--------------------------------------------------------------------------------
Page 1
--------------------------------------------------------------------------------
LICENSE AGREEMENT
This License Agreement (the "Agreement") effective as of May __, 1997 (the
"Effective Date"), is entered by and between U.S. Medical Products, Inc., a
Texas corporation ("Licensor") and Xxxxx Medical, Inc., a California corporation
("Licensee").
RECITALS
A. Licensor owns certain technology, including Intellectual Property (as
defined below) relating to any of Licensor's orthopaedic product lines (the
"Products" or "Product Lines");
B. Licensor wishes to grant to Licensee an exclusive, irrevocable,
royalty-free, worldwide license, with the right to sublicense, to the
Intellectual Property subject to the terms and conditions set forth herein;
C. Upon the closing of an Asset Purchase Agreement between Licensor and
Licensee pursuant to which Licensee acquires certain assets of the Licensor,
Licensor desires Licensee to be the sole and exclusive owner of the Intellectual
Property; and
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. DEFINITIONS.
1.1 "Intellectual Property" shall mean all rights in and to
trademarks, service marks, copyrights, trade names, trade secrets, Know-How,
technical information, business information, computer software, formulae, data,
plans, drawings, designs, models, patterns, documentation, ideas and inventions
(whether patentable or unpatentable and whether or not reduced to practice),
administrative processes, 510(k) clearances or approvals, all GMP, XXX-0000,
XXX-0000 and FDA clearance documentation, proposals, Patent Rights, patient,
customer, supplier and vendor lists and all other confidential information
relating to or arising out of the business of Licensor relating to the Product
Lines, including all rights associated with the use of the names CONSENSUS, U.S.
Medical Products and design; and U.S. and design or any variation or derivative
thereof and any other intellectual property or related rights now or hereafter
recognized by any country or jurisdiction in the world.
1.2 "Patent Rights" shall mean all patents and patent applications in
any country, including any division, continuation, continuation-in-part,
substitute,
--------------------------------------------------------------------------------
Page 2
--------------------------------------------------------------------------------
renewal, reissue, extension, confirmation, reexamination, registration and/or
foreign counterpart thereof and any patent issuing thereon including any
substitute, renewal, reissue, extension, confirmation, reexamination,
registration and/or foreign counterpart thereof relating to the Product Lines,
including, but not limited to the Patents set forth on Exhibit A.
1.3 "Know-How" shall mean all confidential information and materials,
including without limitation, instructions, processes, formulas, biological,
chemical, physical, analytical, clinical, safety, manufacturing and quality
control data, standard operating procedures, work instructions and information
which is necessary or useful for the development, manufacture, use or sale of
the Product Lines.
2. LICENSE GRANT.
2.1 LICENSE. Licensor grants to Licensee:
(i) an exclusive, royalty-free, worldwide, perpetual,
irrevocable license, including the right to grant and authorize sublicenses,
under the Intellectual Property to (i) make, have made, use, sell, import,
export, reproduce, have reproduced, publicly display, publicly perform,
transmit, rent, lease, and otherwise distribute (directly or indirectly through
third parties) the Product Lines and to (ii) import, export, make, have made,
use, and have used apparatus useful for manufacturing the Product Lines and to
(iii) practice and have practiced any method or process involved in the
manufacture or use of the Product Lines. All Intellectual Property must be
delivered to Licensee on the Effective Date, in both hard copy and appropriate
magnetic media.
