LICENSE AGREEMENT

 

THIS AGREEMENT made as of January 30th, 2005.

 

BETWEEN:

 

1476246 ONTARIO LTD.

a corporation incorporated under the laws of the Province of Ontario,

and having a place of business at Sarnia, Ontario,

(the "Licensee")

 

AND:

 

THE UNIVERSITY OF WESTERN ONTARIO,

a corporation under the Universities Act (Ontario)

                (the "University")

 

WHEREAS:

 

A)

the University is an institution of learning and academic research having a
mandate to disseminate information, one of the ways being commercialization of
its research results for the betterment of society as well as the institution

 

B)

the University is the owner of the Licensed Technology (as defined herein)
relating to the University’s Invention No. 02-029 known as: “Less Lethal
Ammunition Projectile” and to the best of its knowledge, has by virtue of
assignment(s) by the inventors the authority and capacity to grant licenses and
rights of use to the Licensed Technology;

 

C)

the University wishes to have the Licensed Technology further developed and
commercialized in an ethical manner and for peaceful purposes in order to
benefit the public and is therefore willing to grant a license to underlying
patent rights and trade secrets related thereto

 

D)

the Licensee, as a duly incorporated corporation, wishes to obtain from the
University a license to commercially exploit the Licensed Technology on the
terms set out. In this Agreement and has as one of its primary purposes to
develop and bring to market products and services derived from the Licensed
Technology.

 

E)

one of the principals of the Licensee is a co-inventor of the Licensed
Technology

 

NOW THEREFORE in consideration of the premises and of the mutual covenants set
forth herein, the parties hereto agree as follows:

 

 

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ARTICLE 1 – DEFINITIONS

 

1.1

For purposes of this Agreement, the following words and phrases shall have the
following meanings:

 

(a)

“Business Day” means every day other than Saturday, Sunday, and statutory
holidays in the Province of Ontario;

 

(b)

“Confidential Information” means scientific, technical and/or business
information (including written descriptions, drawings, samples, compositions,
formulae, visual demonstrations, prototypes and other data) which is disclosed
by one party (the “Disclosing Party”) to the other party (the “Recipient”) and
which is in each case:

 

i)

material which is marked or identified as confidential at the time of
disclosure; or

 

ii)

material in oral or visual form identified as confidential at the time of
disclosure and is subsequently designated as such with a written memorandum sent
to the Recipient within 30 days following the disclosure.

 

(c)

“Effective Date” means the date on which this Agreement shall come into effect,
which shall be the 1st day of April, 2005;

 

(d)

“Field of Use” means the specific sector of application defined as less lethal
projectiles

 

(e)

"Gross Revenue" means all revenues and receipts directly or indirectly received
from or paid by end users of Licensed Products or Licensed Processes arising
from arm’s length third party use, sale, distribution, leasing, or from
sublicensing of Licensed Products and/or the use of Licensed Processes, by the
Licensee and, where sublicensing is permitted hereunder, its sub-licensees,
calculated on the basis of the Licensee’s fiscal year, or part thereof. Licensed
Products shall be deemed to have been sold and included in the Gross Revenue of
the Licensee and sub-licensee when paid for. Gross Revenue shall not include any
amounts in respect of sales, excise, or other taxes and shall be net of any
returned goods and allowances for unreturned defective products. For greater
certainty, in the case of less lethal ammunitions, only revenue and receipts
directly relative to the projectile component of the shell shall be included in
the calculation of Gross Revenue;

 

(f)

“Licensee” is the party of the first part and includes any corporation which
controls, is controlled by, or is under common control with, the Licensee and
also includes any permitted assignee of the Licensee; for this purpose,
“control” means the direct or indirect ownership of voting shares carrying more
than 50% of the votes for the election of directors and sufficient votes to
elect a majority of the board of directors;

 

 

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(g)

“Licensee Improvement” means any technology, whether patentable or not, that is
developed by, or under the direction of, the Licensee and whose use would
infringe one or more claims or any rights under any of the Licensed Patent
Rights or the Licensed Trade Secrets, or whose development has benefited from or
relied upon the Licensed Technology;

 

(h)

“Licensed Process” means any method, procedure, process or other subject matter:
[i] whose use is covered in whole or in part by any claim or claims included
within Licensed Patent Rights or whose use would infringe any one or more claims
or any rights under the Licensed Patent Rights; [ii] incorporates or was
developed through the use of, or reliance upon, Licensed Trade Secrets.

 

(i)

“Licensed Product” means any product, apparatus, kit or component part thereof,
or other subject matter: [i] whose manufacture, use, lease or sale is covered in
whole or in part by any claim or claims included with Licensed Patent Rights or
whose use would infringe any one or more claims or any rights under the Licensed
Patent Rights; [ii] incorporates or was developed through the use of or reliance
upon Licensed Trade Secrets. For greater certainty, in the case of less lethal
ammunitions, the Licensed Product shall only include the projectile component of
the shell;

 

(j)

“Licensed Technology” means Licensed Products and Licensed Processes, referred
to jointly or severally and where the context requires, includes Licensee
Improvements, notwithstanding the ownership thereof;

 

(k)

“Licensed Trade Secrets” means and includes all information including a formula,
pattern compilation, device, method, technique or process, that derives
independent economic value, whether actual or potential, from being generally
not being known to, nor being readily ascertainable by proper means, by other
persons who can obtain economic value from its disclosure or use; and which is
the subject of efforts that are reasonable under the circumstances to maintain
its secrecy including, as applicable, those items specifically described in
Schedule ”C”

 

(l)

“Patent Payments” has the meaning set forth in Section 5.2;

 

(m)

“Licensed Patent Rights” means patent rights of the University to the subject
matter claimed in or covered by:

 

(i)

a patent or patent application listed in Schedule ”A”

 

(ii)

patents issued from the applications listed in Schedule “A”, or any
  divisionals, re-issues or re- examinations claiming priority to any of
        the aforementioned patent applications and patents; or

 

 

 

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(iii)

such other statutory or common law protection as may be available to
         the University in connection with its rights and ownership of the
       Licensed Technology and specifically utilized within the Field of Use.

