Filed by Automated Filing Services Inc. (604) 609-0244 - Mantra Venture Group Ltd. - Exhibit 10.5






OPTION AGREEMENT 

THIS AGREEMENT is made and effective as of the 1st day
of October, 2007 

B E T W E E N: 


  
    
      
        
          THE GOVERNING COUNCIL OF THE UNIVERSITY OF TORONTO,
            a corporation vested with the government, management and control of
            the University of Toronto by the University of Toronto Act, 1971
            and having offices at MaRS Centre, Heritage Building, 101 College
            Street, Suite 320, Toronto, Ontario M5G 1L7, Canada 

          (hereinafter “UT”) 

        

      

    

  



- and - 


  
    
      
        
          MANTRA ENERGY ALTERNATIVES LTD., a corporation
            having offices at 207 West Hastings Street, Suite 1205, Vancouver,
            B.C. V6B 1H7, Canada 

          (hereinafter the “Optionee”) 

        

      

    

  



WHEREAS Mohammad Reza Irvani and Masoud Karimi
Ghartemani (each an “Inventor” and collectively, the “Inventors”),
while employed by UT have made an Invention (as hereinafter defined); 

WHEREAS by Assignments of Rights from UT dated October
7, 2004, UT assigned its entire right, title and interest in the Invention to
the Inventors on terms and conditions set out therein; 

WHEREAS by Assignments of Rights from Masoud Karimi
Ghartemani (“Ghartemani”) dated October 7, 2004, Ghartemani assigned his
entire right, title and interest in the Invention to Mohammad Reza Irvani (the
“Owner”) on terms and conditions set out therein; 

WHEREAS by a Technology Owners’ Agreement dated October
12, 2004 the Owner retained the University of Toronto Innovations Foundation
(“UTIF”) as his exclusive agent for the exploitation of the Invention,
including the patenting and licensing thereof; 

WHEREAS UTIF, on behalf of the Owner, has filed patent
applications in relation to the Invention as listed in Schedule “A” hereof; 

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WHEREAS effective May 1, 2006, UTIF ceased to operate
its business and it transferred and assigned all of its business and assets to
UT; 

WHEREAS the Optionee is a company whose purpose is to
commercialize, develop, manufacture, market, distribute and sell useful
products; and 

WHEREAS UT, on behalf of the Owner, is willing to grant
to the Optionee an option to negotiate and acquire the exclusive right to
develop, manufacture, market, distribute and sell products which may be derived
in whole or in part from the practice of the Technology. 

NOW THEREFORE in consideration of the premises and the
mutual covenants, terms, conditions and agreements contained herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Parties hereto agree as follows: 

ARTICLE 1 
INTERPRETATION 

1.1       
Definitions 

In this Agreement, the following terms have the meanings set
forth below: 

“Agreement” means this Option Agreement including all
attached schedules, as the same may be supplemented, amended, restated or
replaced in writing from time to time by mutual agreement of the Parties; 

“Confidential Information” means this Agreement and its
terms and conditions, the Know-how, and any information, which is non-public,
confidential or proprietary in nature, including, without limitation, business
information, trade secrets, and any information related to the Technology,
whether written, oral or in electronic form, provided that tangible materials
are marked as confidential, and provided that information given orally or by
visual inspection is identified as confidential at the time of disclosure, and
confirmed as confidential in writing within fifteen (15) days, but shall not
include information that: 

	 	(a) 	
      is or becomes generally available to the public other
      than as a result of any act by a receiving Party to this
  Agreement;

	 	 	 
	 	(b) 	
      is rightfully received from a third party without similar
      restriction or without breach of this Agreement;

	 	 	 
	 	(c) 	
      a receiving Party is able to demonstrate, in writing, was
      known to it on a non-confidential basis; or

	 	 	 
	 	(d) 	
      a receiving Party can show through tangible evidence was
      independently developed by a Party without the use of any of the
      Confidential Information.



