[NOTE:
CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. CONFIDENTIALITY HAS BEEN
REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE CONFIDENTIAL
PORTIONS HAVE BEEN PROVIDED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION]
This Agreement
is entered into this 3rd day of July, 2003 by and
between
PACIFIC RIM
MEDICAL VENTURES CORP., a Delaware corporation with its principal
offices at 34 Emerald Glen, Laguna Niguel, California 92677U.S.A.
(hereinafter referred to as “PRMV”)
KONINKLIJKE
PHILIPS ELECTRONICS N.V., having its registered office in
Eindhoven, The Netherlands (hereinafter referred to as
“Philips”)
(PRMV and
Philips hereinafter jointly referred to as “the
Parties” and individually as “a
Party”).
WHEREAS, PRMV
wishes to develop and manufacture and commercially offer and sell
ultrasound imaging catheters, imaging cores, imaging guidewires and
related patient interface modules and IVUS equipment designed for
diagnostic or therapeutic use, or both, in the human coronary and
peripheral vascular system based on the IVUS Technology (as defined
below);
WHEREAS, with
respect to the IVUS Technology, the Parties have entered into a
Non-Disclosure Agreement dated January 10, 2003, which was
extended on April 1, 2003 until June 30, 2003 and a
binding Memorandum of Understanding dated May 22, 2003 in
order for PRMV to pursue the a possible acquisition of said IVUS
Technology from Philips;
WHEREAS, PRMV
has conducted a due diligence investigation and has concluded that
it wishes to acquire from Philips said IVUS Technology;
WHEREAS PRMV
acknowledges that certain IVUS Patents, under which Philips has a
license, are owned by Boston Scientific Corporation;
WHEREAS, PRMV
has requested Philips to transfer all Philips’ rights with
regard to the IVUS Technology to PRMV and Philips is prepared to do
so on the conditions set forth herein;
NOW, THEREFORE,
in consideration of the mutual obligations and covenants
hereinafter set forth, the Parties have agreed as
follows:
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1.
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Definitions
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1.1
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When used in this Agreement, the
following terms shall have the meanings set out below:
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“Annual Payment”
shall have the meaning ascribed to
such term in Section 4.2.
“Associated Company”
shall mean any one or more business
entities (1) owned or controlled by Philips or PRMV,
(2) owning or controlling Philips or PRMV, or (3) owned
or controlled by the business entity owning or controlling Philips
or PRMV at the material time. For the purposes of this definition,
a business entity shall be deemed to own and/or to control another
business entity, if more than 50% (fifty per cent) of the voting
stock of the latter business entity, ordinarily entitled to vote in
the election of directors, (or, if there is no such stock, more
than 50% (fifty per cent) of the ownership of or control in the
latter business entity) is held by the owning and/or controlling
business entity.
“BSC
Agreement” shall
mean the agreement concluded between Boston Scientific Corporation
and Hewlett-Packard Company on 21 February 1995 and its
Amendment dated 28 September 2000, a true, accurate and
complete copy of which has been provided by Philips to
PRMV.
“Catheter Product”
shall mean an IVUS catheter
incorporating the IVUS Technology for which rights are acquired
from Boston Scientific Corporation pursuant to the BSC Agreement,
the Settlement Agreement and the Transfer Agreement, including
without limitation the Licensed Patents, but excluding patient
interface units and other equipment and accessories.
“Closing” shall mean the consummation of the transaction
to transfer the IVUS Technology by Philips to PRMV and the payment
of the Upfront Payment by PRMV to Philips in accordance with
Section 4.1.
“Closing Date”
shall mean the date on which the
Closing shall take place, as provided in Section 2.6.
“Confidentiality
Agreement” shall
have the meaning ascribed to such term in
Section 9.2(a).
“Conflict” shall have the meaning ascribed to such term in
Section 5.1(c).
“Effective Date”
shall mean the day first written
above.
“Excluded Liabilities”
shall have the meaning ascribed to
such term in Section 2.4.
“Implementation Period”
shall mean the period commencing
after the Closing Date, ending no later than 9 months
thereafter, during which the technical activities as described in
the Implementation Plan are to be completed.
“Implementation Plan”
shall mean a description of the
technical support to be provided by Philips relating to the
implementation by PRMV of the IVUS Technology in the manufacture of
Licensed Products during the Implementation Period, as specified in
Annex G.
“Indemnified Party”
shall have the meaning ascribed to
such term in Section 5.8(a).
