Document:

EXHIBIT 10.36

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

PATENT SUBLICENSE AGREEMENT

 

THIS PATENT SUBLICENSE AGREEMENT (“Agreement”) is entered into by and among:

 

LiFePO4+C  Licensing AG, a Swiss corporation having a place of business at Rothausstrasse 61, 4132 Muttenz, Switzerland (“Licensor”); and

 

A123 Systems, Inc., a Delaware corporation having a place of business at 200 West Street, Waltham, MA, United States of America 02451 (“A123”; A123 and its Related Corporations shall be collectively referred to as “Licensee”).

 

Licensor and Licensee shall each be a “Party” and shall be collectively referred to as the “Parties”.

 

BACKGROUND

 

A.                                     Licensor has obtained a worldwide license or sublicense from Hydro-Québec, the Université de Montréal and the Centre National de la Recherche Scientifique to the Licensor Licensed Patent Rights (as defined below) for the manufacture, importation, exportation, sale and use of Licensed Products (as defined below) (the “Head License Agreement”). Licensor’s Head License Agreement includes the limited right to grant sublicenses to third parties under the Licensor Licensed Patent Rights for certain fields of application.

 

B.                                     Licensee is interested in obtaining a worldwide non-exclusive sublicense to the Licensor Licensed Patent Rights in said fields of application in order to have the right to sell Licensed Products in specific circumstances and to incorporate Licensed Products into Electrode Systems, Cells, Complex Systems and other products (as set forth below) and to market and sell such products.

 

C.                                     Licensee is prepared and intends to use commercially reasonable efforts to continue existing and to further develop commercially effective, reasonably funded (as compared to other similarly situated companies), ongoing and active manufacturing, marketing and sales programs in connection with the products.

 

D.                                     In the course of negotiations leading to the execution of this Agreement, Licensors offered to Licensee the choice of being granted a license to the Goodenough Patent Rights, the NTT Patent Rights, and the Carbon Coating Patent Rights separately without being obliged to be granted a license to all of these patents as a package. For commercial reasons, Licensee has chosen to be granted a license to all of these patents.

 

E.                                      A123 and Hydro-Québec are engaged, with others, in a number of judicial and administrative disputes pending in the courts and agencies of the United States of America. The Parties wish to resolve these disputes and settle the claims pending therein 

 

 

through, in part, the creation of this Agreement and the performance of the obligations set forth herein.

 

NOW IT IS HEREBY AGREED:

 

1.                                      DEFINITIONS.

 

1.1                               “A123 Patent Rights” shall mean the specific Patent Rights listed in Appendix D and any Patent Rights resulting therefrom and claiming continuing or divisional priority thereto.  A123 Patent Rights exclude any patents based on continuation-in-part patent applications filed after December 2, 2005.

 

1.2                               “Affiliates”  of a Person shall mean any Person directly or indirectly Controlled by, or under common Control with, that Person.

 

1.3                               “Agreement” shall mean this Patent Sublicense Agreement.

 

1.4                               “Calendar Quarter(ly)” shall mean each of the four quarters in each calendar year where the first quarter commences on January 1 and ends on March 31.

 

1.5                               “Carbon Coating and Process Patent Rights” shall mean the Patent Rights listed in Appendix A and any Patent Rights resulting therefrom and claiming priority thereto.

 

1.6                               “Cathode Powder” shall mean a Licensed Product, including any combination of Licensed Products and other compounds for use in Cells, Electrode Systems and/or Complex Systems, that is not incorporated into an electrode for use in a Cell.

 

1.7                               “Cell” shall mean an independent electrochemical cell comprising at least an anode, an electrolyte, a cathode, the anode and cathode current collectors, and the cell feed-throughs and container, which incorporates any Licensed Product as electrode material. For purposes of this Agreement, the term “Cell” shall include parts thereof incorporating Licensed Products.  Any product that includes a Licensed Product that is not Cathode Powder, an Electrode System or a Complex System shall be deemed a “Cell.”

 

1.8                               “Complex System” shall mean a combination of Cells that is mechanically or electrically interconnected and that includes (i) a [***] and (ii) [***] components.

 

1.9                               “Control” in relation to a Person shall mean the power by another Person (i) over more than half of the voting rights attached to the equity of the controlled Person or the maximum percentage it is permitted to have in the jurisdiction where such controlled Person exists, whichever is less; (ii) to govern the financial and operating policies of the controlled Person; (iii) to appoint or remove the majority of the members of the board of directors or equivalent governing body, provided that control of the controlled Person is by that board or body; and (iv) to have its appointees on the board of directors or equivalent governing body of the controlled Person cast the majority of votes at meetings of such board of directors or equivalent governing body and “Controlling” shall refer to 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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the exercise of Control over another Person and “Controlled” shall refer to having another Person exercising Control over a Person.

 

1.10                        “Effective Date” shall have the meaning as defined in Section 9.1.1 below.

 

1.11                        “Electrode System” shall mean an electrode sold prior to its use in a Cell that incorporates any Licensed Product as electrode material; provided that such Licensed Product is bound to a substrate as it will be used in a Cell incorporating such Licensed Product.

 

1.12                        “Gel Electrolyte” shall mean a solid polymer electrolyte, plasticized with more than [***] of solvent in volume content; furthermore, bi-phased electrolyte systems in which a liquid electrolyte coexists with a gel electrolyte in an electrode or in the separator are to be considered as Liquid Electrolytes and not as Gel Electrolytes.

 

1.13                        “Goodenough Patent Rights” shall mean the Patent Rights listed in Appendix C and any Patent Rights resulting therefrom and claiming priority thereto.

 

1.14                        “Have Sold” shall refer to the sale of Cells, Electrode Systems, and/or Complex Systems by agents for, and on behalf of the Licensee.

 

1.15                        “Head License Agreement” shall have the meaning as defined in clause A of the Background.

 

1.16                        “Joint Venture” shall mean an entity created by Licensee and a Third Party in which Licensee owns [***] or less of the voting securities of such entity or [***] such joint venture.  For the avoidance of doubt and without limitation, a joint venture under which Licensee owns more than [***] of the voting securities of such joint venture, and [***] such joint venture, shall constitute a Related Corporation of A123 under this Agreement (and shall not constitute a “Joint Venture” as such term is defined herein).

 

1.17                        “Licensor Licensed Patent Rights” shall mean the Goodenough Patent Rights, the Carbon Coating and Process Patent Rights and the NTT Patent Rights.

 

1.18                        “Licensed Products” shall mean electrode material for Cells, Electrode Systems, and/or Complex Systems that include either:

 

(i)  olivine or NASICON crystals of lithium and an oxygen polyanion; or

 

(ii) particles of electrode material that include compounds that are coated with carbon; or

 

(iii) both (i) and (ii).

 

For purposes of this Agreement, rights of a Party in connection with Licensed Products shall reflect the Patent Rights licensed to such Party in this Agreement; therefore, when the last to expire of the Goodenough Patent Rights expires, clause (i) of this Section 1.18 shall be of no further force or effect.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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1.19                        “Liquid Electrolyte” shall mean a liquid phase electrolytic solution comprising at least one salt dissolved in at least one liquid non-aqueous polar solvent; furthermore bi-phased electrolyte systems in which a liquid electrolyte coexists with a gel electrolyte in an electrode or in the separator are to be considered as Liquid Electrolytes and not Gel Electrolytes.

 

1.20                        “Net Sales” shall mean the gross amount invoiced by Licensee or a Joint Venture or non-monetary consideration received for each sale of Cells, Electrode Systems, and/or Complex Systems to a Third Party in a bona fide arm’s length transaction or as provided in Section 2.4.2 and/or 2.4.3 less (i) sales and/or use taxes actually paid, (ii) import and/or export duties actually paid, (iii) outbound transportation prepaid or allowed and/or (iv) any customary discount or any rebates or returns actually granted by Licensee, a Joint Venture [***]; provided that (a) for the avoidance of doubt, no Net Sales shall accrue with respect to Cells, Electrode Systems, and/or Complex Systems that contain Cathode Powder, Electrode Systems or Cells purchased by Licensee or a Joint Venture from a Third Party which is licensed by Licensor (or the Patent Owners) under the Licensor Licensed Patent Rights to sell or Have Sold such Cathode Powder, Electrode Systems or Cells and (b) no Net Sales shall accrue on any Complex Systems sold by a Joint Venture if Licensee pays royalties to Licensor (or the Patent Owners) on the Net Sales arising from Licensee’s sale of Cells included in such Complex System.

 

1.21                        “NTT Patent Rights” shall mean the Patent Rights listed in Appendix B and any Patent Rights resulting therefrom and claiming priority thereto.

 

1.22                        “Patent Owners” shall mean Hydro-Québec, the Université de Montréal and the Centre National de la Recherche Scientifique.

 

1.23                        “Patent Rights” shall mean any and all patents, patent applications, utility models and utility model applications (which for the purpose of this Agreement shall be deemed to include certificates of invention and applications for certificates of invention), including divisionals, continuations, continuations-in-part, reissues, renewals, substitutions, registrations, re-examinations, revalidations, extensions, supplementary protection certificates, and the like of any such patents, patent applications, utility models and utility model applications and foreign equivalents of the foregoing that claim a Licensed Product, or the manufacture, formulation or use of Licensed Products.

 

1.24                        “Person” includes an individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate and a natural person.

 

1.25                        “PO Representative” shall mean the Person representing the Patent Owners as stated in Section 13.7 below or other Person designated by written notification of the Patent Owners to Licensee and Licensor.

 

1.26                        “Procter & Gamble” means The Procter & Gamble Company, a corporation incorporated in the State of Ohio, and its Affiliates.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

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1.27                        “P&G Agreement” means the Exclusive License Agreement between Licensee and The Gillette Company, which is an Affiliate of Procter & Gamble, dated November 17, 2008.  A publicly available redacted version of the P&G Agreement is attached hereto as Appendix F; all defined terms in, and sections of, such P&G Agreement which are expressly referenced in this Agreement are hereby incorporated by reference.

 

1.28                        “Related Corporation” of a Person shall mean any other Person that, at all relevant times, is Controlled by that first Person.

 

1.29                        “Royalty Schedule” means the royalty thresholds and schedule set forth in Sections 7.2.1 through 7.2.5 of this Agreement.

 

1.30                        “Term” shall have the meaning as defined in Section 9.1.2 below.

 

1.31                        “Third Party” shall mean any Person other than (i) the Licensor, (ii) the Patent Owners, (iii) Persons Controlling Licensor or one of the Patent Owners, (iv) Related Corporations of Persons referred to in (i), (ii) and (iii), (v) A123, and (vi) A123’s Related Corporations.

 

1.32                        “Toll Manufacturer” shall mean a toll manufacturer that Licensee uses to have made for direct sale to Licensee only, Cathode Powder, Electrode Systems, Cells, or Complex Systems under contract with Licensee, subject to Section 2.5.

 

2.                                      GRANT TO A123; TOLL MANUFACTURERS; JOINT VENTURES; ELECTRODE SYSTEMS.

 

2.1                               Sublicense to the Goodenough Patent Rights, and the Carbon Coating and Process Patent Rights. Subject to the terms and conditions stated hereunder, Licensor hereby grants to A123 a non-exclusive worldwide sublicense under the Goodenough Patent Rights, and the Carbon Coating and Process Patent Rights (i) to manufacture, have manufactured, use, import, export, transfer, offer to sell, sell and Have Sold Cells, Electrode Systems, and/or Complex Systems having a Liquid Electrolyte or a Gel Electrolyte, and (ii) to manufacture, have manufactured, use, import, export, transfer, offer to sell, sell or have sold Cathode Powder that has not been incorporated in Cells, Electrode Systems, and/or Complex Systems, in each case solely for incorporation into Cells, Electrode Systems and/or Complex Systems having a Liquid Electrolyte or a Gel Electrolyte by Licensee or to the extent provided in Sections 2.4, 2.5, 2.6 or 2.7.

 

2.2                               Sublicense to NTT Patent Rights. Subject to the terms and conditions stated hereunder, Licensor hereby grants to A123 a non-exclusive sublicense under the NTT Patent Rights to practice the invention (known as “hatsumei-no-jisshi” in Japan) as that term is used in Article 2(3) of the Japan Patent Law to manufacture, have manufactured, use, import, export, transfer, offer to sell, sell and Have Sold Cells, Electrode Systems, and/or Complex Systems having a Liquid Electrolyte or a Gel Electrolyte, and to manufacture, have manufactured, use, import, export, transfer, offer to sell, sell or have sold Cathode Powder that has not been incorporated in Cells, Electrode Systems, and/or Complex Systems solely for incorporation into Cells, Electrode Systems, and/or Complex Systems 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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having a Liquid Electrolyte or a Gel Electrolyte by Licensee or to the extent provided in Section 2.4, 2.5, 2.6 or 2.7.

 

2.2.1                     The sublicense granted in this Section 2.2 shall be retroactive to October 6, 2008, provided that A123 provides a report of all gross revenues received by A123 from the manufacture, use, sale lease, or import in Japan of all Cells, Electrode Systems, and/or Complex Systems, including specifically the value of any Cells in Complex Systems from October 2, 2008 through December 31, 2011.  For the avoidance of doubt, notwithstanding anything to the contrary in this Section 2.2, no royalties or any other consideration shall be payable by A123 or any Related Corporation under this Agreement for any sales or other activities authorized in this Section 2.2 which occur prior to December 31, 2011.

 

2.3                               Limited Right to grant Sub-Sublicenses. Except as provided in Sections 2.4, 2.5, 2.6 or 2.7, A123 is not entitled to grant sub-sublicenses hereunder, with the exception only of sub-sublicenses to its Related Corporations, and provided that if such sub-sublicensee ceases to be a Related Corporation of A123 (or ceases to meet the requirements of Sections 2.4, 2.5, 2.6 or 2.7, as applicable), any sub-sublicense to such sub-sublicensee shall automatically terminate.  A123 shall give notice to Licensor of the grant or termination of any such sub-sublicense to a Related Corporation of A123 within thirty (30) days of the effective date or termination date of such sub-sublicense. The Related Corporations of A123 which shall have been granted a sub-sublicense hereunder shall not be entitled to grant any further sub-sublicenses.

 

2.4                               Rights relating to Procter & Gamble.

 

2.4.1                     Background regarding P&G Agreement.  Under the P&G Agreement, Procter & Gamble has been granted by Licensee a limited right to make, have made, import, offer for sale, and sell, in the FIELD (as defined in the P&G Agreement), LICENSED PRODUCTS (as defined in the P&G Agreement) that contain Cathode Powder meeting Licensee’s proprietary NANOPHOSPHATE (as defined in the P&G Agreement) formulations which Licensee disclosed to Procter & Gamble pursuant to the P&G Agreement.  Under the P&G Agreement, Procter & Gamble may manufacture such Cathode Powder itself (“P&G-manufactured Powder”) or may purchase such Cathode Powder, or Electrode Systems or Cells, from Licensee, but may not have made such Cathode Powder.  For the avoidance of doubt, all terms referred to in all capital letters in this Section 2.4 refer to the meaning of such terms under the P&G Agreement.

 

2.4.2                     Cathode Powder Sales to Procter & Gamble.  In conformity with the rights granted to Licensee with respect to Cathode Powder pursuant to Sections 2.1, 2.2 and 2.3 and without limiting Licensee’s rights under Sections 2.1, 2.2 or 2.3, Licensee shall be entitled to offer to sell and sell Cathode Powder for Electrode Systems and/or Cells to Procter & Gamble.  For CELLS (as defined in the P&G Agreement) sold by Procter & Gamble which contain Cathode Powder supplied 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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by Licensee (which Cathode Powder was supplied by Licensee separately, and not as part of an Electrode System, Cell or Complex System), Licensee will [***].

 

2.4.3                     [***]

 

2.4.4                     [***] Procter & Gamble.  Procter & Gamble’s rights under this Section 2.4 shall [***] in connection with [***] to the extent permitted under the P&G Agreement.

 

2.5                               Toll Manufacturers. Licensee shall be entitled to have manufactured Cathode Powder, Electrode Systems, Cells and/or Complex Systems for Licensee’s use (or use as contemplated by Sections 2.4, 2.5, 2.6 and 2.7) by any number of Toll Manufacturers at any one time; provided that (A) the right to have manufactured Cathode Powder shall apply to no more than [***] Toll Manufacturers at any one time and (B) the right to have manufactured Electrode Systems shall apply to no more than [***] Toll Manufacturers at any one time.  Should a Toll Manufacturer manufacture both Cathode Powder and Electrode Systems for Licensee, it shall count as both a Cathode Powder Toll Manufacturer and an Electrode Systems Toll Manufacturer for purposes of the limitation of the total number of such Toll Manufacturers.  Licensee shall obtain a written agreement from each such Toll Manufacturer (which Licensor shall have the right to review for purposes of verification) (a) acknowledging the existence of the Licensor Licensed Patent Rights and the Toll Manufacturer’s limited right under this Agreement; (b) agreeing not to, make, have made, use, import and export, offer to sell, sell or have sold Cathode Powder, Electrode Systems, Cells and/or Complex Systems to any Person other than Licensee without first obtaining a license directly from Licensor (which license Licensor is under no obligation to grant) and providing Licensee and the PO Representative with the power to audit and inspect, or appoint, at Licensor’s discretion and expense, an independent Third Party to audit and inspect, such Toll Manufacturer’s activities at reasonable intervals to ensure compliance with the restrictions set forth in this Section 2.5; and (c) that shall not include any right for such Toll Manufacturer to sublicense or subcontract its rights under the Licensor Licensed Patent Rights.  Licensee may supply Cathode Powder to a Toll Manufacturer for the purpose of such Toll Manufacturer manufacturing Electrode Systems, Cells or Complex Systems for supply to Licensee.  Licensee may only use a Toll Manufacturer that is located in a jurisdiction where enforcement of contractual obligations is practicable and effective injunctive relief is generally available through its court system.  Notwithstanding anything else contained in this Agreement or in any other agreement or document, Licensee shall remain responsible for such Toll Manufacturer’s breach of its contractual obligations to Licensee to the extent such obligations were required by this Section 2.5.

 

2.6                               [***] Joint Ventures.

 

2.6.1                     Permitted [***] Joint Ventures.  Licensee shall be entitled to have Joint Ventures that are [***] Joint Ventures under this Agreement.  In the case of each “[***] Joint Venture,” with respect to the applicable Joint Venture, Licensee must have (i) ownership of at least [***] of the voting securities of such Joint Venture and (ii)(a) a contractual or legal veto over decisions relating to sales and 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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manufacturing activities utilizing Licensed Products, provided that the Joint Venture is located in a jurisdiction where the applicable contractual or legal veto is enforceable, or (ii)(b) the power to appoint at least half the members of the board of directors or comparable organizational body governing such Joint Venture.  Licensee shall be entitled to provide to each [***] Joint Venture a sub-sublicense under the Licensor Licensed Patent Rights to (A) develop applications for [***] based on using [***] supplied by Licensee, (B) manufacture [***] using [***] supplied by Licensee and (C) use, import and export, offer to sell, sell and have sold [***] using [***] supplied by Licensee (or [***] manufactured by such [***] Joint Venture pursuant to clause (B) above).

 

2.6.2                     Limitations of [***] Joint Ventures.  Licensee shall be entitled to have [***] Joint Ventures worldwide with rights under this Section 2.6 of this Agreement [***], provided that (a) [***] Joint Ventures may be located in [***] and all other such [***] Joint Ventures must be located in a [***], (b) any such [***] Joint Venture located in [***] must not be created sooner than [***] the Effective Date and (c) Licensee will not form a [***] Joint Venture with any of the following entities or, to the best of A123’s knowledge, Affiliates thereof (excluding entities that are Affiliates due to Control by [***]): [***].  As used herein, “[***]” shall mean [***].