 

(n)

"Royalty Due Date" means the date 30 days following the last day of March, June,
September and December of each and every year during which this Agreement
remains in full force and effect, commencing on January 1st, 2006;

 

(o)

        Territory” means worldwide subject to section 2.2 provided that any lack
of            statutory protection of the enumerated countries shall not impact
any      obligation of the Licensee to pay royalties arising from use, sale,
distribution,            or licensing of the Licensed Technology hereunder.

 

(p)

"Trademarks" means any mark, trademark, service mark, logo, insignia, seal,
design or other symbol or device used by the University or Licensee and
associated with or referring to either of the University or Licensee, as the
case may be, or any of its facilities, property or products.

 

ARTICLE 2 - GRANT OF RIGHTS AND TERM

 

2.1

License. Subject to the terms and conditions of this Agreement, the University
hereby grants to the Licensee the following licenses:

 

i)

Licensed Patent Rights: The University hereby grants to the Licensee an
exclusive world-wide license in the Territory under the University’s Licensed
Patent Rights to make, have made, use, lease, sell, offer to sell and import
Licensed Products, and to practice Licensed Processes in the Field of Use where
Licensee may lawfully grant such a license.

        

ii)

Trade Secrets: The University grants to the Licensee an exclusive world-wide
license in the Territory in the Field of Use to use the Trade Secrets in secrecy
and to disclose the Trade Secrets only to persons who have contractually agreed,
or are under a duty, to maintain the secret nature of the Trade Secrets.

 

Such grants are effective for the period expiring the last of the terms for
which claims under the Licensed Patent Rights expire, unless this Agreement is
sooner terminated according to the terms hereof. Notwithstanding anything to the
contrary, the licenses granted hereunder shall not be construed to confer any
rights or benefits upon the Licensee by implication, or otherwise, as to any
patents, technology or rights not specifically included in the Licensed
Technology or the grants herein.

 

2.2

Countries or geographic regions where there has not been a commercial sale of
Licensed Products within five (5) years following the Effective Date shall
automatically revert back to the University, at which time it may grant licenses
to the Licensed Patent Rights or the Licensed Trade Secrets including on an
exclusive license basis to third parties for any such countries (the
“Surrendered Countries”). The University will grant to the Licensee a right of
first offer to again obtain an

 

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exclusive license in any of the Surrendered Countries prior to entering into
formal negotiations with any third party that has expressed an interest therein.
The University will notify the Licensee in writing of such opportunity and the
Licensee shall have thirty (30) days by which to elect to reacquire the license
with respect to such Surrendered Country or Countries, failing which the
University shall not be under any further obligation to the Licensee in
connection with the Surrendered Countries so offered. Upon the Licensee’s
election to reacquire a license, the University and the Licensee shall negotiate
in good faith for a period not to exceed thirty (30) days the financial terms
and other obligations in connection with such new license, which will otherwise
be in the form of this license agreement.

2.3

Rights Retained by University. Nothing in this Agreement shall affect the
University’s right to practise the Licensed Technology, the Licensed Trade
Secrets, and the Licensee hereby grants back to the University rights to
practice any of the Licensed Patent Rights or the Licensed Trade Secrets,
whether for the University’s own purposes or in conjunction with other similar
research institutions, and for research, teaching and other non-commercial
applications, including technical services and industrially sponsored research
and provided further that the business of the sponsor of any such research does
not conflict with the business of the Licensee in the field of use.

 

2.4

         Ownership, Improvements. The parties acknowledge that the University
shall  retain ownership of the Licensed Technology made both before and after
the       Effective Date excluding only Licensee Improvements. The Licensee
shall own all                Licensee Improvements, provided that the Licensee
hereby grants to the University   a perpetual, non-exclusive royalty-free right
to use all Licensee Improvements for  research, teaching and other
non-commercial uses in accordance with the rights    granted under Section 2.3
and further provided that in consideration of the                exclusivity
granted by the University to the Licensee hereunder, the Licensee further
         agrees that Licensee Improvements may be utilized by any other
licensees of the               University who are appointed under Section 2.2
and are        hereby sub-licensed to such                third parties.

 

2.5           Report of Improvements. The Licensee shall disclose in writing to
the University the details of all Licensee Improvements as part of its annual
report of activity under Section 6.2.

 

2.6

Restriction on Disclosure; Use of Trademarks. Either party may disclose any of
the financial terms and conditions of this Agreement and may reveal the identity
of the parties and the nature of the license granted, provided the other party
consents prior to such disclosure, such consent not to be unreasonably withheld.
Neither party shall use any of the other’s Trademarks or make reference to the
other for any technical specifications, advertising or publicity purposes,
without the prior written consent of that party.

 

ARTICLE 3 - SUBLICENSES

 

3.1           Sublicenses. The Licensee shall have the right to grant
sublicenses of the rights, privileges and licenses granted hereunder within the
Territory in accordance with the

 

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provisions of Section 3.2 and to make, have made, use, lease and sell Licensed
Products and to practise the Licensed Processes provided that the Licensee shall
account to the University for any Gross Revenue of such sublicensee, as though
such Gross Revenue were the Gross Revenue of the Licensee, and pay to the
University the royalties for such Gross Revenue. Upon any termination of this
Agreement, and at the election of the University, any sublicensee’s rights shall
also terminate. No sublicense shall be permitted to further sublicense or to
transfer or assign any rights granted to it.

 

3.2

Covenants of Sublicensees.

 

(a)

Licensee covenants and agrees that it shall cause any sublicense agreement
entered into by it to contain, on the part of such sublicensee, covenants in
favour of the University with respect to any obligations of the Licensee to the
University, and that to the extent there exists an inconsistency between the
sublicense agreement and this Agreement, any such inconsistency or conflict will
be resolved in favour of this Agreement. In granting any sublicense hereunder,
the Licensee undertakes to observe and perform any obligations of the
sublicensee, to intent that none of the rights, entitlements or remedies of the
University are impaired by the granting of such sublicense. The Licensee shall
deliver to the University a true copy of such sublicense agreement upon
execution and a copy of any subsequent amendment thereto, within thirty (30)
days of its execution.

 

The Licensee shall not be entitled to receive from any sublicensee any
onsideration or matter of value in lieu of cash payments not otherwise part of
Gross Revenue, in consideration for any sublicense under this Agreement, without
the express prior written consent of the University.

