EXCLUSIVE PATENT LICENSE AGREEMENT

MASSACHUSETTS INSTITUTE OF TECHNOLOGY


EXCLUSIVE PATENT LICENSE AGREEMENT


(rev. 1/8/98)


This Agreement, effective as of the date set forth above the signatures of the parties below (the "Effective Date"), is between the Massachusetts Institute of Technology ("M.I.T."), a Massachusetts corporation, with a principal place of business at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 and Pacific Lithium ("COMPANY"), a New Zealand corporation, with the mailing address of its principal place of business at 5th Floor, Gosling Chapman Centre, 63 Albert St., Auckland City, New Zealand.


WHEREAS, M.I.T. is the owner of certain PATENT RIGHTS (as later defined herein) relating to:


M.I.T. Case No. 7960, "Glass Compositions for Anode Materials in
Rechargeable Lithium Batteries," by Gerbrand Ceder and Yet-Ming Chiang;


M.I.T. Case No. 7959, "Solid Polymer Electrolyte Lithium Battery and
Process of Manufacture," by Yet-Ming Chiang and Anne M. Mayes;


M.I.T. Case No. 7799, "Mixed Ionic-Electronic Conducting Binder for Lithium
Battery Electrodes," by Yet-Ming Chiang, Anne M. Mayes, and Donald R.
Sadoway;


M.I.T. Case No. 7124, "High Voltage Cathode Materials For Li Batteries," by
Mehmet K. Aydinol, Gerbrand Ceder, Yet-Ming Chiang, Biying Huang, and
Young-il Jang;


M.I.T. Case No. 7054, "Block Copolymer Electrolytes for Lithium Solid
Polymer Electrolyte Batteries," by Anne M. Mayes and Philip P. Soo; and


M.I.T. Case No. 6774, "Cathodes For Lithium Solid Polymer Electrolyte
Batteries," by Anne M. Mayes and Donald R. Sadoway.


M.I.T. has the right to grant licenses under said PATENT RIGHTS, subject only to a royalty-free, nonexclusive non-transferable license to practice the PATENT RIGHTS reserved by the United States Government for M.I.T. Cases 7054 and 7799.


WHEREAS, M.I.T.'s Vice President for Research has approved that Yet-Ming Chiang, Anne M. Mayes, and Gerbrand Ceder, inventors of the PATENT RIGHTS, now hold or shall


February 10, 1998 Page-1-of-26- 3 shortly acquire an equity position in COMPANY and that M.I.T. is accepting equity as partial consideration for the rights and licenses granted under this Agreement;


WHEREAS, the Conflict Avoidance Statement of Yet-Ming Chiang, Anne M. Mayes, and Gerbrand Ceder is Exhibit A hereto; and a Waiver of M.I.T equity sharing for Yet-Ming Chiang, Anne M. Mayes, Gerbrand Ceder, and Donald Sadoway is attached hereto as Exhibit B;


WHEREAS, M.I.T. desires to have the PATENT RIGHTS developed and commercialized to benefit the public and is willing to grant a license thereunder;


WHEREAS, COMPANY has represented to M.I.T., to induce M.I.T. to enter into this Agreement, that COMPANY shall commit itself to a thorough, vigorous and diligent progam of exploiting the PATENT RIGHTS so that public utilization shall result therefrom; and


WHEREAS, COMPANY intends to form a majority owned subsidiary to be incorporated under the laws of the United States and located in Massachusetts (hereinafter referred to as "NEWCO"), for the exploitation of the PATENT RIGHTS; and


WHEREAS promptly upon formation of NEWCO, COMPANY shall assign its rights and obligations to NEWCO, and


NOW, THEREFORE, M.I.T. and COMPANY hereby agree as follows:


1. Definitions.


1.1. "AFFILIATE" shall mean any legal entity (such as a corporation, partnership, or limited liability company) that is controlled by COMPANY. For the purposes of this definition, the term "control" means (i) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities.


