Confidential Treatment Requested.
Confidential portions of this document have been omitted and have
been separately filed with the Securities and Exchange Commission
as part of an application for confidential
treatment.
Exhibit
10.6/A
LICENSE
AGREEMENT
between
UNIVERSITY OF
TENNESSEE RESEARCH FOUNDATION
and
ADVANCED PLASMA
PRODUCTS, INC
This
License Agreement ("Agreement") is made and entered into this 10
th day of September, 2008 (" Effective Date
") by and between the UNIVERSITY OF TENNESSEE RESEARCH FOUNDATION,
having an office at 1534 White Avenue, Knoxville, TN 37996 ("
UTRF "), and Advanced Plasma Products, Inc, a organized and
existing under the laws of the State of Nevada as a wholly-owned
subsidiary of Flight Safety Technologies, Inc, and having its
principal place of business
at 924 Corridor Park Blvd, Knoxville, TN 37932 (" LICENSEE
").
RECITALS:
WHEREAS, UT (defined
below) has submitted the Invention Disclosure(s) (defined below) to
UTRF for administration;
WHEREAS, LICENSEE
desires to utilize and commercialize the Licensed Technology
(defined below) in the Field of Use (defined below) and is willing
to expend its best efforts and resources to do so if it can obtain
a license to use the Licensed Technology under the terms and
conditions set forth herein; and
WHEREAS, UTRF
desires to transfer the right to practice the Licensed Technology
in the Field of Use for the ultimate benefit of the public and
believes that such transfer will be facilitated by the grant of a
license to LICENSEE under the terms and conditions set forth
herein.
NOW,
THEREFORE, in consideration of the recitals, covenants, conditions,
and undertakings contained herein, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS
When
used in this Agreement, the following terms shall have the meanings
set out below. The singular shall be interpreted as including the
plural and vice versa, unless the context clearly indicates
otherwise.
1.1
"
Action " shall have the meaning set forth in Article 8.1(a)
hereof.
1.2
" Affiliate " means any corporation, partnership, or other
entity that at any time during the Term of this Agreement, directly
or indirectly Controls or is Controlled by or is under common
Control with a party to this Agreement, but only for so long as the
relationship exists. A corporation or other entity shall no longer
be an Affiliate when through loss, divestment, dilution or other
reduction of ownership, the requisite Control no longer
exists.
1.3
"
Annual Maintenance Fee " shall have the meaning set forth in
Article 5.1(b) hereof.
1.4
" Control " or " Controls " or " Controlled "
means: (in the case of a corporation, ownership or control,
directly or indirectly, of at least fifty-one percent (51%) of the
shares of stock entitled to vote for the election of directors: or
(ii) in the case of an entity other than a corporation, ownership
or control, directly or indirectly, of at least fifty-one percent
(51%) of the assets of such entity.
1.5
"
Co-Party " shall have the meaning set forth in Article
8.2.
1.6
" Diligence Milestones " shall have the meaning set forth in
Article 4.2 hereof.
1.7
" Dispute " means any and all claims, disputes, or
controversies arising under, out of, or in connection with this
Agreement, including, without limitation, any dispute relating to
patent validity or infringement or to the interpretation or scope
of Article 15 (Dispute Resolution).
1.8
" Federal Policy " shall have the meaning set forth in
Article 2.2 hereof.
1.9
"
Field of Use " means all fields except those related to (1)
electro-chemical energy storage systems, (2) food processing, and
(3) processing and treatment of fibers and fabrics used in rugs and
carpets.
1.10
"
FST " means Flight Safety Technologies, Inc., a corporation
organized and existing under the laws of the State of Nevada and
having its principal place of business at 28 Cottrell St, Mystic,
CT 06355.
1.11
"
Indemnified Party " shall have the meaning set forth in
Article 9.1 hereof.
1.12
"
Instituting Party " shall have the meaning set forth in
Article 8.2 hereof.
1.13
" Invention Disclosure " means UTRF PD 93083, 93084, 94004,
95032, and 98010.
1.14
"
License Issue Fee " shall have the meaning set forth in
Article 5.1(a) hereof.
1.15
"
Licensed Know-How " means, except to the extent published or
otherwise generally known to the public, any technical data,
information, knowledge, methods, or processes (i) developed by a UT
Contributor in the course of employment by UT; (ii) owned or
controlled during the Term by UTRF; (iii) disclosed to LICENSEE by
a UT Contributor or UTRF; and necessary or reasonably useful for
the practice of any of the Licensed Patents.
