EXHIBIT 10.5
LICENSE AGREEMENT
THIS
AGREEMENT made and effective as of the date of last signing (herein
the “Effective Date”) by and between Phoenix
Biosystems, Inc. (herein “Company”), having a principal
place of business at 216 - 1628 West 1st Avenue, Vancouver, BC,
Canada, V6J 1G1, and Michigan State University (herein
“MSU”), having a principal place of business in East
Lansing, Michigan 48824, USA. Company and MSU are each a
“party”, and may collectively be referred to as the
“parties.”
INTRODUCTION
1.
WHEREAS, MSU has developed and is continuing research in the area
of the Technology, as defined in Paragraph 1.1 of this Agreement;
and
2.
WHEREAS, Company desires to obtain certain rights in and to the
Technology; and
3.
WHEREAS, Company and MSU mutually desire to formalize an agreement
which delineates their respective rights and obligations with
respect to the Technology.
NOW
THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement and other good and valuable
consideration, MSU and Company agree as follows:
ARTICLE 1 - DEFINITIONS
In the
terms defined and used herein, the singular shall include the
plural and vice versa. Terms in this Agreement (other than
names of parties and Article headings) which are set forth in upper
case letters have the meanings established for such terms in this
Article 1.
1.1
“Technology” means MSU Invention Disclosure No. 95041
titled “Development of a Sustainable Chick Cell Line Infected
with Marek's Disease Virus” and MSU Invention Disclosure
97071 titled “Immortal Avian Cell Line to Grow Avian and
Animal Viruses to Produce Vaccines”.
1.2
“Know-how” means the data and information embodied in
or required to enable the Technology.
1.3
“Patents” means any and all patent applications
filed in any country of the world by or on behalf of MSU claiming
the Technology and/or any patents maturing from such patent
applications. As of the Effective Date of this Agreement,
patents and patent applications
include US patent 5,827,738
titled “Sustainable chick cell line infected with
Marek's Disease Virus” filed 10/27/1995 and issued
10/27/1998, US patent 5,833,980 titled “Sustainable Cell Line
for the Production of Marek's Disease Vaccines” filed
06/21/1996 and issued11/10/1998, US patent 5,866,117 titled
“Sustainable Chick Cell Line Infected with Marek's Disease
Virus” filed 08/19/1997 and issued 02/02/1999, US patent
5,874,303 titled “Sustainable Cell Line for the Production of
Marek's Disease Vaccines” filed 06/30/1997 and issued
02/23/1999, and United States patent 5,989,805 titled
“Immortal Avian Cell Line To Grow Avian and Animal Viruses To
Produce Vaccines” filed 11/10/1997 and issued11/23/1999.
1.5
“Adjusted Gross Sales” means the aggregate gross
revenues derived by Company and its Affiliates from the sale of
Products and Services to and practice of Processes for an
unaffiliated third party in an arms length transaction, less
credits granted on account of price adjustments, recalls, rejection
or return of items previously sold.
1.6
“Product” means any and all products embodying or
practicing the Technology, Know-how and/or the Patents.
1.7
“Process” means any and all processes embodying or
practicing the Technology, Know-how and/or the Patents.
1.8
“Service” means any and all services embodying or
practicing the Technology, , Know-how and/or the Patents.
1.9
“Term” means the period beginning on the Effective Date
and extending to the expiration of the last to expire of the
Patents, or until Fifteen (15) years after the Effective Date,
whichever is longer.
1.10
“Field” means use of the technology for human and
animal vaccine and virus testing.
1.11
“Territory” means definition worldwide .
1.12
“Improvement” means (a) divisionals of the Patents, and
(b) any continuations of the Patents deriving from inventions made
within the Term (i) in the course of research at MSU supported by
Company hereunder; or (ii) conceived or first reduced to practice
by MSU employees while conducting work for the Company under a
private agreement that is disclosed to and approved by MSU
consistent with the then current MSU policy on outside work for
pay.
1.13
“Affiliate” means any company, corporation or business
which is at least fifty percent owned or controlled by Company, or
which owns or controls at least fifty percent of Company, or which
together with Company is commonly owned or controlled by a third
party who owns or controls at least fifty percent of each.
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1.14
“Government” means the United States Government.
1.17
“Sublicensing Revenues” means any and all payments,
royalties and other consideration collected by Company from its
sublicensees.
ARTICLE 2 - LICENSE
2.1
MSU hereby grants to Company during the Term of this Agreement an
exclusive license within the Territory, limited to the Field, with
the right to sublicense, to make, modify, reproduce, have made,
lease, use, distribute, market and otherwise dispose of Products,
practice the Processes, and offer the Services under the
Technology, the Know-how and/or the Patents.
2.2
The exclusive license specified in Paragraphs 2.1 is subject to a
reserved right of MSU to utilize the Technology, Know-how, and/or
the Patents for the non-commercial research and educational
purposes of MSU.
2.3
The exclusive license specified in Paragraphs 2.1 may be subject to
certain rights of the Government if the Technology, Know-how,
and/or the Patents were created or invented in the course of
Government-funded research. Such rights may include for
example a royalty-free license to the Government and the
requirement that any Product produced for sale in the United States
will be manufactured substantially in the United States.
ARTICLE 3 - R&D PERFORMANCE & MARKETING
3.1
Company shall use reasonable efforts to introduce Products and
Processes into the commercial market as soon as practicable,
consistent with sound and reasonable business practices and
judgment. Thereafter, Company shall endeavor to keep Products
and Processes reasonably available to the public during the
remainder of the Term.
