[PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. A COPY OF THIS EXHIBIT INTACT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
PATENT LICENSE AGREEMENT
THIS PATENT LICENSE AGREEMENT (this "Agreement") is made and entered
into as of July 20, 1998, by and between INSTITUTE OF CRITICAL CARE MEDICINE, a
California non-profit corporation ("Licensor"), with an address at 0000 Xxxxx
Xxxxxxx Xxx, Xxxxxxxx #0, Xxxx Xxxxxxx, Xxxxxxxxxx 00000 and OPTICAL SENSORS
INCORPORATED, a Delaware corporation ("Licensee"), with an address at 0000
Xxxxxx Xxxxxxxx Xxxxx, Xxxxx X, Xxxxxxxxxxx, Xxxxxxxxx 00000.
RECITALS:
A. Licensor is the owner of issued U.S. Patent No. 5,579,763 relating
to a method for measuring CO2 in the esophagus to assess perfusion failure, as
listed in Exhibit A attached hereto (the "Patent") and a filed U.S. patent
application relating to a method for measuring CO2 under the tongue to assess
perfusion failure and a filed continuation of such U.S. patent application, each
as listed in Exhibit A attached hereto (collectively, the "Patent
Applications").
B. Licensee desires to obtain from Licensor, and Licensor desires to
grant to Licensee, an exclusive, worldwide license under the Patent Rights (as
defined below), on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:
1. Definitions.
(a) "Affiliate" as used in this Agreement with respect to a
person or entity means any corporation, company, partnership, joint
venture, entity and/or firm which controls, is controlled by or is
under common control with such person or entity.
(b) "Average Selling Price" as used in this Agreement means
with respect each Major Market (i) the aggregate Net Sales of
Esophageal Sensors or Sublingual Sensors, as the case may be, during a
particular period sold for use in each Major Market divided by (ii) the
aggregate number of Esophageal Sensors or Sublingual Sensors, as the
case may be, sold, net of returns, during the same period for use in
each Major Market. Average Selling Price shall be calculated separately
for each Major Market.
(c) "Esophageal Sensor" as used in this Agreement means
Licensee's disposable fiber optic sensor designed specifically to
measure CO2 in the esophagus to
assess perfusion failure and that is covered by a validly issued U.S.
patent subject to the Patent Rights..
(d) "Gross Margin" as used in this Agreement means the
difference between Net Sales of Instruments and Licensee's direct cost
of manufacturing Instruments (i.e., direct material cost, direct labor
cost and manufacturing overhead) or having third parties manufacture
Instruments, as calculated in accordance with generally accepted
accounting principles consistently applied as utilized by Licensee in
its normal financial reporting. As of the date of this Agreement,
Licensee calculates gross margins for its other products in accordance
with the methodology described in Exhibit B.
(e) "Instruments" as used in this Agreement mean Licensee's
instrumentation designed specifically to be used in conjunction with a
Sensor.
(f) "Net Sales" as used in this Agreement means the amount
actually received by Licensee from the sale of Sensors or Instruments,
as the case may be, less the sum of the following deductions where
applicable: cash, trade or quantity discounts, sales, use, tariff,
import/export duties or other excise or similar taxes imposed upon
particular sales, transportation and related insurance charges and
allowances or credits to customers because of rejections or returns, as
calculated in accordance with consistently applied and generally
accepted accounting principles as utilized by Licensee in its normal
financial reporting.
(g) "Major Market" as used in this Agreement means each of the
following geographic territories: United States, Europe, Japan; and the
rest of the world.
(h) "Patent Rights" as used in this Agreement mean all right,
title and interest of Licensor and its Affiliates in (i) the Patent;
(ii) any patents that issue on the Patent Applications; (iii) any
patents issuing from any reissues, renewals, extensions, divisionals,
continuations and continuations-in-part of the Patent and Patent
Applications; (iv) any foreign patents corresponding to such patents;
and (v) any patents issuing on any and all improvements, modifications,
enhancements or new ideas developed or conceived by Licensor or its
Affiliates which relate to or may be useful in connection with the
Patent and the Patent Applications.
(i) "Sensors" as used in this Agreement mean Esophageal
Sensors and Sublingual Sensors.
(j) "Sublingual Sensor" as used in this Agreement means
Licensee's disposable fiber optic sensor designed specifically to
measure CO2 under the tongue to assess perfusion failure and that is
covered by a validly issued U.S. patent subject to the Patent Rights.