1.16
" Licensed
Patents " means, to the
extent owned solely by UTRF during the Term:
(a)
Any United States and foreign patents and/or patent applications
listed in Appendix A;
(b)
Any
divisionals and continuations of any United States or foreign
patent applications listed in Appendix A;
(c)
Any United States and foreign patents issued from any applications
described in (a) or (b) above;
(d)
Any claims of United States and foreign patent applications
(including, without limitation, continuations-in-part of patent
applications or patents described in (a) or (b) above), and of the
resulting patents (i) that are directed to subject matter claimed
in the patents or patent applications described in (a), (b), or (c)
above, and (ii) that UTRF has the right to license hereunder, and
(iii) that name a UT Contributor as an inventor; and
(e)
Any reissue or extension of any United States patent described in
(a), (b), (c), or (d) above or any patent resulting from equivalent
foreign procedures with respect to any foreign patent described in
(a), (b), (c), or (d) above.
1.17
" Licensed Product " means any product, method, procedure,
service, or process whose manufacture, use, sale, lease, or
import:
(a)
Is covered by a Valid Claim of the Licensed Patents in the country
in which such product, method, procedure, service, process, or part
thereof is manufactured, used, sold, leased, or imported;
or
(b)
Is derived from, made with, uses, or incorporates, in whole or in
part, Licensed Know-How or the inventions claimed in the Licensed
Patents.
1.18
" Licensed Technology " means Licensed Patents and Licensed
Know-How.
1.19
" Net Sales " means:
(a)
The gross receipts received by LICENSEE and Sublicensees from the
use, sale, lease, or other transfer or disposition (including,
without limitation, the performance of services utilizing the
Licensed Technology) to or for third parties (hereinafter "Sale")
of a Licensed Product less the following deductions, provided they
actually pertain to the Sale of Licensed Product and are separately
invoiced:
i.
refunds actually given in connection with the Sale in amounts
customary in the trade for quantity purchases, cash payments, and
prompt payments;
ii.
refunds actually given for Licensed Products that are rejected,
returned, or destroyed by customers;
iii.
sales, tariff duties and/or use taxes directly imposed and with
reference to a particular Sale (but not including income taxes), to
the extent included in gross receipts;
iv.
outbound transportation expenses (including insurance relating
thereto) directly related to the Sale, to the extent included in
gross receipts; and
v.
the cost of export licenses, import duties, value added tax, and
prepaid freight directly related to the Sale, to the extent
included in gross receipts.
(b)
For
purposes of the calculation of Net Sales:
i.
no deductions shall be made for any other costs or expenses,
including commissions paid to individuals, whether they are with
independent sales agencies or regularly employed by LICENSEE or a
Sublicensee;
ii.
"Net Sales" shall not include the gross amounts from the Sale of
any Licensed Products to any Sublicensee unless such Sublicensee is
an end-user of such Licensed Products (i.e., Sublicensee's purchase
of Licensed Products is not for the purpose of resale). If such
Sublicensee is an end-user, such consideration shall be included in
Net Sales at the greater of the actual selling price or the average
selling price charged to a third party.
1.20
"
Patent Expenses " means all fees, costs and expenses
(including, without limitation, the professional fees of US and
foreign patent counsel) relating to the filing, prosecution and
maintenance of the Licensed Patents. For purposes of clarification,
included Patent Expenses are any and all fees, costs, and expenses
incurred before or after issuance of the Licensed Patents,
including, without limitation, fees, costs, and expenses incurred
in association with any reissue or reexamination of a Licensed
Patent, any interference or opposition proceeding involving one or
more Licensed Patents, or any extension or request for extension of
the term of one or more Licensed Patents.
1.21
" Publication " shall have the meaning set forth in Article
17 hereof.
1.22
"
Running Royalties " shall have the meaning set forth in
Article 5.1(d) hereof.
1.23
"
Sublicense " means a direct grant of right, license, or
option to the Licensed Technology from LICENSEE to a third party
and any further sublicense at any tier.
1.24
" Sublicensee " means any recipient of a
Sublicense.
1.25
"
Sublicense Revenue " means all payments received by LICENSEE
and its Affiliates pursuant to each Sublicense, including, without
limitation, up-front fees, milestone payments, and license
maintenance fees. Notwithstanding the foregoing, running royalties
received by LICENSEE or its Affiliates that are calculated as a
percentage of Sublicensee's Net Sales are not included in
Sublicense Revenue.
1.26
" Sublicense Royalties " shall have the meaning set forth in
Article 5.1(e) hereof.
1.27
"
Term " shall have the meaning set forth in Article 14.1
hereof.
1.28
" Territory " means the world, subject to the provisions of
Article 7.5.
