Technology Transfer And License Contract

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TECHNOLOGY TRANSFER


AND


LICENSE CONTRACT


FOR


Ni-Zn BATTERY TECHNOLOGY


AMONG


XIAMEN ERC BATTERY CORP. LTD.,


AND


XIAMEN DAILY-USED CHEMICALS CO., LTD.


AND


ENERGY RESEARCH CORPORATION


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May 29, 1998


This Technology Transfer and License Contract (this "Contract") made and entered into as of May 29, 1998, by and between Xiamen Daily-Used Chemicals Co., Ltd. ("Xiamen") A Chinese legal person having its place of business at 722 Xiahe Road in Xiamen, Fujian Province, China and Energy Research Corporation ("ERC"), a New York corporation having its place of business at 3 Great Pasture Road, Danbury, CT 06813 USA. Following execution of this Contract Xiamen and ERC anticipate establishing a joint venture, Xiamen ERC Battery Corp. Ltd., (the "Joint Venture ") that shall become a party to this Contract. Xiamen and ERC agree, that for purpose of this Contract, Xiamen shall be solely responsible for the obligations of the Joint Venture hereunder (and the term "Joint Venture" when used herein shall mean "Xiamen") until, following the establishment of the Joint Venture, the Joint Venture is made a party to this Contract.


WITNESSETH THAT:


Whereas, ERC has developed certain technology and technical know-how for a sealed nickel zinc ("Ni-Zn") battery including technology for a fibrillated electrode, an improved zinc electrode and a lightweight nickel electrode that uses graphite, ERC has represented to the Joint Venture that such technology has been used to develop a Ni-Zn battery suitable for use in the Field ( as defined herein), and has demonstrated and described this technology to representatives of the Joint Venture and the Joint Venture has determined to its satisfaction that it wishes to acquire and license the technology for the purpose of commercializing a Ni-Zn battery in the Field; and


Whereas, ERC, in consideration of the payments and obligations described herein, wishes to license its know-how to the Joint Venture and enter into a technology license agreement as set forth herein for the purpose of allowing the Joint Venture to make, have made and sell or otherwise commercialize a Ni-Zn battery in the Field and in the Licensed Territories (as defined herein):


NOW, THEREFORE:


In consideration of the foregoing and the mutual terms, promises and conditions set forth herein, all of which is hereby acknowledged, the Parties agree as follows:


I. DEFINITIONS


When used in this Contract, the following capitalized terms shall have the following meanings:


1.1 "Effective Date" shall mean the date this Contract is signed
by the Parties. 1.2 "ERC Facility" shall mean the ERC facility
located at 3 Great Pasture Road, Danbury, CT 06813, USA.


1.3 "ERC Know-How" shall mean all of the technical information, know-how, inventions (whether patented or not), trade secrets, and other technical, engineering and design information and data, including without limitation, all processes and techniques owned by ERC or in which ERC acquires a licensable interest; during the term of this Contract useful for the commercial manufacture of Ni-Zn batteries within the Field, such as designs, drawings, blueprints, flow sheets, reports, manuals, specifications, process descriptions, operating procedures, materials or parts lists and other written or printed materials that are owned by ERC and which may be useful or helpful to die Joint Venture in the development and production of Ni-Zn batteries within the Field.


1.4 "Field" means the manufacture, use and sale, lease or other transfer of Ni-Zn batteries for miner's lamps and two and three wheel vehicles, applications such as motor bikes, bicycles, scooters, rickshaws, industrial traction equipment, and off-road recreational vehicles such as golf carts, boats and all terrain vehicles (ATVs).


1.5 "Licensed Technology" shall mean ERC Know-How.


1.6 "Licensed Territories" means the Exclusive Licensed Territory and Non Exclusive Licensed Territory. The term "Exclusive Licensed Territory" shall mean Mainland China, Taiwan, Hong Kong, and Macao and the term "Non Exclusive Licensed Territory", shall. mean the other countries of Southeast Asia listed in Annexure A. This Contract does not provide a license to any other territory.


1.7 "Net Sales" means the sum of all sales, leases and other transfers of Ni-Zn batteries at the Net Selling Price.