“Indemnifying Party
” shall have the meaning
ascribed to such term in Section 5.8(a).
“IVUS
Technology” shall
mean all of the documents, materials, prototypes, data, reports,
know-how, patents and licenses referred to in Annex A ,
including Appendices 1 and 2 thereto.
“Know-How” shall mean: (a) those items listed in
Annex A which can be characterized as unpatented processes,
trade secrets, technologies and know-how; and (b)other confidential
or proprietary
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Confidential
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technical and
business information that is currently owned by Philips which is
specific to the IVUS Technology, and which will be conveyed during
the Implementation Period per the Implementation Plan. In the
interest of clarity, Know-How does not include patents, unpatented
processes, trade secrets, technologies, know-how or other
confidential or proprietary technical and business information that
is currently owned by Philips in the general field of
ultrasound.
“Knowledge” shall mean: (a) with respect to Philips,
the actual knowledge after due inquiry of the current employees of
Philips who are (1) principally located at Philips’
Andover, MA, USA facility and who are, or at any time were,
involved in the IVUS Technology, or (2) who are part of the
Intellectual Property & Standards group at Philips; and
(b) with respect to PRMV, the actual knowledge after due
inquiry of the officers of PRMV.
“Liability(ies)”
shall mean any liability, whether
known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due.
“Licensed Patents”
shall mean all patents listed on
Annex A, Appendix 1 , excluding the Philips Patents as
defined herein below.
“Licensed Products”
shall mean ultrasound imaging
catheters, imaging cores, imaging guidewires and related patient
interface modules and IVUS equipment designed for diagnostic or
therapeutic use, or both, in the human coronary and peripheral
vascular system, using the IVUS Technology, such products to be
manufactured by or on behalf of PRMV. Catheter Products as defined
hereinabove shall also be considered Licensed Products.
“Licensee Product”
shall mean, in the event that PRMV
licenses any rights under the Philips Patents after the Closing
Date to a licensee, a product manufactured and sold by such
licensee using the Philips Patents where such product does not
constitute a Catheter Product.
“Lien” shall mean any lien (statutory or otherwise),
claim, charge, option, security interest, pledge, mortgage,
restriction, financing statement or similar encumbrance of any kind
or nature whatsoever (including any conditional sale or other title
retention agreement and any lease having substantially the same
effect as any of the foregoing and any assignment or deposit
arrangement in the nature of a security device, but excluding any
licenses to the Philips Patents granted to third parties prior to
the Closing Date).
“
Losses ” shall have the meaning ascribed to such term
in Section 5.6.
“Material Adverse Effect”
shall mean, with respect to a Party,
a material adverse effect, whether individually or in the
aggregate: (a) on the business, operations, financial
condition, assets or properties, Liabilities or prospects of such
Party; or (b) on the ability of such Party to consummate the
transactions contemplated hereby; provided, however, a material
adverse effect shall not include general economic or industry
circumstances or events, or economic or industry trends specific to
such Party
“Patents” shall mean, collectively, all of the Licensed
Patents and the Philips Patents.
“Person” shall mean any individual, group, corporation,
partnership or other organization or entity.
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Confidential
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“Philips Patents”
shall mean all patents listed on
Annex A, Appendix 2 , and all foreign counterparts,
additions, divisions, continuations, continuations-in-part,
provisionals, continued prosecution applications, substitutions,
reissues, extensions, registrations and renewals of any of the
foregoing.
“Proceedings”
shall have the meaning ascribed to
such term in Section 5.1(g).
“Regulatory
Documentation” shall mean the items listed in Annex A,
paragraph 1.6 , and any supporting documentation relating to
any of the foregoing which, to the Knowledge of Philips, is in the
possession of Philips at its Andover, MA, U.S.A. facility and
available for transfer.
“Related Instruments”
shall mean the Bill of Sale, the BSC
Assignment and Assumption Agreement, the Assignment Agreement,
Philips’ Officer’s Certificate, PRMV’s
Officer’s Certificate, and any other agreements entered into
in connection with the transaction contemplated in this
Agreement.
“Royalty Period”
shall mean: (a) with respect to
each Catheter Product, the period following the first commercial
Sale of such Catheter Product in each country where any one or more
of the Patents being used exists until the last to expire or lapse
Patent covering such Catheter Product in such country; and
(b) with respect to each Licensee Product, the period
following the first commercial sale of such Licensee Product in
each country where any one or more of the Philips Patents being
used exists until the last to expire or lapse Philips Patent
covering such Licensee Product in such country;.
