Exhibit 10.13
LICENSE AGREEMENT
This Agreement is made and entered
into as of the 13 th day of February 2002, by and
between the UNIVERSITY OF PITTSBURGH - OF THE COMMONWEALTH SYSTEM
OF HIGHER EDUCATION, a non- profit corporation, organized and
existing under the laws of the Commonwealth of Pennsylvania, having
its principal office at 4200 Fifth Avenue, Pittsburgh, Pennsylvania
15260 (UNIVERSITY), and MEDQUEST PRODUCTS, INC having its principal
office at 825 North 300 West, Suite NE 107, Salt Lake City, UT
84103 (LICENSEE),
WHEREAS, UNIVERSITY, Magnetic
Moments, LLC (“MM”) and the National Aeronautics and
Space Administration (“NASA” are the owners of certain
PATENT RIGHTS, entitled “Magnetically Suspended Miniature
Fluid Pump and Method of Making the Same” developed by Dr.
James F. Antaki and Gregory Burgreen of the UNIVERSITY faculty,
Bradley Paden of MM and Nelson Groom of NASA, and the UNIVERSITY
has the right to grant licenses under such PATENT
RIGHTS;
WHEREAS, UNIVERSITY and NASA have
entered into an Agreement Concerning Licensing of the Jointly Owned
Invention “Magnetically Suspended Miniature Fluid Pump and
Method of Making the Same,” dated July 20, 1998 (“NASA
Agreement”), pursuant to which NASA granted UNIVERSITY the
right to negotiate licenses to the PATENT RIGHTS on NASA’s
behalf, subject to certain conditions;
WHEREAS, UNIVERSITY and Bradley
Paden and MM have entered into an Agreement dated April 24, 1998,
assigning all of Bradley Paden’s and MM’s interest in
the PATENT RIGHTS to UNIVERSITY;
WHEREAS, UNIVERSITY has a
non-exclusive license to certain technology, entitled “Speed
Control System for Implanted Blood Pumps,” US. Patent No.
5,888,242 (filed November 1, 1996), and US. Patent No. 6,066,086
Speed control system for implanted blood pumps (filed March 4,
1998), including the right to sublicense such technology
(“LICENSE RIGHTS”), as more fully described
below;
WHEREAS, UNIVERSITY desires to have
the PATENT RIGHTS and LICENSE RIGHTS (collectively
“TECHNOLOGY”) utilized in the public
interest;
WHEREAS, LICENSEE or its principals
are experienced in the development, production, manufacture,
marketing and sale of PRODUCTS as defined below, and/or the use of
technology similar to the TECHNOLOGY and that LICENSEE shall commit
itself to a thorough, vigorous and diligent program of exploiting
the TECHNOLOGY primarily through the development and
commercialization of PRODUCTS so that public utilization results
therefrom;
WHEREAS, LICENSEE has obtained other
licenses and has entered into agreements, such agreements being
separate and distinct from this agreement, which give it exclusive
ownership of, claims on, and/or rights to license related
technology from other third parties, including LICENSEE’S
AFFILIATES as defined below, including those that have had or
continue to have separate relationships and agreements with the
UNIVERSITY;
and
WHEREAS, LICENSEE desires to obtain
a license to the TECHNOLOGY upon the terms and conditions
hereinafter set forth.
ARTICLE 1 -
DEFINITIONS
For purposes of this Agreement, the
following words and phrases shall have the following
meanings:
1.1
AFFILIATE shall mean, with respect
to UNIVERSITY, any clinical or research entity in Pittsburgh which
is operated or managed as a facility under the UPMC Health System,
whether or not owned by UNIVERSITY.
1.2
LICENSEE shall mean MEDQUEST
PRODUCTS, INC. and all entities at least fifty percent (50%) owned
or controlled by MEDQUEST PRODUCTS, INC.
1.3
AFFILIATE shall mean, with respect
to LICENSEE, any third party that is directly or indirectly under
the control of MedQuest, that is under common control with
MedQuest, or that controls MedQuest. As used herein, the term
“control” shall mean possession, direct or indirect, of
the power to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting
securities, by contract, or otherwise, and the term
“entity” shall include without limitation an
individual, corporation, or other organization.