1.29
" UT " means The University of Tennessee, an educational
agency of the State of Tennessee.
1.30
" UT Contributo r" means any or all of the following: John
R. Roth, Peter P. Tsai, Larry C. Wadsworth, Chaoyu Liu, Paul D.
Spence, and Mounir Laroussi.
1.31
" Valid Claim " means (a) a claim of an issued patent which
(i) has not expired and which has not been held revoked, invalid or
unenforceable by decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed with the time
allowed for appeal having expired, and (ii) which has not been
admitted to be invalid through reissue or disclaimer or otherwise;
or (b) a claim of a pending patent application which (i) was filed
in good faith; and (ii) has not been pending for more than eight
(8) years.
ARTICLE 2.
GRANT
2.1
Grant of License . During the Term hereof, and subject to
the terms and conditions of this Agreement, UTRF hereby grants to
LICENSEE for the purpose of developing, making, having made, using,
marketing, selling, having sold, importing, distributing, and
offering for sale the Licensed Product in the Field of Use in the
Territory:
(a)
an exclusive, commercial right and license, with the right to grant
Sublicenses, to practice under the Licensed Patents; and
(b)
an exclusive, commercial right and license, with the right to grant
Sublicenses, to utilize the Licensed Know-How for the purpose of
practicing under the Licensed Patents
(collectively, the "
License "). Subject to the remaining provisions of this
Agreement, the Parties hereby agree that the term "exclusive" means
that, UTRF shall not grant any commercial license to a third party
or take any action inconsistent with the rights in the Licensed
Patents granted to LICENSEE under this Agreement.
2.2
Limitations on the Rights Granted:
(a)
Federal Government Rights: To the extent that any invention
included within the Licensed Technology has been or is in the
future funded in whole or in part by the United States government,
the United States government retains certain rights in such
inventions as set forth in 35 U.S.C. Sections 200-212 and all
regulations promulgated thereunder, as amended, and any successor
statutes and regulations (" Federal Policy "). As a
condition of the License granted hereby, LICENSEE acknowledges and
shall comply with all aspects of Federal Policy applicable to the
Licensed Technology, including the obligation that Licensed
Products used or sold in the United States be manufactured
substantially in the United States. Nothing contained in this
Agreement obligates UTRF to take any action that would conflict in
any respect with its or UT's past, current or future obligations to
the United States government under the Federal Policy.
(b)
Reserved Rights: The License is expressly made subject to
UTRF's and UT's reserved right to practice under the Licensed
Patents in the Field of Use for its own academic research,
teaching, and other non-commercial purposes and to grant such
rights to other academic or non-profit institutions.
(c)
Third Party
Rights: The exclusive rights
granted in Article 2.1(a) are expressly made subject to any rights
in a Licensed Patent held by a third party resulting from
co-inventorship by an individual whose contribution to a Licensed
Patent is not made in the course of employment by UT.
(d)
Licensed Know-How Limitation: UTRF shall have no obligation
to provide LICENSEE with Licensed Know-How or to provide technical
assistance in the exercise of the License. In the event LICENSEE
requires technical assistance with respect to the activities
conducted by LICENSEE pursuant to this Agreement, obtaining such
technical assistance (whether from the UT Contributors or
otherwise) shall be LICENSEE's responsibility and at LICENSEE's
expense.
2.3
Applicability: Nothing in this Agreement shall be construed
to confer any rights upon LICENSEE by implication, estoppel, or
otherwise as to any patent rights other than the Licensed Patents,
regardless of whether such other rights shall be dominant or
subordinate to any Licensed Patents.
ARTICLE 3.
SUBLICENSES
3.1
Rights and Requirements: LICENSEE shall have
the right to sublicense the rights granted to LICENSEE under this
Agreement, provided that :
(a)
The
Sublicensee shall agree in writing to be bound, to the extent
practicable, by all the provisions of this Agreement in the same
manner as LICENSEE is bound;
(b)
LICENSEE
shall remain liable to UTRF for the full and timely performance of
this Agreement by any Sublicensee. No Sublicense shall relieve
LICENSEE of any of its obligations under this Agreement.
(c)
This Agreement is in effect and LICENSEE is not in breach of its
obligations under this Agreement;
(d)
All Sublicenses granted by LICENSEE under this Agreement shall
conform to this Agreement in the following respects:
i
.
LICENSEE shall not grant any rights to a third party that are
inconsistent with LICENSEE's rights and obligations under this
Agreement;
ii
.
Any Sublicense granted by LICENSEE shall include substantially the
same definitions and provisions on royalties, due diligence,
confidentiality and publicity, reporting and audit requirements,
indemnification, insurance and warranties, patent notices, and use
of names as are agreed to in this Agreement;
iii.
