PETERSEN & FEFER
XXXXXXXX
& XXXXX | ||
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Attorneys
at Law |
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Telephone
0000 000-0000 |
Chateau
de Barbereche |
Facsimile
0000 000-0000 |
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Switzerland
1783 Barbereche |
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Houston
Voicemail/Fax |
E-mail |
New
York Voicemail/Fax |
(000)
000-0000 |
xxx@xxx-xxx.xxx |
(000)
000-0000 |
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March 31,
2005
Xxxxxxx
Xxxxxxxxx, Chief Executive Officer
000
Xxxxxx Xxxxxx
Vaughan,
Ontario, Canada L4L 5Y9
Re: Agreement
Respecting Open Account
Balances
and Future Legal Services
Dear
Xxxxxxx,
This
letter will confirm that the law firm of Xxxxxxxx & Xxxxx has agreed to
continue serving as general counsel to Axion Power International (“Axion”) for a
12-month period commencing April 1, 2005. This letter agreement amends and
supplements our original retainer agreement dated January 2, 2004.
Over the
last several weeks, we have been engaged in discussions with the board of
directors respecting the services provided by our firm during the 15-month
period ended March 31, 2005. These discussions focused principally on the
following issues:
· |
The
best manner for resolving an unpaid balance due to our firm of $50,980 for
basic compliance services under the original
agreement; |
· |
The
best manner for resolving an estimated balance due to our firm of $119,927
for transactional services under the original
agreement; |
· |
The
best manner for resolving an estimated balance due to our firm of $135,000
for litigation services that were excluded from the original agreement;
and |
· |
The
best manner for providing a reasonable monthly payment to our firm and a
predictable monthly expense for Axion during the continuation of our
relationship. |
With
respect to the open compensation issues, we have agreed to compromise and settle
all claims relating to legal services rendered through March 31, 2005 for total
cash payments of $125,000 plus a two-year option to purchase 140,000 Axion
shares at a price of $1.00 per share, which represents a discount of $1.60 per
share from the current market value of those shares. We acknowledge that Xxxxx
afforded us an opportunity to choose between 90,000 fully paid shares and
140,000 options and we selected the option alternative.
With
respect to future services, we have been retained to act as Xxxxx’s principal
legal counsel on securities matters and related business law issues arising in
connection with the implementation of Axion’s business plan. It is expected that
such services will include, but not be limited to:
· |
Preparation
of all required reports under the Securities Exchange Act of
1934; |
· |
Preparation
of all required proxy statements under the Securities Exchange Act of
1934; |
· |
Assistance
in obtaining a listing for Axion’s securities on the American Stock
Exchange; |
· |
Review
of all press releases and other public communications to stockholders and
the financial markets; |
· |
Assistance
in negotiations with respect to acquisitions of additional technologies
and properties; |
· |
Assistance
in negotiations with respect to strategic
relationships; |
· |
Assistance
in negotiations with respect to additional
financing; |
· |
Preparation
of documents associated with property acquisitions, strategic
relationships and financing; |
· |
Assistance
with respect to strategic planning; |
· |
Oversight,
supervision and coordination of all litigation matters;
and |
· |
General
legal services in areas other than patent
law. |
We want
to take this opportunity to caution you that given Xxxxx’s state of development
we believe it likely that a potential underwriter will require Axion to retain a
larger law firm with greater capabilities than our firm. In such an event, we
believe it is likely that the successor firm will also want to assume primary
responsibility for Xxxxx’s other legal affairs. Accordingly, we expressly agree
that Xxxxx will retain the right to terminate our engagement as general counsel
at any time, with or without cause. Subject to Xxxxx’s right to appoint
successor counsel at any time, our representation and assistance will
specifically include the following:
(1) We will
assist Axion in the preparation of all regulatory reports, contracts, minutes of
meetings and other documents that may be necessary, convenient or desirable to
enable Axion to comply with the requirements of the Securities Act of 1933 (the
"Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act").
To the extent that regulatory filings are required under the securities laws of
Canada, we shall assist your Canadian counsel in the preparation of such reports
but we are not licensed to practice law in Canada and cannot competently advise
you as to the specific requirements of Canadian law, including (a) whether any
specific transaction reporting is required, or (b) what the specific content of
any required reports might be. We shall also assist in the preparation of any
necessary additional SEC filings including:
· |
All
necessary Annual, Quarterly and Current Reports under the Exchange Act
beginning with the Annual Report on Form 10-KSB for the year ended
December 31, 2004; |
· |
All
necessary Form S-8 registration statements under the Securities Act to
register any securities issuable to employees, advisors and others as
partial compensation for services rendered;
|
· |
Any
necessary registration statements under the Securities Act to permit the
exercise of outstanding Axion Warrants, the conversion of any outstanding
Axion preferred stock, or the resale of outstanding Axion common
stock; |
· |
Any
necessary listing applications required under the rules of the OTC
Bulleting Board, the Nasdaq Stock Market or the American Stock Exchange;
and |
· |
Any
necessary miscellaneous filings under the Securities Act and the Exchange
Act. |
In
connection with each such SEC filing, we will assist in the preparation of such
contracts, minutes of meetings as other documents as may be necessary,
convenient or desirable to enable Axion to lawfully maintain an active trading
market on the OTC Bulletin Board or the American Stock Exchange, all in
accordance with the requirements of the Exchange Act.
