EXHIBIT 10.1
MEMORANDUM OF UNDERSTANDING
This
Memorandum of Understanding ("Agreement"), effective as of July
27,
2005 (the "Effective Date"), is entered
into by and between PROUROCARE INC., a
Minnesota corporation ("ProUroCare"), and
UROLOGIX, INC., a Minnesota
corporation ("Urologix"). ProUroCare and
Urologix each may be referred to herein
individually as a "Party," or collectively
as the "Parties."
Background Information
ProUroCare
has acquired rights to certain proprietary knowledge and
intellectual property pertaining to
electrical impedance tomography for use in
diagnosing and treating urological
conditions, including the exclusive worldwide
license to certain patents for electrical
current computed tomography,
three-dimensional impedance imaging
processes and related inventions as
described in Exhibit A attached hereto (the
"EIT Technology"). EIT Technology
provides a means to image, in real-time,
the three-dimensional distribution for
the heating effect from the microwave
delivery system used by Urologix, in the
form of a thermally induced image. The
heating effect produces a change in the
local conductivity or resistivity in the
treatment area. The local changes in
the electrical properties of the tissue are
measured by an electrode system
connected to an electronically controlled
low-frequency power supply. The
electrodes receive specific currents and
the possible induced voltages are
measured electronically. An inversion
algorithm creates a real time image of the
pattern.
Urologix
has developed, and currently markets, products for the
treatment
of benign prostatic hyperplasia ("BPH")
using heat applied through controlled
microwave radiation, and is currently
developing additional products for the
treatment of prostatitis/prostadynia, renal
tumors and prostate cancer using
heat applied through controlled microwave
radiation (the foregoing, collectively
"Urologix Products"). Urologix is the owner
or licensee of certain patents and
other proprietary intellectual property
used in the Urologix Products.
The
Parties have discussed establishing a mutually beneficial
business
relationship pursuant to which the EIT
Technology would be incorporated into,
and complement, certain existing and future
Urologix Products. However, several
phases of research and development, along
with clinical testing and FDA
approval, must be undertaken and
successfully completed before any such Urologix
Product will be ready for marketing on a
commercial basis.
The
Parties wish to memorialize their agreement with respect to the
conduct of said research, development and
any subsequent commercialization of
such products, and enter into this
Agreement for that reason and to that end.
NOW,
THEREFORE, in consideration of the foregoing premises, the
mutual
promises and covenants of the Parties
contained herein, and other good and
valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the Parties hereto, intending
to be legally bound, do hereby agree
as follows:
1. Overview
1.1 The
Parties will work together to develop new Urologix Products
that
use the EIT Technology, in combination with
refinements of existing Urologix
Products which use heat applied through
controlled microwave radiation, to treat
BPH, prostatitis/prostadynia, renal tumors
and prostate cancer ("New EIT
Products").
1.2 While
ProUroCare believes that EIT Technology may be used in
connection with diagnosing and treating
urological conditions, such technology
needs to be tested, refined, developed and
verified, in both laboratory and
clinical settings, to establish its
efficaciousness, safety and commercial
viability in the context of any New EIT
Products.
<PAGE>
1.3 The
Parties intend to undertake such testing and development as set
forth herein. If successful in that
endeavor, the Parties contemplate
subsequently entering into mutually
acceptable definitive agreements pursuant to
which Urologix would market New EIT
Products using components supplied by
ProUroCare and licenses granted by
ProUroCare (the "Project").
2. Multi-Phase
Approach
2.1 The
Parties expect that the following phases of research, testing
and
development (the "Phases") will be required
in connection with the Project:
Phase I
(Electrode Array Design and Proof of Concept)
During
Phase I the Parties will work with Gary J. Saulnier, Jonathan
C.
Newell and David Isaacson of the Rensselaer
Polytechnic Institute, Troy, New
York ("RPI"), to develop a suitable
electrode array (number of electrodes, size
and distance) for use in a rectal probe and
skin surface application for the New
EIT Products. (Electrodes will not be
placed on the trans-urethral catheter.)
During Phase I, electrode array
configurations will be assessed by their ability
to produce measurement data that shows the
needed sensitivity to localized
heating as well as their ability to avoid
interaction with the antenna radiation
pattern. Also, the feasibility of achieving
the required resolution/sensitivity
will be assessed. Prior to commencement of
work on Phase I, ProUroCare will
obtain, for the benefit of each of
ProUroCare and Urologix, a confidentiality,
non-use and non-disclosure agreement from
RPI in substance and form reasonably
acceptable to Urologix. The Parties
anticipate that Phase I will be completed on
or before December 31, 2006.