2
2. License.
(a) Grant. Licensor hereby grants to Licensee an exclusive,
worldwide, right and license, with the right to grant sublicenses, to
practice the Patent Rights and to make, have made, use, promote, market
and sell Sensors and Instruments in connection with practicing the
Patent Rights.
(b) Conversion to Non-Exclusive License. If Licensee elects
not to make Minimum Royalty Payments to Licensor after the fifth
anniversary date of this Agreement as permitted by Section 3(b), the
license granted in Section 2(a) may become, at the option of Licensor,
non-exclusive.
3. Royalties; Expenses.
(a) Percentage Royalty. Licensee shall pay to Licensor a
royalty on Net Sales of any Sensors sold by Licensee equal to: (i)
XXXXX% of Net Sales of Esophageal Sensors or Sublingual Sensors, as the
case may be, for calendar years in which Average Selling Price received
by Licensee was $XXXXX or more per unit; (ii) XXXXX% of Net Sales of
Esophageal Sensors or Sublingual Sensors, as the case may be, for
calendar years in which the Average Selling Price received by Licensee
was $XXXXX or more per unit, but less than $XXXXX per unit; and (iii)
XXXXX% of Net Sales of Esophageal Sensors or Sublingual Sensors, as the
case may be, for calendar years in which the Average Selling Price
received by Licensee was less than $XXXXX per unit. Royalties payable
with respect to Net Sales of Sensors shall be calculated separately for
each Major Market based on the Average Selling Price in each Major
Market. Licensee shall pay to Licensor a royalty on Net Sales of any
Instruments sold by Licensee equal to XXXXX% of the aggregate Gross
Margin with respect to Instruments that are sold or placed in the field
by Licensee. Royalties under this Section 3(a) shall be payable only
with respect to sales of Sublingual Sensors and related Instruments
only if a valid U.S. patent, as defined in the Patent Rights, has
issued covering the Sublingual Sensor prior to the date of sale.
[PORTIONS OF THIS SECTION HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. A COPY OF THIS AGREEMENT WITH THIS SECTION INTACT HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
(b) Minimum Royalty. Notwithstanding Section 3(a), Licensee
shall pay to Licensor, or its designee, a minimum royalty equal to
$XXXXX per calendar year ("Minimum Royalty Payment"), which shall be
paid in equal quarterly installments of $XXXXX within forty-five (45)
days of the end of each calendar quarter, beginning with the calendar
quarter ending September 30, 1998; provided that any royalties paid
pursuant to Section 3(a) with respect to Net Sales received or Gross
Margins earned by Licensee for any calendar year shall be applied as a
credit against the Minimum Royalty Payment for such year. Licensee may,
upon one (1) years' written notice to Licensor, elect to stop making
Minimum Royalty Payments; provided, however, that Licensee may not
deliver such notice prior to XXXXX. If Licensee makes such election
with an
3
effective date that is prior to the fifth anniversary date of this
Agreement, Licensor shall have the right to terminate this Agreement.
If Licensee makes such election with an effective date that is after
the fifth anniversary date of this Agreement, Licensor shall have the
right to convert the license granted to Licensee to a non-exclusive
license pursuant to Section 2(b). [PORTIONS OF THIS SECTION HAVE BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIALITY UNDER RULE 24b-2 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. A COPY OF THIS
AGREEMENT WITH THIS SECTION INTACT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(c) Sublicense Fees. If Licensee grants a sublicense to any
third party to practice the Patent Rights and the terms of such
sublicense would have the effect of reduced royalties being payable
under this Agreement with respect to products commercialized by such
sublicensee, then Licensee shall pay to Licensor XXXXX percent (XXXXX%)
of any license fees and XXXXX percent (XXXXX%) royalties received by
Licensee from such sublicensee; provided that amount of royalties
payable to Licensor shall not exceed the amount of royalties that would
have been payable under Section 3(a). Licensor acknowledges that,
notwithstanding the foregoing, Licensee may engage one or more third
parties to (i) manufacture all a portion of the Sensors or Instruments
to be sold by Licensee or (ii) distribute Sensors or Instruments sold
by Licensee to such third party; and that Licensee shall not be
required to pay Licensor any consideration for the granting of
sublicenses in connection therewith that would not constitute royalties
payable pursuant to Section 3(a). [PORTIONS OF THIS SECTION HAVE BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIALITY UNDER RULE 24b-2 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. A COPY OF THIS
AGREEMENT WITH THIS SECTION INTACT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(d) Payments. All royalties payable to Licensor under this
Agreement shall be paid within forty-five (45) days of the end of each
calendar quarter to which such royalty payment relates. The Minimum
Royalty Payment, if any, shall be paid within forty-five (45) days of
the end of each calendar quarter. Each royalty payment shall be
accompanied by a written statement, in form reasonably satisfactory to
Licensor, showing (i) aggregate Net Sales received by Licensee during
such quarter in connection with the sale of Sensors; (ii) Gross Margin
earned by Licensee during such quarter in connection with the sale or
placement of Instruments; (iii) any sublicense fees received; and (iv)
the amount of royalty and sublicense fees, as the case may be, payable
to Licensor with respect to each of the foregoing, together with such
other information as Licensor may reasonably request. Licensee shall
submit such quarterly statements beginning with the first royalty
payment made pursuant to Section 3(a) sublicensee fee payment made
pursuant to Section 3(c), whichever is earlier.
