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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 24, 1998
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AER ENERGY RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
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GEORGIA 0-21926 34-1621925
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
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4600 HIGHLANDS PARKWAY, SUITE G, SMYRNA, GEORGIA 30082
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (770) 433-2127
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On September 24, 1998, AER Energy Resources, Inc. announced that it had
entered into a Technology Licenses and Services Agreement with Duracell Inc., a
wholly-owned subsidiary of The Gillette Company, pursuant to which AER Energy's
zinc-air battery technology has been licensed to Duracell on primarily a
non-exclusive basis. Under the agreement, Duracell will provide funding to AER
Energy for certain product development projects; in return, Duracell will own
the technology developed under the product development projects funded by
Duracell. AER Energy has certain royalty-bearing and royalty-free rights to
utilize the technology funded by Duracell. Duracell also has certain
non-exclusive rights to AER Energy's currently existing technology and certain
option rights to obtain an exclusive license of AER Energy's technology to
manufacture and sell certain battery cells.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
10.1 Technology Licenses and Services Agreement, dated as of
September 24, 1998, by and between Duracell Inc. and
AER Energy Resources, Inc.
99.1 Press release dated September 24, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AER ENERGY RESOURCES, INC.
Date: September 24, 1998 By: /s/ J. T. Moore
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J. T. Moore
Vice President and Chief Financial
Officer
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INDEX TO EXHIBITS
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Exhibit Sequential Page No.
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10.1 Technology Licenses and Service Agreement, dated as of September
24, 1998, by and between Duracell Inc. and AER Energy Resources,
Inc.
99.1 Press release dated September 24, 1998
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EXHIBIT 10.1
TECHNOLOGY LICENSES
AND SERVICES AGREEMENT
ACKNOWLEDGMENT REGARDING CONFIDENTIAL INFORMATION:
AER Energy Resources, Inc. (the "Company") acknowledges that certain
confidential information is contained throughout this Technology Licenses and
Services Agreement and therefore such confidential information has been omitted
from the copy filed with this Current Report on Form 8-K 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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TABLE OF CONTENTS
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ARTICLE 1 - DEFINITIONS.............................................................2
ARTICLE 2 - RESEARCH AND DEVELOPMENT; CERTAIN PAYMENTS..............................7
2.1 RESEARCH AND DEVELOPMENT PROGRAM........................................7
2.2 PROGRAM PLANNING........................................................7
2.3 TERMINATION AND REFUND..................................................7
2.4 PRODUCT DEVELOPMENT PROCEDURES..........................................8
2.5 TEST SERVICES...........................................................8
2.6 DISCLOSURE OF INDEPENDENT RESEARCH......................................8
2.7 CERTAIN PAYMENTS........................................................8
ARTICLE 3 - RIGHTS, OWNERSHIP, AND RELATED LICENSES.................................9
3.1 DURACELL'S FULL OWNERSHIP OF PROGRAM TECHNOLOGY.........................9
3.2 LICENSE OF AER TECHNOLOGY TO DURACELL...................................9
3.3 LICENSES OF PROGRAM TECHNOLOGY TO AER.................................10
3.4 LICENSES OF AER TECHNOLOGY.............................................11
3.5 DURACELL'S OPTION TO MAKE [ ]* CELLS................................11
3.6 PRODUCT MARKING........................................................14
3.7 NON-DISCRIMINATORY PRICING.............................................14
ARTICLE 4 - REPRESENTATIONS........................................................15
4.1 NO CLAIMS..............................................................15
4.2 AUTHORITY; NO VIOLATION; BINDING OBLIGATION............................15
4.3 NO LICENSES............................................................15
4.4 NO OTHER REPRESENTATIONS...............................................15
ARTICLE 5 - INDEMNIFICATION........................................................15
5.1 INDEMNIFICATION........................................................15
ARTICLE 6 - INFRINGEMENT OF AER'S OR DURACELL'S PATENTS;
OR OPPOSITION PROCEEDINGS BY THIRD PARTIES....................................16
6.1 Third Party Infringement...............................................16
ARTICLE 7 - CONFIDENTIALITY........................................................17
7.1 TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION.......................17
7.2 NON-DISCLOSURE.........................................................17
7.3 EXCEPTIONS.............................................................18
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ARTICLE 8 - SOLE AND JOINT INVENTIONS; PATENT APPLICATIONS.........................18
8.1 SOLE AND JOINT INVENTIONS..............................................18
8.2 PATENT APPLICATIONS....................................................18
ARTICLE 9 - TERM AND TERMINATION...................................................19
9.1 TERM; TERMINATION......................................................19
9.2 CONTINUING OBLIGATIONS.................................................19
9.3 CONTINUING LIABILITIES.................................................19
ARTICLE 10 - DEMI PAYMENTS, NET WORTH, ETC.........................................20
10.1 DEMI AGREEMENT.........................................................20
10.2 NET WORTH..............................................................20
10.3 RETURN OF DURACELL EQUIPMENT...........................................20
10.4 PERIODIC REPORTS.......................................................20
ARTICLE 11 - MISCELLANEOUS.........................................................20
11.1 GOOD FAITH.............................................................20
11.2 PRESS RELEASES.........................................................20
11.3 [ ]* TECHNOLOGY.....................................................21
11.4 INDEPENDENT CONTRACTORS................................................21
11.5 OVERDUE PAYMENTS.......................................................21
11.6 SEVERABILITY...........................................................21
11.7 NO WAIVER..............................................................21
11.8 GOVERNING LAW..........................................................21
11.9 ARBITRATOR.............................................................21
11.10 FORCE MAJEURE..........................................................22
11.11 NOTICES................................................................22
11.12 FURTHER ASSURANCES.....................................................23
11.13 ASSIGNMENT.............................................................23
11.14 AMENDMENT..............................................................25
11.15 COUNTERPARTS...........................................................25
11.16 SUCCESSORS, ETC........................................................25
11.17 NO TERMINATION OF DEMI AGREEMENT.......................................25
11.18 AER'S MERGER WITH APSI.................................................25
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TECHNOLOGY LICENSES AND SERVICES AGREEMENT
THIS TECHNOLOGY LICENSES AND SERVICES AGREEMENT, entered into on
September 24, 1998 but having an effective date of August 1, 1998 (the
"Effective Date"), by and between Duracell Inc., a corporation duly organized
and existing under the laws of the State of Delaware ("DURACELL") and AER Energy
Resources Inc., a Georgia corporation having a place of business at 4600
Highlands Parkway, Suite G, Smyrna, Georgia 30082 ("AER"),
WITNESSETH:
WHEREAS, DURACELL has been engaged in the design and manufacture of
alkaline cells, nickel metal hydride cells, lithium ion cells and zinc-air cells
and possesses certain technical information, knowledge, know-how, patents,
experience and expertise related to the design and manufacture of these cells
and also has developed a patent portfolio related to these cells;
WHEREAS, AER has been engaged in the design and pilot 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 patent portfolio related to AER's zinc-air technology;
WHEREAS, the original portions of AER's air manager technology were
licensed to Aerobic Power Systems, Inc., an Ohio corporation ("APSI"), from DEMI
and CHEIKY (both as defined below), pursuant to a License Agreement dated July
19, 1989, as amended (the "DEMI Agreement");
WHEREAS, APSI merged into AER on January 16, 1991, and AER succeeded to
all of APSI's rights and obligations under the DEMI Agreement;
WHEREAS, DURACELL wishes DEMI and CHEIKY to waive certain portions of
the DEMI Agreement as applicable to DURACELL as a sublicensee;
WHEREAS, AER's air manager technology is a key component of AER's
patent portfolio;
WHEREAS, DURACELL wishes AER to perform zinc-air development work
related to [ ]* zinc-air cells and [ ]* zinc-air cells and batteries utilizing
AER's zinc-air technology;
WHEREAS, DURACELL wishes to obtain a complete ownership interest in the
results of such development program, with DURACELL granting to AER certain
non-exclusive rights;
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WHEREAS, DURACELL wishes to license on a non-exclusive basis AER's
existing and future technology for use in [ ]* cells and batteries;
WHEREAS, DURACELL wishes to obtain an option for an exclusive license of
AER's technology for [ ]* cells and batteries; and
WHEREAS, AER will reap financial benefit and favorable publicity if the
zinc-air technology developed is commercially successful;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein and on
the terms and subject to the conditions herein set forth, the parties hereto
hereby agree as follows:
ARTICLE 1 - DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided;
(a) "AER Technology" shall mean any information, know-how, knowledge,
inventions, discoveries, improvements, trade secrets, Patents [ ]* and other
proprietary rights of AER or AER's Affiliates currently existing as of the
Effective Date as applied to [ ]* zinc-air cells and batteries and which
include, without limitation, all of the rights to technology of DEMI licensed to
AER pursuant to the DEMI Agreement as of the Effective Date. AER Technology does
not include AER's Independent Research unless AER, in its sole discretion,
agrees in writing to include a portion or portions of AER's Independent Research
in AER Technology for no consideration, whereupon such AER Independent Research
shall thereafter immediately and irrevocably become AER Technology for purposes
of this Agreement, including, without limitation, Section 3.2.
