SECOND
AMENDMENT TO
DEVELOPMENT
AND LICENSE AGREEMENT
THIS AGREEMENT is
made, entered into and effective as of the 18th day of March 2005
between and among Axion Power International, Inc. (“
Axion ”),
a corporation organized under the laws of the State of Delaware, C
and T Co. Inc., (“
C&T ”)
a corporation organized under the laws of the Province of Ontario,
Canada, and the persons who collectively own 100% of the issued and
outstanding common stock of C&T (
“C&T Shareholders” ).
WHEREAS, between
November 15, 2003 and January 9, 2004 Axion and its wholly owned
subsidiary negotiated a series of agreements to purchase all of the
issued and outstanding common stock of C&T, free and clear of
all encumbrances and corporate obligations of C&T, in exchange
for a consideration that included $1,794,000 in cash that would be
payable in installments and 1,562,900 capital warrants that would
each represent the two-year right to purchase one Axion share at a
price of $2.00 per share; and "
WHEREAS, after
giving effect to the required warrant issuances and cash payments,
Axion owes $1,100,500 for balance of the purchase obligations and
the parties have agreed to settle and fully satisfy the remaining
obligations for a consideration consisting of $100,500 in cash and
100,000 shares of Axion’s 8% Convertible Senior Preferred
Stock; and
WHEREAS, C&T,
the C&T Shareholders and C&T’s directors, officers
and affiliates have agreed to acknowledge and memorialize their
continuing obligations to deliver certain intellectual property to
Axion and assist in efforts to develop and commercialize the
E
3 Cell
Technology;
NOW THEREFORE ,
in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which the parties hereby acknowledge,
the Parties agree as follows:
ARTICLE I
INTEGRATION OF AGREEMENTS BETWEEN THE
PARTIES
1.1
Integration of Agreements. This
Agreement is an amendment, continuation and extension of a business
relationship established between November 15, 2003 and January 9,
2004. The documents identified below (collectively the “Prior
Agreements”) establish and define the terms of the
parties’ relationship with each other:
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A
Development and License Agreement between C&T and Axion dated
November 15, 2003;
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| · |
A
letter of clarification from Axion to C&T dated November 15,
2003;
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| · |
A
letter of amendment from Axion to C&T dated November 17,
2003;
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A
First Amendment to Development and License Agreement dated January
9, 2004; and
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A
Dispute Resolution Memorandum dated January 25, 2005.
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Except
to the extent that the terms of any Prior Agreements are
amended by the express terms of a later agreement, such Prior
Agreements are intended to continue in full force and effect.
In the event of an inconsistency between the Prior Agreements
and this Agreement, the contracts shall be interpreted in a
manner that will give fair application to all agreements
between the parties. If provisions of any agreements between
the parties are inconsistent with the terms of an earlier
agreement, the terms of the later agreement shall be given
priority. To the extent possible, the agreements between the
parties are to be interpreted as an integrated whole and if
any terms are held to be invalid; the remainder shall not be
affected thereby. By execution of this Agreement, C&T and
Axion expressly affirm their mutual intention to fully comply
with all applicable requirements of the Prior
Agreements.
ARTICLE II
SATISFACTION OF CERTAIN OBLIGATIONS
2.1
Delivery of Cash Payment. Upon
execution of this Agreement, Axion shall pay $100,500 to such
account or accounts as may be designated by C&T in final
satisfaction of all debts owed to C&T under the Development and
License Agreement and the prior amendments thereto.
2.2
Issuance of Preferred Stock. Upon
execution of this Agreement, Axion shall issue 100,000 shares of
its 8% Convertible Senior Preferred Stock (the “Preferred
Stock”) to C&T’s creditors and shareholders in such
numbers as C&T may direct. The Preferred Stock is more fully
described in Axion’s Private Placement Memorandum dated
February 16, 2005, copies of which have been provided to C&T
and each person who is entitled to receive shares of Preferred
Stock pursuant to the provisions of this paragraph. As a condition
to the distribution of the shares of Preferred Stock pursuant to
the requirements of this paragraph, each creditor and each C&T
Shareholder shall be required to complete and execute a Stock
Purchase Agreement and Investment Representation Letter in the form
attached as Exhibit C to the memorandum.
2.3
Release of Security Interest. Subject
only to the payment of the cash balance specified in paragraph 2.1,
the issuance and delivery of certificates for the Preferred Stock
specified in paragraph 2.2, C&T declares that the purchase
money security interest specified in paragraph 3.1 of the First
Amendment to Development License Agreement dated January 9, 2004
has been satisfied by Axion and is hereby released by C&T. From
and after the payment of the referenced consideration Axion shall
be the sole and exclusive owner of all right title and interest in
the patents, know-how and other intellectual property embodied in
the E
3 Cell
Technology, including:
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All
rights to exploit the Intellectual property for any purpose and in
any market worldwide;
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| · |
All
rights, powers and privileges that C&T has or may have under
any pre-existing license or other agreements that grant any person
other than Axion any right to exploit all or any part of the
Intellectual Property for any purpose; and
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All
rights to fixed or contingent license fees, royalties or other
payments of any nature that C&T has or may have under any
pre-existing license or other agreements that grant any person
other than Axion any right to exploit all or any part of the
Intellectual Property for any purpose.
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ARTICLE III
IMPLEMENTATION OF ASSET TRANSFER
3.1
Assignment of Patents and Patent Applications.
Upon
C&T’s receipt of the cash payment specified in paragraph
2.1 together with proof of Axion’s delivery of certificates
for the shares of Preferred Stock specified in paragraph 2.2,
C&T shall promptly transfer to Axion by appropriate assignments
all patents and all patent applications owned by C&T that
relate in any way to the E
3 Cell
Technology.
3.2
Warranty of Title. C&T
hereby warrants that with the exception of:
| (a) |
any
rights previously conveyed to Chip Taylor in Trust under the terms
of a Joint Venture Agreement dated December 23, 1999, which was
amended on November 26, 2000 and subsequently terminated by C&T
on June 24, 2003; and
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| (b) |
any
rights previously conveyed to Mega-C Technologies, Inc. and Mega-C
Power Corporation under the terms of an Agreement of Association
dated April 2, 2002 which was subsequently terminated by C&T on
June 24, 2003;
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it
has clear and unencumbered title to the patents, know-how and
other intellectual property embodied in the E
3 Cell
Technology; it has not granted any license or other rights to the
patents, know-how and other intellectual property embodied in the
E
3 Cell
Technology to any other person or entity; and it has not conveyed
or transferred any ownership interest in the patents, know-how and
other intellectual property embodied in the E
3 Cell
Technology to any person or entity. C&T further warrants that
the agreements referred to in subparagraphs (a) and (b) above,
complete copies of which have previously been provided to Axion,
fairly represent all material terms of the agreements between the
parties thereto and have not been amended in any
respect.
3.3
Assignment of Other Assets. Upon
C&T’s receipt of the cash payment specified in paragraph
2.1 together with proof of Axion’s delivery of certificates
for the shares of Preferred Stock specified in paragraph 2.2,
C&T shall promptly assign, transfer, convey and deliver to
Axion, all right, title, interest and benefit, including all of
C&T’s right, title, interest and benefit, of whatever
kind and nature, real, personal and mixed, tangible and intangible,
whether or not reflected on C&T’s books and records,
known or unknown, accrued, absolute, contingent or otherwise, in
and to the assets, properties and rights owned by C&T, free and
clear of and expressly excluding all debts, liabilities,
obligations, taxes, liens and encumbrances of any kind, character
or description, whether accrued, absolute, contingent or otherwise
(a