1.2 "EXCLUDED FIELDS" shall mean "batteries for military applications, and for aerospace applications such as satellites and space vehicles" but not batteries that are essentially equivalent to those sold in commercial, mass-markets.


1.3 "FIELD" shall mean all fields but EXCLUDED FIELDS, as Section 1.3 defines.


February 10, 1998 Page-2-of-26- 4
1.4 "LICENSED PRODUCT" shall mean any product that cannot be manufactured, used, leased, or sold, in whole or in part, without infringing one or more claims under the PATENT RIGHTS.


1.5 "LICENSED PROCESS" shall mean any process that cannot be performed, in whole or in part, without using at least one process that infringes one or more claims under the PATENT RIGHTS.


1.6 "NET REVENUES" shall mean the gross amount billed or invoiced by COMPANY and its AFFILIATES and SUBLICENSEES for sales and leases of LICENSED PRODUCTS and LICENSED PROCESSES, less the following: (i) customary trade, quantity, or cash discounts to the extent actually allowed and taken; (ii) amounts repaid or credited by reason of rejection or return; (iii) to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a LICENSED PRODUCT or LICENSED PROCESS which is paid by or on behalf of COMPANY; and (iv) outbound transportation costs prepaid or allowed and costs of insurance in transit.


No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by COMPANY and on its payroll, or for cost of collections. NET REVENUES shall occur on the date of invoice or billing for a LICENSED PRODUCT or LICENSED PROCESS. If a LICENSED PRODUCT or a LICENSED PROCESS is distributed, billed or invoiced to AFFILIATES or others at a discounted price that is substantially lower than the customary price charged by COMPANY to independent third parties, NET REVENUES shall be calculated based on the invoice amount of the LICENSED PRODUCT or LICENSED PROCESS to an independent third party during the same REPORTING PERIOD or, in the absence of such invoice, on the fair market value of the LICENSED PRODUCT or LICENSED PROCESS as mutually determined by the parties in good faith.


COMPANY nor an AFFILIATE nor any SUBLICENSEE shall accept non-monetary consideration for any LICENSED PRODUCTS or LICENSED PROCESSES without the prior written consent of M.I.T.


1.7. "PATENT RIGHTS" shall mean:


(a) the United States and international patents listed on Appendix A;


(b) the United States and international patent applications listed on Appendix A and the resulting patents;


February 10, 1998 Page-3-of-26- 5
(c) any divisionals, continuations, continuation-in-part applications, and continued prosecution applications (and their relevant international equivalents) of the patent applications listed on Appendix A to the extent the claims are directed to subject matter specifically described in the patent applications listed on Appendix A, and the resulting patents;


(d) any patents resulting from reissues, reexaminations, or extensions (and their relevant international equivalents) of the patents described in (a), (b), and (c) above; and


(e) international (non-United States) patent applications filed after the Effective Date in the countries listed on Appendix B and the relevant international equivalents to divisionals, continuations, continuation-in-part applications and continued prosecution applications of such patent applications to the extent the claims are directed to subject matter specifically described in the patents or patent applications referred to in (a), (b), (c), and (d) above, and the resulting patents.


1.8. "REPORTING PERIOD" shall begin on the first day of each calendar quarter and end on the last day of such calendar quarter; except that the first and last REPORTING PERIODS under this Agreement may be partial calendar quarters in that the first REPORTING PERIOD shall begin on the Effective Date, and the last REPORTING PERIOD shall end on the later of (i) the date of termination of this Agreement or (ii) the date upon which COMPANY completes and sells its remaining work-in-progress and inventory of LICENSED PRODUCTS pursuant to Section 8.5.


1.9. "SUBLICENSE INCOME" shall mean any payments that COMPANY receives from a SUBLICENSEE in consideration of the sublicense of the rights granted COMPANY under Section 2.2, including, without limitation, license fees, milestone payments, license maintenance fees, and other payments, but specifically excluding running royalties.


1.10. "SUBLICENSEE" shall mean any permitted sublicensee of the rights granted COMPANY under this Agreement, as further described in Section 2.3.