(e) Books and Records. Licensee agrees to keep complete and
accurate books of account and records covering all transactions
relating to this Agreement. Licensee shall deliver to Licensor, within
ninety (90) days of the end of Licensee's fiscal year, a report of
Licensee's independent auditors, in substantially the form of Exhibit
C,
4
regarding the statements delivered by Licensee pursuant to Section
3(d). Licensor, at its expense, shall have the right to have an
independent accounting firm, mutually agreeable to both parties, one
time in each calendar year on reasonable notice to audit Licensee's
books of account and records that relate to the subject matter and
terms of this Agreement. All such books of account and records shall be
kept available for at least two (2) years after the termination of this
Agreement. Licensor shall not have any right to audit any other books
of account or records of Licensee.
4. Licensee's Development Milestones.
(a) Milestones. Licensee agrees to use commercially reasonable
efforts to complete the following development milestones within the
respective time periods:
(1) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
(2) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
(3) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
(4) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
(5) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
[PORTIONS OF THIS SECTION HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. A COPY OF THIS AGREEMENT
WITH THIS SECTION INTACT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(b) Extension of Milestones. If Licensee determines that it
will be unable to complete any of the development milestones set forth
in Section 4(a) within the corresponding time period, Licensee shall so
notify Licensor at least thirty (30) days prior to the previously
scheduled date for completing such milestone specifying a new date by
which Licensee anticipates completing such milestone. Licensee may not
extend any date for completing a milestone by more than thirty (30)
days at any one time, but Licensee may subsequently extend any date for
completing a milestone for any number of additional thirty-day periods
by delivery of a subsequent notice at least thirty (30) days
5
prior to the previously scheduled date for completing such milestone.
Upon delivery of any such notice, the date for completing such
milestone shall be automatically extended to the date specified in
Licensee's notice unless the failure to complete such milestone was due
to Licensee's failure to use commercially reasonable efforts to
complete such milestone by the previously scheduled completion date. If
Licensee's failure to complete such milestone by the previously
scheduled completion date was due to Licensee's failure to use
commercially reasonable efforts to complete such milestone by such
date, Licensor shall have the right to terminate this Agreement. If the
parties disagree as to whether or not Licensee used commercially
reasonable efforts to complete such milestone by such date, the dispute
shall be resolved in accordance with the mediation and arbitration
procedures set forth in Section 13(d).
5. Commercialization Responsibilities.
(a) Consulting Agreement. Licensor and Licensee shall, within
thirty (30) days of the date of this Agreement, negotiate in good faith
the terms and conditions of a consulting agreement, mutually agreeable
to both parties, pursuant to which Licensor will provide services
related to tissue perfusion research on a fee for service basis.
(b) Regulatory Approvals. Licensee will be responsible for
obtaining, at its own expense, such regulatory clearances or approvals
from the FDA and any comparable foreign regulatory authorities, whose
function and purpose include regulating the design, manufacture,
quality and/or sale of medical devices, as Licensee in its sole
discretion deems necessary or appropriate for marketing Sensors and
Instruments.
(c) Distribution Channels. Licensee will be responsible for
establishing the distribution channels for the sale and distribution of
Sensors and Instruments. Licensee will use commercially reasonable
efforts to cause Sublingual Sensors and related Instruments to be
marketed and distributed on a worldwide basis.
