicense.
"Territory" means North America and Europe.
"Trade Secret" means any information (including technical or
nontechnical data, and any formula, pattern, compilation, program, device,
method, technique, drawing, process, financial data, or list of actual or
potential customers or suppliers) which:
(i) derives economic value, actual or potential, from not being
generally known to other persons who can obtain economic value
from its disclosure or use; and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality.
ARTICLE 2: DEVELOPMENT PROGRAM; STOCK PURCHASE
2.1. Stock Purchase. Within five (5) business days following the
satisfaction of the condition set forth in Section 10.16:
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(a) RAYOVAC shall purchase from AER, and AER shall issue
and sell to RAYOVAC, 656,858 shares of AER Common Stock for a cash
purchase price of $250,000 to be paid to AER by wire transfer to an
account specified by AER. AER shall deliver to RAYOVAC certificate(s)
representing the AER Common Stock to be purchased by RAYOVAC pursuant
to this Section 2.1(a), in such form as shall vest RAYOVAC with good
and valid title to and record and beneficial ownership of such shares,
against payment of the purchase price therefor by RAYOVAC, by check or
wire transfer payable to AER.
(b) AER agrees to issue to RAYOVAC a duly executed and
authorized warrant, in substantially the form set forth in Exhibit D,
attached hereto and incorporated herein by reference, to purchase
218,953 shares of AER Common Stock for a per share exercise price of
$0.4567 ("Warrant I"). Warrant I shall immediately vest upon issuance
and be exercisable by RAYOVAC at anytime prior to the fourth annual
anniversary of the date of issuance.
(c) RAYOVAC shall deliver to AER $250,000 in cash in
exchange for a duly executed and authorized convertible promissory
note, substantially in the form attached hereto as Exhibit I (the
"Note"). The Note shall be convertible into the number of shares of AER
Common Stock (rounded to the nearest whole share) equal to the
outstanding principal under the Note at the time of conversion divided
by the AER Stock Price. The Note will automatically convert into AER
Common Stock on the Phase III Notice Date.
2.2. Development Program Parameters.
(a) RAYOVAC and AER shall conduct a development program
to determine he feasibility of commercial production of [*] (the
"Development Program"). [*] The Development Program will be performed
at AER's facility in Smyrna, Georgia, or at another mutually acceptable
location.
(b) At its own expense, AER has developed, and RAYOVAC
has approved a plan for the Development Program (the "Development
Plan"). The Development Plan includes details with respect to: (i) each
party's respective roles and obligations for each Sub-phase of the
Development Program; (ii) estimated cost budget for the Development
Program; and (iii) a timetable for the completion of AER's obligations
under each Sub-phase of the Development Plan. Any material substantive
changes, including additions, deletions or modifications, to the
Development Plan must be made in writing and approved in advance by
RAYOVAC. RAYOVAC shall reasonably cooperate with AER in the creation of
mutually acceptable program goals and operating procedures with respect
to the Development Plan.
(c) At its own respective expense, each party shall
perform the specific obligations set forth and assigned to it in the
Development Plan and in accordance with the completion schedule for
such obligations also set forth in the Development Plan.
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Notwithstanding the foregoing, the parties contemplate that AER will
not be required to incur more than $250,000 in costs, including
overhead (determined in a manner consistent with the methodology
reflected in the Development Plan) in connection with its obligations
under the Development Program as specified in the Development Plan. AER
will keep RAYOVAC informed in a timely manner and on a regular basis as
to AER's costs related to the Development Program so that the parties
can manage and, as necessary, modify AER's obligations under the
Development Program so that its costs do not exceed $250,000.
[*]
2.3. Completion of Development Program. At such time when the
parties mutually agree that the obligations in the Development Plan have been
fulfilled with respect to each Sub-phase, or at such earlier date as RAYOVAC may
in its sole discretion determine, RAYOVAC will give written notice to AER (the
"Phase III Notice") of its election either to commence the commercial production
of [*] or to terminate the Development Program and this Agreement. If AER has
not received such notice within ten (10) days after all obligations of the
parties in the Development Plan for Sub-phase C have been completed or RAYOVAC
has terminated the Development Program, or if AER in good faith has determined
that RAYOVAC has ceased any significant activity as to the Development Program
for a period in excess of sixty (60) days, AER may at its election give written
notice to RAYOVAC requesting RAYOVAC to submit the Phase III Notice to AER.
RAYOVAC shall thereafter have thirty (30) days in which to resume activity on
the Development Program and notify AER of its resumption or continuation of
activity on the Development Program. If RAYOVAC fails to so notify AER of
RAYOVAC's resumption or continuation of activity on the Development Program
within thirty (30) days after receipt of such notice from AER, or if RAYOVAC
fails to deliver the Phase III Notice within thirty-five (35) days following
such notice from AER, then RAYOVAC shall be deemed to have elected to commence
the commercial production of [*], and the date that such notice from AER is
received by RAYOVAC will be deemed to be the Phase III Notice Date for purposes
of determining the AER Stock Price.
2.4. Election to Commence Production. Within ten (10) business days
following RAYOVAC's written election, or deemed election, pursuant to the Phase
III Notice, to commence the commercial production of [*]:
(a) RAYOVAC shall purchase, and AER shall issue and sell
to RAYOVAC, the number of shares of AER Common Stock equal to $500,000,
or such greater amount as the parties may mutually agree, divided by
the AER Stock Price (rounded to the nearest whole share). AER shall
deliver to RAYOVAC certificate(s) representing the AER Common Stock to
be purchased by RAYOVAC pursuant to this Section 2.4(a), in such form
as shall vest RAYOVAC with good and valid title to and record and
beneficial ownership of such shares, against payment of the purchase
price therefor by RAYOVAC,
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by check or wire transfer payable to AER.
(b) AER agrees to issue to RAYOVAC a duly executed and
authorized warrant, in substantially the form attached hereto as
Exhibit D, to purchase a number of shares of AER Common Stock having a
value of $200,000 (rounded to the nearest whole share) based upon a per
share exercise price equal to 120% of the AER Stock Price ("Warrant II"
and together with Warrant I, the "Warrants"). Warrant II shall
immediately vest upon issuance and be exercisable at anytime prior to
the third annual anniversary of the date of issuance.
(c) RAYOVAC agrees to deliver to AER a refundable cash
deposit in the amount of $500,000, as a pre-payment of the royalty fees
that may become due and payable to AER pursuant to Article 4 below.
Such amount shall be credited to RAYOVAC or retained by AER as
specified in Section 4.1(d).
2.5. Other Financial Rights and Obligations.
(a) Use of Proceeds. AER acknowledges and agrees that the
$250,000 payable by RAYOVAC pursuant to Section 2.1(c), shall be used
only for funding working capital needs related to the Development
Program.
(b) Registration Rights. RAYOVAC shall have and be
entitled to exercise the following registration rights with respect to
any shares of AER Common Stock issued to RAYOVAC pursuant to this
Agreement (including upon the exercise of the Warrants or upon the
conversion of the Note) from the date of this Agreement through the
date that is eight (8) years hereafter:
(i) RAYOVAC shall be entitled to "piggy-back"
registration rights on all registrations of AER Common Stock
(other than registrations on Form S-4 or S-8), subject to the
right, however, of AER and its underwriters to reduce or
eliminate the total number of piggyback shares proposed to be
registered pro rata (as to such shares to be sold by RAYOVAC
as well as other holders of piggyback registration rights) in
view of market conditions.
(ii) RAYOVAC shall be entitled to demand
registration on Form S-3 (or other short-form registration
statement) if (A) this Agreement is terminated by RAYOVAC
pursuant to Section 9.2(a), or (B) RAYOVAC or any of its
Affiliates that beneficially owns shares of AER Common Stock
issued pursuant to this Agreement (or upon exercise of the
Warrants or upon conversion of the Note) is prohibited from
selling all of their AER Common Stock issued pursuant to this
Agreement (or upon exercise of the Warrants or upon conversion
of the Note) within three (3) months in compliance with Rule
144 promulgated under the Securities Act.
(iii) If Form S-3 (or other short-form
registration statement) is not available, RAYOVAC shall be
entitled to demand registrations on Form S-1 (or any similar
long-form registration statement). AER shall be obligated to
effect only one (1) such demand registration if the
registration is on Form S-1, and only
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if the proposed aggregate selling price in any such offering
is at least $2,000,000; and AER shall be obligated to effect
not more than three (3) such demand registrations if the
registration is on Form S-3, without any limitation as to the
proposed aggregate selling price in any such offering.
(iv) AER agrees to execute and deliver, or cause
to be executed and delivered, and take, or cause to be taken,
such further actions, as RAYOVAC may reasonably request, as
being necessary or advisable to effect or evidence the
registration rights contemplated by this Section 2.5(b). AER
shall bear all registration expenses of piggy-back
registrations pursuant to Section 2.5(b)(i) (other than
expenses incurred directly by RAYOVAC, such as out-of-pocket
fees of attorneys and financial advisors). RAYOVAC shall bear
all registration expenses of the demand registration rights
granted in Sections 2.5(b)(ii) and 2.5(b)(iii), including
AER's out-of-pocket costs and the fully-loaded cost of
personnel time associated with any such demand registrations.
RAYOVAC shall cooperate as reasonably requested by AER in
connection with any such demand or piggyback registration,
including signing a customary underwriting agreement if
required in connection with an underwritten offering, and
furnishing to AER in writing all such information reasonably
requested by AER.
(v) Notwithstanding anything to the contrary in
Section 2.5(b)(ii) or (iii), AER shall have the right to defer
the initial filing or request for acceleration of
effectiveness of any registration pursuant to Section
2.5(b)(ii) or (iii) after effectiveness, to suspend
effectiveness of any such registration statement or to require
holders to suspend further sales pending amendment (each a
"Delay") if, in the reasonable good faith judgment of the
Board of Directors of AER and upon the advice of counsel to
AER, such delay in filing or requesting acceleration of
effectiveness or such suspension of effectiveness or
suspension of sales is necessary (A) in light of the existence
of material non-public information (financial or otherwise)
concerning AER disclosure of which at the time is not, in the
opinion of the Board of Directors of AER and upon the advice
of counsel, (1) otherwise required and (2) in the best
interests of AER or (B) because the filing of such
registration statement might interfere with or adversely
affect the negotiation or completion of any transaction that
is being contemplated by AER (whether or not a final decision
has been made to undertake such transaction) at the time the
right to Delay is exercised; provided, however that AER will
not invoke such a Delay for more than three (3) months, unless
the reason for the Delay is that AER is then engaged in an
acquisition, in which case it will use its best efforts to end
the Delay as soon as possible and provided, further that AER
will not invoke Delays for more than an aggregate of six (6)
months in any calendar year.
(c) Reservation of AER Common Stock. AER shall at all
times reserve and keep available out of its authorized but unissued
shares of AER Common Stock, solely for the purpose of issuance upon
exercise of the Warrants and conversion of the Note, such number of
shares of AER Common Stock issuable upon exercise of all outstanding
Warrants and upon conversion of the Note. All shares of AER Common
Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable
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and free from all taxes, liens, claims, encumbrances and charges, and
will not be subject to any preemptive right, co-sale right,
registration right (other than the registration rights set forth in
this Agreement), right of first refusal or other similar right. AER
shall take all such actions as may be necessary to assure that all such
shares of AER Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any
securities exchange, quotation system or bulletin board upon which
shares of AER Common Stock may be listed or quoted.
(d) Assignment of Government Contract. RAYOVAC agrees to
use reasonable commercial efforts to assign or subcontract a portion of
the ManTech government contract, if awarded to RAYOVAC, and subject to
AER's agreement to the terms of such assignment or subcontract, such
that the lesser of (i) $500,000 or (ii) 33% of the contract value of
such government contract is so assigned or subcontracted to AER.
2.6. RAYOVAC's Full Ownership of Program Technology/Equipment.
(a) Ownership. RAYOVAC is and shall be the owner of, and
own all right, title and interest in and to (i) all Program Technology,
and (ii) all designs, processes and specifications for all tooling and
equipment developed during both the Design Study and the Development
Program, and during any interim period ("Equipment Tooling"). To the
extent that AER owns any right, title or interest in any of the Program
Technology or Equipment Tooling, AER hereby sells, assigns and conveys
all such right, title and interest, immediately and irrevocably, to
RAYOVAC. Any Patent applications relating to designs, processes or
other inventions included within the Program Technology or Equipment
Tooling shall be filed in the names of the inventors, and AER and
RAYOVAC agree to cause such Patent applications to be promptly assigned
to RAYOVAC, and any filing fees and related expenses shall be paid by
RAYOVAC.
(b) AER Assistance. AER shall reasonably cooperate with
RAYOVAC at its own cost and expense to provide appropriate information
and assistance in connection with the preparation and prosecution of
any applications for Patents arising under the Program Technology and
Equipment Tooling. In addition, AER shall reasonably cooperate with
RAYOVAC to provide appropriate information and assistance in connection
with the protection of all rights under any such Patent applications at
its own expense; provided, however, that if the assistance requested of
AER in connection with such protection is related to a claim or action
brought by or against a third party with respect to the Program
Technology or Equipment Tooling, then RAYOVAC shall (i) reimburse AER's
expenses incurred in providing the assistance, and (ii) reasonably
compensate AER for employee time spent in connection with such
assistance.