1.11. "TERM" shall mean the term of this Agreement as further defined in Section 8.1. below.


1.12. "TERRITORY" shall mean worldwide.


1.13. "FINANCING EVENT DATE" shall mean each date on which the COMPANY sells equity in the COMPANY.


February 10, 1998 Page-4-of-26- 6 2. Grant of Rights.


2.1 COMPANY agrees that the following are preconditions to the license being granted in this agreement:


(a) NEWCO shall be incorporated by June 30, 1998 with
an initial capitalization from COMPANY of at least $500,000.


(b) Promptly upon formation of NEWCO, COMPANY shall
assign all of its rights and obligations under this license
agreement to NEWCO, and M.I.T hereby consents and approves of
this assignment.


In the event either condition of this section 2.1 is not fulfilled, this agreement will automatically terminate on June 30, 1998 without further notice. Any amounts due to be paid or paid hereunder prior to June 30, 1998 are nonrefundable.


2.2. License Grant. Subject to the terms of this Agreement, M.I.T. hereby grants to COMPANY and its AFFILIATES a royalty-bearing license under its rights in the PATENT RIGHTS, to the extent not prohibited by other patents, to develop, make, have made, use, sell, lease, and import LICENSED PRODUCTS in the FIELD in the TERRITORY and to develop and perform LICENSED PROCESSES in the FIELD in the TERRITORY.


2.3 Exclusivity.


M.I.T. agrees that it shall not grant any other license to make, have made, use, sell, lease and import LICENSED PRODUCTS in the FIELD in the TERRITORY or to develop and perform LICENSED PROCESSES in the FIELD in the TERRITORY during the period of time of commencing on the Effective Date to the end of the TERM, unless sooner terminated as provided in this Agreement.


2.4. Sublicenses. COMPANY shall have the right to grant sublicenses of its rights under Section 2.2. COMPANY shall incorporate terms and conditions into its sublicense agreements sufficient to enable COMPANY to comply with this Agreement. COMPANY shall promptly furnish M.I.T. with a fully executed copy of any sublicense agreement. Upon termination of this Agreement for any reason, any SUBLICENSEE not then in default shall have the right to seek a license from M.I.T. M.I.T. agrees to negotiate such licenses in good faith under reasonable terms and conditions.


February 10, 1998 Page-5-of-26- 7
2.5. Retained Rights.


(a) M.I.T. M.I.T. retains the right to practice under the PATENT RIGHTS for research, teaching, and educational purposes, without payment of compensation to COMPANY.


(b) Federal Government. To the extent that any invention claimed in the PATENT RIGHTS has been partially funded by the U.S. federal government, COMPANY acknowledges that the federal government retains a royalty-free, non-exclusive, non-transferable license to practice any government-funded invention claimed in any PATENT RIGHTS. This Agreement and the grant of any rights in such government funded inventions in the PATENT RIGHTS are subject to and governed by federal law as set forth in 35 U.S.C. Sections 201-211, and the regulations promulgated thereunder, as amended, or any successor statutes or regulations. If any term of this Agreement fails to conform with such laws and regulations, the relevant term shall be deemed an invalid provision and modified in accordance with Section 10.10.


2.6 Access to lists of technologies available for license. M.I.T agrees to answer periodic requests from COMPANY to provide under a nondisclosure agreement descriptions of technologies available for licensing from M.I.T in the battery area.


2.7 No Additional Rights. Nothing in this Agreement shall be construed to confer any rights upon COMPANY by implication, estoppel, or otherwise as to any technology or patent rights of M.I.T. or any other entity other than the PATENT RIGHTS, regardless of whether such rights shall be dominant or subordinate to any PATENT RIGHTS.