“Settlement Agreement”
shall mean the agreement concluded
between Boston Scientific Corporation and Agilent Technologies,
Inc. dated 28 September 2000, a true, accurate and complete
copy of which has been provided by Philips to PRMV.
“Sign-off Date”
shall mean the earlier of:
(a) the date on which the Implementation Plan has been
fulfilled ends, or (b) the date on which PRMV has consummated
all available Philips’ employee days according to the
Implementation Plan.
“Sold,”
“Sale” or any
other variation thereof shall mean, with respect to Catheter
Products, that a unit of Catheter Product has been manufactured by
or for PRMV or any sublicensee or assignee of the Licensed Patents
and has been shipped and invoiced by or for PRMV or any such
sublicensee or assignee to a third party. For the avoidance of
doubt, the foregoing shall not include any Catheter Products that:
(a) are manufactured but are not shipped from the facility
where manufactured, or any distribution center, if such Catheter
Products are scrapped prior to being shipped and invoiced to a
third party; or (b) are returned by any such third party as
damaged or spoiled goods in shipment, handling or storage, provided
that no such deduction shall be allowed where such returns are
covered by an insurance policy in the name of or to the benefit of
PRMV and further provided that any such deduction by virtue of such
returns shall not exceed 5% of the Catheter Products shipped or
invoiced in any calender year; or (c) constitute demo units
pursuant to Section 4.6.
“Transfer Document”
shall mean the letter dated
August 10, 2001 with regard to the transfer of the BSC
Agreement from Agilent Technologies, Inc. to Philips, a true,
accurate and complete copy of which has been provided by Philips to
PRMV.
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Confidential
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“Territory” shall mean the world.
“Third
Party Claim” shall
have the meaning ascribed to such term in
Section 5.8(a).
“Upfront Payment”
shall have the meaning ascribed to
such term in Section 4.1.
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1.2
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In
the event of an ambiguity or a question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by
the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of
any provisions of this Agreement.
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2.
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Transfer of Assets; Grant of
Rights
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2.1
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At
the Closing, Philips shall assign to PRMV the BSC Agreement, the
Settlement Agreement and the Transfer Document, including without
limitation all Philips rights under the Licensed Patents and the
benefit of the covenant by BSC contained in Section 9 of the
BSC Agreement, and PRMV shall assume all the obligations of Philips
arising under the foregoing solely to the extent that such
obligations relate to the period from and after the Closing Date,
pursuant to that certain assignment and assumption agreement to be
executed by Philips and PRMV, in substantially the form attached as
Annex B (the “ BSC Assignment and Assumption
Agreement ”).
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2.2
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At
the Closing, Philips shall assign to PRMV the Philips Patents, the
Regulatory Documentation and Know-How pursuant to that certain
assignment agreement to be executed by Philips and PRMV, in
substantially the form attached as Annex C (the “
Assignment Agreement ”).
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Without prejudice to the foregoing,
Philips will assign the Philips Patents to PRMV, subject to all
prior agreements and prior commitments of Philips and its
Affiliated Companies to third parties, entered into prior to the
Closing Date and subject to Philips and its Affiliated Companies
retaining a non-exclusive, non-transferable, irrevocable,
perpetual, world-wide, and royalty free license, excluding the
right to sublicense but otherwise unrestricted, under all Philips
Patents for any purpose other than the manufacture, use or sale of
Licensed Products in the Territory.
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Notwithstanding the foregoing, it is
explicitly acknowledged and agreed that, in the event that PRMV
fails to make any payment to Philips hereunder in accordance with
the provisions within Sections 4.2 and 4.7 and fails to remedy
such non-payment within 90 days of receipt of a written notice
from Philips specifying the failure and requiring it to be
remedied, the right of Philips and its Affiliated Companies to use
the Philips Patents shall be automatically reinstated without any
restriction whatsoever. For the purpose of clarification, upon such
occurrence, the right of Philips and its Affiliated Companies shall
include the right to manufacture, use or sale of Licensed Products
in the Territory. Further, upon such occurrence, the Philips
Patents shall be re-assigned to Philips. PRMV hereby grants
irrevocable power of attorney to Philips to do all acts necessary
and to execute all documents on PRMV’s behalf in order to
confirm and perfect such assignments.