2.2 LICENSOR'S RIGHTS Subject to Section 2.1, Licensor shall retain
a non-exclusive, non-assignable, royalty-free, worldwide irrevocable license,
without the right to grant or authorize sublicenses under the Intellectual
Property provided, however, on the earlier to occur of (i) the closing of an
asset purchase agreement that sets forth the terms and conditions upon which
Licensee or its affiliate proposes to acquire certain tangible and intangible
assets of the Licensor (the "Closing Date") or (ii) July 15, 1997, Licensor
shall take all actions necessary to transfer and assign all right title and
interest in and to the Intellectual Property to Licensee and any license or
other right by implication, trademark or copyright of Licensor shall terminate
immediately thereon. Nothwithstanding the above, if there has been no closing
by July 15, 1997, Licensor shall have the right to sell any and all Inventory of
Licensor existing on July 15, 1997. Except for the above limited right,
Licensor shall have no other right or license, implied or otherwise. Licensor
shall retain title to the 510(k) clearances until the earlier of the Closing
Date or July 15, 1997. Licensor shall then notify and register the transfer of
title to such 510(k)'s with the U.S. Food and Drug Administration promptly
within thirty (30) days and take all such steps necessary to effect such
transfer.
2.3 RESTRICTED INTELLECTUAL PROPERTY. In the event that Licensor
does not have the right to grant a license under any particular Intellectual
Property of the scope
--------------------------------------------------------------------------------
Page 3
--------------------------------------------------------------------------------
set forth above in Section 2.1, then the license granted herein under said
Intellectual Property shall be of the broadest scope which Licensor has the
right to grant within the scope set forth above.
2.4 FRUSTRATION OF INTENDED PURPOSE. Licensor may not license or
assign any of Intellectual Property to any third party. Licensor has not and
may not enter into any confidentiality agreements that would prevent it from
disclosing any Know-How or Intellectual Property to Licensee or prevent Licensee
from exercising any of its rights under Section 2.1 or prevent Licensee from
sublicensing such rights.
2.5 DELIVERY. Licensor shall disclose and provide to Licensee all
materials, inventions, know-how and/or trade secrets developed by Licensor that
have not already been disclosed or provided to Licensee at the time this
Agreement is executed.
3. CONSIDERATION
In full and complete consideration for the license granted under Section
2.1 herein and for the transfer of ownership, which will occur on the closing of
the Asset Purchase Agreement as described in Section 2.2, Licensee agrees to
pay Licensor $400,000 on the Effective Date and a promissory note, secured by
the inventory of Licensee, in the amount of $150,000 at 10% interest per annum
payable over eighteen months (the "Note").
4. PATENTS
4.1 Licensee shall be responsible for filing, prosecuting and
maintaining the Patent Rights, as the case may be. Prior to the earlier of July
15, 1997 or the Closing Date, Licensee shall provide to Licensor for review and
comment copies of all such patent applications relating to the Patent Rights
and a listing of countries in which filing is intended. Licensee shall give due
consideration to any comments made by Licensor.
5. INSURANCE
Until the earlier of the Closing Date or until all of the existing
Inventory of Licensor is sold, Licensor shall continue to maintain product
liability insurance with a limit of not less than One Million dollars
($1,000,000) per occurrence to cover claims relating to Products manufactured
and sold by Licensor to any third party, including distributors. For a period
of five years following the earlier of the Closing Date or until all of the
existing Inventory of Licensor is sold, Licensor shall maintain product
liability insurance with a limit of not less than One Million dollars
($1,000,000) per occurrence to cover claims relating to Products manufactured
and sold by Licensor to any third party, including distributors. Licensor shall
provide Licensee with a current Certificate of
--------------------------------------------------------------------------------
Page 4
--------------------------------------------------------------------------------
Insurance each year during the five year period, which provides evidence of such
product liability insurance, including broad form vendors coverage and naming
Licensee and its subsidiary, National Medical Specialty, Inc., as additional
insureds. Licensor shall promptly provide proof of such insurance coverage to
Licensee within 2 days of Licensee's request.