3. COMPANY Obligations Relating to Commercialization.


3.1. Diligence Requirements. COMPANY shall use diligent efforts, or shall cause its AFFILIATES and SUBLICENSEES to use diligent efforts, to develop LICENSED PRODUCTS or LICENSED PROCESSES and to introduce LICENSED PRODUCTS or LICENSED PROCESSES into the commercial market; thereafter, COMPANY or its AFFILIATES or SUBLICENSEES shall make LICENSED PRODUCTS or LICENSED PROCESSES reasonably available to the public. Specifically, COMPANY or AFFILIATE or SUBLICENSEE shall fulfill the following obligations:


(a) Within six (6) months after the Effective Date, Company
shall furnish M.I.T. with a written research and development plan
documenting the major tasks and dates to be achieved from inception
through first sale specifying the number of staff and


February 10, 1998 Page-6-of-26- 8 other resources devoted to the commercialization of LICENSED PRODUCTS or LICENSED PROCESSES in the FIELD.


(b) Consistent with Section 5.l(a) (Frequency of Reports), within sixty (60) days after the end of each calendar year, COMPANY shall furnish M.I.T. with a written report on the progress of its efforts during the immediately preceding calendar year to develop and commercialize LICENSED PRODUCTS or LICENSED PROCESSES, including without limitation research and development efforts, efforts to obtain regulatory approval, marketing efforts, and sales figures. The report shall also contain a discussion of intended efforts and sales projections for the year in which the report is submitted.


(c) COMPANY shall raise at least Ten Million Dollars ($10,000,000) by March 30, 1999 from the sale of COMPANY's equity securities for its own account.


(d) In the aggregate, COMPANY shall raise at least One Hundred Million Dollars ($100,000,000) by December 31, 2000 from the sale of COMPANY's equity securities for its own account or demonstrate that it owns the production capacity to produce at least 5,000,000 batteries based on LICENSED PRODUCTS per annum or that COMPANY has signed multi year contracts for the contract manufacture of at least 5,000,000 batteries based on LICENSED PRODUCTS per annum.


(e) By January 31, 1999, COMPANY shall start construction of pilot plants each capable of producing at least 100 tons per year of lithium carbonate and/or lithium hydroxide and by January 31, 2000 demonstrate that a commercial-sized plant can produce such salts at costs commercially practical for the use in producing at least 5,000,000 batteries based on LICENSED PRODUCTS per annum; or shall demonstrate to the satisfaction of M.I.T. that it has procured a long-term source of such salts at commercially practical prices to produce at least 5,000,000 batteries based on LICENSED PRODUCTS per annum.


(f) COMPANY shall sponsor a minimum of Seven Hundred and Twenty Four Thousand Dollars ($724,000) of research at M.I.T. starting no later than June 30, 1998 and continuing for the next twenty-four months, under the terms of M.I.T.'s standard Research Agreement (as may be modified by mutual agreement between the parties.) and further provided that:


any additional patent rights arising from such research sponsored by COMPANY shall be added, at COMPANY'S election by amendment to the License Agreement for a license issue fee to be negotiated but not to exceed $50,000 per patent added, and otherwise under the royalty terms and other terms of the License Agreement.


February 10, 1998 Page-7-of-26- 9
(g) COMPANY shall develop working developmental prototypes
according to the following schedule:


YEAR DEVELOPMENTAL PROTOTYPE
---- -----------------------
January 1, 2000 Lithium batteries for laptop
computers and cellular telephones


January 1, 2004 Lithium batteries for electric vehicle
applications


January 1, 2008 Large energy storage systems and/or
large energy leveling systems


If COMPANY documents that the major reason for a delay in meeting the requirements of paragraph (g) are directly attributable to equivalent delays in achieving the results projected in the sponsored research described in paragraph (f) then M.I.T. shall consider such impact in the making the determination of whether COMPANY has met the requirements of paragraph (g).


(h) COMPANY shall permit an in-plant inspection by M.I.T. on or before December, 1998, and thereafter permit in-plant inspections by M.I.T. at regular intervals with at least six (6) months between each such inspection.


(i) COMPANY shall make a first commercial sale of a LICENSED PRODUCT on or before December 31, 1999.