 

ARTICLE 4 – LICENSEE’S PERFORMANCE OBLIGATIONS

 

4.1

Licensee’s Commercialization The Licensee shall use commercially reasonable
efforts to bring one or more Licensed Products or Licensed Processes to market,
and to continue active marketing efforts for one or more Licensed Products or
Licensed Processes during the entire period that this Agreement is in effect,
including those requirements and milestones as more particularly set out on
Schedule “D”.

 

4.2

Acknowledgement of Expertise by Licensee. The Licensee covenants and agrees that
it has the expertise necessary to handle the Licensed Technology with care and
without danger to the University or to the Licensee, its employees, agents, or
the public, and to observe and perform the covenants and obligations set out
herein.

 

4.3

Compliance by Licensee with Laws. The Licensee covenants and agrees that it will
comply with all laws, regulations and ordinances, whether federal, provincial,
state, municipal or otherwise, as appropriate, with respect to the Licensed
Technology, the Licensed Trade Secrets and this Agreement.

 

4.4

Failure to Meet Performance Requirements. In the event the Licensee fails to
meet any of the milestones or performance criteria, or observe and perform the

 

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obligations set forth under any of Sections 4.1, including Schedule “D”, 4.2,
4.3 such shall constitute a default under this Agreement and shall entitle the
University to terminate this Agreement pursuant to Section 13.2 hereof.

 

ARTICLE 5 –FEES, ROYALTIES AND PAYMENTS

 

5.1

Initial License Fee. The Licensee shall pay to the University, an initial fee
with respect to the issuance of the grant(s) of license, of CDN $ 5,000. The
said sum shall be deemed earned and due immediately upon the Effective Date, and
shall not be refundable to the Licensee in whole or in part under any
circumstances. The sum shall be applied to the balance of the University’s
patent costs to date.

5.2

Patent Payments. On January 1, 2006 or such earlier date that the Licensee
assumes responsibility for the patent prosecution in accordance with 8.2
Licensee shall pay to the University the balance of the University's patent
application and registration costs, provided that sixty (60) days in advance of
such due date, the University shall deliver to the Licensee a report of the
aggregate amount due and which shall include copies of the agents invoices.

          

If the Licensee shall fail to make payment of the patent expenses as set out
herein, the University may on thirty (30) days notice terminate this Agreement,
if such default has not been cured and payment made within such thirty (30) day
period, and the provisions of Sections 13.3 and 13.4 shall be applicable.

 

5.3

Minimum Annual Royalties. To maintain its exclusive license rights, Licensee’s
four quarterly royalty payments for the year during each of the years [two (2)
through three (3)] both inclusive must total at least $5,000 per year
(hereinafter Minimum Annual Royalty). For years [four (4) through six (6),] both
inclusive, the Minimum Annual Royalty shall be adjusted to $10,000 per year, and
thereafter, for the balance of the term, the Minimum Annual Royalty shall be
$20,000 per year. If in any calendar year the respective Minimum Annual Royalty
amount is not reached through royalties otherwise payable on Gross Revenue in
any year, then the University can within ninety (90) days of the end of the
year, upon written notice to Licensee, terminate this Agreement, in whole or in
part with respect to the Territory. To avoid having the Agreement terminated as
aforesaid Licensee can pay the difference between the total of the four
quarterly royalty payments for the year and the Minimum Annual Royalty for the
year, within sixty (60) days of the end of the year.

 

5.4

Annual Royalties and Payments. In consideration of the license granted
hereunder, the Licensee shall pay to the University:

 

(a)

Annual royalties of 3 % of the Gross Revenue. Subject to section 5.4 (b),
          such royalties shall become due and payable on each Royalty Due Date,
and           shall be calculated with respect to the Gross Revenue of the
Licensee  and/or Sublicensee for the calendar quarter immediately preceding the
month in   which the applicable Royalty Due Date occurs. When discounts are
afforded as a result of concurrent sales of other products and Licensed
Products, Gross

 

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Revenue will be calculated on the basis of the normal price of Licensed Products
as established by independent sales of the Licensed Products.

 

(b)

No Annual Royalty shall accrue or be due or payable in respect of Gross Revenue
attributable to the period prior to April 1, 2006

 

5.5

Currency and Place of Payments. All payments to be made by the Licensee to the
University hereunder shall be made in Canadian dollars at London, Ontario
without deduction of taxes or other fees of any other kind whatsoever, which may
be imposed by any government, and which taxes or fees shall be paid by the
Licensee. Where any payment or amount is denominated in a currency other than
Canadian dollars, it shall be converted to the equivalent in Canadian dollars at
the rate of exchange set by the Bank of Montreal in Toronto, Canada for
converting the currency of such amount into Canadian dollars, on the last
Business Day of the reporting period to which such payment relates.

 

5.6

Interest. Failure to make the prompt payment of sums payable when due shall
attract interest from the due date to the date of payment in full, at prime plus
seven percent (7%). Here prime is the interest rate determined from time to time
by the Bank of Montreal to its best risk, commercial customers, compounded
monthly.

 

ARTICLE 6 – RECORDS AND REPORTING

 

6.1

Accounting Records. The Licensee shall maintain at its principal place of
business, accounts and records of transactions arising pursuant to this
Agreement, such accounts and records to be in sufficient detail to enable proper
returns to be made under this Agreement, and the Licensee shall require
sublicensees to keep similar accounts and records.

 

6.2

Reports. The Licensee shall deliver to the University by no later than each
Royalty Due Date, together with the royalty payment required, a report (the
“Accounting”) setting out particulars of the use, sale, distribution, leasing or
sublicensing of the Licensed Technology shall be requisite for the payment of
royalties, including the following:

 

(a)

the number or quantity of Licensed Products sold, used, leased or licensed by
Licensee and all sublicensees in each country during the applicable royalty
period;

 

(b)

the Gross Revenue for Licensed Products during the applicable royalty period;

 

(c)

an accounting for all Licensed Processes used, sold, leased, or, if applicable,
licensed by the Licensee and all sublicensees;

 

(d)

a calculation of Gross Revenue;

 

 

 

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(e)

total royalties payable on Gross Revenue in Canadian dollars, together with the
exchange rates used for any currency conversion in accordance with Section 5.5.

 

(f)

A copy of the Licensee current insurance policy as well as that of each of the
sub-licensees.