2.7. Status of Representatives of Each Party. Each of RAYOVAC and
AER is an independent contractor with respect to the other. Neither party shall
have any authority to bind the other party unless expressly agreed in writing.
Nothing in this Agreement shall be construed to create a partnership, agency or
employer-employee relationship between the parties, and in no event shall
RAYOVAC and AER be deemed joint employers. Neither party shall be responsible
for the compensation, payroll-related taxes, worker's compensation, accident and
health
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insurance or other benefits of employees of the other party, who shall assume
all responsibility therefor.
ARTICLE 3: TECHNOLOGY LICENSES
3.1. License of AER Technology to RAYOVAC.
(a) Subject to the terms and conditions of this
Agreement, AER hereby grants to RAYOVAC and those RAYOVAC Affiliates
listed on Exhibit E attached hereto and incorporated herein by
reference, as may be amended from time to time by RAYOVAC (which are
the Affiliates of RAYOVAC that will be utilizing the AER Technology), a
non-exclusive, worldwide, royalty-bearing, right and license:
(i) under the unexpired Patents included in AER
Technology, to make, have made, use, distribute, sell, offer
to sell and import [*] covered by one or more such Patents;
and
(ii) under the Intellectual Property Rights,
other than Patents, included in the AER Technology, to make,
have made, use, distribute, sell, offer to sell and import [*]
covered by AER Technology but not covered by any unexpired
Patents included in AER Technology.
(b) [*]
(c) RAYOVAC shall have no right to grant any Sublicenses
except with AER's prior written consent, which may be granted or
withheld by AER in its complete and sole discretion. RAYOVAC shall
cause each of its Affiliates listed on Exhibit E to comply with the
terms and conditions of this Agreement; provided that as among RAYOVAC
and its Affiliates, RAYOVAC shall administer this Agreement and shall
be responsible for remitting payments due to AER hereunder, whether
such payments are attributable to RAYOVAC or one or more of its
Affiliates. RAYOVAC shall promptly inform AER in writing as to any
change in, or addition to, the Affiliates utilizing the AER Technology.
AER will execute such additional documents confirming the foregoing
license and sublicensing rights of RAYOVAC as RAYOVAC may reasonably
request.
3.2. Restrictions on AER's Right to License AER Technology.
[*]
3.3. Legends.
(a) RAYOVAC shall clearly label, in a manner approved by AER,
all
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[*] sold by it with a legend including substantially the following
language:
AER Energy U.S. Pat. 5919582
(b) RAYOVAC shall clearly label, in a manner approved by
AER, the packaging for all [*] sold by it with a legend including
substantially the following language:
Manufactured under the following patent
licenses from AER Energy: U.S. Patent Nos.
5,691,074 and 5,919,582; European Patent No.
0860032; and Japanese Patent No. 3051455.
(c) RAYOVAC shall mark [*]sold by it containing
technology licensed under this Agreement pursuant to Section
3.1(a)(ii), but not covered by any AER Patent and thus not licensed
pursuant to Section 3.1(a)(i), with a legend including substantially
the following language:
Under license from AER Energy
(d) AER may from time to time in its reasonable
discretion request that modifications to the legends in Sections
3.3(a), 3.3(b), and 3.3(c) be implemented upon written notice to
RAYOVAC, provided that RAYOVAC shall have the absolute right to sell
down or otherwise use all [*] (and packaging therefor) produced prior
to the implementation of such legend modifications.
(e) RAYOVAC shall include with all [*] an agreement
between AER and the purchaser, in substantially the terms of Form A or
Form B of Exhibit F attached hereto. RAYOVAC will place such agreement
on or in the product package that must be opened to access the product.
3.4. License of Program Technology to AER.
(a) [*]
(b) [*]
(i) [*]
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(ii) [*]
(iii) [*]
(iv) [*]
(c) RAYOVAC and AER each shall execute such additional
documents confirming the foregoing license and Sublicense rights of AER
as the other party may reasonably request. The foregoing Sublicense
rights are conditioned further upon AER's indemnification obligations
with respect to Sublicensees in Section 6.4.
3.5. Licensor Improvements; [*].
(a) AER shall promptly inform RAYOVAC of all Licensor
Improvements, and AER shall disclose in writing to RAYOVAC all
technical information embodying such Licensor Improvements.
(b) AER shall offer RAYOVAC rights to Licensor
Improvements as follows:
(i) As to any Licensor Improvement that relates
to [*] (including Air Manager technology) and as to which AER
has granted or proposes to grant a non-exclusive license to
any third party, AER will offer RAYOVAC the right to license
such Licensor Improvement on terms no less favorable than the
most favorable terms under which any third party licenses such
Licensor Improvement from AER during the term of this
Agreement.
(ii) As to any Licensor Improvement that relates
to [*] (including Air Manager technology) and as to which AER
proposes to license such Licensor Improvement on an exclusive
basis to a third party, AER shall offer RAYOVAC the
opportunity to negotiate for itself the terms of an exclusive
license with AER with respect to such Licensor Improvement.
AER will in good faith discuss the terms of an exclusive
license with RAYOVAC over the course of a term not to exceed
30 days prior to entering into an exclusive licensing
arrangement with a third party. The parties acknowledge that
AER shall be free to continue discussions with the prospective
third party licensee during such 30-day period.
(iii) As to any Licensor Improvement that does not
relate to Air Manager technology, RAYOVAC shall be entitled
only to such license rights as may be agreed upon by RAYOVAC
and AER.
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(c) [*]
3.6. Technical Assistance. Each of AER and RAYOVAC shall offer to
provide continuing consultation and advice to the other party following the
Development Program from time to time as requested by such other party. Any
consulting services to be provided by AER or RAYOVAC personnel pursuant to this
Section 3.6 shall be provided on an hourly basis at AER's or RAYOVAC's (as the
case may be) then-prevailing standard hourly rates (presently $100 for
engineers, $150 for managers and $200 for officers). The recipient party shall
pay for coach class airfare for U.S. domestic travel (business class for
international travel), hotel, meals, and other out-of-pocket expenditures
incurred by the consultant party's personnel in providing the services
contemplated by this Section 3.6.
ARTICLE 4: ROYALTIES
4.1. Running Royalty Amounts; Minimum Sales.
(a) RAYOVAC shall pay to AER a running royalty at the
rate set forth in Section 1 of Exhibit G on Net Sales Value of any [*]
covered by one or more valid and unexpired Patents included in AER
Technology sold by RAYOVAC or an Affiliate of RAYOVAC. As set forth in
Section 2.4(c), RAYOVAC will deposit with AER $500,000 as a prepayment
of royalty fees to be paid under this Article 4. Notwithstanding
anything else in this Section 4.1, royalty payments due and payable
hereunder shall first be credited against the prepaid amount of
$500,000.
(b) Royalty payments shall be made to AER on a calendar
quarterly basis for sales made during the previous quarter and shall be
paid to AER no later than 30 days following the end of such quarter.
If, for any 12 month period during the period commencing October 1,
2004, and ending September 30, 2007, the Net Sales Value for the
applicable period as set forth on Exhibit G exceeds actual Net Sales
Value for such year and RAYOVAC does not pay AER the difference between
the royalties paid for the applicable period and the royalties that
would be due had the Net Sales Value set forth in Exhibit G for the
applicable period been met, then (i) the restrictions set forth in
Section 3.2 shall no longer apply, and (ii) the royalty rate pursuant
to Section 4.1(a) for the period from July 20, 2004 to September 30,
2007, shall be increased from 6% to 8%, commencing with the year in
which minimum Net Sales Value was not met (and royalties with respect
to such year shall be computed retroactively and paid based upon a
royalty rate of 8%).
(c) Notwithstanding the foregoing, a uniform royalty rate
of three percent (3%) of Net Sales Value shall apply during the Term
for so long as a competitor to RAYOVAC offers for sale in the Territory
any [*] that is competitive with a [*] sold by RAYOVAC and licensed
pursuant to this Agreement, provided that (i) such royalty
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reduction will only continue for so long as such competitor is selling
competitive products, and will only apply to those RAYOVAC products
that compete with such competitive products; (ii) such competitive
products utilize a zinc-air battery including an air management system
that offers substantially comparable or superior performance to the
affected RAYOVAC products and in a substantially similar configuration;
and (iii) such competitive products do not use any Patents included in
the AER Technology or the Program Technology.
(d) Should RAYOVAC not have incurred royalty obligations
of $500,000 as of December 31, 2005, AER shall promptly refund to
RAYOVAC the amount of $500,000 less the amount of royalty obligations
incurred prior to such date. AER shall additionally refund such amount,
less any royalty obligations incurred, in the event that this Agreement
is terminated for any reason other than termination by AER pursuant to
Section 9.2(a), in which event no such amount shall be refundable to
RAYOVAC.
(e) To the extent that, after the date of this Agreement,
AER licenses any other Person to distribute, sell, offer to sell or
import [*] in the Territory for sale in the Consumer Aftermarket, AER
will offer RAYOVAC the right to license the AER Technology on terms no
less favorable than the most favorable terms under which any third
party licenses such AER Technology to distribute, sell, offer to sell
or import [*] in the Consumer Aftermarket in the Territory.
4.2. Payments in U.S. Dollars. All payments to be made to AER
hereunder shall be made in United States dollars via bank wire transfer to an
account specified by AER, or via such other method as AER may approve in
writing.
4.3. Recordkeeping; Inspection. Accurate books of account shall be
kept by RAYOVAC and shall be open for three years following the close of the
calendar year to which they pertain. At AER's written request, such records
shall be inspected and reviewed for accuracy by AER or its representative(s) at
AER's cost and expense. Such inspection and review shall take place no more than
once each year, provided that if any such inspection reveals one or more errors
resulting in an understatement of Net Sales Value of $25,000 or more, AER shall
be permitted to conduct the inspection and review contemplated by this Section
4.3 twice for each of the next two (2) years, and RAYOVAC shall pay AER's costs
and expenses (including professional fees) of one such inspection and review
during each of the two (2) succeeding years. Prompt adjustment shall be made to
the proper party to compensate for any errors or omissions disclosed by such
inspection and review.
4.4. Written Report. Each payment of royalties shall be accompanied
by a written report signed by an officer of RAYOVAC, in a form reasonably
acceptable to AER, showing a computation thereof, including without limitation
the following:
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(a) the number of [*] by model number, product name or
other readily identifiable product designation that were sold to or
otherwise transferred to any customer of RAYOVAC during the calendar
quarter, or that were used by RAYOVAC or its Affiliates and included in
the definition of Net Sales Value, and the country of location of the
customers to which they were sold;
(b) the gross selling prices attributable to such
products and the royalties payable thereon and detailing the deductions
from the gross selling prices in computing the Net Sales Value
attributable thereto;
(c) as to any sales made through channels, the country in
which the products are sold by the last reseller to end-users (to the
extent that RAYOVAC can determine such information using reasonable
efforts); and
(d) the method of converting local currency to U.S.
dollars and the conversion rate used (if applicable).
RAYOVAC shall furnish whatever additional information AER may reasonably request
from time to time to enable AER to ascertain which products of RAYOVAC are
subject to payment of royalties hereunder, and the amount of royalties payable
thereon.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES
5.1. AER Technology; Licensor Improvements. AER represents and
warrants that, to the best of its present knowledge and belief, it possesses all
right, title and interest in and to the AER Technology necessary to grant the
licenses to the same set forth in this Agreement, free and clear of any lien,
encumbrance, security interest, restriction or limitation. Other than the [*],
AER has not as of the execution date of this Agreement entered into any
enforceable agreement (excluding non-binding expressions of interest or
non-binding letters of intent) or granted any Intellectual Property Rights
whatsoever relating to the AER Technology, AER Excluded Technology, and/or
Licensor Improvements.
5.2. No Known Claims Against AER Technology. AER represents and
warrants to RAYOVAC that, as of the date of execution of this Agreement: (i) to
the best of AER's present knowledge and belief, there are no pending or
threatened claims that the AER Technology violates the Intellectual Property
Rights of any Person, or that call into question AER's rights to license to
RAYOVAC the AER Technology pursuant to this Agreement; (ii) AER is neither
seeking, nor actively considering seeking, to obtain a license or use right
under any specific Patent by reason of the potential infringement of such Patent
by use of the AER Technology; and (iii) AER is not aware of any facts that
indicate a likelihood of any of the foregoing. Except as provided in Sections
5.1 and 5.2, AER makes no representations or warranties with respect to the AER
Technology or with respect to any [*] or its subsequent manufacture, including
without
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limitation, any representation or warranty regarding their operability, safety,
functional effectiveness, or marketability, or with respect to the freedom from
infringement of the Patents of others.
5.3. Investment Representation. RAYOVAC represents and warrants to
AER that, as of the date of this Agreement it is, and as of the date of each
purchase of AER Common Stock pursuant to this Agreement it will continue to be,
an "accredited investor" as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
5.4. Authority; No Violation; Binding Obligation. AER and RAYOVAC
each represents and warrants to the other that it is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and that the execution and delivery of this Agreement by it and
the performance of its obligations hereunder have been duly authorized by all
necessary company action and that such execution and performance do not conflict
with, violate or constitute a default or breach under such party's articles of
incorporation, bylaws, or any agreement, order, consent, judgment or other
restriction to which it is a party or any law, regulation or rule to which it or
its assets are subject, and this Agreement constitutes its legal and binding
obligation.