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“Copyright” means the rights prescribed in the
Copyright Act (Canada), including those copyright registrations and
applications relating to the Technology identified in Schedule “A” herein; 

“Draft License Agreement” shall mean the technology
license agreement in relation to the Technology attached hereto as Schedule “B”;


“Effective Date” shall mean the date first shown in this
Agreement; 

“Intellectual Property Rights” means all Patents,
Copyright, trade-names and other intellectual property rights relating to the
Invention, whether registered or not, owned by or licensed to the Owners (or any
of them); 

“Invention” means the invention titled “A Novel System
for Detection and Extraction of Useful Signals in Three-Phase Power Systems” as
more fully described in the University of Toronto Confidential Intellectual
Property Disclosure attached hereto as Schedule “C”; 

“Know-how” means any and all trade secrets, technical
expertise, knowledge, confidential information and know-how, whether patentable
or unpatentable relating to the Invention, whether in written, machine readable,
drawing or oral form, including, without limiting the generality of the
foregoing, all technical information, raw material, data, product
specifications, processes and designs, operating and production data,
calculations, computer programs, instructions and techniques, quality control
and other standards, and drawings relating thereto which are developed by the
Owner and which exist at the Effective Date; 

“Parties” means UT and the Optionee collectively, and
“Party” means any of them; 

“Patents” means the patents listed in Schedule “A”
appended hereto, and shall include any divisional, re-examination, renewal, or
continuation applications based on the said patent applications, any patents
which may issue on, from or as a result of any of the foregoing, including all
foreign patents, and any reissue of said patents; and 

“Technology” means the Invention, the Know-how and all
Intellectual Property Rights relating to the Invention. 

1.2        Captions


The division of this Agreement into articles, sections,
subsections and schedules and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The article, section, subsection and schedule headings in this
Agreement are not intended to be full or precise descriptions of the text to
which they refer and are not to be considered part of this Agreement. All uses
of the words “hereto”, “herein”, “hereof”, “hereby” and “hereunder” and similar
expressions refer to this Agreement and not to any particular section or portion
of it. References to an Article, Section, Subsection or Schedule refer to the
applicable article, section, subsection or schedule of this Agreement. 

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1.3        Currency


Unless specified otherwise, all statements of or references to
dollar amounts in this Agreement are to lawful money of Canada. 

1.4        Schedules


The following schedules are attached to and incorporated by
reference into this Agreement: 

	Schedule A 	Intellectual
      Property Rights 
	Schedule B 	Draft License Agreement 
	Schedule C 	Invention
  


ARTICLE 2 
TECHNOLOGY OPTION 

2.1       
Grant of Option 

	 	(a) 	
      UT (solely as agent of the Owner) hereby grants to the
      Optionee an exclusive option to negotiate and obtain an exclusive,
      worldwide license to the Technology in all fields of use (the
      “Option”), upon and subject to the terms and conditions hereinafter
      set forth.

	 	 	 
	 	(b) 	
      UT (solely as agent of the Owner) hereby grants to the
      Optionee, during the term of this Agreement, a non-exclusive right to use
      the Technology for internal research purposes.

	 	 	 
	 	(c) 	
      Nothing in this Agreement grants the Optionee the right
      to use the Technology for the purpose of making, using or selling a
      commercial product.

	 	 	 
	 	(d) 	
      The Optionee may exercise its Option hereunder at any
      time during the term of this Agreement or any extension thereof.

	 	 	 
	 	(e) 	
      In the event that the Optionee exercises its Option
      hereunder, the Optionee and UT agree to execute a technology license
      agreement containing substantially similar terms and conditions as set
      forth in the Draft License Agreement.

	 	 	 
	 	(f) 	
      In the event that the Optionee fails to exercise the
      Option within the term of this Agreement or within any extension thereof,
      or if this Agreement is terminated pursuant to Section 6.2 herein, UT may
      offer exclusive worldwide licenses in relation to the Technology to third
      parties.



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ARTICLE 3 
CONSIDERATION 

3.1       
Upfront Fees 

	 	(a) 	
      In consideration for the Option granted herein, the
      Optionee shall pay to UT a non-refundable upfront fee (the “Option
      Fee”) of twelve thousand dollars ($12,000) on or within thirty (30)
      days following the Effective Date.

