Exhibit 10.7
SECOND LICENSE AGREEMENT
This
SECOND LICENSE AGREEMENT, dated as of this 3rd day of March,
2005
(this "SECOND LICENSE AGREEMENT") is made
by and between Cytomedix, Inc.
("LICENSOR") and DePuy Spine, Inc. (f/k/a
DePuy AcroMed, Inc.) ("LICENSEE").
Capitalized terms used herein shall have
the meaning set forth herein.
WHEREAS,
A. LICENSOR co-owns certain patents with
the University of Minnesota pertaining
to damaged tissue treatment methods,
processes, and compositions. The University
of Minnesota has assigned all rights to the
certain patents, but has retained a
non-exclusive perpetual license solely in
connection with not-for-profit
research and teaching.
B. WHEREAS, LICENSOR and LICENSEE entered
into a license agreement dated March
19, 2001 (the "FIRST LICENSE AGREEMENT"),
whereby LICENSOR granted LICENSEE the
worldwide exploitation rights to practice
and utilize the PATENTS in certain
fields of use (the "ORIGINAL LICENSED
FIELDS") on the terms and conditions set
forth in the FIRST LICENSE AGREEMENT.
C. WHEREAS, LICENSEE desires the
non-exclusive worldwide right to practice and
utilize the PATENTS in the ADDITIONAL
LICENSED FIELDS;
D. WHEREAS, LICENSOR desires to grant to
LICENSEE non-exclusive worldwide
exploitation rights to practice and utilize
the PATENTS in the ADDITIONAL
LICENSED FIELDS on the terms and conditions
set forth in this SECOND LICENSE
AGREEMENT;
NOW,
THEREFORE, in consideration of the mutual covenants and
promises
contained in this SECOND LICENSE AGREEMENT,
and for other good and valuable
consideration, the receipt of which is
hereby acknowledged, the parties agree as
follows:
I. Definitions
1.00
PATENT or PATENTS means the patents and/or patent applications
listed
in Appendix AA.
1.01
LICENSED TERRITORY means the entire world.
1.02
ADDITIONAL LICENSED FIELDS means all fields other than (i) the
LICENSED FIELD of the FIRST LICENSE
AGREEMENT and (ii) the treatment of "chronic
non-healing wounds." For purposes of this
SECOND LICENSE AGREEMENT, the term
"chronic non-healing wounds" means (i) any
venous stasis, decubitus, or diabetic
foot ulcers or (ii) any wounds lasting 30
days or longer.
1.03
PRODUCT shall mean any LICENSEE device marketed or promoted by
LICENSEE as being for producing or applying
compositions including platelets
(which includes, but is not limited to,
platelet concentrate) to facilitate
healing and used in all ADDITIONAL LICENSED
FIELDS. Any LICENSEE device which is
marketed by LICENSEE without direct or
indirect reference to platelets or
platelet releasate shall not be considered
a PRODUCT. Notwithstanding the above,
for the term of this Agreement, the items
listed in Appendix BB and replacements
of the centrifuge and separator products
will be considered PRODUCTS
irrespective of the LICENSEE'S marketing
activities thereon. LICENSEE reserves
the right to revise the items listed in
Appendix BB subject to LICENSOR'S
written consent.
1.04 NET
SALES PRICE shall mean LICENSEE'S invoice price to customers,
AFFILIATES, or DISTRIBUTORS, f.o.b.
factory, after deduction of freight, taxes
and agent's commissions. PRODUCTS that are
used only by LICENSEE for sales
demonstration purposes shall have a zero
dollar value for NET SALES PRICE.
PRODUCTS that are not sold to an end user,
but are disposed of by LICENSEE due
to obsolescence, damage or other similar
conditions shall have a zero dollar
value for NET SALES PRICE. NET SALES PRICE
for the purposes of computing
royalties under this Agreement shall never
be less than LICENSEE'S cost to
manufacture, determined by LICENSEE'S
customary accounting practices plus five
percent (5%).