 

The Licensee shall also provide to the University periodic reports at all
significant stages and milestones in the development, manufacture and sale,
distribution, leasing or sublicensing of Licensed Technology, including but not
limited to, the milestones described in Sections 4.1, 4.4 and 5.2, by no later
than thirty (30) days following the completion of such stage or milestone.

 

6.3

Generally Accepted Accounting Principles (GAAP). The calculation of royalties
shall be made in accordance with generally accepted accounting principles from
time to time approved by the Canadian Institute of Chartered Accountants (or any
successor institute applicable as at the date on which any calculation is
required to be made, and applied on a consistent basis) or the U.S. counterpart.

 

6.4

Retention of Accounts and Records. The Licensee shall retain the accounts and
records referred to in Section 6.1 for at least five (5) years after the date
upon which they were made.

 

6.5

Audit Right. During the term of this Agreement and for one (1) year thereafter,
the University may audit or cause to be audited the applicable books, records or
other relevant materials of the Licensee referable hereto, to verify any report
rendered hereunder. The audit must be on reasonable advance, written notice, and
be conducted during normal business hours of the Licensee. The Licensee shall
furnish such reasonable evidence as such representative will deem necessary to
verify the ccounting and may permit such representative to make copies of or
extracts from such accounts, records and agreements. If the audit reveals an
underpayment by the Licensee of five (5) percent or more of royalties payable in
any fiscal year of the Licensee, the Licensee shall pay to the University such
deficiency within fifteen (15) days of the determination thereof, together with
interest thereon from the date such amount was due to the date of payment, and
shall further reimburse the University for its full and reasonable out-of-pocket
costs of the audit. In any other instance of overpayment or underpayment by the
Licensee, the appropriate payment of such deficiency or refund shall be made
within fifteen (15) days following the determination thereof, together with
interest thereon from the date such overpayment or underpayment was made and the
University shall bear its own costs of the audit. In order to limit the need for
an audit by the University, a compliance certificate from the Licensee’s
independent auditors consistent with the requirements of the Accounting may be
acceptable.

 

6.6

Power of Entry. Provided the University provides the licensee with 24 hours
prior written notice, the Licensee shall permit any duly authorized
representative of the University during normal business hours and at the
University's sole risk and expense to enter upon and into any premises of the
Licensee for the purpose of inspecting the Licensed Products and the manner of
their manufacture, and the use

 

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of the Licensed Processes; and generally ascertaining whether or not the
provisions of this Agreement have been and, are being complied with by the
Licensee.

 

6.7

Registration of Security Interest. Upon the University’s request, the Licensee
acknowledges and agrees to provide reasonable and necessary assurances to the
University to permit registration of a security interest in favour of the
University with respect to the interests granted hereunder and royalties and
other amounts payable hereunder arising from such grant, in the appropriate
registry office having jurisdiction, being the Province of Ontario, as the
University shall elect. All costs of registration and renewal are for the
account of the University.

 

6.8

Survival of this Article after Termination. Notwithstanding the termination of
this Agreement, this Article 6 shall remain in full force and effect until:

 

 

(a)

all payments and royalties required to be made by the Licensee to the University
under this Agreement have been made by the Licensee to the University; and

 

(b)

any other claims of any nature or kind whatsoever of the University against the
Licensee arising out of the termination have been settled.

 

ARTICLE 7 – REPRESENTATIONS AND WARRANTIES

 

7.1

Each of the University and the Licensee warrants and represents to the other,
and acknowledges that the other has relied upon the completeness and accuracy of
such representations and warranties in entering into this Agreement, namely:

 

 

i)

it has the corporate capacity to enter into this Agreement and to perform each

of its obligations hereunder; and

 

ii)

it has duly authorized, executed and delivered the Agreement, and the Agreement
constitutes a legal, valid and binding obligation of it, enforceable against it
in accordance with its terms, except only as such enforcement may be limited by
applicable bankruptcy, insolvency and other laws of general application
affecting the enforcement of creditors’ rights and subject to general equitable
principles.

 

The University represents and warrants to, and covenants with, the Licensee that
the university is the owner of the Licensed Technology, (excluding any Licensee
Improvements) and that the University has the sole right to grant the license
herein granted free from all encumbrances.

 

ARTICLE 8 – PATENT PROSECUTION

 

8.1

Licensed Patent Rights. The Licensee hereby recognizes and acknowledges the
ownership rights of the University to the Licensed Technology, as applicable,
the validity of the Licensed Patent Rights and Licensed Trade Secrets licensed
hereunder, and agrees not to contest the ownership of any of the Licensed
Technology or the validity of the Licensed Patent Rights or Licensed Trade
Secrets either directly or indirectly by assisting other parties, nor to
initiate or participate in

 

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opposition proceedings or an interference application in connection with
Licensed Patent Rights.

 

8.2

Patent Prosecution and Patent Costs. The Licensee shall reimburse the University
for all reasonable disbursements, fees and costs relating to the filing,
prosecution and maintenance of the Licensed Patent Rights, whether such fees and
costs were incurred before or after the January 1, 2006. The Licensee shall pay
to the University such fees and costs within thirty (30) days of receiving
copies of invoices for such fees and costs. As of January 1, 2006 or on an
earlier date at the option of the Licensee subject to first paying the Patent
Payments in accordance with Article 5.2, the Licensee shall assume primary
responsibility for the filing, prosecution and maintenance of patents and/or
patent applications worldwide for those inventions within the Licensed Patent
Rights, at the Licensee’s expense, provided that the University shall be
consulted by the Licensee as to the prosecution and maintenance of all such
patent applications within the Licensed Patent Rights prior to any substantive
deadline or action, and shall not substantially limit the scope of patent
protection without the University’s consent, not to be unreasonably withheld.
The Licensee shall furnish the University with copies of all relevant documents
upon filing the same with the patent office of any country, and proof of payment
of patent, application, and maintenance fees. The University shall use
reasonable efforts to assist the Licensee with such filing, prosecution and
maintenance.

 

8.3

Copies of Patent Related Materials. The University shall provide the Licensee
with copies of the patent applications and all official correspondence with the
respective patent and trademarks office(s) relating to the Licensed Patent
Rights.

 

ARTICLE 9 – INFRINGEMENT

 

9.1

Enforcement of Rights Against Third Parties.