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Confidential
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Page 5 of 57
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In
the event PRMV and its successors and assignees undertake to
enforce, or authorize any Person to enforce any of the Philips
Patents assigned to PRMV under this Section 2.2 against a
third party, PRMV or its successor assignees shall have the right
to request in writing from Philips and Philips shall confirm in
writing within four weeks following receipt of such request,
whether or not such third party can claim rights under the Philips
Patents, granted by Philips and/or any of its Affiliated Companies
under any prior agreement or prior commitment entered into prior to
the Closing Date.
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2.3
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At
the Closing, Philips shall sell, transfer and deliver to PRMV all
right, title and interest in all of the other assets set forth in
Annex A comprising the IVUS Technology pursuant to that
certain bill of sale to be executed by Philips and PRMV, in
substantially the form attached as Annex D (the “
Bill of Sale ”).
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2.4
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Philips acknowledges and agrees
that, other than the obligations being assumed pursuant to the BSC
Assignment and Assumption Agreement, PRMV is not assuming,
guaranteeing nor is otherwise responsible for any Liability,
obligation or commitment of any nature of Philips, including
without limitation: (a) all Liabilities arising out of or
relating to any use of the IVUS Technology made by or on behalf of
Philips or its Associated Companies prior to the Closing Date; and
(b) all obligations of Philips for an excise, sales, use,
transfer, value added or similar taxes required to be made to any
governmental entity in connection with the transactions
contemplated and pursuant to the terms of this Agreement (all of
the foregoing, collectively, the “ Excluded
Liabilities ”).
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2.5
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PRMV confirms that it intends to
develop and manufacture ultrasound imaging catheters, imaging
cores, imaging guidewires and related patient interface modules and
IVUS equipment, designed for diagnostic or therapeutic use, or
both, in the human coronary and peripheral vascular system based on
the IVUS Technology.
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2.6
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Unless this Agreement is earlier
terminated pursuant to Section 6.1, the Closing will take
place as promptly as practicable but no later than three
(3) business days following satisfaction or waiver of the
conditions set forth in Sections 2.13 and 2.14, at such other
time and place as shall be mutually agreed upon by the
Parties.
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2.7
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At
the Closing, Philips shall deliver or cause to be delivered to
PRMV: (1) a duly executed BSC Assignment and Assumption
Agreement; (2) a duly executed Assignment Agreement;
(3) a duly executed Bill of Sale; and (4) Philips’
Officer’s Certificate.
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2.8
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At
the Closing, PRMV shall deliver to Philips: (1) the Upfront
Payment, as provided in Section 4.1; (2) a duly executed
BSC Assignment and Assumption Agreement; (3) a duly executed
Assignment Agreement; and (4) PRMV’s Officer’s
Certificate.
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2.9
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On
the Closing Date, title to the assets being acquired pursuant to
the Bill of Sale shall be transferred to PRMV. Immediately
following the Closing Date, Philips will make available the
foregoing assets to PRMV at the Philips’ Andover facility in
MA, U.S.A.. PRMV shall be responsible for loading the goods on
truck or container at the Philips’ Andover facility, and for
the subsequent costs and risks (EX WORKS); thereafter, PRMV shall
bear all risk of loss associated with such assets and shall be
solely responsible for procuring adequate insurance to protect
against such loss.
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Page 6 of 57
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2.10
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Except as otherwise provided in
Section 2.9: (a) until the Closing, any loss of or damage
to the IVUS Technology from fire, casualty or any other occurrence
shall be the sole responsibility of Philips; and (b) at the
Closing, title to the IVUS Technology shall be transferred to PRMV
and PRMV shall thereafter bear all risk of loss associated with the
IVUS Technology and be solely responsible for procuring adequate
insurance, if desirable by PRMV, to protect the IVUS Technology
against any such loss.
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2.11
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From the date of this Agreement
until the Closing, Philips shall make all necessary filings and fee
payments required to ensure continued prosecution of the Philips
Patents and licenses and to otherwise preserve the value of the
IVUS Technology.
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2.12
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On
the terms and subject to the conditions of this Agreement, each
Party shall use all reasonable commercial efforts to cause the
Closing to occur, including taking all reasonable actions necessary
to comply promptly with all legal requirements that may be imposed
on it with respect to the Closing.
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2.13
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The
obligation of PRMV to effect the transactions contemplated by this
Agreement is subject to the satisfaction or waiver by PRMV, at or
prior to the Closing, of the following conditions:
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(a) The
representations and warranties of Philips made in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of the Closing Date, except
to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects, on
and as of such earlier date).