<PAGE>
a.
capital
PRODUCT
i.
disposable allocation
In the instance wherein LICENSEE disposes of a CAPITAL PRODUCT
(such
as a
centrifuge) to a third party and receives full consideration
therefor
solely by
explicitly adding a capital allocation therefor to invoices for
the sales
of disposable PRODUCTS to the third party, the royalty due for
disposal
of the capital PRODUCT shall be included in the royalty due
upon
the
disposable PRODUCTS (such as a separator).
ii. outright
capital PRODUCT sales
In the instance wherein the capital PRODUCT is sold outright,
the
royalty
shall be ten dollars ($10.00) for such PRODUCTS sold to a U.S.
customer,
and five dollars ($5.00) for such PRODUCTS sold to non-U.S.
customers.
b.
Non-US
AFFILIATE sales of disposables
For LICENSEE'S non-US sales to AFFILIATES, the NET SALES PRICE
will
be
LICENSEE'S transfer price to its AFFILIATES, but in no event will
be
less than
cost to manufacture determined by LICENSEE'S customary
accounting
practices plus five percent (5%).
c.
Applicators/Mixers
Royalties for all other products marketed and sold by LICENSEE
in
the
ADDITIONAL LICENSED FIELDS shall not require further fee and no
additional
payment shall be made over the flat fee payments made pursuant
to Section
1.4.c of the FIRST LICENSE AGREEMENT.
1.05
Intentionally Omitted
1.06
AFFILIATES shall mean entities owned and organized under DePuy,
Inc.
including, but not limited to DePuy
Orthopaedics, Inc., DePuy International,
Ltd. and its affiliates, DePuy ACE, Inc.,
and Codman & Shurtleff, Inc., or an
entity that directly or indirectly
controls, is controlled by, or is under
common control with, the entity specified.
The term "owned" means the legal,
beneficial or equitable ownership directly
or indirectly of more than 50% of the
aggregate of all voting equity interests
rights in such entity.
1.07
DISTRIBUTORS shall mean an entity which is not an AFFILIATE but
which
contracts with LICENSEE or an AFFILATE to
either a) provide promotion, sales and
distribution services under the name of
LICENSEE or an AFFILATE respecting
PRODUCT in exchange for commissions, or b)
buys PRODUCT from LICENSEE or an
AFFILATE for resale under the name of
LICENSEE or an AFFILATE.
<PAGE>
II. LICENSE GRANT
2.00 LICENSOR hereby grants to LICENSEE, to
the extent of the ADDITIONAL
LICENSED FIELDS and LICENSED TERRITORY, a
license under PATENTS, to fully
practice PATENTS, including the right to
make, have made, use, offer for sale,
sell and import PRODUCTS and promote the
methods and compositions recited in the
claims of PATENTS using PRODUCTS in the
ADDITIONAL LICENSED FIELDS. LICENSOR
recognizes that LICENSEE may also practice
the PATENTS by promoting and selling
through its AFFILIATES and DISTRIBUTORS.
This license also includes a right in
purchasers and users of the purchased
PRODUCT to fully practice PATENTS within
the ADDITIONAL LICENSED FIELDS with such
PRODUCT. LICENSEE acknowledges and
agrees that no license is granted or
implied hereunder outside the ADDITIONAL
LICENSED FIELDS and LICENSED TERRITORY.
Furthermore, LICENSOR releases LICENSEE
from any liability to LICENSOR of any kind
whatsoever (including breach of
contract) arising from purchasers of
PRODUCT using the PRODUCT outside the
LICENSED FIELD of the FIRST LICENSE
AGREEMENT and the ADDITIONAL FIELDS of the
SECOND LICENSE AGREEMENT provided that
LICENSEE does not promote sales of
PRODUCT outside the LICENSED FIELD of the
FIRST LICENSE AGREEMENT and the
ADDITIONAL FIELDS of the SECOND LICENSE
AGREEMENT.
2.01 The
license granted pursuant to Section 2.00 hereof shall be
non-exclusive for the term of this
Agreement.
III. LICENSE FEES AND ROYALTIES
3.00 No
upfront payments shall be paid by LICENSEE for practicing the
PATENTS within the ADDITIONAL LICENSED
FIELDS.
3.01
LICENSEE shall pay to LICENSOR six and one-half percent (6.5%),
after
the effective date, of the NET SALES PRICE
("Royalty") of all PRODUCTS sold or
otherwise disposed of under the license
granted under Section 2.00 of this
Agreement in jurisdictions having valid,
unexpired, and enforceable U.S. or
foreign PATENTS where the PRODUCT is made,
used, sold, or offered for sale.