(b) "Affiliate" shall mean with respect to a specified Person, a
corporation with respect to which such other Person owns, directly or
indirectly, stock in such corporation possessing more than fifty percent (50%)
of the total combined voting power of all classes of stock in such corporation
or a partnership or limited liability company with respect to which such other
Person possesses, directly or indirectly, the right to direct the management and
policies of such entity. For the purposes of this Agreement, The Gillette
Company and its divisions other than DURACELL shall be considered Affiliates of
DURACELL, and DEMI and CHEIKY shall not be considered as Affiliates of AER.
(c) "Air Manager Design Guide" shall mean the design guide prepared by
AER to facilitate the translation of AER Technology into battery products, as
updated from time to time.
(d) "Battery Manufacturer" shall mean only [ ]*.
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* Confidential Information 2
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(e) "Camcorder" shall mean a hand-held portable device for recording
video images.
(f) "Cellular Phone" shall mean a hand-held telephone not hardwired to
an existing telephone cable system.
(g) "CD Player" shall mean an apparatus for playing recordings contained
on a compact diskette.
(h) "CHEIKY" shall mean Michael Cheiky, a California resident who was
formerly DEMI's Director of Research but is no longer employed by DEMI.
(i) "Concept Phase" shall mean the time when the consumer needs and
expectations with respect to a product design are clearly understood and
documented such that the written output is a design brief. The design brief
should contain the presently intended requirements, such as a certain number of
prototypes to be determined by DURACELL, that must be assembled and tested for
the product development process to be considered complete, and this time shall
end at the start of the Engineering Phase.
(j) "Consumer Product" shall mean a Camcorder, Cellular Phone, CD
Player, or other device generally purchased by consumers, capable of being
powered by a [ ]* Cell or a [ ]* Cell, solely or in combination with other power
sources.
(k) "[ ]* Cell" shall mean an individual [ ]* zinc-air cell with [ ]*,
which cell is typically used in Consumer Products and has a [ ]*, including all
components thereof such as, without limitation, electrodes, electrolyte,
separators [ ]* and the individual cell enclosure, and shall also mean a battery
comprised of multiple [ ]* Cells and the enclosure in which they are contained.
"[ ]* Cell" shall not mean a battery comprised of multiple [ ]* cells which do
not have [ ]*.
(l) "[ ]* Sales" shall mean Net Sales of [ ]* Cells pursuant to the
Exclusive [ ]* Cell License.
(m) "DEMI" shall mean Dreisbach Electromotive Inc., a privately-owned
Ohio corporation which is, together with CHEIKY, the licensor of certain AER
Technology pursuant to the DEMI Agreement.
(n) "DURACELL Technology" shall mean any information, know-how,
knowledge, inventions, discoveries, improvements, trade secrets, Patents, and
other proprietary rights of DURACELL or its Affiliates related to zinc-air cells
and batteries currently existing as of the Effective Date which relate to [ ]*
cells and batteries. DURACELL Technology shall not include DURACELL's
Independent Research.
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(o) "Engineering Phase" shall mean the period beginning at the end of
the Concept Phase and ending when the necessary engineering specifications and
qualification deliverables set forth in the Program Objectives, as amended from
time to time, are achieved in order to develop a new [ ]* Cell or [ ]* Cell,
wherein the specifications and qualifications should enable the delivery of a
quality product and process ready for further development in the Pre-production
Phase.
(p) "Equipment" shall mean any equipment used for carrying out any
Process for Assembling [ ]* Cells or [ ]* Cells, or their respective components.
(q) "Exclusive [ ]* Cell License" shall mean the exclusive license that
may be granted by AER to DURACELL pursuant to Sections 3.5 and 11.13.
(r) "First Sales Year" shall mean the one year period beginning on the
first day of the first month following the date of the first commercial shipment
against a purchase order to a customer for ultimate retail sale of one or more
[ ]* Cells by DURACELL which is subject to the Exclusive [ ]* Cell License.
(s) "Independent Research" shall mean any research and related
information, know-how, knowledge, inventions, discoveries, improvements, trade
secrets, Patents and other proprietary rights created by DURACELL or DURACELL's
Affiliates or created by AER or AER's Affiliates in each case after the
Effective Date and which is not work conducted and which does not result from
work conducted under the Program.
(t) "Joint Inventions" shall mean inventions, discoveries, and
improvements and the related Patents created by two or more inventors at least
one of which is employed by DURACELL and at least one of which is employed by
AER, and which would be owned by both DURACELL and AER equally absent the
provisions of this Agreement.
(u) "Net Sales" shall mean the gross selling price of a [ ]* Cell or
[ ]* Cell when sold by DURACELL or AER or its respective Sublicensees or
Affiliates to a third party, less the following: accepted returns from
DURACELL's or AER's or DURACELL's or AER's Sublicensee's or Affiliate's
customers and breakage for which DURACELL or AER or its respective Sublicensee
or Affiliate gives credit to its customers, excise or other sales taxes which
DURACELL or AER or its respective Sublicensee or Affiliate has to pay or absorb,
customs duties and consular fees, transportation and insurance charges and
packaging paid by DURACELL or AER respectively, sales commissions and other
costs used to secure the sale, including but not limited to, fees paid to
manufacturers' representatives and any other commercially acceptable
promotional, quantity, trade or cash discounts or rebates. In the event that
[ ]* Cells or [ ]* Cells are hard-wired by DURACELL or AER or its respective
Sublicensee or Affiliate into Consumer Products then Net Sales will be
determined on the basis of (x) the ratio of the raw materials costs of the [ ]*
Cell or [ ]* Cell to the total raw materials costs of the entire Consumer
Product times (y) the gross selling price of the Consumer Product when sold to a
third party.
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(v) "[ ]* Cell" shall mean a [ ]* zinc-air cell typically used in
Consumer Products [ ]* and shall include all components thereof such as, without
limitation, electrodes, electrolyte, separators, [ ]* and cell casing, and shall
also mean a battery comprised of multiple [ ]* Cells and all components thereof.
(w) "Non-Exclusive [ ]* Cell License" shall mean the non-exclusive
license that may be granted by AER to DURACELL pursuant to Section 3.5.
(x) "Original Equipment Manufacturer" or "OEM" shall mean a manufacturer
of electrical products, some of which are battery-operated, and which are
assembled from components and which are sold as finished products or parts of
finished products.
(y) "Patents" means patents and patent applications including any
legally enforceable patent rights which may issue on such applications in any
country of the world. AER has previously delivered to DURACELL copies of the
issued United States patents presently owned or licensed by AER relating to
zinc-air technology. DURACELL has previously delivered to AER copies of the
issued United States patents presently owned or licensed by DURACELL or its
Affiliates relating to zinc-air technology.
(z) "Person" shall mean any natural person, corporation, company,
partnership, limited liability company, firm, association, trust, government,
governmental agency or other entity, whether acting in an individual, fiduciary
or other capacity.
(aa) "Pilot Line" means an assembly of Equipment which, when the
Equipment includes a full complement of the necessary mechanical, electrical,
pneumatic, and hydraulic components as agreed between DURACELL and AER, and
human operators, and is operated in a Process of Assembling, yields the
production of [ ]* Cells or [ ]* Cells at a minimum rate of one [ ]* Cell or
[ ]* Cell per minute and a maximum rate of 12 [ ]* Cells or [ ]*
Cells per minute.
(bb) "Pre-production Phase" shall mean the period of time beginning at
the end of the Engineering Phase and concluding with AER's establishment of the
manufacturability of the [ ]* Cell or [ ]* Cell.
(cc) "Process for Assembling" shall mean any manufacturing process for
fabricating or assembling or testing a [ ]* Cell or [ ]* Cell, or its
components.
(dd) "Production Line" shall mean an assembly of Equipment comprising
various components, which, when the Equipment includes a full complement of the
necessary mechanical, electrical, pneumatic, and hydraulic components as
specified by DURACELL and AER, and human operators, and is operated in a Process
of Assembling, yields the production of [ ]* Cells at a rate of at least 45 [ ]*
Cells per minute.