6. CONFIDENTIAL
6.1 OBLIGATIONS. Should either party (the "Disclosing Party")
disclose to the other any of such party's tangible information that is marked
"Confidential" or "Proprietary" ("Confidential Information"), the party
receiving the Confidential Information (the "Receiving Party") shall maintain
the Confidential Information in confidence, shall use at least the same degree
of care to maintain the secrecy of the Confidential Information as it uses in
maintaining the secrecy of its own proprietary, confidential and trade secret
information, shall always use at least a reasonable degree of care in
maintaining the secrecy of the Confidential Information, shall use the
Confidential Information only for the purpose of performing its obligations
under this Agreement and exercising its rights under this Agreement unless
otherwise agreed in writing by the Disclosing Party. No Receiving Party shall
disclose any Disclosing Party's Confidential Information to any person except
those of the Receiving Party's employees and consultants having a need to know
in order to accomplish the purposes and intent of this Agreement, and shall
ensure that each such employee has been instructed to keep confidential the
Confidential Information of the Disclosing Party and shall ensure that each such
consultant has signed a confidentiality agreement covering the Confidential
Information of the Disclosing Party. In no event shall the distribution of a
Licensee Product to a third party be deemed a breach of the provisions of this
Section 6.
6.2 EXCEPTIONS. A Receiving Party shall not have any obligation with
respect to any portion of Confidential Information of the Disclosing Party which
(i) was known to the Receiving Party prior to receipt from the Disclosing Party,
(ii) is lawfully obtained by the Receiving Party from a third party under no
obligation of confidentiality, (iii) is independently developed by the Receiving
Party without use of the Confidential Information of the Disclosing Party, (iv)
is or becomes publicly available other than as a result of any act or failure to
act of the Receiving Party or (v) is disclosed pursuant to subpoena or other
legal process, provided that the Disclosing Party is given prior notice of such
disclosure.
7. REPRESENTATIONS AND WARRANTIES
7.1 LICENSOR. Licensor represents and warrants that (i) it has full
and complete legal right, title and interest to the Intellectual Property, (ii)
it will use its best efforts to obtain consents to assign all of its rights
under the License Agreement to Licensee dated December 11, 1995 by and between
Licensor and Stelkast, Inc. (the "Stelkast License Agreement"), (iii) that to
Licensor's knowledge, there are no liens,
--------------------------------------------------------------------------------
Page 5
--------------------------------------------------------------------------------
licenses, options agreements, security interests or encumbrances of any kind
relating to the Intellectual Property, (iv) it has the full right and authority
to enter into this Agreement and grant the rights and exclusive licenses granted
herein, (v) the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of Licensor, (vi)
subject to the Stelkast License Agreement, it has not granted and will not grant
any rights in conflict with the rights and exclusive license granted to Licensee
herein, (vii) it is not aware of any third party right that would be infringed
by the practice of the Intellectual Property and (viii) to the best of
Licensor's knowledge, there are no pending or threatened claims, disputes,
litigation or proceeding challenging Licensor's right to and use of any
Intellectual Property.
7.2 LICENSEE. Licensee represents and warrants that (i) it has the
full right and authority to enter into this Agreement and (ii) the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Licensee.
8. INDEMNIFICATION.
8.1 LICENSOR'S INDEMNIFICATION. Licensor shall hold harmless and
indemnify Licensee, its officers, employees and agents from and against (i)
amounts paid to third parties as a result of claims, demands, or causes of
action resulting from whatsoever including, but not limited to intellectual
property infringement or arising on account of any injury or death of persons,
or related damages caused by, or arising out of, or resulting from the exercise
or practice of the rights and license granted under this Agreement by Licensor
for Products manufactured and sold by Licensor to any third party, including
distributors; provided that (a) Licensor receives prompt notice of any such
claim, demand or cause of action, (b) Licensor shall not be obligated to
indemnify any party for any claim, demand or cause of action in connection with
any settlement unless Licensor consents in writing to such settlement, and
(c) Licensor shall have the exclusive right to defend any such claim, demand or
cause of action or (ii) any damages, losses, costs or expenses (includingd
reasonable attorneys' and professional fees and other expenses of litigation
and/or arbitration) resulting from Licensor's breach of or failure to comply
with any provision of this Agreement (collectively, "Licensee Losses").
