LICENSE AND DEVELOPMENT AGREEMENT

Exhibit 10.39

LICENSE AND DEVELOPMENT AGREEMENT

        THIS LICENSE AND DEVELOPMENT AGREEMENT is entered into on the 6 ^th day of December 1996.

WITNESSETH:

        WHEREAS Licensor is the owner (subject to the rights of Medtronic, Inc. as defined in the Investment Agreement, Schedule A) of the entire right, title and interest in proprietary technology and a patent family relating to certain devices and methods clearing blood clots and other obstructions in the lumens (hereinafter referred to as the "IVM System"), which are in part the subject of U.S. Patent No. 5,423,799, invented by Man F. Shiu, M.D.;

        WHEREAS Licensee desires to obtain certain licensing rights with respect to the IVM System, as well as certain rights with respect to future developments and improvements;

        WHEREAS Licensee desires to have product development conducted by Licensor relating to the IVM System; and

        WHEREAS Licensor desires to provide such rights to Licensee on the terms and conditions set forth below;

        NOW THEREFORE, for and in consideration of the covenants and promises set forth below, the parties agree as follows:

ARTICLE I

        1.     As used above and throughout this license and development agreement, the definitions of the following terms have the meanings set forth below:

•         1.1   "Affiliate" shall mean any corporation, firm, association or other legal entity that directly or indirectly controls, is controlled by, or is under common control with, a party, but only for so long as said control continues. For purposes of this definition, "control"

• means possession of the power to direct voting rights of more than fifty percent (50%) of the shares having a right to vote for directors.

          1.2   "Combination Product" shall mean a product in which an IVM Technology Product is a component of a combination of functional elements or is a separate component sold in combination with other products.

          1.3   "Effective Date" shall mean the date that both parties have formally executed this Agreement.

          1.4   "Field" shall mean the treatment or removal from non-coronary vasculature of atheroma, thrombus, or other substances or tissues known to block blood vessels.

          1.5   "Improvements" shall mean all research, developments, improvements, modifications or adaptations relating to any aspect of the IVM System, Licensed Patents, Technical Information or Work Plan, which might reasonably be of commercial interest to either party in the design, use, manufacture or supply of the IVM Technology Products in the Field.

          1.6   "IVM Technical Information" shall mean all Technical Information that would be considered confidential in accordance with Section 15.1 at the time a sale of an IVM Technology Product occurs creating a royalty obligation under Article VI below.

          1.7   "IVM Technology Products" shall mean any Licensed Product or any product made using IVM Technical Information.

          1.8   "Joint Improvements" shall mean Improvements which are jointly conceived, and/or reduced to practice, or written (as determined by United States patent or copyright law) by Licensor, or by an employee consultant, agent, or representative of Licensor or some other person obligated to assign their rights to such Improvements to Licensor, and Licensee, or by an employee, consultant, agent, or representative of Licensee or some other person obligated to assign their rights to such Improvements to Licensee.

          1.9   "Licensed Patents" shall mean any issued patents or which may issue claiming priority from GB 8829182 filed December 14, 1988 or U.S. Patent Application No. 08/010,505 filed January 28, 1993, all applications claiming priority to those applications or their priority filings, and any divisions, continuations, and continuations-in-part and corresponding international filings thereof, including all patent filings owned or licensable by Licensor relating to the IVM System and any patent acquired or controlled by Licensor with the right to sublicense which dominates other Licensed Patents or covers IVM Technology Products; and Licensor warrants that Schedule 1.9 is a complete list of all such patent filings existing as of the execution of this agreement, which will be updated as necessary to reflect additional filings, issuances, and overall status of the portfolio.

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•         1.10 "Licensed Product" shall mean any product, the manufacture, use or sale of which literally infringes, on a country-by-country basis, an unexpired, enforceable claim of the Licensed Patents.

          1.11 "Licensed Territory" shall mean the entire world.

          1.12 "Licensee Improvements" shall mean Improvements which are conceived and/or reduced to practice by any employee or consultant of Licensee who has access to Technical Information without the assistance of Licensor.

          1.13 "Licensor Improvements" shall mean Improvements which are conceived and/or reduced to practice by any employee or consultant of Licensor without the assistance of Licensee or which are licensed to or acquired by Licensor.