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(ee) "Production Qualification" shall mean qualification of a [ ]* Cell
according to a predetermined DURACELL/AER qualification plan which is designed
to validate and evaluate product.
(ff) "Program" shall mean the research and development program conducted
by DURACELL and AER under this Agreement funded by DURACELL for the purpose of
designing [ ]* Cells or [ ]* Cells under and limited to the research and
development activities set forth in the currently approved version of the
Program Objectives.
(gg) "Program Objectives" shall mean the written statement of the
currently approved research and development activities of the Program, as agreed
to by AER and DURACELL, as amended from time to time. The Program Objectives
will be amended from time to time upon mutual written agreement between DURACELL
and AER. The version of the Program Objectives which results after amendment
shall thereafter be known as the currently approved version of the Program
Objectives, which shall set forth the currently approved research and
development activities.
(hh) "Program Technology" shall mean any information, know-how,
knowledge, inventions, discoveries, improvements, trade secrets, Patents and
other proprietary rights developed under the Program or which result from work
conducted under the Program (and conceived or reduced to practice by AER or
DURACELL or both or their respective Affiliates during the duration of the
Program or within six months following termination of the Program and which
result from the work conducted under the currently approved version of the
Program Objectives). The Program Objectives and any and all work conducted by
either DURACELL or AER personnel wherein such personnel are performing work
under the Program Objectives shall be Program Technology. Independent Research
shall not constitute Program Technology unless the party conducting the
Independent Research agrees in writing in its sole discretion and in exchange
for an agreed upon amount of cash or other agreed upon consideration that such
Independent Research shall be used in connection with the Program Objectives and
such Independent Research shall thereafter be considered as always having been
Program Technology and not Independent Research. Once any proprietary rights
become Program Technology they remain Program Technology forever regardless of
the nature of the work conducted under later approved versions of the Program
Objectives or the termination of this Agreement. AER shall record the transfer
to DURACELL of any Patents (including Patent applications) included in AER's
Independent Research which subsequently becomes Program Technology.
(ii) "Second Sales Year" shall mean the one year period beginning on the
day after the end of the First Sales Year.
(jj) "Sole Inventions" shall mean inventions, discoveries, and
improvements and their related Patents which relate to primary and not
rechargeable batteries by an inventor or inventors
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employed by only one of the parties, and which would be solely owned by the
party employing said inventor or inventors absent the provisions of this
Agreement.
(kk) "Sublicense" shall mean any agreement by DURACELL 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 DURACELL or AER.
(ll) "Sublicensee" shall mean the recipient of a Sublicense.
(mm) "Test Services" shall mean [ ]* Cell and [ ]* Cell testing work
including, without limitation, such as may be conducted at the DURACELL
Worldwide Technology Center in Needham, Mass. including measurement of
performance, and resistance to abuse.
(nn) "Third Sales Year" shall mean the one year period beginning on the
day after the Second Sales Year.
ARTICLE 2 - RESEARCH AND DEVELOPMENT; CERTAIN PAYMENTS
2.1 Research and Development Program. DURACELL and AER shall conduct the Program
as set forth in the currently approved version of the Program Objectives.
DURACELL shall conduct with AER personnel monthly technology reviews at AER's
offices in Smyrna, Georgia or at a mutually acceptable location describing in
reasonable detail all Program activities carried out since the date of the last
such review (or, in the case of the first such review, since the date hereof)
and the results thereof and determining what Program Technology, if any, has
been developed since the last such review. After each such review, AER will
prepare a written report summarizing such review, subject to approval by
DURACELL, which approval shall not be unreasonably withheld.
2.2 Program Planning. DURACELL shall meet with AER before or upon the Effective
Date, and thereafter shall meet with AER each calendar quarter to discuss the
Program Objectives for the second successive quarter thereafter and the amount
of any payments due AER for such second successive quarter, except that the
initial meeting shall cover the work objectives and payments for the first two
quarters. Final written agreement to any proposed changes in the Program
Objectives, and the amount of any payments to AER for AER's work to be conducted
or materials or Equipment to be ordered in such second successive quarter, shall
be reached by the end of the second quarter preceding such second successive
quarter. DURACELL's payments to AER for a quarter shall be made within five (5)
days after the start of that quarter. Work shall not commence on the Program
Objectives for a quarter unless DURACELL and AER have mutually agreed in writing
on said objectives.
2.3 Termination and Refund. Program activities shall continue for the term of
this Agreement, unless the Program is terminated earlier by either DURACELL or
AER, at its sole discretion. Early termination of the Program does not prevent
later reinstatement of the Program during the term of
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this Agreement, but only if both parties first agree to reinstatement of the
Program, nor shall termination of the Program affect any rights of the parties
accrued under the Program prior to such termination. In the event that either
party decides to terminate the Program, it may do so effective upon written
notice to the other party at least ninety (90) days prior to the termination
date, and upon any such termination effective other than at the end of a
calendar quarter, AER shall promptly refund to DURACELL a pro rata portion of
the amount paid by DURACELL pursuant to Section 2.2 for that quarter that is
equal to the number of days remaining in the quarter following termination
relative to the total number of days in that quarter, but less any
non-cancelable expenses already committed to be spent by AER and less any
expenses related to the Program already incurred by AER.
2.4 Product Development Procedures. Development of any new or improved [ ]* Cell
or [ ]* Cell resulting from the Program will proceed under normal DURACELL
product development procedures, from the Concept Phase through the Engineering
Phase. AER and DURACELL will be responsible for the development of any new or
improved [ ]* Cell or [ ]* Cell developed under the Program, from pre-production
through production, as set forth more completely in the Program Objectives.
AER's responsibilities will include cooperation with respect to all Production
Qualification of [ ]* Cells or [ ]* Cells resulting from the Program. DURACELL
will provide to AER details as how to conform to DURACELL's product development
procedures.
2.5 Test Services. DURACELL will supply, at no cost to AER, Test Services to AER
for DURACELL to carry out Production Qualification for the [ ]* Cells or [ ]*
Cells developed under the Program.
2.6 Disclosure of Independent Research. Each quarter AER shall disclose to
DURACELL information concerning AER's actual Independent Research during the
prior quarters or proposed for the following quarter or quarters, and at
DURACELL's sole discretion, each quarter DURACELL may disclose to AER
information concerning DURACELL's actual Independent Research during the prior
quarter or proposed for the following quarter or quarters.
2.7 Certain Payments. DURACELL will pay to AER $50,000.00 upon delivery to
DURACELL of the [ ]* Design Guide. Notwithstanding Section 2.2 of this
Agreement, DURACELL also will pay to AER the following: (a) upon execution and
delivery of this Agreement by DURACELL, (i) $50,000.00 for the option for the
Exclusive [ ]* Cell License; and (ii) $300,000.00 for work, materials and
Equipment under the Program for 1998; and (b) during 1999: (i) $375,000.00 per
quarter for work, materials and Equipment under the Program; and (ii)
$1,100,000.00 in January 1999 for the option for the Exclusive [ ]* Cell
License; provided that the amounts set forth in Section 2.7(b)(i) need not be
paid following any termination of the Program if DURACELL has made a reasonable
determination that there has been a fundamental adverse change in the market for
[ ]* Cells or that the AER Technology and the Program Technology will not
achieve the purposes intended by this Agreement.
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ARTICLE 3 - RIGHTS, OWNERSHIP, AND RELATED LICENSES
3.1 DURACELL's Full Ownership of Program Technology. AER hereby sells, assigns
and conveys all right, title, and interest, immediately and irrevocably, to
DURACELL, in all Program Technology.
3.2 License of AER Technology to DURACELL.
(a) License. AER hereby grants to DURACELL and DURACELL's Affiliates the
perpetual, non-exclusive, royalty-bearing, worldwide right and license under the
AER Technology, with the right to grant Sublicenses, to make, have made, use,
sell and offer to sell [ ]* Cells.
(b) Air Manager Design Guide. At the time of the execution and delivery of
this Agreement, AER will deliver to DURACELL a copy of the Air Manager Design
Guide. AER will also deliver to DURACELL any updates to the Air Manager Design
Guide.
(c) Royalty Payments and Reports.