 

2.6.3                     Single Customer [***] Joint Ventures.  Licensee may sub-sublicense any number of [***] Joint Ventures to manufacture, use, import and export, offer to sell, sell and have sold [***] (which incorporate [***] supplied by Licensee) for that [***] Joint Venture’s own use or for sale to a single end customer designated by Licensee; provided that such end customer is not permitted to sell or transfer any such [***] except as part of a [***].

 

2.6.4                     Limitations.  For the avoidance of doubt, (a) all supplies of [***] (other than those [***] manufactured by a Joint Venture as contemplated by Sections 2.6.1 and 2.6.3) to [***] Joint Ventures shall pass through Licensee, and (b) no [***] Joint Venture shall receive a right under this Section 2.6 to receive a sub-sublicense under the Licensor Licensed Patent Rights for such [***] Joint Venture to sell [***] (except as expressly permitted by Sections 2.6.1 and 2.6.3) or to manufacture [***].  Licensee or its Related Corporations may supply [***] to any [***] Joint Venture, subject to the limitations set forth in this Section 2.

 

2.6.5                     [***] Joint Venture Records.  Licensee shall obtain a written agreement from each [***] Joint Venture (which Licensor shall have the right to review for purposes of verification) agreeing (i) to keep at its own expense, during the Term and for three (3) years after expiration or early termination of this Agreement, accurate books of account, detailing all data necessary to calculate and audit such [***] Joint Venture’s Net Sales and (ii) upon not less than thirty (30) days advance written notice to Licensee, to allow the PO Representative to have an independent appointed auditor have access to such books and records as necessary to conduct a review or audit of all activities of such [***] Joint Venture upon the 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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same terms and conditions and for the same purpose as provided in Section 8.2 hereof, mutatis mutandis.

 

2.7                               [***] Joint Ventures.  Licensee may grant sub-sublicenses hereunder to permit Joint Ventures to (a) manufacture and use (but not to sell or Have Sold, except as provided in clause (b) below) [***] using [***] supplied by Licensee (but not to manufacture [***]), and (b) import and export, offer to sell, sell and Have Sold [***] (but not [***]) using [***] supplied by Licensee or [***] produced by the Joint Venture under clause (a) above.  Such Joint Ventures shall be deemed “[***] Joint Ventures.”  There is no limit on the number or location of [***] Joint Ventures permitted hereunder.  For the avoidance of doubt, a Joint Venture may be deemed to be both a [***] Joint Venture and a [***] Joint Venture, subject to the separate restrictions placed on [***] Joint Ventures and [***] Joint Ventures hereunder.

 

2.7.1                     [***] Joint Venture Records.  Should royalties be payable to Licensor hereunder on any product sold by a [***] Joint Venture, prior to or immediately upon the first such royalty-bearing [***] Joint Venture sale, Licensee shall obtain a written agreement from such [***] Joint Venture (which Licensor shall have the right to review for purposes of verification) agreeing (i) to keep at its own expense, from the date of the written agreement and thereafter during the Term and for three (3) years after expiration or early termination of this Agreement, accurate books of account, detailing all data necessary to calculate and audit such [***] Joint Venture’s Net Sales and (ii) upon not less than thirty (30) days advance written notice to Licensee, to allow the PO Representative to have an independent appointed auditor have access to such books and records as necessary to conduct a review or audit of all activities of such [***] Joint Venture upon the same terms and conditions and for the same purpose as provided in Section 8.2 hereof, mutatis mutandis.

 

2.8                               Breach by Joint Venture.  Notwithstanding anything else contained in this Agreement or in any other agreement or document, Licensee shall remain responsible for a Joint Venture’s breach of its contractual obligations to Licensee to the extent such contractual obligations are required by Section 2.6 or 2.7 hereof.

 

2.9                               [***] Transfer.  For the avoidance of doubt, notwithstanding Sections 2.4, 2.5, 2.6 and 2.7, no party other than Licensee shall have any right under this Agreement to transfer [***] to any other Joint Venture or Toll Manufacturer.  Licensee shall have no right to transfer [***] to any Third Party other than Procter & Gamble or to Toll Manufacturers or Joint Ventures to the extent permitted by Sections 2.5, 2.6 or 2.7.

 

2.10                        Maximum Percentage of [***].  Licensee covenants that, during the Term, Net Sales arising from the sale of [***] (individually and not as part of [***]) by Licensee, will not exceed [***] of the sum of (A) Licensee’s aggregate gross revenue from their businesses plus (B) the Net Sales of its Joint Ventures which sell [***] for which royalties are due hereunder.  Should such Net Sales exceed the foregoing percentage of the sum of clauses 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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(A) and (B) above, then the Parties shall discuss in good faith making reasonable adjustments to the applicable royalties set forth in Section 7 below.

 

3.                                      GRANT TO LICENSOR

 

3.1                               License to the A123 Patent Rights. Subject to the terms and conditions stated herein, A123 hereby grants to Licensor a royalty-free, non-exclusive, perpetual, worldwide license under the A123 Patent Rights to manufacture, have manufactured, use, import and export, offer to sell, sell and have sold Cathode Powder, Cells, Electrode Systems, and/or Complex Systems covered by the claims of the A123 Patent Rights.  This Section 3 shall terminate upon the expiration or termination of this Agreement, except as provided in Section 9.3.1 hereof.

 

3.2                               Limited Right to grant Sub-Sublicenses. Licensor shall be entitled to grant sublicenses to the A123 Patent Rights solely in conjunction with, and to the same Persons to whom it has or will grant sublicenses under, the Goodenough Patent Rights, the Carbon Coating and Process Patent Rights and/or the NTT Patent Rights.

 

4.                                      TITLES AND WARRANTIES.

 

4.1                               Licensor’s Warranties. Licensor represents that it has the right to sublicense the Licensor Licensed Patent Rights under the terms hereof.

 

4.2                               A123’s Warranties.

 

4.2.1                     A123 is aware of the fact that this sublicense is granted by Licensor in order to broaden the market and encourage competition in the development, manufacture, use and sale of products incorporating Lithium Iron Phosphate.

 

4.2.2                     A123 represents that it has the right to license the A123 Patent Rights under the terms hereof.

 

4.3                               No Conflict. Each of Licensor and A123 represents to the other that neither it nor any of its Related Corporations have or shall have any agreement with any Third Party that conflicts with the rights and obligations under this Agreement, except as previously disclosed to Licensor with respect to Licensee’s P&G Agreement.

 

4.4                               Pending Matters. A123 is aware of the fact that there are several proceedings pending in which, inter alia, the validity of certain Licensor Licensed Patent Rights is in dispute. As of the signing date, these proceedings include: a) European Patent Office Appeal T0834/09 appealing the Opposition Decision revoking EP 0904607; b) an appeal filed against the decision rendered by the State Intellectual Property Office of the People’s Republic of China on an Invalidation Request filed on October 29, 2010 by the China Battery Industry Association regarding Chinese Patent ZL01816319.X; c) Civil Action No. 1:06-CV-111 SS in the United States District Court for the Western District of Texas regarding US 5,910,382 and US 6,514,640; and d) Action No. T-219-07 before the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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Federal Court of Canada between Phostech Lithium Inc. and Valence Technology Inc. regarding Patent Rights in Canada and the appeal thereof before the Federal Court of Appeal of Canada, including the decision of the Federal Court of Appeal of Canada rendered on August 17, 2011.

 

4.5                               DISCLAIMER OF WARRANTIES BY LICENSOR. LICENSOR MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY ASPECT OF THE LICENSOR LICENSED PATENT RIGHTS, NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. THE LICENSOR LICENSED PATENT RIGHTS ARE LICENSED TO LICENSEE STRICTLY ON AN AS IS BASIS.  LICENSOR DOES NOT WARRANT THAT ANY ASPECT OF THE LICENSOR LICENSED PATENT RIGHTS IS ERROR FREE OR WILL MEET LICENSEE’S REQUIREMENTS.  ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY DISCLAIMED AND EXCLUDED. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE LICENSED PRODUCTS AND OF THE CELLS IN WHICH LICENSED PRODUCTS WILL HAVE BEEN INCORPORATED IS ASSUMED BY LICENSEE. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR MAKES NO OTHER REPRESENTATIONS, EXTENDS NO WARRANTIES, EXPRESS OR IMPLIED, AND ASSUMES NO LIABILITIES OR RESPONSIBILITIES WITH RESPECT TO THE USE, SALE OR OTHER DISPOSITION BY LICENSEE, TOLL MANUFACTURERS, JOINT VENTURES,  PROCTER & GAMBLE, DISTRIBUTORS, VENDEES OR TRANSFEREES OF CATHODE POWDER, CELLS, ELECTRODE SYSTEMS AND/OR COMPLEX SYSTEMS.

 

4.6                               DISCLAIMER OF WARRANTIES BY LICENSEE. LICENSEE MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY ASPECT OF THE A123 PATENT RIGHTS, NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. THE A123 PATENT RIGHTS ARE LICENSED TO LICENSOR STRICTLY ON AN AS IS BASIS. LICENSEE DOES NOT WARRANT THAT ANY ASPECT OF THE A123 PATENT RIGHTS IS ERROR FREE OR WILL MEET LICENSOR’S REQUIREMENTS. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY DISCLAIMED AND EXCLUDED. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE LICENSED PRODUCTS AND OF THE CELLS IN WHICH LICENSED PRODUCTS WILL HAVE BEEN INCORPORATED IS ASSUMED BY LICENSOR. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, A123 MAKES NO OTHER REPRESENTATIONS, EXTENDS NO WARRANTIES, EXPRESS OR IMPLIED, AND ASSUMES NO LIABILITIES OR RESPONSIBILITIES WITH RESPECT TO THE USE, SALE OR OTHER DISPOSITION BY LICENSOR, TOLL MANUFACTURERS, DISTRIBUTORS, VENDEES OR TRANSFEREES OF CATHODE POWDER, CELLS, ELECTRODE SYSTEMS AND/OR COMPLEX SYSTEMS.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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4.7                               LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVE OR OTHER INDIRECT DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR ITS SUBJECT MATTER, REGARDLESS OF WHETHER SUCH PARTY KNOWS OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL NOT LIMIT LICENSEE’S LIABILITY FOR UNAUTHORIZED USE BY LICENSEE OF THE LICENSOR LICENSED PATENT RIGHTS OR LICENSOR’S LIABILITY FOR THE UNAUTHORIZED USE BY LICENSOR OF THE A123 PATENT RIGHTS.

 

4.8                               Compliance with Import, Export and Re-Export Controls. Licensee agrees to fully comply with all applicable laws or regulations affecting the import, export or re-export of Cathode Powder (only as otherwise permitted under this Agreement), Cells, Electrode Systems and/or Complex Systems under Licensee’s control which include a product benefitting from the license set forth in Section 2 in every jurisdiction worldwide. Licensee agrees to defend, indemnify and hold Licensor harmless from and against any and all claims, liabilities, damages, penalties or the like arising out of or relating to Licensee’s import, export or re-export of Cathode Powder (only as otherwise permitted under this Agreement), Cells, Electrode Systems and/or Complex Systems under Licensee’s control in every jurisdiction worldwide.  Licensor agrees to fully comply with all applicable laws or regulations affecting the import, export or re-export of Cells, Electrode Systems and/or Complex Systems under Licensor’s control which include a product benefitting from the license set forth in Section 3 in every jurisdiction worldwide. Licensor agrees to defend, indemnify and hold Licensee harmless from and against any and all claims, liabilities, damages, penalties or the like arising out of or relating to Licensor’s or its affiliates’ import, export or re-export of Cells, Electrode Systems and/or Complex Systems under Licensor’s control in every jurisdiction worldwide.

 

5.                                      PATENT RIGHTS.

 

5.1                               Claims or Challenges. A123 acknowledges that it has been provided Sections 9.4 and 9.7 of the license agreement between NTT and HQ regarding the NTT Patent License, such Sections 9.4 and 9.7 being attached hereto as Appendix E.

 

5.2                               Information. Licensee shall immediately notify Licensor, in writing, if it becomes aware of any suspected infringement of the Licensor Licensed Patent Rights.

 

5.3                               Cooperation between the Parties. Each Party shall cooperate fully as reasonably necessary with the other in connection with any litigation (except with respect to litigation against an existing customer or business partner of such Party) asserting the Licensor Licensed Patent Rights or the A123 Patent Rights in a manner that will preserve attorney-client privilege, professional secret and attorney work protection thereto. Unless prohibited by applicable laws, each Party shall cooperate fully in such litigation with all discovery requests permissible under applicable laws, regardless of whether such

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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compliance is legally required by applicable laws. Excepted “existing customers or business partners” of Licensee shall include, without limitation, Licensee’s customers or business partners or entities to whom Licensee has submitted a written proposal or with whom Licensee has a product evaluation agreement or confidentiality agreement at the time such litigation is initiated or such assistance is requested, whichever is earlier.  Excepted “existing customers or business partners” of Licensor shall include, without limitation, sublicensees of Licensor or potential sublicensees with whom Licensor has executed a confidentiality agreement at the time such litigation is initiated or such assistance is requested, whichever is earlier.  With respect to a Party’s excepted existing customers or business partners, no duty of cooperation shall exist and any information available to that Party regarding the excepted existing customer or business partner or the Party’s relationship with that entity must be obtained through third party discovery processes as provided by the relevant court or judicial body.  This Section 5.3 provides no special exemptions from such discovery processes with respect to information available to a Party regarding an excepted existing customer or business partner. or the Party’s relationship with that entity.

 

5.4                               Enforcement.  If after the Effective Date of this Agreement, Licensee provides written notice to Licensor (the “Infringement Notice”) that it has actual knowledge or good faith belief that a Third Party, who is a direct competitor of Licensee in phosphate-based products for a material business opportunity, is infringing the Licensor Licensed Patent Rights based upon grounds identified and described in the Infringement Notice, that, to Licensee’s knowledge such Third Party is not a licensee of the Licensor Licensed Patent Rights, and that Licensee entered a competitive bid and was forced to lower its bid price due to a lower bid by the Third Party, as demonstrated by written evidence, then Licensor will be required to inform Licensee in writing within [***] of receiving such Infringement Notice whether it will elect to commence enforcement actions against such Third Party for such infringement (the “Response Notice”) and shall actually execute such enforcement action(s) as soon as reasonably possible, in no event later than [***] after the date that Licensor received the Infringement Notice (the “Enforcement Period”).  Such enforcement actions may include [***], but are not required to include [***].  For purposes of clarity, Licensee shall further be required to identify, in the Infringement Notice, the jurisdictions served by the competitive bid.  If Licensor fails to undertake such enforcement actions by the end of the Enforcement Period, then [***] with respect to any sales of Electrode Systems, Cells or Complex Systems to which Licensee commits in connection with that material business opportunity.  Licensor in the Response Notice shall identify the jurisdictions identified in the applicable Infringement Notice in which enforcement actions are not possible due to lack of Licensor Licensed Patent Rights covering the Third Party’s products.  If Licensor, after good faith investigation, determines that enforcement is not legally warranted in a jurisdiction identified, Licensor shall then promptly advise Licensee, who agrees to discuss to determine the appropriate measures to be taken, if any.  If Licensor is unable to undertake any enforcement action due to lack of Licensor Licensed Patent Rights in any jurisdiction identified by Licensee, [***] with respect to sales of Electrode Systems, Cells and Complex Systems that are intended for final use in that jurisdiction.  For purposes of this Section 5.4, a “material

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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business opportunity” shall mean a transaction that Licensee reasonably expects, at the time of the Infringement Notice, to result in aggregate revenue of more than [***].

 

6.                                      CONFIDENTIAL INFORMATION.

 

6.1                               Confidentiality of Agreement. During the Term and for a period of [***] thereafter, neither Party may, without the consent of the other Party, disclose the provisions of this Agreement to Third Parties, other than their legal representatives and auditors, and subject to the rights of Licensor to disclose the provisions of this Agreement on a confidential basis, to the Patent Owners and their financial and legal professionals and to a Third Party who is, would be or could become a most favored licensee, including any existing licensees so long as such Third Party is subject to binding confidentiality obligations consistent with this Section 6. Notwithstanding the above, either Party may disclose the provisions of this Agreement on a confidential basis, to its shareholders, its financial and legal professionals and bankers, to potential investors or to any of its Related Corporations or Joint Ventures that is benefitting from the rights granted hereunder, or on a non-confidential basis in the context of a public offering or public company reporting obligations as required under securities laws and related regulations, but only to the extent required to comply with applicable legal disclosure requirements, and Licensor and Patent Owners may disclose the fact that Licensee is holding a non-exclusive license to the Licensor Licensed Patent Rights, following the issuance of a mutually agreed press release, or as otherwise set forth in Section 6.4.

 

6.2                               Other Confidential Information. During the Term and for [***] thereafter, each Party (the Receiving Party) shall maintain in confidence and not disclose to Third Parties, except to the extent contemplated by this Agreement, any information which has been disclosed to it by the other Party (the Disclosing Party, which shall include Related Corporations of the Disclosing Party) under this Agreement, provided such information has been disclosed or is disclosed:

 

6.2.1                     in written form and marked confidential; or

 

6.2.2                     orally or visually, and is identified as confidential at the time of disclosure and summarized in a written memorandum marked confidential and delivered to the Receiving Party within thirty (30) days of the initial disclosure; or

 

6.2.3                     disclosed in the form of samples of materials or products identified in writing as confidential;

 

and, in each such case, subject to the right of Licensor to disclose the reports and other information provided by Licensee to Licensor under this Agreement on a confidential basis to the Patent Owners and their financial and legal professionals. If the Disclosing Party gives its consent to the disclosure by Receiving Party to any Third Party of any information contemplated in Sections 6.1 or 6.2 hereof or in the case of any permitted disclosure to any Third Party pursuant to these two sections, the Receiving Party shall prior to the time of disclosure, have a written agreement with said Third Party containing

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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terms and conditions with respect to the protection of confidential information which are no less restrictive than those contained in this Agreement. For the same aforementioned period, a Party receiving information in accordance with Section 6.2 shall use the information only for purposes contemplated by this Agreement or to enforce its rights hereunder.

 

6.3                               Exclusions. The obligations set forth in Section 6.2 shall not apply when and to the extent the information:

 

6.3.1                     was known to the Receiving Party prior to receipt from the Disclosing Party;

 

6.3.2                     was lawfully available to the trade or to the public prior to receipt from the Disclosing Party;

 

6.3.3                     becomes lawfully available to the public after the date of disclosure through no act or fault on the part of the Receiving Party;

 

6.3.4                     corresponds in substance to any information received in good faith by the Receiving Party from any Third Party who is not obligated to the Disclosing Party to keep such information confidential;

 

6.3.5                     is communicated to any Third Party by the Disclosing Party without restriction as to confidentiality or on the basis of a restriction that has elapsed, by issuance of a Patent Right to it, or otherwise;

 

6.3.6                     is independently developed by an employee or agent of the Receiving Party subsequent to receipt of such information from the Disclosing Party, as evidenced by written records of the Receiving Party;

 

6.3.7                     is required to be disclosed to a Third Party by law, regulation or legal process (including without limitation each Party’s obligations under applicable securities and securities exchange laws), provided that the Receiving Party takes reasonable steps in accordance with applicable law to inform the Disclosing Party of such disclosure before it takes place and affords it the possibility to try to obtain a court order, or to request that the Receiving Party seek reasonable confidential treatment of submissions to securities regulators or exchanges, protecting the confidentiality of such information; or

 

6.3.8                     is required to be disclosed to recover damages for a breach of this Agreement provided reasonable measures are taken to limit such disclosure.

 

In addition, the obligations set forth in Section 6.1 shall not apply when and to the extent the information is required to be disclosed pursuant to Section 6.3.7 or 6.3.8.