          1.14 "Net Sales" shall mean the net invoice price (gross billing price) which Licensee or its sublicensees charge to its arms-length customers for IVM Technology Products or Licensed Products less sales, use, occupation and excise taxes and transportation, returns and allowances in lieu of returns. In no event shall the Net Sales be less than seventy percent (70%) of the annual list price established by Licensee. In the event that IVM Technology Products are sold as Combination Products, "Net Sales" for the purpose of calculating royalties will be the greater of:

  •         (a)   the average Net Sales of such IVM Technology Product portion (on a unit basis) of the Combination Product when sold separately within the previous year; or

            (b)   if the IVM Technology Product is sold in a Combination Product with any article which does not embody any of the claims of the IVM Technology Patents or the IVM Technical Information and each item in such kit or combination is also sold separately, as for example a guidewire, the Net Sales of the IVM Technology Product included in such Combination Product shall be determined by multiplying the gross invoiced selling price of such Combination Product, less applicable deductions and off-sets hereinabove referred to, by a fraction, the numerator of which shall be Licensee's or its Affiliate's or sublicensee's published list price for the IVM Technology Product included in such Combination Product and the denominator of which shall be Licensee's or its Affiliates' or sublicensee's published list price for the Combination Product. If the IVM Technology Product is sold in a Combination Product with any article which does not embody any of the claims of the IVM Technology patents or the Technology Information and each item in such Combination Product is not sold separately, the Net Sales of the IVM Technology Product included in such Combination Product shall be determined by multiplying the gross invoiced selling price of such Combination Product, less applicable deductions and off-sets hereinabove referred to, by a fraction, the numerator of which shall be Licensee's or its Affiliates or sublicensee's fully burdened manufacturing cost or purchase price paid for item(s) in such Combination Product which embody any of the claims of the IVM Technology Patents or the IVM Technical Information and the denominator of which shall be Licensee's or its Affiliates' or sublicensee's

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• • fully burdened manufacturing cost or purchase price paid for all items contained in such Combination Product.

    In countries where the net invoice price is not available to Licensee under its regular internal financial reporting procedures, Net Sales shall be the average net invoice price for IVM Technology Products in the United States during the most recent calendar quarter in which the sale is made. Licensee shall keep regular books of account for its manufacturing and sales of said IVM Technology Products.

          1.15 "Steering Committee" shall mean a committee composed of an equal number of representatives from each of Licensor and Licensee (to be one each unless decided otherwise), which shall meet on at least a semi-annual basis (alternating between the parties' offices) to review technical progress in the Work Plan and consider and decide matters concerning the conduct of the Work Plan, and to oversee the funded research relationship between the parties pursuant to Article III of this agreement.

          1.16 "Technical Information" shall mean all know-how, experience, drawings, prototypes, specifications, designs, tools, molds, diagrams, computer programs and all other technical information known to Licensor up to the first commercial sale of IVM Technical Products relating to the IVM System, or IVM Technology Products and, for example, which might reasonably be necessary or useful to Licensee in the design, use, manufacture or supply of the IVM Technology Products in the Field or in the operation of any process based thereon.

          1.17 "Work Plan" shall mean a product development programs mutually agreed by the parties, such Work Plan to be finalized by January 20, 1997.

ARTICLE II

        2.     Technical Information, Due Diligence, and Investments

•         2.1   Within thirty (30) days of the execution of this agreement, Licensor will supply Licensee with all Technical Information and other information and materials in its possession relating to the IVM System that has not previously been disclosed and that is reasonably necessary or useful to enable Licensee to design, manufacture on a commercial scale, use and sell IVM Technology Products in the Field. With respect to the molds which are currently in the possession of Licensor, during the term of this Agreement Licensee will have access to the molds, ownership of which is to be retained by Licensor.

          2.2   Licensor warrants to the best of its knowledge and belief that Licensor is the owner of and has or will have the right to disclose and grant the use and other rights herein relating to all Technical Information and Licensed Patents disclosed and/or licensed to Licensee hereunder. Licensor indemnifies Licensee against any and all losses, costs, and damages arising from a breach of this warranty.

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•         2.3   Upon execution of this agreement, the parties will enter into an Investment Agreement specifying Licensee's purchase of certain IVM common stock and option to purchase all outstanding IVM stock. An executed copy of the Investment Agreement is attached hereto as Schedule B and incorporated herein by reference.

ARTICLE III

        3.     Product Development

•         3.1   In a program of product development with a commencement date of the Effective Date, Licensor, with the close cooperation of Licensee, shall use commercially reasonable efforts, including the provision of qualified personnel, equipment, materials and facilities, to conduct the development and meet the milestones set forth in the Work Plan. Any Improvements or any developments relating to the IVM System or IVM Technology Products will be analyzed jointly by the parties. The Work Plan is estimated to last ten (10) months, but may be extended by mutual agreement of the parties. A detailed outline of activities to be performed in the course of the Work Plan, with anticipated dates of completion of each aspect and a cost budget will be set forth in the Work Plan. The Work Plan may be revised at any time with the written consent of the parties. Licensor acknowledges that time is of the essence with respect to the successful completion of the Work Plan.