(i) DURACELL shall pay to AER a royalty equal to [ ]* of the Net Sales
of any [ ]* Cell covered by one or more unexpired Patents (including Patent
applications) included within AER Technology sold by DURACELL or an Affiliate or
Sublicensee of DURACELL, the [ ]* royalty rate being applicable for so long as
AER is required to pay a royalty to DEMI under the DEMI Agreement and such rate
shall decrease to [ ]* thereafter. Such 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 forty-five (45) days following the end of such
quarter. Such payment shall be made in U.S. dollars. For any transaction by
DURACELL made in any foreign currency, the conversion to U. S. dollars will be
at rates DURACELL uses as reflected in its financial statements from time to
time.
(ii) Accurate books of account shall be kept by DURACELL and shall be
open for three (3) 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 DURACELL'S independent public accountants, which shall provide a
written report to AER and DURACELL, and AER's independent public accountants
shall have the right to review such report and the work papers prepared by
DURACELL's independent public accountants related to products sold under this
Agreement. Such inspection and review shall take place no more than once each
year. DURACELL will pay for such inspection and review by DURACELL's independent
public accountants. Prompt adjustment shall be made to the proper party to
compensate for any errors or omissions disclosed by such inspection and review.
(iii) Each payment of royalties shall be accompanied by a written report
signed by an officer of DURACELL indicating the volume of [ ]* Cells subject to
the royalty that were
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sold to any customer by DURACELL or an Affiliate or Sublicensee of DURACELL
during the calendar quarter, the Net Sales attributable thereto, and the
calculation of the royalty payable. DURACELL shall furnish whatever additional
information AER may reasonably request from time to time to enable AER to
ascertain which products of DURACELL are subject to payment of royalties
hereunder, and the amount of royalties payable thereon.
3.3 Licenses of Program Technology to AER.
(a) For [ ]* Cells. DURACELL hereby grants to AER and AER's Affiliates
the perpetual, non-exclusive, royalty-bearing, worldwide, right and license
under the Program Technology to make, have made (other than by Battery
Manufacturers), use, sell and offer to sell (but not to Battery Manufacturers)
[ ]* Cells. AER shall have the right to grant Sublicenses of the right to make
[ ]* Cells under the Program Technology to OEMs, and to other Persons other than
Battery Manufacturers which DURACELL approves, which approval shall be granted
if the Sublicensee is a Person which intends to utilize the Program Technology
in a manner which will generate aftermarket sales to DURACELL.
(b) For Rechargeable Cells and Batteries. DURACELL further grants to AER
the perpetual, non-exclusive, royalty-free, worldwide, paid-up, right and
license under the Program Technology, with the right to grant Sublicenses, to
make, have made, use, sell and offer to sell, without restriction, rechargeable
cells and batteries utilizing the Program Technology.
(c) Royalty Payments and Reports.
(i) AER shall pay to DURACELL a royalty equal to [ ]* of the Net
Sales of any [ ]* Cell covered by one or more unexpired Patents (including
Patent applications) included within Program Technology sold by AER or an
Affiliate or Sublicensee of AER, the [ ]* rate being applicable for so long as
AER is required to pay a royalty to DEMI under the DEMI Agreement and such rate
shall increase to [ ]* thereafter. Such royalty payments shall be made to
DURACELL on a calendar quarterly basis for sales made during the previous
quarter and shall be paid to DURACELL no later than forty-five (45) days
following the end of such quarter. Such payment shall be made in U.S. dollars.
For any transaction by AER made in any foreign currency, the conversion to U.S.
dollars will be at rates AER uses as reflected in its financial statements from
time to time.
(ii) Accurate books of account shall be kept by AER and shall be
open to inspection and review, adjustments shall be made, expenses shall be
borne and information shall be furnished, all in the manner set forth in Section
3.2(c).
(iii) Each payment of royalties shall be accompanied by a written
report signed by an officer of AER indicating the volume of [ ]* Cells subject
to the royalty that were sold to any customer by AER or an Affiliate of AER
during the calendar quarter, the Net Sales attributable
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thereto, and the calculation of the royalty payable. AER shall furnish whatever
additional information DURACELL may reasonably request from time to time to
enable DURACELL to ascertain which products of AER are subject to payment of
royalties hereunder, and the amount of royalties payable thereon.
3.4 Licenses of AER Technology. Subject to Section 3.5, AER may grant any
license of AER Technology and AER Independent Research to any party, and nothing
in this Agreement shall prevent AER from granting said non-exclusive, worldwide
or territorially restricted licenses of AER Technology and AER Independent
Research to one or more OEMs and other Persons (including Battery Manufacturers)
to make, have made, use, sell and offer to sell (a) [ ]* Cells and (b) except as
otherwise provided in Section 3.5, [ ]* Cells, and nothing in this Agreement
shall limit in any way AER's ability to license zinc-air technology for use in
[ ]* cells and batteries.
3.5 DURACELL's Option to Make [ ]* Cells.
(a) During the period from the Effective Date through August 31, 2001
(the "Exclusive License Option Period"), DURACELL shall have the option to take
the Exclusive [ ]* Cell License, as set forth in this Section 3.5. If DURACELL
elects to exercise the option to take the Exclusive [ ]* Cell License, it shall
provide written notice of such election to AER and shall make the payment
provided for in Section 3.5(d)(i) below. Upon giving such notice and making such
payment, the Exclusive [ ]* Cell License shall immediately be in full force and
effect in accordance with the terms and conditions of this Section 3.5. Under
the Exclusive [ ]* Cell License, DURACELL shall have a perpetual, worldwide,
exclusive right and license under all Patents (including Patent applications)
owned or licensed by AER at the time DURACELL takes the Exclusive [ ]* Cell
License, and whether or not said Patents (including Patent applications) are
developed under the Program, except for Patents and Patent applications licensed
to AER by DURACELL under Section 3.3, with the right to grant Sublicenses, to
make, have made, use, sell and offer to sell [ ]* Cells utilizing said Patents
and Patent applications. Under the Exclusive [ ]* Cell License, DURACELL has the
obligation to pay a royalty to AER. Such royalty shall be [ ]* of Net Sales. The
Exclusive [ ]* Cell License will convert to non-exclusive if AER does not
receive, during the six (6) year period beginning on the date of the
effectiveness of the Exclusive [ ]* Cell License (as described above), a total
of [ ]* from the sum of (i) royalty payments payable pursuant to this Section
3.5(a), (ii) the additional license fee payments provided for in Section 3.5(d)
below, and (iii) any other payments DURACELL may wish to make to AER to reach
the total of [ ]*. The terms and conditions of the Non-Exclusive [ ]* Cell
License shall be as provided in Sections 3.5(e) and (f) and Section 3.7 below.
(b) DURACELL shall pay to AER $1,150,000.00 for DURACELL's option to
take the Exclusive [ ]* Cell License, such payments to be made as set forth in
Section 2.7. DURACELL shall be obligated to make these payments even if it
determines that it does not wish to exercise the option to take the Exclusive
[ ]* Cell License.
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(c) During the Exclusive License Option Period and during the period the
Exclusive [ ]* Cell License is in effect, AER shall not license other Battery
Manufacturers to make [ ]* Cells, nor make [ ]* Cells for Battery Manufacturers,
nor work with Battery Manufacturers to develop [ ]* Cells, nor make [ ]* Cells
for sale to others.
(d) If DURACELL elects to exercise the option to take the Exclusive [ ]*
Cell License, DURACELL shall pay to AER, in addition to the royalties provided
for in Section 3.5(a), an additional license fee amount as follows:
(i) upon DURACELL's exercise of the option to take the Exclusive
[ ]* Cell License, an amount equal to [ ]* of DURACELL's then current forecast
of [ ]* Sales for the First Sales Year;
(ii) no later than the first day of the First Sales Year, an
amount equal to [ ]* of DURACELL's then current forecast of [ ]* Sales for the
First Sales Year;
(iii) if the sum of the amounts paid by DURACELL to AER under
clauses (i) and (ii) above is less than [ ]* of actual [ ]* Sales for the First
Sales Year, DURACELL will pay such difference to AER no later than forty-five
(45) days following the end of the First Sales Year;
(iv) no later than forty-five (45) days following the end of the
Second Sales Year, an amount equal to [ ]* of [ ]* Sales for the Second Sales
Year; and
(v) no later than forty-five (45) days following the end of the
Third Sales Year, an amount equal to [ ]* of [ ]* Sales for the Third Sales
Year.
If the sum of the amounts previously paid by DURACELL to AER pursuant to
Sections 3.5(d)(i) and (ii) exceeds an amount equal to [ ]* of actual [ ]* Sales
for the First Sales Year, DURACELL shall notify AER and AER shall pay such
excess to DURACELL within five (5) days thereafter.