5.5. Issuance of Securities.
(a) The shares of AER Common Stock issued pursuant to
this Agreement are duly authorized and, upon issuance in accordance
with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, free from all taxes, liens, claims, encumbrances
and charges with respect to the issuance thereof, and will not be
subject to any preemptive right, co-sale right, registration right
(other than the registration rights set forth in this Agreement), right
of first refusal or other similar right.
(b) Subject to the accuracy of and in reliance upon the
representations in Section 5.3, the offer, sale and issuance of the
shares of AER Common Stock hereunder, the issuance of the Warrants and
the Note hereunder and the issuance of the AER Common Stock upon
exercise of the Warrants and conversion of the Note, are exempt from
the registration requirements of any applicable state and federal
securities laws, and neither AER nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
5.6. Capitalization. The authorized, issued and outstanding capital
stock of AER and each of its subsidiaries is set forth in Exhibit H, AER does
not have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock, nor does it have outstanding any rights or options
to subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans, except as set forth in Exhibit H.
5.7. SEC Documents; Financial Statements. Since January 1, 1998,
AER has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Securities Exchange Act of
1934 (the "Exchange Act") (all of the foregoing filed prior to the
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date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents"). AER has
delivered to RAYOVAC, or RAYOVAC has had access to, true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of AER and the related notes included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of AER as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the financial statements included in the SEC Documents, AER has
no liabilities, contingent or otherwise, other than (A) liabilities incurred in
the ordinary course of business subsequent to December 31, 2000 and (B)
liabilities of the type not required under generally accepted accounting
principles to be reflected in such financial statements or (C) other liabilities
which would not, individually or in the aggregate, have a material adverse
effect on the assets, liabilities, business, properties, operations, financial
condition or prospects, or results of operations of AER.
5.8. Absence of Certain Changes. Since December 31, 2000 or as
otherwise disclosed in filings with the SEC, AER has conducted its business only
in the ordinary course in substantially the same manner as theretofore
conducted, and there has been no material adverse change in the assets,
liabilities, business, properties, operations, financial condition or prospects,
or results of operations of AER.
ARTICLE 6: INDEMNIFICATION
6.1. Indemnification by RAYOVAC. RAYOVAC shall defend, hold
harmless and indemnify AER and its past, present and future directors, officers,
employees, Affiliates, successors and assigns, during the term of this Agreement
and thereafter, from and against any and all damages, liabilities, costs and
expenses (including without limitation settlement and arbitration negotiation
costs and reasonable attorneys' fees) (collectively "Costs") arising out of (i)
claims in the Territory that any product or component manufactured by or for
RAYOVAC or its Affiliates that incorporates or is manufactured using the Program
Technology or RAYOVAC Excluded Technology, infringes the Patents of any Person
as a result of the incorporation of such Program Technology or RAYOVAC Excluded
Technology; (ii) claims for the death of or injury to any Person, or damage to
any Person's property, resulting from alleged negligence, fault or defect in the
manufacture or design of products or components manufactured by or for RAYOVAC
or its Affiliates; (iii) RAYOVAC's failure to comply with applicable laws,
rules, regulations, ordinances, permits or licenses; (iv) RAYOVAC's breach of
any of its representations or warranties under Article 5 of this Agreement; and
(v) RAYOVAC'S failure to
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perform any covenant or agreement hereunder or to fulfill any other obligation
in respect hereof. RAYOVAC will cause AER to be added to its commercial
liability and products liability insurance policies as an additional named
insured for purpose of the indemnity provided by this Section, which policies
will provide for aggregate coverage of not less than $2 million, and will
maintain such policies (or suitable replacement or "tail" policies) in effect
throughout the term of this Agreement and for five years thereafter. RAYOVAC
will cause a copy of a certificate of insurance in English with respect to each
such policy to be furnished to AER on each annual anniversary of the Effective
Date.
6.2. Indemnification by AER. AER shall defend, hold harmless and
indemnify RAYOVAC and its past, present and future directors, officers,
employees, Affiliates, successors, and assigns, during the term of this
Agreement and thereafter, from and against any and all Costs arising out of or
related to (i) claims in the Territory that the AER Technology or Licensor
Improvements, or that any product or component manufactured by or for RAYOVAC or
its Affiliates that incorporates or is manufactured using the AER Technology or
Licensor Improvements, infringes the Patents of any Person as a result of the
incorporation of such AER Technology or Licensor Improvements; (ii) claims for
the death of or injury to any Person, or damage to any Person's property,
resulting from alleged negligence, fault or defect in the manufacture or design
of products or components manufactured by or for AER, its Affiliates or Program
Technology Sublicensees; (iii) AER's failure to comply with applicable laws,
rules, regulations, ordinances, permits or licenses; (iv) AER's breach of any of
its representations or warranties under Article 5 of this Agreement; and (v)
AER's failure to perform any covenant or agreement hereunder or to fulfill any
other obligation in respect hereof. AER will cause RAYOVAC to be added to its
commercial liability and products liability insurance policies as an additional
named insured for purpose of the indemnity provided by this Section, which
policies will provide for aggregate coverage of not less than $2 million, and
will maintain such policies (or suitable replacement or "tail" policies) in
effect throughout the term of this Agreement and for five years thereafter. AER
will cause a copy of a certificate of insurance in English with respect to each
such policy to be furnished to RAYOVAC on each annual anniversary of the
Effective Date.
6.3. Limitation. Each party's respective indemnification
obligations with respect to liabilities arising out of claims of Patent
infringement shall be limited to the lesser of (a) $5 million or (b) the amount
received by AER from RAYOVAC pursuant to Article 2 and Article 4 of this
Agreement; provided that no such limitation shall apply if the action arises out
of knowing or willful infringement.
6.4. Sublicensees. As a pre-condition to the grants of Sublicense
rights in Program Technology pursuant to Section 3.4(a), AER hereby agrees that
the terms of each Sublicense shall require the Sublicensee to indemnify AER for
all Costs arising out of claims for the death of or injury to any Person, or
damage to any Person's property, resulting from alleged negligence, fault or
defect in the manufacture or design of products or components manufactured by or
for Sublicensee and its Affiliates and their respective successors and assigns.
AER and RAYOVAC hereby agree that RAYOVAC shall have the right at any time to
enforce the indemnification obligation of any Sublicensee on AER's behalf.
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6.5. Indemnification Procedures. Upon receipt of notice, whether
formal or informal, direct or indirect, of any claim for which indemnification
may be available under this Article 6, the party receiving notice shall notify
the other and management of both parties shall meet to discuss how to handle the
matter. When seeking indemnification, the indemnified party shall reasonably
cooperate with the indemnifying party, at the indemnifying party's expense, in
its defense or settlement of the claim. The indemnifying party shall not settle
a claim against the indemnified party for other than money damages without the
indemnified party's consent. If both parties jointly instigate infringement or
opposition proceedings, both parties shall share the costs and the receipt of
damages on an equitable basis which shall be as agreed by the parties, or in the
absence of such agreement, shall be based on a commercially reasonable
determination of the respective interests of the parties in enjoining the
infringement and the relative damages suffered.
ARTICLE 7: PROTECTION OF PATENTS; INFRINGEMENT OF AER'S PATENTS; OPPOSITION
PROCEEDINGS BY THIRD PARTIES
7.1. Protection of Patents.
(a) During the term of this Agreement AER shall use
reasonable efforts at its own cost and expense to maintain in full
force and effect all material Patents included in the AER Technology
and Licensor Improvements licensed to RAYOVAC hereunder.
(b) If RAYOVAC determines that AER has failed to take any
action with respect to maintaining in full force and effect the Patents
described in Section 7.1(a) above (including the making of any filing
or the payment of any maintenance fee or other required fee), then
RAYOVAC shall give AER notice of such failure, and AER shall have a
reasonable time as set forth in the notice to take corrective action.
If AER does not take corrective action in such time, then RAYOVAC shall
be entitled to (i) take any action and incur any liability necessary to
ensure that the Patents are maintained in full force and effect, and
AER shall reimburse RAYOVAC for all fees, costs, expenses or other
liabilities incurred by RAYOVAC in ensuring the protection of the
Patents or (ii) if AER so elects, take an assignment of the Patent or
Patents which AER has failed to maintain in full force and effect.
7.2. Third Party Infringement.
(a) In the event that either party learns of an
infringement by a third party of a Patent included in the AER
Technology or Licensor Improvements, or of an opposition proceeding by
a third party attacking the validity of such a Patent, it shall
promptly provide the other party with a written statement of the facts
of the infringement or opposition, to the extent known. Within a
reasonable time, including time to satisfy itself as to the facts, with
respect to a notice of a third party infringement or opposition, AER
shall have the right to bring suit to enjoin such infringement and to
recover damages therefor and to select counsel for the prosecution of
any such infringement suit.
(b) If AER chooses not to bring such an infringement
suit, or if the suit requires emergency response or involves
irreparable harm, then RAYOVAC may, to the
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extent permitted by applicable law, at its own expense and in the name
of AER (or in its own name, or both at RAYOVAC's discretion), bring
suit to enjoin such infringement and to recover damages therefor and to
select counsel for the prosecution of any such infringement suit.
(c) Any damages collected in any suit pursued by a party
under this Section 7.2 shall first be applied to the reimbursement of
litigation expenses of the party bringing suit and second to the
reimbursement of any reasonable expenses incurred by the other party in
support of such suit. Any remaining damages shall belong to the party
bringing the suit (or, if suit is filed by RAYOVAC in AER's name, to
RAYOVAC).
ARTICLE 8: CONFIDENTIALITY
8.1. Trade Secrets and Other Confidential Information. During the
term of this Agreement, each party may discover, whether directly or indirectly,
non-public technology, data, methods, know-how, techniques, Trade Secrets and
business, finance, marketing, customer, supplier and other information about the
other party and its Affiliates. "Confidential Information" shall be identified
as information of either AER or AER's Affiliates, or RAYOVAC or RAYOVAC's
Affiliates, which:
(a) if in written form, includes, but is not limited to,
drawings, specifications, data, graphs and letters, and engineering
specifications which have been marked as "Proprietary" or
"Confidential" prior to transfer to the receiving party; or
(b) if in oral or visual form, has been preceded by an
oral or written assertion of confidentiality and has been subsequently
reduced to writing, marked confidential as provided in (a) above, by
the disclosing party, and is delivered to the receiving party within 30
days of such oral or visual disclosure; or
(c) if in the form of samples of materials or parts or
equipment transmitted from one party to another, has been so designated
with appropriate markings as provided in (a) above; or
(d) includes knowledge of the other party's projects and
general activities and any information not publicly disclosed relating
to the business and future marketing or product development or product
testing activities of the other party.
AER and RAYOVAC each respectively and on behalf of their respective Affiliates
agree, subject to the exceptions set forth in Section 8.4 below, that: (i) it
shall not use, sell or otherwise disclose Confidential Information of the other
party to any Person without the prior written consent of the disclosing party
for any purpose other than to fulfill its rights and obligations under this
Agreement; and (ii) it will maintain and hold in confidence the Confidential
Information of the other party disclosed to them, and each shall use no less
than the same safeguards as it uses to protect its own confidential information
of a similar nature. Each party shall maintain the confidentiality of
Confidential Information of the other party throughout the term of this
Agreement and for a period of five years thereafter or, in the case of Trade
Secrets, for so long as they remain Trade Secrets under applicable law.
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8.2. Non-Disclosure of Confidential Information.
(a) The receiving party shall disclose Confidential
Information of the other party only to its officers, employees, and
third party consultants whose duties reasonably require familiarity
with such information. The receiving party shall obtain from such third
party consultants legally enforceable undertakings not to disclose
Confidential Information, or knowledge or know-how derived therefrom,
to any other Person or use such information for any purposes other than
those contemplated by this Agreement. Except as otherwise agreed by the
parties, the receiving party shall be required to take such legal
actions, at its own expense, as may be reasonably necessary to enforce
such undertakings. Each party shall be responsible for compliance with
the restrictions in this Agreement by its Affiliates and the officers,
employees and third party consultants of itself and its Affiliates.
(b) Notwithstanding Section 8.2(a), RAYOVAC shall not
share all or any portion of the Air Manager Design Guide with any other
Person unless it has obtained AER's prior written consent (which
consent will be granted or withheld in AER's sole discretion) as to the
terms and restrictions applicable to such disclosure, and RAYOVAC shall
promptly notify AER as to any other disclosure by RAYOVAC of AER's
Confidential Information to another Person.
8.3. Non-Disclosure of Agreement.
(a) Neither party shall disclose the terms of this
Agreement to any other Person, except (i) as required to be disclosed
pursuant to a governmental or judicial requirement or other requirement
of law (including, without limitation, disclosure requirements under
Federal securities laws); or (ii) to an investor, licensor or licensee,
or bona fide potential investor, licensor or licensee, of a party or
its Affiliates, such exceptions subject to the further limitations in
Sections 8.3(b) and 8.3(c) below.
(b) For all disclosures permitted under Section
8.3(a)(i), the disclosing party must: (i) give written notice of the
intended disclosure to the other party at least ten (10) business days
in advance of the date of disclosure; (ii) redact portions of this
Agreement to the fullest extent permitted under any applicable laws,
rules and regulations; and (iii) submit a request, to be agreed upon by
the other party if practicable in light of the relevant filing
deadline, that such portions and other provisions of this Agreement
requested by the other party receive confidential treatment under the
laws, rules and regulations of the body or tribunal to which disclosure
is being made or otherwise be held in the strictest confidence to the
fullest extent permitted under the laws, rules or regulations of any
other applicable governing body.