(b) Philips shall have performed in all
material respects all obligations and covenants required to be
performed or complied with by Philips under this Agreement by the
time of the Closing, except for the activities related to the
Implementation Plan, which shall take place after the
Closing.
(c) PRMV
shall have received from Philips a certificate, dated the Closing
Date, duly executed by an authorized officer of Philips, reasonably
satisfactory in form to PRMV, to the effect of Section 2.13(a)
and (b) in substantially the form attached as Annex E
(the “ Philips’ Officer’s Certificate
”).
(d) Philips shall have delivered or caused
to be delivered to PRMV each of the documents specified in
Section 2.7.
(e) No
Proceedings that question the validity or legality of the
transactions contemplated hereby shall have been instituted or
threatened and not settled or otherwise terminated.
(f) All
consents and approvals of Governmental Entities necessary to permit
the transactions contemplated hereby to be consummated shall have
been obtained.
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2.14
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The
obligation of Philips to effect the transactions contemplated by
this Agreement is subject to the satisfaction or waiver by Philips,
at or prior to the Closing, of the following conditions:
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(a) The
representations and warranties of PRMV made in this Agreement shall
be true and correct in all material respects on and as of the
Closing Date as though made on and as of the Closing Date, except
to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects, on
and as of such earlier date).
(b) PRMV
shall have performed in all material respects all obligations and
covenants required to be performed or complied with by PRMV under
this Agreement by the time of the Closing.
(c) Philips shall have received from PRMV a
certificate, dated the Closing Date, duly executed by an authorized
officer of PRMV, reasonably satisfactory in form to Philips, to the
effect of Section 2.14(a) and (b) in substantially the
form attached as Annex F (“ PRMV’s
Officer’s Certificate ”).
(d) PRMV
shall have delivered or caused to be delivered to Philips each of
the items specified in Section 2.8.
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2.15
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Neither PRMV nor Philips may rely on
the failure of any condition set forth in Section 2.13 or 2.14
to be satisfied if such failure was caused by such Party’s
failure to act in good faith or to use all reasonable commercial
efforts to cause the Closing to occur.
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3.
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Implementation
Plan
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3.1
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Concurrent with the execution of
this Agreement, the Parties have agreed upon the Implementation
Plan, as set out in Annex G , to transfer the Know-how. Each
Party shall use all reasonable efforts to conduct the activities,
perform the services and provide the deliverables required of such
Party pursuant to the Implementation Plan.
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3.2
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Upon the occurrence of the Sign-off
Date, the Parties shall sign the document attached as Annex
H . After such Sign-off Date Philips shall have no further
obligation whatsoever towards PRMV with regard to the transfer of
the IVUS Technology. The foregoing shall not, however, reduce any
other obligation or liability that Philips may have to PRMV
pursuant to this Agreement or alter in any way Philips’
liability for any Excluded Liabilities.
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4.
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Fees, Reporting and
Payment
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4.1
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In
consideration of the rights granted by Philips hereunder and the
transfer of the IVUS Technology, PRMV shall, at the Closing Date,
make a non-refundable, non-recoupable payment of
€
3,000,000 (three
million Euro) to Philips in immediately available funds via wire
transfer in accordance with the instruction given by Philips
(“ Upfront Payment ”).
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4.2
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In
consideration of the rights granted by Philips hereunder and the
transfer of the IVUS Technology, on each of the first four
anniversaries of the Closing Date, PRMV shall pay to Philips a
non-refundable sum of €
725,000 (“
Annual Payment ”).
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4.3
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(a) In further consideration of
the rights granted hereunder by Philips to PRMV and the transfer of
the IVUS Technology, PRMV agrees to pay to Philips a fee for each
Catheter Product Sold, on a country-by-country basis, during the
Royalty Period for such Catheter Product.
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(b) All
payments by PRMV to Philips under this Agreement shall be made in
EUROS to the EUR bank account no. 8923019 of Koninklijke Philips
Electronics N.V. — Licenses, with the Citibank N.A., London,
swift code CITIGB2L, sort code 185008, under the following
reference: “IVUS license”.
(c) A fee
shall be due on each Catheter Product Sold, as provided in and
pursuant to Section 4.5.
(d) In
addition to the above, PRMV shall pay a fee to Philips for each
Licensee Product sold by a sublicensee of PRMV, as provided in and
pursuant to Section 4.5(c), during the Royalty Period for such
Licensee Product.