(vi) Accurate books of account with respect to [ ]* Sales for the
First Sales Year, Second Sales Year and Third Sales Year shall be kept by
DURACELL and shall be open for three (3) years following the close of the year
to which they pertain. At AER's written request, such records shall be inspected
and reviewed for accuracy by DURACELL'S independent public accountants, which
shall provide a written report to AER and DURACELL, and AER's independent public
accountants shall have the right to review such report and the work papers
prepared by DURACELL's independent public accountants. Such inspection and
review shall take place no more than once each year. DURACELL will pay for such
inspection and review. Prompt adjustment shall be made to the proper party to
compensate for any errors or omissions disclosed by such inspection and review.
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(vii) Each payment of additional license fee amount shall be
accompanied by a written report signed by an officer of DURACELL, in a form
reasonably acceptable to AER, showing a computation thereof, including without
limitation the following: the number of [ ]* Cells by model number, product name
or other readily identifiable product designation that were included in Net
Sales by DURACELL for the year, the gross selling prices attributable to such
products and detailing the deductions from the gross selling prices in computing
the Net Sales attributable thereto. DURACELL shall furnish whatever additional
information AER may reasonably request from time to time to enable AER to
ascertain the additional license fee amount payable hereunder.
(viii) Notwithstanding the foregoing, the maximum amount payable
by DURACELL to AER as additional license fee under this Section 3.5(d) shall be
[ ]*, but which amount is reduced as set forth in Section 3.5(d)(ix).
(ix) DURACELL shall be entitled to credit against amounts payable
by DURACELL under this Section 3.5 in respect of the First Sales Year an
advertising allowance in the amount of [ ]* of the advertising expenditures of
DURACELL during the First Sales Year applicable to products for which royalties
would be payable under the Exclusive [ ]* Cell License; provided that such
advertising allowance credit shall not exceed [ ]*, or [ ]* of the total amounts
paid by DURACELL under this Section 3.5 in respect of the First Sales Year,
whichever is less.
(e) If DURACELL has made the payments required under Section 3.5(b) and
does not elect to exercise the option to take the Exclusive [ ]* Cell License
prior to September 1, 2001, DURACELL shall have a second option through August
31, 2004 to take the Non-Exclusive [ ]* Cell License. If DURACELL elects to
exercise the option to take the Non-Exclusive [ ]* Cell License, it shall
provide written notice of such election to AER. Upon giving such notice, the
Non-Exclusive [ ]* Cell License shall immediately be in full force and effect in
accordance with the terms and conditions of this Section 3.5. The royalty rate
under the Non-Exclusive [ ]* Cell License shall be [ ]* of Net Sales. Under the
Non-Exclusive [ ]* Cell License, DURACELL shall have a perpetual, worldwide,
non-exclusive, royalty-bearing right and license under all of the Patents
(including Patent applications) owned or licensed by AER, except for Patents and
Patent applications licensed to AER by DURACELL under Section 3.3, with the
right to grant Sublicenses, to make, have made, use, sell and offer to sell [ ]*
Cells utilizing said Patents and Patent applications. Under the Non-Exclusive
[ ]* Cell License, AER would not be restricted in any way from licensing AER
Technology to Battery Manufacturers or other Persons.
(f) The Exclusive [ ]* Cell License shall become effective and be in
full force and effect immediately upon the exercise by DURACELL of the option to
take such Exclusive [ ]* Cell License, and the Non-Exclusive [ ]* Cell License
shall become effective and be in full force and effect immediately upon the
exercise by DURACELL of the option to take such Non-Exclusive [ ]* Cell License,
in each case without the need for any further act or agreement in order to
effectuate
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such license. The terms of the Exclusive [ ]* Cell License and the Non-Exclusive
[ ]* Cell License shall be governed by this Section 3.5 and the other applicable
provisions of this Agreement (including without limitation Articles 5, 6, 7, 9,
10 and 11). If the parties hereto wish to provide for additional terms with
respect to either such license which are not inconsistent with the terms and
conditions set forth in this Section 3.5, the parties may negotiate such
additional terms, but the failure of the parties to reach agreement with respect
thereto shall not affect the validity of the Exclusive [ ]* Cell License or the
Non-Exclusive [ ]* Cell License, as the case may be.
(g) Notwithstanding the foregoing in this Section 3.5, if DURACELL
terminates the Program pursuant to Section 2.3 prior to the end of the term of
this Agreement, then AER shall have the option exercisable by written notice to
DURACELL within one hundred eighty (180) days following such termination to
repurchase and cancel DURACELL's option to obtain the Non-Exclusive [ ]* Cell
License by paying to DURACELL an amount equal to fifty percent (50%) of the
aggregate amount paid by DURACELL to AER under Section 3.5(b).
3.6 Product Marking. DURACELL and AER will mark in accordance with all
applicable patent marking laws all products made, used or sold by either party.
3.7 Non-Discriminatory Pricing. AER agrees that, with respect to royalty rates
applicable to DURACELL pursuant to Sections 3.2(c)(i), 3.5(a), 3.5(e), 11.13(h),
11.13(i) and 11.13(j), such rates will be adjusted prospectively to the extent
necessary (but not above the rates set forth in this Agreement) so that DURACELL
will have royalty rates for [ ]* Cells as favorable as the lowest royalty rate
charged by AER for AER Technology or AER Independent Research used in [ ]* Cells
for Retail Sale, and DURACELL will have royalty rates for [ ]* Cells as
favorable as the lowest royalty rate charged by AER for AER Technology or AER
Independent Research used in [ ]* Cells for Retail Sale, as applicable.
Notwithstanding the foregoing, no such adjustment will be made if the lower
royalty rate is charged by AER with respect to only an insignificant aspect of
AER Technology or AER Independent Research; [ ]*. Upon execution thereof, AER
will disclose to DURACELL any license which AER believes falls with the purview
of the prior sentence. For purposes of this Section 3.7, "Retail Sale" shall
mean the sale and subsequent distribution of a [ ]* Cell or a [ ]* Cell to
replace a similar cell originally included in a Consumer Product, or to fill a
cavity designed to use a [ ]* Cell or a [ ]* Cell where the Consumer Product is
sold to consumers without first including a [ ]* Cell or a [ ]* Cell therein.
"Retail Sale" shall not include the sale of [ ]* Cells or [ ]* Cells directly to
OEMs for inclusion in a Consumer Product, and such sales by AER shall not affect
the royalty rates applicable to DURACELL pursuant to Sections 3.2(c)(i), 3.5(a),
3.5(e), 11.13(h), 11.13(i) and 11.13(j).
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ARTICLE 4 - REPRESENTATIONS
As of the Effective Date, DURACELL and AER each represents and warrants to the
other that:
4.1 No Claims. To the best of its present knowledge and belief, there are no
pending or threatened claims of Patent infringement, copyright infringement or
misappropriation of trade secrets against it regarding the DURACELL Technology
or AER Technology, respectively; and there are no pending or threatened claims
against it which call into question its rights to license to the other the
Program Technology or AER Technology, respectively, and it does not have under
active consideration the seeking of a license under any specific Patent by
reason of the potential infringement of such Patent by use of the Program
Technology or AER Technology, respectively.
4.2 Authority; No Violation; Binding Obligation. The execution and delivery of
this Agreement by it and the performance of its obligations hereunder have been
duly authorized by all necessary corporate action and do not conflict with,
violate or constitute a default or breach under any agreement 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. AER represents and
warrants to DURACELL that (a) the DEMI Agreement is in full force and effect,
that AER is not in default under the DEMI Agreement, and so far as is known to
AER, neither DEMI nor Cheiky is in default under the DEMI Agreement; and (b) the
DEMI Agreement does not conflict with the provisions of this Agreement, as
modified by the AER/CHEIKY/DEMI/DURACELL Agreement of even date herewith
attached as Exhibit A.
4.3 No Licenses. AER represents and warrants to DURACELL that AER is not
currently the grantor of any license to any Person under any AER Technology
Patents.
4.4 No Other Representations. Except as provided in Sections 4.1, 4.2 and 4.3
neither DURACELL nor AER makes any representations or warranties with respect to
the DURACELL Technology or AER Technology, respectively, or with respect to any
[ ]* Cell or [ ]* Cell or Consumer Product or their subsequent manufacture,
including without 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.
