Technology License Agreement

This Technology License Agreement (this “Agreement”) is entered into this 10th day of November, 2006 (the “Effective Date”) by and between The Research Foundation of State University of New York, for and on behalf of University at Buffalo, a non-profit corporation organized and existing under the laws of the State of New York (the “Foundation”), Donald D. Hickey, M.D. (“Hickey”) and Clas E. Lundgren, M.D., Ph.D. (a/k/a Claes Lundgren and referenced herein as “Lundgren”) and Medi-Hut Co., Inc., a corporation duly organized under the laws of the State of Nevada, and having its principal place of business at 215 Morris Avenue, Spring Lake, New Jersey 07762 (“Licensee”). Foundation, Hickey and Lundgren will be collectively referenced herein as “Licensor”.

WHEREAS, Licensor and Licensee wish to enter into an exclusive license agreement to facilitate the development and commercialization of certain technology owned by Licensor so that this technology may be utilized to the fullest extent for the benefit of Licensee, Licensor, the inventor(s) and the public;

NOW, THEREFORE, in consideration of the terms and considerations hereinafter set forth, the parties agree as follows:

All capitalized terms used in this Agreement will have the meanings stated below or defined elsewhere in the Agreement.

1.1      “Affiliate ” means every corporation or entity which, directly or indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with Licensee.

1.2      “Copyrights” means Licensor’s copyrights in any software (the “Software”) developed and/or owned by Licensor to embody or enable the technology claimed in the Patent Rights and any manuals, protocols or any other documentation, whether in electronic or print format, relating to the Software.

1.3      “Derivatives” means Licensee created computer software and any documentation, whether in electronic or print format, relating thereto which will include, or be based in whole or in part on, Software.

1.5      “Licensor Improvements” means any further technological developments of the Technology developed by Dr. Donald D. Hickey during the term of this Agreement and owned or controlled by Licensor and/or the Foundation, Hickey or Lundgren individually, that is not filed as a continuation-in-part application claiming priority to any patent applications listed in Exhibit A.

1.6      “Licensee Improvements” means any further technological developments of the Technology developed by Licensee during the term of this Agreement and owned or controlled by Licensee.

1.7      “Intellectual Property” means all know-how, experimentation documentation, lab notebooks, patient documentation, source code, and any and all trade secrets relating to the Patent Rights.

1.8      “Licensed Product” means all products that incorporate, utilize, or are made with the use of the Technology, Licensee Improvements, Licensor Improvements licensed to Licensee after the Effective Date, Software, or any part thereof and products that incorporate, utilize or are made with the use of a Derivative or Source Code.

1.9      “Net Sales” means the gross revenues actually received by Licensee, Affiliates and Sublicensees in the Field and Territory during the Term from the manufacture, use, sale, lease or other transfer of Licensed Product to non-sublicensee third parties, less: (a) sales and/or use taxes actually paid, import and/or export duties actually paid, excise taxes and other compulsory payments to governmental authorities, (b) outbound transportation paid, prepaid or allowed, including shipping, freight, transportation and insurance for the Licensed Product to the extent such costs are included in Licensee’s or Sublicensees’ invoice price to its customers for the Licensed Product, and (c) all bona fide allowances for returns, rebates, chargebacks, provisions for bad debts determined in accordance with U.S. G.A.A.P., and discounts actually given to and taken by non-sublicense third parties, such allowances to be adjusted to actual on a periodic basis, no less frequently than annually. In this context, gross revenues will also include the fair market value of any non-cash consideration actually received by Licensee, Affiliates and Sublicensees for the manufacture, use, sale, lease, or other transfer of Licensed Product. Net Sales does not include the transfer price paid by a Sublicensee to the Licensee for Licensed Product.

1.10      “Patent Costs” means all reasonable costs incident to filing, prosecuting and maintaining the patents associated with the Patent Rights in the United States and elected foreign countries, and any and all reasonable costs incurred in filing continuations, divisional applications or related applications thereon and any re-examinations or reissue proceedings thereof.

1.11      “Patent Rights” means Licensor’s patent rights to any subject matter claimed in or covered by (a) any pending or issued United States or foreign patent or any patent application listed in Exhibit A attached hereto, including any reissues, reexaminations, renewals, substitutions, or extensions thereof; (b) any continuation, continuation-in-part or divisional applications of the patents and patent applications listed in Exhibit A; and (c) any patents issued on continuation or divisional applications, including reissues and reexaminations, of the patents and patent applications listed in Exhibit A.