(c) Disclosures permitted under Section 8.3(a)(ii) shall
in no event be deemed to allow disclosure to [*], or any of their
respective affiliates (the "Restricted Entities"), for a period of two
(2) years from the date of execution of this Agreement.
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Notwithstanding the foregoing, upon AER's reasonable request and good
faith representation that it intends to execute an agreement with a
Restricted Entity, RAYOVAC shall permit disclosure of this Agreement to
outside counsel representing such Restricted Entity with respect to the
agreement, provided that prior to any such disclosure, AER shall enter
into a written non-disclosure agreement with such outside counsel that
includes, at a minimum, the following restrictions and provisions: (i)
outside counsel shall review the Agreement for the sole purpose of
confirming that the rights and restrictions on RAYOVAC and AER herein
are not inconsistent with the agreement to be executed between AER and
such Restricted Entity; (ii) outside counsel shall not provide a copy
of the Agreement to any Person, including such Restricted Entity; (iii)
outside counsel shall use reasonable efforts not to disclose any of the
terms or conditions of the Agreement to any Person, including such
Restricted Entity, except in connection with counsel's confirmations to
be provided pursuant to subsection (i) above to such Restricted Entity;
and (iv) RAYOVAC shall be a third party beneficiary thereto.
8.4. Exceptions. The confidentiality obligations of the receiving
party under Sections 8.1, 8.2 and 8.3 shall not apply to Confidential
Information which:
(a) is or becomes publicly known through no wrongful act
of the receiving party or its officers, employees, or third party
consultants;
(b) is received by the receiving party without
restriction from a third party without breach of any obligation of
nondisclosure;
(c) is required to be publicly disclosed pursuant to a
governmental or judicial requirement or other requirement of law
(including, without limitation, disclosure requirements under Federal
securities laws), but only after notifying the party owning such
Confidential Information of such requirement and, if requested by such
party, using reasonable efforts to obtain confidential treatment for
all or relevant portions of the Confidential Information to be
disclosed; or
(d) the receiving party can show was already in its
possession at the time of disclosure hereunder and was not previously
obtained from the disclosing party under a continuing obligation of
confidentiality.
ARTICLE 9: TERM AND TERMINATION
9.1. Term. Unless earlier terminated pursuant to Article 2 or this
Section 9.1, this Agreement shall terminate on the expiration or termination of
all of the Patents included in the AER Technology (as reflected on Exhibit A, as
supplemented by AER from time to time to reflect the grant of additional Patents
relating to patent applications and unpatented inventions included in the AER
Technology).
9.2. Termination. This Agreement may be terminated as follows:
(a) by either party in the event that the other party
fails to perform any material obligation or undertaking to be performed
by it under this Agreement, and such failure is not cured within 60
days after written notice thereof from the other party, such
23
25
notice to specify in detail the nature of the breach and indicating the
other party's intent to terminate this Agreement if such breach is not
cured within such 60-day period; provided, however, that no such
termination shall be permitted if the breaching party begins to remedy
the breach within such 60-day period and pursues diligently such remedy
and such breach is remedied within 90 days after such notice is given,
and provided further that any failure to make payments due under this
Agreement shall not be subject to such 60 and 90-day cure periods but
shall be subject to only a 30-day cure period;
(b) by RAYOVAC (i) for convenience upon 60 days written
notice to AER of its intent to so terminate or (ii) by its election or
deemed election not to commence commercial production of [*] pursuant
to the Phase III Notice and Section 2.3; and
(c) by AER upon 60 days written notice to RAYOVAC if
RAYOVAC or any of its Affiliates directly challenges, in a suit or
proceeding initiated by RAYOVAC or its Affiliates, the validity of any
of the Patents included in AER Technology as to any jurisdiction in
which such termination is lawful; provided that any such challenge in
an answer, affirmative defense, counterclaim or responsive pleading of
any kind shall not be grounds for termination hereunder.
9.3. Continuing Obligations; Effect of Terminations.
(a) Subject to Sections 9.3(b) and 9.3(c) below, upon
termination of this Agreement as provided in this Article 9, all
obligations undertaken by the parties hereunder shall terminate
immediately, except that all licenses granted in Article 3 and the
related royalty obligations under Article 4, and the rights and
obligations set forth in Sections 2.5(a) - (c), 2.6, 2.7, and in
Articles 6, 7, 8, 9 and 10, shall remain in full force and effect.
(b) If AER terminates this Agreement in accordance with
Section 9.2(a) for RAYOVAC's material breach, or if RAYOVAC terminates
this Agreement pursuant to Section 9.2(b), then: (i) AER may terminate
any licenses granted by it to RAYOVAC under this Agreement; (ii) AER
shall be fully released from all licensing or sublicensing restrictions
imposed upon it under Article 3, other than Section 3.4 thereof, such
restrictions to be of no further force or effect; and (iii) AER shall
have the right to purchase the Program Technology from RAYOVAC for such
price as is negotiated and mutually agreed by the parties in good
faith, provided that if the parties are unable to agree as to price,
then AER may submit the matter to arbitration pursuant to this
Agreement for a price to be determined, such price to be not less than
the actual amount of RAYOVAC's investment in the Program Technology
(including without limitation amounts actually paid to AER and not
repaid to RAYOVAC by AER pursuant to the Letter Agreement, pursuant to
Sections 2.1(a) and (c) with respect to the Development Program, and
costs incurred directly by RAYOVAC).
(c) If RAYOVAC terminates this Agreement in accordance
with Section
- -----------------
* Confidential treatment
24
26
9.2(a) for a material breach by AER that materially detracts from the
value of the rights granted to RAYOVAC pursuant to Sections 3.2(a) and
3.4(b), then (i) the royalty rate set forth in Section 1 of Exhibit G
shall drop to 3% of Net Sales Value as of the date of such breach, and
(ii) RAYOVAC shall be entitled to offset its future royalty payment
obligations by the amount by which damages caused by such breach exceed
the reduction in royalty resulting from clause (i) above, as determined
by RAYOVAC in good faith, and in no event shall such offset be deemed
to be a breach by RAYOVAC. If AER disputes the offset amount, the
parties will arbitrate the dispute in accordance with Section 10.7. If
the arbitrator determines that the offset amount exceeds the actual
damage caused by AER's breach, then RAYOVAC shall pay to AER an amount
equal to the difference between the offset amount and the determined
amount, plus interest on the overdue amount in accordance with Section
10.3, but in no event shall such amount result in an increase in the
adjusted royalty rate pursuant to clause (i) above unless it is
determined that AER has not materially breached this Agreement or that
such breach did not materially detract from the value of the rights
granted to RAYOVAC pursuant to Sections 3.2(a) and 3.4(b), in which
event such drop in royalty rate shall be reversed. In no event shall
RAYOVAC be deemed to have breached this Agreement by exercising its
offset right in subsection (ii) above, even if the offset amount is
later determined to be greater than RAYOVAC's actual damages related to
AER's breach.
9.4. Continuing Liabilities. Termination of this Agreement for any
reason shall not release any party hereto from any liability which, at the time
of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination, or constitute a waiver of,
or preclude either party from pursuing, any rights and remedies it may have
hereunder or at law or in equity which accrued or are based upon any event
occurring prior to such termination.
ARTICLE 10: MISCELLANEOUS
10.1. Good Faith. RAYOVAC and AER will act in good faith to carry
out their respective obligations under this Agreement.
10.2. Other Technology Licensing. Except as set forth in Sections
3.2, 3.4, and 3.5, nothing in this Agreement shall limit in any way AER's rights
with respect to the ownership, development, license or sale of battery
technology, including without limitation battery technology included within the
AER Technology and any Licensor Improvements; and nothing herein shall limit in
any way AER's rights with respect to the ownership, development, license or sale
of Licensor Improvements that are not included within the Program Technology and
are conceived after the Effective Date.
10.3. Overdue Payments. In addition to all other remedies available
under this Agreement or applicable law, payments provided for in this Agreement
shall, when overdue, be subject to interest on the overdue amount at a rate of
one and one-half percent (1.5%) per month during delinquency; provided, however,
that if the amount of such late payment charge exceeds the maximum permitted by
law for any such charge, such charge shall be reduced to such maximum amount.
RAYOVAC shall promptly reimburse AER for all fees, costs and expenses
25
27
(including attorneys' fees) incurred by AER in any action to collect any
payments due from RAYOVAC under this Agreement.
10.4. Severability. In the event that any part of this Agreement
shall be determined to be in violation of any statute, rule of law, governmental
regulation or decree of a court of competent jurisdiction, or unenforceable for
any reason, such part shall be deemed severed from this Agreement, but the
remainder of this Agreement shall continue in full force and effect.
10.5. No Waiver. The failure of either party to exercise any right
or to demand the performance by the other party of duties required hereunder
shall not constitute a waiver of any rights or obligations provided for herein.
10.6. Governing Law and Language. This Agreement shall be governed
by and construed in accordance with, and the legal relations between the parties
hereto shall be determined in accordance with, the laws of the State of Georgia,
without regard to any laws relating to conflicts of law; provided, that all
questions concerning the construction or effect of patent applications and
patents shall be determined in accordance with the laws of the country in which
the particular patent application or patent has been filed or granted, as the
case may be.
10.7. Arbitrator. If any dispute shall arise between the parties
hereto as to any matter relating to this Agreement, or the breach hereof, the
parties hereto shall negotiate with each other in good faith and attempt to
reach an amicable resolution of such dispute. If, after negotiating in good
faith, the parties are unable to resolve such dispute on an amicable basis
within a period of 90 days, either party may submit the dispute to binding
arbitration by a single arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The place of arbitration shall be
Washington, D.C. The parties shall be bound by any award issued as a result of
such arbitration and such award may be enforced by any court of competent
jurisdiction. Process in any action or proceeding may be served on any party
anywhere in the world and in any event service of any and all process on any
party hereto in any suit, action or proceeding arising out of this Agreement may
be made in accordance with applicable law to the address set forth for such
party on the signature page of this Agreement and service thus made shall be
taken and held to be valid personal service upon such party.
10.8. Force Majeure. No party shall be liable to any other for
failure or delay in the performance of any of its obligations under this
Agreement for the time and to the extent such failure or delay is caused by
riots, civil commotion, wars, hostilities between nations, governmental laws,
orders or regulations, embargoes, actions by government or agency thereof, acts
of God, storms, fires, accidents, labor disputes or strikes, sabotage,
explosions or other similar or different contingencies, in each case, beyond the
reasonable control of the respective party. If the performance of any obligation
under this Agreement is delayed owing to any such causes for any continuous
period of more than three months, the parties hereto shall consult with each
other with respect to an equitable solution.
10.9. Notices. Any notice, request or other communication hereunder
from one party to the other party shall be in writing and given by depositing
the same with Federal Express or another recognized overnight delivery service
for next-business day delivery, prepaid and addressed to the party to be
notified, or by delivering the same in person or by facsimile. Such
26
28
notice shall be deemed received on the date on which it is hand-delivered or on
the next business day following the day on which it is deposited with an
overnight delivery service; provided, however, that any notice by facsimile
shall be effective if receipt is confirmed and acknowledged by the party
receiving such notice on the date of such receipt. For purposes of notice, the
addresses of the parties shall be as set forth on the signature page hereof. Any
party may, by written notice to the other party in accordance with this Section
10.9, change the address or addressee to which notices, requests or other
communications shall be given.
10.10. Further Assurances. RAYOVAC and AER shall execute and deliver
such further documents and take such further actions as may be necessary or
appropriate to carry out the provisions of this Agreement.
10.11. Assignment. This Agreement is personal to RAYOVAC, RAYOVAC
having entered into this Agreement based upon the special knowledge, skill and
abilities of AER. This Agreement may not be assigned by either party and shall
not inure to the benefit of any trustee in bankruptcy, receiver or successor of
any party without the prior written consent of the other party hereto; provided,
however, that either party may assign its rights and obligations under this
Agreement to an Affiliate without the consent of the other party provided that
the assigning party hereto remains liable, together with any such assignee, for
all of its respective obligations under this Agreement; and provided, further,
that notwithstanding anything to the contrary in this Agreement, either party
shall have the right to assign or transfer all of its rights and obligations
under this Agreement without the consent of the other in connection with the
sale or transfer of all or substantially all of its business, whether by sale of
stock, sale of assets, merger or otherwise, provided that the party acquiring
such business assumes all of the assigning party's obligations under this
Agreement.
Notwithstanding the above, in the event of an assignment or transfer by AER as
permitted above, including without limitation in the context of a merger,
without RAYOVAC's consent to a battery manufacturer (including Persons that
contract the manufacturing of batteries to third parties for sale under their
own label), RAYOVAC may at its option terminate the license set forth in Section
3.4.
10.12. Press Releases. RAYOVAC and AER will cooperate in the
preparation of a press release announcing the execution and delivery of this
Agreement and subsequent press releases describing material developments in
their relationship. Except as may be required by law or regulation, including
any applicable law or regulation of the Securities and Exchange Commission, the
New York Stock Exchange, the Nasdaq Stock Market, or any other national
securities exchange or self-regulatory organization, as applicable, neither
party will issue any press releases relating to this Agreement without the other
party's prior written consent, which consent will not be unreasonably withheld
or delayed.