 

(a)

In the event of an alleged infringement of the Licensed Patent Rights or an
unauthorized use of the Licensed Technology by a third party in the Territory
for the Field of Use, the Licensee shall have the obligation to prosecute, at
its own expense, any such alleged infringement, subject to prior written advice
to the University. The University agrees to co-operate to the extent of
executing all necessary documents to vest in the Licensee the right to institute
any such suits, and the right to use the University’s name as a party plaintiff.
No settlement, consent, judgment or other voluntary final disposition of the
suit may be entered into without the consent of the University, which consent
shall not unreasonably be withheld. At any time during the prosecution of the
action by the Licensee, the University shall have the right to undertake
direction of the continued prosecution, in its own name or jointly with the
Licensee. The Licensee shall indemnify the University against any order for
costs that may be made against the University in such proceedings.

 

(b)

               In the event that the Licensee undertakes assertion of rights
with respect to the Licensed Technology or the enforcement of the Licensed
Patent Rights by litigation, the Licensee may withhold up to fifty percent (50%)
of the payments otherwise thereafter due to the University under

 

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Article 5 hereunder and apply such withheld amounts toward reimbursement of up
to fifty percent (50%) of Licensee’s expenses, including reasonable attorneys’
fees, in connection therewith. Any recovery of damages by Licensee for each such
suit shall be issued in the name of the Licensee and the University jointly, and
shall be applied first in satisfaction of fifty percent (50%) of any
unreimbursed expenses and legal fees of Licensee relating to such suit, and next
applied for any payments to the University under Article 5 past due or withheld
pursuant to this Article 9 and finally to any remaining unreimbursed expenses
and legal fees of Licensee relating to such suit. The balance remaining from any
such recovery shall be divided equally between the Licensee and the University.
The Licensee shall provide to the University an accounting for all costs,
expenses and disbursements incurred with respect to the defence or enforcement
of the action.               In the event that the enforcement of the Licensed
Patent Rights by the Licensee is not successful, or the Licensee does not
recover 50% of its legal fees and expenses from the withheld royalty amounts,
the Licensee surrenders and foregoes any further entitlement to offset any
amounts against the royalty payments otherwise payable under Article 5.

 

(c)

In the event that the enforcement of the Licensed Patent Rights by the Licensee
or the University is not successful, the Licensee shall have the right to
terminate this Agreement upon sixty (60) days written notice to the University,
provided that the obligations of the Licensee for payment under Section 9.1 (b)
have been fulfilled. Alternatively, the Licensee and the University may enter
renegotiations of a new royalty rate, having regard to the nature and extent of
the Licensed Technology and/or Licensed Patent Rights as are available to be
licensed to the Licensee, pursuant to a revised agreement.

 

(d)

Notwithstanding the foregoing, the University shall have the right to enter into
a contract with the successful third party with respect to licensing of rights
from it in order to permit the continued use of the license hereunder for the
Licensed Technology, and in such case, the terms of this Agreement shall
continue in full force and effect.

 

9.2

Co-operation between the Parties. In any infringement suit to enforce the
Licensed Patent Rights pursuant to this Agreement, the other party hereto shall,
at the request and expense of the party initiating such suit, cooperate in all
respects and, to the extent possible, have its employees testify when requested
and make available relevant records, papers, information, samples, specimens and
the like.

 

9.3

Right to Sublicense Alleged Infringer. The Licensee shall have the right, in
accordance with the terms and conditions herein, to sublicense any alleged
infringer in the Territory for the Field of Use for future use of the Licensed
Technology or the Licensed Patent Rights, as the case may be. Any upfront fees
as part of such a sublicense shall be shared between the Licensee and the
University, together with other fees, royalties and payments, in accordance with
Article 5.

 

 

 

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9.4

Infringement Actions by Third Parties. In the event that a complaint alleging
infringement or violation of any patent or other proprietary rights is made
against the Licensee with respect to the use of the Licensed Technology or the
Licensed Patent Rights, in accordance with this Agreement the following
procedure shall be adopted:

 

(a)

the Licensee shall promptly notify the University upon receipt of any such
complaint and shall keep the University fully informed of the actions and
positions taken by the complainant and taken or proposed to be taken by the
Licensee;

 

(b)

subject to this section, all costs and expenses incurred by the Licensee in
investigating, resisting, litigating and settling such a complaint, including
the payment of any award of damages and/or costs to any third party, shall be
borne by the Licensee provided that the Licensee shall be permitted to deduct
one hundred (100%) of all such costs and expenses from any amounts owing by the
Licensee to the University under this Agreement;

 

(c)            no decision or action concerning or governing any settlement or
other final disposition of the complaint shall be taken without full
consultation with and approval by the University;

(d)

the University may elect to participate formally in any litigation involving the
complaint, to the extent that the court may permit, but any additional expenses
generated by such formal participation shall be borne entirely by the University
(subject to the possibility of recovery of some or all of such additional
expenses from the complainant); and

 

(e)

if the complainant is willing to accept an offer of settlement and one of the
parties to this Agreement is willing to make or accept such offer and the other
is not, then the unwilling party shall conduct all further proceedings at its
own expense, and shall be responsible for the full amount of any damages, costs,
accounting of profits and settlement costs in excess of those provided in such
offer, and shall indemnify the other party for such costs, but shall be entitled
to retain unto itself the benefit of any litigated or settled result entailing a
lower payment of costs, damages, accounting of profits and settlement costs than
that provided in such offer.

 

ARTICLE 10 – CONFIDENTIALITY

 

10.1

Mutual Obligation of Confidentiality. Each party shall treat all Confidential
Information in respect of which it is the Recipient as confidential and shall
not disclose any Confidential Information to any third party or use the
Confidential Information for any purpose other than for the purposes of
fulfilling its obligations under this Agreement. The Recipient shall use at
least the same standard of care in protecting the Confidential Information as it
uses in protecting its own information of a similar nature but, in any event, no
less than a reasonable standard of care. Without limiting the generality of the
foregoing, the Licensee shall not, during the term of this Agreement or at any
time thereafter, disclose any of the University’s Confidential Information to
any person other than a prospective permitted

 

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sublicensee who shall have entered into a confidential disclosure agreement in
form and substance satisfactory to the University. Any Confidential Information
will be disclosed within the Recipient only on a “need to know” basis.
Confidential Information shall be deemed to include the Licensed Trade Secrets.