          3.2   Within ninety (90) days of the Steering Committee informing the parties in writing of the contemplated successful completion of the Work Plan, Licensee will initiate internal qualification of any proposed product(s). Licensee's failure to commence internal qualification within that time period shall constitute grounds for Licensor to terminate the agreement under Section 9.2.

          3.3   Within ten (10) days after the end of each month during the Work Plan, Licensor shall provide the Steering Committee with progress reports containing a detailed description of the work conducted by it in the course of the Work Plan and of the results thereof. The parties shall keep the Steering Committee fully informed regarding their analysis of the Improvements and potential commercial products and processes.

          3.4   (a) Licensee shall pay Licensor up to Four Hundred Thousand Dollars ($400,000.00) for work performed in accordance with the Work Plan (such payments including, for example, costs of qualified personnel, advisors, equipment, materials, facilities, overhead, etc.).

  •         (b)   Licensee shall make an upfront payment of $40,000 upon the parties' mutual agreement on the Work Plan as described in Section 1.17 against which Licensor shall charge for work performed under the Work Plan. Thereafter, Licensor shall invoice Licensee

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• on a monthly basis for the amounts incurred and such payments will be due within thirty (30) days following Licensee's receipt of the invoice.

ARTICLE IV

        4.     Improvements

•         4.1   Licensor and Licensee shall forthwith disclose to each other in confidence and in such detail as reasonably required all Improvements that it may develop or acquire during the term of this agreement.

          4.2   Licensor hereby agrees, on behalf of itself and all staff, employees, and/or consultants performing work under this agreement or otherwise involved in making Improvements, to (i) assign to Licensee an undivided joint interest in all Licensor Improvements, (including any and all patents and patent applications thereon), developed during the term of the Work Plan; (ii) communicate to Licensee any facts known by Licensor relating to the patentability of Licensor Improvements; and (iii) have inventors sign all lawful oaths and papers, execute all divisional, continuing, provisional, and reissue applications and priority documents, and otherwise generally work together with Licensee in to obtain patent protection on such Licensor Improvements in all countries in which the parties mutually agree to file patent applications.

          4.3   Licensee hereby agrees, on behalf of itself and all staff, employees, and/or consultants performing work under this agreement or otherwise involved in making Improvements, to (i) assign to Licensor an undivided joint interest in all Licensee Improvements, (including any and all patents and patent applications thereon), developed during the term of the Work Plan; (ii) communicate to Licensor any facts known by Licensee relating to the patentability of Licensee Improvements; and (iii) have inventors sign all lawful oaths and papers, execute all divisional, continuing, provisional, and reissue applications and priority documents, and otherwise generally work together with Licensor in obtaining patent protection on such Licensee Improvements in all countries in which the parties mutually agree to file patent applications.

          4.4   Joint Improvements shall be jointly owned by the parties and licensed pursuant to Sections 5.2 and 5.3 below.

          4.5   Except for the license grant under Section 5.3 below, no rights in any intellectual property rights of Licensee are conveyed hereunder to Licensor, even if such intellectual property rights are required to practice the Improvements. In particular, no owned rights under any patents of Licensee are conveyed hereunder, again even if such rights are required to practice the Improvements.

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ARTICLE V

        5.     Grant of Licenses

•         5.1   Licensor hereby grants to Licensee and Affiliates an exclusive license, including the right to grant sublicenses, under the Technical Information and Licensed Patents to practice methods and to manufacture, have manufactured, import, use, offer to sell, sell and otherwise dispose of products in the Field within the Licensed Territory.

          5.2   With respect to any Licensor Improvements which are developed prior to the first commercial sale of an IVM Technology Product, Licensor's joint interest in Licensee Improvements developed during the Work Plan and Licensor's rights in and to Joint Improvements, such Improvements and rights shall be deemed to be Technical Information and/or Licensed Patents, as the case may be, and shall be subject to the grant under Section 5.1.

          5.3   With respect to Licensee Improvements which are developed during the Work Plan, Licensee's joint interest in Licensor Improvements developed during the Work Plan and Licensee's rights in and to Joint Improvements, Licensee hereby grants Licensor and Affiliates a royalty-free exclusive license, including the right to grant sublicenses, under any such Improvements to practice methods and manufacture, have manufactured, import, use, offer to sell, sell and otherwise dispose of products outside the Field.

          5.4   With respect to Licensor Improvements developed after the first commercial sale of IVM Technology Products, Licensor hereby grants to Licensee the exclusive right to negotiate rights in and to such Licensor Improvements for use within the Field for a period of sixty (60) days from Licensor's written disclosure to Licensee of such Licensor Improvements.

