|
EXHIBIT 10.8
LICENSE
AGREEMENT
University
of Michigan Files 1175, 1356, 1442, 1442d1,
1442d3,
1543,
1543d1, 1720, 2044 and 2115
This
Agreement is effective as of
May
24
,
2007
(the
"Effective Date"), between Quick-Med Technologies, Inc.
("LICENSEE") having the address in Article 13 below, and the
Regents of the University of Michigan, a constitutional
corporation of the State of Michigan ("MICHIGAN"). LICENSEE
and MICHIGAN agree as follows:
ARTICLE 1 - DEFINITIONS
1.1
“AFFILIATE”
means any company, corporation, association or business entity
that is controlled by, is in control of, or is under common
control with a Party. The term “control” shall
mean a greater than fifty percent (50%) ownership of issued
and outstanding voting interests in a corporation, limited
liability company, partnership or other legal entity, or
greater than fifty percent (50%) ownership
interest in a corporation, limited liability company,
partnership or other legal entity, directly or
indirectly.
1.2
“COMBINATION
PRODUCT” means a combination or bundled product that is
sold at a single price by LICENSEE, an AFFILIATE or a
SUBLICENSEE and that includes: (a) a LICENSED PRODUCT or
LICENSED PROCESS and (b) another product or process that is
not covered by the PATENT RIGHTS.
1.3
“EXCLUDED
MOLECULES” means molecules
that have ******** as of the Effective Date, with the
exception of ********, as identified in Schedule
2.
1.4
“FIELD
OF USE” means uses
of a product or ingredient other than those that would
require,
prior to the production or marketing of such product or
ingredient, receipt of marketing approval from the U.S. Food
and Drug Administration (or, with respect to activity outside
the U.S., any substantially equivalent application from any
applicable regulatory authority) pursuant to one of the
following:
(a)
New Drug Application,
(b)
Biologics License Application,
(c)
Abbreviated New Drug Application,
(d)
Over-the-Counter (“OTC”) New Drug
Application,
(e)
New Drug Application under Section 505(b)(2) of the U.S. Food,
Drug and Cosmetic Act, and/or
(f)
OTC drug tentative final or final monograph,
any
of which (a)-(f) is effective, promulgated, and/or amended
after the Effective Date.
Further,
notwithstanding the foregoing, the use of EXCLUDED MOLECULES
is specifically excluded from the FIELD OF USE
hereunder.
1.5
“FIRST
COMMERCIAL SALE” means the first sale, rental, or lease
of any LICENSED PRODUCT or first commercial use of a LICENSED
PROCESS by LICENSEE, an AFFILIATE or a SUBLICENSEE, other than
sale of a LICENSED PRODUCT or use of a LICENSED PROCESS for
use in trials, such as field trials, being conducted to obtain
governmental approvals to market LICENSED PRODUCTS or
otherwise commercially use LICENSED PROCESSES.
1.6
“LICENSED
PROCESS(ES)” means any process or method that, but for
this Agreement, comprises an infringement (including
contributory or inducement) of an issued, unexpired claim or a
pending claim contained in the PATENT RIGHTS.
1.7
“LICENSED
PRODUCT(S)” means any product that, but for this
Agreement:
(a)
comprises an infringement (including contributory or
inducement) of an issued, unexpired claim or a pending claim
contained in the PATENT RIGHTS; or
(b)
is manufactured by using a LICENSED PROCESS.
1.8
“NET
SALES” means the gross revenue actually received by
LICENSEE or AFFILIATES from sale
,
rental or lease to a third party of LICENSED PRODUCTS and
LICENSED PROCESSES covered by a VALID CLAIM of a PATENT
RIGHT in
the jurisdiction in which the sale, rental or lease
occurs ,
less the following items (so
long as such deductions are not obtained in view of other
consideration received by LICENSEE:
(a)
cash discounts actually granted to customers in such invoices
for sales or lease of LICENSED PRODUCTS, but only in amounts
customary in the trade;
(b)
sales, tariff duties and/or use taxes separately stated in
such bills or invoices with reference to particular sales and
actually paid by LICENSEE or AFFILLIATES to a governmental
unit;
(c)
actual freight expenses between LICENSEE or AFFILIATES and
customers, to the extent such expenses are not charged to or
reimbursed by customers;
(d)
amounts actually refunded or credited on returns;
and
(e)
price allowances and trade discounts actually granted to
customers.
NET
SALES shall exclude sales or transfers of LICENSED PRODUCTS
and LICENSED PROCESSES between LICENSEE and an AFFILIATE,
where the same are intended for resale to third
parties.