6. Licensee's Representations and Warranties. Licensee hereby
represents and warrants to Licensor that as of the date hereof:
(a) Licensee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and this
Agreement has been duly authorized by all necessary corporate action.
(b) This Agreement is the legal, valid and binding obligation
of Licensee, enforceable against Licensee in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor
the compliance with the terms and conditions hereof will conflict with,
result in a breach or violation by Licensee of or constitute a default
under any of the terms, conditions or provisions of any contract,
agreement or other instrument to which Licensee is or may be bound or
affected.
6
(d) Licensee is under no obligation or subject to any
judicial, administrative or other proceeding which would limit
licensee's ability to fully perform its obligations hereunder.
7. Licensor's Representations and Warranties. Licensor hereby
represents and warrants to Licensee that as of the date hereof:
(a) Licensee is a non-profit corporation duly organized,
validly existing and in good standing under the laws of the State of
California, and this Agreement has been duly authorized by all
necessary corporate action.
(b) This Agreement is the legal, valid and binding obligation
of Licensor, enforceable against Licensor in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor
the compliance with the terms and conditions hereof will conflict with,
result in a breach or violation by Licensor of or constitute a default
under any of the terms, conditions or provisions of any contract,
agreement or other instrument to which Licensor is or may be bound or
affected.
(d) Licensor is the sole and exclusive owner of the Patent
Rights, free and clear of any license, security interests, known
claims, encumbrances or known charges of any kind, and has full right,
power and authority to enter into this Agreement and to grant to
Licensee the rights to be granted hereunder. No other party has any
rights of first refusal with respect to the licenses granted herein or
any other rights to obtain a license from Licensor to practice the
Patent Rights.
(e) Licensor is not under any obligations inconsistent with
the provisions of this Agreement.
(f) To the best of Licensor's knowledge, (i) the Patent Rights
are valid and enforceable, including inventorship, and (ii) the rights
granted under this Agreement do not infringe any patent, copyright,
trademark, license, trade secret or other intellectual property right
of any third party. Licensor is not aware of any information which
could render any of the claims of any of the Patent Rights invalid or
unenforceable.
(g) There is no legal, administrative, arbitration, or other
proceeding, suit, claim or action of any nature, judgment, decree,
decision, injunction, writ or order pending or, to the knowledge of
Licensor, threatened or contemplated by or against or involving
Licensor or its shareholders directors or officers (but only in their
capacity as such), pertaining to the Patent Rights or this Agreement,
whether at law or in equity, before or by any person, entity
governmental or quasi-governmental, administrative or regulatory agency
or any court.
(h) If any of the representations or warranties by Licensor in
this Section 7 are or become inaccurate or breached, Licensee, in
addition to its other rights under this Agreement, shall be entitled to
(i) a refund of all or a portion of the royalties paid by
7
Licensee under this Agreement and (ii) a reduction in such amounts
payable thereafter by Licensee under this Agreement, such refund and
reduction to be in such an amount or amounts as will compensate
Licensee for its damages incurred by reason of the inaccuracy or breach
and compensate Licensee for the loss of value in rights granted to
Licensee under this Agreement as compared with the value of such rights
in the absence of such inaccuracy or breach.
8. Term and Termination.
(a) Term. The term of this Agreement shall commence on the
date hereof and shall remain in force, unless terminated earlier in
accordance with Section 8(b), until XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX. [PORTIONS OF THIS SECTION HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIALITY UNDER RULE 24b-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. A COPY OF THIS AGREEMENT
WITH THIS SECTION INTACT HAS BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
(b) Termination. Notwithstanding the provisions of Section
8(a), this Agreement may be terminated in accordance with the following
provisions:
(1) Upon mutual agreement of the parties.
(2) Either party may terminate this Agreement at any
time by giving notice in writing to the other party, which
notice shall be effective upon dispatch, should the other
party file a petition for a liquidation in bankruptcy, be
declared bankrupt, make an assignment for the benefit of
creditors, go into liquidation or receivership, or otherwise
lose legal control of its business.
(3) Either party may terminate this Agreement by
giving notice in writing to the other party in the event the
other party is in material breach of this Agreement and shall
have failed to cure such breach within ninety (90) days of
receipt of written notice thereof from the first party, unless
such breach cannot reasonably be cured within ninety (90)
days, in which case the breaching party shall have undertaken
good faith efforts to cure such breach within ninety (90)
days.
(4) Licensee may terminate this Agreement immediately
if any U.S. Patent Rights are held to be invalid or
unenforceable by a court of competent jurisdiction.