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4.4
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(a) Within 45 days
following 31 March, 30 June, 30 September and 31 December of each
year during the relevant Royalty Periods for each Catheter Product
and/or Licensee Product, PRMV shall submit to Philips a written
statement in the form as attached hereto as Annex I
(Reporting Form), signed by a duly authorized officer on behalf of
PRMV, setting forth with respect to the preceding quarterly
period:
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(1)
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the
quantities of Catheter Products Sold,
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(2)
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the
quantities of Licensee Products sold,
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(3)
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the
quantities of Catheter Products scrapped, returned or shipped as
demo units pursuant to each of paragraphs (a), (b) and
(c) in the definition of Catheter Products; and
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(4)
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a
computation of the fees due under this Agreement.
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(b) The
report shall include all manufacturing facilities, including any
third party facility engaged by PRMV, which have manufactured and
Sold Catheter Products, as well as any sublicensees of PRMV, which
have manufactured and Sold Catheter Products or have sold Licensee
Products.
(c) PRMV
shall pay the fees due to Philips as provided in Section 4.5
hereunder within 70 days after the end of each quarterly
period.
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4.5
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(a) During the relevant Royalty
Period for Catheter Products, PRMV shall report such Sale in
accordance with Section 4.4 and pay a fee to Philips
of:
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(1)
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€
[CONFIDENTIAL]
per Catheter Product Sold for the first [CONFIDENTIAL]
Catheter Products Sold;
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(2)
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€
[CONFIDENTIAL]
per Catheter Product Sold for Catheter Products above
[CONFIDENTIAL] and up to [CONFIDENTIAL] units
Sold;
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(3)
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€
[CONFIDENTIAL]
per Catheter Product Sold for Catheter Products above
[CONFIDENTIAL] and up to [CONFIDENTIAL] units
Sold;
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(4)
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€
[CONFIDENTIAL]
per Catheter Product Sold for Catheter Products above
[CONFIDENTIAL] and up to [CONFIDENTIAL] units Sold;
and
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(5)
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€
[CONFIDENTIAL]
per Catheter Product Sold for Catheter Products above
[CONFIDENTIAL] units Sold.
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(b) All
above quantities of Catheter Products Sold are for Catheters
Products Sold during each calendar year during the relevant Royalty
Period. At the beginning of each calendar year, the Catheter
Products Sold quantity is re-set to zero. Upon expiry or
termination of this Agreement, PRMV shall continue to pay the fees
due on all Catheter Products that were manufactured as of the
expiration or termination of the Royalty Period for such Catheter
Products and are thereafter Sold within one year after such
expiration or termination. At the end of such one-year period, PRMV
shall pay the fees due on all Catheter Products that were
manufactured prior to the expiration or termination of the Royalty
Period for such Catheter Products and are remaining in stock at
that time. On such amount in stock, a deduction from the number of
units of Catheter Products on which such fees shall be due is
allowed for the average percentage of the number of demo units and
scrapped or returned Catheter Products as determined based on the
actual number of demo units and scrapped or returned Catheter
Products during the Royalty Period.
(c) During
the relevant Royalty Period, PRMV shall pay a fee of
€
[CONFIDENTIAL] to Philips for
each Licensee Product sold, unless such product is subject to a fee
for Catheter Products in accordance with
Section 4.5.
(d) The
Parties acknowledge and agree that a fee pursuant to this
Section 4.5 shall only be due once for each Catheter Product
or Licensee Product manufactured and/or sold, as provided
herein.
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4.6
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Without prejudice to the generality
of the foregoing, no fee will be due on Catheter Products which
have been provided by PRMV to a third party customer as a demo unit
for trial purposes as part of the sales, promotion or marketing
effort being made by or for PRMV. The Parties have agreed that the
maximum number of demo units of such non-fee bearing Catheter
Products per year shall be 2,000 units.
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4.7
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(a) In the event that the
aggregate fees accrued pursuant to Section 4.5 for the 12
month-period ending on June 30, 2008 are less than
€
500,000, then PRMV will
make a single cash payment to Philips (within 90 days of
June 30, 2008) in the amount of the difference between the
fees accrued during such 12 month period and
€
500,000.
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(b) In the
event that the aggregate fees accrued pursuant to Section 4.5
for the 12-month period ending on June 30, 2009 are less
than € 500,000, then PRMV will make a single cash
payment to Philips (within 90 days of June 30, 2009) in
the amount of the difference between the fees accrued during that
12 month period and € 500,000.