Licensee shall have the right to offset the Note for any of the Licensee Losses
as set forth herein pursuant to the offset provisions set forth on EXHIBIT B.
8.2 LICENSEE'S INDEMNIFICATION. Licensee shall hold harmless and
indemnify Licensor, its officers, employees and agents from and against (i)
amounts paid to third parties as a result of claims, demands, or causes of
action resulting from whatsoever including, but not limited to intellectual
property infringement or arising on account of any injury or death of persons,
or related damages caused by, or arising out of, or resulting from the exercise
or practice of the rights and license granted under this Agreement by Licensee
for Products manufactured and sold by Licensee; provided that (a) Licensee
receives prompt notice of any such claim, demand or cause of action,
(b) Licensee shall not be obligated to indemnify any party for any claim, demand
or cause of action in connection with any settlement unless Licensee consents in
writing to
--------------------------------------------------------------------------------
Page 6
--------------------------------------------------------------------------------
such settlement, and (c) Licensee shall have the exclusive right to defend any
such claim, demand or cause of action or (ii) any damages, losses, costs or
expenses (includingd reasonable attorneys' and professional fees and other
expenses of litigation and/or arbitration) resulting from Licensee's breach of
or failure to comply with any provision of this Agreement.
8.3 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR LOST PROFITS, OR FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR
INCIDENTAL DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY OR WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER
ANY CAUSE OF ACTION AND IN ANY WAY OUT OF THIS AGREEMENT.
9. BANKRUPTCY PROTECTION.
9.1 RIGHTS IN BANKRUPTCY. Notwithstanding any provision
contained herein to the contrary, in case either party is under any proceeding
under the U.S. Bankruptcy Code and the trustee in bankruptcy rightfully elects
to reject this Agreement, the other party may, pursuant to 11 U.S.C. Section
365(n), retain any and all rights hereunder, to the maximum extent permitted by
law.
10. MISCELLANEOUS.
10.1 GOVERNING LAW. The internal laws of the State of California
(irrespective of its choice of law principles) shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties.
10.2 BINDING UPON SUCCESSORS AND ASSIGNS. Until the Note is paid
in full, neither party shall have the right to assign this Agreement without the
prior written consent of the other party to an entity that succeeds to all or
substantially all of the business or assets of the assigning party, except that
Licensee may assign this Agreement without the prior written consent of Licensor
to a subsidiary or affiliate. Subject to the foregoing, this Agreement shall be
binding upon, and inure to the benefit of, the successors and permitted assigns
of a party to this Agreement, provided that any successor or permitted assign
shall agree in writing, for the express benefit of the other party, to assume
all of the obligations of its predecessor under this Agreement. Any assignment
or attempted assignment of this Agreement not permitted by this section shall be
void.
10.3 SEVERABILITY. If any provision of this Agreement, or the
application of a provision, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement, and (if appropriate) such
provision to other persons or circumstances, shall remain in full force and
effect and be interpreted so as best to reasonably effect the intent of the
parties.
--------------------------------------------------------------------------------
Page 7
--------------------------------------------------------------------------------
10.4 ENTIRE AGREEMENT. This Agreement, including the Exhibits to
this Agreement, constitutes the entire understanding and agreement of the
parties with respect to their subject matter and supersede all prior and
contemporaneous agreements or understandings between the parties.
10.5 AMENDMENT AND CHANGES. No amendment, modification,
supplement or other purported alteration of this Agreement shall be binding
upon the parties unless it is in writing and is signed on behalf of the parties
by their own authorized representatives.
10.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any party whose
signature appears on such counterpart and all of which together shall constitute
one and the same instrument.
10.7 NO WAIVER. The failure of either party to enforce any of
the provisions of this Agreement shall not be construed to be a waiver of the
right of such party thereafter to enforce such provisions.
10.8 NOTICES. Whenever any party desires or is required to give
any notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, certified mail if desired, postage prepaid, or by
facsimile with confirmed answer back, addressed as follows:
(i) If to Licensor, then addressed to:
U.S. Medical Products, Inc.