 

 

10.2

Exclusions from Confidentiality. Notwithstanding Section 10.1, the obligations
regarding confidentiality shall not apply to information which:

 

(a)

was in Recipient's possession before receipt from the Disclosing Party, as
established by documentary evidence; or

 

(b)

is or becomes a matter of public knowledge without breach of this Agreement by
Recipient; or

 

(c)

is received by Recipient from a third party which had no duty of confidentiality
with respect to it; or

 

(d)

is independently developed by the Recipient as established by documentary
evidence; or

 

(e)

is made subject to an order by judicial or administrative process requiring
Recipient to disclose any or all of the information, provided that the Recipient
shall use reasonable efforts in the circumstances to promptly notify the
Disclosing Party of such requirement to enable the Disclosing Party to oppose
such process, before disclosure occurs;

 

(f)

is made in compliance with the rules, policies or laws of a regulatory body,
including a securities exchange or market, with jurisdiction over the Recipient,
provided that the Recipient shall use reasonable efforts in the circumstances to
promptly notify the Disclosing Party of such requirement to enable the
Disclosing Party to oppose such process, before disclosure occurs; or

 

(g)

is disclosed by Recipient with the Disclosing Party’s prior written approval.

 

10.3

Injunction. The parties acknowledge that if a party breaches the provisions of
this Article 10, there may not be an adequate remedy at law through damages.
Accordingly, the parties agree that a non-defaulting party shall have the right
to seek and obtain temporary and permanent injunctive relief to restrain a
violation of this Article 10. The parties acknowledge that the provisions herein
are reasonable, and are fully required to protect the legitimate interests of
the affected party.

 

ARTICLE 11 – DISCLAIMER OF WARRANTIES BY UNIVERSITY AND LIMITATION OF LIABILITY

 

11.1

Disclaimer of Warranties by the University. Except as expressly set forth in
this Agreement, the University, its trustees, officers, employees, students and
agents make no representations or warranties of any kind, either express or
implied, and there are no conditions, either express or implied. Without
limiting the generality of

 

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the foregoing, there are no express or implied warranties of merchantability or
fitness for a particular purpose, validity of Licensed Patent Rights claims,
issued or pending, or the absence of latent or other defects in the Licensed
Patent Rights, or the Licensed Trade Secrets. Nothing in this Agreement shall be
construed as a representation or warranty by the University that the practise by
the Licensee of the license granted hereunder, including, without limitation, to
make, have made use, lease, sell, distribute and import Licensed Products and to
practise the Licensed Processes will not infringe any patent, copyright,
trademark, or other rights of any third party, but to this intent, the
University represents that as at the Effective Date, the University has not been
made aware any Licensed Patent Rights licensed hereunder which infringe the
rights of any third parties. The Licensee acknowledges that it has been advised
by the University to undertake its own due diligence, including independent
legal advice, with respect to the grant of the Licensed Patent Rights, the
Licensed Trade Secrets and the terms of this Agreement.

 

11.2

Limitation of the University’s Liability. The aggregate damages for which the
University shall be liable shall not exceed the amount of royalties paid by the
Licensee to the University. In no event shall the University, its trustees,
officers, students, employees or agents be liable for any indirect,
consequential, incidental, or special damages of any kind whatsoever, including,
but not limited to, economic damage or injury to property or lost profits, even
if the University has been advised of or knows of the possibility of such
damages.

 

11.3

Additional Disclaimers. Nothing in this Agreement shall be construed as:

 

(a)

an obligation by the University to bring or prosecute actions or suit against
third parties for infringement of patents, copyrights, trade-marks, registered
design or other intellectual property or contractual rights, or

 

(b)

the conferring by either party of any right to use in advertising, publicity or
otherwise the Trademarks or the name of the other party.

 

ARTICLE 12 – LICENSEE INDEMNITY AND INSURANCE

 

12.1

Licensee’s Indemnity. The Licensee shall at all times during the term of this
Agreement and thereafter, indemnify, defend and hold harmless the University,
its trustees, directors, officers, employees, students and agents, against all
claims, proceedings, demands and liabilities of any kind whatsoever (including
but not limited to legal fees and disbursements on a solicitor-and-own-client
basis) whether, arising out of the death of or injury to any person or persons
or out of any damage to property, or resulting from the use of the Licensed
Patent Rights or the Licensed Trade Secrets or from the production, manufacture,
sale, use, lease, consumption or advertisement of the Licensed Technology, or
arising from any right or obligation of the Licensee hereunder, or otherwise,
excepting only claims that the Licensed Patent Rights infringe intellectual
property rights of third parties.

 

12.2

Insurance Required for Licensee. Prior to the first sale of a Licensed Product
or use of a Licensed Process and throughout the term hereof and a reasonable
period of time thereafter, the Licensee shall procure and maintain comprehensive
general

 

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liability insurance; including product liability, personal liability, personal
injury, property damage, and broad form contractual liability coverage for all
acts and omissions directly or indirectly associated with this License
Agreement, and deliver to the University a certificate therefor. Such insurance
shall be no less than the insurance which a reasonable and prudent corporation
carrying on a similar business would acquire. This insurance shall be placed
with a reputable and financially secure insurance carrier, shall include the
University, its trustees, faculty, officers, employees, students and agents as
additional insureds, shall contain a waiver of subrogation against the
University, its trustees, faculty, officers, employees, students and agents and
shall be endorsed to include product liability coverage and shall provide that
the policy shall not be cancelled or materially amended except upon at least
thirty (30) days’ written notice to the University. The Licensee shall require
that each sublicensee under this Agreement shall procure and maintain equivalent
insurance coverages.

 

12.3

Insurance Not to Affect Indemnities. The existence of any insurance policies
will not relieve the Licensee from its obligations under the indemnification
provisions contained in this Agreement.

 

ARTICLE 13 – TERMINATION

 

13.1

Termination by the University. In addition to any specific rights of termination
provided for herein, the University may, at its option and in its sole
discretion, terminate this Agreement on the happening of any one or more of the
following events of default, where such default is not cured within thirty (30)
days after receipt of written notice of the default from the University, or is
not cured within such further reasonable period of time as may be necessary,
provided that the Licensee is diligently seeking to remedy such default, and
upon the expiration of such ppropriate time period to cure without the default
being remedied, this Agreement shall terminate without further formality:

 

(a)

if the Licensee is more than thirty (30) days in arrears of fees, royalties or
payments due under this Agreement, including payment of patent costs or fees
contemplated under Section 8.2;

 

 

(b)

if the Licensee seeks creditor protection; or if any execution, sequestration,
or any other process of any court becomes enforceable against the Licensee; or
if any such process is levied on the rights under this Agreement or upon any of
the monies due to the University and is not released or satisfied by the
Licensee within thirty (30) days thereafter;

 

(c)

if any resolution is passed or order made or other steps taken for the winding
up, liquidation or other termination of the existence of the Licensee, or if the
Licensee ceases to carry on its business.