1.4
LICENSE RIGHTS shall mean the
technology entitled “Speed Control System for Implanted Blood
Pumps,” U.S. Patent No. 5,888,242 (filed November 1, 1996),
and U.S. Patent No. 6,066,086 Speed control system for implanted
blood pumps (filed March 4, 1998) that are the subject of the
Assignment of PATENT LICENSE AGREEMENT between UNIVERSITY and
Argonaut Medical, Inc., dated August 20, 1998, plus any
divisionals, continuations, continuations-in-part, re-examinations,
re-issues, renewals or extensions of these patents.
1.5
PATENT RIGHTS shall mean UNIVERSITY
intellectual property described below:
(a)
The United States and foreign
patents and/or patent applications listed in Exhibit A;
(b)
United States and foreign patents
issued from the applications listed in Exhibit A and from
divisionals, continuations, continuations-in-part, re-examinations,
re-Issues, renewals or extensions of these applications issued from
such applications;
(c)
Claims of U.S. and foreign
continuation-in-part applications, and of the resulting patents,
which are directed to subject matter specifically described in the
U.S. and foreign applications listed in Exhibit A; and
(d)
Claims of all foreign patent
applications, and of the resulting patents, which are directed to
subject matter specifically described in the United States patents
and/or patent applications described in (a), (b) or (c)
above
1.6
PRODUCT OR PRODUCTS shall mean an
implantable blood pump using rotation means to pump blood and its
supporting components.
1.7
NET SALES shall mean
LICENSEE’s and any sublicensee’s invoice price for
products or processes included in TECHNOLOGY and produced hereunder
less the sum of the following:
(a)
Actual cost of freight charges or
freight absorption, separately stated in such invoice;
(b)
Actual trade, quantity or cash
discounts allowed, if any;
(c)
Sales taxes, tariff duties, excise
taxes, and/or use taxes separately stated on each
invoice;
(d)
Allowances, credits, and write-offs
for rejections or returns.
1.8
FIELD shall mean implantable blood
pumps.
ARTICLE 2 - GRANT
2.1
UNIVERSITY hereby grants to
LICENSEE, to the extent it may lawfully do so, the right and
worldwide exclusive license to make, have made, use, sell, offer
for sale or import PRODUCTS in the FIELD under the PATENT RIGHTS to
the end of the term for which the PATENT RIGHTS are granted, and
the worldwide nonexclusive sublicense to make, have made, use,
sell, offer for sale or import PRODUCTS under the LICENSE RIGHTS,
to the end of the term for which the LICENSE RIGHTS are granted, in
each case unless this Agreement is terminated sooner as provided
herein. The license granted hereby is subject to the rights of the
United States government, if any, as set forth in 35 U.S.C. Section
200, et seq.
2.2
Rights to AFFILIATES.
The rights licensed to LICENSEE
hereunder shall extend to its AFFILIATES designated in writing by
LICENSEE, provided each such AFFILIATE agrees in writing to be
bound by the terms and conditions of this Agreement except that
AFFILIATE will only have any right to make and/or sell the
TECHNOLOGY to
serve the development and commercialization
milestones of MedQuest, which right can be withdrawn by MedQuest.
MedQuest agrees to be fully responsible for the performance of such
authorized AFFILIATES hereunder.
2.3
UNIVERSITY shall not grant any other
license to the PATENT and/or LICENSE RIGHTS.
2.4
UNIVERSITY and NASA reserve the
royalty-free, non-exclusive right to practice under the PATENT
RIGHTS and to use the TECHNOLOGY for their own non-commercial
education and research purposes. UNIVERSITY reserves the
royalty-free, non-exclusive right to practice under the LICENSE
RIGHTS for its own non-commercial education and research
purposes.
2.5
The license granted hereunder shall
not be construed to confer any rights upon LICENSEE by implication,
estoppel or otherwise as to any technology not specifically set
forth in Exhibit A hereof.
2.6
Sublicensing.
LICENSEE shall have the exclusive
right under PATENT RIGHTS and the nonexclusive right under LICENSE
RIGHTS to grant sublicenses to third parties other than AFFILIATES
(“Sublicensees”) in its discretion. Any such
sublicenses shall incorporate all of the terms and conditions of
this Agreement. Termination of this Agreement or the License shall
act to terminate any such sublicenses; except that any Sublicensee
whose sublicense is in good standing with MedQuest may elect to
maintain its sublicense by advising UNIVERSITY, within sixty (60)
days of such Sublicensee’s receipt of written notice from
LICENSEE or UNIVERSITY of such termination, of its election and
agreement to assume with respect to UNIVERSITY all the obligations
contained in its sublicense with LICENSEE.