Any act or omission of a Sublicensee which would constitute a
breach of this Agreement if it were the act or omission of LICENSEE
shall be deemed to be an Event of Default of this Agreement by
LICENSEE, subject to the same cure provisions in favor of LICENSEE
as are otherwise provided herein for breach by LICENSEE.
Sublicenses shall include such other provisions as are needed to
enable LICENSEE to comply with this Agreement.
(e)
LICENSEE shall provide UTRF with a copy of each executed Sublicense
Agreement within thirty (30) days of its execution.
3.2
Special Termination Rules: Upon termination of
this Agreement, each Sublicense shall be governed by Article 14 of
this Agreement.
3.3
Failure to Conform to this Article: LICENSEE's failure
to conform any Sublicense to this Article will have the following
effects:
(a)
The non-conforming Sublicense will be voidable at UTRF's sole
discretion provided that UTRF has provided written notice to
LICENSEE and within 60 days of such notice from UTRF, LICENSEE
fails to cure such non-conformance of the Sublicense;
and
(b)
Said failure will constitute a material breach of this Agreement
subject to the termination provisions of Article 14 of this
Agreement.
ARTICLE 4.
DILIGENCE
4.1
Diligence : LICENSEE shall use
its commercially reasonable efforts to proceed diligently to
acquire funding, staff, equipment, and facilities sufficient to
commercialize the Licensed Technology in the Field of Use. Further,
LICENSEE shall, throughout the Term of this Agreement, conduct,
organize or manage a diligent program of research utilizing the
Licensed Technology in the Field of Use and employ active, diligent
marketing efforts to achieve commercial utilization of Licensed
Technology.
4.2
Milestones : In particular,
LICENSEE will use its commercially reasonable efforts to meet the
following milestones ( " Diligence Milestones
" ):
(a)
1 st Diligence Milestone: On or before the six month
anniversary of the Effective Date, LICENSEE will have completed
assumed lease to prior AGT facilities or otherwise acquired other
facilities to continue development and commercialization of the
Licensed Technology.
(b)
2
nd Diligence Milestone: On or before the six month
anniversary of the Effective Date, LICENSEE will have made itself
available to Sentech, Inc, with a local office at 702 S. Illinois
Avenue, Suite #B-204, Oak Ridge, TN 37830, for the purpose of
negotiating a sublicense of the Licensed Technology.
(c)
3
rd Diligence Milestone: On or before the 1 st
anniversary of the Effective Date, LICENSEE will have produced
first prototype Licensed Product for evaluation.
(d)
4
th Diligence Milestone: On or before the 2 nd
anniversary of the Effective Date, LICENSEE will have made first
commercial sale of a Licensed Product, including, without
limitation, a Licensed Product that constitutes the provision of a
service using Licensed Technology.
(e)
5 th
Diligence Milestone:
On or before the 3 rd anniversary of the Effective Date,
LICENSEE will have reached cumulative Net Sales of _____________
* _______________.
4.3
Notification: LICENSEE will notify
UTRF in writing of the achievement of each Diligence Milestone
within thirty (30) days thereafter, including sufficient
information for UTRF to determine whether such Diligence Milestone
has been fully accomplished, and LICENSEE will provide UTRF with
all relevant information requested by UTRF pertaining to the
achievement of each Diligence Milestone.
ARTICLE 5. Royalties
and other payments
5.1
Fees and Royalties: For the rights,
privileges and license granted hereunder, LICENSEE shall pay to
UTRF the following fees and royalties in the manner hereinafter
provided until this Agreement expires or is terminated.
(a)
License Issue Fee: Within 120 (one
hundred and twenty) days of the Effective Date, LICENSEE shall
cause FST to complete all actions required to issue to UTRF the
number of FST's common shares equivalent to _____________ *
_______________ using a share value based on the average of the
closing price for the twenty (20) trading days immediately
preceding the Effective Date of this Agreement, and LICENSEE shall
notify or shall cause FST to notify UTRF in writing of that action
and provide UTRF copies of FST's Articles of Incorporation and
Bylaws, including any amendments to the Articles of Incorporation
and Bylaws as they become effective in the future, and LICENSEE
shall provide or cause FST to provide UTRF copies of the FST
shareholders' and Board's documentation making UTRF a shareholder
in FST (" License Issue Fee ")
*Confidential
material omitted and filed separately with the Securities and
Exchange Commission as part of an application for confidential
treatment.