1.8 "Net Selling Price" means the gross invoiced price of Ni-Zn batteries sold by the Joint Venture or the consideration received by the Joint Venture if leased or transferred by the Joint Venture or its agents or affiliates in arms-length commercial transactions in the ordinary course of business, without any deduction other than returns, rebates and refunds actually given and die following items of expense to the extent to which they are actually given or paid and expressly included in the gross invoice price:


1. Sales discounts;
2. Transportation insurance premiums
3. Transport expenses on sales, leases and other transfers.


For the purpose of computing the Net Selling Price for sales, leases or other transfers of the Ni-Zn batteries to affiliates of the Joint Venture or other parties that do not represent arms-length commercial transactions in the ordinary course of business, the Net Selling Price shall be determined by the Joint Venture.


1.9 "Party" means ERC or Xiamen until the Joint Venture is made a party to this Contract and, thereafter, ERC, Xiamen or the Joint Venture as the case may be.


II LICENSE


2.1 License. ERC hereby grants to the Joint Venture for the duration of the Term stated in Section 6.1, a license of the Licensed Technology solely within the Licensed Territories and solely within the Field, subject to and in accordance with the terms and conditions of this Contract. The Joint Venture agrees that: (a) notwithstanding the transfer of the License Technology contemplated in this Contract, ERC owns and retains, and shall continue after the transfer to own and retain, all rights in the Licensed Technology, (b) the Joint Venture receives hereby only those rights expressly granted to it in this Contract, and (C) the Joint Venture shall make no use of any trade names or marks of ERC without ERC's express written consent.


2.2 Exports. The Joint Venture shall not, without ERC's prior written consent export, cause to be exported or facilitate the export of Ni-Zn batteries out of either the Exclusive Licensed Territory or the Non-Exclusive Licensed Territory, nor sell, lease or transfer Ni-Zn batteries to third parties for export, or sale, lease or transfer, provided however, that the Joint Venture may (a) export products incorporating the Ni-Zn batteries, and (b) sell, lease or transfer Ni-Zn batteries to third parties incorporating Ni-Zn batteries into their products for export, if the manufacture of, and the incorporation of Ni-Zn batteries into, such products takes place in the Exclusive Licensed Territory and Non-Exclusive Licensed Territory.


2.3 New Developments. ERC or its assigns shall promptly from time to time, but at least once a year, disclose to the Joint Venture any know-how or patents of ERC or its assigns arising or issued after the Effective Date and not previously disclosed to the Joint Venture, and if reasonably requested by the Joint Venture, provide the Joint Venture, from time to time, with a list of all patent applications filed by ERC relating to the Field. Similarly, the Joint Venture shall promptly disclose to ERC or its assigns any inventions, discoveries, know-how, technical information, improvements or other developments, whether or not patentable, relating to the Licensed Technology, that it develops or in which it acquires a licensable interest during the term of this Contract. ERC or its assigns shall have a worldwide, perpetual royalty-free license to use these new developments, for all purposes, outside the Exclusive Licensed Territory.


2.4 Compliance with Law. The Joint Venture shall comply with all applicable laws and regulations when using the Licensed Technology, including any applicable U.S. export control laws, and shall take all steps required to record and authenticate this Contract and obtain whatsoever Chinese approvals are required to render it valid and enforceable.


2.5 Other Agreements. During the Term of the license granted under Section 2.1 hereof ERC will not work independently or with any other entity in the Field in the Exclusive Licensed Territory.


III PAYMENTS


3.1 Transfer Payment. The total payment (the "Transfer Payment") (which does not include royalties) for the transfer of the Licensed Technology is three million U.S. dollars (US$3,000,000). This amount shall be paid to ERC by the Joint Venture within sixty (60) days of the Effective Date of the Joint Venture Contract.


3.2 Payment Procedures. All payments made pursuant to this Contract including all royalty payments due under Part V hereof, shall be made by wire transfer to an account designated by ERC or Xiamen net of any applicable taxes, withholdings, duties owed by the Joint Venture or ERC or Xiamen (excluding, in the case of ERC or Xiamen, only income or corporate excise taxes imposed by the U.S. or P.R.China and its states and instrumentalities respectively). Accordingly, whatever payment is due hereunder the Joint Venture shall make such additional payments as are necessary to ensure that the net amounts actually received by ERC or Xiamen will not be less that the amounts it would have received if such taxes and the like were not r ...