00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx
With a copy to:
Petillon & Xxxxxx
1260 Union Bank Tower
00000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
(ii) If to Licensee, then addressed to:
Xxxxx Medical, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
--------------------------------------------------------------------------------
Page 8
--------------------------------------------------------------------------------
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxx X. X'Xxxxx
Any such communications shall be effective when they are received by the
addressee; but if sent by certified mail in the manner set forth above, they
shall be effective five (5) days after being deposited in the mail. Any party
may change its address for such communications by giving an appropriate notice
to the other parties in conformity with this section.
10.9 NO JOINT VENTURE. Nothing contained in this Agreement shall
be deemed or construed as creating a joint venture or partnership between the
parties. Except as expressly set forth, neither party is by virtue of this
Agreement authorized as an agent, employee or legal representative of any other
party, and the relationship of the parties is, and at all times will continue to
be, that of independent contractors.
10.10 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by the other party, to better evidence and reflect the transactions
described in and contemplated by this Agreement, and to carry into effect the
intents and purposes of this Agreement.
IN WITNESS WHEREOF, the authorized representatives of the parties to this
Agreement have executed and delivered this Agreement, with the intent to be
bound as of the date first set forth above.
LICENSOR
U.S. Medical Products, Inc.
a Texas corporation
By:
Name: Xxxxxxxxx X. Xxxxxxxxxx
-----------------------
Title: Chief Executive Officer
-----------------------
LICENSEE
Xxxxx Medical, Inc.
--------------------------------------------------------------------------------
Page 9
--------------------------------------------------------------------------------
a California corporation
By:
Name: Xxxxxx X.X. Xxxxx, Xx., Ph.D.
-----------------------------
Title: Chief Executive Officer
--------------------------
--------------------------------------------------------------------------------
Page 10
--------------------------------------------------------------------------------
EXHIBIT A
PATENTS AND PENDING APPLICATIONS
TYPE OF INVENTION U.S. PATENT NUMBER ISSUE DATE
----------------- ------------------ ----------
Tibial Prosthetic Implant 5,271,737 December 21, 1993
with Offset Stem
Surgical Xxxxxx and 5,324,293 June 28, 1994
Xxxxxx Holder
Prosthetic Socket 5,540,697 July 30, 1996
Installation Apparatus and
Method
Prosthetic Implant for Joint 5,425,779 June 20, 1995
Structures
Tibial Resection Guide 5,628,750 May 13, 1997
Alignment Apparatus and
Method
Tibial Prosthetic Implant Pending September 18, 1995 (filed)
with Offset Stem
Patella Recession Pending/Allowed June 30, 1995 (filed)
Instrument and Method for
Anatomically-Shaped
Patellar Prosthesis
--------------------------------------------------------------------------------
Page 11
--------------------------------------------------------------------------------
EXHIBIT B
OFFSET PROCEDURE
In the event Licensor breaches any representation, warranty or covenant, or
Licensee has a claim against Licensor under either the License Agreement or
Asset Purchase Agreement, following execution thereof or Licensee seeks
indemnification by Licensor, Licensee and Licensor shall attempt to resolve any
such disputes within ten (10) business days of Licensee's notice of claim. If
Licensee and Licensor are unable to resolve the matter within such ten (10)
business day period, they shall jointly select and engage an arbitrator to
determine whether the bases of the claim set forth in the notice are appropriate
and to make any adjustments to the Note necessitated thereby. The fees of such
arbitrator shall be divided equally between Licensor and Licensee. Both parties
agree to make any and all records available that are requested by the arbitrator
relating to the claim. Such arbitrator's determination shall be conclusive and
binding upon the parties and shall be delivered within (30) thirty days after
the Licensee's notice of claim. Notwithstanding the above, any offset by
Licensee for less than $1,000 shall be made by Licensee solely in its
discretion, and not subject to the arbitration procedure set forth above until
such claims aggregate over $10,000.