(j) COMPANY shall establish commercial relationships with one or more potential customers for LICENSED PRODUCTS by selling Lithium containing products which need not be LICENSED PRODUCTS with net revenues of at least $500,000 in the year ending Dec. 31, 1999 to such customers.


(k) COMPANY shall make NET REVENUES according to the following
schedule:


in the year ending Dec. 31, 2000 $2,500,000;
in the year ending Dec. 31, and each year thereafter $15,000,000


In the event that M.I.T. determines that COMPANY (or an AFFILIATE or SUBLICENSEE) has failed to fulfill its obligations under this Section 3.1 then M.I.T. will treat such failure as a Material Breach as described in Section 8.3(b).


3.2 Indemnification.


(a) Indemnity. COMPANY shall indemnify, defend, and hold harmless M.I.T. and its trustees, officers, faculty, students, employees and agents and their respective successors,


February 10, 1998 Page-8-of-26- 10 heirs and assigns (the "Indemnitees"), against any liability, damage, loss, or expense (including reasonable attorneys fees and expenses) incurred by or imposed upon any of the Indemnitees in connection with any claims, suits, actions, demands or judgments arising out of any theory of liability (including without limitation actions in the form of tort, warranty, or strict liability and regardless of whether such action has any factual basis) concerning any product, process, or service that is made, used, sold, or imported pursuant to any right or license granted under this Agreement.


(b) Procedures. The Indemnitees agree to provide COMPANY with prompt written notice of any claim, suit, action, demand, or judgment for which indemnification is sought under this Agreement. COMPANY agrees, at its own expense, to provide attorneys reasonably acceptable to M.I.T. to defend against any such claim. The Indemnitees shall cooperate fully with COMPANY in such defense and will permit COMPANY to conduct and control such defense and the disposition of such claim, suit, or action (including all decisions relative to litigation, appeal, and settlement); provided, however, that any Indemnitee shall have the right to retain its own counsel, at the expense of COMPANY, if representation of such Indemnitee by the counsel retained by COMPANY would be inappropriate because of actual or potential differences in the interests of such Indemnitee and any other party represented by such counsel. COMPANY agrees to keep M.I.T. informed of the progress in the defense and disposition of such claim and to consult with M.I.T. with regard to any proposed settlement.


(c) Insurance. COMPANY shall obtain and carry in full force and effect commercial general liability insurance, including product liability and errors and omissions insurance which shall protect COMPANY and Indemnitees with respect to events covered by Section 3.2(a) above. Such insurance shall be issued by an insurer pre-approved by M.I.T, such approval not to be unreasonably withheld, shall list M.I.T. as an additional named insured thereunder, shall be endorsed to include product liability coverage, and shall require thirty (30) days written notice to be given to M.I.T. prior to any cancellation or material change thereof. The limits of such insurance shall not be less than One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for bodily injury including death; One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for property damage; and One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for errors and omissions. In the alternative, COMPANY may self-insure subject to prior approval of M.I.T. COMPANY shall provide M.I.T. with Certificates of Insurance evidencing compliance with this Section. COMPANY shall continue to maintain such insurance or self- insurance after the expiration or termination of this Agreement during any period in which COMPANY or any AFFILIATE or SUBLICENSEE continues (i) to


February 10, 1998 Page-9-of-26- 11 make, use, or sell a product that was a LICENSED PRODUCT under this Agreement or (ii) to perform a service that was a LICENSED PROCESS under this Agreement, and thereafter for a period of five (5) years.


3.3. Use of M.I.T. Name. COMPANY and its AFFILIATES and SUBLICENSEES shall not use the name of "Massachusetts Institute of Technology," "Lincoln Laboratory" or any variation, adaptation, or abbreviation thereof, or of any of its trustees, officers, faculty, students, employees, or agents, or any trademark owned by M.I.T., or any terms of this Agreement in any promotional material or other public announcement or disclosure without the prior written consent of M.I.T. The foregoing notwithstanding, w ...