10.13. Entire Agreement; Amendment. This Agreement and all exhibits
and other attachments hereto constitute the entire agreement between the parties
regarding the subject matter of this Agreement, and supercede all other prior
agreements, understandings and negotiations, both written and oral, among the
parties with respect to the subject matter of this Agreement, including without
limitation the Letter Agreement. If any part of this Agreement is determined to
be in violation of any statute, rule of law, governmental regulation or decree
of a
27
29
court of competent jurisdiction, or unenforceable for any reason, such part
shall be deemed severed from this Agreement, but the remainder of this Agreement
shall continue in full force and effect. This Agreement may not be amended
except by an instrument in writing signed by a duly authorized officer or
representative of each of the parties hereto.
10.14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
10.15. Successors. The terms and conditions of this Agreement shall
be binding upon the parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Neither this Agreement nor any other agreement
contemplated hereby shall be deemed to confer upon any person not a party hereto
or thereto any rights or remedies except as specifically set forth herein or
therein.
10.16. Condition to Effectiveness of this Agreement. This Agreement
shall become effective upon the execution of the agreement attached hereto as
Exhibit J by Michael Cheiky and Dreisbach Electromotive, Inc., provided that if
such agreement is not executed by April 27, 2001, unless the parties agree
otherwise, this Agreement shall be null and void.
[signatures on following page]
28
30
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer or representative on
April 6, 2001, effective as of the Effective Date.
RAYOVAC: RAYOVAC CORPORATION:
By: /s/ Kent J. Hussey
-------------------------------------
Kent J. Hussey
President and Chief Operating Officer
Address for Notices: 601 RAYOVAC Drive
Madison, Wisconsin 53711
Attn: President
Facsimile: 608-278-6666
AER: AER ENERGY RESOURCES, INC.
By: /s/ David W. Dorheim
-------------------------------------
David W. Dorheim
President
AER Energy Resources, Inc.
Address for Notices: 4600 Highlands Parkway
Suite G
Smyrna, GA 30082
Attn: President
Facsimile: 770-433-2286
29
31
EXHIBIT A
AER PATENTS
1. AER ENERGY RESOURCES, INC.: U.S. PATENT PORTFOLIO AS OF JANUARY 10, 2001
- ---------------------------------------------------------------------------------------------------------------------------
PATENT # ISSUED TITLE/COUNTRY EXPIRES
- ---------------------------------------------------------------------------------------------------------------------------
4,913,983 1990 METAL-AIR BATTERY POWER SUPPLY*/US 2008
- ---------------------------------------------------------------------------------------------------------------------------
5,354,625 1994 METAL-AIR POWER SUPPLY AND AIR MANAGER SYSTEM, AND METAL-AIR CELL FOR USE 2012
THEREIN/US
- ---------------------------------------------------------------------------------------------------------------------------
5,356,729 1994 DIFFUSION CONTROLLED AIR MANAGER FOR METAL-AIR BATTERY/US 2013
- ---------------------------------------------------------------------------------------------------------------------------
5,387,477 1995 AIR MANAGER SYSTEM FOR METAL-AIR BATTERY*/US 2012
- ---------------------------------------------------------------------------------------------------------------------------
5,560,999 1996 AIR MANAGER SYSTEM FOR RECIRCULATING REACTANT AIR IN A METAL-AIR BATTERY/US 2013
- ---------------------------------------------------------------------------------------------------------------------------
5,571,630 1996 AIR MANAGER SYSTEM FOR METAL-AIR BATTERY*/US 2014
- ---------------------------------------------------------------------------------------------------------------------------
5,691,074 1997 DIFFUSION CONTROLLED AIR VENT FOR A METAL-AIR BATTERY (DIFFUSION AIR 2015
MANAGER)/US
- ---------------------------------------------------------------------------------------------------------------------------
5,721,064 1998 AIR MANAGER SYSTEM FOR REDUCING GAS CONCENTRATIONS IN A METAL-AIR BATTERY/US 2016
- ---------------------------------------------------------------------------------------------------------------------------
5,888,664 1999 METAL-AIR BATTERY WITH A REACTANT AIR PATHWAY/US 2017
- ---------------------------------------------------------------------------------------------------------------------------
5,919,582 1999 DIFFUSION CONTROLLED AIR VENT AND RECIRCULATION AIR MANAGER FOR A METAL-AIR 2015
BATTERY/US
- ---------------------------------------------------------------------------------------------------------------------------
6,068,944 2000 AIR DISTRIBUTORS FOR METAL-AIR CELLS 2018
- ---------------------------------------------------------------------------------------------------------------------------
6,087,029 2000 WATER RECOVERY USING A BI-DIRECTIONAL AIR EXCHANGER FOR A METAL-AIR BATTERY 2018
- ---------------------------------------------------------------------------------------------------------------------------
6,106,962 2000 AIR MANAGER CONTROL USING CELL VOLTAGE AS AUTO-REFERENCE 2018
- ---------------------------------------------------------------------------------------------------------------------------
6,168,877 2001 AIR-MANAGING SYSTEM FOR METAL-AIR BATTERY USING RESEALABLE SEPTUM 2018
===========================================================================================================================
4,894,295 1990 Metal-Alloy Air Battery*/US 2008
- ---------------------------------------------------------------------------------------------------------------------------
4,916,036 1990 Continuous Consumable Anode*/US 2008
- ---------------------------------------------------------------------------------------------------------------------------
4,957,826 1990 Rechargeable Metal-Air Battery*/US 2009
- ---------------------------------------------------------------------------------------------------------------------------
5,306,579 1994 Bifunctional Metal-Air Electrode/US 2012
- ---------------------------------------------------------------------------------------------------------------------------
5,328,777 1994 Cathode Cover for Metal-Air Cell/US 2012
- ---------------------------------------------------------------------------------------------------------------------------
5,362,577 1994 Diffusion Vent for a Rechargeable Metal-Air Cell/US 2013
- ---------------------------------------------------------------------------------------------------------------------------
5,399,445 1995 Battery Case Leakage Detector/US 2014
- ---------------------------------------------------------------------------------------------------------------------------
5,432,022 1995 Coated Cathode for Rechargeable Metal Battery*/US 2013
- ---------------------------------------------------------------------------------------------------------------------------
5,486,429 1996 Diffusion Vent for a Rechargeable Metal-Air Cell/US 2015
- ---------------------------------------------------------------------------------------------------------------------------
5,506,067 1996 Rechargeable Electrochemical Cell and Cell Case Therefor with Vent for Use in 2015
Internal Recombination of Hydrogen and Oxygen/US
- ---------------------------------------------------------------------------------------------------------------------------
A-1
32
Exhibit A, Continued
AER Energy U.S. Patent Portfolio
5,532,086 1996 Anode Assembly with Thin Metal Current Collector and Electrochemical Cell 2014
Comprising an Anode Support Structure and a Gas Release System/US
- ---------------------------------------------------------------------------------------------------------------------------
5,536,590 1996 Portable Battery for Use Externally of an Electronic Device*/US 2014
- ---------------------------------------------------------------------------------------------------------------------------
5,563,004 1996 Rechargeable Metal-Air Electrochemical Cell with Hydrogen Recombination and 2015
End-of-Charge Indicator/US
- ---------------------------------------------------------------------------------------------------------------------------
5,567,172 1996 Universal Strain Relief Device for Connectors/US 2014
- ---------------------------------------------------------------------------------------------------------------------------
5,569,551 1996 Dual Air Electrode Cell/US 2015
- ---------------------------------------------------------------------------------------------------------------------------
5,615,717 1997 Electrolyte Distributing System and Method*/US 2014
- ---------------------------------------------------------------------------------------------------------------------------
5,639,568 1997 Split Anode for a Dual Air Electrode Cell/US 2015
- ---------------------------------------------------------------------------------------------------------------------------
5,641,588 1997 Portable Battery with a Retrofitting Projection and Wrist Rest for Use 2014
Externally of an Electronic Device/US
- ---------------------------------------------------------------------------------------------------------------------------
5,716,726 1998 Electrolyte Starved Metal-Air Battery*/US 2015
- ---------------------------------------------------------------------------------------------------------------------------
5,733,677 1998 Metal-Air Electrochemical Cell with Oxygen Reservoir/US 2017
- ---------------------------------------------------------------------------------------------------------------------------
D397,670 1998 Battery Pack for a Portable Electronic Device/US 2012
- ---------------------------------------------------------------------------------------------------------------------------
5,891,589 1999 Method and Apparatus for Joining Metal-Air Cells/US 2017
- ---------------------------------------------------------------------------------------------------------------------------
5,920,179 1999 A System and Method for Balancing Charge Cycles for Batteries or Multiple-Cell 2017
Battery Packs/US
- ---------------------------------------------------------------------------------------------------------------------------
5,985,475 1999 Membrane for Selective Transport of Oxygen Over Water Vapor and Metal-Air 2017
Electrochemical Cell Including Said Membrane/US
- ---------------------------------------------------------------------------------------------------------------------------
5,993,999 1999 Multi-Layer Current Collector/US 2017
- ---------------------------------------------------------------------------------------------------------------------------
6,049,141 2000 Device and a Method Allowing Multiple Batteries to Share a Common Load 2018
- ---------------------------------------------------------------------------------------------------------------------------
6,051,328 2000 Method and Apparatus for Joining Metal-Air Cells 2018
- ---------------------------------------------------------------------------------------------------------------------------
6,069,107 2000 Recharge Catalyst with Thin Film Carbon Coating, Metal-Air Electrode including 2018
Said Catalyst and Methods for Making Said Catalyst and Electrode
- ---------------------------------------------------------------------------------------------------------------------------
6,127,060 2000 Recharge Catalyst With Thin Film Low Corrosion Coating, Metal-Air Electrode 2018
Including Said Catalyst And Methods For Making Said Catalyst And Electrode
- ---------------------------------------------------------------------------------------------------------------------------
A-2
33
Exhibit A, Continued
AER Energy U.S. Patent Portfolio
2. AER ENERGY RESOURCES, INC.: INTERNATIONAL PATENT PORTFOLIO AS OF
JANUARY 10, 2001
- ---------------------------------------------------------------------------------------------------------------------------
PATENT # ISSUED TITLE/COUNTRY EXPIRES
- ---------------------------------------------------------------------------------------------------------------------------
0630527 1996 METAL-AIR POWER SUPPLY AND AIR MANAGER SYSTEM, AND METAL-AIR CELL FOR USE 2013
THEREIN/EPO
- ---------------------------------------------------------------------------------------------------------------------------
2,108,372 1996 METAL-AIR BATTERY POWER SUPPLY*/JAPAN 2008
- ---------------------------------------------------------------------------------------------------------------------------
0696384 1996 RECIRCULATION OF CATHODE AIR AND MOISTURE CONTROL/EPO 2014
- ---------------------------------------------------------------------------------------------------------------------------
2,753,147 1998 DIFFUSION CONTROLLED AIR MANAGER FOR A METAL-AIR BATTERY/JAPAN 2014
- ---------------------------------------------------------------------------------------------------------------------------
2,783,462 1998 METAL-AIR POWER SUPPLY AND AIR MANAGER SYSTEM, AND METAL-AIR CELL FOR USE 2013
THEREIN/JAPAN
- ---------------------------------------------------------------------------------------------------------------------------
2,130,559 1999 METAL-AIR POWER SUPPLY AND AIR MANAGER SYSTEM, AND METAL-AIR CELL FOR USE 2013
THEREIN/CANADA
- ---------------------------------------------------------------------------------------------------------------------------
2,970,938 1999 RECIRCULATION OF CATHODE AIR AND MOISTURE CONTROL/JAPAN 2014
- ---------------------------------------------------------------------------------------------------------------------------
2,163,441 1999 DIFFUSION CONTROLLED AIR MANAGER FOR A METAL-AIR BATTERY/CANADA 2014
- ---------------------------------------------------------------------------------------------------------------------------
0860032 1999 DIFFUSION CONTROLLED AIR VENT AND RECIRCULATION AIR MANAGER FOR A METAL-AIR 2016
BATTERY/EPO
- ---------------------------------------------------------------------------------------------------------------------------
3051455 2000 DIFFUSION CONTROLLED AIR VENT AND RECIRCULATION AIR MANAGER FOR A METAL-AIR 2016
BATTERY/JAPAN
- ---------------------------------------------------------------------------------------------------------------------------
2,164,132 2000 DIFFUSION VENT FOR A RECHARGEABLE METAL-AIR CELL/CANADA 2014
===========================================================================================================================
0667041 1996 Bifunctional Air Electrode/EPO 2013
- ---------------------------------------------------------------------------------------------------------------------------
2,568,260 1996 Metal-alloy Air Battery*/Japan 2008
- ---------------------------------------------------------------------------------------------------------------------------
0708988 1998 Diffusion Vent for a Rechargeable Metal-Air Cell/EPO 2014
- ---------------------------------------------------------------------------------------------------------------------------
0823135 1998 Dual Air Electrode Cell/EPO 2016
- ---------------------------------------------------------------------------------------------------------------------------
2,865,424 1998 Diffusion Vent for a Rechargeable Metal-Air Cell/Japan 2014
- ---------------------------------------------------------------------------------------------------------------------------
2,866,479 1998 Bifunctional Air Electrode/Japan 2013
- ---------------------------------------------------------------------------------------------------------------------------
2,147,975 1999 Bifunctional Air Electrode/Canada 2013
- ---------------------------------------------------------------------------------------------------------------------------
0819321 1999 Rechargeable Electrochemical Cell and Cell Case Therefor with Vent for Use in 2016
Internal Recombination of Hydrogen and Oxygen/EPO
- ---------------------------------------------------------------------------------------------------------------------------