 

6.4                               Disclosure of Relationship. Notwithstanding Section 6.1, (i) on or after the Effective Date, the Parties shall agree to make publicly known the existence of the cross-licenses granted herein and the dismissal of the pending litigation through an appropriate joint

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

15

 

press release and/or individual press releases, which content shall have been pre-approved by the Parties, such approval not to be unreasonably withheld, conditioned or delayed; and (ii) Licensor and the Patent Owners shall be allowed to mention Licensee’s name as licensee of the Licensor Licensed Patent Rights in their brochures and webpages in relation with their technology commercialization efforts and achievements; provided that Licensee’s name as licensor of the A123 Patent Rights is also mentioned and that Licensee shall be allowed to mention Licensor’s name as licensee of the A123 Patent Rights in its brochures and webpages in relation with its technology commercialization efforts and achievements.  Licensor and Licensee agree that the press release attached as Schedule 6.4 hereto is hereby approved by both Parties, and that either Party may publicize the contents of such press release without restriction hereunder.

 

7.                                      REMUNERATION.

 

7.1                               Remuneration in General. In consideration of the rights granted hereunder by Licensor commencing as of the Effective Date, Licensee shall owe to Licensor, payable as and when indicated, the following:

 

7.1.1                     a fixed amount of US$ 5,000,000 payable as follows:

 

a)                                     a first installment of US$ 3,500,000 to be paid within [***] of the execution of this Agreement;

 

b)                                     a second installment of US$ 750,000 to be paid on or before [***] 2013 (which will survive termination of this Agreement by Licensee pursuant to Section 9.3, as set forth in Section 13.14); and

 

c)                                      a final installment of US$ 750,000 to be paid on or before [***] 2014 (which will survive termination of this Agreement by Licensee pursuant to Section 9.3, as set forth in Section 13.14);

 

7.1.2                     royalties anywhere in the world during any Calendar Quarter between January 1, 2012 and [***], equal to [***] of Net Sales during such Calendar Quarter, with respect to:

 

a)                                     any Cell, Electrode System, or Complex System sold or Have Sold by Licensee [***] to a Third Party (“Licensee-Supplied Components”), excluding Cells, Electrode Systems, or Complex Systems supplied to a Joint Venture (1) that were sold by Licensee to the Joint Venture at prices which do not reflect an arms length transaction or (2) for which Licensee chooses not to pay royalties on Net Sales arising from such sale of the applicable Licensee-Supplied Components to such Joint Venture (clauses (1) and (2), collectively and separately, “Excluded JV Sales”); and

 

b)                                     any Cell, Electrode System, or Complex System sold or Have Sold by a Joint Venture to another Third Party (“JV Products”) which incorporate

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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Cells, Electrode Systems, or Complex Systems that were Excluded JV Sales.

 

7.1.3                     royalties anywhere in the world during any Calendar Quarter starting after [***], equal to the product of the applicable royalty rate specified in Section 7.2 below and [***] of Net Sales during such Calendar Quarter, with respect to:

 

a)                                     any Cell, Electrode System, or Complex System sold or Have Sold by Licensee [***] to a Third Party, excluding Excluded JV Sales; and

 

b)                                     any JV Products sold or Have Sold by a Joint Venture to another Third Party which incorporate Cells, Electrode Systems, or Complex Systems that were Excluded JV Sales.

 

No royalties shall be payable by Licensee on any Cell, Electrode System, or Complex System sold or Have Sold by Licensee, a Related Corporation, or a Joint Venture to a Third Party anywhere in the world prior to December 31, 2011 inclusively.

 

7.1.4                     For the avoidance of doubt, royalties shall not be due in connection with the transfer of any [***] due to limits placed on Licensee’s, Procter & Gamble’s, Toll Manufacturers’, and Joint Ventures’ rights to transfer [***] which require its ultimate inclusion in a Cell, Electrode System, or Complex System that is royalty-bearing under this Agreement.

 

7.2                               Calculation of Applicable Royalty. At any time during each calendar year during the Term starting after [***], the applicable royalty for calculation of Licensor’s consideration stated in Article 7.1 shall be determined as follows:

 

7.2.1                     Until Licensee has accrued total royalties owed to Licensor equal to [***] in that calendar year on Net Sales of Cells, Electrode Systems, or Complex Systems that are made during this time frame, the applicable royalty shall be [***] of such Net Sales.

 

7.2.2                     After Licensee has accrued total royalties owed to Licensor greater than [***] in that calendar year but before Licensee has accrued total royalties owed to Licensor equal to [***] in that calendar year on Net Sales of Cells, Electrode Systems, or Complex Systems that are made during this time frame, the applicable royalty shall be [***] of such Net Sales.

 

7.2.3                     After Licensee has accrued total royalties owed to Licensor greater than [***] in that calendar year but before Licensee has accrued total royalties owed to Licensor equal to [***] in that calendar year, on Net Sales of Cells, Electrode Systems, or Complex Systems that are made during this time frame, the applicable royalty shall be [***] of such Net Sales.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

17

 

7.2.4                     After Licensee has accrued total royalties owed to Licensor greater than [***] in that calendar year but before Licensee has accrued total royalties owed to Licensor equal to [***] in that calendar year, on Net Sales of Cells, Electrode Systems, or Complex Systems that are made during this time frame, the applicable royalty shall be [***] of such Net Sales.

 

7.2.5                     After Licensee has accrued total royalties owed to Licensor greater than [***] in that calendar year until the end of that calendar year, on Net Sales of Cells, Electrode Systems, or Complex Systems that are made during this time frame, the applicable royalty shall be [***] of such Net Sales.

 

7.3                               Change in the relative percentage of sale of Cells, Electrode Systems, and Complex Systems. In the event the present relative percentage of Licensee’s sales (including all royalty-bearing sales of Related Corporations or Joint Ventures under Section 7.1 and 7.2) of Electrode Systems and Cells, in the aggregate compared to the percentage of Licensee’s sales of Complex Systems (including all royalty-bearing sales of Related Corporations or Joint Ventures under Section 7.1 and 7.2), in the aggregate being currently estimated by Licensee to be under [***] for [***] and over [***] for [***], increases substantially so that Licensee’s revenue for sales of [***] (including all royalty-bearing sales of Related Corporations or Joint Ventures under Section 7.1 and 7.2) represent more than [***] of Licensee’s overall business in Cells, Electrode Systems, and Complex Systems (including all royalty-bearing sales of Related Corporations or Joint Ventures under Section 7.1 and 7.2) within any given period of [***] consecutive Calendar Quarters, Licensee agrees to promptly notify Licensor and the Parties shall enter into good faith negotiations to determine whether it shall still be appropriate for the royalties applicable on such sales of Electrode Systems, Complex Systems and Cells to be calculated on only [***] of the applicable Net Sales of Licensee or whether such percentage should be raised to account for the increased relative value of the Licensed Product within Licensee’s [***] revenue. The obligations of this Section 7.3 shall survive any Change of Control of A123.

 

7.4                               Change of Control of A123.

 

7.4.1                     In the event a Third Party, which is (A) currently legally engaged in making Licensed Products, including Complex Systems, Cathode Powder, Cells, or Electrode Systems incorporating Licensed Products, or (B) a potential sublicensee with whom Licensor has executed a confidentiality agreement, and which has not entered into a sublicense agreement on Licensor Licensed Patent Rights with Licensor (a “Competitive Acquirer”), acquires the Control of A123, the royalties payable in respect to all sales of Cells, Electrode Systems, and/or Complex Systems taking place after the date of acquisition of Control shall be as provided in Sections 7.1.2, 7.1.3 and 7.2 until the aggregate royalties paid by Licensee (including any royalties paid by Licensee in connection with any JV Products [***]) under this Agreement reach [***], at which time royalties payable shall be as provided in Sections 7.1, 7.2 and 7.7 with the exception that royalties on sales of Complex Systems, Cells and Electrode Systems shall be based on [***] Net

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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Sales of such Complex Systems, Cells and Electrode Systems (instead of [***] Net Sales), subject in all respects to Section 7.14 and 7.15.

 

7.4.2                     In event a Third Party who is not a Competitive Acquirer, acquires Control of A123, the royalties payable in respect to all sales of Cells, Electrode Systems, and/or Complex Systems taking place after the date of acquisition of Control shall be as [***].

 

7.5                               Royalty Accrual Date. For purposes of determining the rates for the applicable running royalty on sales of Cells, Electrode Systems, and/or Complex Systems and calculating the correct royalties owed for any calendar year, royalties for a particular sale of Cells, Electrode Systems, and/or Complex Systems shall accrue on the date that the Net Sales of each one of the Cells, Electrode Systems, and/or Complex Systems is invoiced by Licensee.

 

7.6                               Calculation of Quarterly Payments after [***] until [***]. During the [***] starting respectively on [***], Licensee shall, subject to Section 7.11 below, pay to Licensor the royalties as accrued in each Calendar Quarter following the end of such Calendar Quarter.

 

7.7                               Calculation of Quarterly Payments after [***]. During the [***] starting on [***], Licensee shall, subject to Section 7.11 below, pay to Licensor the royalties as accrued in each Calendar Quarter following the end of such Calendar Quarter. During each successive [***], Licensee shall, subject to Section 7.11 below, pay to Licensor for each Calendar Quarter an estimated royalty for sales of Cells equal to [***] of the product of [***] of the Net Sales of Cells, Electrode Systems and/or Complex Systems made during that Calendar Quarter by the [***] applied on Cells during the [***].

 

7.8                               Annual True up Payments. Licensee shall also pay to Licensor on the [***] day following the end of each [***] starting after [***], a true up payment equal to the difference between, on the one hand, the sum of the four quarterly payments of the estimated royalty for Cells, Electrode Systems and/or Complex Systems and, on the other hand, the actual royalties accrued from sales of Cells, Electrode Systems and/or Complex Systems as calculated using the applicable royalties set forth herein. In the case where the sum of the four quarterly payments of the estimated royalty for Cells, Electrode Systems and/or Complex Systems is greater than the actual royalties accrued from sales of Cells, Electrode Systems and/or Complex Systems, the difference shall be credited against royalty payments for the successive [***] until such credit is exhausted, or refunded if no further royalties are payable.

 

7.9                               Term of Royalty Payment Obligation. The royalties under this Section 7 are payable during the Term.

 

7.10                        Payment. The royalties calculated pursuant to Sections 7.1.2 and 7.1.3 and to Sections 7.3 to 7.8 shall be paid to Licensor on a Calendar Quarterly basis within [***] after the end of each Calendar Quarter during the Term. All amounts payable hereunder by Licensee

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

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must be paid in US Dollars without deduction for taxes, assessment, fees or charges of any kind unless expressly allowed herein.

 

7.11                        Interest. Licensee shall pay Licensor interest on any amounts not paid when due. Such interest shall accrue from the fifteenth day after the payment was due, at a rate of [***] and the interest payment shall be due and payable on the [***] after interest begins to accrue until full payment of all amounts due to Licensor pursuant to this Agreement is made.

 

7.12                        Tax Withholding. To the extent required by law, Licensee may retain from all payments payable to the Licensor hereunder, any required withholding taxes and shall forward such retained payments to the competent tax authorities, provided, however, the following conditions are met: (a) the respective tax is an income tax and not any consumption tax, use tax, sales tax or other tax; (b) Licensor is liable for such taxes under applicable laws; and (c) Licensee is required by applicable laws to withhold the tax from payments due to the Licensor and to forward such tax to the competent tax authorities. If taxes have to be withheld, Licensee shall give notice to that effect to Licensor, without undue delay, at the latest [***] before the payment is made, make the necessary withholding and make timely payment of the amount withheld to the appropriate governmental authority.  If the Licensee’s entity making a payment under this Agreement will be other than United States tax resident, Licensee shall provide notice of the tax residence of the payer to Licensor at least [***] before the payment is made.

 

Licensor shall take such actions as permitted under applicable law to obtain an exemption or reduction of withholding taxes on any payments hereunder.  If Licensee is United States tax resident, Licensor shall provide Licensee with the appropriate US-tax forms duly completed and signed (e.g. W8-BEN and/or W8-IMY as the case may be) showing that Licensor is tax-exempt or entitled to a reduction of withholding taxes under applicable tax laws or under the applicable tax treaty provisions.

 

All taxes so withheld shall be paid before penalties attached thereto or interest accrued thereon. If any such penalties or interest nonetheless become due, Licensee shall make prompt payment thereof to the appropriate governmental authority.

 

If Licensor becomes liable for, and pays any amounts in respect of taxes on any payment due by Licensee hereunder or in respect of penalties or interests thereon, Licensee shall reimburse Licensor in the currency in which Licensor shall be liable to pay such amount in respect of taxes, penalties or interests.

 

If Licensor is or becomes entitled under any applicable law or treaty to a reduced withholding rate on amounts payable by Licensee under this Agreement, or a complete exemption from withholding with respect to taxes on amounts payable by Licensee under this Agreement, Licensor shall complete and deliver from time to time to Licensee, as soon as possible after Licensee’s request, any form (e.g.. if Licensee is United States tax resident, Forms W8-BEN and/or W8-IMY as the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

20

 

case may be) that Licensee is required to obtain to give effect to the reduced rate or exemption.

 

Licensee shall pay forthwith to Licensor any additional amount necessary to ensure that the amount actually received by Licensor from any payment made by Licensee hereunder, after any withholding tax, is equal to the amount that Licensor would have received had no tax amount been required to be withheld on that payment; provided that, if the Licensor is not tax resident in Switzerland, the maximum additional amount the Licensee is required to pay under this Section 7.12 shall be the amount that would have been due if the Licensor had been tax resident in Switzerland.

 

Licensee and Licensor each represents, warrants and agrees that it will take all necessary steps to obtain the lowest available rate for withholding taxes under all applicable tax treaties and under domestic law.  Licensee further represents, warrants and agrees that it will withhold taxes at the lowest rate available under such treaties and domestic law provisions; provided Licensor complies with all applicable requirements for such lowest rate.

 

Licensee shall issue or provide to Licensor the documents required under applicable law (such as tax assessment notices, proof of payment/bank statements) attesting the withholding tax amounts withheld and remitted by Licensee to the competent tax authorities in connection with any and all payments hereunder. These documents shall be issued or provided without undue delay, at the latest within [***] following the end of each [***].

 

7.13                        Foreign Sales. The conversion of foreign sales and the respective royalty payments into US Dollars shall occur as the sales are invoiced according to Generally Accepted Accounting Principles in the United States. For all royalty payments the conversion ratio from the respective currency to US Dollars shall be based on the applicable exchange rate on the business day of invoicing (or, if such day is not a business day in the United States, on the immediately following business day in the United States) as reflected on Statistical Release H.10 issued by the Board of Governors of the Federal Reserve System for conversion of such currency to US Dollars. The conversion ratio from another currency to the US Dollar for any other payment to Licensor pursuant to this Agreement shall be based upon the arithmetic mean of the exchange rates for each day in the relevant period as reflected on Statistical Release H.10 issued by the Board of Governors of the Federal Reserve System for conversion of such currency to US Dollars.

 

7.14                        Most Favored Licensee.  Licensor shall ensure that the terms of this Agreement, taken as a whole, shall be no less favorable than the terms taken as a whole provided to any Third Party licensee of the Licensor Licensed Patent Rights.  In the event that a sublicense is granted under the Licensor Licensed Patent Rights for the development, manufacture, use and/or sale of Cathode Powder, Cells, Electrode Systems, and/or Complex Systems on terms that are, taking this Agreement and the proposed Third Party sublicense agreement as a whole, more favorable for such Third Party than the terms of this Agreement as applied to Licensee, then Licensor shall inform License of such agreement within [***] of entering into such an agreement with any Third Party, and, at Licensee’s option, there

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

21

 

shall be imposed an adjustment of the terms of this Agreement on a prospective basis so that Licensee’s terms are not materially less favorable than the terms granted to the Third Party sublicense in light of the relevant factors.  Unless permitted by the confidentiality terms of the Third Party sublicense agreement, Licensee shall not be entitled to directly review such agreement, but instead may provide the Third Party agreement to an independent auditor selected by Licensee who shall report to Licensee whether the terms, taken as a whole, are more or less favorable than those of this Agreement.  Should the auditor conclude that the terms, taken as a whole, are more favorable than those of this Agreement, auditor shall also, upon Licensee’s request, identify such terms that together are more favorable to Licensor, who will disclose such terms to Licensee at that time.  Upon not less than [***] advance written notice to Licensor, Licensee is entitled to have an independent appointed auditor have access to such books and records of Licensor as necessary to conduct a review or audit of Licensor’s compliance with this Section 7.14.  For the avoidance of doubt, the terms of the licenses with Sony Corporation, the terms of the Head License Agreement and the terms of any settlement agreement with a Third Party regarding the Licensor Licensed Patent Rights shall not be taken into consideration under this Section 7.14.

 

7.15                        Notice of Alliance Licenses; Preserving Licensee’s Discount from Licensor’s Royalty Structure.

 

7.15.1              Licensor shall provide Licensee with an abstract of the financial terms of each sublicense, or any amendment to a previous sublicense, granted by Licensor on or after the Effective Date, under any of the Licensor Licensed Patent Rights, for the development, manufacture, use and/or sale of Cathode Powder, Cells, Electrode Systems, and/or Complex Systems, excluding those set forth in Section 7.15.6 below.  Such abstract need not provide the identity of the parties to the relevant agreement, but shall provide sufficient financial information to enable Licensee to apply the terms of this Section 7.15 to such agreement.  Although certain reductions in royalty rates or up-front payments may result from the application of this Section 7.15 involving future licenses governing the sale of Cathode Powder, nothing herein shall be construed to expand the licenses granted in Sections 2.1 and 2.2 with respect to the sale of Cathode Powder by A123.

 

7.15.2              Licensor acknowledges that Licensee is entering into this Agreement based on an understanding that in general, as of the time of the Effective Date, Licensor licenses the Licensor Licensed Patent Rights to its licensees subject to the Royalty Schedule and the Powder Royalty Schedule (as defined in Section 7.15.3), and subject to a standard up-front, non-creditable license fee payable by such third party licensees of [***] (“Standard Up Front Fee”), effective from the commencement of each of its agreements which sublicense the Licensor Licensed Patent Rights.

 

7.15.3              If, at any time during the Term, a sublicense is granted to any Third Party by Licensor, under the Licensor Licensed Patent Rights, for the development, manufacture, use and/or sale of Cathode Powder, Cells, Electrode Systems, and/or

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

22

 

Complex Systems, in which the applicable licensee is required to pay any royalty rates (“Lower Rates”), with respect to Cells, Electrode Systems, and/or Complex Systems, less than the royalty rates set forth in the Royalty Schedule (which are [***] as provided in each of Sections 7.2.1 through 7.2.5, respectively) or, with respect to Cathode Powder, less than the royalty rates set forth in the “Powder Royalty Schedule” ([***] at the same royalty amount owed set forth in Sections 7.2.1 through 7.2.5, but as applied to Net Sales of Cathode Powder) (collectively, the “Standard Rates”) for any of the same threshold of Net Sales, but with an upfront fee that is not  higher than the Standard Up Front Fee, then Licensor shall provide Licensee with written notice describing such Lower Rates, and, prior to [***], the royalty rate of [***] set forth in Section 7.12 shall be reduced by an amount proportional to the proportion of the Lower Rates to the Standard Rates or, subsequent to [***], the Royalty Schedule under this Agreement shall be reduced by an amount to be the same as the Lower Rates or, in the case of Lower Rates applicable to the Powder Royalty Schedule, the rates in the Royalty Schedule shall be reduced by an amount proportional to the proportion of the Lower Rates to the Standard Rates.  Any recalculated royalty rates applicable under this Section 7.15.3 will only be applied to sales after the date of any such sublicense granted to a Third Party that results in such recalculated rates.  The application of such recalculated rates shall never result in the refund of any amounts accrued prior to the date of any such sublicense granted to a Third Party that results in such recalculated rates.