1.12      “Source Code” means the source code for the Software and/or any Derivative.

1.13      “Sublicensing Revenue” means any payments that Licensee or an Affiliate receives from a Sublicensee in consideration of the sublicense of the rights granted Licensee and Affiliates under Article 5, including without limitation, license fees, milestone payments, license maintenance fees, and other payments, but specifically excluding royalties on Net Sales, development grants specifically for the development of Licensed Products, equity or debt sold to Sublicensee, reimbursed patent costs and expenses (may only be deducted once and for the first time collected), any payment made pursuant to the indemnification obligations of the parties, and any payment made to Licensee in connection with a cross-license of technology or similar in-kind technology transfers or exchanges directly related to the development, manufacture and sale of Licensed Product.

1.14      “Sublicensee” means any non-Affiliate sublicensee of the rights granted Licensee under Article 5, specifically excluding those non-Affiliate entities to which a sublicense is granted only in connection with a distribution agreement with the Licensee and no royalty is paid to Licensee under such distribution agreement; provided, however, that a royalty is paid by Licensee or an Affiliate to Licensor for Licensed Products sold under such distribution agreement.

1.15      “Technology” means (a) confidential and/or proprietary Information and materials in which Licensor has a legal interest and which involves the Technology and/or UB IPD File Nos. S-409, R-5421 and R-6013 and which was developed by Donald D. Hickey, M.D. at the University at Buffalo on or before the Effective Date and which Licensor is free to disclose to Licensee (“Know-How”), (b) the Patent Rights, (c) the Copyrights, and (d) the Intellectual Property.

1.16      “Term” means the period of time beginning on the Effective Date and ending on the later of (i) the expiration date of the last to expire Patent Right, or (ii) ten (10) years from the sale of the first Licensed Product.

1.17      “Territory” means worldwide.

2.       GRANT OF RIGHTS AND RETAINED RIGHTS

2.1      Exclusive License. Licensor grants to Licensee an exclusive license under its Technology rights to (a) develop, make, have made, use, sell and offer for sale or otherwise exploit the Licensed Products, and (b) use and reproduce Software, create Derivatives, and distribute Software to end-users through the normal channels of distribution, in the Field and Territory during the Term. Licensees will have the unrestricted right to develop Licensee Improvements relating to the Licensed Products in the United States for distribution and exploitation of the Licensed Products either in the United States or outside of the United States. Licensee will also have the unrestricted right to develop Licensee Improvements relating to the Licensed Products in any foreign country for distribution and exploitation of the Licensed Products in any other country, including the U.S.

2.2       Retained Rights. Licensor retains the right to use and reproduce the Technology and Software and to create derivatives of the Software for educational purposes and internal research and development only. Unless Licensor has complied with the ‘First Look’ provision set forth in Section 2.3, Licensor will not have the right to use and reproduce the Technology and create and exploit such derivatives of the Software for any other purpose. Unless Licensor has complied with the ‘First Look’ provision set forth in Section 2.3, Licensor will not use the Technology and/or Software to create any product that competes or has the potential to compete with the Licensed Products in the Territory. Hickey and Lundgren each will execute a restrictive covenant agreement, attached hereto as Exhibit D for Hickey and Exhibit E for Lundgren and incorporated by reference herein.