2,966,105 1999 Rechargeable Electrochemical Cell and Cell Case Therefor with Vent for Use in 2016
Internal Recombination of Hydrogen and Oxygen/Japan
- ---------------------------------------------------------------------------------------------------------------------------
2,971,581 1999 Dual Air Electrode Cell/Japan 2016
- ---------------------------------------------------------------------------------------------------------------------------
A-3
34
Exhibit A, Continued
AER Energy U.S. Patent Portfolio
3. AER ENERGY RESOURCES, INC.: U.S. PATENT APPLICATIONS PORTFOLIO AS OF
JANUARY 10, 2001
- ---------------------------------------------------------------------------------------------------------------------------
APPL. # FILED TITLE
- ---------------------------------------------------------------------------------------------------------------------------
09/177,852 1998 PRIMARY METAL-AIR POWER SOURCE AND VENTILATION SYSTEM FOR SAME
- ---------------------------------------------------------------------------------------------------------------------------
09/215,820 1998 CYLINDRICAL METAL-AIR BATTERY WITH A CYLINDRICAL PERIPHERAL AIR CATHODE
- ---------------------------------------------------------------------------------------------------------------------------
09/215,879 1998 DIFFUSION CONTROLLED AIR VENT WITH AN INTERIOR FAN
- ---------------------------------------------------------------------------------------------------------------------------
09/216,114 1998 UNIFORM SHELL FOR A METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/216,115 1998 LOAD RESPONSIVE AIR DOOR FOR A METAL-AIR CELL
- ---------------------------------------------------------------------------------------------------------------------------
09/216,273 1998 GEOMETRY CHANGE DIFFUSION TUBE FOR METAL-AIR BATTERIES
- ---------------------------------------------------------------------------------------------------------------------------
09/216,026 1998 AIR MANAGER SYSTEMS FOR METAL-AIR BATTERIES UTILIZING A DIAPHRAGM OR BELLOWS
- ---------------------------------------------------------------------------------------------------------------------------
09/216,660 1998 AIR DELIVERY SYSTEM WITH VOLUME-CHANGEABLE PLENUM FOR METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/216,343 1998 AIR MANAGING SYSTEM FOR METAL-AIR BATTERY USING RESEALABLE SEPTUM
- ---------------------------------------------------------------------------------------------------------------------------
09/216,118 1998 AIR MOVER FOR A METAL-AIR BATTERY UTILIZING A VARIABLE VOLUME ENCLOSURE
- ---------------------------------------------------------------------------------------------------------------------------
09/256,815 1999 AIR MANAGER WITH MICROMACHINED AIR MOVER FOR A METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/275,855 1999 AIR MANAGER CONTROL USING CELL LOAD CHARACTERISTICS AS AUTO-REFERENCE
- ---------------------------------------------------------------------------------------------------------------------------
09/346,405 1999 CONVECTIVE AIR MANAGER FOR METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/546/863 2000 DIFFUSION PATHWAY WITH AN ELECTRICAL CONNECTION FOR A METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
NYA 2000 DIFFUSION CONTROLLED AIR VENT WITH AN INTERIOR SCREW
- ---------------------------------------------------------------------------------------------------------------------------
09/574,154 2000 ELECTRICAL DEVICE WITH REMOVABLE METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/602,187 2000 AIR MANAGING SYSTEMS AND METHODS FOR GAS DEPOLARIZED POWER SUPPLIES UTILIZING A DIAPHRAGM
- ---------------------------------------------------------------------------------------------------------------------------
09/593,343 2000 SYNTHETIC AIR JET FOR A METAL-AIR BATTERY
- ---------------------------------------------------------------------------------------------------------------------------
09/594,188 2000 ELECTRICALLY ACTIVATED SHEET AIR MOVER
- ---------------------------------------------------------------------------------------------------------------------------
NYA 2000 VIBRATION DAMPING MOUNT FOR A METAL-AIR BATTERY OR THE LIKE
===========================================================================================================================
09/191,402 1998 Anode Can For A Metal-Air Cell
- ---------------------------------------------------------------------------------------------------------------------------
09/198,663 1998 Mercury-Free Zinc Anode For Electrochemical Cell and Method For Making Same
- ---------------------------------------------------------------------------------------------------------------------------
09/154,812 1999 Method for Making Metal-Air Electrode with Water Soluble Catalyst Precursors and Resulting
Electrode
- ---------------------------------------------------------------------------------------------------------------------------
09/504,010 2000 Metal-Air Cell Housing With Improved Peripheral Seal Design
- ---------------------------------------------------------------------------------------------------------------------------
09/639,476 2000 Methods For Making Oxygen Reduction Catalyst Using Micelle Encapsulation And Metal-Air
Electrode Including Said Catalyst
- ---------------------------------------------------------------------------------------------------------------------------
NYA = Not Yet Assigned
A-4
35
EXHIBIT B
[*]
[*]
- ----------------
* Confidential treatment
* Confidential treatment
B-1
36
EXHIBIT C
[*]
- ----------------
* Confidential treatment
C-1
37
EXHIBIT D
FORM OF WARRANTS
THIS WARRANT AND THE SECURITIES PURCHASED ON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) THE CORPORATION SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL THAT
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION THEREWITH.
Warrant to Purchase Warrant No.
Shares -------------
- ----------
WARRANT TO PURCHASE COMMON STOCK
OF
AER ENERGY RESOURCES, INC.
THIS CERTIFIES that RAYOVAC CORPORATION, a Wisconsin corporation
("Holder"), or any subsequent holder hereof, has the right to purchase from AER
Energy Resources, Inc., a Georgia corporation (the "Company"), up to
_____________ fully paid and nonassessable shares of the Company's Common Stock,
no par value ("Common Stock") (subject to adjustment from time to time, as
provided in Section 5), at the Exercise Price (as defined herein), at any time
on or before 5:00 p.m., Atlanta, Georgia time, on ______________________(1)
("Exercise Period").
This Warrant is subject to all of the conditions, limitations and
provisions set forth herein.
1. Exercise.
Holder may exercise this Warrant as to at least _______
shares of Common Stock or, if less, all remaining shares of Common Stock
covered hereby at any time and from time to time after the date of issuance
to and including the Exercise Period, upon surrender of this Warrant, with
the Subscription Form attached hereto duly executed, together with the full
Exercise Price in cash, or by certified or official bank check payable in
New York Clearing House Funds or wire transfer payable in immediately
available federal funds for
- ------------------------
(1)_____ years from the issue date of the Warrant.
D-1
38
each share of Common Stock as to which this Warrant is exercised, at the
office of the Company, AER Energy Resources, Inc., 4600 Highlands Parkway,
Suite G, Smyrna, GA 30082, or at such other office or agency as the Company
may designate in writing (such surrender and payment hereinafter called the
"Exercise of this Warrant"). The "Date of Exercise" of the Warrant shall be
defined as the date that the original Warrant and Subscription Form are
received by the Company. This Warrant shall be canceled upon its Exercise,
and, as soon as practicable thereafter, the Holder hereof shall be entitled
to receive a certificate or certificates for the number of shares of Common
Stock purchased upon such Exercise and a new Warrant or Warrants
(containing terms identical to this Warrant) representing any unexercised
portion of this Warrant. Each person in whose name any certificate for
shares of Common Stock is issued shall, for all purposes, be deemed to have
become the Holder of record of such shares on the Date of Exercise of this
Warrant, irrespective of the date of delivery of such certificate. Nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a shareholder of the Company until the Date of Exercise.
2. Exercise Price.
The Exercise Price shall be $_________________ per share, subject to
adjustment as set forth in Section 4.
3. Transfer and Registration.
Subject to the provisions of Section 7 of this Warrant, this Warrant
and all rights hereunder may be transferred on the books of the Company,
wholly or in part, in person or by attorney, without charge to the Holder,
upon surrender of this Warrant properly endorsed, with signature
guaranteed. This Warrant shall be canceled upon such surrender and, as soon
as practicable thereafter, the person to whom such transfer is made shall
be entitled to receive a new Warrant or Warrants (with all rights
hereunder) as to the portion of this Warrant transferred, and the Holder of
this Warrant shall be entitled to receive a new Warrant or Warrants (with
all rights hereunder) as to the portion hereof retained.
4. Anti-Dilution Adjustments.
(a) If the Company shall at any time declare a dividend payable in
shares of Common Stock, then the Holder hereof, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is Exercised, such additional shares of Common stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date.
(b) If the Company shall at any time effect a recapitalization or
reclassification (including stock splits, reverse stock splits, stock dividends
or otherwise) of such character that the shares of Common stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof, the number of shares of Common Stock which the
Holder hereof shall be entitled to purchase upon Exercise of this Warrant shall
be increased or
D-2
39
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization or
reclassification, and the Exercise Price shall be, in the case of an increase in
the number of shares, proportionately decreased and, in the case of a decrease
in the number of shares, proportionally increased.
(c) If the Company shall at any time distribute to holders of Common
Stock cash, evidences of indebtedness or other securities or assets (other than
cash dividends or distributions payable out of earned surplus or net profits for
the current or preceding year) then, in any such case, the Holder of this
Warrant shall be entitled to receive, upon Exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date for fixing
shareholders to be affected by such event (the "Determination Date") or, in lieu
thereof, if the Board of Directors of the Company should so determine at the
time of such distribution, a reduced Exercise Price determined by multiplying
the Exercise Price on the Determination Date by a fraction, the numerator of
which is the result of such Exercise Price reduced by the value of such
distribution applicable to one share of Common Stock (such value to be
determined by the Board in its discretion) and the denominator of which is such
Exercise Price.
(d) If the Company shall at any time consolidate or merge with any
other corporation or transfer all or substantially all of its assets or
dissolve, then the Company shall deliver written notice to the Holder of such
merger, consolidation or sale of assets or dissolution at least thirty (30) days
prior to the closing of such merger, consolidation or sale of assets or
dissolution, and this Warrant shall terminate and expire immediately prior to
the closing of such merger, consolidation or sale of assets or dissolution.
(e) As used in this Warrant, the term "Exercise Price" shall mean the
purchase price per share specified in Section 2 of this Warrant until the
occurrence of an event stated in Section 4(b) or 4(c) and thereafter shall mean
said price as adjusted from time to time in accordance with the provisions of
said sections. No such adjustment pursuant to Section 4(b) or 4(c) shall be made
unless such adjustment would change the Exercise Price at the time by $.01 or
more; provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time by
$.01 or more. No adjustment made pursuant to any provision of this Section 4
shall have the effect of increasing the total consideration payable upon
Exercise of this Warrant in respect of all the Common Stock as to which this
Warrant may be exercised.
(f) In the event that at any time, as a result of an adjustment made
pursuant to this Section 4, the Holder of this Warrant shall, upon Exercise of
this Warrant, become entitled to receive shares and/or other securities or
assets (other than Common Stock) then, wherever appropriate, all references
herein to shares of Common Stock shall be deemed to refer to and include such
shares and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to adjustment from
time to time in a manner and upon terms as nearly equivalent as practicable to
the provisions of this Section 4.
D-3
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5. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, the Holder hereof may purchase only a whole number of shares of
Common Stock. The Company shall, within 5 days after the Date of Exercise,
deliver to Holder a payment in cash in respect of any fractional shares
which might otherwise be issuable upon Exercise of this Warrant, calculated
by multiplying the fractional share amount by the market price of the
Company's Common Stock on the Date of Exercise as reported on the Nasdaq
National Market or such other exchange or system on which the Company's
Common Stock is traded.
6. Reservation of Shares.
The Company shall at all times reserve for issuance and keep available
out of its authorized and unissued shares of Common Stock (or other
securities substituted therefor as herein above provided) solely for the
purpose of issuance upon the Exercise of this Warrant, such number of
shares of Common Stock issuable upon exercise of the Warrant. The Company
covenants and agrees that upon Exercise of this Warrant, all shares of
Common Stock issuable upon such Exercise shall be duly and validly issued,
fully paid, nonassessable and free from all taxes, liens and preemptive
rights. The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange, quotation system or
over-the-counter market upon which shares of Common Stock may be listed or
quoted (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance, if required). The Company
shall not take any action which would cause the number of authorized but
unissued shares of Common Stock to be less than the number of such shares
required to be reserved hereunder for issuance upon exercise of the
Warrant.
7. Restrictions on Transfer.
This Warrant and the Common Stock issuable on Exercise hereof have been
or will be acquired by the Holder hereof for investment for its own account
and not with a view to the distribution thereof, have not been registered
under the Securities Act of 1933, as amended (the "Act"), or under any
state securities laws (the "State Acts") and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of in the absence of
registration or the availability of an exemption from registration under
the Act and any applicable State Acts and, in the event a Holder believes
an exemption from the registration requirements of the Act and any
applicable State Acts is available, the Holder must deliver a legal opinion
reasonably satisfactory in form and substance to the Company and its
counsel, stating that such exemption is available. All shares of Common
Stock issued upon Exercise of this Warrant shall bear an appropriate legend
to such effect. Holder has represented to the Company that it and any
transferee of all or any portion of this Warrant is and will remain at all
times while this Warrant is outstanding an "accredited investor" as defined
in Rule 501 of Regulation D promulgated under the Act.