 

13.2

Termination by Either Party. Except as provided in Section 5.2 or Section 13.1,
if either party shall be in default under or shall fail to comply with the terms
of this Agreement and if such default is reasonably curable within thirty (30)
days after

 

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occurrence of such default and such default or failure to comply is not cured
within such thirty (30) days after receipt of written notice thereof, or is not
cured within such further reasonable period of time as may be necessary,
provided that the defaulting party is diligently seeking to remedy such default,
then the non-defaulting party shall have the right to terminate this Agreement
immediately by giving written notice to that effect to the party in default.

 

13.3

Rights upon Termination. If this Agreement is terminated pursuant to Section
13.1 or 13.2 hereof;

 

(a)

all Confidential Information of each party shall be returned to the other party;

 

 

(b)

all rights other than Licensee Improvements to the Licensed Technology, Licensed
Trade Secrets, and including, without limitation any rights to knowledge,
know-how, information techniques or use of Licensed Products or Licensed
Processes and any other rights granted hereunder shall revert to the University;
and

                

(c)

Disposal of Unsold Licensed Product. Alternative Remedies. The Licensee shall
cease to use the Licensed Processes in any manner whatsoever or to manufacture
the Licensed Products or to otherwise practise the Technology within five (5)
Business Days following the effective date of the termination of this Agreement
("Effective Date of Termination"). The Licensee shall then deliver or cause to
be delivered to the University a complete final accounting of all Gross Revenue
and of all other amounts payable to the Licensee in respect of the sublicensing
of the Technology and/or the sale or distribution of Licensed Products and/or
use of Licensed Processes and shall make payments to the University required by
Article 5 hereof within thirty (30) days following the Effective Date of
Termination, and at the University’s request, deliver at no cost to the
University, any Licensed Products remaining in the possession of the Licensee.

 

13.4

Preservation of all Remedies and Rights. Upon any termination of this Agreement,
the non-defaulting party shall have the right to enforce one or more remedies
successively or concurrently in accordance with applicable law and retains all
rights and remedies against the defaulting party. The University may proceed to
enforce payment of all debts owed to the University and to exercise any or all
of the rights and remedies contained herein or otherwise available to the
University by law or in equity.

 

13.5

Non-Waiver. No condoning, excusing or overlooking by any party of any default,
breach or non-observance by any other party at any time or times in respect of
any covenants, provisos, or conditions of this Agreement shall operate as a
waiver of such party's rights under this Agreement in respect of any continuing
or subsequent default, breach or non-observance, so as to defeat in any way the
rights of such party in respect of any such continuing or subsequent default or
breach and no waiver shall be inferred from or implied by anything done or
omitted by such party, save only an express waiver in writing.

 

 

 

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No exercise of a specific right or remedy by any party precludes it from or
prejudices it in exercising another right or pursuing another remedy or
maintaining an action to which it may otherwise be entitled either at law or in
equity.

 

ARTICLE 14 – GENERAL

 

14.1

Relationship. Nothing contained herein shall be deemed or construed to create
between the parties hereto a partnership, joint venture or employment
relationship. No party shall have the authority to act on behalf of the other
party, or to commit the other party in any manner or cause whatsoever or to use
the other party's name in any way not specifically authorized by this Agreement.
Neither party shall be liable for any act, omission, representation, obligation
or debt of the other party, even if informed of such act, omission,
representation, obligation or debt.

 

14.2

Governing Law. This Agreement shall be governed by and construed and applied in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable in such Province, except that questions regarding the construction
and effect of any patent shall be determined by the laws of the country in which
the patent was granted.

 

14.3

Dispute Resolution. In the event of a dispute between the parties arising out of
or in connection with this Agreement or regarding the interpretation of the
provisions hereof other than in connection with whether an event of default has
occurred, the procedure set forth in Schedule ”B” shall apply.

 

14.4

Enurement, Survival of Covenants. Subject to the limitations hereinbefore
expressed, this Agreement shall enure to the benefit of and be binding upon the
parties, and their respective successors and permitted assigns. The terms and
provisions, covenants and conditions contained in this Agreement which by the
terms hereof require their performance by the parties hereto after the
expiration or termination of this Agreement shall be and remain in force
notwithstanding such expiration or other termination of this Agreement for any
reason whatsoever.

 

14.5

Assignment. Neither the Licensee nor the University shall be entitled to assign,
transfer, mortgage, charge or otherwise dispose of this Agreement or any
interest therein, or of any of the rights, duties or obligations granted
hereunder (any of the foregoing being an “Assignment”), without the express
written consent of the other, such consent not to be unreasonably withheld or
delayed, and any attempt to effect such Assignment shall cause such Assignment
to be void. Assignment shall also include any assignment by operation of law,
but shall not include any change in shareholder control of the Licensee, The
licensee shall be entitled to transfer, assign or otherwise convey the whole but
not less than the whole of its interest in this Agreement and the license herein
granted in connection with the sale of the Licensee or an incorporated division
of the Licensee or the sale of all or substantially all the assets of the
Licensee or a division of the Licensee, subject to the prior written consent of
the University, such consent shall not be unreasonably withheld.

 

14.6

Entire Agreement; Severability. This Agreement sets forth the entire
understanding between the parties and no modifications hereof shall be binding

 

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unless set forth in a written agreement or other document executed by the
parties hereto. In the event that any part, section, clause, paragraph or
subparagraph of this Agreement shall be held to be invalid, illegal or otherwise
unenforceable, the entire agreement shall not fail on account thereof, and the
balance of this Agreement shall continue in full force and effect.

 

14.7

Headings, Number, Gender. Marginal headings as used in this Agreement are for
the convenience of reference only and do not form a part of this Agreement and
are not be used in the interpretation hereof. Whenever the singular or masculine
or neuter is used throughout this Agreement the same shall be construed as
meaning the plural or feminine or body corporate when the context of the parties
hereto may require.