2.3       “First Look" Right.  Subject to any existing obligations to third parties and so long as Licensee is not in default of any of its obligations hereunder, Licensor hereby grants to Licensee a "first look" right as to any Licensor Improvements. "First Look" right means the exclusive right to negotiate a definitive license agreement for an exclusive, royalty bearing, worldwide license to use and otherwise commercially exploit Licensor’s intellectual property rights to any Improvements. This "first look" right will commence on the date that Licensor discloses the Improvements to Licensee, and Licensee has sixty (60) days (“Notice Period”) to provide Licensor written notice (“First Look Notice”) of its interest in entering into negotiations for a license under Licensor’s intellectual property rights to make, have made, use, sublicense, sell, offer for sale products that make use of the Improvements. If and when Licensor receives the First Look Notice, the parties will promptly and in good faith commence license negotiations. The first look right will terminate (1) at the end of the Notice Period if Licensee has not notified Licensor of its interest in negotiating a license, or (2) one hundred fifty (150) days after Licensor receives the First Look Notice if the parties have not yet finalized a definitive license agreement. In the event that the parties are unable to agree on terms for a complete license agreement for the Licensor Improvement within ninety (90) days of the notification of the “first look”, Licensee, may at its discretion, refer any outstanding issues to a mutually agreed upon mediator. The mediator will, based upon and consistent with the terms and conditions of this Agreement, upon the parties’ prior offers to one another, and upon custom and practice in transactions between medical device companies and universities, make recommendations to both parties for resolution of any outstanding issues. If, after thirty (30) days of mediation, the parties still have not reached agreement, the “first look” right will expire. Disclosure to Licensee of any confidential or proprietary information relating to any Improvements will be considered “Confidential Information” subject to Section 16 of this Agreement. Subject to any existing or hereafter incurred obligations to third parties, Licensor will not undertake to negotiate entering into any exclusive license under its intellectual property rights to make, have made, use, sell, offer for sale products that make use of the Licensor Improvements with any other party until after termination of Licensee’s “First Look” right.

2.4       Consulting Obligation. Hickey and Lundgren will each individually provide up to fifty (50) hours of consulting services to Licensee regarding the Technology. Such consulting services will be provided at no additional cost to Licensee at such times and places to be determined by the parties. Such consulting services will only be for consulting that can reasonably be expected to be within Hickey’s and Lundgren’s respective areas of knowledge and expertise with respect to the Technology, but will not include the performance of research and development projects, animal studies, or clinical studies. Any consulting services requested by Licensee in excess of the fifty (50) hours will be provided for a consulting fee to be determined by the parties. Licensee will be responsible for and advance or promptly reimburse Hickey and Lundgren for any out-of-pocket costs associated with the consulting services, such as travel, food and lodging.

2.5       No Compulsory Package License. The parties agree and acknowledge that Licensor requested that Licensee license all of the licensed patents together under a single license and that the Licensor did not request that Licensee license any patent individually.

2.6       Transfer of Tangible Assets. Within fifteen (15) days of the Effective Date of this Agreement, Licensor will deliver or otherwise provide to Licensee all of Licensor’s tangible assets relating to the Licensed Products, Intellectual Property, Software, Source Code, Licensor Improvements and Derivatives, including but not limited to those items set forth on Exhibit B attached hereto and incorporated herein. Title ownership of the items listed in Exhibit B will remain with Licensor. Licensor may request that any item listed in Exhibit B be returned to Licensor by Licensee for Licensor’s use under Section 2.2 Retained Rights according to a mutually agreeable schedule, and any such item must be returned upon termination of this Agreement for any reason.

3.1       Royalties on Net Sales. Licensee will pay Licensor a royalty of 5% (“Royalty Rate”) on annual Net Sales. Earned royalties due on Net Sales made in the United States will be paid to Foundation, and earned royalties on Net Sales made outside of the United States will be paid to Hickey and Lundgren.

3.2       Reduction in Royalty Rate. Notwithstanding the foregoing, Licensee will have the right to reduce the Royalty Rate owed to Licensor hereunder Section 3.1 in the following circumstances and in accordance with the following calculations:

(a)      Licensee will have the right to reduce the Royalty Rate paid to Licensor for a Licensed Product in the event that Ethox International, Inc. or its employees (collectively “Ethox”) has any intellectual property right or claim or any other legal right with respect to the Technology and such right(s) were developed, owned, assigned or originated by Ethox prior the execution of this Agreement and such right(s) prevent or otherwise limit Licensee’s ability to exploit the Technology. The royalty rate payable to Ethox may be deducted from the Royalty Rate specified under Section 3.1 but in no case will the Royalty Rate specified in Section 3.1 be reduced by more than one percent (1%). For example, if the royalty rate payable to Ethox is 1%, the Royalty Rate specified in Section 3.1 will be reduced to 4%.