3.2
MSU shall have the right to terminate or render this license
nonexclusive at any time after three (3) years from the Effective
Date if Company: (a) has not put the Technology into commercial use
in the Territory, directly or through a sublicense or (b) is not
demonstrably engaged in a research, development, manufacturing,
marketing or sublicensing program, as appropriate, directed toward
this end.
3.3
The following developmental steps shall be performed within one
year of the Effective Date of this Agreement: 1) MSU shall
thaw and deliver to Company viable cultures from three
cryogenically stored vials of cells; 2) Company shall determine
that the cell lines are free of the following select agents:
retroviruses (RT activity), reovirus, herpesviruses (MDV),
newcastle disease virus and avian leukosis virus; 3) Company shall
test cells for
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growth of human vaccine strain influenza viruses and determine
titres achieved; and 4) Company shall test cells for growth of H5N1
avian influenza virus strains.
ARTICLE 4 - PATENTS AND PATENT COSTS
4.1
MSU shall retain title to the Technology, Know-how, and the
Patents.
4.2
MSU shall file, prosecute, and maintain Patents in the United
States and in any other countries designated by Company at
Company’s expense.
4.3
Company agrees promptly to reimburse MSU for its outside legal
costs incurred under Paragraph 4.2 within thirty (30) days after
the receipt of invoices from MSU. Late payment shall be
subject to interest charges of one and one-half percent (1½
%) per month. Such reimbursement payments by Company of costs
incurred by MSU under Paragraph 4.2 shall be creditable against up
to 50% of the royalties that are due from Company to MSU under
Article 6 during the same calendar year in which such
reimbursements are due.
4.4
Failure of Company to pay the amounts required under Paragraph 4.3
within ninety (90) days after the receipt of invoices from MSU
shall constitute a default by Company under this Agreement, and
entitle MSU to exercise its rights to terminate this Agreement
under Article 13.
4.5
Nothing in this Agreement shall prevent MSU from seeking patents on
the Technology in countries other than those designated by Company.
Such patent applications shall be filed, prosecuted and
maintained at MSU’s expense, and shall be free of any
obligations to Company under this Agreement.
ARTICLE 5 - PUBLICATION RIGHTS
5.1
MSU reserves the right to publish or present the results of its
research on the Technology.
ARTICLE 6 - PAYMENTS AND ROYALTIES
6.1
Company agrees to pay to MSU a non-refundable initial fee of One
Thousand United States Dollars ($1,000.00) upon the execution of
this License Agreement.
6.2
(a)
Company shall pay to MSU a running royalty of Two and One
Half percent (2.5%) of Adjusted Gross Sales. Where a Product
or Process is not sold, but is otherwise disposed of, Adjusted
Gross Sales for the purpose of computing royalties shall be the
Adjusted Gross Sales price at which products or processes of
similar kind and quality, sold in similar quantities, are currently
being offered for
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sale by Company. Where such products and processes are not
currently being separately offered for sale by Company, Adjusted
Gross Sales shall be Company's cost of manufacture, determined by
Company's customary accounting procedures, increased by 100 %.
(b)
Company shall pay to MSU a running royalty of Two and One Half
percent (2.5%) of sublicensee’s Adjusted Gross Sales.
6.3
Beginning in calendar year 2010, Company agrees to pay MSU an
annual minimum payment as shown in the table below. Should
the actual running royalties paid under Paragraph 6.2 fall short of
this minimum amount, Company shall pay MSU the difference when the
royalty payment for the last calendar quarter of such calendar year
is due in accordance with Paragraph 6.4.
|
|
|
Year
|
Minimum
Payment
|
|
2010-2014
|
$10,000.00
|
|
2015-termination
|
$20,000.00
|
6.4
Company shall deliver to MSU within thirty (30) days after
achieving developmental steps one through four of Article 3.3 the
milestone payments as shown in the table below.
|
|
|
Development
Step
|
Milestone
Payment
|
|
1
|
$1,000.00
|
|
2
|
$2,000.00
|
|
3
|
$2,000.00
|
|
4
|
$10,000.00
|
6.5
Company shall deliver to MSU within thirty (30) days after the end
of each calendar quarter:
(a)
A
written report showing all figures necessary to compute Adjusted
Gross Sales and Company’s computation of all remuneration to
MSU due under this Agreement for such calendar quarter, accompanied
by a check in full payment of the remuneration due. Adjusted Gross
Sales shall be segmented in each such report on a
country-by-country basis, including the rates of exchange used for
conversion to USA Dollars from the currency in which such sales
were made.
(b)
For any Adjusted Gross Sales which are made in a currency other
than U.S. dollars, the amount of such sales shall be converted to
U.S. Dollars using the currency exchange rates set forth in The
Wall Street Journal on the last day of the calendar
quarter.
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(c)
All payments due shall be made in U.S. dollars without deduction
for taxes, assessments, or other charges of any kind which may be
imposed on Company by the government of the country where the
transactions occur or any political subdivision thereof with
respect to any amounts payable to MSU pursuant to this Agreement,
and such taxes, assessments, or other charges shall be assumed by
Company.
(d)
Late payments shall be subject to an interest charge of one and
one-half percent (1½%) per month.
6.6
Company shall keep for a period of three (3) years following the
year to which such records relate, full, true and accurate books of
accounts and other records containing all information and data
which may be nec
