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Exhibit 10.10
LICENSE AGREEMENT
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:
1. Defined Terms .
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.
A. License Fees .
(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 the sublicensee to make such
records available for inspection by Licensor’ independent
auditor.
(b)
Audit Expenses . Licensor shal
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