(b)      In the event that a competitor of Licensee or Sublicensee sells a product in a country where there is no patent protection, which is competitive with a Licensed Product and captures twenty-five percent (25%) or more of the market in such country for esophageal balloon catheter-based cardiac performance measurement, then the royalties otherwise payable in such country as set forth in this section after any adjustments made under 3.2 (a), (b) or (c) will be reduced by 35%. In order to make such an adjustment to the royalty for sales in a country where there is no patent protection, Licensee must provide to Licensor i) evidence of sales of the competitive product in that country and ii) reasonably demonstrate the capture of twenty-five percent (25%) of the market by providing to Licensor third party market tracking service data, if available. If third party market tracking service data is not available, the licensee will make reasonable efforts to demonstrate the capture of twenty-five percent (25%) of the market through other means.

(c)      The Royalty Rate payable by Licensee on Net Sales by Sublicensees may be reduced according to the adjustments provided in this Section 3.2, provided that any incremental royalty rate paid by a Sublicensee to Licensee is similarly reduced under the same circumstances and in accordance with the same calculations provided for in this Section 3.2.

Each such Royalty Rate or payment reduction will be indicated in the quarterly and annual reports provided to Licensor pursuant to Section 7.2, below.

3.3       Annual Minimum Royalty. Beginning with the first full calendar year of sales of Licensed Product in the United States and for two years thereafter, Licensee will pay Licensor an Annual Minimum Royalty payment of $100,000 against which any Royalty on Net Sales paid in the same calendar year for sales in the United States will be credited. Subject to Section 10.3, beginning with the first full year of sales of Licensed Product outside of the United States (“Non U.S.”) and for two years thereafter, Licensee will pay Licensor an Annual Minimum Royalty payment of $100,000 against which any Royalty on Net Sales paid in the same calendar year for sales outside the United States will be credited. The Annual Minimum Royalty for a given year will be due at the time payments are due for the calendar quarter ending on December 31.

Annual Minimum Royalty due on sales made in the United States will be paid to Foundation and Annual Minimum Royalty due on sales made outside of the United States will be paid to Hickey and Lundgren.   

3.4       Sublicensing Fees. Licensee will pay Hickey and Lundgren 18.75% of Sublicensing Revenue, and Licensee will pay Foundation 6.25% of Sublicensing Revenue (Licensor will in the aggregate receive 25% of the Sublicensing Revenue, and such amount will be considered “Sublicensing Fees”).

3.5      Milestone Payments. Licensee will pay Licensor milestone payments according to the following schedule or events (each payable one time only):

3.6       Payment Terms. All dollar amounts referenced herein will refer to U.S. Dollars. Payments with designated payment dates are due and payable on or before those dates. Earned royalty payments will be made within thirty (30) days after the end of each calendar quarter for the calendar quarter. All invoiced payments will be paid within thirty (30) days of Licensee’s receipt of invoice. When Licensed Products are sold for currencies other than U.S. Dollars, earned royalties will first be determined in the foreign currency of the country in which the Licensed Products were sold and then converted into equivalent U.S. Dollars. The exchange rate is that rate quoted in the Wall Street Journal on the last business day of the reporting period and is quoted as local currency per U.S. Dollar.

3.7       Payment Address for Foundation. All payments due Foundation will be made payable to “The Research Foundation of State University of New York” and will be sent to the below address:

UB Office of Science, Technology Transfer & Economic Outreach

Intellectual Property Division

UB Technology Incubator

Baird Research Park

1576 Sweet Home Road

Amherst, NY 14228

Attn: Licensing Specialist

3.8       Payment Address for Hickey and Lundgren. All payments due Hickey and Lundgren will be made payable to the Client Trust Account reference of “Lundgren & Hickey 01378.00019” and will be wired to the below address:

3.9       Foreign Charges. Royalties due on Net Sales that occur in any country outside the United States may not be reduced by any deduction of withholding, value-added taxes, fees, or other charges imposed by the government of such country, except as permitted in the definition of Net Sales. Licensee is responsible for all bank transfer charges.

4.0      DUE DILIGENCE

4.1      Licensee will use commercially reasonable efforts to commercialize and market Licensed Products as soon as practicable and in accordance with the milestone events set forth herein.