 

7.15.4     If, prior to [***] from the Effective Date, a sublicense is granted to any Third Party by Licensor, under the Licensor Licensed Patent Rights, for the development, manufacture, use and/or sale of Cathode Powder, Cells, Electrode Systems, and/or Complex Systems or similar products, in which the applicable licensee is required to pay any up front fee (the “Lower Up-Front Fee”) that is less than the Standard Up-Front Fee, the total of Five Million U.S. Dollars ($5,000,000) due in Section 7.1 shall be reduced by an amount proportional to the proportion of the Lower Up-Front Fee to the Standard Up-Front Fee.  Subsequent to this [***], no adjustments to the amount due in Section 7.1.1 shall be made.

 

7.15.5     Should any reduction under this Section 7.15 in royalties due under this Agreement or in the up-front payment due under Section 7.1.1 result in Licensee having previously paid Licensor an amount in excess of the amount actually due under this Section 7 (an “Overpayment”), Licensor shall hold such Overpayment as credit against future royalties due and shall provide Licensee with an accounting of any Overpayment within [***] of its establishment.  Licensee shall reduce the subsequent royalty payment(s) by the amount of the Overpayment.

 

7.15.6     The net effect of reduction in royalty rate applicable to Net Sales arising from any application of royalty rates to less than [***] of such other licensee’s Net Sales from Cathode Powder, Cells or Electrode Systems, or less than [***] of such other licensee’s Net Sales from Complex Systems, shall be deemed a reduction in the Standard Rates for that license for the purposes of this Section 7.15.  For the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

23

 

avoidance of doubt, the terms of [***], the terms of [***] and the terms of [***] regarding the Licensor Licensed Patent Rights shall not be taken into consideration under this Section 7.15.  Furthermore, any royalty-free, non-exclusive license to all or part of the Licensor Licensed Patent Rights granted to [***] shall not be taken into consideration under this Section 7.15.

 

8.                                      REPORTING; BOOKS AND RECORDS.

 

8.1                               Calendar Quarterly Reporting and Payment. Within [***] after the end of each Calendar Quarter, Licensee shall provide Licensor with a true and accurate report on royalties due hereunder for such Calendar Quarter; and during the first Calendar Quarter of each [***] with an [***] report of the royalties that were payable in respect of sales made during the preceding [***]. The royalty report shall identify and report separately:

 

8.1.1                     the Net Sales; and

 

8.1.2                     the amount of all gross revenues received by Licensee, a Related Corporation, or a Joint Venture from the manufacture, use, sale, lease, import in, Japan of Cells, Electrode Systems, and/or Complex Systems.

 

The royalty report shall contain all data used to calculate the royalty, in sufficient detail to allow Licensor to verify all such payments and the annual royalty report shall also be accompanied by a statement signed by a person in authority at Licensee.

 

Each royalty report shall be accompanied by the royalty payment due for such Calendar Quarter and a corresponding credit note to Licensor.

 

8.2                               Books and Records; Audit Rights. Licensee shall keep at its own expense, and shall cause each Joint Venture to keep at its own expense to the extent required under Sections 2.6 and 2.7, during the Term and for three (3) years after expiration or early termination of this Agreement, accurate books of account, detailing all data necessary to calculate and audit any payments due to Licensor under this Agreement. Upon not less than thirty (30) days advance written notice to Licensee, the PO Representative is entitled to have an independent appointed auditor have access to such books and records as necessary to conduct a review or audit of all activities of Licensee relating to payment obligations under the Agreement, including Net Sales and the volume of sales made of Cells, Electrode Systems and/or Complex Systems by Licensee, and to verify all reports submitted and payments. The independent appointed auditor shall be bound by an obligation of confidentiality no less strict than the respective obligations under this Agreement. Such access will be available to the PO Representative not more than once each calendar year of the Term, during normal business hours, and once a year for three (3) years after the expiration or termination of the Agreement. The auditor shall be paid by the PO Representative, unless the audit of Licensee’s records reveals that Licensee has underpaid amounts owed by more than five percent (5%) for the records so audited. In the latter case Licensee will pay the reasonable costs and expenses incurred by the PO Representative and its representatives and accountants, if any, in connection with the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

24

 

review or audit. Licensee will immediately remit any underpayment and any accrued interest to Licensor.

 

9.                                      TERM AND TERMINATION.

 

9.1                               Term.

 

9.1.1                     This Agreement shall be effective as of October     , 2011 (the “Effective Date”) upon signature of both Parties. If the first installment of the upfront payment is not made within [***] after the execution of this Agreement as provided in Section 7.1.1a), Licensor is entitled, without any prior notice, to withdraw herefrom.

 

9.1.2                     The term of this Agreement shall be equal to the life of the last to expire of the Patent Rights forming part of the Licensor Licensed Patent Rights, unless sooner terminated pursuant to Sections 9.2 or 9.3 (the “Term”).

 

9.2                               Termination by Licensor. This Agreement may be terminated by Licensor by written notice to Licensee, in the event of any of the following events:

 

9.2.1                     if Licensee abandons business , becomes insolvent or bankrupt or is the object of a forced liquidation or forced winding-up; for purposes of this Section 9.2.1., permitted assignments of this Agreement shall not be considered abandonment of Licensee’s business;

 

9.2.2                     if Licensee (a) asserts any claims against a Patent Owner or Licensor (i) relating to the Licensor Licensed Patent Rights; or (ii) challenging the validity, enforceability, ownership, or inventorship of the Licensor Licensed Patent Rights; or (b) asserts any claims against a Patent Owner, Licensor or NTT (i) relating to the NTT Patent Rights; or (ii) challenging the validity, enforceability, ownership, or inventorship of the NTT Patent Rights; or (c) otherwise sues NTT for any acts or omissions prior to the Effective Date relating to the NTT Patent Rights; or (d) asserts against NTT any right, interest, claim, demand, damage or cause of action asserted against NTT in the action styled The Board of Regents of the University of Texas System on behalf of the University of Texas and Hydro Quebec v. Nippon Telegraph & Telephone Corporation in the 126th Judicial District Court of Travis County, Texas styled Cause No. D-1-GN-01-001844, and Licensee does not remedy the default within thirty (30) days after receipt of written notice issued by Licensor;

 

9.2.3                     if Licensee fails to comply with any payment obligation under this Agreement and Licensee does not remedy its default within thirty (30) days after receipt of written notice issued by Licensor; or

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

25

 

9.2.4                     if Licensee fails to comply with any other obligation under this Agreement (except as excused under Section 13.8 hereof) and Licensee does not remedy its default within ninety (90) days after receipt of written notice issued by Licensor.

 

9.3                               Termination by A123. A123 may terminate this Agreement for any or no reason, at its sole discretion, by delivery of a 90 day prior written notice of termination to Licensor.

 

9.3.1       Section 3 shall survive any termination under this Section 9.3 without cause.

 

9.3.2       If Licensor fails to comply with any obligation under this Agreement and Licensor does not remedy its default with thirty (30) days after receipt of written notice issued by Licensee, Licensee shall be entitled to terminate this Agreement for cause, in which event Section 3 shall not survive.

 

9.4                               Final Reporting and Payment. In the event of any early termination of this Agreement, all amounts, including royalties, due to Licensor pursuant to this Agreement prior to the date of such termination shall be immediately due and payable to Licensor, within [***] of the effective date of termination and Licensee shall provide Licensor a final royalty report, with such payment.

 

9.5                               Reversion of Rights. Upon expiration or earlier termination of this Agreement by Licensor under Section 9.2 or by Licensee under Section 9.3, all rights granted to Licensee pursuant to this Agreement shall revert to Licensor and Licensee shall immediately cease any and all use of the Licensor Licensed Patent Rights.

 

9.6                               Sell Off. Notwithstanding the reversion of rights pursuant to Section 9.5, upon the applicable termination of this Agreement by Licensor under Section 9.2 or by Licensee under Section 9.3, Licensee (i) shall provide to Licensors a report showing all finished Cathode Powder, Cells, Electrode Systems and/or Complex Systems in stock by Licensee and any Toll Manufacturers or Joint Ventures on the termination date of this Agreement, and (ii) may, for [***], starting on the termination date of this Agreement, sell Cells, Electrode Systems and/or Complex Systems, transfer Cathode Powder in stock on such date to Procter & Gamble for the purposes provided in Section 2.4 and to Joint Ventures for the purposes provided in Sections 2.6 and 2.7, and incorporate or have incorporated by Procter & Gamble or Joint Ventures Cathode Powder in stock on such date into Cells, Electrode Systems and/or Complex Systems, subject to the payment of the royalties for these Cells, Electrode Systems and/or Complex Systems sold after the termination date of this Agreement.  Such royalties shall be paid within [***] from the end of such [***] period. Any Cathode Powder, Cells, Electrode Systems, and Complex Systems including Licensed Products not sold by Licensee, Procter & Gamble, any Toll Manufacturer, or any Joint Venture after this nine (9)-month period shall not be covered by any of the licenses granted to Licensee under this Agreement. Upon the expiration of this Agreement, Licensee shall (i) provide to Licensor a report showing all finished Cathode Powder, Cells, Electrode Systems and/or Complex Systems in stock by Licensee and any Toll Manufacturers or Joint Ventures on the expiration date of this Agreement, and (ii) continue to make royalty payments for the Cells, Electrode Systems and/or Complex

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

26

 

Systems that were manufactured during the Term under a valid claim of a Licensor Licensed Patent Right to the extent such Cells, Electrode Systems and/or Complex Systems are sold by Licensee, Joint Ventures or Procter & Gamble in the [***] period referenced above.

 

9.7                               No Limitation on Rights or Remedies. The early termination or expiration of this Agreement shall not operate to limit any rights or remedies available to any Party, which accrued prior to termination or expiration hereof.

 

10.                               GOVERNING LAW; DISPUTE RESOLUTION.

 

10.1                        Applicable Law. This Agreement shall be construed, interpreted and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the Province of Québec and the Federal laws of Canada applicable therein (excluding any conflict of law, rule, or principle of such laws that might refer such interpretation or enforcement to the laws of any other jurisdiction).

 

10.2                        Mediation. Any disputes relating to issues arising from this Agreement shall, in the absence of resolution within thirty (30) days of the dispute arising, be referred to the President of the Board of the Licensor on behalf of Licensor, and to the Chief Executive Officer of A123, who shall discuss the matter and attempt to resolve it by mutual consent. Licensor’s President of the Board and A123’s Chief Executive Officer shall meet once face-to-face within thirty (30) days to discuss and resolve the dispute. If the dispute cannot be resolved within thirty (30) days, either Party may, by written notice to the other Party, invoke mediation procedure. The Parties shall conduct a mediation procedure according to the ICC ADR Rules of the International Chamber of Commerce (ICC) in effect on the date of the commencement of the mediation proceedings. The location of the mediation proceedings will be Montreal. The number of mediators will be one (1). The language of the mediation proceeding will be English. If the dispute has not been settled pursuant to the said rules within sixty (60) days following the filing of a request for mediation or within such other period as the Parties may agree in writing, either Party may bring a lawsuit. Exclusive venue for such lawsuit shall be with the competent courts of the Province of Quebec.

 

11.                               GUARANTEE OF PERFORMANCE.

 

Performance by Agents and Related Corporations. A123 Systems, Inc. guarantees the performance by its agents and Related Corporations of all obligations hereunder and waives any benefit of division and discussion in connection therewith.

 

12.                               RESOLUTION OF ONGOING DISPUTES AND RELEASES.

 

12.1                        Dismissal of Pending Actions and Releases.  In partial consideration of the rights and obligations exchanged herein, the Parties have entered into a Settlement Agreement concurrently with the present Agreement that sets forth the terms and mechanisms for

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

27

 

resolving and dismissing the actions pending between A123, Black and Decker,  Hydro-Québec and the University of Texas.

 

13.                               GENERAL PROVISIONS.

 

13.1                        Amendment. No amendment to the terms and conditions of this Agreement shall be valid and binding on the Parties hereto unless made in writing and signed by an authorized representative of each of the Parties.

 

13.2                        Severability. If a provision of this Agreement is held invalid or unenforceable, any other provision contained herein shall be separately valid and enforceable to the fullest extent permitted by law unless it is apparent that this Agreement may be considered only as an indivisible whole.

 

13.3                        No Implied Waiver. No negligence or waiver by either Party to exercise a right shall be deemed to be or construed as a waiver by either Party of its rights.

 

13.4                        Background and Appendices. The Background section and Appendices form part of this Agreement.

 

13.5                        Successors and Assigns. This Agreement shall be binding upon each Party’s successors and permitted assigns.

 

13.6                        No partnership or joint venture. Nothing contained in this Agreement shall constitute or be deemed to create a partnership, joint venture or principal and agent relationship between the Parties.

 

13.7                        Notices. Any communication including any written notice provided under this Agreement shall be in writing and may be given by any means that shall enable to prove receipt of such communication or notice at the following addresses or any other address that either Party may notify in writing to the other and such notices shall be effective upon actual receipt:

 

To Licensor:

 

LiFePO4+C Licensing AG
 Rothausstrasse 61
 4132 Muttenz
 Switzerland

 

Attention: Managing Director

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

28

 

To Licensee:

 

A123 Systems, Inc.
 200 West Street
 Waltham, MA 02451

 

Attention:  General Counsel

 

To Hydro Québec being designated as PO Representative:

 

75 René-Lévesque Blvd.
 Montréal, Québec, H2Z 1A4
 Canada

 

Attention: Executive Vice President Technology
  With a copy to: General Counsel

 

13.8                        Force Majeure. Save and except with respect to the performance of any obligation to pay when due any amount payable under this Agreement, neither Party hereto shall be responsible for any failure or delay which is due to an unforeseeable event or to a cause beyond its control. If the performance of any obligation of Licensee under this Agreement is delayed pursuant to this Section 13.8, for any continuous period of more than [***], Licensor shall have the right to terminate this Agreement, upon written notice.

 

13.9                        Entire Agreement. This Agreement sets forth the entire understanding and agreement of the Parties with respect to the subject matter hereof. This Agreement supersedes and replaces all prior agreements between the Parties with respect to the subject matter hereof.

 

13.10                 Remedies. All remedies conferred by this Agreement shall be cumulative, and a pursuit by any Party of any such remedy shall not limit such Party from pursuing any other remedy to which it may be entitled whether under this Agreement or under law.

 

13.11                 Compliance with Laws. Each Party shall at all times comply with laws and regulations applicable to the subject matter of this Agreement and to the execution thereof.

 

13.12                 Further Actions. The Parties hereto shall upon request by the other Party, make, execute and deliver any and all such other and further instruments as may be necessary or desirable for the purpose of giving full force and effect to the provisions of this Agreement, without charges therefor.

 

13.13                 Assignments. Neither Party shall assign this Agreement in whole or in part nor the performance of any obligations hereunder without the consent of the other Party which shall not be unreasonably withheld, subject however, to the automatic assignment of this Agreement by Licensor to the Patent Owners upon the expiry or earlier termination of the Head License Agreement, and Licensee hereby approves such automatic assignment to the Patent Owners; provided that, either Party may assign or otherwise transfer this

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

29

 

Agreement to a successor in connection with a merger, consolidation, reorganization or sale of all or substantially all of a Party’s business related to this Agreement, without the other Party’s or any Third Party consent, subject to the provisions of Section 7.4

 

13.14                 Survival. The following sections of this Agreement shall survive any expiration or early termination of this Agreement: Section 1, Sections 4.2, 4.5, 4.6 and 4.7, Section 6, Section 7.1.1 (a), (b) and (c) (for each of (a)-(c), subject to the last sentence of this Section 13.14), Section 7.12, Section 8.2, Sections 9.4 to 9.7, Section 10, Section 11, Section 12 and Section 13.  The payments set forth in Section 7.1.1 shall survive termination of this Agreement solely in the event of termination by A123 pursuant to Section 9.3 and, in such event, shall remain due and payable on the dates set forth in Section 7.1.1.

 

13.15                 Construction. Headings are included for convenience only and will not be used to construe the Agreement. The Parties acknowledge and agree that both Parties substantially participated in negotiating the provisions of the Agreement; therefore, all Parties agree that any ambiguity in the Agreement shall not be construed more favorably toward one Party than the other Party, regardless of which Party primarily drafted the Agreement.

 

13.16                 Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute an original of this Agreement, but all the counterparts shall together constitute the same Agreement. No counterpart shall be effective until each Party has executed at least one counterpart.

 

13.17                 English Language. The Parties confirm that it is their wish that this Agreement and any other documents delivered or given pursuant to this Agreement, including notices, have been and shall be in the English language only.  Les parties aux présentes confirment leur volonté que cette convention, de même tous les documents, y compris tous avis, s’y rattachant, soient rédigés en anglais seulement.

 

IN WITNESS WHEREOF, this Patent Sublicense Agreement is hereby executed by:

 

	
 
    	
A123   SYSTEMS, INC.
    
	
 
    	
 
    
	
LIFEPO4+C   LICENSING AG
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Peter Zimmermann
    	
 
    	
By:
    	
/s/   David Vieau
    
	
 
    	
Peter   Zimmermann
    	
 
    	
 
    	
David   P. Vieau
    
	
 
    	
Board   Member
    	
 
    	
 
    
	
Date:
    	
28   October 2011
    	
 
    	
Date:
    	
10/31/2011
    
							

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

30

 

Undertaking of the Patent Owners

 

All capitalized terms used in this undertaking and not otherwise defined shall have the same meaning as in the Sublicense Agreement entered into with A123 to which the present undertaking is attached.

 

The Patent Owners acknowledge that the rights conveyed under the Sublicense Agreement to Licensee flow from the Patent Owners through Licensor pursuant to the Head License Agreement and finally to the Licensee. The Patent Owners agree that should the Head License Agreement be terminated, the Patent Owners shall step into the role of Licensor and respect the rights granted to the Licensee and shall honor the terms and conditions of this Agreement  The Patent Owners further agree to require any acquirer of any of the Licensor Licensed Patent Rights to agree and acknowledge that such acquirer’s rights to such Licensor Licensed Patent Rights are subject in all respects to the rights granted by Licensor and the Patent Owners under this Agreement.

 

The Patent Owners understand and agree that, according to the Sublicense Agreement, the PO Representative will receive or have access to confidential information related to the commercial activities of A123 and its Related Corporations and Joint Ventures, and technical information related to the processes used by such companies and the products made and sold by such companies. The Patent Owners agree that such information will be kept confidential and, by way of example and not limitation, such information will not be disclosed to other entities participating in the relevant markets including Süd-Chemie AG or other sublicensees. It is understood, however, that such information may be disclosed by the PO Representative to Licensor, insofar is required by Licensor to exercise its rights and perform its obligations under the Sublicense Agreement and under its agreements with the Patent Owners and, in aggregate form only, also insofar as required to assess infringement of the Licensor Licensed Patent Rights by Third Parties.

 

The Patent Owners represent and warrant that the Patent Owners have the right to grant the covenant set forth in Section 2.4, that they have further consented to Licensor’s grant of the covenant in Section 2.4 and that such covenant shall be effective with respect to all the Patent Owners to the same extent such covenant is applicable to Licensor and/or the Patent Owners hereunder.