ARTICLE 3 - DUE
DILIGENCE
3.1
LICENSEE shall use its best efforts
to bring PRODUCTS to market through a thorough, vigorous and
diligent program for exploitation of the PATENT RIGHTS and LICENSE
RIGHTS throughout the pendency of this Agreement.
3.2
In addition, LICENSEE shall adhere
to each of the following milestones:
(a)
Finalization of first PRODUCT design
by no later than December 31,2003;
(b)
Commence a human clinical trial with
first PRODUCT by no later than December 31, 2004;
(c)
Obtain regulatory approval for
commercial sale of first PRODUCT by no later than December 31,
2006.
3.3
LICENSEE’s failure to perform
in accordance with Section 3.1 or to fulfill on a timely basis any
one of the milestones set forth in Section 3.2 hereof shall be
grounds for UNIVERSITY to terminate this Agreement, pursuant to
Article 11, and upon termination all rights and interest to the
TECHNOLOGY, PATENT RIGHTS, and LICENSE RIGHTS shall revert to
UNIVERSITY.
ARTICLE 4 - ROYALTIES AND OTHER
LICENSE CONSIDERATION
4.1
In consideration of the rights,
privileges and license granted by UNIVERSITY hereunder, LICENSEE
shall pay royalties and other monetary consideration as
follows:
(a)
Initial license fees, non-refundable
and non-creditable against royalties, of Fifty Thousand Dollars
($50,000) due as follows:
(i)
$10,000 immediately upon execution
of this Agreement;
(ii)
$20,000 on or before June 1, 2002;
and
(iii)
$20,000 on or before December 1,
2002.
(b)
Royalties in an amount equal to
one-tenth of one percent (0.1%) of NET SALES of PRODUCTS utilizing
or incorporating TECHNOLOGY, payable per calendar quarter;
and
(c)
Annual maintenance fees,
non-refundable and non-creditable against royalties, will paid as
follows:
(i)
$15,000 on or before May
1,2003;
(ii)
$20,000 on or before May 1,
2004;
(iii)
$40,000 on or before May
1,2005;
(iv)
$50,000 on or before May 1, 2006;
and
(v)
$75,000 on or before May 1, 2007,
and annually thereafter, until gross sales of PRODUCTS utilizing or
incorporating TECHNOLOGY during the preceding twelve (12) month
period is greater than Five Hundred Thousand Dollars
($500,000).
4.2
Ninety percent (90%) of all payments
due hereunder shall be paid to UNIVERSITY in United States dollars
and ten percent (10%) of such royalty payments shall be paid to
NASA, to the extent NASA has rights in the TECHNOLOGY, and directed
to the addresses set forth in Section 12 hereof. Royalty payments,
pursuant to Section 4.1(b), shall be paid within thirty (30) days
after each March 31, June 30, September 30 and December 31. The
maintenance payments, pursuant to Section 4.1(c) above, shall be
paid in like manner by the respective dates set forth in Section
4.1(c) above.
4.3
Payments pursuant to this Agreement,
which are overdue shall bear interest calculated from the due date
until payment is received at the rate of eight percent (8%) per
annum.
4.4
Licensee shall sell PRODUCTS and/or
process resulting from TECHNOLOGY to UNIVERSITY and is AFFILIATES
upon request at such price(s) and on such terms and conditions as
such PRODUCTS and/or proceses are made available to
LICENSEE’s most favored customer.
ARTICLE 5 –
REPORTS
5.1
Within (3) days after each march 31,
June 30, September 30 and December 31 of each year during the term
of this agreement and starting with the calendar year in which NET
SALES first occur, LICENSEE shall deliver to UNIVERSITY and to NASA
true, accurate and detailed reports of the following information in
a form acceptable to UNIVERSITY:
(a)
Number of PRODUCTS utilizing or
incorporating TECHNOLOGY manufactured and sold by LICENSEE and all
sublicensees;
(b)
Total billings for all such
products;
(c)
Accounting for all TECHNOLOGY
processes used or sold by LICENSEE and all sublicensees;
(d)
Deductions set forth in Section
1.5;
(e)
Total
