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EXHIBIT 10.3
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.
“
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.
“
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
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
sublicense,
obtain the agreement of the sublicensee to make such records
available for inspection by Licensor’ indep
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