 

	
HYDRO-QUÉBEC
    	
 
    	
CENTRE NATIONAL DE LA RECHERCHE   SCIENTIFIQUE
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
Date:
    	
 
    	
 
    

 

	
UNIVERSITÉ   DE MONTRÉAL
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

31

 

APPENDIX A

 

LIST OF CARBON COATING AND PROCESS PATENT RIGHTS

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry
   Date
    
	
2
    	
 
    	
Electrode materials with high surface   conductivity
    	
 
    	
ACEP, Centre   National Recherche Scientifique, Université de Montreal
    	
 
    	
Hydro Quebec
    	
 
    	
US 09/560,572 not published   provisional application
    	
 
    	
28.04.2000
    	
 
    	
 
    
	
US 20020195591 Con granted as US   6855273
    	
21.06.2002
    	
04.05.2020**
    
	
 
    	
 
    	
 
    	
 
    
	
US 20040140458 Div granted as US   6962666
    	
 
    	
22.12.2003
    	
28.04.2020**
    
	
US 20060060827 Con granted as US   7344659
    	
 
    	
04.11.2005
    	
28.04.2020**
    
	
US 20080257721 Div granted as US   7815819
    	
 
    	
19.02.2008
    	
28.04.2020**
    
	
US 12/899067 not published
    	
 
    	
06.10.2010
    	
28.04.2020**
    
	
US 12/951335 not published
    	
 
    	
22.11.2010
    	
28.04.2020**
    
	
Hydro Quebec
    	
EP 1049182
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-DE 60037609
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-FR 1049182
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-GB 1049182
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-IT 1049182
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
Hydro Quebec
    	
EP 20070025160 application number not   yet published
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
Hydro Quebec
    	
EP 1796189 Div
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-DE 60041896
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-FR 1796189
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-GB 1796189
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
 
    	
EP-IT 1796189
    	
 
    	
02.05.2000
    	
02.05.2020
    
	
Hydro Quebec
    	
JP 2001015111
    	
 
    	
01.05.2000
    	
01.05.2020
    
	
ACEP, Centre National Recherche Scientifique, Université de Montreal
    	
JP 2008186807 Div
    	
 
    	
22.02.2008
    	
01.05.2020*
    

 

* May be subject to terminal disclaimer

 

** Expiration dates for US Patent Applications are estimated based on filing dates. If the relevant application qualifies for a Patent Term Adjustment under US law, the expiration date may be later than indicated

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry
   Date
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,307,119
    	
 
    	
28.04.2000
    	
 
    	
28.04.2020
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,270,771
    	
 
    	
30.04.1999
    	
 
    	
30.04.2000
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,625,896
    	
 
    	
28.04.2000
    	
 
    	
28.04.2020
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,658,728
    	
 
    	
28.04.2000
    	
 
    	
28.04.2020
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,658,741
    	
 
    	
28.04.2000
    	
 
    	
28.04.2020
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2,658,748
    	
 
    	
28.04.2000
    	
 
    	
28.04.2020
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3
    	
 
    	
Method for synthesis of carbon-coated complex   oxide with control size
    	
 
    	
Hydro Quebec
    	
 
    	
Hydro   Quebec,Centre National Recherche Scientifique,Université de Montreal
    	
 
    	
WO 02/027823
    	
 
    	
21.09.2001
    	
 
    	
21.03.2003
    
	
US20040033360 granted as US 7601318
    	
21.09.2001
    	
09.04.2023**
    
	
Hydro Quebec, Centre National Recherche Scientifique, Université de   Montreal
    	
US 2010065787 Con
    	
11.09.2009
    	
21.09.2021**
    
	
 
    
	
EP 1325525
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
EP 20100180996 Div. application number   not yet published
    	
21.09.2001
    	
21.09.2021
    
	
 
    	
JP 2004509447
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Hydro Quebec
    	
CA 2320661 Prio
    	
26.09.2000
    	
 
    	
26.09.2020
    
	
Hydro Quebec
    	
CA 2422446
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
Hydro Quebec
    	
CN 101453020
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
Hydro Quebec
    	
CN 1478310 granted as CN 100421289
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
Hydro Quebec
    	
KR 20030045791 granted as KR 100879839
    	
28.02.2003
    	
 
    	
21.09.2021
    
	
Hydro Quebec
    	
WO 02/027824
    	
21.09.2001
    	
 
    	
21.03.2003
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4
    	
 
    	
Synthesis method for carbon material based on   LixM1-yM’(XO4)n
    	
 
    	
Hydro Quebec
    	
 
    	
Hydro Quebec,   Centre National Recherche Scientifique, Université de Montreal
    	
 
    	
US 20040086445 granted as US 7285260
    	
 
    	
21.09.2001
    	
 
    	
27.04.2022**
    
	
 
    	
 
    	
 
    
	
Hydro Quebec, Centre National Recherche Scientifique, Université de   Montreal
    	
US 20070134554 Con granted as US   7457018
    	
19.01.2007
    	
21.09.2021**
    
	
 
    	
 
    	
 
    	
 
    
	
Hydro Quebec
    	
EP 1325526
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Hydro Quebec, Centre National Recherche Scientifique, Université de   Montreal
    	
JP 2004509058
    	
21.09.2001
    	
 
    	
21.09.2021
    

 

* May be subject to terminal disclaimer

 

** Expiration dates for US Patent Applications are estimated based on filing dates. If the relevant application qualifies for a Patent Term Adjustment under US law, the expiration date may be later than indicated

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry
   Date
    
	
 
    	
 
    	
 
    	
 
    	
Hydro Quebec
    	
 
    	
 
    	
 
    	
CA 2320661 Prio
    	
 
    	
26.09.2000
    	
 
    	
26.09.2020
    
	
Hydro Quebec
    	
CA 2423129
    	
 
    	
21.09.2001
    	
 
    	
21.09.2021
    
	
Hydro Quebec, Université de Montreal
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

* May be subject to terminal disclaimer

 

** Expiration dates for US Patent Applications are estimated based on filing dates. If the relevant application qualifies for a Patent Term Adjustment under US law, the expiration date may be later than indicated

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

APPENDIX B

 

LIST OF NTT PATENT RIGHTS

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry Date
    
	
5
    	
 
    	
LITHIUM SECONDARY BATTERY.
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
JP 2001085010 granted as JP 3504195
    	
 
    	
16.09.1999
    	
 
    	
16.09.2019
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6
    	
 
    	
NON-AQUEOUS ELECTROLYTE SECONDARY BATTERY.
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
JP 09134724 granted as JP 3523397
    	
 
    	
07.11.1995
    	
 
    	
07.11.2015
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7
    	
 
    	
NON-AQUEOUS ELECTROLYTE SECONDARY BATTERY.
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
JP 09134725 granted as JP 3484003
    	
 
    	
07.11.1995
    	
 
    	
07.11.2015
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8
    	
 
    	
NONAQUEOUS ELECTROLYTE SECONDARY BATTERY.
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
NIPPON TELEGR & TELEPH CORP   <NTT>
    	
 
    	
JP 2004178835 granted as JP 4153288
    	
 
    	
25.11.2002
    	
 
    	
25.11.2022
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

APPENDIX C

 

LIST OF GOODENOUGH PATENT RIGHTS

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry
   Date
    
	
1
    	
 
    	
Cathode materials for secondary   (rechargeable) lithium batteries
    	
 
    	
University of Texas
    	
 
    	
Hydro Quebec
    	
 
    	
WO 97/40541
    	
 
    	
23.04.1997
    	
 
    	
23.10.1998
    
	
US 60/016,060 not published provisional   application
    	
23.04.1996
    	
 
    	
23.04.1997
    
	
US 60/032,346 not published   provisional application
    	
04.12.1996
    	
 
    	
04.12.1997
    
	
 
    	
 
    	
US 5,910,382
    	
21.04.1997
    	
 
    	
21.04.2017
    
	
 
    	
 
    	
US 6,391,493 Div
    	
23.04.1999
    	
 
    	
21.04.2017
    
	
 
    	
 
    	
EP 0904607
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP-DE 69731382
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP-FR 0904607
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP-GB 0904607
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP-IT 0904607
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP 1501137 Div.
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP 1755182 Div.
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP 1755183 Div.
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP 2282368 Div.
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
EP 10186105.2 Div. application   number not yet published
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
JP 2000-509193 granted as JP 4369535
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
JP 2007-214147 Div
    	
14.05.2007
    	
 
    	
23.04.2017*
    
	
 
    	
 
    	
JP 2007-294463 Div
    	
14.05.2007
    	
 
    	
23.04.2017*
    
	
 
    	
 
    	
JP 2009-110967 Div
    	
17.12.2008
    	
 
    	
23.04.2017*
    
	
 
    	
 
    	
JP 2010-056097 Div
    	
07.12.2009
    	
 
    	
23.04.2017*
    
	
 
    	
 
    	
CA 2,251,709
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
CA 2,543,784
    	
23.04.1997
    	
 
    	
23.04.2017
    
	
 
    	
 
    	
US 6,514,640 Con
    	
24.12.1997
    	
 
    	
21.04.2017**
    
	
 
    	
Michel Armand, John B. Goodenough,   Akshaya K. Padhi, Kirakodu S. Nanjundaswamy, 
    	
US 20030082454 Con
    	
02.12.2002
    	
 
    	
21.04.2017**
    
	
US 20050003274 Con
    	
30.07.2004
    	
21.04.2017**
    
	
US 20050244321 Con
    	
13.07.2005
    	
21.04.2017**
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry
   Date
    
	
 
    	
 
    	
 
    	
 
    	
Christian Masquelier
    	
 
    	
 
    	
 
    	
US 20070117019 Con
    	
 
    	
29.12.2006
    	
 
    	
21.04.2017**
    
	
US 20070166618 Con
    	
29.12.2006
    	
 
    	
21.04.2017**
    
	
US 20070281215 Con
    	
03.08.2007
    	
21.04.2017**
    
	
US 20110039158 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
US 12/952978 not published
    	
23.11.2010
    	
21.04.2017**
    
	
 
    	
US 20100314577 Con
    	
20.08.2010
    	
21.04.2017**
    
	
 
    	
US 20100314589 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
US 20100310935 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
US 20100316909 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
US 20110006270 Con
    	
08.09.2010
    	
 
    	
21.04.2017**
    
	
 
    	
US 20110017959 Con
    	
08.09.2010
    	
 
    	
21.04.2017**
    
	
 
    	
US 20110006256 Con
    	
08.09.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
John B. Goodenough, Akshaya K. Padhi,   Kirakodu S. Nanjundaswamy, Christian Masquelier
    	
 
    	
 
    	
 
    	
US 7,972,728 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US 7,964,308 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US  7960058 Con
    	
08.09.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US  7,955,733 Con
    	
20.08.2010
    	
 
    	
21.04.2017**
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US20110068297   Con
    	
2010-11-23
    	
 
    	
21.04.2017**
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

APPENDIX D

 

A123 PATENT RIGHTS

 

	
Patent
   Family
    	
 
    	
Title
    	
 
    	
Applicant/
   Proprietor
   according to
   data base
    	
 
    	
Current
   proprietor
    	
 
    	
Document No.
    	
 
    	
Application
   Date
    	
 
    	
Expiry Date
    	
 
    
	
1
    	
 
    	
NANOSCALE   ION STORAGE MATERIALS
    	
 
    	
A123   Systems, Inc.
    	
 
    	
A123   Systems, Inc.
    	
 
    	
US Patent No. 7,939,201
    	
 
    	
03.04.2006
    	
 
    	
03.04.2026**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US 13/086,883, (Continuation of US   Patent No. 7,939,201; Notice of Allowance Mailed on 29.06.2011)
    	
 
    	
14.04.2011
    	
 
    	
03.04.2026**
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
CN 200680035978.5
    	
 
    	
03.08.2006
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
EP 06851633.5
    	
 
    	
03.08.2006
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
JP 2008-536570
    	
 
    	
03.08.2006
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
KR 10-2008-7005568
    	
 
    	
03.08.2006
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
TW 95129015
    	
 
    	
06.08.2006
    	
 
    	
 
    	
 
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

APPENDIX E

 

SECTIONS 9.4 AND 9.7 
 OF THE LICENSE AGREEMENT BETWEEN HQ AND NTT 
 REGARDING THE NTT PATENT RIGHTS

 

Section 9.4:

 

[***]

 

Section 9.7:

 

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

APPENDIX F

 

REDACTED PATENT SUBLICENSE AGREEMENT

 

[Attached separately]

 

(Reference is made to Exhibit 10.30 filed with the company’s registration statement on 
 Form S-1/A, dated November 25, 2008, filed separately with the Securities and Exchange
 Commission and incorporated herein by reference.)

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

SCHEDULE 6.4

 

PRESS RELEASE

 

[To be attached]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.EXHIBIT 10.37

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

Execution Version

 

TECHNOLOGY LICENSE AGREEMENT

 

 

Between

 

A123 SYSTEMS, INC.

 

AS LICENSOR

 

and

 

IHI CORPORATION

 

AS LICENSEE

 

 

Confidential

 

 

TECHNOLOGY LICENSE AGREEMENT

 

This Technology License Agreement (the “Agreement”), dated November 3, 2011 (the “Effective Date”), is entered into by A123 Systems, Inc., with offices at 200 West Street, Waltham, MA 02451 USA (the “Licensor”), a corporation organized and existing under the laws of the State of Delaware in the United States of America, and IHI Corporation, with offices at Toyosu IHI Building 1-1, Toyosu 3-chome, Koto-ku, Tokyo 135-8710 Japan (the “Licensee”), a corporation organized and existing under the laws of Japan.

 

WHEREAS, Licensor is the authorized licensor of certain Licensed Technology (as defined below);

 

WHEREAS, pursuant to this Agreement, Licensee desires to obtain, and Licensor desires to grant, a license of the Licensed Technology to enable Licensee to manufacture, market and sell Exclusive Products and Non-Exclusive Products  (as defined below), solely in Japan, with additional distribution rights (and related obligations) granted to Licensee under a separate Value Added Reseller Agreement;

 

WHEREAS, Licensor and Licensee are expanding their current cooperation in the advanced lithium-ion battery market by undertaking various strategic initiatives, including;

 

·                  the supply by Licensor to Licensee of lithium-ion Battery Cells and related products under a Product Supply Agreement entered into on the date hereof by the Parties (“Product Supply Agreement”);

 

·                  the provision by Licensor of technical support services under a mutually agreed Professional Services Agreement (“Professional Services Agreement”); and

 

·                  the grant by Licensor to Licensee to distribute its independently developed and non-competitive solutions globally using Battery Cells supplied by Licensor under a mutually agreed Value-Added Reseller Agreement to be entered into by the Parties by December 31, 2011 pursuant to the terms attached hereto as Appendix 3 and such other terms as may be mutually agreed (“Value-Added Reseller Agreement”); and

 

WHEREAS, Licensee will make a strategic investment of $25 million dollars ($25,000,000) in common stock of Licensor, under a Stock Purchase Agreement entered into on the date hereof by the Parties, no later than fifteen (15) days after the Effective Date (“Stock Purchase Agreement”), subject to certain conditions precedent described in the Stock Purchase Agreement.

 

The Product Supply Agreement, the Professional Services Agreement, the Value-Added Reseller Agreement, and the Stock Purchase Agreement shall be referred to collectively as the “Related Agreements.”

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements and covenants herein contained, the Parties hereto agree as follows:

 

Section 1.              Definitions.

 

1.1 “Affiliate” of a person or entity shall mean any entity Controlled by, under common Control with or under the Control of such person or entity.

 

1.2 “Agreement” shall have the meaning set forth in the Preamble.

 

1.3  “Battery Cell” shall mean an independent electrochemical cell, comprising at least an anode, an electrolyte, a cathode, the anode and cathode current collectors, and a container.

 

1.4  “Battery Module” shall mean a combination of components of a Battery System that includes at least the following components: a Battery Cell, battery management electronics for Battery Cell balancing, voltage and temperature measurement, and connectors.

 

1.5 “Battery System” shall mean a complete energy storage system, including the Battery Cell, Battery Module, battery management system, cell balance circuit, monitoring and sensing, thermal management system, safety management system and physical integration and algorithms and source code related thereto.

 

1.6 “[***]” shall have the meaning set forth in Section 4.

 

1.7 “Change in Control” shall mean, with respect to a Party, (i) the acquisition of that Party by another entity by means of any transaction or series of related transactions, whether effected by that Party or its stockholders (including, any stock acquisition, reorganization, merger, consolidation or the like but excluding any sale of stock for capital raising purposes), other than a transaction or series of transactions in which the holders of the voting securities of that Party outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity) on account of their shares of stock of that Party as of immediately prior to such transaction a majority of the total voting power represented by the voting securities of the Party or such surviving entity outstanding immediately after such transaction or series of transactions; or (ii) a sale, lease or other conveyance of all or substantially all of the assets of that Party (including the sale or exclusive licensing of all or substantially all of the Intellectual Property assets of that Party).

 

1.8  “Confidential Information” means all information and materials, including source code and software, that are not generally known to the public and in which either Party, or its suppliers, clients or other persons (to the extent such Party owes a duty of confidence to any such person) has rights, and which (i) is

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

2

 

marked confidential, restricted or proprietary, or (ii) under all of the circumstances, ought reasonably to be treated as confidential.  Confidential Material of Licensor includes this Agreement and the Licensed Technology.  Confidential Information does not include information that:  (i) is, as of the time of its disclosure, or thereafter becomes, part of the public domain without breach of this Agreement; (ii) was known to the receiving Party as of the time of its disclosure; (iii) is independently developed by employees of the receiving Party who have not used or had access to the Confidential Information as evidenced by written documentation; or (iv) is subsequently learned from an unaffiliated Third Party not subject to an obligation of confidentiality with respect to the information disclosed.

 

1.9 “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of registered capital or voting securities, by Agreement or otherwise, and includes (i) ownership directly or indirectly of fifty percent (50%) or more of the shares or other equity interests in issue or registered capital of such entity, (ii) ownership, directly or indirectly of fifty percent (50%) or more of the voting power of such Person or (iii) the power directly or indirectly to appoint a majority of the members of the board of directors or similar governing body of such entity, and the terms “Controlled” and “Controlling” shall have correlative meanings.

 

1.10  “Cure Period” shall have the meaning set forth in Section 18.2(d).

 

1.11 “Disclosing Party” shall have the meaning set forth in Section 16.1.

 

1.12 “Equity Investment” shall have the meaning set forth in Section 3.

 

1.13 “Event of Force Majeure” shall have the meaning set forth in Section 20.1.

 

1.14 “Executive Business Reviews” shall have the meaning set forth in Section 11.4.

 

1.15 “Exclusive Products” shall mean Battery Systems (commonly referred to as “Transportation Packs”), or Battery Modules that are utilized in Battery Systems, each of which are used in transportation applications.  For clarity, Exclusive Products shall not include (i) Battery Cells (or any of the other components of a Battery System or of a Battery Module) as a standalone product or (ii) any electric grid energy storage application.

 

1.16 “Field” shall mean all transportation applications, including automotive (passenger and commercial), maritime and rail.

 

1.17 “Good Faith Negotiation Period” shall have the meaning set forth in Section 5.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

3

 

1.18 “[***]” shall have the meaning set forth in Section 5

 

1.19 “[***] License” shall have the meaning set forth in Section 5

 

1.20 “Hindered Party” shall have the meaning set forth in Section 20.1.

 

1.21  “Indemnification Claim” shall have the meaning set forth in Section 14.8.

 

1.22 “Indemnified Party” shall have the meaning set forth in Section 14.8.

 

1.23 “Indemnifying Party” shall have the meaning set forth in Section 14.8.

 

1.24  “Initial Royalty” shall have the meaning set forth in Section 8.1(b).

 

1.25 “Initial Royalty Threshold” shall have the meaning set forth in Section 8.1(b).

 

1.26 “Intellectual Property” shall mean (a) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model, certificate of invention and design patents, patent applications, registrations and applications for registrations; (b) trademarks, service marks, trade dress, Internet domain names, logos, trade names and corporate names and registrations and applications for registration thereof; (c) copyrights and registrations and applications for registration thereof; (d) mask works and registrations and applications for registration thereof; (e) computer software, data and documentation; (f) inventions, trade secrets and confidential business information, whether patentable or non-patentable and whether or not reduced to practice, Know-How, manufacturing and product processes and techniques, research and development information, copyrightable works; and (g) copies and tangible embodiments thereof.

 

1.27  “Japan” shall mean the nation of Japan.

 

1.28  “Joint Improvements” shall mean shall mean technical data, engineering information and Know-How which are improvements or modifications to the Licensed Technology and are developed jointly (as determined under the patent laws of the United States) by one or more employees, agents or contractors of both Parties or their Affiliates during the Term.