	 	 	 
	 	(b) 	
      In the event that the Optionee fails to exercise the
      Option within the term of this Agreement or if this Agreement is
      terminated in accordance with section 6.2 hereof, the Parties hereto
      acknowledge and agree that the Option Fee shall be forfeit by the Optionee
      and shall remain the property of UT.



ARTICLE 4 
INTELLECTUAL PROPERTY 

4.1       
Patent Prosecution 

During the term of this Agreement, UT shall: 

	 	(i) 	
      file, prosecute and maintain the Patents in the name of
      Owner as assignee;

	 	 	 
	 	(ii) 	
      pay all third party charges relating to the filing,
      prosecution and maintenance of the Patents; and

	 	 	 
	 	(iii) 	
      keep the Optionee reasonably advised of the progress of
      prosecution and of any actions UT proposes to take or has taken in
      connection with the prosecution or maintenance of the
  Patents.



4.2       
Confidentiality 

	 	(a) 	
      All Confidential Information will remain the property of
      its owner or the party that furnished it as the case may be.

	 	 	 
	 	(b) 	
      For a period of five (5) years from the date of
      disclosure of Confidential Information, each Party agrees to maintain in
      confidence all Confidential Information disclosed with the same degree of
      care as it normally takes to preserve its own confidential information of
      similar grade, but in any event, no less than a reasonable degree of
      care.

	 	 	 
	 	(c) 	
      Each Party may only disclose Confidential Information to
      persons with a “need to know” who shall be made aware of, and be required
      to observe and comply with the covenants and obligations contained herein,
      and the



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      Confidential Information shall only be used to carry on
      or facilitate business as contemplated under this Agreement.

	 	 	 
	 	(d) 	
      A Party may disclose Confidential Information pursuant to
      the requirements of a government agency or pursuant to a court order,
      provided that the Party shall take all reasonable steps, including, but
      not limited to the seeking of an appropriate protective order, to preserve
      the confidentiality of the Confidential Information provided.

	 	 	 
	 	(e) 	
      If this Agreement is terminated for any reason, any Party
      in receipt of Confidential Information shall promptly deliver or destroy
      all Confidential Information of the disclosing Party without retaining
      copies thereof, except that the receiving Party may retain in the office
      of its legal counsel one (1) copy of written Confidential Information for
      record purposes only.

	 	 	 
	 	(f) 	
      In the event that a Party becomes aware of, or perceives
      any threat that, any Confidential Information may be disclosed contrary to
      the provisions of this Section 4.2, or in the circumstances referred to in
      Subsection 4.2(d) hereof, such Party shall immediately provide written
      notice thereof to the other Party.



ARTICLE 5
REPRESENTATIONS, WARRANTIES AND INDEMNITY


5.1       
Representations and Warranties of Parties 

The representations of the Optionee and UT, one to the other
are as follows: 

	 	(a) 	
      The Optionee is a corporation duly organized, validly
      existing and in good standing, and it has the right and authority to enter
      this Agreement, and do all acts and things as required or contemplated to
      be done, observed and performed by it hereunder;

	 	 	 
	 	(b) 	
      the execution, delivery and performance of this Agreement
      does not contravene any law, rule or regulation of any Party or of the
      jurisdiction in which it is incorporated; and

	 	 	 
	 	(c) 	
      UT is a corporation duly organized, validly existing and
      in good standing, and it has the right to grant the Option as provided
      herein and that such grant is not in conflict with any other agreement to
      which it is a party.



EXCEPT FOR THE FOREGOING REPRESENTATIONS AND WARRANTIES
PROVIDED IN THIS SECTION 5.1, UT DISCLAIMS ALL REPRESENTATIONS, WARRANTIES AND
CONDITIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING WITHOUT LIMITATION ALL REPRESENTATIONS, WARRANTIES AND CONDITIONS AS
TO QUALITY, MERCHANTABLE QUALITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, SCOPE, PATENTABILITY, VALIDITY OR 

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ENFORCEABILITY OF THE TECHNOLOGY OR THAT THE TECHNOLOGY IS SAFE
FOR ANY USE OR PURPOSE WHATSOEVER, OR THAT THE TECHNOLOGY DOES NOT INFRINGE THE
RIGHTS OF ANY THIRD PARTY. 