Phase II
(Reconstruction Algorithm Development)
During
Phase II the Parties will work with RPI to design, implement
and
test a reconstruction algorithm to produce
images from data taken using
candidate electrode arrays.
Phase III
(Instrument Design and Implementation)
During
Phase III the Parties will work with RPI to design and prototype
an
instrument utilizing the EIT Technology
that is capable of supporting the
required number of electrodes and providing
the needed measurement precision and
speed.
Phase IV
(Clinical Trials)
During
Phase IV the Parties will conduct the requisite clinical
studies
upon mutually agreeable terms reflected in
a definitive agreement to be
negotiated in good faith by the Parties
when appropriate; provided, however,
neither Party has agreed to incur any
expenses whatsoever in connection with
Phase IV.
Phase V
(FDA Approvals)
During
Phase V the Parties will cooperate to obtain all required
approvals
from the U.S. Food and Drug Administration
("FDA") upon mutually agreeable terms
reflected in a definitive agreement to be
negotiated in good faith by the
Parties when appropriate; provided,
however, neither Party has agreed to incur
any expenses whatsoever in connection with
Phase V.
Phase VI
(Market Release)
During
Phase VI the Parties will cooperate to prepare the New EIT
Products
for final market release upon mutually
agreeable terms reflected in a definitive
agreement to be negotiated in good faith by
the Parties when appropriate;
provided, however, neither Party has agreed
to incur any expenses whatsoever in
connection with Phase VI.
2.2 The
Parties will cooperate during all Phases of the Project during
the
Term.
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Memorandum of Understanding
Page 2 of 14
<PAGE>
2.3 Each
Phase of the Project must be successfully completed before
substantial work may begin on the next
Phase.
2.4 If any
Phase cannot be completed due to factors affecting the ultimate
success of the Project such as (but not
limited to) timeliness, cost, commercial
feasibility and technical constraints, or
the Parties are unable to enter into a
definitive agreement when appropriate, or
the Parties are unable to agree
regarding the responsibility for further
funding of the Phases for Phases I, II
and III in excess of the $550,000 projected
costs (as set forth in Section 3
hereof), either Party may, in its sole
discretion and upon written notice to the
other Party, choose to abandon the
Project.
2.5
Attached as Exhibit B is the agreement between RPI and
ProUroCare
covering the role, responsibilities, rights
and obligations of RPI and
ProUroCare with respect to work to be
performed by RPI during the Phase I of the
Project.
3. Development Costs
Urologix
and ProUroCare agree to equally share in the development costs
incurred by RPI or its contractors during
the first three Phases. Projected
costs for the first three Phases are as
follows:
--------------------------------------------------------------------------
Phase
Projected Cost
--------------------------------------------------------------------------
Phase I:
Electrode Array Design and Proof of Concept
$150,000
--------------------------------------------------------------------------
Phase II:
Reconstruction Algorithm Development
$200,000
--------------------------------------------------------------------------
Phase III:
Instrument Design and Implementation
$200,000
--------------------------------------------------------------------------
Each Party will make timely payment to RPI
of its share of the foregoing
development costs. The Parties may in each
of their sole discretion mutually
agree to share costs in excess to the
foregoing projected costs.
4. Development
Committee
4.1
ProUroCare and Urologix shall jointly establish a development
committee (the "Development Committee"),
which shall oversee the Project's
Phases, its budget, and other activities
related to the Project. Each Party
shall appoint an equal number of
representatives with the requisite experience
and seniority to enable them to make
decisions on behalf of the Parties with
respect to the project. The Development
Committee shall meet monthly, or as
otherwise agreed to by the Parties. A
quorum of the Development Committee shall
exist whenever there is present at a
meeting at least one representative
appointed by each Party. Members of the
Development Committee may attend a
meeting either in person or by telephone,
video conference or similar means in
which each participant can hear what is
said by the other participants.
Representation by proxy shall not be
allowed.
4.2 The
Development Committee shall take action by unanimous consent of
ProUroCare and Urologix, with each such
Party having a single vote, irrespective
of the number of representatives actually
in attendance at a meeting, or by a
written resolution signed by the designated
representatives of each of
ProUroCare and Urologix.