 

14.8

Notices. All notices, requests, directions or other communications (“Notices”)
required or permitted herein will be in writing and will be delivered to the
parties hereto respectively as follows:

 

If to the Licensee:

 

If to the Licensee:

 

1200 Michener Road, Box 6

 

Sarnia, ON, N7T 7H8

 

Attention:

Barry Lamperd

 

Facsimilie No.:

(519) 344-8700

 

and copy to

McLean Kerr LLP

Suite 2800

 

130 Adelaide Street West

 

Toronto, ON, M5H 3P5

 

Attention:

Koby Smutylo

 

If to the University:

 

Respecting administrative and financial matters, amendment or termination of
this Agreement:

 

Industry Liaison

 

Stevenson-Lawson Building

 

Room 328

 

The University of Western Ontario

London, ON N6A 5B8

 

 

Attention: Director

 

Facsimile No:

519-661-3907

 

 

 

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In order for any notice, request, direction, or other communication to be
effective, it will be delivered by courier or sent by facsimile (followed by
hard copy) addressed to the party for whom the Notice is intended at the
above-mentioned address and will be deemed to have been received on the date of
delivery if delivered by courier, and if sent by facsimile, on the next business
day following electronic confirmation of the successful transmission of the
facsimile. The address of either party may be changed by notice in the manner
set out in this provision.

 

14.9

Time of the Essence. Time shall be of the essence of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

THE UNIVERSITY OF WESTERN ONTARIO

 

 

[img1.gif]
By: /s/ Alex Navarre                                         Alex Navarre,
Ph.D., MBA

Director, Technology Transfer

I have authority to bind the University.

 

1476246 ONTARIO LTD.

 

 

By: /s/ Barry Lamperd

 

Barry Lamperd

 

[img2.gif]
President

I have authority to bind the Corporation.

 

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SCHEDULE A

 

 

United States Patent Applications and Foreign Patent Applications

 

U.S. Provisional 60/507,491: Less-Lethal Ammunition Projectile

PCT/CA2004/01773: Less-Lethal Ammunition Projectile

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE B

 

Dispute Resolution

 

In the event a dispute or disagreement (hereinafter called “Dispute”) arises
between the parties in connection with the interpretation of any provision of
this Agreement or the compliance or non-compliance therewith, or the validity or
enforceability thereof, or the performance or non-performance of either party to
the Agreement, the following Dispute resolution process shall be followed by the
parties:

 

i.

A Dispute will be deemed to have arisen upon the delivery of a written notice by
one party to the other describing the Dispute (herein called the “Dispute
Notice”). Upon delivery of the Dispute Notice, the parties agree to attempt to
resolve the Dispute in a prompt and expeditious manner. Except for the Dispute
Notice, all communications between the parties will be on a without prejudice
basis.

 

ii.

If the parties have not been able to resolve the dispute in a prompt and
expeditious manner after delivery of the Dispute Notice, either party may at any
time thereafter request by written notice to the other party that the Dispute be
escalated to Senior Management.

 

iii.

In the event such a request with written notice is made, each party shall make
available the senior executives specified in the following subsection (“Senior
Management”) who shall meet within fifteen (15) Business Days after such request
is made at the offices of the party which received the request to attempt to
resolve the Dispute.

 

iv.

The Senior Management appointee for each party is as follows:

 

Licensee: the person designated by the Board of Directors of the Licensee

 

University: Vice-President, Research, or designate

 

Either party may change its Senior Management appointee upon prior written
notice to the other.

 

In case such Dispute is not settled amicably by Senior Management within thirty
(30) days of escalation to Senior Management, such Dispute shall be arbitrated
by a single arbitrator acting in accordance with the provisions of the
Arbitration Act, 1991 (Ontario), whose decision shall be final and binding upon
the parties. The arbitrator shall be the person that the parties may agree on
and in default of agreement within twenty (20) days following the expiration of
the above-mentioned thirty (30) day period, then either party may apply to a
Judge of a court having jurisdiction to appoint the single arbitrator who shall
be unconditionally accepted by both parties. The place of arbitration for
disputes for which arbitration is initiated by either party shall be London,
Ontario. The arbitrator as selected or appointed shall have knowledge of and
experience in licensing. The language of any arbitration will be English.

 

 

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The arbitration hearing shall commence within sixty (60) days after appointment
of the arbitrator is done and shall be completed and a binding award rendered in
writing within sixty (60) days after commencement of the hearing unless
exceptional circumstances warrant delay. The decision of the arbitrator may be
entered in any court of competent jurisdiction and execution entered thereupon
forthwith. The law specified in Section 14.2 of this Agreement shall apply.

 

Each party shall bear the cost of preparing its own case. The arbitrator shall
have the right to include in the award the prevailing party’s costs of
arbitration and reasonable fees of attorneys, accountants, engineers, scientists
and other professionals incurred by it in connection with the arbitration.
Failing a specific award, the parties shall share equally the costs of the
arbitrator and arbitration proceedings.

 

Notwithstanding the provisions of this Schedule, the parties recognize that a
party may desire to seek emergency, provisional, or summary relief (including
temporary injunctive relief) to enforce the provisions of this Agreement
relating to protection of intellectual property and/or Confidential Information.
A party may seek such relief, provided, however, that immediately following the
issuance of any emergency, provisional, temporary injunctive or summary relief,
any such judicial proceedings shall be stayed (and each party shall consent to
such stay) pending resolution of any related underlying claims between the
parties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE C

 

Trade Secrets

 

i.

processing conditions for injection moulding.

ii.

die design

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE D

 

Commercialization Due Diligence Requirements

And Milestones

 

 

Milestones. The Licensee shall adhere to the following milestones:

 

(a)           Licensee shall develop a working model and operating facility to
utilize the Licensed Technology on or before December 31, 2005 and permit an
in-plant inspection by the University on or before December 31, 2005, and
thereafter permit in-plant inspections by the University at regular intervals
with at least twelve (12) months between each such inspection;

 

(b)

Raise: $250,000 by September 1, 2005.

 

(c)

Have the following equipment operational by December 31, 2005:

 

(i)

One injection molding machine

 

 

 

 

 

 

 

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