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Exhibit
10.3
ROYALTY
AGREEMENT
BETWEEN
BIOVEST INTERNATIONAL,
INC.
AND
VALENS OFFSHORE SPV II,
CORP.
This Royalty Agreement (this
“Agreement”) effective as of December 10, 2007, by
and between BIOVEST INTERNATIONAL, INC. , a Delaware
corporation (“Biovest”) and VALENS OFFSHORE SPV II,
CORP. (“Valens Offshore”) (collectively the
“Parties”).
WITNESSETH:
WHEREAS, Biovest and Valens
Offshore entered into a Note Purchase Agreement dated as of the
date hereof (the “Purchase Agreement”);
WHEREAS, Biovest and Valens
Offshore wish to enter into this Royalty Agreement pursuant to and
in furtherance of the terms of the Purchase Agreement;
NOW, THEREFORE, in
consideration of the various promises and undertakings set forth
herein, the Parties agree as follows:
ARTICLE 1 —
DEFINITIONS
As used herein, the following
capitalized terms shall have the following meanings:
1.1 “Affiliate”,
with respect to any Party, shall mean any person or entity
controlling, controlled by, or under common control with such
Party. For these purposes, “control” shall refer to
(i) the possession, directly or indirectly, of the power to
direct the management or policies of a person or entity, whether
through the ownership of voting securities, by contract or
otherwise or (ii) the ownership, directly or indirectly, of at
least 50% of the voting securities or other ownership interest of a
person or entity.
1.2 “Biovest Biologic
Products” shall mean all biopharmaceutical products including
but not limited to monoclonal antibodies, peptides, infectious
disease and cancer vaccines, autologous cancer vaccines such as for
non-Hodgkins lymphoma and renal cell carcinoma, cell-based
therapies, stem cells, cytokines, and viruses produced by mammalian
cell culture techniques which are currently owned, licensed or
being developed by Biovest or its subsidiaries or which may be
subsequently acquired or developed by Biovest during the Term of
this Agreement.
1.3 “Effective
Date” shall mean the date first written above.
1.4 “Joint
Invention” shall mean any invention for which it is
determined, in accordance with applicable law, that both:
(i) employees or agents of Valens Offshore or any other
persons obligated to assign such Invention to Valens Offshore, and
(ii) employees or agents of Biovest or any other persons
obligated to assign such invention to Biovest, are joint inventors
of such invention.
1.5 “License
Revenue” shall mean any and all revenue or other
consideration received by Biovest from a Licensee for Biovest
Biologic Products under this Agreement, including but not limited
to, revenue or royalties from sales of Biovest Biologic Products,
upfront revenue, milestone revenue, royalty income, and the market
value at the time of transfer of all non-monetary consideration
such as barter or counter-trade in the country of
disposition.
1.6 “Licensee”
shall mean any Third Party granted a license by Biovest to
manufacture, sell, or commercialize Biovest Biologic Products
pursuant to Section 3.2 hereof.
1.7 “Net Sales”
shall mean the gross amount invoiced for Biovest Biologic Products
sold in arm’s length sales or commercial transactions to a
Third Party by Biovest, its Affiliates or any Third Party which
acquired ownership of any Biovest Biologic Product from Biovest,
less deductions for:
(a) commissions, trade,
quantity and cash discounts or rebates actually allowed or
given;
(b) credits, allowances or
refunds given or made for rejected, outdated or returned Biovest
Biologic Products, if applicable; and
(c) any prepaid or invoiced
charges for import or export taxes, insurance or charges for
returnable containers.
1.8 “Party” shall
mean Valens Offshore or Biovest and, when used in the plural, shall
mean Valens Offshore and Biovest.
1.9 “Patent”
means (i) any unexpired patent (including inventor’s
certificates) which has not been held invalid or unenforceable by a
court of competent jurisdiction from which no appeal can be taken
or has been taken within the required time period, including
without limitation any substitution, extension, registration,
confirmation, reissue, re-examination, renewal or any like filing
thereof and (ii) pending applications for patent, including
without limitation any continuation, division or
continuation-in-part thereof and any provisional
applications.
1.10 “Territory”
shall mean the world.
1.11 “Third
Party” means any person or entity other than Valens Offshore,
Biovest or any Affiliate of either Valens Offshore or
Biovest.
ARTICLE 2 —
REPRESENTATIONS AND WARRANTIES
2.1 Representations and
Warranties of Both Parties . Each Party represents and warrants
to the other Party that: (i) it is free to enter into this
Agreement; (ii) in so doing, it will not violate any other
agreement to which it is a party; and (iii) it has taken all
corporate action necessary to authorize the execution and delivery
of this Agreement and the performance of its obligations under this
Agreement.