4.3 Each
Party agrees to designate an executive sponsor to serve as its
point of escalation for resolving disputes
that may arise relative to the
Development Committee and to facilitate
regular communication between the
Parties as necessary.
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Memorandum of Understanding
Page 3 of 14
<PAGE>
5. Initial Products
5.1
Assuming successful completion of Phases I through V, the
Parties
contemplate that the first New EIT Product
to be marketed and sold will be a
system for the treatment of BPH using heat
applied through controlled microwave
radiation (the "Initial Product") comprised
of the following:
5.1.1 External Box. An EIT external box compatible with the
Urologix
product
currently described as the Targis control unit as well as any
subsequent
versions of the control unit ("EIT External Box"). If this
product
proves efficacious and is commercially viable, the Parties
expect
that
subsequent versions of Urologix control unit products will
either
have EIT
Technology incorporated into the control unit or continue to be
used with
a compatible EIT External Box. Any such EIT External Box will
be
manufactured by or for Urologix. In accordance with and subject to
the
terms of
this Agreement, Urologix will have an exclusive,
sub-licensable,
worldwide,
fully paid-up license to use the EIT Technology in connection
with any
sale, marketing, manufacture, importation, export and/or
distribution of the EIT External Box and any control unit
containing the
EIT
External Box, but only in conjunction with the Rectal Sheath
and
Abdominal
Belt (hereinafter described) manufactured or supplied by
ProUroCare.
5.1.2 Rectal Sheath and Abdominal Belt. A separate but integral
component
of the Initial Product will be a disposable rectal sheath (the
"Rectal
Sheath") and an abdominal belt containing electrodes (the
"Abdominal
Belt") (collectively, together with any additional components,
products,
materials or supplies provided or to be provided by ProUroCare,
the
"ProUroCare Products"). ProUroCare, in consultation with
Urologix,
will
determine whether the Abdominal Belt is disposable or reusable.
The
ProUroCare
Products will be manufactured to Urologix's specifications by
ProUroCare
or by a supplier to ProUroCare reasonably acceptable to
Urologix.
The Parties contemplate that Urologix will purchase the kit
including
the ProUroCare Products for approximately $150 based upon
ProUroCare's estimated cost of less than $50, and a minimum markup
of $100
and a
minimum multiple of price to cost of four times (4x). Urologix
and
ProUroCare
may jointly determine to purchase all rectal sheaths both with
and
without EIT electrodes from the same supplier. Urologix may
continue
to
purchase rectal sheaths from its current supplier without EIT
capability. The details of such purchase(s) will be reflected in
a
definitive
agreement to be negotiated in good faith by the Parties when
appropriate.
5.2
Assuming successful completion of Phases I through V, the
Parties
agree to negotiate, in good faith, the
preparation of definitive agreements
covering the manufacture, sourcing, sale
and distribution of the New EIT
Products and the constituent components
thereof. As a guide to preparation of
such definitive agreements, the Parties
expect that such agreements will include
the following provisions (among
others):
5.2.1 Subject to and upon the terms of the aforementioned
definitive
agreement(s), ProUroCare will be the exclusive provider of the
ProUroCare
Products
to Urologix, and Urologix will purchase one hundred percent
(100%) of
its requirements for ProUroCare Products from ProUroCare. Such
definitive
agreement will, among other things, (a) provide for alternative
sourcing
and manufacture of the ProUroCare Products under certain
commercially reasonable circumstances, (b) contemplate that
ProUroCare
will seek ways
to reduce the cost of manufacturing or sourcing the
ProUroCare
Products by methods such as elimination of components,
obtaining
alternate sources of materials, redefinition of ProUroCare
Product
specifications in ways that do not detract from ProUroCare
Product
quality
and improved assembly or test methods, (c) provide licensing
rights
adequate to protect Urologix's interests, and (d) grant Urologix
or
its
designee the right (but not the obligation) to monitor all
manufacture, sourcing and distribution of the ProUroCare
Products.
5.2.2 Urologix will convert then-existing Targis (or successor)
control
units located in the United States, Europe and Japan to include
EIT
Technology functionality according to the schedule immediately
following.
