EXCLUSIVE LICENSE AGREEMENT
THIS AGREEMENT is by and between DENTAL/MEDICAL DIAONOSTIC SYSTEMS, INC.,
("DMD") a corporation having a principal place of business in Westlake Village,
California, and CHRYSALIS DENTAL, INC., ("CDI") a corporation having a principal
place of business in Salt Lake City, Utah, and is effective as of the date first
written below.
WHEREAS CDI has created new and improved tooth whitening products which can be
utilized without a gingival dam for use in a dental office and a product for
home use, ("New Products");
WHEREAS DMD is desirous of acquiring the exclusive
worldwide rights to market, sell, distribute, make or have made said New
Products; and
WHEREAS CDI has represented to DMD that said New Products are secret and
proprietary to CDI and that patent protection is being sought for the inventions
embodied in said New Products;
WHEREAS, the parties hereto have entered into a Letter of Intent in which the
basic terms and conditions of this Agreement were decided upon and which
conditioned this Agreement upon the satisfactory completion of a due diligence
investigation;
THEREFORE the parties agree as follows:
X. XXXXX OF LICENSE AND RIGHT OF FIRST REFUSAL
1.1 CDI hereby grants to DMD the exclusive worldwide license to make
or have made, use, or sell said New Products under any and all applications for
Letters Patent or Letters Patent maturing therefrom, including continuations,
continuations-in-part, divisionals
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thereof, as well as any and all proprietary trade secret information, whether in
the United States of America or in countries foreign to the United States of
America.
1.2 Any improvements of New Products made independently by CDI shall
automatically be included in this Agreement and subject to the same royalty
schedule set forth herein. Any improvements sought or suggested by DMD shall be
funded by DMD. CDI shall not, without the express consent and approval of DMD,
develop new or related technology and market it competitive with the technology
licensed herein. CDI may, however, in its discretion, conduct ongoing research
and development. CDI hereby grants DMD a right of first refusal to license the
new or related technology. For any such competitive technology, DMD, in its
absolute discretion, may exercise such right of first refusal and determine not
to use, sell, make, market, or seek intellectual property protection for such
technology during the period that DMD enjoys the exclusive rights granted
herein.
1.3 In the event that CDI develops an Improvement and DMD determines
not to exploit the Improvement, although CDI shall be entitled to file for,
receive, and maintain Letters Patent covering such improvement.
1.4 In the event that CDI elects not to file any patent application
covering any of its Improvements in or outside the Licensed Territory, then CDI
shall in good time inform DMD to this effect and DMD shall be entitled to
receive the full and active cooperation of CDI and file for, receive, and
maintain, in its own name, Letters Patent covering such Improvement.
1.5 DMD shall be responsible to ensure that appropriate patent and
trademark notices, numbers and/or registrations be prominently placed on
appropriate product, product packaging, product literature and any other
materials associated with the products manufactured under this agreement.
II. COMPENSATION AND PAYMENT
2.1 As and for compensation for the license granted herein, DMD will
grant to CDI:
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a. CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION shares of the common stock
of DMD;
b. An advance against royalties of $CONFIDENTIAL INFORMATION
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION;
c. An annual minimum royalty of $CONFIDENTIAL INFORMATION
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION; and
d. An earned royalty of CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION%
on the net sales of the New Products; Subject to the terms and
conditions set forth below. If, however, five years from the
date of the Agreement have elapsed and no Letters Patent
have issued covering the New Products and no application for
Letters Patent is then pending, the royalty rate will drop
to CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION%.
2.2 DMD shall transmit the CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION shares to CDI in the form
of an unregistered certificate upon DMD's acceptance of this Agreement. DMD will
take all appropriate steps to register the shares with or at the time of DMD's
1998 Annual Statement.
2.3 DMD shall pay CDI $CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION a nonrefundable advance
at the time of execution of this Agreement and the balance of $CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION upon acceptance of the Agreement by DMD.
2.4 The minimum annual royalty for the first year shall extend over a
period of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION (CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION) months but not past
December 31, 1999, commencing on the date that DMD first ships New Products to a
non-affiliated purchaser and shall be paid CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION days after the
close of the first quarter following said first shipment. Thereafter, the
minimum royalty shall be payable in quarterly installments, due and payable
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION days after the close of each quarter.
2.5 Minimum royalties shall be credited against earned royalties and,
to the extent that earned royalties in any quarter fail to exceed the minimum,
any shortfall shall be carried over into succeeding quarter so that earned
royalties in any quarter shall be reduced by any carried forward shortfall.
Earned royalties in excess of the quarterly minimum shall be credited against
future minimums.
2.6 Earned royalties are due and payable within CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION) days after the close of each quarter after
the advance or minimum royalty of $CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION has been recouped.
2.7 "Net sales" for the purposes of computing earned royalties shall
be equal to gross sales less freight, taxes, discounts actually taken, returns
and credits.
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2.8 Payment of royalties shall be in United States dollars.
III. EXPORTING
3.1 DMD shall be responsible for compliance with all export and import
regulation and payment of any related taxes of any government or governing body
related to DMD's manufacture, marketing, sales and distribution of product under
this Agreement. In order for CDI to comply with the export regulations of the US
Department of Commerce and to facilitate the exchange of know-how and other
information pursuant to this Agreement, DMD hereby gives its assurance to CDI
that DMD will not knowingly, unless prior authorization is obtained from CDI and
the US Office of Export Control, re-export directly or indirectly any technical
data received from CDI under this Agreement, and will not export directly the
product of such technical data to any countries as said countries may be listed,
from time to time, by the US Government and agencies thereof.
