This License
Agreement (“ Agreement ”) is entered into
as of September 1, 2006, by and between National Quality Care,
Inc., a Delaware corporation (“ Licensor
”), and Xcorporeal, Inc. (“ Licensee
”) (each, a “ Party ;”
collectively, the “ Parties ”). The
Parties hereby agree as follows:
For purposes of
this Agreement, the following definitions will apply:
“
Affiliate ” means, when applied to a Party, any entity
that is controlled by, controls, or is under common control with,
such Party.
“
Confidential Information ” means and includes any
non-public information relating to or concerning a Party hereto
(the “ Disclosing Party ”), or any of its
Affiliates, that is provided or made available to the other Party
(the “ Receiving Party ”), either before
or after the Effective Date of this Agreement, directly or
indirectly, in any form whatsoever, including in writing, orally,
and in electronic or other machine readable form, including, but
not be limited to, designs, know-how, inventions, technical data,
ideas, uses, processes, methods, formulae, research and development
records and materials, work in process, scientific, engineering
and/or manufacturing records or materials, marketing plans,
business plans, financial or personnel records or materials,
present or future products, sales, suppliers, customers, employees,
investors or business, information about this Agreement, and any
other non-public business records and information, the use or
disclosure of which might reasonably be construed to be contrary to
the interests of the Disclosing Party or any of its Affiliates,
including non-public information of third parties that is possessed
by the Disclosing Party is subject to confidentiality obligations
and that the Disclosing Party is lawfully allowed to disclose to
the Receiving Party.
“
Derivative Works ” means (a) for Licensor
material subject to copyright or mask work right protection, any
work that as a whole represents an original work of authorship, and
is based upon one or more pre-existing works, such as a revision,
modification, translation, abridgment, condensation, expansion,
collection, compilation or any other form in which such
pre-existing works may be recast, transformed or adapted;
(b) for Licensor patentable materials, any adaptation, subset,
addition, improvement or combination of such materials;
(c) for Licensor material subject to trade secret protection,
any new material, information or data relating to and derived from
such material, including new material that may be protectable by
copyright, patent or other proprietary rights; and (d) with
respect to each of the above, any material the preparation, use
and/or distribution of which, in the absence of this Agreement or
other authorization from Licensor, would constitute infringement or
misappropriation under applicable law.
“ Gross
Sales ” means the total amount actually received by
Licensee as revenue from the exploitation of the Technology (as
defined below) by Licensee, its Affiliates and sub licensees,
collectively, less separately stated freight payable to third
parties, commercially reasonable special packaging, and duties,
sales, use, excise, value added and other taxes, discounts,
returns, and allowances.
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“
Intellectual Property Rights ” means all of the
following worldwide legal rights owned, held or controlled by
Licensor: (a) patents, patent applications, and patent rights;
(b) trademarks, trademark registrations and applications therefor,
trade names, rights in trade dress and packaging; (c) rights
associated with works of authorship (including audiovisual works),
including copyrights, copyright applications, and copyright
registrations; (d) rights relating to the protection of trade
secrets, confidential information, technical information, know-how,
ideas, concepts, processes, procedures, techniques, discoveries,
and inventions; (e) Moral Rights (as defined below);
(f) design rights; (g) rights in name, likeness and other
rights of commercial publicity; (h) any rights analogous to
those set forth in the preceding clauses and any other proprietary
rights relating to intangible property; and (i) divisions,
continuations, renewals, reissues, and extensions of the foregoing
(as applicable) now existing or hereafter filed, issued, or
acquired.
“
Know-How ” means all (i) information and data
possessed by Licensor, exclusive of any of the independent claims
contained in the Licensor Patents (but including all other
information and data contained in, or related to, any patent
application filed by or on behalf of Licensor), relating to the
exploitation and/or use of the Licensed Products (as defined
below), including without limitation: (a) sources of
materials; (b) methods, processes and procedures (and related
test results and design data) for the extraction, isolation,
creation, purification, and/or chemical modification of materials
used in the production of the Licensed Products; (c) methods,
processes and procedures used in the design, development, creation,
modification, manufacture, production, processing, storage,
packaging, testing and/or evaluation of the Licensed Products,
including without limitation all biological and toxicological tests
(and results thereof) together with all correspondence, notes,
memoranda, and other information and/or data provided to, or
received from, all health regulatory authorities; and
(ii) trade secrets, data, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, program
proposals, presentations, inventions and ideas, past, current, and
planned research and development, current and planned manufacturing
or distribution methods and processes, market studies, business
plans, computer software and programs, systems, structures and
architectures (and related processes, formulae, composition,
improvements, devices, inventions, discoveries, concepts, ideas,
designs, methods and information), and any other information,
however documented, that is not generally known to the public or
that constitutes a trade secret under any applicable trade secret
law.
“
Licensed Products ” means all products based on or
derived from the Technology (as defined below), and any products
sold in connection with the use of such products, including, but
not limited to the Wearable Kidney and all related devices, whether
now-existing or hereafter developed, that where sold, would
infringe or misappropriate one or more of Licensor’s
Intellectual Property Rights or Know-How, including, without
limitation, the Licensor Patents or Licensor Patent
Applications.
“
Licensor Patents ” means the patents (and all
re-issues and extensions) listed on the Schedule
attached hereto and the patents, when issued, based upon the
Licensor Patent Applications and in all divisions, continuations
and continuations in part relating thereto.
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“
Licensor Patent Applications ” means the patent
applications listed on the Schedule attached hereto
and any substitutions and continuations together with any patent
applications based on, or related to, the Technology that may be
filed by Licensor from the date hereof.