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Memorandum of Understanding
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<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Period
(number of years Minimum percentage of
existing Urologix systems to be retrofitted to use EIT
after FDA approval):
Technology within Period:
-----------------------------------------------------------------------------------------------------------
<S>
<C>
1
5%
-----------------------------------------------------------------------------------------------------------
2
10%
-----------------------------------------------------------------------------------------------------------
3
15%
-----------------------------------------------------------------------------------------------------------
4
20%
-----------------------------------------------------------------------------------------------------------
5
30%
-----------------------------------------------------------------------------------------------------------
</TABLE>
5.2.3 Urologix will sell new control systems incorporating EIT
Technology
according to the following schedule:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Period
(number of years Minimum percentage of
new Urologix systems to use EIT Technology within Period:
after FDA
approval):
-----------------------------------------------------------------------------------------------------------
<S>
<C>
1
30%
-----------------------------------------------------------------------------------------------------------
2
40%
-----------------------------------------------------------------------------------------------------------
3
50%
-----------------------------------------------------------------------------------------------------------
4
60%
-----------------------------------------------------------------------------------------------------------
5
70%
-----------------------------------------------------------------------------------------------------------
</TABLE>
5.2.4 In the event that Urologix fails to meet the minimum
percentages set forth in Sections 5.2.2 or 5.2.3, ProUroCare may,
at its
option,
give written notice to Urologix that Urologix's license with
respect to
the EIT Technology and/or the Patents as further described in
Section
6.2 hereof will become non exclusive (in addition to being
royalty-free, worldwide, fully paid and sub-licensable) and such
non
exclusivity shall become effective upon receipt of said notice by
Urologix
for the
remaining Term.
6. EIT Technology -
Representations, Ownership and Exclusive License Rights
6.1
ProUroCare represents and warrants:
6.1.1 That the execution and delivery of this Agreement by
ProUroCare
and the performance of and compliance by ProUroCare with the
terms and
conditions of this Agreement will not result in the imposition
of any
lien or other encumbrance on the EIT Technology or the Patents,
and
will not
conflict with or result in a breach by ProUroCare of any of the
terms,
conditions or provisions of any order, injunction, judgment,
decree,
statute, rule or regulation applicable to ProUroCare, the EIT
Technology
or the Patents, or any note, indenture or other agreement,
contract,
license or instrument by which any of the EIT Technology or the
Patents
may be bound or affected. No consent or approval by any person
or
public
authority is required to authorize or is required in connection
with, the
execution, delivery or performance of this Agreement by
ProUroCare.
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Memorandum of Understanding
Page 5 of 14
<PAGE>
6.1.2 That it has the necessary right, title, interest and power
to
grant the
licenses to Urologix set forth in this Agreement, free and
clear
of any
liens, claims, options, rights, mortgages, licenses(s) to any
third
party,
encumbrances or security interests of any kind.
6.1.3 That it is not currently the subject of any litigation or
pending
claim that would affect its ability to perform under this
Agreement
nor is it aware of any question or challenge to its ability to
perform
under this Agreement.
6.1.4 That no agreement or understanding with any third party
exists
or will
exist that would interfere with its obligations hereunder;
provided,
however, ProUroCare derives its exclusive rights to the EIT
Technology
and Patents from a License Agreement with Renesselaer
Polytechnic Institute ("RPI") dated July 13, 2001, as amended by
Amendment
#1 to
License Agreement (the "RPI License"), a true and correct copy
of
which is
attached hereto as Exhibit C. This Agreement does not interfere
with, and
will not cause a default under, the RPI License.
6.1.5 That the licenses granted and the use of the EIT Technology
as
contemplated by this Agreement, does not and will not infringe any
patent,
copyright,
trademark, trade secret or other intellectual property right of
any third
party; provided, however, Urologix's remedy for breach of the
warranty
contained in this Section 6.1.5 shall be limited to the
indemnification rights set forth in Section 7 hereof.
6.1.6 In addition, ProUroCare represents and warrants that it
has
sole and
exclusive rights to the patents identified on Exhibit A and has
or will
have such rights to any patents which issue from the
applications
made with
respect to such patents, including, without limitation, any
continuations, continuations-in-part, reissues, reexaminations and
patent
applications ("Patents").
6.2 During
the Term of this Agreement, Urologix shall have, and ProUroCare
hereby grants, an exclusive, royalty-free,
worldwide, fully paid license to
make, have made, use, sell, sub-license,
offer to sell, and/or import any and
all products and services embodying,
incorporating, based upon or derived from
the EIT Technology and/or the Patents, in
connection with or related to the
treatment of BPH, prostatitis/prostadynia,
renal tumors and/or prostate cancer
using heat applied through controlled
microwave radiation, but only in
conjunction with the Rectal Sheath and
Abdominal Belt manufactured or supplied
by ProUroCare, in accordance with and
subject to the terms hereof or any other
applicable definitive agreement
subsequently executed by the Parties (the
"License"). The License is further
evidenced by the Sublicense Agreement dated
of even date herewith between Urologix and
ProUroCare and approved by RPI, a
true and correct copy of which is attached
hereto as Exhibit D.