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(c) The
single cash payments as referred to under subsection (a) and
(b) hereinabove do not release PRMV from its payment
obligation of the remainder of any fees, in the event such accrued
fees on June 30, 2008 or on June 30, 2009 would be higher
than € 500,000 per year.
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4.8
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PRMV shall have the right to buy-out
the fee payment obligations set forth in Section 4.5 and 4.7
at any time by paying Philips a sum of €
[CONFIDENTIAL] .
This buy-out payment does not release PRMV from its obligations to
pay the Annual Payments provided for in Section 4.2. In the event
that PRMV exercises such right, PRMV shall pay Philips any fees
which have accrued pursuant to Section 4.5 prior to the date
of such exercise, as provided for and in the manner set forth
therein, but thereafter, PRMV shall have no further obligation to
Philips for the payment of any fees pursuant to Section 4.5 or
4.7, and PRMV shall have no further obligation to provide the
statements pursuant to Section 4.4.
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4.9
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PRMV shall submit to Philips, within
120 days after the end of PRMV’s fiscal year, an audit
statement by its external auditors, who shall be certified public
auditors, confirming that all quarterly fee statements as submitted
by PRMV to Philips during the preceding fiscal year, are true,
complete and accurate, as verified using customary auditing
practices. Notwithstanding this audit statement, Philips reserves
the right to inspect the books and records of PRMV from time to
time in accordance with Section 4.12.
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4.10
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Any
payment due under this Agreement which is not made on or before the
date(s) specified herein, shall accrue interest at the rate of 1%
(one per cent) per month (or part thereof), or the maximum amount
permitted by law, whichever is lower.
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4.11
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All
costs, stamp duties, taxes and other similar levies arising from or
in connection with the conclusion of this Agreement (but excluding
any income or capital gains taxes or VAT payable by Philips on any
income or gain resulting from the sale of the IVUS Technology to
PRMV) shall be borne by PRMV. Philips shall be responsible for and
shall pay all income or capital gains taxes to any government of
any country due on any income or gain resulting from the sale of
the IVUS Technology to PRMV. In the event that the government of a
country imposes any income taxes on payments made by PRMV to
Philips hereunder and requires PRMV to withhold such tax from such
payments, PRMV may deduct such tax from such payments. In such
event, PRMV shall promptly provide Philips with tax receipts issued
by the relevant tax authorities so as to enable Philips to support
a claim for credit against income taxes which may be payable by
Philips and/or its Associated Companies in The Netherlands and to
enable Philips to document, if necessary, its compliance with tax
obligations in any jurisdiction outside The Netherlands.
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4.12
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(a) In order that the fee
statements provided for Section 4.4 may be verified, PRMV
shall keep complete and accurate books and records relating to the
manufacture and Sales of Catheter Products and the sales of
Licensee Products during the relevant Royalty Period, and shall
keep such books and records available for a period of 3 years
following the Sale of each Catheter Product or the sale of each
Licensee Product.
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(b) Philips shall have the right to inspect
such books and records of PRMV from time to time, in order to
verify the correctness of the aforementioned fee statements. Any
such
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inspection
shall take place no more than once per calendar year and shall be
conducted by a certified public auditor appointed by Philips and
reasonably acceptable to PRMV. Such audit shall be conducted on
PRMV’s premises upon at least 14 days advance written
notice and during normal business hours. PRMV may require such
auditors to execute a confidentiality agreement prior to providing
access to such books and records, for the avoidance of doubt: such
confidentiality agreement shall not preclude the auditor to report
its findings to Philips.. PRMV shall co-operate and provide all
such reasonable assistance as is necessary in connection with such
inspection as Philips and/or the auditor may reasonably request.
The report by such auditor to Philips shall not contain any
customer identities or other business information of PRMV, and a
copy of such report shall be provided to PRMV. The inspection shall
be conducted at Philips’ own expense, provided that, in the
event that PRMV has failed to submit fee statements and/or yearly
written statement(s) by its external auditors, as provided for in
Section 4.9 in respect of the period to which the inspection
relates or in the event that any discrepancy or error exceeding 5%
(five per cent) of the monies actually due is established, the cost
of the inspection shall be borne by PRMV, without prejudice to any
other claim or remedy as Philips may have under this Agreement or
under applicable law.