(5) Licensee may terminate this Agreement if no valid
U.S. patent issues covering a method for measuring CO2 under
the tongue to assess perfusion failure that are substantially
the same as the claims in the Patent Applications as
originally filed with the U.S. Patent and Trademark Office
within XXXXX (XXXXX) years of the date of this Agreement.
8
(6) Licensee may terminate this Agreement pursuant to
Section 10(c).
(7) Licensor may terminate this Agreement if Licensee
fails to make a Minimum Royalty Payment that is payable with
respect to the period beginning on the date of this Agreement
and ending on the XXXXX (XXXXX) anniversary date of this
Agreement within thirty (30) days of notice from Licensor of
such failure, in which event Licensor shall be entitled to
receive from Licensee any Minimum Royalty Payment that would
have been payable on or before XXXXX.
(8) Licensor may terminate this Agreement if Licensee
has not commenced commercial introduction of a Sensor and
related Instrument within XXXXX (XXXXX) years of the date of
this Agreement.
[PORTIONS OF THIS SECTION HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. A COPY OF THIS AGREEMENT
WITH THIS SECTION INTACT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
(c) Rights and Obligation on Termination. In the event of
termination of this Agreement for any reason, the parties shall have
the following rights and obligations:
(1) Licensee shall remain responsible for any payment
due to Licensor that has accrued prior to the effective date
of termination.
(2) The license granted to Licensee hereunder shall
immediately terminate and be of no further force and effect.
(3) Sections 10, 11(a), 11(b) and 12(a) shall survive
termination of this Agreement.
(4) Licensee, its Affiliates and sublicensees shall
be permitted to sell any inventory of Sensors and Instruments
on hand at the effective date of termination, provided that no
provision of this Agreement shall prevent Licensee, its
Affiliates or sublicensees from practicing the Patent Rights
or selling Sensors and Instruments after termination of this
Agreement if the relevant Patent Rights have expired.
9. Patent Prosecution and Maintenance.
(a) Existing Patents and Patent Applications. Licensee shall
pay when due all maintenance fees for the Patent in accordance with
applicable law and regulation. Licensee shall have the right, but not
the obligation, to prosecute the Patent Applications and any other
applications comprising the Patent Rights, at Licensee's expense. If
Licensee elects to prosecute any such patent application and a valid
patent issues thereon, then Licensee shall maintain, including payment
of any maintenance fees, any patents that issue on such patent
application that Licensee prosecuted. If Licensee fails to
9
prosecute or maintain any such patent application, it will so notify
Licensor, and Licensor shall have the right, but not the obligation, to
prosecute and maintain any such patent application, at Licensor's
expense. Licensor shall provide Licensee with copies of all relevant
documentation on a confidential basis so that Licensee may undertake
such prosecution, and both parties shall keep the other informed and
apprised of the continuing prosecution and maintenance with respect to
such patent applications.
(b) Future Patents and Patent Applications. Licensee shall
have the right, but not the obligation, to prosecute and maintain any
foreign patent applications corresponding to the Patent or Patent
Applications, which have not been filed prior to the date of this
Agreement, at Licensee's expense. Licensee shall determine in its sole
and reasonable discretion whether any particular patent application
shall be filed or prosecuted or any patent shall be maintained pursuant
to this Section 9(b). Any such patent application shall be in the name
of Licensor and shall be deemed to be part of the Patent Rights under
this Agreement. Upon request from Licensor, Licensee will provide
Licensor with copies of patent applications prepared by Licensee prior
to filing and responses to patent office actions related to such
applications. Licensor shall cooperate fully with Licensee and execute
all necessary documentation to enable Licensee to file, prosecute and
maintain all such patent applications and patents issuing thereon. If
Licensee fails to file, prosecute or maintain any such patents or
patent applications, it will so notify Licensor, and Licensor shall
have the right, but not the obligation, file, prosecute and maintain
any such patents or patent application, at Licensor's expense.