D-4
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8. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person
other than the Company and the Holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall
be for the sole and exclusive benefit of the Company and the Holder of this
Warrant.
9. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the State of Georgia.
Jurisdiction for any dispute regarding this Warrant lies in Georgia.
10. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the
Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall (at its expense) execute and deliver a new warrant of
like kind representing the same rights represented by this Warrant.
11. Notice to Company and Holder.
Notices or demands pursuant to this Warrant to be given or made by the
Holder of this Warrant to or on the Company shall be sent by certified or
registered mail, return receipt requested, postage prepaid, or sent by
reputable overnight courier service (charges prepaid), and deemed to have
been given when so delivered or deposited in U.S. Mail, addressed, until
another address is designated in writing by the Company, to AER Energy
Resources, Inc., 4600 Highlands Parkway, Suite G, Smyrna, GA 30082,
Attention: Chief Executive Officer. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on the Holder of this
Warrant shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, or sent by
reputable overnight courier service (charges prepaid), and deemed to have
been given when so delivered or deposited in U.S. Mail, addressed to the
Holder as follows: Rayovac Corporation, 601 Rayovac Drive, Madison,
Wisconsin 53711, Attn: President.
(signature follows on next page)
D-5
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IN WITNESS WHEREOF, this Warrant is hereby executed effective as of the
date set forth below.
Dated as of _______________________.
AER ENERGY RESOURCES, INC.
By:
---------------------------------------
[Corporate Seal]
Attest:
- -------------------------
Secretary
D-6
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SUBSCRIPTION FORM
TO: AER ENERGY RESOURCES, INC.
The undersigned hereby irrevocably exercises the right to purchase
_______________ shares of Common Stock of AER Energy Resources, Inc., a Georgia
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Exercise Price with respect to such shares in full, all in accordance with
the conditions and provisions of said Warrant.
The undersigned represents that it is an "accredited investor" as
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended, agrees not to offer, sell, transfer or otherwise dispose of any of such
Common Stock, except in accordance with the provisions of Section 8 of the
Warrant, and consents that the following legend may be affixed to the
certificates for the Common Stock hereby subscribed for, if such legend is
applicable:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law, and may not be sold,
transferred, pledged, hypothecated or otherwise disposed of until
either (i) a registration statement under the Securities Act and
applicable state securities laws shall have become effective with
regard thereto, or (ii) the corporation shall have received an opinion
of counsel reasonably acceptable to the corporation and its counsel
that an exemption from registration under the Securities Act or
applicable state securities laws is available in connection therewith."
The undersigned requests that certificates for such shares be issued,
and a warrant representing any unexercised portion thereof be issued, pursuant
to the Warrant in the name of the Registered Holder and delivered to the
undersigned at the address set forth below:
Dated:
------------------------------
- --------------------------------------------------------------------------------
Signature of Registered Holder
- --------------------------------------------------------------------------------
Name of Registered Holder (Print)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
The attached Warrant and the securities issuable on exercise thereof have not
been registered under the Securities Act of 1933, as amended, or any state
securities law and may not be sold, transferred, pledged, hypothecated or
otherwise disposed of in the absence of registration or the availability of an
exemption from registration under said Act or any state securities law.
D-7
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ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase ____________ shares of the Common Stock of AER ENERGY RESOURCES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ___________________________ as attorney to transfer the said Warrant on
the books of the Company, with full power of substitution in the premises.
Dated:
---------------------------------- --------------------------------
Signature
Fill in for new Registration of Warrant: Signature Guarantee:
- ---------------------------------------- --------------------------------
Name Name of Guarantor
By:
- ---------------------------------------- -----------------------------
Name:
- ---------------------------------------- ---------------------------
Address Title:
--------------------------
Please print name and address of assignee
(including zip code)
- --------------------------------------------------------------------------------
NOTICE
The signature to the foregoing Subscription Form or Assignment must correspond
to the name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.
D-8
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EXHIBIT E
RAYOVAC AFFILIATES
[RAYOVAC LOGO]
RAYOVAC CORPORATION AND SUBSIDIARIES
RAYOVAC CORPORATION RAYOVAC LATIN AMERICA, LTD.
ROV HOLDING, INC. RAYOVAC OVERSEAS CORPORATION
RAYOVAC (UK) LIMITED RAYOVAC ARGENTINA S.R.L.
RAYOVAC EUROPE LIMITED RAYOVAC CHILE, LTDA.
RAYOVAC CANADA INC. RAYOVAC COLOMBIA, S.A.
RAYOVAC FAR EAST LIMITED RAYOVAC COSTA RICA, S.A.
ZOEPHOS INTERNATIONAL N.V. RAYOVAC DOMINICAN REPUBLIC, S.A.
RAYOVAC EUROPE B.V. RAYOVAC EL SALVADOR, S.A. DE C.V.
MINERA VIDALUZ S.A. DE C.V. RAYOVAC GUATEMALA, S.A.
RAYOVAC FOREIGN SALES CORPORATION DISTRIBUIDORA RAYOVAC GUATEMALA, S.A.
BRISCO ELECTRONICS B.V. RAYOVAC HONDURAS, S.A.
BRISCO ELECTRONICS GMBH DISTRIBUIDORA RAYOVAC HONDURAS, S.A.
ROVCAL, INC. RAY-O-VAC DE MEXICO, S.A. DE C.V.
RAYOVAC VENEZUELA, S.A.
E-1
46
EXHIBIT F
FORM OF END USER LICENSE AGREEMENT
FORM A: ON OUTSIDE OF PACKAGE OR VISIBLE THROUGH PACKAGING
IMPORTANT -- READ THE TERMS AND CONDITIONS OF THIS LICENSE AGREEMENT CAREFULLY
BEFORE OPENING THIS PACKAGE. BY OPENING THIS PACKAGE, YOU ARE ACCEPTING AND
AGREEING TO THE TERMS OF THIS LICENSE AGREEMENT. IF YOU ARE NOT WILLING TO BE
BOUND BY THE TERMS OF THIS LICENSE AGREEMENT, YOU SHOULD PROMPTLY RETURN THE
PACKAGE IN UNOPENED FORM, AND YOU WILL RECEIVE A REFUND OF YOUR MONEY.
1. License Grant. The enclosed battery product (the "Product")
is produced under license from AER Energy Resources, Inc. ("we" or "us") and
utilizes patented technology owned by or licensed to us. By opening this package
and thereby accepting the terms of this license agreement, we grant to you, and
you accept, a limited, non-exclusive, royalty-free license under all patents
which are held by or licensed to us, including U.S. patents 5,691,074 and
5,919,582, European patent E.P. 0860032 and Japanese patent 3051455, such
license being specifically limited to your use of the Product and not extending
to any other device or process whatsoever. If the Product has battery cells that
can be replaced, this license is restricted to use of the Product with
replacement battery cells that, either because of their structure or because
they are authorized/licensed by us, do not infringe our patents, directly,
contributorily or by inducement. If you have questions concerning particular
replacement battery cells, please contact us at ____________________.
[INCLUDE PARAGRAPHS 2-5 IF THERE IS ROOM ON THE BATTERY PACKAGING]
2. Certain Limitations. You agree that you will not assign,
sublicense, transfer, pledge, lease, rent, or share your rights under this
License Agreement. This License Agreement does not convey to you an interest in
or to any of our patents, but only a limited right of use revocable in
accordance with the terms of this License Agreement.
3. Term. This License Agreement is effective upon your opening
of this package and continues until terminated. You may terminate this License
Agreement at any time by returning the Product to the manufacturer. We may
terminate this License Agreement upon your breach of any term hereof. Upon such
termination by us, you agree to return the Product to the manufacturer.
4. Disclaimer of Warranties. THE PRODUCT IS LICENSED "AS IS,"
AND WE DISCLAIM ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING
(WITHOUT LIMITATION) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Any warranties on the Product are the sole responsibility of
the manufacturer.
5. Limitation of Liability. Our cumulative liability to you or
any other party for any loss or damages resulting from any claims, demands, or
actions arising out of or relating to this Agreement shall not exceed the
royalty fees paid to us in connection with the sale of this Product. In no event
shall we be liable for any indirect, incidental, consequential, special, or
exemplary damages or lost profits, even if we have been advised of the
possibility of such damages. SOME STATES DO NOT ALLOW THE LIMITATION OR
EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE
LIMITATION OR EXCLUSION MAY NOT APPLY TO YOU.
F-1
47
Exhibit F (Continued)
Form B: Inside Packaging
IMPORTANT -- READ THE TERMS AND CONDITIONS OF THIS LICENSE AGREEMENT CAREFULLY
BEFORE USING THIS PRODUCT. BY USING THIS PRODUCT, YOU ARE ACCEPTING AND AGREEING
TO THE TERMS OF THIS LICENSE AGREEMENT. IF YOU ARE NOT WILLING TO BE BOUND BY
THE TERMS OF THIS LICENSE AGREEMENT, YOU SHOULD PROMPTLY RETURN THE PRODUCT
UNUSED IN ITS ORIGINAL PACKAGING, AND YOU WILL RECEIVE A REFUND OF YOUR MONEY.
1. License Grant. The enclosed battery product (the "Product")
is produced under license from AER Energy Resources, Inc. ("we" or "us") and
utilizes patented technology owned by or licensed to us. By using this product
and thereby accepting the terms of this license agreement, we grant to you, and
you accept, a limited, non-exclusive, royalty-free license under all patents
which are held by or licensed to us, including U.S. patents 5,691,074 and
5,919,582, European patent E.P. 0860032 and Japanese patent 3051455, such
license being specifically limited to your use of the Product and not extending
to any other device or process whatsoever. If the Product has battery cells that
can be replaced, this license is restricted to use of the Product with
replacement battery cells that, either because of their structure or because
they are authorized/licensed by us, do not infringe our patents, directly,
contributorily or by inducement. If you have questions concerning particular
replacement battery cells, please contact us at ____________________.
[INCLUDE PARAGRAPHS 2-5 IF THERE IS ROOM ON THE BATTERY PACKAGING]
2. Certain Limitations. You agree that you will not assign,
sublicense, transfer, pledge, lease, rent, or share your rights under this
License Agreement. This License Agreement does not convey to you an interest in
or to any of our patents, but only a limited right of use revocable in
accordance with the terms of this License Agreement.
3. Term. This License Agreement is effective upon your initial
use of this package and continues until terminated. You may terminate this
License Agreement at any time by returning the Product to the manufacturer. We
may terminate this License Agreement upon your breach of any term hereof. Upon
such termination by us, you agree to return the Product to the manufacturer.
4. Disclaimer of Warranties. THE PRODUCT IS LICENSED "AS IS,"
AND WE DISCLAIM ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING
(WITHOUT LIMITATION) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Any warranties on the Product are the sole responsibility of
the manufacturer.
5. Limitation of Liability. Our cumulative liability to you or
any other party for any loss or damages resulting from any claims, demands, or
actions arising out of or relating to this Agreement shall not exceed the
royalty fees paid to us in connection with the sale of this Product. In no event
shall we be liable for any indirect, incidental, consequential, special, or
exemplary damages or lost profits, even if we have been advised of the
possibility of such damages. SOME STATES DO NOT ALLOW THE LIMITATION OR
EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE
LIMITATION OR EXCLUSION MAY NOT APPLY TO YOU.
F-2
48
EXHIBIT G
ROYALTIES
1. RUNNING ROYALTY RATE FOR PATENTED ITEMS (SECTION 4.1(a)):
Item Royalty Amount
---------------------- ---------------------------------------
Sales of [*] 10% of Net Sales Value through July 20,
2004; 6% of Net Sales Value as of July
21, 2004
RAYOVAC acknowledges that the royalty rates stated above reflect the value of
the limited licenses granted in Article 3 of this Agreement.
2. MINIMUM ROYALTY SCHEDULE (SECTION 4.1(B)):
12 Month Period Commencing Net Sales Value
-------------------------- ---------------
10/1/04 $ 8 Million
10/1/05 $ 9 Million
10/1/06 $10 Million
** All payments shall be made in U.S. dollars **
- ---------------
* Confidential treatment
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EXHIBIT H
CAPITALIZATION TABLE
Shares as of
April 4, 2001
------------------
Series A redeemable convertible preferred stock, no par value,
425,000 shares authorized 404,500
Series B redeemable convertible preferred stock, no par value,
250,000 shares authorized 102,250
Common Stock, no par value
Authorized 100 million shares
Outstanding shares 24,850,263
Stock options outstanding 1,631,250
Warrants outstanding from 1996 capital transaction 835,000
exercisable at $6.3125, expiring in May 2001
Warrants outstanding from previously outstanding notes 225,988
payable
Warrants outstanding from Convertible Preferred Stock,
Series A & B 1,716,769
----------
29,259,270
Conversion of Preferred Stock, Series A & B 7,095,627(a)
----------
36,354,897
==========
(a) Subject to adjustment as result of accruing Preferred Stock dividends
and certain common stock price declines. Shares calculated as of March
26, 2001 (not materially different from the number if calculated as of
April 4, 2001).