(c) Philips’ right of inspection as
set out in this Section 4.12 shall survive for a period of
3 years after the end of the last calendar year in the
relevant Royalty Period.
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4.13
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Without prejudice to the provisions
of Section 4.12, PRMV shall provide all relevant additional
information as Philips may reasonably request from time to time, so
as to enable Philips to ascertain which products manufactured, sold
or otherwise disposed of by PRMV or any of its sublicensees are
subject to the payment of fees to Philips hereunder.
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5.
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Representations and Warranties;
Indemnification
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5.1
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Philips represents and warrants to
PRMV, as of the Effective Date and as of the Closing Date, as
follows:
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(a) Philips is a corporation, duly
organized and in good standing under the laws of The Netherlands.
Philips holds all requisite permits and authorizations to own, or
have rights to, and use the IVUS Technology, except where the
failure to have such power and authority or to hold such permits or
authorizations would not have a Material Adverse Effect on
Philips.
(b) Philips has all requisite power and
authority and has taken all actions necessary to execute and
deliver this Agreement and all Related Instruments to be executed
and delivered by Philips, to consummate the transactions
contemplated hereby and thereby and to perform its obligations
hereunder and thereunder, and no other proceedings on the part of
Philips are necessary to authorize this Agreement or any Related
Instrument to be executed and delivered by Philips or to consummate
the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by Philips and,
assuming that this Agreement has been duly authorized, executed and
delivered by PRMV, constitutes, and each Related Instrument that is
to be executed and delivered by Philips will constitute, when
executed and delivered by Philips, assuming that such Related
Instrument has been duly authorized, executed and delivered by
PRMV, if and as applicable, a valid and binding obligation of
Philips, enforceable against Philips in accordance with its terms
except: (a) as
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limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally; and (b) as limited by laws
relating to the availability of specific performance, injunctive
relief or other equitable remedies.
(c) The
execution and delivery by Philips of this Agreement and any Related
Instruments, and the performance by Philips of its obligations
under this Agreement and any Related Instrument to be executed and
delivered by Philips and the consummation of the transactions
contemplated hereby and thereby will not: (1) conflict with or
violate or breach any of the terms, conditions or provisions of any
organizational document of Philips; (2) conflict with or
result in a violation or breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute
a breach or default) under, or result in the termination of, or
accelerate the performance required by, or cause the acceleration
of the maturity of any debt or obligation pursuant to, any
contract, agreement or instrument to which Philips is a party or by
which Philips or any of the IVUS Technology is bound resulting in
the creation or imposition of any Lien upon any portion of the IVUS
Technology; or (3) violate or conflict with any law, rule,
regulation, judgment, order or decree of any court applicable to
Philips or the IVUS Technology, except in the case of clauses
(2) or (3) of this Section 5.1(c) for violations,
breaches or defaults which would not result in a Material Adverse
Effect with respect to Philips (any of clauses (2) and (3), a
“ Conflict ”).
(d) Except
as set forth on Annex J, Part 5.1(d), no permit, consent,
approval, or registration, declaration or filing with, any Person
(so as not to trigger any Conflict) is necessary for the execution
and delivery of this Agreement or any Related Instrument by Philips
or the consummation by Philips of the transactions contemplated by
this Agreement or any Related Instrument to be executed and
delivered by Philips, except for those filings, permits, consents,
approvals, registrations or declarations the failure of which to be
made or obtained would not result in a Material Adverse Effect with
respect to Philips.
(e) Upon
the consummation of the transactions contemplated herein, PRMV
shall acquire all right, title and interest of Philips in and to,
the IVUS Technology, free and clear of all Liens. For the avoidance
of doubt it is acknowledged and agreed between the Parties that
this representation is without prejudice to the provisions of
Section 2.2.
(f) Annex A,
Appendix 1 and Appendix 2 sets forth a
complete and accurate list of all of the patents owned by Philips
or to which Philips has rights under the BSC Agreement that Philips
believes to be necessary to develop, make use and sell Licensed
Products. Each Philips Patent is valid and subsisting, and all
necessary registration, maintenance and renewal fees in connection
with the Philips Patents have been paid.
(g) To the
Knowledge of Philips, there are no claims, actions, suits,
proceedings, arbitrations, orders, inquiries, hearings or
assessments before any court, tribunal (including the United States
Patent and Trademark Office or equivalent authority anywhere in the
world) or other governmental entity other than proceedings related
to usual and customary patent prosecutio
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