******** This
material has been omitted pursuant to a request for
confidential treatment and filed separately with the
Securities and Exchange Commission.
Where
LICENSEE or AFFILIATE receives any consideration other than
cash for such transactions, fair market cash value for such
consideration, to be agreed upon by the parties hereto, shall
be included in NET SALES.
1.9
“PATENT
RIGHTS” means
:
(a)
the
United States and foreign patents and/or patent applications,
and divisionals, continuations, including
continuations-in-part
(
but
only to the extent that claims
in such continuations-in-part
are entitled to the priority date of another
patent or application among
the
PATENT RIGHTS )
,
and
foreign counterparts of the same listed in Appendix A-1 and
A-2; and
(b)
United States and foreign patents issued from the applications
listed in Appendix
A-1
and A-2 ,
including any reissued or reexamined patents based upon the
same.
1.10
“ROYALTY
PERIOD(S)” means the six-month periods ending on the
last days of June and December each year.
1.11
“SUBLICENSEE(S)”
means any person or entity sublicensed, or granted an option
for a sublicense, by LICENSEE under this Agreement, however,
AFFILIATES and contract manufacturers are not
SUBLICENSEES.
1.12
“SUBLICENSE
INCOME” means the amount actually received by LICENSEE
from any and all SUBLICENSEES arising from the sublicense of
the right to make, use, or sell LICENSED PRODUCTS or LICENSED
PROCESSES. SUBLICENSE INCOME shall include up-front or license
fees, milestone payments, royalties on sales, annual
maintenance fees and any other direct payments in respect of
the grant to such SUBLICENSEE of a sublicense of the right to
make or sell LICENSED PRODUCTS or LICENSED PROCESSES, but only
to the extent such amounts are directly attributable to the
PATENT RIGHTS extended hereunder.
1.13
“TERRITORY”
means worldwide.
1.14
“VALID
CLAIM” means:
(a)
a claim within the PATENT RIGHTS that is in an issued patent
and has not expired or been held invalid, revoked or
unenforceable by a court or administrative agency of competent
jurisdiction in a final and non-appealable judgment
or
in a judgment for which an appeal has not been filed within
the time allowed for appeal, and which has not been
disclaimed, denied or admitted to be invalid or unenforceable
through reissue, reexamination or otherwise; or
(b)
a claim that is in a patent application within
the PATENT RIGHTS that has not yet issued and that is or will
be under active prosecution and has been pending for less than
four years.
ARTICLE 2 - GRANT OF LICENSE
2.1
Subject
to the terms and conditions of this Agreement and the sole
non-exclusive license entered into prior to the Effective Date
for the PATENT RIGHTS listed in APPENDIX A-2 (UM File #1442),
MICHIGAN hereby grants to LICENSEE
an
exclusive license under PATENT RIGHTS with
the right to grant sublicenses, both subject to the terms and
conditions of this Agreement, in the FIELD OF USE and the
TERRITORY to make, use, sell, offer for sale, import and
otherwise exploit LICENSED PRODUCTS and LICENSED PROCESSES,
and to have any of the foregoing done on its behalf.
In
the event MICHIGAN wishes to grant a license under the PATENT
RIGHTS to any party for the EXCLUDED MOLECULES in the FIELD OF
USE, MICHIGAN shall deliver a notice to LICENSEE stating
MICHIGAN’s desire to grant a license, including a
statement of the scope thereof. ********.
2.2
MICHIGAN
reserves the right to practice the PATENT RIGHTS
for
research, public service, internal (including clinical) and/or
educational purposes ,
and the right to grant the same limited rights to other
non-profit research institutions
2.3
This
Agreement shall extend until expiration of the last to expire
of the licensed PATENT RIGHTS, unless sooner terminated as
provided in another specific article of this
Agreement.
2.4
To
the extent that the following grant may be required by
research funding agreements between MICHIGAN and the United
States Government, MICHIGAN reserves the right to grant to the
United States Government nonexclusive, nontransferable,
irrevocable, paid-up licenses to practice or have practiced
for or on behalf of the United States PATENT RIGHTS throughout
the world.
2.5
LICENSEE
is entitled to extend its licenses under this Article 2 to its
AFFILIATES, consistent with all of the terms and conditions of
this Agreement. If LICENSEE does extend its license and an
AFFILIATE assumes obligations under the Agreement, LICENSEE
guarantees performance by the AFFILIATE. If MICHIGAN has a
claim arising under this Agreement against an AFFILIATE,
MICHIGAN may seek a remedy directly against LICENSEE and may,
but is not is not required to, seek a remedy against the
AFFILIATE. Any termination of the Agreement under Article 11
as to LICENSEE also constitutes termination as to any
AFFILIATES.