ARTICLE 5 - INDEMNIFICATION
5.1 Indemnification. DURACELL and AER shall each defend, hold harmless and
indemnify the other and its past, present and future directors, officers,
employees, Affiliates, successors, assigns, distributors and customers, whether
wholesale or retail, during the term of this Agreement and thereafter from and
against any and all liability, costs and expenses (collectively "Costs") arising
out of (a) 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 it; or (b) its failure to comply
with relevant laws, rules, regulations, ordinances, permits or
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licenses. DURACELL and AER shall notify the other promptly in writing after
notice of such claim is received, and each shall give the other reasonable
assistance, at the other's expense, 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 5.1, the party
receiving notice shall notify the other and senior management of both shall meet
to discuss how to handle the matter.
ARTICLE 6 - INFRINGEMENT OF AER'S OR DURACELL'S PATENTS;
OR OPPOSITION PROCEEDINGS BY THIRD PARTIES
6.1 Third Party Infringement.
(a) In the event that one party learns of an infringement by a third
party of DURACELL's or AER's Patents, or of an opposition proceeding by a third
party attacking the validity of a DURACELL or AER Patent, it shall immediately
provide the other party with a written statement of the facts of the
infringement or opposition, to the extent known. Within a reasonable time
thereafter, including time to satisfy itself as to the facts, with respect to a
notice of a third party infringement, the owner of the Patent 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 one party chooses not to bring such an infringement suit, the
other party may, at its own expense and in the name of the owner or in its own
name, or both, 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 single party 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 suit.
(d) 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.
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ARTICLE 7 - CONFIDENTIALITY
7.1 Trade Secrets and Other Confidential Information. Non-public technology,
data, methods, know-how, techniques, trade secrets and other information
furnished or made available by either party hereunder, whether directly or
indirectly ("Confidential Information" as further defined in the following
paragraph), is for the receiving party's own use in the development, manufacture
and sale of [ ]* Cells or [ ]* Cells, or in the use of Equipment, or in the
practice of a Process of Assembling, and is to be kept confidential, by the
receiving party during the term of this Agreement and for a period of five (5)
years thereafter, or in the case of trade secrets, for so long as they remain
trade secrets.
"Confidential Information" shall be identified as information of either
AER or AER's Affiliates, or DURACELL or DURACELL'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 by DURACELL or its Affiliates as either "DURACELL Proprietary"
or "DURACELL Confidential"; or by AER or its Affiliates as "AER Proprietary" or
"AER 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 thirty (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.
DURACELL and AER respectively and on behalf of their respective Affiliates agree
that such Confidential Information is not to be given, sold or disclosed by the
receiving party to any other party without the prior written consent of the
disclosing party, except as authorized herein. The parties agree to use their
best efforts to maintain the confidentiality of the Confidential Information
disclosed to them and each shall use no less than the same safeguards as its
uses to protect its own confidential information of a similar nature.
7.2 Non-Disclosure. The receiving party shall disclose Confidential Information
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
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derived therefrom, to any other third party 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.
7.3 Exceptions. The confidentiality obligation of the receiving party under
Sections 7.1 and 7.2 shall not apply to Confidential Information which:
(a) is or becomes publicly known through no wrongful act of the
receiving party or its employees;
(b) is received by the receiving party without restriction from a third
party without breach of any obligation of nondisclosure;
(c) is or has been independently developed by the receiving party;
(d) is publicly disclosed pursuant to a governmental or judicial
requirement;
(e) 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; or
(f) is AER Confidential Information which is included in Program
Technology to the extent it has already been published in a DURACELL Patent
application or Patent.
ARTICLE 8 - SOLE AND JOINT INVENTIONS; PATENT APPLICATIONS
8.1 Sole and Joint Inventions. The assignment provided and the licenses granted
under Article 3 shall apply to Sole and Joint Inventions which are conceived
under the Program. Joint Inventions conceived outside of the Program shall be
jointly owned by AER and DURACELL but neither party shall license any Person
with respect thereto without the prior written consent of the other party to
this Agreement.
8.2 Patent Applications. Patent applications for the Program Technology shall be
filed in the name of the inventors and assigned to DURACELL, which shall file
and prosecute such Patent applications at its own expense. Each party shall
cooperate with the other party to provide information and assistance in the
preparation and prosecution of any Patent applications, including, without
limitation, Joint Inventions conceived outside of the Program.
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ARTICLE 9 - TERM AND TERMINATION
9.1 Term; Termination. Unless earlier terminated pursuant to this Section 9.1 or
Section 11.13, this Agreement shall terminate ten (10) years from the Effective
Date. This Agreement may be terminated 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 shall not be cured within
ninety (90) days after written notice thereof from the other party, specifying
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 90-day period;
provided, however, that no such termination shall be permitted if the breaching
party begins to remedy the breach within such 90-day period and pursues
diligently such remedy and such breach is remedied within one hundred fifty
(150) 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 90 and
150-day cure periods but shall be subject to only a ten (10)-day cure period.
9.2 Continuing Obligations. Upon termination of this Agreement as provided in
this Article 9 or Section 11.13, all obligations undertaken by the parties
hereunder, including, without limitation, DURACELL's and AER's obligations to
continue to conduct the Program, shall terminate immediately, except as follows:
(a) The licenses and options to obtain a license granted under this
Agreement (Sections 3.2 through 3.7) shall continue in accordance with their
terms following termination of this Agreement; provided, however, that if a
party hereto terminates this Agreement due to a breach of a material obligation
by the other party, the party terminating this Agreement may also terminate any
licenses granted by it under this Agreement, and provided, further, that if this
Agreement is terminated pursuant to Section 11.13, all licenses and options to
obtain a license granted by DURACELL and AER shall be modified or terminate as
set forth in Section 11.13; and
(b) Articles 3 (except as otherwise provided in Sections 9.2(a) and
11.13), 5, 6, 7, 9, 10 and 11 shall remain in full force and effect.
9.3 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.
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ARTICLE 10 - DEMI PAYMENTS, NET WORTH, ETC.
10.1 DEMI Agreement. If AER fails to pay DEMI the dollar amounts set forth on
Appendix 4 of the DEMI Agreement (under the provisions of Section 2(b) thereof)
or in the event AER fails to meet the minimum royalty payments as set forth in
Appendix 5 of the DEMI Agreement, then within thirty (30) business days of the
date any such payment is due, AER shall give notice to DURACELL in order to
afford DURACELL the opportunity to make these payments to DEMI so as not to lose
the exclusive worldwide right and license to use the Licensed Rights granted
from DEMI and CHEIKY to AER. If DURACELL makes any such payment to DEMI on
behalf of AER, AER will reimburse DURACELL within thirty (30) days after such
payment by DURACELL.
10.2 Net Worth. AER will use its best efforts to maintain a positive net worth
(total assets minus total liabilities as determined under generally accepted
accounting principles, consistently applied) and pay its debts as they mature.
If AER files a petition under Chapter 7 of the United States Bankruptcy Code,
prior to so doing, it shall notify DURACELL of its intention to file such a
petition, and upon request of DURACELL, AER will sell to DURACELL, for its then
fair market value, any of AER's Pilot Line, Production Line, [ ]* Cells in
inventory, [ ]* Cells in inventory, work in progress related thereto and related
support tools and fixtures, and DURACELL may make an offer to purchase all or
part of the AER Technology but AER shall be under no obligation to accept any
such offer. The licenses set forth in this Agreement will survive any bankruptcy
of AER pursuant to Section 365(n) of the United Sates Bankruptcy Code.
10.3 Return of DURACELL Equipment. If AER files a petition under Chapter 7 of
the United States Bankruptcy Code, prior to so doing, it will return to DURACELL
all materials and Equipment which have been designated for the Program and paid
for by DURACELL.
10.4 Periodic Reports. Promptly after filing, AER will deliver to DURACELL
copies of all periodic reports AER files with the Securities and Exchange
Commission, and appropriate AER personnel will review such periodic reports with
appropriate DURACELL personnel.
ARTICLE 11 - MISCELLANEOUS
11.1 Good Faith. DURACELL and AER will act in good faith to carry out their
respective obligations under this Agreement.
11.2 Press Releases. DURACELL 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. AER will not issue any press releases relating to this Agreement
or DURACELL without DURACELL's written consent, which consent will not be
unreasonably withheld.
- ----------------------------
* Confidential Information 20
<PAGE> 24
11.3 [ ]* Technology. Nothing in this Agreement shall limit in any way
DURACELL'S or AER's rights with respect to the ownership, development, license
and sale of [ ]* battery technology.