(2) In
connection with the future securities law compliance and corporate financing
activities of Axion we will explain to responsible officers and directors of
Axion their responsibilities under the applicable provisions of state and
Federal securities laws and regulations including, in general terms, the
possible civil and criminal consequences associated with a failure to comply
with such requirements. The appropriate officers and directors of Axion must
devote adequate time and attention to the review of any documents prepared by us
because the applicable securities laws place upon them responsibility for
assuring that all necessary disclosure documents are not materially false,
misleading or incomplete. They should further understand that we, as lawyers,
cannot relieve Axion or their officers, directors and principal stockholders of
their individual responsibilities under the law although we can assist them in
fulfilling them. All information respecting Axion, and all biographical
information on the officers and directors of Axion, shall be furnished to us in
writing. We shall be entitled to rely on the accuracy and truthfulness of all
written information furnished by Xxxxx and their respective officers and
directors, and the Axion and their respective officers and directors shall
jointly and severally indemnify and hold the law firm of Xxxxxxxx & Xxxxx
harmless from and against all claims arising out of or resulting from material
misrepresentations or omissions contained in such written information. In
addition to (and not as a limitation to) the foregoing, Axion and their
respective officers and directors shall execute a Representation Agreement that
will be supplied by us prior to the closing of any future financing
transaction.
(3) We will
discuss with the appropriate officers and directors of Axion their need to
create procedures that will enable them to develop the information reasonably
necessary to meet the requirements of the Securities Act and the Exchange Act,
and to create a reasonable timetable and assignment of responsibilities for
developing such information. In each case, the officers and directors of Axion
shall be responsible for assigning responsibility for developing particular
types of information to those persons most knowledgeable about such matters.
Particularly, all officers and directors should be given a timely opportunity to
review the necessary disclosure documents and discuss them with those persons
who are directly involved in their preparation and to whom the officers and
directors have assigned responsibility.
(4) We will
perform legal review and analysis of matters that we may be required to pass
upon in connection with any opinion that must be given because it is required by
law, requested by a party to a transaction involving Axion, or has been
requested by Xxxxx. This would include for example, a check of due formation of
Axion, the valid authorization of the securities being issued and other
securities of the same class and the revision of any documents that may directly
affect the proposed transaction. Our review and analysis might also include in
our discretion inquiry concerning titles, important contracts, pending
litigation and the impact of laws having a special effect on Axion.
(5) We will
assist Axion on the basis of information furnished to us by Xxxxx. The
responsibility for decisions as to whether a fact is material or whether there
is a material inaccuracy in any statement shall remain with the officers and
directors of Axion. We are not obligated to search all the files and records of
Axion to
discover,
for example, all material contracts or other documents but shall be entitled to
rely, outside of certain legal matters, on interrogations of and reports and
compilations prepared by others, including auditors and other lawyers. In
particular, we are not being retained to furnish accounting or economic
advice.
(6) We will
assist Axion in the drafting of the various documents that will be filed with
the Securities and Exchange Commission by Axion to the end that in his opinion,
these documents reflect what Xxxxx intend them to say, are not ambiguous and are
written in a manner that is designed to protect Axion from later claims of
overstatement, misleading implications, omissions or other deficiencies due to
the manner in which the documents in question have been written. However, you
are cautioned merely because we have assisted you in this endeavor, this will
not insure such documents will be free from all misleading, unclear or ambiguous
statements. However, all information properly furnished to us will be provided
in the in the format required. Again, the ability to determine the substance or
context of any document filed with the SEC rests solely with Xxxxx.
(7) We will
not be required to nor will we make statements that could give a mistaken
impression we have passed upon matters which we have not nor that we take
responsibility for the accuracy and completeness of any document prepared on
behalf of Xxxxx. We will advise Axion with respect to certain matters under the
Federal securities law that may arise and not relate directly to the preparation
of any offering document, report or regulatory filing. We will advise Axion as
to the procedures and requirements involved in the processing and distribution
of regulatory reports, proxy statements, news releases and other investor
communications. We will also assist Axion in the preparation of any notices or
other applications which may be required to be filed with the National
Association of Securities Dealers, any Stock Exchanges upon which Axion will
seek to list its securities and the securities regulatory authority of the
applicable states and will advise and assist Xxxxx in responding to any comments
from such authorities.