******** This
material has been omitted pursuant to a request for
confidential treatment and filed separately with the
Securities and Exchange Commission.
License
Agreement between
The
University of Michigan and
Quick-Med
Technologies
ARTICLE 3 - CONSIDERATION
3.1
LICENSEE
shall
pay
royalties to MICHIGAN until the expiration date of the last to
expire of PATENT RIGHTS or until this Agreement is
terminated.
Royalties
shall include:
(a)
A License Issue Fee of ********Such License Issue Fee shall be
nonrefundable and is due thirty days (30) from the complete
execution of this Agreement ;
(b)
Royalties
equal to ******** of NET SALES ;
(c)
******** of
SUBLICENSE INCOME ;
(d)
LICENSEE shall pay to MICHIGAN an Annual License Maintenance
Fee ("Annual Fee"). This Annual Fee is accrued on June 30 of
the years specified below, and is payable with the semi-annual
report for the ROYALTY PERIOD in which the Annual Fee accrues.
LICENSEE may credit each Annual Fee in full against all
royalties otherwise due MICHIGAN for the prior July 1 through
the June 30 on which the Annual Fee accrues. The annual
license maintenance fees are:
(1)
In
2008-2009: ********;
(2)
In
2010: ********; and
(3)
In
2011 and in each year thereafter during the term of this
Agreement: ********..
Should
this Agreement terminate or expire other than on a June 30,
the Annual Fee for such portion of a year shall be determined
by multiplying the amount set forth above for the given year
by a fraction, the numerator of which shall be the number of
days since the prior June 30 during which the Agreement is in
effect and the denominator of which shall be three hundred and
sixty-five.
3.2
LICENSEE
shall be responsible for the payment of all taxes, duties,
levies, and other charges imposed by any taxing authority with
respect to the royalties payable to MICHIGAN under this
agreement. Should LICENSEE be required under any law or
regulation of any government entity or authority to withhold
or deduct any portion of the payments on royalties due to
MICHIGAN, then the sum payable to MICHIGAN shall be increased
by the amount necessary to yield to MICHIGAN an amount equal
to the sum it would have received had no withholdings or
deductions been made. MICHIGAN shall cooperate reasonably with
LICENSEE in the event LICENSEE elects to assert, at its own
expense, MICHIGAN’s exemption from any such tax or
deduction.
3.2
LICENSEE
is not obligated to pay multiple royalties if any LICENSED
PRODUCT or LICENSED PROCESS is covered by more than one claim
of PATENT RIGHTS or the same LICENSED PRODUCT is covered by
claims in two or more countries.
3.3
If
LICENSEE is obligated or reasonably deems it necessary to pay
consideration to any third party that holds a patent(s) that
would, in the reasonable judgment of LICENSEE be infringed by
the manufacture, importation, use, offer for sale or sale of a
LICENSED PRODUCT or a LICENSED PROCESS, LICENSEE may reduce
the amount of royalties owed to MICHIGAN by an amount equal to
fifty percent (50%) of the amount of royalties owed to such
THIRD PARTY Licensor by LICENSEE. In no instance under this
subsection may the royalty due to MICHIGAN be reduced below
fifty percent (50%) of the amount that would have otherwise
been owed by LICENSEE, however.
3.4
If
a LICENSED PRODUCT or LICENSED PROCESS is sold in a
COMBINATION PRODUCT, then NET SALES for purposes of
determining royalty payments on the COMBINATION PRODUCT or
LICENSED PROCESS will be determined pro rata on a COMBINATION
PRODUCT-by-COMBINATION PRODUCT and country-by-country basis
until the date of expiration of the last to expire PATENT
RIGHT covering the manufacture, use or sale of such
COMBINATION PRODUCT in such country, calculated using one of
the following methods:
(a)
By
multiplying NET SALES of the COMBINATION PRODUCT by the
fraction A/(A+B), where A is the invoice price, during the
royalty-paying period in question, of the LICENSED PRODUCT
sold separately, and B is the invoice price during the royalty
period in question, of the other products in the COMBINATION
PRODUCT when sold separately by LICENSEE, its AFFILIATE or
SUBLICENSEE or, if not so sold, then the average invoice price
when sold separately by third parties; or
(b)
If
no separate sales are made of the LICENSED PRODUCT or LICENSED
PROCESS or any of the other products in such COMBINATION
PRODUCT during the royalty-paying period in question, NET
SALES for the purposes of determining royalty payments must be
calculated by multiplying NET SALES of the COMBINATION PRODUCT
by the fraction A/C, where A is as previously defined and C is
the invoice price of the COMBINATION PRODUCT sold by LICENSEE,
its AFFILIATE or SUBLICENSEE. If neither the royalty-bearing
nor the non-royalty bearing product(s) included in the
COMBINATION PRODUCT are sold separately, or the COMBINATION
PRODUCT itself, or both, are not sold separately, NET SALES
shall be calculated based on mutual written agreement as to a
reasonable allocation between the LICENSED PRODUCT or LICENSED
PROCESS and the other products in the COMBINATION PRODUCT,
taking into account total manufacturing costs, proprietary
protection and relative contribution of the
products.