 

1.29 “Know-How” means know-how, trade secrets and other confidential technical information, including, technical data, formulae, specifications, processes, methods, software source code, and materials , unless such information is generally known and generally available for public use without breach of a confidentiality obligation.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

4

 

1.30 “License” shall mean the licenses granted in Section 2.1 and Section 2.2.

 

1.31 “Licensed Component Multiple” shall mean a fraction, the denominator of which is the total material cost in the applicable bill of materials (“BOM”) for a Non-Exclusive Product and the numerator of which is the material cost in the BOM for those materials in the Non-Exclusive Product that embody Licensed Technology.

 

1.32 “Licensed Technology” shall mean certain of Licensor’s Patent Rights, Know-How and Intellectual Property rights in the form of technical data and engineering information, all as specifically described in Appendix 1.

 

1.33 “Licensee” shall have the meaning set forth in the Preamble.

 

1.34 “Licensee Improvements” shall mean technical data, engineering information and Know-How that are improvements or modifications to the Licensed Technology and are developed by one or more employees, agents, Affiliates or contractors of Licensee during the Term, including, those based on or designed to address requests or requirements received by Licensee from existing or potential customers of Products in the Territory.  Licensee Improvements shall not include Joint Improvements.

 

1.35 “Licensee IP Claim” shall have the meaning set forth in Section 14.5.

 

1.36  “Licensor” shall have the meaning set forth in the Preamble.

 

1.37 “Licensor Improvements” shall mean technical data, engineering information and Know-How which are improvements or modifications to the Licensed Technology and are developed by Licensor and/or employees, agents or contractors of Licensor or its Affiliates during the Term whether or not jointly with any Third Party other than Licensee.  Licensor Improvements shall not include Joint Improvements.  For purposes of this definition, any routine maintenance updates to software developed by Licensor i.e., an “update”, shall each be deemed a Licensor Improvement.  Licensor Improvements shall not include New Developments.

 

1.38 “Licensor IP Claim” shall have the meaning set forth in Section 14.5.

 

1.39 “Loss” shall have the meaning set forth in Section 14.1.

 

1.40 “New Development” shall mean developments made by or on behalf of Licensor that are not incremental improvements or modifications to the Products, e.g., a new generation of control electronics that provides new functionality.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

5

 

1.41  “Net Sales” shall mean the gross amount invoiced by Licensee and/or its Affiliates for Products, less (i) the cost of Battery Cells purchased from Licensor for use with such Products, (ii) customary trade, quantity, or cash discounts or rebates to the extent actually allowed and taken, and (iii) transportation costs, shipment insurance costs, and shipment packaging fees.  No deductions shall be made for commissions paid to entities or individuals whether they be with independent sales agencies or regularly employed by Licensee and on its payroll, or for cost of collections.

 

1.42 “Non-Exclusive Product” shall mean a product developed by Licensee that uses Licensed Technology and Battery Cells supplied by Licensor and which is (i) manufactured and sold pursuant to the rights granted to Licensee by Licensor in the Value-Added Reseller Agreement and (ii) which is not competitive with any of Licensor’s current or planned products.

 

1.43 “Party” shall mean Licensor or Licensee, individually, and “Parties” shall mean Licensor and Licensee, collectively.

 

1.44 “Patent Rights” shall mean those patent applications and patents set forth in Appendix 1 hereto, and any continuations, divisionals, reissues, and reexaminations thereof.

 

1.45 “Products” shall mean, collectively, Exclusive Products and Non-Exclusive Products.

 

1.46 “Professional Services Agreement” shall have the meaning set forth in Section 5.

 

1.47 “Receiving Party” shall have the meaning set forth in Section 16.1.

 

1.48 “Refusing Manufacturer” shall have the meaning set forth in Section 2.7(b).

 

1.49 “Related Agreements” shall have the meaning set forth in the Preamble.

 

1.50 “Reporting Period” shall begin on the first day of each calendar [***] and end on the last day of such [***].

 

1.51 “Revenue Targets” shall have the meaning set forth in Section 2.5.

 

1.52  “Right of First Offer” shall have the meaning set forth in Section 5.

 

1.53 “Royalties” shall have the meaning set forth in Section 8.1(b).

 

1.54 “Settlement of the Patent Litigation” shall mean settlement by Licensor of all claims relating to the following lawsuit and related litigation: The Board of the Regents of the University of Texas

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

6

 

System et al. v. A123 Systems, Inc. et al., Case No. 3:06-cv-01655-B (N.D. Tex.) in a manner that does not adversely affect the Parties’ ability to perform their obligations under the Product Supply Agreement.

 

1.55 “Technical Documentation” shall mean documentation embodying technical information, know-how, trade secrets, data, plans, specifications, necessary for Licensee to exploit the Licensed Technology to develop, use, make, and have made Products.

 

1.56 “Term” shall have the meaning set forth in Section 18.1

 

1.57 “Territory” shall mean Japan.

 

1.58 “Third Party” shall mean any person or entity other than a Party to this Agreement.

 

1.59  “USA” shall mean the United States of America.

 

1.60 “US dollars” or “US$” shall mean the lawful currency of the United States.

 

Section 2.              Grant of License.

 

2.1 Exclusive License. Provided Licensee fully complies with its obligations under this Agreement (including its confidentiality obligations under Section 16, the business performance milestones specified in Attachment 2, and the Equity Investment under Section 3) and the Related Agreements (including payment of all applicable fees and royalties therein), and subject to the terms and conditions of this Agreement, Licensor grants to Licensee, and Licensee hereby accepts from Licensor, an exclusive, non-sublicensable (except as provided in Section 2.9), non-transferable, royalty-bearing license under the Licensed Technology to develop, use, make, offer to sell, sell, lease and otherwise provide to third parties the Exclusive Products (including, for clarity, the sale of Battery Modules as standalone products or in combination with Battery Systems), solely in the Field in the Territory during the Term. Licensee may not have the Exclusive Products made by a Third Party without Licensor’s prior written consent.

 

2.2 Non-Exclusive Grant.  Provided Licensee fully complies with its obligations under this Agreement (including its non-competition obligations under Section 10 and its confidentiality obligations under Section 14) and the Related Agreements, and subject to the terms and conditions of the Value Added Reseller Agreement, Licensor grants to Licensee, and Licensee hereby accepts from Licensor, a non-exclusive, non-sublicensable (except as provided in Section 2.8), non-transferable, royalty-bearing license under the Licensed Technology to develop, use, make, offer to sell, lease and otherwise provide to third parties the Non-Exclusive Products inside and outside the Territory and inside and outside the Field during the Term, it being acknowledged and agreed that (i) the Parties shall review any development, manufacturing, marketing and sales activities

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

7

 

conducted by Licensee with respect to the Non-Exclusive Products outside of the Territory during the business reviews conducted pursuant to Section 11.4, and (ii) the terms and conditions under which the foregoing license may be exercised will be set forth in more detail and governed by the Value-Added Reseller Agreement.  Licensee may not have the Non-Exclusive Products made by a Third Party without Licensor’s prior written consent, unless otherwise expressly agreed in the Value-Added Reseller Agreement.

 

2.3 Third-Party Manufacturers.  In addition to the rights granted to Licensee in Sections 2.1 and 2.2, Licensee shall have the right to have Products made by its Affiliates that are not competitors of Licensor.

 

2.4 Technical Documentation.  Within [***] of the Effective Date, Licensor shall deliver to Licensee one (1) complete copy of the Technical Documentation in both electronic and hardcopy form.  Licensor hereby grants Licensee the right to use, copy and adapt the Technical Documentation for solely the purpose of developing, using, and making  Products in accordance with this Agreement.

 

2.5 Revenue Targets.  The revenue targets that Licensee must meet to retain the exclusive rights set forth in Section 2.1 are set forth in Section A of Appendix 2, attached hereto (“Revenue Targets”).  If Licensee fails to achieve any such Revenue Targets Licensor may convert the exclusive license in Section 2.1 to a non-exclusive license upon written notice to Licensee, which conversion shall be effective on the date specified for such conversion in the notice.  Conversion of the exclusive license to a non-exclusive license shall be Licensor’s sole remedy for Licensee’s failure to meet such Revenue Targets under this Section 2.5.  The Parties shall review the foregoing performance milestones by no later than [***] and shall discuss in good faith any requested adjustments requested by either Party based on such review.  If the Parties do not agree on any adjustments during such review, the then-current performance milestones shall remain in effect.

 

2.6 Professional Services.  Licensee has the right to provide professional services in the Territory to Licensee’s customers in relation to its Products and Licensor shall provide Licensee with training to provide such services in accordance with terms and conditions of the Professional Services Agreement.

 

2.7 Exceptions to Exclusivity.  The exclusive rights granted in Section 2.1 above are subject to the following exceptions.

 

(a)                   Licensor shall retain the right to market and sell [***].

 

(b)                   Licensor shall retain the right to sell [***], as long as the following conditions are met: [***].  If [***], Licensor shall have the right to sell [***].  Licensor shall inform Licensee promptly of [***].  At the Executive Business Reviews, the Parties will discuss sales figures of [***].

 

(c)                   Licensor shall retain the right to sell [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

8

 

(d)                   Subject to Section 5, nothing in this Agreement shall prohibit or limit Licensor’s right to make, use, sell, market or distribute any products or services (i) outside of the Territory (whether within or outside the Field) or (ii) within the Territory outside the Field.

 

2.8 Government Rights.  Licensee acknowledges that pursuant to 35 U.S.C §§ 201-211, the United States federal government retains (i) a non-exclusive, non-transferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States throughout the world any invention conceived or first actually reduced to practice under any agreement funded in whole or in part by the United States federal government as may be claimed in any existing or future patents of Licensor, and (ii) additional rights as specified in such statutes and the regulations promulgated thereunder, as amended, or any successor statutes or regulations.  Schedule 2.7 of this Agreement contains a true, complete, and accurate list of all inventions and patents in the Licensed Technology, if any, under which the United States federal government retains any rights pursuant to 35 U.S.C. §§ 201-211.

 

2.9 Sublicensing and Marking.  Licensee has the right to sublicense the Licensed Technology to any partially owned subsidiary of Licensee to which Licensee transfers its business or operations relating to the subject matter of this Agreement and the Related Agreements; provided that (i) the partially owned subsidiary is neither a competitor of Licensor nor a subsidiary or Affiliate of a competitor of Licensor and (ii) the partially owned subsidiary agrees in writing to be bound by the same obligations under this Agreement applicable to Licensee and that Licensor shall have the right to terminate the sublicense if the partially owned subsidiary is subsequently acquired by a competitor of Licensor and (iii) Licensee maintains management control over the partially owned subsidiary, which control shall include control over the day-to-day operations of such subsidiary.  If Licensee does not maintain such management control over a partially owned subsidiary as required by subparagraph (iii), then any such sublicense shall be subject to Licensor’s prior review and written consent.  Licensee shall be liable for any act or omission of such partially owned subsidiary that would be a breach of this Agreement if such act or omission were committed by Licensee.  Licensee shall not sublicense the Licensed Technology to any other Third Party.  Licensee shall not obscure, remove or alter any of the trademarks, trade names, logos, patent or copyright notices or markings from the Licensed Technology.

 

2.10 Ownership.  Licensee agrees and acknowledges that, as between Licensee and Licensor, Licensor is the sole and exclusive owner of all the Licensed Technology.  Licensee shall not, and shall not abet or encourage any Third Party to, challenge the scope, validity or enforceability of any of the Intellectual Property rights in the Licensed Technology.  Nothing in this Agreement shall be construed to confer any rights upon Licensee by implication, estoppel, or otherwise as to any technology, patent or other Intellectual Property rights of Licensor or any other entity other than the rights granted hereunder with respect to the Licensed Technology.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

9

 

2.11 Infringement.  Licensee shall notify Licensor immediately of any information it obtains concerning any Third Party’s infringement on any patent right or other proprietary right of Licensor with respect to the Licensed Technology and Licensor shall notify Licensee immediately of any information it obtains concerning any Third Party’s infringement on any patent right or other proprietary right of Licensor with respect to the Licensed Technology that Licensor reasonably believes might affect Licensee’s rights under this Agreement, the Product Supply Agreement, or the Value-Added Reseller Agreement.

 

Section 3.              Equity Investment by Licensee.  Licensee shall make an investment in an amount equal to twenty five million dollars ($25,000,000) by purchasing A123 common stock under the Stock Purchase Agreement (“Equity Investment”) by no later than fifteen (15) days following the Effective Date, subject to conditions precedent under the Stock Purchase Agreement.

 

Section 4.              Future License to [***].  If Licensor determines that the Battery System market in Japan is meeting its revenue and growth expectations, then Licensor may, in its sole discretion, elect to negotiate in good faith a separate license of [***] to Licensee for the manufacture of [***] in its facilities in the Territory, as well as marketing and selling such [***] in the Territory.  For the avoidance of any doubt, [***] includes, but is not limited to [***].

 

Section 5.              Right of First Offer.  Provided Licensee fully complies with its obligations under this Agreement and the Related Agreements, and subject to the terms and conditions of this Agreement, Licensor grants to Licensee a Right of First Offer (as defined below) on any future license under the Licensor’s Battery System technology (excluding, for clarity, any Battery Cell technology) to manufacture and sell Battery Systems for [***] applications (“[***]”) in the Territory (the “[***] License”).  Any such license would not restrict or prohibit either Licensor or its customers from selling and importing [***] into the Territory.  The term “Right of First Offer” means that before offering the [***] License for the first time Licensor shall notify Licensee and, if requested by Licensee after such notice, shall negotiate in good faith with Licensee for [***] after such notice (the “Good Faith Negotiation Period”) with respect to the [***] License.  If the Parties are not able to reach agreement on the terms of a [***] License during the Good Faith Negotiation Period, Licensor shall have the right to offer the [***] License to Third Parties without any limitations.

 

Section 6.              Technical Support.  Subject to Licensee’s compliance with the Related Agreements, Licensor or its Affiliates shall be responsible for providing qualified technical personnel and services to assist and support Licensee’s personnel in the use of the Licensed Technology pursuant to a mutually agreed Professional Services Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

10

 

Section 7.                                          Rights to Improvements.

 

7.1 Improvements.  Licensor and Licensee agree to the following provisions regarding Joint Improvements, Licensor Improvements, and Licensee Improvements:

 

(a)                                 Joint Improvements shall be jointly owned by the Parties. Either Party shall, promptly upon making any Joint Improvement, inform the other Party of such Joint Improvement in reasonable detail in writing.  Each Party hereby grants the other Party a non-exclusive, fully-paid, royalty-free, perpetual, irrevocable, sublicensable license under such Party’s rights in any Joint Improvement to utilize, employ, practice and/or otherwise exploit all Joint Improvements without any duty of accounting to the other Party or any duty or obligation to obtain the other Party’s consent to any sublicensing or other exploitation of any Joint Improvement.  If any of the Joint Improvements are patentable and the Parties agree to file a patent application for such Joint Improvement, the Parties shall discuss in good faith the prosecution of the patent and the payment of prosecution and maintenance fees.

 

(b)                                 All Licensee Improvements shall constitute Confidential Information of Licensee and shall be subject to the confidentiality provisions set forth in Section 16 (provided that the foregoing does not limit Licensor’s right to exercise its license right to Licensee Improvements set forth in this Section 7.1(b)).  Licensee hereby grants Licensor and its Affiliates a non-exclusive, fully-paid, royalty-free, perpetual (subject to Section 14.7), irrevocable (subject to Section 14.7), sublicensable license to utilize, employ, practice and/or otherwise exploit (including to make, have made, use, sell, offer to sell, and import products and services) all Licensee Improvements (i) outside of the Territory, in any field and (ii) within the Territory, outside of the Field (except that Licensor may exploit such improvements with Refusing Manufacturers in accordance with Section 2.6(b) within the Field) during the Term and any in field after the Term.

 

(c)                                  All Licensor Improvements shall constitute Confidential Information of Licensor and shall be subject to the confidentiality provisions set forth in Section 16.  If requested by Licensee, Licensor shall grant Licensee and its wholly owned subsidiaries under the Licensor Improvements a license that is non-exclusive but that is otherwise consistent with the terms of the license granted in Section 2.1, without compensation for a period of [***] from the Effective Date, and thereafter, subject to the Parties’ agreement on compensation for such improvements pursuant to Section 7.3.

 

7.2 At each Executive Business Review, (i) Licensee shall inform Licensor of all Licensee Improvements it has made during the period covered by such Executive Business Review and (ii) Licensor shall inform Licensee of all Licensor Improvements it has made during the period covered by such Executive Business Review; provided, however, that if Licensee makes a Licensee Improvement that could reasonably be expected to significantly enhance Licensor’s ability to exploit the Licensed Technology, Licensee shall promptly inform Licensor thereof, and if Licensor makes a Licensor Improvement that could reasonably be expected to

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

11

 

significantly enhance Licensee’s ability to exploit the license granted hereunder,  Licensor shall promptly inform Licensee thereof.

 

7.3 The Parties shall negotiate in good faith compensation for (i) Licensor Improvements if and when they  are made available by Licensor (subject to the last sentence of Section 7.1(c)) and (ii) any New Developments if and when made available by Licensor during the Term, which compensation shall reflect the following with respect to each Licensee Improvement and each New Development:

 

(a)                                 a one-time, non-refundable fee, which shall not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000); and/or

 

(b)                                 an increase in the Initial Royalty Threshold.

 

Section 8.                                          Fees, Royalties and Payment Terms.

 

8.1 Consideration for Grant of Rights.

 

(a)                                                     License Fee. In consideration of the rights granted hereunder, Licensee shall pay to Licensor an aggregate of Seven Million Five Hundred Thousand Dollars (US$7,500,000) in non-refundable license fees (the “License Fee”) within ten (10) business days after invoice is received by Licensee.

 

(b)                                                    Royalties. During the Term, Licensee shall pay to Licensor running royalties as a percentage of Net Sales for all sales by Licensee of Products that use or embody the Licensed Technology (“Royalties”). Royalties shall be payable for each Reporting Period and shall be due to Licensor within [***] after the end of each such Reporting Period according to the following schedule:

 

(i) An initial royalty equal to [***] of Net Sales for Exclusive Products and an initial royalty equal to [***] of Net Sales multiplied by the Licensed Component Multiple for Non-Exclusive Products sold under the Value-Added Reseller Agreement (“Initial Royalty”). The Initial Royalty shall apply until the amounts paid by Licensee under the Initial Royalty equal [***](“Initial Royalty Threshold”). Any royalties paid by Licensor to Licensee pursuant to this Section 8.1(b) shall be deducted from the foregoing [***] amount;

 

(ii)  The royalty rate after amounts paid by Licensee under the Initial Royalty equal [***] shall be [***] of Net Sales for Exclusive Products and [***] of Net Sales multiplied by the Licensed Component Multiple for Non-Exclusive Products sold under the Value-Added Reseller Agreement, to remain in effect during the Term.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

12

 

(iii)  In cases where Licensee develops a Battery System for a customer located in the Territory that will manufacture its transportation application outside the Territory, Licensee will be entitled to earn a royalty from Licensor if Licensor manufactures the Battery System to be included in such transportation application for such customer at any of Licensor’s manufacturing facilities. This royalty will consist of [***] of the system revenue value net of cell value for sales and project management effort, plus a royalty provision for any engineering effort not compensated by the customer during development. This additional royalty for engineering effort will be mutually agreed in writing by the Parties and may vary depending on, among other things, the commercial terms of each customer program.

 

8.2 Payments.

 

(a)                                                    Method of Payment.  All payments under this Agreement shall be made by wire transfer to a bank account, anywhere in the world, as Licensor may identify to Licensee in writing from time to time.