          5.5   With respect to Licensee Improvements developed after the completion of the Work Plan, Licensee hereby grants to Licensor the exclusive right to negotiate rights in and to such Licensee Improvements for use outside the Field for a period of sixty (60) days from Licensee's written disclosure to Licensor of such Licensee Improvements.

          5.6   The licenses granted hereunder shall be effective as of the Effective Date and shall include the right or the licensed party to sell and otherwise dispose of products under it's own trademarks or any other trademarks, and separately or in combination with any other products.

          5.7     Covenant Not to Sell.     Licensee agrees and covenants not to sell or market, directly or indirectly, any products which incorporates any IVM Technical Information or sell products covered by the Licensed Patents, for use outside the Field. In the event that Licensee learns that such Products are being sold or marketed outside the Field, it shall take all reasonable actions required to stop such sales and/or marketing.

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ARTICLE VI

        6.     Reports and Payments

•         6.1   In addition to the research payments provided for in Section 3.4.a., Licensee agrees to make the following payments to Licensor, provided such events occur during the term of this agreement:

  •         (a)   Two Hundred Fifty Thousand Dollars ($250,000.00) license issue fee payable on January 2, 1997; and

            (b)   Five Hundred Thousand Dollars ($500,000.00) after both the Work Plan and Licensee's internal qualification (as specified in Section 3.2) have been successfully completed and Licensee has begun human clinical testing of IVM Technology Products. In the event that Licensee begins human clinical testing, the Work Plan and the internal qualification will be deemed to have been completed. This amount is due within thirty (30) days of commencement of such human clinical testing.

            (c)   Five Hundred Thousand Dollars ($500,000.00) after a 510(k) or PMA covering IVM Technology Products has been submitted by Licensee to the United States Food and Drug Administration (FDA) or other appropriate agency as required by United States laws. This amount is due within thirty (30) days of such submission.

          6.2   Licensee shall during the term of this agreement pay to Licensor a royalty based on the annual Net Sales of Licensed Products by Licensee its Affiliates or sublicensees as follows: six percent (6%) on Net Sales of Licensed Products until Net Sales of IVM Technology Products exceed Ten Million Dollars ($10,000,000.00); and thereafter eight percent (8%) on Net Sales of Licensed Products until Net Sales of IVM Technology Products exceed Twenty-Five Million Dollars ($25,000,000.00); and thereafter ten percent (10%) on all Net Sales of Licensed Products after Net Sales of IVM Technology Products exceed Twenty-Five Million Dollars ($25,000,000); such totals to be calculated on a yearly basis in accordance with the "Year" definition specified in Section 7.4(d)(i) and (ii) below.

          6.3   If Licensee sells, during the term of this Agreement, a product for removing blood clots from vessels that is an IVM Technology Product but not a Licensed Product, then for up to ten (10) years from the first commercial sale of IVM Technology Products, Licensee will pay royalties on the Net Sales of such products as follows: two and one-half percent (2.5%) of Net Sales of such products until Net Sales of IVM Technology Products exceed Ten Million Dollars ($10,000,000.00); and thereafter three and one-half percent (3.5%) on Net Sales of such products until Net Sales of IVM Technology Products exceed Twenty-Five Million Dollars ($25,000,000.00); and thereafter four and one-half percent (4.5%) on all Net Sales of such products after Net Sales of IVM Technology Products exceed Twenty-Five

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• Million Dollars ($25,000,000); such totals to be calculated on a yearly basis in accordance with the "Year" definition specified in Section 7.4(d)(i) and (ii) below. After said ten (10) year period, this royalty obligation will be paid-up in full and no additional royalty obligation will be due on future sales of such products. Only a single royalty will be due for any product sold during this Agreement.

          6.4   All royalties and other payments made under this Agreement shall be payable in United States dollars; and all international and domestic sales of IVM Technology Products shall be reported in equivalent United States Dollars. All conversions of currency into United States Dollars shall be made at the end of the relevant quarter in accordance with the rate published for the purchase of U.S. Dollars in the Wall Street Journal on that date or by such other published source as may be agreed upon by the parties hereto from time to time.

          6.5   Licensee shall at all times keep accurate books and records in connection with the manufacture and sale of IVM Technology Products. On or before the forty-fifth day (45th) day after the last day of each calendar quarter that IVM Technology Products are sold during the term of this agreement, Licensee shall (i) provide a written accounting to Licensor of the Net Sales made by Licensee, Affiliates and/or its sublicensees for the previous calendar quarter of all IVM Technology Products and the royalties due and payable to Licensor during that period, and (ii) pay to Licensor all royalties due and payable during that period.