H-1
50
EXHIBIT I
FORM OF PROMISSORY NOTE
THIS NOTE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND UNDER THE SECURITIES
LAWS OF THE STATES OF WISCONSIN AND GEORGIA. THIS NOTE CANNOT BE RESOLD OR
OTHERWISE TRANSFERRED OR DISPOSED OF IN ANY MANNER UNLESS IT IS REGISTERED
PURSUANT TO THE 1933 ACT AND APPLICABLE STATE LAW OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS THEN AVAILABLE AND THE HOLDER HEREOF OBTAINS AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
AER ENERGY RESOURCES, INC.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
[Date of Issuance] $250,000
AER ENERGY RESOURCES, INC., a Georgia corporation (the
"Company"), hereby promises to pay to the order of RAYOVAC CORPORATION, a
Wisconsin corporation, or its assigns (the "Holder") the principal amount of
$250,000 (the "Note").
This Note was issued pursuant to a License and Development
Agreement, dated as of April 6, 2001 (as amended and modified from time to time,
the "License Agreement"), between the Company and the Holder. Except as defined
in paragraph 6 hereof or unless otherwise indicated herein, capitalized terms
used in this Note have the same meanings set forth in the License Agreement.
1. No Interest. No interest shall be payable on this Note.
2. Payment of Principal on Note. The Company shall have no right to
prepay any of the outstanding principal amount of this Note. Principal shall be
repaid only in the case of an Event of Default. Absent an Event of Default, the
full principal amount of this Note shall be converted in accordance with Section
4 below.
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51
3. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:
(i) the Company fails to perform or observe any
material provision contained in this Note or in the License Agreement;
(ii) any representation, warranty or information
contained in the License Agreement or required to be furnished to Holder
pursuant to the License Agreement, or any writing furnished by the Company to
any Holder, is false or misleading in any material respect on the date made or
furnished;
(iii) the Company or any Subsidiary makes an
assignment for the benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Company or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Company or any Subsidiary is entered under
the Federal Bankruptcy Code; or the Company or any Subsidiary petitions or
applies to any tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company or any Subsidiary, or of any substantial part of the
assets of the Company or any Subsidiary, or commences any proceeding (other than
a proceeding for the voluntary liquidation and dissolution of any Subsidiary)
relating to the Company or any Subsidiary under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or any Subsidiary and either (A)
the Company or any such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 60 days;
(iv) a judgment in excess of $1,000,000 is
rendered against the Company or any Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay, such
judgment is not discharged in full; or
(v) the Company or any Subsidiary defaults in
the performance of any obligation if the effect of such default is to cause an
amount exceeding $1,000,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount exceeding
$1,000,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
I-2
52
(b) Consequences of Events of Default.
(i) If an Event of Default of the type described
in subparagraph 3(a) above has occurred, without waiving any rights or remedies
of the Holder under paragraph 4 hereof or any other right Holder may have at law
or equity, Holder may declare all or any portion of the outstanding principal
amount of this Note (together with all other amounts due and payable with
respect thereto) to be immediately due and payable without any action on the
part of the Holder, and the Company shall immediately pay to the Holder all
amounts due and payable with respect to this Note.
(ii) Holder shall also have any other rights or
remedies which such Holder may have been afforded under any contract or
agreement (including this Note) at any time and any other rights which such
holder may have pursuant to applicable law. The exercise of any such right or
remedy (whether under this Note or otherwise) shall not limit or restrict the
ability of the Holder to exercise any other such rights or remedies (whether
under this Note or otherwise).
(iii) The Company hereby waives diligence,
presentment, protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Company hereunder.
4. Conversion Rights.
(a) Conditions. If the Conversion Date occurs at any time
prior to the payment of this Note in full, then the outstanding principal amount
of this Note (the "Conversion Amount") shall automatically convert into a number
of shares of the Conversion Stock determined by dividing the Conversion Amount
by the Conversion Price (rounding up any fractional share).
(b) Conversion Procedures.
(i) A conversion of this Note pursuant to
subparagraph 4(a) above shall be deemed to have been effected as of the close of
business on the date on which this Note has been surrendered for conversion at
the principal office of the Company. At such time as such conversion has been
effected, the rights of the Holder, to the extent of the conversion, shall
cease, and the Person or Persons in whose name or names any certificate or
certificates for shares of the stock into which this Note was converted are to
be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of such stock represented thereby.
(ii) Within five business days after a conversion
has been effected, the Company shall deliver to the converting holder a
certificate or certificates representing the number of shares of the stock into
which this Note was converted (rounding up any fractional share) issuable by
reason of such conversion in such name or names and such denomination or
denominations as the converting holder has specified.
I-3
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(iii) The issuance of certificates for shares of
the stock into which this Note was converted upon conversion of this Note shall
be made without charge to the Holder hereof for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such conversion
and the related issuance of such shares. Upon conversion of this Note, the
Company shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
(iv) The Company shall not close its books
against the transfer of the Conversion Stock issued or issuable upon conversion
of this Note in any manner which interferes with the timely conversion of this
Note. The Company shall assist and cooperate with any holder of this Note
required to make any governmental filings or obtain any governmental approval
prior to or in connection with the conversion of this Note (including, without
limitation, making any filings required to be made by the Company).
(v) The Company shall at all times reserve and
keep available out of its authorized but unissued shares of the Conversion
Stock, solely for the purpose of issuance upon the conversion of this Note, such
number of shares of Conversion Stock issuable upon the conversion of this
outstanding Note. All shares of stock which are so issuable shall, when issued,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens, charges and pre-emptive rights. The Company shall take all such
actions as may be necessary to assure that all such shares of Conversion Stock
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange, quotation
system or over-the-counter market upon which shares of such Conversion Stock may
be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance).
5. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
6. Definitions. For purposes of this Note, the following capitalized
terms have the following meaning.
"Conversion Date" means the Phase III Notice Date (as defined
in the License Agreement).
"Conversion Price" means the AER Stock Price (as defined in
the License Agreement).
"Conversion Stock" means shares of the Company's common stock,
no par value.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated
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organization and a governmental entity or any department, agency or political
subdivision thereof.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
7. Cancellation. After all principal owed on this Note has been paid in
full or satisfied by conversion into Conversion Stock, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.
8. Payments. All payments to be made to the Holder shall be made in the
lawful money of the United States of America in immediately available funds.
9. Place of Payment. Payments of principal and certificates
representing shares of Conversion Stock shall be delivered to the following
address:
Rayovac Corporation
601 Rayovac Drive
Madison, Wisconsin 53711
Attn: Chief Financial Officer
or to such other address or to the attention of such other person as specified
by prior written notice to the Company.
10. Business Days. If any payment is due, or any time period for giving
notice or taking action expires, on a day which is a Saturday, Sunday or legal
holiday in the State of New York, the payment shall be due and payable on, and
the time period shall automatically be extended to, the next business day
immediately following such Saturday, Sunday or legal holiday.
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IN WITNESS WHEREOF, the Company has executed and delivered
this Note on April __, 2001.
AER ENERGY RESOURCES, INC.
By
---------------------------------
Its
--------------------------------
Attest:
- --------------------------
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EXHIBIT J
FORM OF AGREEMENT OF
MICHAEL CHEIKY AND DREISBACH ELECTROMOTIVE, INC.
AGREEMENT
For $1.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Michael Cheiky, a California
resident ("Cheiky") and Dreisbach Electromotive, Inc., an Ohio corporation
("DEMI") (Cheiky and DEMI being referred to collectively as the "Licensors")
hereby agree as follows for the benefit of AER Energy Resources, Inc., a Georgia
corporation ("AER") and Rayovac Corporation, a Wisconsin corporation
("RAYOVAC"):
Background Statement
AER, Cheiky and DEMI are parties to a License Agreement dated as of
July 19, 1989 (the "Original License Agreement"), which has been amended by the
following agreements: DEMI/AER Air Manager Agreement dated as of January 16,
1992; Amended and Restated DEMI/AER Air Manager Agreement dated as of October
15, 1993; Consent to Partial Assignment of Royalties and Amendment No. 2 to
License Agreement dated as of October 15, 1993 and Amendment No. 3 to License
Agreement and Termination of Technology Assignment Agreement dated as of
December 26, 1995, all by and among AER, Cheiky and DEMI (the Original License
Agreement and such amendments and supplementary agreements are herein referred
to collectively as the "DEMI License"). AER and RAYOVAC contemplate entering
into a License and Development Agreement in substantially the form attached to
this Agreement (the "AER/RAYOVAC License"). Among other things, the AER/RAYOVAC
License provides for AER to license certain intellectual property rights to
RAYOVAC, including technology licensed to AER pursuant to the DEMI License. This
Agreement is being executed by the Licensors to provide certain modifications to
the DEMI License related to AER's sublicense to RAYOVAC of the technology
licensed to AER pursuant to the DEMI License.
The Licensors' Agreement
1. No Objections. The Licensors confirm that they have reviewed
the AER/RAYOVAC License and neither has any objection to the provisions of the
AER/RAYOVAC License or AER's execution and delivery of the AER/RAYOVAC License.
2. Non-Applicability of Certain Provisions. Section 11, the third
sentence of Section 15, and Sections 17 and 18 of the DEMI License shall not
apply to RAYOVAC, as a Sublicensee under the DEMI License.
3. No Rights. Notwithstanding any provisions of the DEMI License
to the contrary: (a) DEMI and Cheiky each shall have no rights to any Program
Technology (as "Program Technology" is defined in the AER/RAYOVAC License) or
any of RAYOVAC's other
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proprietary technology, and (b) the last sentence of Section 1(e) and the
proviso to Section 2(a) of the DEMI License shall not apply to RAYOVAC, and (c)
with respect to products which RAYOVAC or any of its Sublicensees manufactures,
makes, has made, uses, sells, offers to sell or leases, DEMI or the
Shareholders' Agent (as defined in the DEMI License) shall be paid royalties by
AER under the DEMI License through July 19, 2004, only with respect to Net Sales
Value (as defined in the AER/RAYOVAC License) for which RAYOVAC pays AER, and
through July 19, 2004, AER will pay royalties to DEMI or the Shareholders' Agent
at a rate of four percent (4%) of such Net Sales Value with respect to all Net
Sales Value with respect to which RAYOVAC or any of its Sublicensees pays AER
under the AER/RAYOVAC License. After July 19, 2004, no royalties will be owed by
AER under the DEMI License. AER will use its best efforts to cause RAYOVAC to
pay to AER all amounts owed by RAYOVAC to AER under the AER/RAYOVAC License.
DEMI and Cheiky acknowledge and agree that under the DEMI License, AER and not
its Sublicensees is responsible for paying royalties to DEMI; provided, however,
that in the event RAYOVAC breaches the AER/RAYOVAC License by failing to pay
royalties to AER in accordance with the provisions of the AER/RAYOVAC License
and AER fails to cause RAYOVAC to meet its royalty obligations under the
AER/RAYOVAC License within 60 days after the breach by RAYOVAC, (i) DEMI shall
be entitled to proceed directly against RAYOVAC to recover any amounts owed by
AER to DEMI under the DEMI License, and (ii) DEMI shall retain all rights under
applicable law to seek damages and injunctive relief from RAYOVAC for RAYOVAC's
use of patents and other Aerobic Power Technology (as defined in the DEMI
License) owned by DEMI.
4. Indemnification. RAYOVAC and AER shall each, severally but not
jointly, defend, hold harmless and indemnify DEMI and its past, present and
future directors, officers, employees, affiliates, successors and assigns,
during the term of this Agreement and thereafter from and against any and all
liability, costs and expenses (collectively "Costs") arising out of (i) the
death or injury to any person or persons or damage to property resulting from
any negligence, fault or defect in the manufacture or design of products or
components manufactured by or for RAYOVAC or AER, respectively; or (ii) its
failure to comply with relevant laws, rules, regulations, ordinances, permits or
governmental licenses. DEMI shall promptly notify RAYOVAC or AER or both, as
appropriate, in writing after notice of such claim is received, and shall give
RAYOVAC or AER or both, as appropriate, reasonable assistance at RAYOVAC's or
AER's expense, respectively, in the defense of such claim. Upon receipt of
notice, whether formal or informal, direct or indirect, of any action for which
indemnification may be available under this Section 4, the party receiving
notice shall notify the other or others and their senior management shall meet
to discuss how to handle the matter.
5. RAYOVAC Rights Continue. If AER ceases operations or
terminates or proposes to terminate the AER/RAYOVAC License, or if the DEMI
License is rejected in any proceeding under the United States Bankruptcy Code or
other insolvency laws, Cheiky and DEMI shall allow RAYOVAC to maintain in force
the licenses set forth in Sections 3.2 and 3.5 of the AER/RAYOVAC License and
shall take no action to impair RAYOVAC's licenses set forth in Sections 3.2 and
3.5 of the AER/RAYOVAC License, upon payment directly to DEMI of the royalties
set forth in the DEMI License which would be payable to DEMI by AER under the
DEMI License with respect to products sold by RAYOVAC under the AER/RAYOVAC
License.
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6. Future Amendments to DEMI License. During the term of the
AER/RAYOVAC License, AER, Cheiky and DEMI agree that the DEMI License will not
be amended or modified in a manner which adversely effects RAYOVAC without the
written consent of RAYOVAC, which consent shall not be withheld unreasonably.
7. No Other Changes. DEMI, Cheiky and AER agree that except as
modified above, the DEMI License remains in full force and effect.
Executed and delivered on April ___, 2001.
-----------------------------------
Michael Cheiky
DREISBACH ELECTROMOTIVE, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Accepted and agreed:
AER ENERGY RESOURCES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
RAYOVAC CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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