5.2       
Indemnity 

Except to the extent when caused by the gross negligence of UT,
the Optionee shall indemnify and hold harmless the Inventors, the Owner, their
respective successors and assigns, and UT, its parents, subsidiaries,
affiliates, attorneys, agents, officers, directors, employees, administrators,
predecessors, successors or assigns (collectively, the “Indemnitees”)
from and against any and all claims, threats, loss, liability, damage or
expense, including reasonable lawyers’ fees, by reason or arising out of any
acts or failure to act by or out of any use of the Technology by the Optionee or
its servants, agents, affiliates, officers, directors, stock-holders, or
employees. The party seeking indemnification shall give the Optionee prompt
notification of any such claim, threat, loss, liability, damage or expense. The
indemnity provided herein shall survive any termination or assignment of this
Agreement without time limit. The Optionee acknowledges that UT is entering this
Agreement and obtaining the foregoing indemnification as agent for other
Indemnitees and is holding the rights contained in this paragraph in trust for
the other Indemnitees. 

ARTICLE 6
TERM AND TERMINATION 

6.1       
Term 

This Agreement shall come into effect upon the Effective Date,
and unless earlier terminated, shall terminate twelve (12) months following the
Effective Date. 

6.2       
Termination 

	 	(a) 	
      This Agreement may be terminated for material breach by
      any of the Parties upon at least thirty (30) days prior written notice (in
      accordance with the notice provisions of Section 7.1 hereof) to the Party
      asserted to be in breach thereof.

	 	 	 
	 	(b) 	
      Termination shall be effective on the date set forth in
      the notice, unless prior to that date the Party in breach has cured the
      breach.

	 	 	 
	 	(c) 	
      The Optionee may terminate this Agreement, at is sole
      discretion, at any time upon thirty (30) days prior written notice to
      UT.

	 	 	 
	 	(d) 	
      If a Party:

	 	 	 
	 		
      (i)       
      is adjudicated insolvent or a bankrupt,



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	 	(ii) 	
      is the subject of any proceedings relating to its
      liquidation, insolvency or for the appointment of a receiver or similar
      officer for it, or

	 	 	 
	 	(iii) 	
      makes a general assignment for the benefit of all or
      substantially all of its creditors, or enters into an agreement for the
      composition, extension or re-adjustment of all or substantially all of its
      obligations,




	 		
      then the other Party, within the conditions of applicable
      law, may immediately terminate this Agreement by giving written
    notice.

	 	 	 
	 	(e) 	
      Termination as set forth in this Section shall not
      relieve any of the Parties of any obligations accrued under this Agreement
      prior to the date of termination. The following provisions shall survive
      termination of this Agreement: Sections 1.1 (Definitions); 4.2
      (Confidentiality); 5.2 (Indemnity); Subsection 6.2(e) (Survival); and
      Article 7 (General Provisions).



ARTICLE 7 
GENERAL 

7.1       
Notices 

All notices required and permitted under this Agreement shall
be in writing, and service of all such notices shall be sufficient and complete
if and when sent by registered mail, postage prepaid addressed to the party to
be notified, at the address given above or at other addresses of which the
parties have notice in writing. 

7.2       
Conflict 

In the event any term or any part of any term of this Agreement
is determined to be void or unenforceable, such term or part of a term shall be
considered separate and severable from this Agreement and the remaining terms
shall continue in full force and effect. 

7.3       
Governing Law 

This Agreement shall be governed by, and interpreted and
enforced in accordance with the laws in force in the Province of Ontario and the
federal laws of Canada applicable therein (excluding any conflict of laws, rule
or principle which might refer such interpretation to the laws of another
jurisdiction). Each Party hereby attorns and submits to the exclusive
jurisdiction of the Ontario Superior Court of Justice in any action or
proceeding arising out of or relating to this Agreement. Further, each Party
hereby agrees that service may be made on any representative of the Parties
hereto, whether in Toronto or elsewhere. Finally, each Party hereby agrees that
all such claims in respect of such actions or proceedings shall be heard and
determined in Toronto in such Ontario court. 