******** This
material has been omitted pursuant to a request for
confidential treatment and filed separately with the
Securities and Exchange Commission.
3.5
Royalty
payments shall be paid to the "Regents of the University of
Michigan" in United States dollars in Ann Arbor, Michigan,
sent as provided in Article 13. In computing royalties,
LICENSEE shall convert any revenues it receives in foreign
currency into its equivalent in United States dollars at the
most recent exchange rate published in the Wall Street Journal
on the last business day of the ROYALTY PERIOD during which
such payments are received by LICENSEE, or at such other
exchange rate as the parties may agree to in
writing.
3.6
Royalty
payments shall be made on a semi-annual basis with submission
of the reports required by Article 4. All amounts due under
this Agreement, including amounts due for the payment of
patent expenses, shall, if overdue, be subject to a charge of
interest compounded monthly until payment, at a per annum rate
of five percent (5%) above the prime rate in effect at the JP
Morgan Chase & Co. or its successor bank on the due date
(or at the highest allowed rate if a lower rate is required by
law) or $250, whichever is greater. The payment of such
interest shall not foreclose MICHIGAN from exercising any
other rights it may have resulting from any late payment.
LICENSEE shall reimburse MICHIGAN for the costs, including
reasonable attorney fees, for expenses paid in order to
collect any amounts overdue more than 120 days.
ARTICLE 4 - REPORTS
4.1
Until
the FIRST COMMERCIAL SALE, LICENSEE shall provide to MICHIGAN
a written annual report on or before October
1 of
each year. The annual report shall include: reports of
progress on research and development, regulatory approvals,
manufacturing, sublicensing, marketing and sales during the
preceding twelve (12) months, and plans for the coming year.
LICENSEE also shall report to MICHIGAN the date of first sale
or lease of LICENSED PRODUCTS (or results of LICENSED
PROCESSES) in each country within thirty (30) days of
occurrence.
4.2
After
the FIRST COMMERCIAL SALE, LICENSEE shall provide semi-annual
reports to MICHIGAN. By each October
1 and April 1, LICENSEE
shall report to MICHIGAN for that ROYALTY PERIOD:
(a)
number of LICENSED PRODUCTS sold, leased or distributed by
LICENSEE or AFFILIATE.
(b)
NET SALES, excluding the deductions provided therefor, of
LICENSED PRODUCTS sold by LICENSEE or AFFILIATE.
(c)
accounting for all LICENSED PROCESSES used or sold by LICENSEE
or AFFILIATE, including NET SALES, excluding the deductions
therefor.
(d)
deductions applicable as provided in the definition for NET
SALES above.
(e)
total SUBLICENSE INCOME and royalties due under Paragraph 3.1
above, including supporting figures.
(f)
foreign currency conversion rate and calculations (if
applicable) and total royalties due.
(g)
names, addresses and U.S.P.T.O. Entity Status (as discussed in
Paragraph 4.5) of all SUBLICENSEES having a sublicense or
option therefor any time during the particular ROYALTY
PERIOD.
(h)
for each sublicense or amendment thereto completed in the
particular ROYALTY PERIOD, the date of each agreement and
amendment, the territory of the sublicense, the scope of the
sublicense, and the nature, timing and amounts of all fees and
royalties to be paid thereunder.
(i)
any milestone (under Article 5) that has been achieved, and
any milestone that was due during the ROYALTY PERIOD but not
achieved, specifying each milestone and whether or not it was
achieved.
LICENSEE
shall include the amount of all payments due, and the various
calculations used to arrive at those amounts, including the
quantity, description (nomenclature and type designation as
described in Paragraph 4.3 below), country of manufacture and
country of sale of LICENSED PRODUCTS and LICENSED PROCESSES.