 

(b)                                                    Currency.  All payments under this Agreement shall be made in United States Dollars.  Prior to calculation of Royalties, any Net Sales arising in any other currency other than United States Dollars shall be converted to U.S. Dollars at the exchange rate that is the median rate between the applicable buying and selling rates announced by OANDA Corporation on the last business day of the applicable Reporting Period.

 

(c)                                                      Late Payments.  Any payments by Licensee that are not paid on or before the date such payments are due under this Agreement shall bear interest at a rate equal to the lesser of (i) [***] per [***] and (ii) the highest rate permitted by applicable law.

 

Section 9.                                          Competitiveness of Licensed Technology.  The Parties shall use commercially reasonable efforts to work together to provide that the Licensed Technology remains competitive, in terms of technology and price, with competing technologies.

 

Section 10.                                   Non-Competition.  Licensee will not develop, sell or produce Products, Battery Cells (other than as licensed or acquired from Licensor) or their components that compete with those developed, produced or sold by Licensor or establish any new legal entity or business, either directly or indirectly, to do the same during the Term of and for [***] after termination or expiration of this Agreement (“Post-Term Period”), unless Licensee has terminated this Agreement pursuant to Section 18.2(d), or 18.2(i), or Licensor has terminated it pursuant to Section 14.4(iv), in which case the Post-Term Period will be [***]; provided that if Licensee terminates this Agreement pursuant to Section 18.2(i), upon such termination Licensee may develop, alone or with third parties (subject to the confidentiality obligations in Section 16), products that compete with the Products, Licensor’s Battery Cells and their components but may not sell or produce such products during the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

13

 

[***] Post-Term Period.  The foregoing shall not affect Licensee’s rights under Sections 2.2 (b), (c), and (d) of the Product Supply Agreement.

 

Section 11.                                   Reports and Records.

 

11.1 Frequency of Reports.  Licensee shall deliver reports to Licensor within [***] after the end of each Reporting Period, containing information concerning Products and Net Sales in such Reporting Period, as further described in Section 2.3.  If Licensor owes Licensee any royalties under Section 7 or 8 of this Agreement, Licensor shall deliver reports to Licensee within [***] after the end of each Reporting Period containing all information necessary to allow the Parties to calculate the royalties owing to Licensee.

 

11.2 Content of Reports and Payments.  Each report delivered by Licensee to Licensor shall contain at least the following information for the immediately preceding Reporting Period:

 

(a)                                 the number of Products, categorized by type of Product into which they are incorporated, sold, leased or distributed by Licensee and its Affiliates during such Reporting Period;

 

(b)                                 the gross price charged by Licensee and its Affiliates for each Product, categorized by type of Product;

 

(c)                                  calculation of Net Sales of Products for the applicable Reporting Period, together with the exchange rates used for conversion of any Net Sales obtained by Licensee in any currency other than United States Dollars;

 

(d)                                 the Licensed Component Multiple for Non-Exclusive Products; and

 

(e)                                  total Royalty payable on Net Sales of Products, in U.S. Dollars.

 

If no amounts are due to Licensor for any Reporting Period, the report shall so state.

 

11.3 Records.  Each Party shall maintain, and shall cause its Affiliates to maintain, complete and accurate records relating to its rights and obligations under this Agreement and any amounts payable to the other Party in relation to this Agreement, which records shall contain sufficient information to permit each Party to confirm the accuracy of any reports delivered to such Party and compliance in other respects with this Agreement.  Each Party shall retain such records for at least five (5) years following the end of the calendar year to which they pertain, during which time the other Party shall have the right to engage an independent certified public accountant, at the other Party’s expense, to inspect such records during normal business hours to verify any reports and payments made or compliance in other respects under this Agreement.  In the event that any audit performed under this Section reveals underpayment in excess of five percent (5%) over any consecutive six (6)-

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

14

 

month period or longer, the Party making the underpayment shall bear the full cost of such audit and shall remit any amounts due to the Party that commissioned the audit within thirty (30) days after receiving notice thereof from the Party that commissioned the audit.  The obligations under this Section 11.3 shall apply to Licensor only during any period in which Licensor pays royalties to Licensee under this Agreement.

 

11.4 Executive Business Review.  Executive management of the Parties will plan to meet in person for periodic business reviews not less than [***] during the Term, with at least [***] in Japan and [***] in the United States [***] (such meetings, the “Executive Business Reviews”). The Executive Business Reviews will assess the performance of both Parties and adapt business plans as may become necessary from time to time as well as the matters contemplated in Sections 2.6(b) and 7.3. Additional management reviews will be scheduled as needed with the expectation of [***] meetings at least in the [***] of the relationship. For the avoidance of doubt, this performance assessment will include discussion of [***].

 

Section 12.                                   Taxes and Bank Charges.

 

12.1 All taxes, duties, registration fees or other charges or fees arising in connection with the implementation of this Agreement imposed by Japan law or a competent Japanese government authority on Licensor shall be borne by Licensee.  Licensee shall gross up all payments to Licensor to ensure Licensor receives the full amount of the License Fees, Royalties and other payments due to it in accordance with this Agreement, after withholding of applicable taxes and deductions of other applicable charges and fees.  All taxes in connection with the subject matter of this Agreement that are levied by authorities outside Japan on Licensor shall be borne by Licensor.

 

12.2 All bank charges incurred in Japan shall be borne by Licensee and all bank charges incurred outside Japan shall be borne by Licensor.

 

Section 13.                                   Warranties.

 

13.1 Mutual Warranties.  Each Party represents and warrants that it is duly organized and validly existing under the laws of its domicile, and has the power and authority to enter into and perform its obligations under this Agreement.

 

13.2 Licensor Warranties.  Licensor represents and warrants that:

 

(a)                                 the Licensed Technology conforms in all material respects to the applicable documentation set forth in Appendix 1;

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

15

 

(b)                                 it has the full right, power, and authority, including all necessary governmental authorizations, licenses, and other approvals, to grant the rights and licenses described in this Agreement, free and clear of any and all claims, rights, and obligations of Third Parties;

 

(c)                                  as of the Effective Date, and except regarding the litigation referred to in the definition of “Settlement of the Patent Litigation,” Licensor has not received any written notice from a Third Party that the Licensed Technology or the Technical Documentation  infringes or misappropriates, any patent, trademark, copyright, trade secret or other Intellectual Property or proprietary rights;

 

(d)                                 the Technical Documentation delivered to Licensee contains all Licensor’s documentation,  specifications, and technical information, in each case that is in written or electronic form and is in Licensor’s possession as of the Effective Date, and that relates to the use of the Licensed Technology to develop and manufacture Products.

 

(e)                                  neither the Licensed Technology nor the Technical Documentation is subject to United States export laws and regulations, including, the Export Administration Regulations of the U.S. Department of Commerce Bureau of Industry and Security (15 C.F.R. Parts 730-774) and International Traffic in Arms Regulations of the U.S. Department of State Directorate of Defense Trade Controls (22 C.F.R. Parts 120-130) and Licensor’s grant of the rights and licenses described in this Agreement will not violate any laws of the USA.

 

13.3 Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 13, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE LICENSED TECHNOLOGY, TRADEMARKS OR PROFESSIONAL SERVICES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE AND VALIDITY OF PATENT CLAIMS.  SPECIFICALLY, AND NOT TO LIMIT THE FOREGOING, LICENSOR MAKES NO WARRANTY OR REPRESENTATION (I) REGARDING THE VALIDITY OR SCOPE OF THE PATENT RIGHTS, OR (II) THAT THE EXPLOITATION OF THE PATENT RIGHTS OR ANY PRODUCT WILL NOT INFRINGE ANY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF A THIRD PARTY.

 

Section 14.                                   Indemnification

 

14.1 Each Party shall indemnify, defend, and hold harmless the other Party and its Affiliates and their respective employees, representatives and agents, successors and assigns from and against any Third Party claim, suit, action, demand, damages, liabilities, expenses (including reasonable fees and disbursements of counsel and court costs), judgments, settlements and penalties of every kind (collectively, “Losses”) arising out of, resulting from or related to (i) the first Party’s gross negligence or intentional misconduct of itself or of its employees, agents, representatives or subcontractors during the performance of its obligations under this Agreement or (ii) in the case of Licensee, its exercise of the rights granted by Licensor under this Agreement, including product liability claims or demands that arise from Licensee’s development, integration, assembly,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

16

 

manufacture, production, verification, use, offer to sell or sale of Products, in each case, only to the extent that such Losses do not arise from an IP Claim.

 

14.2 During the term of this  Agreement and for three (3) years thereafter, Licensor shall defend Licensee from any Third Party claim that the Know How described in Appendix 1 (as such appendix is updated by the Parties during the Term) or Licensor Improvements licensed to Licensee under Section 7.3 (collectively, the “Licensed Materials”)  infringe or misappropriate any proprietary right of such Third Party (each, a “Licensor IP Claim”), and subject to the other terms of this Section 14, and the limitations set forth in Section 15, Licensor shall (i) pay any damages awarded by a court or agreed to by Licensor in a settlement arising from such Licensor IP Claim and (ii) reimburse Licensee for (A) Licensee’s cost of the destruction, disposition, modification, or repair of Products in Licensee’s inventory at the time of a settlement or injunctive relief ruling or other court order resulting from a Licensor IP Claim (the “Order”) and (B) the value of the inventory destroyed or disposed of, provided that (x) in the case of destruction or disposition of Products, either the destruction or disposition is required to be undertaken to comply with the terms of such Order or such Order prohibits the sale of such Products, or (y) in the case of modification or repair of Products, the modification or repair is required to be undertaken to comply with the terms of such Order.

 

14.3 Notwithstanding the foregoing, Licensor shall have no responsibility for Licensor IP Claims to the extent they result from (i) misuse of, or improvements or modifications to, the Licensed Materials by Licensee, its customers or any other Third Party, (ii) design specifications used by Licensee that were not provided by Licensor, (iii) Licensee’s design or development activities or (iv) the combination, operation or use of the Licensed Materials with any products or technology not supplied by Licensor.  If a Licensor IP Claim is subsequently found by a court of competent jurisdiction or other competent authority to result solely or in part from any actions or items described in clauses (i) through (iv) above, Licensee shall indemnify Licensor for Losses arising from such claim, including reasonable expenses Licensor incurred in handling the claim,  but not to the extent such Losses are attributable to acts by Licensor (which acts, for clarity, do not include the grant of rights hereunder by Licensor).

 

14.4 If the use of the Licensed Materials as authorized under this Agreement, or any part thereof, is enjoined or in Licensor’s opinion is likely to become the subject of a valid claim of infringement, then Licensor may, at its sole expense: (i) procure for Licensee the right to continue using the Licensed Materials as authorized hereunder; (ii) replace the Licensed Materials with a non-infringing version of equivalent function and performance; (iii) modify the Licensed Materials to be non-infringing and to be of equivalent function and performance; or (iv) if the remedies in clauses (i) through (iii) cannot be obtained with respect to any infringing Licensed Materials after using reasonable efforts, terminate this Agreement with respect to such Licensed Materials , in which case Licensee will cease using such Licensed Materials after the date of Licensor’s notice of such termination.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

17

 

14.5 During the term of this  Agreement and for three (3) years thereafter, Licensee shall defend Licensor from any Third Party claim that the Licensee Improvements infringe or misappropriate any proprietary right of such Third Party (each, a “Licensee IP Claim”), and subject to the other terms of this Section 14, and the limitations set forth in Section 15, Licensee shall (i) pay any damages awarded by a court or agreed to by Licensee in a settlement arising from such Licensee IP Claim and (ii) reimburse Licensor for Licensor’s cost of the destruction, disposition, modification, or repair of products in Licensor’s inventory at the time of a settlement or injunctive relief ruling or other court order resulting from a Licensee IP Claim, which destruction, disposition, modification, or repair is required to be undertaken to comply with the terms of such settlement or injunctive relief or other court order resulting.

 

14.6 Notwithstanding the foregoing, Licensee shall have no responsibility for Licensee IP Claims to the extent they result from (i) misuse of, or improvements or modifications to, the Licensee Improvements by Licensor, its customers or any other Third Party, (ii) design specifications used by Licensor that were not provided by Licensee, (iii) Licensor’s design or development activities or (iv) the combination, operation or use of the Licensee Improvements with any products or technology not supplied by Licensee.  If a Licensee IP Claim is subsequently found by a court of competent jurisdiction or other competent authority to result solely or in part from any actions or items described in clauses (i) through (iv) above, Licensor shall indemnify Licensee for Losses arising from such claim, including reasonable expenses Licensee incurred in handling the claim, but not to the extent such Losses are attributable to acts by Licensee (which acts, for clarity, do not include the grant of rights hereunder by Licensee).

 

14.7 If the use of the Licensee Improvements as authorized under this Agreement, or any part thereof, is enjoined or in Licensee’s opinion is likely to become the subject of a valid claim of infringement, then Licensee may, at its sole expense: (i) procure for Licensor the right to continue using the Licensee Improvements as authorized hereunder; (ii) replace the Licensee Improvements with a non-infringing version of equivalent function and performance; (iii) modify the Licensee Improvements to be non-infringing and to be of equivalent function and performance; or (iv) if the remedies in clauses (i) through (iii) cannot be obtained with respect to any infringing Licensee Improvements after using reasonable efforts, terminate this Agreement with respect to such Licensee Improvements, in which case Licensor will cease using such Licensee Improvements after the date of Licensee’s notice of such termination.

 

14.8 If either Party is entitled to make a claim (an “Indemnification Claim”) for indemnification under Section 14.1, 14.2 or 14.5 (the “Indemnified Party”), it shall promptly notify the other Party (the “Indemnifying Party”) in writing of the Indemnification Claim.  The Indemnifying Party shall defend the Indemnified Party, at the Indemnified Party’s request, from and against any Indemnification Claim.  Promptly after receipt of such request, the Indemnifying Party shall assume the defense of such Indemnification Claim with counsel of its choosing, but reasonably satisfactory to the Indemnified Party.  The Indemnifying Party must

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

18

 

conduct the defense of the Indemnification Claim in a commercially reasonable manner.  The Indemnified Party will cooperate with the Indemnifying Party and provide the Indemnifying Party with all information in its possession or control that is related to the claim or its defense.  The Indemnifying Party shall not settle or compromise any such Indemnification Claim if the settlement or compromise imposes any liability on or makes any admission of liability on behalf of the Indemnified Party, or in any way restricts the Indemnified Party’s right to conduct its business (excluding restrictions on use of the Licensed Technology or Licensee Improvements, as applicable), unless the Indemnifying Party obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld) and an unconditional release of all indemnified claims by each plaintiff or claimant in favor of the Indemnified Party.  In addition, the Indemnified Party may, at its own expense, retain its own counsel to participate in the defense and settlement of any Indemnification Claim tendered under this Section, provided that such counsel may act solely in an advisory role.

 

Section 15.                                   Limitations of Liability.

 

15.1 Disclaimer of Liabilities. IN NO EVENT SHALL EITHER PARTY, ITS AFFILIATES AND THEIR DIRECTORS, OFFICERS, EMPLOYEES REPRESENTATIVES AND AGENTS BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, INCLUDING ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER LICENSEE OR ANY OTHER ENTITY OR PERSON SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

 

15.2 Limitation of Liability.  Each Party’s aggregate liability under any theory (including contract, tort, indemnity, or otherwise) arising out of or in connection with this Agreement shall not exceed [***] or amounts paid to Licensor under the Product Supply Agreement in the [***] period preceding the initial claim for which a Party recovers damages hereunder, whichever is higher; provided, however that the limitations in Sections 15.1 and 15.2 shall not apply to Licensee’s breach of Sections 2.1 or 2.2 (or other unauthorized use or misappropriation of the Licensed Technology), Section 2.9, Section 3, Section 10 or either Party’s breach of Section 16.

 

Section 16.                                   Confidentiality.

 

16.1 Restrictions.  Each Party agrees that, with respect to any Confidential Information that is disclosed by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”), except as expressly specified in this Agreement, the Receiving Party shall:

 

(a)                                 maintain in confidence such Confidential Information, using the same degree of care as it uses to protect its own confidential information of like nature, but not less than a reasonable degree of care;

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

19

 

(b)                                 except as permitted in Section 16.3 below, not disclose any such Confidential Information to any person outside that Party’s business organization; and

 

(c)                                  use such Confidential Information only for the purposes set forth in this Agreement and subject to the terms and conditions of this Agreement.

 

16.2 Licensee Obligations.  Licensee shall limit the use of and access to the Licensed Technology, and all other Confidential Information provided by Licensor hereunder, to its employees and consultants whose use of or access to the Confidential Information is necessary for Licensee’s exercise of its rights under this Agreement and who are bound by an obligation to maintain the confidentiality of such Confidential Information at least as stringent as that set forth in this Agreement.  Licensee shall not remove any copyright, proprietary rights or confidentiality notices included in or affixed to any Confidential Information, and shall reproduce all such notices on any copies of Confidential Information made by Licensee. Licensee shall destroy the Confidential Information in the event of termination of this Agreement.

 

16.3 Exceptions.  The Receiving Party may disclose Confidential Information to the minimum extent necessary, if such disclosure is:  (i) required to be made pursuant to law or regulation, government authority, duly authorized subpoena or court order, whereupon the Receiving Party will provide prompt notice to the Disclosing Party and give such Party a reasonable opportunity to respond prior to such disclosure and seek a protective order or other appropriate remedy, or (ii) is approved by the express prior written consent of the Disclosing Party.  If a protective order is not available, the Receiving Party shall only provide that information which is absolutely necessary and obtain whatever level of obligation the governmental agency is willing to assume for the protection of such Confidential Information.  In addition, the subject matter of this Agreement may be disclosed to persons within the Parties’ own management or those of their Affiliates or within governments having jurisdiction or to the Parties’ legal counsel to the extent, and only to the extent, that the recipients of such information need it to perform properly their functions pertaining to the subject matter of this Agreement.

 

Section 17.                                   Public Statements.

 

17.1 The Parties will jointly coordinate all press conferences, press releases, or public statements about their co-operation regarding the strategic business relationship contemplated by this Agreement and any press release or public statement shall be subject to the consent of the other Party, which shall not be unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing, either Party may disclose the provisions of this Agreement on a confidential basis, to its financial and legal professionals and bankers, or to any of its Affiliates that is benefitting from the rights granted hereunder, or on a non-confidential basis in the context of a public offering or public company reporting obligations as required under applicable law.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

20

 

17.2 The Parties intend to jointly announce the expanded strategic relationship promptly following their execution of the Agreement and may specify in the announcement that Licensee has exclusive license rights under the Licensed Technology in the Territory.

 

Section 18.                                   Term and Termination.

 

18.1 Term.  The Term of this agreement shall be ten (10) years from the Effective Date unless extended by mutual written agreement of the parties or unless terminated according to this Section 18 (“Term”).

 

18.2 Termination for Cause:  This Agreement and all rights and licenses granted hereunder may be terminated by written notice:

 

(a)                                 By either Party if the other Party becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business;

 

(b)                                 By either Party if any governmental authority having authority over either Party requires any provision of this Agreement to be revised in such a way as to cause significant adverse consequences to that Party, in the discretion of such Party;

 

(c)                                  By either Party if the consequences of an Event of Force Majeure (as defined below) excuse performance hereunder for a period in excess of [***];

 

(d)                                 By the non-breaching Party in the following circumstances: a Party is in material breach of the terms or conditions of this Agreement and such breach is not cured by such breaching Party within [***] after receipt of written notice of such breach from a non-breaching Party (the “Cure Period”), then the non-breaching Party shall have the right to serve written notice to the breaching Party to terminate this Agreement; provided, however, that if the Party that received the aforesaid written notice of breach does not agree that it is in material breach of the terms or provisions of this Agreement as alleged in such notice, such Party shall have the right to submit such disagreement to arbitration pursuant to Section 22.  In such event, the award rendered by the arbitration tribunal shall govern the issue of the termination of this Agreement under this Section 18.2(d).  In addition to the right of the non-breaching Party, at its option, to terminate this Agreement, the non-breaching Party shall have the right to seek monetary damages as compensation for such breach.  The monetary damages shall be measured from the date of the first breach, and not the date of receipt of the notice thereof.  The monetary damages shall be the amount provided by law to fully compensate the non-breaching Party;

 

(e)                                  By Licensor if there is unauthorized use of Licensor’s Intellectual Property rights in the Territory or outside of the Territory that is attributable to Licensee’s actions and that is not attributable to Licensor’s actions;

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

21

 

(f)                                   By Licensor if the Equity Investment does not close according to the schedule in the Stock Purchase Agreement;

 

(g)                                  By Licensor, if Licensee fails to achieve the “Minimum Sales” volume set forth in Section B of Appendix 2 for [***] ([***] shall begin on the Effective Date);

 

(h)                                 By Licensee, if the Settlement of the Patent Litigation has not been completed by [***];

 

(i)                                     By Licensee, if Licensee terminates the Product Supply Agreement in accordance with its terms; or

 

(j)                                    By Licensee if Licensor undergoes a Change in Control and assigns this Agreement in violation of Section 23.2.