3.02 In
the event that LICENSOR enters into any agreement with a third
party whereby LICENSOR grants the third
party a license under the PATENTS, and
said third party is obligated under said
license to pay LICENSOR a royalty rate
that is less than the six and one-half
percent (6.5%) royalty rate payable under
Sections 3.01 and 5.03 hereof (hereinafter,
the "More Favorable Royalty Rate),
then the royalty rate of Sections 3.01 and
5.03 hereof shall be deemed,
effective as of the date of such
third-party license agreement, to be the More
Favorable Royalty Rate.
3.03 Commencing in
respect of royalties payable for the second calendar
quarter of 2005 and continuing through the
termination of this Agreement,
LICENSEE shall be entitled to take as a
credit against royalty payments made
under any agreement with LICENSOR in an
amount as provided in Section 6.06
hereof.
IV. MINIMUM ROYALTIES
4.00 There
shall be no minimum royalties payable under this SECOND LICENSE
AGREEMENT for practice of the PATENTS in
the ADDITIONAL LICENSED FIELDS.
4.01
Intentionally omitted.
V. SUBLICENSING
5.00
LICENSEE shall have the right to sublicense to AFFILIATES and
DISTRIBUTORS. This sublicense also includes
a right in purchasers and users of
the purchased PRODUCT to fully practice
PATENTS within the ADDITIONAL LICENSED
FIELDS with such PRODUCT. The LICENSEE
shall not have the right to sublicense to
any other third party.
5.01
LICENSEE shall supply LICENSOR with a copy of each such
sublicense
agreement within thirty (30) days after the
execution of the sublicense
agreement.
5.02 The
royalty for sublicensees shall be no less than that set forth
for
LICENSEE in Section 3.01, above.
<PAGE>
5.03
LICENSEE shall pay to LICENSOR six and one-half percent (6.5%) of
any
and all net sales made by sublicensors of
PRODUCTS. For purposes of calculating
the amount due to LICENSOR under this
Section 5.03, sales of products by
sublicensors shall be made using the
definition of NET SALES PRICE and PRODUCT
or PRODUCTS. Amounts payable under this
Section 5.02 shall be made to LICENSOR
quarterly as provided in Section 6.00.
5.04 If
this Agreement is terminated, LICENSEE shall immediately assign
all of its right, title, and interest to
all sublicenses to LICENSOR, including
the right to receive all income from
sublicensees. LICENSEE shall, prior to
execution of each sublicense, make the
sublicense aware of this contingency.
5.05
Intentionally omitted.
VI. PAYMENTS
6.00
LICENSEE shall pay all amounts due pursuant to Sections 3.01 and
5.03
("Royalty") quarterly. Within thirty (30)
days after the end of each calendar
quarter, LICENSEE shall (a) pay LICENSOR
the Royalty owed by LICENSEE for such
calendar quarter, and (b) provide LICENSOR
with a written report setting forth
the NET SALES PRICE with respect to
Products for the applicable quarter.
LICENSEE shall separately report PRODUCTS
sold and PRODUCTS otherwise disposed
of pursuant to Section 1.07 plus a
computation of royalty amount due with
respect thereto for the applicable quarter
for LICENSEE, each AFFILIATE, and
each sublicensee. At LICENSEE'S option,
each AFFILIATE shall provide a written
report directly to LICENSOR setting forth
the NET SALES PRICE with respect to
PRODUCTS for the applicable quarter. The
AFFILIATE shall separately report
PRODUCTS sold and PRODUCTS otherwise
disposed of pursuant to Section 1.07 plus
computation of Royalty amounts due with
respect thereto for the applicable
quarter. Any reports required to be
submitted pursuant to Section 6.00 hereof
may be consolidated with any report
submitted pursuant to Section 6.0 of the
FIRST LICENSE AGREEMENT.
6.01 The
Royalty shall be payable in currency of the United States of
America regardless of the country where
earned and shall be paid or deposited as
designated in writing by LICENSOR. The
exchange rate used to calculate the
amounts due pursuant to Sections 3.01 and
5.03 shall be the same rate specified
under Financial Accounting Standards Board
Statement 52, or its successor, used
to translate the financial results of
LICENSOR or its AFFILIATES for public
reporting.