6.3
ProUroCare retains all right, title and interest, including the
right
to grant licenses to third parties, in and
to the Patents, EIT Technology,
Rectal Sheath and Abdominal Belt, but only
to the extent not manifestly
inconsistent with the licenses granted to
Urologix herein. Notwithstanding the
foregoing, during the Term of this
Agreement ProUroCare will not, directly or
indirectly, grant any license (or right) to
any third party with respect to the
Patents, the EIT Technology or the
ProUroCare Products for treatment of BPH,
prostatitis/prostadynia, renal tumors or
prostate cancer using heat applied
through controlled microwave radiation, to
the extent, if any, these Indications
(as such term is hereafter defined) have
not been terminated by ProUroCare
pursuant to Section 12.2 hereof and only
for so long as Urologix's license to
the EIT Technology and Patents is
exclusive.
6.4
Intellectual Property Rights.
6.4.1 Each Party agrees to provide the other Party, at its
reasonable
request, all such assistance as may reasonably be required to
obtain,
evidence and/or perfect such Intellectual Property Rights in
any
country or
jurisdiction worldwide; provided, however, such assistance
shall be
at the cost and expense of the Party requesting assistance.
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Memorandum of Understanding
Page 6 of 14
<PAGE>
6.4.2 Except as expressly stated herein, each Party reserves
all
rights in
and to its pre-existing Intellectual Property Rights.
6.4.3 For all purposes of this Section 6.4, "Intellectual
Property
Rights"
means all worldwide (a) patents, patent applications, and
patent
rights;
(b) rights associated with works of authorship including
copyrights, copyright applications, copyright restrictions, mask
work
rights,
mask work applications, and mask work registrations: (c) rights
relating
to the protection of trade secrets and confidential
information;
(d) moral
rights; (e) rights analogous to those set forth herein and any
other
proprietary rights relating to intangible property; and (f)
divisions,
continuations, substitutions, continuations-in-part, renewals,
reissues,
extensions, registration, confirmations, re-examinations,
supplementary protection certificates and the like of the foregoing
(as
applicable) now existing or hereafter filed, issued or
acquired.
6.4.4 If during the Term of this Agreement and in connection
with
the
performance thereof by the Parties, new Intellectual Property
Rights
are
developed, created or authored ("New Intellectual Property
Rights"),
then
Urologix reserves the rights to, and shall own exclusively, all
New
Intellectual Property Rights pertaining to treatment of BPH,
prostates/prostadynia, renal tumors and prostate cancer using heat
applied
through
controlled microware radiation (whether such New Intellectual
Property
Rights were created through joint efforts of the Parties or
not)
and
ProUroCare reserves the rights to, and shall own exclusively, all
New
Intellectual Property Rights pertaining to EIT Technology
whether
contained
in the EIT External Box, control unit or the ProUroCare
Products,
including, without limitation, new algorithms specifically
created
for the EIT External Box or control unit (whether such New
Intellectual Property Rights were created through joint efforts of
the
Parties or
not); provided, however, that Urologix shall have the license
rights
granted to it with respect to New Intellectual Property of
ProUroCare
to the same extent as shall exist with respect to the License
granted
herein and, provided further, this Section 6.4.4 will not
prevent
the use or
resale of any Urologix Products sold and delivered or placed in
service by
Urologix during the Term hereof.
7. Indemnification
7.1
ProUroCare will indemnify and hold harmless Urologix, and will
reimburse Urologix for any loss, liability,
claim, damage, expense (including
costs of investigation and defense and
reasonable attorneys' fees and expenses),
arising from or in connection with any
claim asserted by an unaffiliated third
party that any Patent or aspect of the EIT
Technology infringes or violates such
third party's confidentiality rights or any
patent, copyright or trademark, or
misappropriates its trade secret ("Claim").
Each Party must notify the other
promptly in writing of a Claim and agree to
cooperate with each other in
defending the claim. ProUroCare shall have
the right to defend such claim, and
Urologix shall have the right, at its
option and expense, to participate in
defense of the claim and any settlement
negotiations relating to such claim,
t