 

18.3 Sections 1, 2.10, 7.1, 10, 11, 12, 13.3, 14, 15, 16, 17, 18, 19, 20, 22, 23, 24, 25, and any payment obligations that have accrued under Section 8 but have not been paid to Licensor as of the date of expiration or termination, shall survive the expiration or termination of this Agreement according to their terms.

 

18.4 Upon the termination of this Agreement pursuant to this Section 18, (a) all amounts then due and unpaid by either Party hereunder, as well as all other amounts accrued but not yet payable by Licensee at that time, shall become immediately due and payable to the other Party, and (b) except for early termination of this Agreement by Licensee under Section 18.2(d), Licensee shall return all the Licensed Technology and Licensor Improvements to Licensor, and Licensee shall not have the right to use any Licensed Technology or Licensor Improvements or to disclose Licensed Technology or Licensor Improvements in any form to any Third Party and Licensee shall stop selling Products not in inventory.

 

18.5 If Licensee terminates this Agreement pursuant to Section 18.2(d), Licensee may continue to use the Licensed Technology for programs in production at the time of termination for a period of [***] following such termination, subject to payment of all applicable fees and royalties.

 

18.6 If Licensor terminates this Agreement pursuant to Section 18.2(g), Licensee shall have the right to continue to supply Product to customers for a period of [***] under purchase orders that are outstanding as of the date of termination.  The Parties will also negotiate in good faith the manner in which to address any related service requirements for Licensee’s customers during such time period.

 

Section 19.                                   Notices. Any notice or other communication required to be given by any Party under this Agreement shall be in writing in the English language and shall be given by (i) personal delivery,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

22

 

(ii) internationally recognized courier service, (iii) facsimile, or (iv) registered airmail, postage prepaid, to the address of the other Party set forth below or to such other address as may from time to time be designated by the other Party through notification to such Party.  The dates on which notices shall be deemed to have been duly given shall be determined as follows:

 

(a)                                 Notices given by personal delivery shall be deemed duly given on the date of signature of receipt by the person taking personal delivery;

 

(b)                                 Notices given in letter form shall be deemed duly given on the 10th day after the date mailed (as indicated by the postmark) by registered airmail, postage prepaid, or the 7th day after delivery to an internationally recognized courier service; and

 

(c)                                  Notices given by facsimile shall be deemed duly given on the date of confirmation of transmission to the sending Party from the receiving Parties.

 

to Licensor:

 

A123 Systems, Inc.

200 West Street

Waltham, Massachusetts 02451

Attention: Mr. Eric Pyenson, General Counsel

 

Tel: (617) 778-5745

Fax (617) 924-8910

 

If to Licensee:

 

IHI Corporation,

Toyosu IHI Building 1-1,

Toyosu 3-chome, Koto-ku,

Tokyo 135-8710 Japan

Attention:  Mr. Koji Tanaka

 

Tel:                           81-3-6204-7027

Fax:                       81-3-6204-8607

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

23

 

Section 20.                                   Force Majeure.

 

20.1 When the obligations of a Party under this Agreement cannot be performed in full or in part according to the agreed terms as a direct result of an event that is unforeseeable and of which the occurrence and consequences cannot be prevented or avoided (an “Event of Force Majeure”), the Party that encounters such Event of Force Majeure (the “Hindered Party”) shall not be deemed to be in breach of this Agreement if all of the following conditions are met:

 

(a)                                 The Event of Force Majeure was the direct cause of the stoppage, impediment or delay encountered by the Hindered Party in performing its obligations under this Agreement;

 

(b)                                 The Hindered Party used its commercially reasonable best efforts to perform its obligations under this Agreement and to reduce the losses to the other Party arising from the Event of Force Majeure; and

 

(c)                                  At the time of the occurrence of the Event of Force Majeure, the Hindered Party immediately informed the other Party, providing written information and supporting documentation of such event within fifteen (15) days of its occurrence, including a statement of the reasons for the delay in implementing or partially implementing this Agreement.

 

20.2 Subject to Section 20.3, if an Event of Force Majeure shall occur, the time for performance of the Hindered Party’s obligations shall be extended for a period corresponding to the period of the delay caused by the Event of Force Majeure.

 

20.3 If an Event of Force Majeure shall occur and its consequences continue for more than [***], the Parties shall decide whether to amend this Agreement in light of the impact of the event upon the implementation hereof.

 

20.4 An Event of Force Majeure shall not suspend any obligation of either Licensor or Licensee to make any payments due under this Agreement.

 

Section 21.                                   Registration and Approvals.

 

21.1 Licensee shall, at its own expense, obtain any approvals and registrations, fulfill all other requirements and carry out all procedures related to this Agreement that are or may become required under any law or regulation now or hereafter existing in Japan or any jurisdiction in which Licensee makes or sells the Non-Exclusive Products, to enable the Parties to exercise, enforce and enjoy all of the rights and obligations contained in this Agreement, including any approvals and registrations required from Japanese or other such jurisdiction’s examination and approval authority and/or the relevant Japanese or other such jurisdiction’s economic and trade

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

24

 

authority, and the necessary procedures relating to the payment and remittance of all amounts payable hereunder to Licensor. Licensor shall render reasonable assistance to Licensee in the required registration and approval procedures.

 

21.2 Licensor shall, at its own expense, obtain any approvals or authorizations that are or may become required by United States laws and regulations and competent authorities to enable the Parties to exercise, enforce and enjoy all of the rights and obligations contained in this Agreement, including any export licenses required to deliver or otherwise disclose Licensed Technology to Licensee.  Licensee shall render reasonable assistance to Licensor in the required approval or authorization procedures.

 

21.3 Neither Party shall be entitled to exercise any rights or be bound to perform any obligations contained in this Agreement until receipt, upon request of a Party, from the non-requesting Party of evidence satisfactory to it of the granting of all approvals and/or registrations and the fulfillment of all other requirements referred to in Sections 21.1 and 22.2.

 

Section 22.                                   Governing Law and Settlement of Disputes.

 

22.1 This Agreement and all disputes arising out of or related to this Agreement, or the performance, enforcement, breach or termination hereof, and any remedies relating thereto, shall be construed, governed, interpreted and applied in accordance with the laws of the State of New York, excluding (i) conflict of laws principles that would apply the law of any other jurisdiction, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted; (ii) the United Nations Convention on Contracts for the International Sale of Goods; (iii) the 1974 Convention on the Limitation Period in the International Sale of Goods; and (iv) the Protocol amending the 1974 Convention, done at Vienna April 11, 1980.

 

22.2 Initially, any dispute or claim arising out of or relating to this Agreement or the interpretation, breach, termination or validity hereof shall be resolved through good faith efforts in friendly consultation among the Parties.  Such consultation shall begin immediately after one Party has delivered to the other Party a written request for such consultation.

 

22.3 If, within thirty (30) days following the date on which any such request is delivered, the dispute or claim cannot be resolved after consultation among the Parties, the same may be submitted to arbitration by any one of the Parties.

 

22.4 The arbitration shall be conducted in San Francisco in accordance with the International Chamber of Commerce Rules of Arbitration (“ICC Rules”) for the time being in force which rules are deemed to be incorporated by reference to this clause.  However, if such Rules are in conflict with the provisions of this

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

25

 

Section 22, including the provisions concerning the appointment of arbitrators, the provisions of this Section 22 shall prevail.

 

22.5 The arbitration tribunal shall consist of three (3) arbitrators.  Licensor shall select one (1) arbitrator, and Licensee shall also select one (1) arbitrator, all in accordance with the ICC Rules.  Within twenty (20) days after the appointment of the second such arbitrator, the two (2) appointed arbitrators shall select a third arbitrator to serve as chairman of the tribunal; provided, however, that in no event shall the presiding arbitrator be of the same nationality as Licensor or Licensee.  If any arbitrator has not been appointed within the time limits specified herein the International Chamber of Commerce shall make the appointment within ten (10) days of request therefrom by either Licensor or Licensee.

 

22.6 The language in which the arbitration shall be conducted will be English, and all writings, documents and evidentiary materials submitted by the Parties shall be submitted in English.  The award of the arbitration tribunal shall be issued in writing in English

 

22.7 The award of the arbitration body shall be issued no later than sixty (60) days after the conclusion of the arbitration hearing or the final submission of evidence.

 

22.8 Notwithstanding anything contained in Section 22 to the contrary, each Party shall have the right to institute judicial proceedings in any court of competent jurisdiction against the other Party in order to enforce the instituting Party’s Intellectual Property rights and other rights hereunder through specific performance, injunctions or similar equitable relief, or orders to preserve assets and evidence or other emergency relief.

 

22.9 During the period of any dispute and/or arbitration of such dispute, each Party may exercise all of its rights and shall perform all of its obligations hereunder in accordance with the terms of this Agreement, except for the sections which are the subject of the dispute.

 

22.10 The arbitrators may grant pre-award interest as part of any award.  Amounts due under any arbitration award shall be paid as provided in the award, and interest on any unpaid amount shall accrue penalty interest calculated at a daily rate equal to the then-current interest rate published in the Wall Street Journal from the date on which such amount is due until the date on which such amount has been received by the payee.

 

22.11 Each Party irrevocably consents to the service of process, notices or other paper in connection with or in any way arising from the arbitration or the enforcement of any arbitral award, by use of any of the methods and to the addresses set forth for the giving of notices in Section 19.  Nothing contained herein

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

26

 

shall affect the right of any Party to serve such processes, notices or other papers in any other manner permitted by applicable law.

 

22.12 The award rendered in any arbitration commenced hereunder shall be final and binding upon the Parties and judgment thereon may be enforced in any court of competent jurisdiction.  The award may be used as a basis for a writ of execution, judgment or other decree for execution and may be enforced in Japan or elsewhere in any court or other governing body having jurisdiction.  The losing Party shall pay all legal fees and costs incurred by the other Party in the arbitration.

 

Section 23.                                   Assignability.

 

23.1 This Agreement may not be assigned, subcontracted or transferred by either Party without the other Party’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed; provided however, that Licensor may assign this Agreement without consent in connection with a Change in Control, provided that (i) the assignee agrees in writing to be bound by the same obligations under this contract applicable to Licensor, and (ii) Licensor or the assignee provides written notice of the assignment to Licensee.

 

23.2 Notwithstanding Section 23.1, Licensee’s consent to assignment shall be required if Licensor assigns this Agreement in connection with a Change in Control pursuant to which the divisions within Licensor that are responsible for the Licensed Technology and for the products sold by Licensor to Licensee under the Product Supply Agreement would not be under the assignee’s common ownership and control immediately after such Change in Control.

 

Section 24.                                   Severability.  If any provision of this Agreement cannot be implemented by reason of its being deemed to be illegal, in contravention of public policy or for any other similar reason, such provision shall be removed from the Agreement so that all other provisions of the Agreement will be in accordance with law, effective and enforceable. The Parties shall agree on a new provision to replace the removed provision that, to the extent allowed by law, to the greatest extent provides for the same economic and commercial intent as the original provision.

 

Section 25.                                   Miscellaneous Provisions.

 

25.1 The singular shall include the plural and vice versa where required.  Titles of Sections are for convenience only, and neither limit nor amplify the provisions of this Agreement.  The word “including” and its variants shall mean “including without limitation” when used in this Agreement.

 

25.2 Failure of a Party to enforce one or more of the provisions of this Agreement, or to exercise any option or other rights hereunder, or to require at any time performance of any of the obligations

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

27

 

hereof shall not be construed to be a waiver of such provisions by such Party or to, in any way, affect the validity of this Agreement or such Party’s right to enforce each and every provision of this Agreement, or to preclude such Party from taking any other action at any time which it would legally be entitled to take.

 

25.3 The Appendices and Schedules to this Agreement are an integral part of this Agreement and have the same force as this Agreement.  This Agreement and its Appendices and Schedules constitute the entire agreement among the Parties with respect to the subject matter of this Agreement and supersede all previous oral and written proposals, negotiations, term sheets, letters of intent, memoranda of understanding and other agreements and documents among the Parties regarding the subject matter hereof.  If there is a conflict between this Agreement and its Appendices and Schedules, the terms and provisions of this Agreement (excluding the Appendices and Schedules) shall govern.

 

25.4 Amendments to this Agreement and its Appendices and Schedules must be made by a written agreement signed by each Party in English text.

 

25.5 This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which when taken together shall constitute one and the same instrument.

 

25.6 At the time of signature of this Agreement, each Party will provide the other with documentation establishing the power of the signatories hereto to represent and bind the Parties.

 

25.7 Licensee shall use the “A123®” registered trademark in connection with all advertising, promotion and sale of Products, including in related written materials and other materials.  All uses of the “A123®” mark by Licensee shall be subject to Licensor’s prior review and written approval.

 

25.8 Licensee shall not use, export or re-export or allow the use, export or re-export of the Licensed Technology or any components thereof except in compliance with all applicable, relevant laws and regulations.

 

IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby, have executed this Technology License Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

28

 

	
 
    	
A123   SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ J M   Forcier
    
	
 
    	
 
    	
Name: 
    	
Jason M.   Forcier
    
	
 
    	
 
    	
Title: 
    	
VP, Automotive
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
IHI   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Taizo Suga
    
	
 
    	
 
    	
Name: 
    	
Taizo Suga
    
	
 
    	
 
    	
Title: 
    	
Associate   Director
    
	
 
    	
 
    	
 
    	
General   Manager
    
	
 
    	
 
    	
 
    	
Corporate   Business Development Director
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

29

 

APPENDIX 1

 

Licensed Technology

 

“Licensed Technology” shall mean Battery System level technology and Know-How described in the following schedule.   For the avoidance of any doubt, Licensed Technology shall not mean [***].

 

	
A123 Systems Technology
    	
 
    	
Deliverable Type
    
	
[***]
    	
 
    	
[***]
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

“Patent Rights” shall mean the following patents and patent applications:

 

	
A123
   Case
   Number
    	
 
    	
Country
    	
 
    	
Status
    	
 
    	
App. No.
    	
 
    	
Filing Date
    	
 
    	
AppTitle
    	
 
    	
Inventor
    
	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

Appendix 2

 

Business Performance Milestones

 

All figures shown in Millions of JPY

 

Section A: Revenue Targets

 

	
Year:
    	
 
    	
2012
    	
 
    	
2013
    	
 
    	
2014
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2017
    	
 
    	
2018
    	
 
    	
2019
    	
 
    	
2020
    
	
Revenue:
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    

 

Section B: Minimum Sales

 

	
Year:
    	
 
    	
2012
    	
 
    	
2013
    	
 
    	
2014
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2017
    	
 
    	
2018
    	
 
    	
2019
    	
 
    	
2020
    
	
Revenue:
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    	
 
    	
[***]
    

 

For the purposes of computing the actually achieved sales at the end of any calendar year, the Parties desire to use data which is readily available to both Parties. Revenue will be calculated by dividing the total royalties paid by Licensee by the corresponding royalty rate and adding to that result the total amount of Battery Cell purchases by Licensee.

 

Revenue = (total royalties paid by Licensee / corresponding royalty rate) + Licensee cell purchases from Licensor.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

Appendix 3

 

VAR Agreement Term Sheet

 

Licensor and Licensee will enter into a mutually agreed Value-Added Reseller Agreement (“VAR Agreement”) under which Licensor will grant to Licensee a non-exclusive, worldwide right to independently develop and sell energy storage products (“Products”) using battery cells exclusively supplied by Licensor , so long as such Products are not competitive with Licensor’s current and future planned products.

 

Both Parties require clarity on how the non-competition terms will be applied to future applications. The following principles will be further elaborated in the VAR Agreement:

 

·                  The VAR Agreement will contain an appendix listing the types of solutions that the parties have agreed are non-competitive.

 

·                  That appendix will initially include Licensee’s existing designs for:

 

·                  [***]

 

·                  When Licensor agrees that a certain type of application or system concept is non-competitive, Licensee will have the right to sell that Product to its customers without further consultation with Licensor. Any determination about the competition of an Licensee solution will be valid for the duration of the VAR Agreement. The appendix listing all approved Products will be amended by mutual agreement from time to time as appropriate.

 

·                  During the periodic Executive Business Reviews specified in the Technology License Agreement, the Parties will review new VAR solutions which Licensee is contemplating for development.

 

·                  Licensor will not limit Licensee developments on the basis of market potential or other commercial factors. Licensee will be solely responsible for evaluating the business case for products that it may choose to develop under the VAR Agreement.

 

·                  To assert that a solution intended for development and sale by Licensee is competitive with a planned Licensor product, Licensor shall be required to produce existing business plans, product designs or other documentation to demonstrate that Licensor already has, at the time of disclosure by Licensee of the new solution, a plan for the application that is similar in all material respects to the application that Licensee intends to develop.

 

·                  In cases where Licensor has an existing product but no intention to sell it in some parts of the world, Licensee may receive the right to independently develop its own solution for the same application but may only distribute it in geographic regions then unaddressed by Licensor.

 

·                  If Licensee requires a faster response on a potential new solution, they may call a special meeting with Licensor to review the concept and discuss the degree to which it may be competitive with Licensor.

 

·                  When Licensee proposes a new solution for competitive review, Licensor shall provide a determination of competitive threat within 30 days.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

2

 

·                  If Licensee disputes the determination provided by Licensor, the disagreement shall be negotiated by the most senior member of both parties who normally attend the periodic Executive Business reviews. In case these two individuals cannot agree on a competitive determination, the final decision shall be made by Licensor. Licensor shall explain in writing the basis for such determination

 

·                  Any information about new solutions or planned applications disclosed by either Party to the other will belong to the disclosing Party, will be subject to confidentiality undertakings, and may not be disclosed or used by the other Party.

 

·                  If Licensee expends development effort on a new solution before receiving a determination that it is not competitive with Licensor, Licensor will have no obligation to compensate Licensee in case it is later found to be competitive.

 

·                  Licensee right to re-sell individual cells: In cases where Licensee has developed a customer relationship in Japan and that customer wants to purchase individual battery cells, Licensee will have the right to re-sell Licensor battery cells to that customer in Japan provided that:

 

·                  Licensee maintains all facets of the commercial relationship with the customer, including sole responsibility for product support, warranty coverage and contractual liability with the customer. Licensee will not be free to partially serve a customer’s cell needs. If Licensee elects to serve a customer in this way, it must manage the customer for all needs of individual cells.

 

·                  Licensee will be entitled to a commission on cell sales for assuming the obligations above at a rate of x% of the price paid to Licensor for the cells distributed under this non-exclusive reseller right.

 

·                  The VAR agreement shall have a [***] term.

 

·                  Termination provisions:

 

·                  No termination for convenience.

 

·                  Termination allowed by either party if a material breach by the other party is not cured within 30 days.

 

·                  Licensee may terminate if the Product Supply Agreement is terminated for a material, uncured breach by Licensor.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

3

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