(8) We will
advise Axion Companies in the preparation of any notices, forms, qualifications
and other documents that may be necessary to notify the Securities and Exchange
Commission, the securities regulatory authority of any states, and any other
person or regulatory authority of any of the proposed transactions, will advise
and assist Axion Companies in responding to any comments from such regulatory
authorities.
(9) We will
advise Axion in the negotiation and preparation of any contracts that are
necessary or desirable for the future operations of Axion including, but not
limited to, employment contracts, stock incentive plans, contracts for the
acquisition of tangible property, intellectual property and other intangible
property, contracts for the acquisition of business activities or assets,
contracts for the creation of strategic relationships and contracts associated
with the future financing activities of Axion.
(10) We will
serve as general counsel in connection with litigation matters and provide
oversight, supervision and coordination for the various law firms retained to
represent Axion in connection therewith. We are not licensed to practice in any
jurisdiction other than the State of Texas and we cannot assume primary
responsibility as counsel of record for any litigation matters. Nevertheless, we
will provide support services to all law firms retained by Axion including,
where appropriate, the preparation of all reports, memoranda, draft pleadings
and other documents that may be necessary, convenient or desirable to enable
Axion’s external counsel to efficiently represent Xxxxx’s interest.
(11) I will
personally agree to serve as a member of Xxxxx’s board of directors for the
entire term of this agreement if, in the judgment of the other board members,
that service is in the best interest of Xxxxx and its stockholders. If I am
elected to serve on the board of directors and a majority of the board members
believe another director would better serve the interests of Xxxxx and its
stockholders, I will promptly resign my position in favor of the new board
nominee.
To the
extent we deem it prudent to consult with counsel for Axion for advice or
opinions on matters pertaining to litigation, Canadian law, patent law or other
matters outside of our area of expertise, we are authorized to do so with the
prior approval of Xxxxx. All fees and expenses of such counsel shall be the sole
and direct responsibility of Xxxxx.
The
foregoing undertakings are contingent upon Axion promptly advancing, upon
request, all costs and expenses and fees when due and owing. Costs and expenses
include, but are not limited to, travel, printing, filing fees, photocopy,
telephone, document preparation charges, courier, Federal Express, postage and
other expenses. Xxxxx further acknowledge that we may be required to resign this
engagement if our failure to do so would result in a violation of the Code of
Professional Responsibility, or any Disciplinary Rule promulgated thereunder,
such as those prohibiting counsel from knowingly advising or assisting his
client to engage in an illegal or fraudulent act.
In
recognition of the limited financial resources of Axion and the fact that Axion
intends to aggressively control its’ future out-of-pocket costs, we have agreed
to modify the compensation structure in our original agreement and eliminate all
transaction-based compensation in return for a fixed monthly retainer of
$15,000. Axion will have the right to terminate our engagement as general
securities counsel at any time, with or without cause.
All
options issued pursuant to this agreement shall be issuable 50% to Xxxx X.
Xxxxxxxx and 50% to Xxxxxx X. Xxxxx. To the extent it may lawfully do so, Axion
shall file a registration statement under the Securities Act with respect to all
shares issuable upon exercise of our options, but only if Axion is then eligible
to file a short form Registration Statement on Form S-8. If Axion is not
eligible to file a Form S-8 Registration Statement, then such shares shall be
issued pursuant to SEC Regulation D.
We hereby
agree that (a) the options provided for herein will be issued to us compensation
for bona fide legal services rendered to Axion, (b) as long as we are the
beneficial owner of any securities of Axion, we will not engage in “buy-side”
trading activities, hedging transactions or other activities that could
reasonably be expected to influence the market price of such securities, (c) we
will not sell any shares in a transaction that is effected at a price lower than
the quoted bid price of the securities at the time of sale, (d) if we engage in
multiple sales in any five consecutive trading days, we will not sell any shares
in a transaction that is effected at a price lower than the last price received
by us for the same securities, and (e) we will not sell more than 10% of the
shares issued to us in any calendar month.
If the
foregoing terms meet with your approval, please execute one copy of this letter
in the space provided below and return the signed copy at your earliest
convenience. We appreciate this opportunity to serve your needs and look forward
to a long and productive relationship. Please call if you have any questions or
comments regarding the terms set forth above.
Very
truly yours,
XXXXXXXX
& XXXXX, ATTORNEYS
Xxxx X.
Xxxxxxxx
Accepted
and agreed to this 18th day of March 2005.
By: ____________________________________
Xxxxxxx
Xxxxxxxxx, Chief Executive Officer