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7.4       
Further Assurances 

The Parties agree to execute, acknowledge and deliver all such
further instruments, and to do all such other acts, as may be necessary or
appropriate to carry out the intent and purpose of this Agreement. 

7.5       
Waiver of Rights 

No failure or delay on a part of a Party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or future exercise thereof or the exercise of any other right, power
or remedy. No waiver by a Party hereto of a default hereunder shall operate
against such Party as a waiver of such default unless made in writing and signed
by an authorized officer of such Party. 

7.6       
Relationship of the Parties 

	 	(a) 	
      The relationship of the Optionee to UT is that of an
      independent contractor and neither the Optionee nor its agents or
      employees shall be considered employees of UT. This Agreement does not
      constitute and shall not be construed as constituting a partnership or
      joint venture or grant of a franchise between the Optionee and
  UT.

	 	 	 
	 	(b) 	
      A Party will not use the name of any other Party, nor any
      member of such Party’s staff in any advertising or publicity without the
      prior written approval of an authorized representative of the body whose
      name is to be used. However, a Party may notify others of the fact that
      this Agreement is in effect.



7.7       
Force Majeure 

No Party shall be liable to any other party for delay or
failure in the performance of any of its obligations hereunder if such failure
is caused by Force Majeure, as hereinafter defined. For the purposes hereof,
“Force Majeure” means any act of God, action or failure to act of any
government or governmental or regulatory authority, failure of supplies,
materials, equipment, labour or transportation being provided by any other
person, power failure or shortage, strike, lockout, work slowdown or stoppage,
accident, fire, flood, explosion, storm, other natural occurrence, sabotage or
other event beyond the control of the relevant party. 

7.8       
Entire Agreement 

This Agreement, including all attached Schedules which are
hereby incorporated by reference, sets forth the entire agreement and
understanding of the Parties relating to the subject matter contained herein and
merges all prior discussions and agreements between them, and neither Party
shall be bound by any definition, condition, warranty or representation other
than expressly stated in this Agreement. Any amendment to this 

Page 9 of 13 




Agreement shall not be effective unless it is in writing and
signed by the duly authorized signing officers of each Party. 

7.9       
Facsimile Execution 

To evidence the fact that it has executed this Agreement, a
Party may send a copy of its executed counterpart to the other Party by
facsimile transmission. That Party shall be deemed to have executed this
Agreement on the date it sent such facsimile transmission. In such event, such
Party shall forthwith deliver to the other Party the counterpart of this
Agreement executed by such Party. 

7.10       
Assignment 

This Agreement shall not be assigned by the Optionee without
the prior written consent of UT, such consent not to be unreasonably withheld.


7.11       
Succession 

This Agreement shall be binding upon and enure to the benefit
of the Parties hereto and their respective heirs, executors, administrators and
other legal representatives and, to the extent permitted hereunder, their
respective successors and permitted assigns. 

IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed in a legally binding manner. 

THE GOVERNING COUNCIL OF THE UNIVERSITY OF TORONTO



Per:    /s/ Tim McTiernan, Ph.D.                                      

            Tim McTiernan, Ph.D. 

             Interim Vice-President,
  Research 

             Executive Director,
  The Innovations Group 

             University of Toronto


 

MANTRA ENERGY ALTERNATIVES LTD. 


Per:    /s/ David Warren                                                   

             David Warren 

             Chief Financial
  Officer and Chief Operating Officer 

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SCHEDULE “A” 
INTELLECTUAL PROPERTY RIGHTS 

	Jurisdiction: 	Canada 
	Patent Title: 	“Three-Phase Power Signal
      Processor” 
	Application Number: 	2,503,685 
	Filing Date: 	April 5, 2005 
	  	  
	Jurisdiction: 	United States 
	Patent Title: 	“Three-Phase Power Signal
      Processor” 
	Application Number: 	11/098,421 
	Filing Date: 	April 5, 2005



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SCHEDULE “B” 

  DRAFT LICENSE AGREEMENT 

 

 

 

 

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SCHEDULE “C” 

  INVENTION 

 

 

 

 

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