“ Moral
Rights ” means any rights of paternity or integrity, any
right to claim authorship, to object to or prevent any distortion,
mutilation or modification of, or other derogatory action in
relation to the subject work, whether or not such would be
prejudicial to the author’s honor or reputation, to withdraw
from circulation or control the publication or distribution of the
subject work, and any similar right, existing under judicial or
statutory law of any country in the world, or under any treaty,
regardless of whether or not such right is denominated or generally
referred to as a “moral right.”
“ Net
Sales ” means Gross Sales less the following:
(a) all direct costs and expenses of Licensee attributable to
the research, development, production, marketing, sale and
exploitation of the Licensed Products, including, without
limitation, costs of materials and direct labor costs; and
(b) all indirect costs of Licensee properly allocated under
generally accepted accounting principles to the research,
development, production, marketing, sale and/or exploitation of the
Licensed Products, including, without limitation, overhead and
selling, general and administrative expenses.
“
Technology ” means and includes all existing and
hereafter developed Intellectual Property, Know-How, Licensor
Patents, Licensor Patent Applications, Derivative Works, and any
other technology invented, improved or developed by Licensor, or as
to which Licensor owns or holds any rights, arising out of or
relating to the research, development, design, manufacture or use
of: (a) any medical device, treatment or method as of the date
of this Agreement, (b) any portable or continuous dialysis
methods or devices, specifically including any wearable artificial
kidney, or Wearable Kidney, and related devices, (c) any
device, methods or treatments for congestive heart failure, and
(d) any artificial heart or coronary device.
“
Territory ” means anywhere in the universe.
2. Grant Of
Exclusive License. Subject to Licensee’s continuing full
compliance and complete and timely performance of all of the
material obligations, terms and conditions imposed on it by this
Agreement, Licensor hereby grants to Licensee, with right to grant
sublicenses, the sole and exclusive license, during the Term and
throughout the Territory, to use. improve, expand and otherwise
exploit the Technology, to make (and have made), use, and sell the
Licensed Products, and otherwise to practice the inventions and the
art that is embodied or described in the Licensor Patents, the
Licensor Patent Applications, and any improvements thereto made in
whole or in part by Licensor (whether or not patented) in
connection with the Technology (the “ License
”), provided, however, that the terms of
any sublicense shall expressly conform and be made subject to the
terms and conditions of this Agreement.
3. License
Fees, Reports And Records.
(1) During
the Term of this Agreement, Licensee shall pay to Licensor a
license fee of seven percent (7.0 %) of Net Sales (the “
Royalty ”) ; provided, however,
that
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Licensee shall
pay to Licensor a minimum aggregate annual Royalty of two hundred
fifty thousand dollars ($250,000.00) (the “ Minimum
Royalty ”). Within ninety (90) days of each
anniversary of the date of this Agreement, Licensee shall pay
Licensor the remaining difference, if any, between the Minimum
Royalty and the aggregate of all Royalty payments for the preceding
year. All payments due hereunder will be paid by wire transfer or
check payable in United States currency. Whenever conversion of
payments from any foreign currency is required, such conversion
will be made at the rate of exchange reported in The Wall Street
Journal on the last business day of the applicable reporting
period. Unless earlier terminated as provided hereinafter, the
obligation of Licensee to pay Royalties to Licensor shall expire
upon the date that none of the Licensed Products infringe any of
the Licensor Patents.
(2) Notwithstanding
the foregoing Section 3(A)(1) , in the event that the
Merger Agreement of even date herewith among the Parties and NQCI
Acquisition Corporation, a Delaware corporation (the “
Merger Agreement ”) is terminated pursuant to
Section 6(A) thereof, the Royalty pursuant to this Agreement
will thereafter be as follows:
(a)
If notice of termination is given pursuant to Section 6(A)(3),
six and one-half percent (6.5%) of Gross Sales;
(b)
If notice of termination is given pursuant to Section 6(A)(1),
(5) or (6), seven and one-half percent (7.5%) of Gross Sales;
and
(c)
If notice of termination is given pursuant to Section 6(A)(2)
or (4), eight and one-half percent (8.5%) of Gross
Sales;
provided,
however, that if it is
later determined by an arbitrator or court of competent
jurisdiction that a notice of termination was improper, or that the
Merger Agreement was terminated on a different basis or pursuant to
a different provision, the Royalty rate will be retroactively
adjusted to the correct rate pursuant to one of the foregoing
subsections, and any difference between the Royalty paid and the
Royalty rate determined to be correct will be paid by the
appropriate Party to the other within ninety (90) days of any
such final determination.
B.
Reports . Within thirty (30) days following the end of
each fiscal quarter, Licensee shall deliver to Licensor a report
setting forth the calculation of the Royalty for the applicable
fiscal period, including the number of Licensed Products sold by
Licensee and all sublicensees (if any), the Gross Sales and Net
Sales, as applicable, a reasonable breakdown of expenses in
arriving at the foregoing, any other transactions involving
Licensed Products, and the Gross Sales or Net Sales, as applicable,
resulting from all such transactions during such fiscal quarter,
and accompanied by payment of the Royalty due thereon.
C.
Records . Licensee and its sublicensees (if any) shall
maintain records of the transactions involving Licensed Products,
Gross Sales, Net Sales, permitted expense deductions, and all
Royalties paid thereon for a period of four (4) years
following the end of the quarter following sale.
(a)
Audits . Licensor may appoint an independent certified
public accountant, who shall have the right to examine the records
required under this Section 3.C during normal business
hours on reasonable notice. Licensee shall, as a condition to the
grant of any
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sublicense,
obtain the agreement of t
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