10. Infringement.
(a) Action by Licensee. When information comes to the
attention of Licensor or Licensee to the effect that any of the Patent
Rights have been or are threatened to be infringed by a third party,
Licensee shall have the initial right, but not the obligation, at its
expense to take such action as Licensee may deem necessary to prosecute
or prevent such infringement, including the right to bring or defend
any suit, action or proceeding involving any such disclosure or
infringement. Licensee shall notify Licensor promptly of the receipt of
any such information and of the commencement of any such suit, action
or proceeding. If Licensee determines that it is necessary or desirable
for Licensor to join any such suit, action or proceeding, Licensor
shall execute all documents and perform such other acts as may be
reasonably required. In the event that Licensee brings a suit, Licensee
shall have the right to first reimburse itself out of any sums
recovered in such suit or in settlement thereof for all costs and
expenses, including reasonable attorneys' fees, necessarily involved in
the prosecution of such suit, and any funds that shall remain from said
recovery shall be distributed to Licensor and Licensee in proportion to
the loss incurred by each of Licensor and Licensee.
(b) Action by Licensor. If, within ninety (90) days after
receipt from Licensor of information described in Section 10(a) or
after giving notice to Licensor of such information, Licensee does not
notify Licensor that Licensee has commenced suit against any infringer,
Licensor shall have the right, but not the obligation, to bring suit
for such
10
alleged infringement, and may join Licensee as party plaintiff, if
appropriate. Licensee shall execute all documents and take all other
actions, including giving testimony, which may reasonably be required
in connection with such suit, action or proceeding.
(c) Failure to Remove Competing Products. Notwithstanding the
parties' efforts pursuant to Section 10(a) and 10(b), if the parties
are unable to prevent a competitor from manufacturing, marketing or
selling products that are functionally equivalent to the Sensors and
the Instruments and such functionally equivalent products have
significantly affected the revenues or earnings that Licensee is able
to derive from the sale of Sensors and Instruments for a period of six
(6) months, Licensee shall have the right to renegotiate the royalties
payable under this Agreement by giving written notice thereof to
Licensor. If the parties agree to reduce royalty payments, Licensee
will pay to Licensor fifty percent (50%) of any amounts paid in
settlement or damages by such competitor to Licensee for claims brought
by Licensee against such competitor, after deducting Licensee's
attorneys' fees and disbursements, for bringing such claims, up to the
amount of the reduced royalties. If the parties are unable to agree on
new royalty rates within thirty (30) days after notice from Licensee of
its election to renegotiate the royalties payable under this Agreement,
Licensee shall have the right to terminate this Agreement immediately.
(d) Action Against Licensee. Licensor will cooperate with
Licensee in the defense of any suit, action or proceeding against
Licensee, or any Affiliate or sublicensee of Licensee, alleging the
infringement of a patent or other intellectual property right owned by
a third party by reason of the use of the Patent Rights in the
manufacture, use or sale of Sensors or Instruments. Licensee shall give
Licensor prompt notice of the commencement of any such suit, action or
proceeding or claim of infringement and shall furnish to Licensor a
copy of each communication relating to the alleged infringement.
Licensor hereby grants to Licensee the right to exclusive control of
the defense of any such suit, action or proceeding and the exclusive
right to compromise, litigate, settle or otherwise dispose of any such
suit, action or proceeding and shall provide all information and
assistance necessary to defend or settle any such suit, action or
proceeding. Licensee may join Licensor as a defendant, if necessary or
desirable, and Licensor shall execute all documents and take all other
actions, including giving testimony, which may reasonably be required
in connection with the defense of such suit, action or proceeding.
11. Indemnification and Insurance.
(a) Indemnification by Licensor. Licensor shall indemnify,
hold harmless, defend and protect Licensee and its Affiliates,
sublicensees, successors, assigns, employees, representatives and
agents from and against any and all claims, causes of action, costs,
expenses, losses, damages and liabilities (including, without
limitation, reasonable attorneys' fees) arising out of or resulting
from (i) the falsity of any representation or warranty made by Licensor
herein, (ii) any claim that any rights within Patent Rights were
granted by Licensor to any third party or (iii) any unlawful
misappropriation by Licensor of trade secrets or proprietary rights
belonging to any third
11
party. Licensee shall have the right to offset and deduct any amount to
which it is entitled to indemnification hereunder against royalties or
other payments due under Section 3.
(b) Indemnification by Licensee. Licensee shall indemnify,
hold harmless, defend and protect Licensor and its Affiliates,
successors, assigns, employees, representatives and agents, from and
against any and all claims, causes of action, costs, expenses, losses,
damages and liabilities (including, without limitation, reasonable
attorneys' fees) arising out of or resulting from the falsity of any
representation or warranty made by Licensee herein.