4.2      Unless there is “good reason” that such milestones cannot be reached with commercially reasonable efforts, Licensee undertakes to reach the following milestones in the timeframes set forth below:

As used herein, the term “good reason” will include:

Except with respect to the occurrence of the events set forth in either 4 or 6 above, in the event of failure to meet the milestones for “good reason”, Licensee and Licensor will negotiate in good faith to amend the milestones, taking into account the “good reason” event that has occurred, in order to establish a revised set of commercially reasonable milestones and timeframes to be met by Licensee going forward.

In the event that: (i) a challenge, claim, suit interference to the Patent Rights that raises a significant commercial risk unless resolved, or is incapable of being resolved, or (ii) the revelation of facts concerning the state of development of the device, the clinical or biological results pertaining thereto, the ownership of the device or other significant facts bearing on the commercial viability of the device, which are contrary to or in conflict with the statements and/or representations of the Licensor or its agents concerning the device, Licensee will have the right to terminate this Agreement in accordance with Section 10.3.

The license granted in this Agreement includes the right of Licensee to grant sublicenses to third parties during the Term. With respect to sublicenses granted pursuant to Article 5, Licensee will:

Upon termination of this Agreement for any reason, Licensor, at its sole discretion, will determine whether Licensee will cancel or assign to Licensor any and all sublicenses. 

6.       PATENT PROSECUTION AND PATENT COSTS

6.1       Patent Costs Incurred Pre-Effective Date. Licensee will reimburse Licensor $264,300 for actual Patent Costs incurred by Licensor prior to the Effective Date in accordance with the following payment schedule:

6.2       Patent Rights Management. Licensor will control and manage all future preparation, filing, prosecution and maintenance of the Patent Rights; provided however, that Licensor will (a) cause its patent counsel to timely copy Licensee on all official actions and written correspondence with, and received from, any patent office, and (b) allow Licensee a reasonable opportunity to comment and advise Licensor on all filings and communications to be made with any patent office and Licensor will consider and reasonably incorporate all comments and advice, provided they are consistent with Licensor’s interests. In the event that Licensor’s patent counsel fails to perform legal services in accordance with professional standards or performs services in a manner that may jeopardize the Patent Rights, Licensee will notify Licensor that new patent counsel should be selected and the parties will cooperate in the joint selection of new patent counsel acceptable to both parties. If Licensee is not satisfied with the services performed by Licensor’s patent counsel for any reason other than those stated above, Licensee may notify Licensor of the issue with patent counsel and Licensor will seek to resolve the issue in a timely manner, not to exceed thirty (30) days from the date of such notice. If the issue is not resolved to the satisfaction of Licensee within said time period, then Licensee may request the selection of new patent counsel. The parties will cooperate in the selection of new patent counsel, which counsel will be mutually acceptable to both parties. The selection of the new counsel will be made within thirty (30) days of the date Licensee requests new patent counsel. Both parties agree to be reasonable in the selection of new patent counsel. When the new counsel is agreed upon by the parties, Licensor will dismiss the original patent counsel and request a transfer of all legal files to the new patent counsel with as much speed as is reasonable, but in not more than fifteen (15) days.

6.3       Post-Effective Date Patent Costs. Licensee will be directly responsible for payment of all Patent Costs incurred after the Effective Date. Licensor will instruct respective patent counsels to set up direct billing arrangements with Licensee under terms and conditions satisfactory to the Licensee and consistent with industry practices between similar entities. Licensee will directly negotiate billing terms and legal fees with Licensor’s patent counsel. Licensor will request copies of all invoices from patent counsel and Licensee will copy Licensor on all payments to patent counsel.

6.4       Declinations. Licensee may elect to terminate its payment obligations with respect to any patent application or patent in Patent Rights upon three (3) months written notice to Licensor. Licensor will use reasonable efforts to curtail further Patent Costs for such application or patent when such notice of termination is received from Licensee. Licensee is responsible for paying any Patent Cost incurred prior to the end of the three (3) month notice period. Licensor, in its sole discretion and at its sole expense, may continue prosecution and maintenance of said application or patent, in which case Licensee’s license under such Patent Rights and other rights related to Technology in such country or territory will terminate. Non-payment of any portion of Patent Costs with respect to any application or patent may be deemed by Licensor as an election by Licensee to terminate its payment obligations with respect to such application or patent. The failure of Licensee to pay any such fee or costs within one-hundred twenty (120) days of receipt of an invoice for same will cause Licensee to, upon receipt of notice from Licensor, lose all rights in the country or territory for which fees or costs were due, unless Licensor receives notice from Licensee that such invoice is in dispute. In the event of a dispute regarding an invoice, Licensee’s rights will not be subject to termination for non-payment of the disputed invoice in accordance with this section. Licensor and Licensee will make good faith efforts to resolve any such dispute with the respective patent counsel. Following the loss of rights in any country or territory by Licensee, Licensor will be free to exploit or contract with third parties to exploit the Technology rights to (a) make, have made, use, sell and offer for sale Licensed Products, and (b) use and reproduce Software, create Derivatives, and distribute Software to end users in such jurisdiction. Nothing herein will obligate Licensor to apply for, prosecute or maintain any patent or copyright registration in any jurisdiction other than those set forth in Exhibit A (List of Patents).