2.2 Representations and
Warranties of Biovest . Biovest hereby represents and warrants
that:
(a) Biovest has the right to
enter into this Agreement without the consent or approval of any
Third Party;
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(b) Biovest is not aware of
any asserted or unasserted claim or demand against the Biovest
Biologic Products;
(c) To the best of
Biovest’s knowledge, the Biovest Biologic Products do not
infringe upon any patent or other proprietary rights of any other
Third Party; and
(d) Biovest has not entered
into any agreement with any Third Party which is in conflict with
the rights granted to Valens Offshore pursuant to this
Agreement.
ARTICLE 3 —
INTENTIONALLY OMITTED
ARTICLE 4 — ROYALTY
PAYMENTS AND REPORTS
4.1 Royalties .
Biovest shall pay to Valens Offshore, or its assigns (in addition
to any royalties now being paid, or hereafter to be paid by Biovest
to Valens Offshore), a royalty equal to two and twelve one
hundredths (2.12%) percent of the Net Sales and License
Revenue within the Territory from any Biovest Biologic Products
received by Biovest (“Royalties”). For the avoidance of
doubt, the obligation to pay Royalties granted hereby are limited
to Net Sales and License Revenue within the Territory from Biovest
Biologic Products and no interest, royalty right or license is
granted to Valens Offshore hereunder with regard to any Biovest
activity other than Biovest Biologic Products. Without limiting the
foregoing, contract cell production and the manufacture or sale of
instruments including automated instruments or disposables of such
instruments are expressly excluded from this Agreement and no
Royalty shall be paid with regard thereto.
4.2 Term of Royalty
Obligations . The Royalty specified in Section 4.1 above
shall continue for so long as Biovest manufactures, sales,
commercializes, conducts a clinical trial, or licenses any Biovest
Biologic Product.
4.3 Payments of
Royalties . Royalties shall be paid no later than sixty
(60) days following the end of the calendar quarter during
which Net Sales or License Revenue are invoiced for Biovest
Biologic Products (“Royalty Payments”).
4.4 Place of Payment .
All Royalty Payments due shall be payable in U.S. Dollars by wire
transfer to a bank account designated by each Party from time to
time. Biovest shall convert all non-U.S. Dollar sales to U.S.
Dollars using the average exchange rates quoted in the Wall Street
Journal for the final day of each month in the relevant period for
which the Royalty is being paid. In the event payment of any
Royalties is restricted or prohibited by the laws or regulations of
a particular country, then to the extent of such a restriction and
prohibition, royalties shall be paid to Biovest in that country and
in the currency of said country into an account to be designated by
Biovest.
4.5 Taxation of
Payments .
(a) Insofar as any payment
that is due under this Agreement is subject to any tax, duty, levy,
or other government imposition, the Party receiving the payment
agrees to bear
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any and all such taxes, duties, levies
or impositions. Each Party hereby authorizes the other Party to
withhold such taxes, duties, levies or impositions from the
payments in accordance with this Agreement if Biovest or Valens
Offshore is required to do so under the laws of the United States
or any country in the Territory where such taxes, duties, levies or
impositions are payable. Whenever a Party deducts such tax, duty,
levy or imposition from any payments due, then it shall furnish the
other Party with a certificate showing the payment of thereof to
the United States or any country in the Territory.
(b) In the event any payments
which are due under this Agreement are subject to value added
taxation by any government, then the Party receiving the payment
shall bear such value added tax in full and the Party making the
payment shall be reimbursed therefor. If appropriate, the Party
receiving payment may add such value added taxes to its royalty
accounts, provided such value added taxes are credited against the
other Party’s value added tax debt and the other Party is
reimbursed in full with respect thereto. Notwithstanding anything
herein to the contrary, the Party making the payment shall have no
liability for any value added tax directly or indirectly relating
thereto.
(c) In the event any payment
is subject to a withholding or other income tax in any country in
the Territory, promptly following becoming aware of the
applicability of any such tax, the Party making the payment shall
so advise the other Party. The Party receiving the payment shall
have the right to contest such tax with the appropriate
governmental body any such proposed withholding and the other Party
shall provide, at receiving Party’s expense, reasonable
cooperation in any such contest. The Parties shall provide each
other with such receipts or other evidence of any tax withheld as
is necessary to claim any credit or deduction available to it in
other jurisdictions. Payments shall only be reduced for withholding
taxes imposed by the jurisdiction out of which the payment is
directly made.
4.6 Interest . All
payments due hereunder that are not paid when due and payable as
specified in this agreement shall bear interest at an annual rate
equal to the prime rate (“Prime Rate”) for U.S. dollar
deposits in effect from time to time, as published daily in the
Wall Street Journal plus 5%, compounded monthly from the date due
until paid, or at such lower rate of interest as shall then be the
maximum rate permitted by applicable law.
4.7 Right to
Documentation . Upon request, Valens Offshore shall have the
right to request reasonable documentation of Biovest’s
calculations to determine Biovest’s Net Sales and/or License
Revenue and to request discussion of such calculations with
appropriate representatives of Biovest.
4.8 Records Retention
. Biovest, its assignees and Affiliates shall keep complete and
accurate records pertaining to Net Sales and License revenue for a
period of three (3) calendar years
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