(c) Insurance. To the extent that Licensee maintains product
liability insurance covering any loss, damage, expense or liability
incurred or suffered by third parties arising out of any use of Sensors
or Instruments, Licensee shall cause Licensor to be named as an
additional insured under such insurance policy. Licensee shall provide
such evidence of the effectiveness of such insurance to Licensor as may
be reasonably requested.
12. Confidentiality and Publication.
(a) Confidentiality. Each party agrees not to disclose to any
third party or use the other party's Confidential Information, as
defined in this Section 12, other than for purposes of this Agreement.
Upon termination of this Agreement, all Confidential Information shall
be returned to the disclosing party. "Confidential Information" means
any information which is disclosed in any tangible form and is clearly
labeled or marked as confidential, proprietary or its equivalent, or
information which is disclosed orally or visually, is designated
confidential, proprietary or its equivalent at the time of its
disclosure and is reduced to writing and clearly marked or labeled as
confidential, proprietary or its equivalent within thirty (30) days of
disclosure; provided that "Confidential Information shall not include
information that (i) was in the receiving party's possession or was
known to it prior to its receipt from the disclosing party; (ii) is or
becomes public knowledge without the fault of the receiving party;
(iii) is or becomes rightfully available on an unrestricted basis to
the receiving party from a source other than the disclosing party; (iv)
becomes available on an unrestricted basis to a third party from the
disclosing party or from someone acting under its control or (v) is
independently developed by the receiving party as demonstrated by its
written records.
(b) Scientific Publications and Presentations. Licensee
recognizes that Licensor is a public non-profit, research and
educational institution and, as such, conducts scientific research and
medical education. Licensor's mission is to perform research and to
educate medical scientists with the goal of improving current methods
of life-saving critical care. As such, Licensee further recognizes that
Licensor's primary method of achieving such progress is by timely
presentations, publications and other means of disseminating scientific
knowledge in the public interest. Licensor may publicly disseminate
such information except to the extent that such dissemination would
directly
12
compromise the commercialization of Sensors or Instruments by Licensee
or such dissemination discloses patentable or other information
proprietary to Licensee. The rights of presentation and publication of
scientific discoveries made during the term of this Agreement are
subject to Licensee's prior approval, which will not be unreasonably
withheld. Licensor will provide pre-publication documentation for
review and comment by Licensee. Such review will be completed within
ten (10) working days or extensions not to exceed an additional five
(5) working days at the request of Licensee.
13. Miscellaneous.
(a) Public Announcements. Each of the parties hereto agrees
that it will not, without the prior written consent of the other party,
make any public announcement of this Agreement or any of the terms and
conditions of this Agreement, except for such disclosure to the public
or to governmental agencies as its counsel shall deem necessary to
comply with applicable law, rule or regulation. Notwithstanding the
foregoing, either party may disclose publicly that Licensor has granted
Licensee an exclusive, worldwide license in the Patent Rights.
(b) Assignment. Neither party may assign or otherwise transfer
its rights and obligations under this Agreement without the prior
written consent of the other party, except to (i) an Affiliate,
provided that the original party to this Agreement remains obligated to
perform under this Agreement or (ii) any successor in interest of all
or substantially all of the business of such party, whether by merger,
operation of law, assignment, purchase or otherwise. Any prohibited
assignment shall be null and void. All terms and conditions of this
Agreement shall be binding on and inure to the benefit of the
successors and permitted assigns of the parties.
(c) Relationship. This Agreement shall not constitute either
party as the legal representative, partner, joint venturer or agent of
the other party hereto, nor shall either party have the right or
authority to assume, create, or incur any liability or any obligation
of any kind, express or implied, against or in the name of or on behalf
of the other party hereto.
(d) Mediation and Arbitration. If any dispute, controversy or
claim arises under this Agreement, the parties shall negotiate in good
faith to settle the matter. If the parties are unable to resolve the
matter within a reasonable time, the parties shall submit the matter to
mediation by a trained mediator approved by both parties, the cost of
which shall be shared equally by the parties. Any dispute, controversy
or claim arising under this Agreement not resolved through mediation
shall be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in
effect on the date of this Agreement by a single arbitrator appointed
in accordance with said Rules. The appointing authority shall be the
American Arbitration Association. The costs of any arbitration shall be
shared equally by the parties, unless the award of the arbitrator
provides otherwise. The arbitrator's award shall be non-
13
appealable and enforceable in any court of competent jurisdiction. The
place of mediation or arbitration shall be Chicago, Illinois.