7.      BOOKS, RECORDS AND REPORTS

7.1       Books and Records. Licensee will keep complete, true and accurate books of account containing reasonable particulars that may be necessary for the purpose of showing the amounts payable to Licensor hereunder and for the purpose of showing compliance with all other obligations under this Agreement. Licensee will use reasonable efforts to require any Affiliate and Sublicensee to comply with this Section. Said books and the supporting data will be available at all reasonable times for five (5) years following the end of the calendar year to which they pertain, to confidential inspection (subject to Foundation’s obligations relating to internal reporting and accounting requirements) by Licensor or its agents, upon reasonable notice to Licensee, for the purpose of verifying Licensee’s royalty statement or compliance in other respects with this Agreement. Licensor and its agents may make copies of relevant information during the course of an inspection. In addition, Licensee agrees to provide copies to Licensor of relevant records upon request of Licensor. Each party will promptly pay or credit the other for any underpayment or overpayment discovered during an inspection. Should such inspection lead to the discovery of a greater than 5% discrepancy in reporting to Licensor’s detriment, Licensee will pay (a) the full cost of the inspection, and (b) accrued interest at the lesser of the maximum rate allowed by law or 1 ½ % per month.

7.2       Reports. After an initial sale of Licensed Product by Licensee, Affiliate or Sublicensee in a given country, within sixty (60) days after the end of each calendar quarter during the term of the Agreement, Licensee will provide reports containing the following information relating to the quarter: (a) number and type of Licensed Products made by or for Licensee and any Sublicensees; (b) number and type of Licensed Products sold by Licensee, Affiliates and Sublicensees; (c) Net Sales (and the calculation of Net Sales); (d) royalties due under Section 3.1; (e) Sublicensing Revenue (and the calculation of Sublicensing Revenue, including documentation of any allowed exclusions under Section 1.14); (f) Sublicensing Fees due under Section 3.3, (g) the total amount (royalties and Sublicensing Fees) due for such quarter; and (h) justification for any reduction in Royalty Rate under Section 3.2 . Within ninety (90) days after the end of each calendar year during the term of the Agreement, Licensee will also provide reports containing the following information relating to the calendar year: (a) progress on the commercialization of the Technology and the development of Licensed Products (i.e., new product development, product evaluation and testing, marketing plans, sales forecasts, significant commercialization events and progress related to completion of the milestones set forth in Section 4.2); and (b) any Net Sales adjustments for allowances according to Section 1.9. The foregoing will be provided on a country-by-country basis.

7.3       Report Certification. Each report will be signed by an officer of Licensee, and all reports will be prepared in accordance with U.S. G.A.A.P. If no royalties are due for a fiscal quarter, Licensee will submit a report to Licensor that states this.

8.      PATENT RIGHTS INFRINGEMENT

Upon either Party becoming aware of any potential infringement of the Patent Rights, Software, Technology, Derivatives, Licensor Improvements, or other intellectual property relating to the Licensed Products in the Territory, such Party will promptly give notice thereof to the other Party which notice will contain all information possessed by the Party, giving such notice relating to such potential infringement. Licensee will have the right but not the obligation, in its own name, to institute infringement proceedings against third parties based on any such potential or actual infringement. If Licensee does not institute infringement proceedings against such third parties within thirty (30) days after its knowledge of such potential infringement, Licensor will have the right, but not the obligation, to institute such proceedings. The expenses of such proceedings, including legal fees, will be borne by the Party instituting suit. Each Party will execute a