(b)
Annual Maintenance Fee: LICENSEE shall pay
UTRF, in addition to all other amounts payable hereunder, a
non-refundable license maintenance fee in the amount of
_____________ * _______________ on January 31, 2010 and on
January 31 of each year thereafter during the Term of this
Agreement (" Annual Maintenance Fee "), provided, however,
that the Annual Maintenance Fee due and owing in any given calendar
year shall be reduced by the combined amount of all Running
Royalties timely paid to UTRF in the prior calendar year. Using
calendar year 2010 as an example, the combined amount of the
Running Royalty payments made under Article 5.1.(c) below on July
31, 2009 and January 31, 2010 would be creditable against the
Annual Maintenance Fee due on January 31, 2010. For the avoidance
of doubt, Running Royalties paid in a given calendar year in excess
of the corresponding Annual Maintenance Fee for that year shall not
be creditable against the Annual Maintenance Fee in any other
calendar year.
(c)
Running Royalties: In addition to all
other amounts payable hereunder, subject to the provisions of
Article 5.1(d), LICENSEE shall pay to UTRF an amount equal to _____
* ______ of Net Sales (" Running Royalties ").
Payment of Running Royalties shall be made on a semi-annual basis
by the last day of July, and January each year on Net Sales
occurring during the immediately preceding half year. For example,
payment of Running Royalties will be due by the last day of January
on Net Sales occurring during the last half (July through December)
of the immediately preceding calendar year. Notwithstanding the
foregoing, LICENSEE shall owe no Running Royalties on any Sale that
does not take place during the Term of this Agreement. For purposes
of determining whether a Sale takes place during the Term of this
Agreement, a Sale shall be deemed to occur upon the earlier of the
shipment of a Licensed Product or the performance of a service
using Licensed Technology or invoicing.
(d)
Service Applications: Notwithstanding the foregoing,
LICENSEE shall pay to UTRF Running Royalties equal to ______
* ________ of any Net Sales generated from the performance
of medical waste processing services that utilize Licensed
Technology. With respect to the potential performance of other
service applications that utilize the Licensed Technology, LICENSEE
and UTRF shall negotiate in good faith a Running Royalties rate
that shall not exceed ___ * ____ nor be less than ____
* ____, depending upon the business aspects of the specific
service application.
(e)
Sublicense Royalties : In addition to all
other amounts payable hereunder, LICENSEE shall pay to UTRF the
following percentages of Sublicense Revenue according to the
cumulative amount of Sublicense Revenue received by LICENSEE during
the Term of this Agreement. (" Sublicense Royalties ")
Payment of Sublicense Royalties shall be made on a semi-annual
basis by the last day of January and July each year on Sublicense
Revenue generated during the immediately preceding calendar
half-year. For example, payment of Sublicense Royalties will be due
by the last day of July on Sublicense Revenue occurring during the
first half (January through June) of the same calendar
year.
Percentage
Cumulative Amount of Sublicense Revenue Received During the Term
of this Agreement
__ *
__
____ * ____
__ *
__
____ * ____
__ *
__
____ * ____
For
example, if LICENSEE received Sublicense Revenue in the amount of
____ * ____ during the period January through June of a
particular year, and as of June 30 of the same year the cumulative
Sublicense Revenue received by LICENSEE during the Term of this
Agreement is ____ * ____, LICENSEE would be required to pay,
on or before July 31 of the same year, Sublicensee Royalties in the
amount of ____ * ____ plus Sublicense Royalties in the
amount of ____ * ____.
*Confidential
material omitted and filed separately with the Securities and
Exchange Commission as part of an application for confidential
treatment.
5.2
Maximum Royalties: In the event that
any royalties payable under this Agreement are higher than the
maximum royalties permitted by the law or regulations of a
particular country:
(a)
The Running Royalties payable for LICENSEE's Net Sales in such
country shall be equal to the maximum permitted royalty under such
law or regulations;
(b)
Notice documenting that Running Royalties payable under this
Agreement are higher than a country's maximum royalties shall be
provided to UTRF;
(c)
An authorized representative of LICENSEE shall notify UTRF, in
writing, within 30 days of discovering that such Running Royalties
are approaching or have reached the maximum amount; and
(d)
LICENSEE shall provide UTRF with written documentation regarding
the laws or regulations establishing any such maximum.
5.3
Effect of Taxes on Royalties: In the event that
any taxes are levied by any foreign taxing authority on Running
Royalties payable by LICENSEE under this Agreement, and LICENSEE
determines in good faith that it must pay such taxes:
(a)
LICENSEE
shall have the right to pay such taxes levied on Running Royalties
to the local tax authorities on behalf of UTRF;
(b)
LICENSEE
shall pay the net amount of Running Royaltie