(e) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties hereto relative to the subject
matter hereof, and supersedes any and all prior agreements, written or
oral, between the parties relating to such subject matter including,
but not limited to, the Joint Non-Disclosure Agreement, dated March 26,
1998, and the letter, dated July 2, 1998. No modifications or
amendments of any of the terms hereof shall be valid or binding unless
made in writing and signed by Licensor and Licensee.
(f) Waiver. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent or
subsequent breach of the same or any other provision hereof, and no
waiver shall be effective unless made in writing.
(g) Notices. Notice permitted or required to be given under
this Agreement shall be deemed sufficient if given in writing by
facsimile, commercial air delivery service or by registered or
certified air mail, postage prepaid, return receipt requested,
addressed to the respective addresses of the parties set forth below or
at such other address as the respective parties may designate by like
notice from time to time. Notices so given shall be effective upon the
earlier of: (a) receipt by the party to which notice is given (which,
in the instance of a facsimile, shall be deemed to have occurred at the
time that the machine transmitting the facsimile verifies a successful
transmission of the facsimile); (b) on the fifth business day following
the date such notice was deposited in the mail; or (c) on the second
business day such notice was delivered to a commercial air delivery
service. Notices shall be given as follows:
If to Licensor: Institute of Critical Care Medicine
0000 Xxxxx Xxxxxxx Xxx, Xxxxxxxx #0
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Max Xxxxx Xxxx, M.D., Ph.D.,
MACP, FACC, FCCP
Fax: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
If to Licensee: Optical Sensors Incorporated
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx X
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
14
With a copy to: Xxxxxxxxxxx Xxxxx & Xxxxxxxx XXX
Xxxxx XXX Xxxxxxxx, Xxxxx 0000
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
(h) Severability. If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction,
the remaining provisions of this Agreement shall remain in full force
and effect. Further, should any provision of this Agreement be deemed
unenforceable by virtue of its scope, such provision shall be deemed
limited to the extent necessary to render the same enforceable.
(i) Governing Law. This Agreement will be construed in
accordance with, and governed by, the laws of the State of Minnesota in
all respects, including, without limitation, interpretation,
performance, effect and remedies (without regard to the laws of
conflict of any jurisdiction).
(j) Headings. The headings of sections and subsections of this
Agreement have been inserted for the convenience of reference only and
shall in no way restrict or otherwise modify the terms of this
Agreement.
(k) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but
each of which together shall constitute one and the same document.
[Remainder of Page Intentionally Left Blank]
15
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement as of the date and year first above written.
OPTICAL SENSORS INCORPORATED
By /s/ Xxx X. Xxxxxxxxx
-----------------------------------------
Xxx X. Xxxxxxxxx
President and Chief Executive Officer
INSTITUTE OF CRITICAL CARE MEDICINE
By: /s/ Max Xxxxx Xxxx
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
16
EXHIBIT A
PATENTS AND PATENT APPLICATIONS
U.S. Patent No. 5,579,763 entitled "Measurement of Systemic Perfusion"
U.S. Patent Application No. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
U.S. Patent Application No. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
[PORTIONS OF THIS EXHIBIT A HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. A COPY OF THIS AGREEMENT WITH THIS EXHIBIT A INTACT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
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EXHIBIT B
METHODOLOGY CURRENTLY USED FOR CALCULATING OF GROSS MARGIN
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
[PORTIONS OF THIS EXHIBIT B HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIALITY UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. A COPY OF THIS AGREEMENT WITH THIS EXHIBIT B INTACT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
18
EXHIBIT C
FORM OF REPORT OF INDEPENDENT AUDITORS
We have audited, in accordance with generally accepted auditing standards, the
financial statements of Optical Sensors Incorporated for the year ended December
31, _______, and have issued our report thereon dated _____________. We also
have audited the accompanying schedule [IDENTIFICATION OF PRESENTATION OF
ELEMENTS] of Optical Sensors Incorporated as of December 31, ________, and for
the year then ended. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this schedule based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the schedule of [IDENTIFICATION OF PRESENTATION OF
ELEMENTS] is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the schedule of
[IDENTIFICATION OF PRESENTATION OF ELEMENTS]. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall schedule presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the schedule referred to above presents fairly, in all material
respects, the [IDENTIFICATION OF PRESENTATION OF ELEMENTS] of Optical Sensors
Incorporated at December 31, _________, and for the year then ended, in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Minneapolis, Minnesota
[Date]
19