11.4 Independent Contractors. The parties hereto are independent contractors and
shall have no power, nor will either of the parties represent that either has
any power, to bind the other party or to assume or to create any obligation or
responsibility, expressed or implied, on behalf of the other party or in other
party's name. This Agreement shall not be construed as constituting DURACELL,
and AER as partners or as creating any other form of legal association which
would impose liability upon one party for the act or failure to act of the
other.
11.5 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 a late payment charge calculated monthly at a fluctuating
rate of interest equal to two percent (2%) over the prime rate (or equivalent
designation) announced by Citibank, N.A., New York City, 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. In the event that such prime rate (or equivalent
designation) shall be discontinued or become unavailable for any reason, the
prime rate (or equivalent designation) of another bank in New York City shall be
selected by AER and approved by DURACELL, which approval shall not be
unreasonably withheld.
11.6 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.
11.7 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.
11.8 Governing Law. 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 Connecticut, without
regard to any laws relating to conflicts of law.
11.9 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 ninety
(90) days, either party may submit the dispute to binding arbitration pursuant
to the Commercial Arbitration Rules of the American Arbitration Association. The
place of arbitration shall be Hartford, Connecticut. The parties shall be bound
by any award issued as a result of such arbitration and such
- ----------------------------
* Confidential Information 21
<PAGE> 25
award may be enforced by any court of competent jurisdiction. The State and
Federal Courts of Connecticut, Georgia and New York shall be courts of competent
jurisdiction for the purpose of this provision. Process in any action or
proceeding referred to in the preceding sentence 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 in Section 11.11 (as the same may be changed pursuant to the provisions of
Section 11.11), and service thus made shall be taken and held to be valid
personal service upon such party.
11.10 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
(3) months, the parties hereto shall consult with each other with respect to an
equitable solution.
11.11 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 in
the United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by delivering the
same in person or by telecopier. Such notice shall be deemed received on the
date on which it is hand-delivered or on the third business day following the
day on which it is so mailed; provided, however, that any notice by telecopier
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:
If to DURACELL: Donal B. Tobin or Paul I. Douglas
Patent and Trademark Counsel
The Gillette Company
Prudential Tower Building
Boston, MA 02199
Telecopier: (617) 421-7866
with a copy to: Kevin Loftus, Legal Department
DURACELL North Atlantic Group
Berkshire Corporate Park
Bethel, CT 06801
Telecopier: (203) 796-4518
- ----------------------------
* Confidential Information 22
<PAGE> 26
If to AER: Mr. David W. Dorheim
AER Energy Resources, Inc.
4600 Highlands Parkway
Suite G
Smyrna, GA 30082
Telecopier: (770) 433-2286
Any party may, by written notice to the other party in accordance with
this Section 11.11, change the address or addressee to which notices, requests
or other communications shall be given.
11.12 Further Assurances. DURACELL 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.
11.13 Assignment. This Agreement is personal to DURACELL, DURACELL 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 any party may assign its rights and obligations under this
Agreement to an Affiliate without the consent of the other party or parties
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 AER's obligations
under this Agreement.
Notwithstanding any of the provisions of this Agreement to the contrary,
if AER transfers all of its rights and obligations under this Agreement without
the consent of DURACELL in connection with the sale or transfer of all or
substantially all of AER's business to a Battery Manufacturer or one or more of
its Affiliates (collectively a "Manufacturer"):
(a) AER will return to DURACELL all of DURACELL'S Confidential
Information in its possession prior to such sale or transfer and AER will not
disclose any of DURACELL's Confidential Information or Program Technology to the
Manufacturer except that AER will be permitted to disclose Confidential
Information of DURACELL to a third party to the extent otherwise permitted by
Section 7.3 of this Agreement;
(b) the licenses granted by DURACELL to AER under Section 3.3 shall
apply only to products AER is selling commercially on the date of such sale or
transfer;
- ----------------------------
* Confidential Information 23
<PAGE> 27
(c) the royalty rate for licenses granted by DURACELL to AER under
Section 3.3(a) shall increase to [ ]*;
(d) the licenses granted by DURACELL to AER under Section 3.3 shall
terminate three (3) years after the date of the closing of such sale or
transfer, if DURACELL decides in its sole discretion to terminate such licenses;
(e) DURACELL shall have no obligation to assist such Manufacturer with
any research and development activities;
(f) for twenty-four (24) months following such sale or transfer, AER
will provide DURACELL with priority access to AER's production facilities as
reasonably necessary to enable AER to fulfill its obligations to DURACELL;
(g) DURACELL, in its sole discretion, may terminate the Program at any
time after the execution and delivery by AER of a definitive agreement for the
sale or transfer to a Manufacturer of all or substantially all of AER's business
and at any time after the closing of such sale or transfer; provided, however,
that, notwithstanding the provisions of Section 2.3, DURACELL shall not be
required to give a 90-day notice of such termination and may make such
termination effective immediately or upon such notice as DURACELL in its
absolute discretion may determine;
(h) the royalty rate normally payable by DURACELL to AER under Section
3.2(c) shall be reduced to [ ]* until July 19, 2004, and then reduced to [ ]*
thereafter, but AER shall still owe royalties under the DEMI License as set
forth therein;
(i) (i) if such sale or transfer to a Manufacturer occurs prior to March
1, 2000, DURACELL shall have the option to take the Exclusive [ ]* Cell License
prior to September 1, 2001, with the obligation to pay royalties equal to [ ]*
of Net Sales until July 19, 2004 and [ ]* thereafter, upon a one-time payment to
AER or the Manufacturer no later than August 31, 2001 of [ ]*, but the period of
exclusivity shall last only through the earlier of the (x) date which is [ ]*
after the first commercial shipment by DURACELL or its Affiliate against a
purchase order to a customer for ultimate retail sale of a [ ]* Cell, or (y)
sixty (60) months after the date the option to take the Exclusive [ ]* Cell
License is exercised, or (ii) if such sale or transfer to a Manufacturer occurs
on or after March 1, 2000 but prior to September 1, 2001, DURACELL shall have
the right to obtain the Exclusive [ ]* Cell License prior to the date which is
eighteen (18) months following such sale or transfer, with the obligation to pay
royalties equal to [ ]* of Net Sales until July 19, 2004 and [ ]* thereafter,
upon a one-time payment to AER or the Manufacturer prior to the expiration of
the eighteen (18) month period following such sale or transfer of [ ]*, but the
period of exclusivity shall last only through the earlier of (x) the date which
is [ ]* after the first commercial shipment by DURACELL or its Affiliate against
a purchase order to a customer for ultimate retail sale of a [ ]* Cell, or (y)
sixty (60) months after the date the option to take the Exclusive [ ]* Cell
License is exercised; and
- -----------------------------
* Confidential Information 24
<PAGE> 28
(j) if such sale or transfer to a Manufacturer occurs prior to September
1, 2001 and DURACELL has already taken the Exclusive [ ]* Cell License under
Section 3.5, DURACELL shall have the option, at its sole discretion, to either
(i) continue under the provisions of Section 3.5 to pay royalties to AER to keep
the Exclusive [ ]* Cell License in perpetuity (subject to conversion to
non-exclusive as provided in Section 3.5) or (ii) converting to the [ ]*
royalty, [ ]* payment and exclusivity periods provided for in Section 11.13(i).
If DURACELL has already paid AER [ ]* under Section 3.5(d) and elects to convert
to the aforementioned provisions of Section 11.13(i), DURACELL shall owe no
further payments to AER under Section 3.5 other than royalties. If DURACELL has
already paid more than [ ]* to AER under Section 3.5(d), AER shall retain all
such funds. If DURACELL has paid less than [ ]* to AER under Section 3.5(d),
DURACELL shall pay a total of [ ]* to AER no later than August 31, 2001 pursuant
to Section 11.13(i).
(k) if such sale or transfer to a Manufacturer occurs after DURACELL has
paid [ ]* to AER under Section 3.5(a), DURACELL shall retain the Exclusive [ ]*
Cell License as provided in Section 3.5, and the provisions of Sections 11.13(i)
and (j), shall not apply.
(l) AER will transfer to DURACELL all materials and Equipment which have
been designated for the Program and paid for by DURACELL or, if requested by
DURACELL, will pay to DURACELL the fair market value of such materials and
Equipment.
11.14 Amendment. 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.
11.15 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.
11.16 Successors, Etc. 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.
11.17 No Termination of DEMI Agreement. AER will not terminate the DEMI
Agreement without first giving DURACELL sufficient notice to enable AER's rights
under the DEMI Agreement to be fully assigned to DURACELL.