LICENSEE shall direct its authorized representative to certify
that reports required hereunder are correct to the best of
LICENSEE's knowledge and information. Failure to provide
reports as required under this Article 4 shall be
considered
a
material breach of this Agreement.
If
no payment is due, LICENSEE shall so report to MICHIGAN that
no payment is due.
4.3
LICENSEE
shall promptly establish and consistently employ a system of
specific nomenclature and type designations for LICENSED
PRODUCTS and LICENSED PROCESSES to permit identification and
segregation of various types where necessary. LICENSEE shall
consistently employ, and shall require SUBLICENSEES to
consistently employ, the system when rendering invoices
thereon and shall inform MICHIGAN, or its auditors, when
requested, as to the details concerning such nomenclature
system, all additions thereto and changes
therein.
******** This
material has been omitted pursuant to a request for
confidential treatment and filed separately with the
Securities and Exchange Commission.
4.4
LICENSEE
shall keep, and shall require AFFILIATES and SUBLICENSEES to
keep, true and accurate records containing data reasonably
required for the computation and verification of payments due
under this Agreement. LICENSEE shall, and it shall require all
AFFILIATES and SUBLICENSEES to: (a) open such records for
inspection upon reasonable notice during business hours by
either MICHIGAN auditor(s) or an independent certified
accountant selected by MICHIGAN, for the purpose of verifying
the amount of payments due; and (b) retain such records for
six (6) years from date of origination.
The
terms of this Article shall survive any termination of this
Agreement. MICHIGAN is responsible for all expenses of such
inspection, except that if any inspection reveals an
underpayment greater than five percent (5%) of royalties due
MICHIGAN, then LICENSEE shall pay all expenses of that
inspection and the amount of the underpayment and interest to
MICHIGAN within twenty-one (21) days of written notice
thereof. LICENSEE shall also reimburse MICHIGAN for reasonable
expenses required to collect the amount
underpaid.
4.5
So
that MICHIGAN may pay the proper U.S. Patent and Trademark
Office fees relating to the PATENT RIGHTS, if LICENSEE, any
company related to LICENSEE or SUBLICENSEE (including
optionees) does not qualify as a “Small Entity”
under U.S. patent laws, LICENSEE shall notify MICHIGAN
immediately. The parties understand that the changes to
LICENSEE’s, SUBLICENSEE’s, or optionees’
businesses that might affect entity status include:
acquisitions, mergers, hiring of a total of more than 500
total employees, sublicense agreements, and sublicense
options.
ARTICLE 5 - DILIGENCE
5.1
LICENSEE
shall use commercially reasonable efforts to bring LICENSED
PRODUCTS to market or one or more LICENSED PROCESSES to
commercial use. LICENSEE has the responsibility to do all that
is necessary to obtain and retain any governmental approvals
to manufacture and/or sell LICENSED PRODUCTS and/or use
LICENSED PROCESSES for all relevant activities of LICENSEE,
AFFILIATES and SUBLICENSEES.
5.2
As
part of the diligence required by Paragraph 5.1, LICENSEE
agrees to reach the following commercialization and research
and development milestones for the LICENSED PRODUCTS and
LICENSED PROCESSES (together the “MILESTONES”) by
the following dates:
1)
Initiate
communication with
all Tier 1 (Largest
- see Schedule 2) Cosmetic or Chemical Companies with Category
1 Products (defined at those which explicitly use ********
within their product or marketing literature during
******** .
2)
Initiate communication with all Tier 2 Companies (Significant
size, but not the very largest - see Schedule 3) with Category
1 products during ********.
3)
Complete product research on all Category 2 (defined as those
products which are suspected by LICENSEE of using ******** by
virtue of claimed activity or description of active
ingredients) within ********.
4)
Initiate communication with
all Tier 1 Companies with Category 2 products (to be
determined based on research completed in Milestone #3)
within
********.
5)
Within ******** of the effective date of this agreement,
LICENSEE will obtain at least **** new revenue-generating
business relationship from among the Companies currently or
prospectively identified as Tier 1 or 2 Companies. Additional
royalties to MICHIGAN from such additional business under
Section 3.1 (b) or (c) herein shall be at least ******** per
year. In the event that such business relationships do not
generate at least ***** per year in additional royalties, the
Annual Fee due MICHIGAN (as defined in Sect ion
3.1 (d)) shall be increased by the difference between ******
and the royalty amount actually incurred.
5.3
LICENSEE
must achieve the MILESTONES on or before the deadline dates
indicated. LICENSEE shall notify MICHIGAN withi
| 