6.02 If
the Royalty for the previous calendar quarter remains unpaid
thirty (30) days after the end of such
calendar quarter, interest shall accrue
on such unpaid amount at the lower of (a)
fifteen percent (15%) per annum, or
(b) the highest rate permitted by law,
until paid.
6.03
Intentionally omitted.
6.04 If
this Agreement is for any reason terminated before all of the
payments herein provided for have been
made, LICENSEE shall immediately submit a
terminal report and pay to LICENSOR any
remaining unpaid balance even though the
due date as above provided has not been
reached.
6.05 Prior
to the execution of any agreement (the "DISTRIBUTION
AGREEMENT") between LICENSEE and Harvest
Technologies, Inc. ("HARVEST"),
granting LICENSEE the right to distribute
products purchased from HARVEST for
sale or use in the ADDITIONAL LICENSED
FIELDS, the parties agree that all
royalties paid by LICENSEE under any
agreement with LICENSOR shall be deemed to
relate exclusively to the ORIGINAL LICENSED
FIELDS. For the first four full
calendar quarters following the execution
of a DISTRIBUTION AGREEMENT between
HARVEST and LICENSEE, all royalties paid by
LICENSEE under any agreement with
LICENSOR shall be deemed to relate 80% to
the ORIGINAL LICENSED FIELDS and 20%
to the ADDITIONAL LICENSED FIELDS. Within
90 days following the end of said four
calendar quarters, LICENSEE shall conduct a
randomized sampling of a limited
number of users of its PRODUCT to solely
determine the sales allocable to the
ORIGINAL LICENSED FIELDS and the sales
allocable to the ADDITIONAL LICENSED
FIELDS. Such randomized sampling shall be
of LICENSEE'S sole design, regardless
of whether the sampling is performed by
LICENSEE or any other third party, and
LICENSEE shall bear all costs associated
with such sampling; provided, however,
that if the sampling is conducted by a
third party, then LICENSOR shall directly
pay LICENSEE up to $15,000 per sampling to
cover the costs of such sampling
(following submission to LICENSOR of proof
of payment for such services by
LICENSEE). The resultant percentage
allocation of sales between these licensed
fields resulting from the sampling
procedures shall be conclusively deemed for
the succeeding four calendar quarters to be
the percentages of royalties payable
on account of sales in the ORIGINAL
LICENSED FIELDS and the ADDITIONAL LICENSED
FIELDS. LICENSOR shall not use the sampling
information against LICENSEE in any
way or have any cause of action against
LICENSEE and LICENSEE shall have no
liability whatsoever to LICENSOR for the
manner in which the sampling is
conducted. LICENSOR hereby indemnifies and
holds LICENSEE harmless against any
third party claims that LICENSEE has
interfered with any obligations of LICENSOR
to such third party.
<PAGE>
6.06
Commencing April 1, 2005 through execution of a DISTRIBUTION
AGREEMENT, LICENSEE shall be entitled to
take as a credit against royalty
payments made in respect of the ORIGINAL
LICENSED FIELDS an amount equal to
$6,250 per calendar quarter (or any pro
rated period thereof through execution
of a DISTRIBUTION AGREEMENT). Following
execution of a DISTRIBUTION AGREEMENT,
LICENSEE shall be entitled to take as a
credit against royalty payments made in
respect of the ORIGINAL LICENSED FIELDS an
amount equal to $12,500 per calendar
quarter (or any pro rated period thereof),
with said credit to be applied first
against royalties paid (or presumed under
Section 6.05 hereof to be paid) in
respect of the ADDITIONAL LICENSED FIELDS,
and the remainder (if any) applied
against royalties paid (or presumed under
Section 6.05 hereof to be paid) in
respect of the ORIGINAL LICENSED
FIELDS.
VII. CONFIDENTIALITY
7.00 No
party to this Agreement shall disclose to any third party nor
use
for any purpose, other than the purpose of
this Agreement information or data
received from a Party under this Agreement
without prior written approval from
the Party from whom the information or data
was received.
7.01 The
obligations of no