11.18 AER's Merger with APSI. AER will supply corporate records to DURACELL,
certified by the Georgia Secretary of State, establishing that Aerobic Power
Systems, Inc. merged into AER Energy Resources, Inc.
[signatures on next page]
25
<PAGE> 29
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer or representative as of the date
and year of first above written.
DURACELL, INC.
By: /s/ Robert A. Burgholzer, Jr.
--------------------------------------
Name: Robert A. Burgholzer, Jr.
Title: Vice President and Controller
AER ENERGY RESOURCES, INC.
By: /s/ David W. Dorheim
--------------------------------------
Name: David W. Dorheim
Title: President and Chief Executive Officer
<PAGE> 30
List of Exhibits
A. AER/CHEIKY/DEMI/DURACELL Agreement
<PAGE> 31
EXHIBIT A
AER/CHEIKY/DEMI/DURACELL
AGREEMENT
For $1.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, AER Energy Resources, Inc., a
Georgia corporation ("AER"), Michael Cheiky, a California resident ("Cheiky"),
Dreisbach Electromotive, Inc., an Ohio corporation ("DEMI"), and Duracell, Inc.,
a Delaware corporation ("DURACELL"), hereby agree, as follows:
1. DEMI Agreement. AER, Cheiky and DEMI represent and warrant to
DURACELL that 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. AER, Cheiky and DEMI
further represent and warrant to DURACELL that (a) the Original License
Agreement and the above-mentioned subsequent amendments and supplementary
agreements represent all of the amendments and supplementary agreements relating
to the Original License Agreement (the Original License Agreement and such
amendments and supplementary agreements are herein referred to collectively as
the "DEMI License"); and (b) the DEMI License is in full force and effect and no
party is in default under the DEMI License.
2. No Objections. Cheiky and DEMI agree that each has reviewed the
Technology Licenses and Services Agreement dated September 24, 1998 between
DURACELL and AER (the "DURACELL Agreement") and Cheiky and DEMI have no
objections to the provisions of the DURACELL Agreement or AER's execution and
delivery of the DURACELL Agreement.
3. 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 DURACELL, as a Sublicensee under the DEMI License.
4. 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 or DURACELL Technology or both (as "Program Technology" and "DURACELL
Technology" are defined in the DURACELL Agreement), and (b) the last sentence of
Section 1(e) and the proviso to Section 2(a) of the DEMI License shall not apply
to DURACELL, and (c) with respect to products which DURACELL 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 (as defined in the DURACELL Agreement) for which DURACELL
pays AER, and through July
<PAGE> 32
19, 2004, AER will pay royalties to DEMI or the Shareholders' Agent at a rate of
four percent (4%) of such Net Sales with respect to all Net Sales with respect
to which DURACELL or any of its Sublicensees pays AER under the DURACELL
Agreement. After July 19, 2004, no royalties will be owed by AER under the DEMI
License. AER will use its best efforts to cause DURACELL to pay to AER all
amounts owed by DURACELL to AER under the DURACELL Agreement. 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 DURACELL breaches the DURACELL Agreement by failing to pay royalties to
AER in accordance with the provisions of the DURACELL Agreement and AER fails to
cause DURACELL to meet its royalty obligations under the DURACELL Agreement
within 60 days after the breach by DURACELL, (i) DEMI shall be entitled to
proceed directly against DURACELL 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 DURACELL for DURACELL's use of
patents and other Aerobic Power Technology (as defined in the DEMI License)
owned by DEMI.
5. Indemnification. DURACELL 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 DURACELL or AER, respectively; or (ii) its
failure to comply with relevant laws, rules, regulations, ordinances, permits or
licenses. DEMI shall promptly notify DURACELL or AER or both, as appropriate, in
writing after notice of such claim is received, and shall give DURACELL or AER
or both, as appropriate, reasonable assistance at DURACELL'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 5, the party receiving notice shall notify
the other or others and their senior management shall meet to discuss how to
handle the matter.
6. DURACELL Rights Continue. If AER ceases operations or terminates or
proposes to terminate the DURACELL Agreement, 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 DURACELL to maintain in force the licenses set
forth in Sections 3.2 and 3.5 of the DURACELL Agreement and shall take no action
to impair DURACELL's licenses set forth in Sections 3.2 and 3.5 of the DURACELL
Agreement, 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 DURACELL under the DURACELL Agreement.
7. Future Amendments to DEMI License. During the term of the DURACELL
Agreement, AER, Cheiky and DEMI agree that the DEMI License will not be amended
or
A-ii
<PAGE> 33
modified in a manner which adversely effects DURACELL without the written
consent of DURACELL, which consent shall not be withheld unreasonably.
8. 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 September 17, 1998.
AER ENERGY RESOURCES, INC.
By: /s/ David W. Dorheim
-----------------------------------------
Name: David W. Dorheim
Title: President and Chief Executive Officer
/s/ Michael Cheiky
--------------------------------------------
Michael Cheiky
DREISBACH ELECTROMOTIVE, INC.
By: /s/ C. L. Smythe, Jr.
-----------------------------------------
Name: C. L. Smythe, Jr.
Title: Chairman of the Board
DURACELL, INC.
By: /s/ Robert A. Burgholzer, Jr.
-----------------------------------------
Name: Robert A. Burgholzer, Jr.
Title: Vice President and Controller
A-iii
<PAGE> 1
EXHIBIT 99.1
CONTACTS: Mary Ann Haskins or Frank Harris
AER Energy Resources, Inc.
(770) 433-2127
Fax: (770) 433-2286
http://www.aern.com
AER ENERGY AND DURACELL SIGN AGREEMENT
TO DEVELOP ADVANCED ZINC-AIR BATTERIES
ATLANTA, Georgia, September 24, 1998 - AER Energy Resources, Inc. (NASDAQ: AERN)
and Duracell Inc. (The Gillette Company/NYSE:G) today announced they have signed
a Technology Licenses And Services (TLAS) Agreement. Under the terms of the TLAS
Agreement, AER Energy is licensing its zinc-air related battery technology to
Duracell. In addition, Duracell is funding certain product development projects
with AER Energy.
Under the TLAS Agreement, Duracell will license the rights to AER Energy's
currently existing patents. Duracell will own technology developed under the
projects it funds, and AER Energy will have rights to utilize the technology.
Duracell also has options to obtain certain license rights.
"AER Energy is pleased to be working with Duracell on the development of
zinc-air technology under this agreement," said David W. Dorheim, president and
chief executive officer of AER Energy. "This joint research and development
effort represents an opportunity to further develop this technology for
commercial application."
"Duracell is continuously researching various battery chemistries in an effort
to provide more power and longer battery life for consumers," says Paul B.
Stratton, vice president, Advanced Business Development of Duracell. "The
technology developed with AER Energy could enable zinc-air batteries to power
more electronic devices in the future."
Duracell Inc., a subsidiary of The Gillette Company, is headquartered in Bethel,
Connecticut. Duracell is the world's leading manufacturer and marketer of
high-performance alkaline batteries. Duracell also markets rechargeable
nickel-metal hydride batteries, primary lithium and zinc-air batteries. DURACELL
batteries are sold throughout the world, primarily under the DURACELL trademark.
1
<PAGE> 2
AER Energy Resources, Inc. is engaged in the development and commercialization
of high energy density zinc-air batteries that provide long, continuous runtime
for portable electronic products. Its patented Diffusion Air Manager technology
can provide zinc-air batteries with long in-service storage life and potentially
allow these batteries to serve a variety of portable electronic devices. For
more information about AER Energy, visit its web site at http://www.aern.com.
###
Note: This document contains statements, which to the extent that they are not
recitations of historical fact, may constitute "forward looking statements"
within the meaning of applicable federal securities laws and are based on AER
Energy's current expectations and assumptions. These expectations and
assumptions are subject to a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated, which include but
are not limited to the following: ability of AER Energy to achieve development
goals, ability of AER Energy to commercialize its battery technology,
development of competing battery technologies, ability of AER Energy to protect
its proprietary rights to its technology, improvements in conventional battery
technologies, demand for and acceptance of AER Energy's products and services in
the marketplace, ability to obtain commitments from battery manufacturers and
OEMs, AER Energy's ability to ramp up production to meet anticipated sales,
impact of any future governmental regulations, impact of pricing or material
costs, ability of AER Energy to raise additional funds and other factors
affecting AER Energy's business. All forward looking statements contained in
this release are intended to be subject to the safe harbor protection provided
by applicable federal securities laws.
DURACELL(R) is a trademark of Duracell; AER Energy(TM) is a trademark of AER
Energy Resources, Inc.
2