IV. TERM AND TERMINATION
4.1 This Agreement is conditioned upon the acceptance by DMD, after a
due diligence investigation of no more than seven working days (7) days from the
execution of this Agreement, of the adequacy of any pending applications for
Letters Patent and specific approval thereof as well as a review of the clinical
trial material and experimental data, if requested.
4.2 The initial term of this Agreement shall be twenty years. DMD,
upon ninety (90) days notice, shall have the option to renew this agreement for
an additional term.
4.3 After December 31, 2000, should DMD fail to pay any installment of
the minimum royalty when due, DMD shall have the option to convert the exclusive
license granted herein into a non-exclusive license to license to make or have
made, use, or sell said New Products for an earned royalty, only and shall be
excused of any further obligation of a minimum royalty.
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V. CONSULTING OBLIGATIONS OF XX. XXXXXXXX
5.1 The principal investigator and primary inventor of the New
Products is Xx. Xxxx X. Xxxxxxxx ("AHA"), who is also principal in CDI. 5.2 AHA
shall make himself available for consultation and promotion on reasonable
notice. DMD shall compensate AHA at his customary and usual rate and shall pay
all reasonable costs and expenses in connection therewith.
VI. RECORD KEEPING AND AUDITS
6.1 DMD shall maintain books and records adequate to verify royalties
earned hereunder. Within thirty days after the close of each quarter, (except
for the first quarter) DMD shall submit a report certified by an officer setting
forth the net sales for the quarter and the royalty due. Such report shall be
accompanied by a payment (if any) of earned royalties due and owing and a
payment of the minimum quarterly royalty for the following quarter.
6.2 CDI shall have the right to audit DMD's books and records to
verify the accuracy of the reports through a qualified representative at the
expense of CDI. Such audit may be conducted no more often than once yearly on
reasonable notice. In the event that the audit determines a discrepancy in favor
of CDI in an amount greater than 10% of the amount reported, the discrepancy
shall be paid within 30 days and the cost of the audit shall be borne by DMD.
VII. DISPUTES
7.1 All disputes shall be referred to a forum of alternative dispute
resolution including, but not limited to arbitration under the Code of Civil
Procedure of the State of California. The laws of the State of California shall
be applied and jurisdiction of shall be limited to the State of California.
7.2 In the event of an accusation of breach, the party accused of
breach shall be informed in writing of the circumstances considered to be a
breach and such accused party
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shall have forty-five days within which to cure or propose an acceptable plan to
cure. No action to enforce this Agreement shall be taken until after such period
has elapsed.
7.3 In the event of breach of the terms of this Agreement, other than
the obligation to pay minimum royalties after December 31, 2000, or a failure to
cure or propose an acceptable plan after an accusation of breach, CDI may
terminate this license with sixty (60) days written notice.
VIII. NOTICE
8.1 All notices required to be given shall be sent by facsimile or
E-mail with a written confirmation by first class certified mail, return receipt
requested. Notice shall be deemed given when the transmission of the facsimile
or E-mail is confirmed. The notices shall be sent to:
CDI: Xx. Xxxx X. Xxxxxxxx
CHRYSALIS DENTAL, INC.
00000 Xxxxx X'Xxxxx Xxxx
Xxxxx, XX 00000 Facsimile: (801)
523-8967 E-mail: xxxxx00000@xxx.xxx
With a copy to:
Xxxx Xxxxxx, Esq.
XXXXXX & XxXXXXXX
60 East South
Temple Street, Ste. 1800
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile: (000) 000-0000
E-mail: xxxxxxx@xxxxxx.xxx
DMD: Xxxxxxx X. Xxxx, CFO
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
000 X. Xxxxxxxx Xxxx., #000
Xxxxxxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
E-mail: xxxxxx@xxxxxxx.xxx
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With a copy to:
XXXXXX X. XXXXXXXXX
XXXXXXXXX & XXXXXX, LLP
0000 Xxxxxxx Xxxx X. #0000
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
E-mail: XXX@XX-XXXXX.XXX
IX. WARRANTIES AND REPRESENTATIONS
9.1 To the best of CDI's knowledge, the making, using or selling of
the New Products, if used in the manner taught by CDI's patent disclosure
documents, does not infringe the known intellectual property rights of any third
party. If DMD wishes to defend, CDI agrees to cooperate with DMD in the defense.
If a license is required to permit DMD to continue to make, use or sell the New
Products, any royalty that must be paid shall be deducted from the earned
royalty otherwise due CDI, but in no event shall the royalty earned by CDI fall
below CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION%. To the extent possible, DMD will seek insurance
coverage and will tender any defense to an insurer affording coverage.
9.2 To the best of CDI's knowledge, the making, using or selling of
the New Products, if used in the manner taught by CDI's patent disclosure
documents, is safe and effective and does not cause lasting pain or damage to
users. If DMD defends CDI, CDI agrees to cooperate with DMD in the defense. To
the extent possible, DMD will obtain product liability insurance coverage
including coverage of the New Products and will tender any defense to an insurer
affording coverage.
X. PATENT INFRINGEMENT BY OTHERS
10.1 DMD shall have the initial exclusive right and option, at its
expense, to institute infringement or other appropriate legal actions against
alleged prospective or actual infringers under the patent laws of the relevant
jurisdiction, and to retain all monetary recovery received therefrom. Any
recovery of lost profits or lost sales less costs and expenses of litigation
shall be deemed a part of Net Sales upon which an earned royalty is due and
payable. Such
Page 7
earned royalty is to be paid to CDI within sixty (60) days of receipt of any
monetary judgment payment.
10.2 In the event DMD declines to institute infringement or other
appropriate legal action against alleged prospective or actual infringers within
ninety (90) days after receiving a written notice or request to do so from CDI,
CDI shall have the right and option to take whatever action it deems appropriate
and retain all recoveries, and DMD agrees to permit joinder of DMD in any legal
action at the request of CDI for purposes of jurisdiction or obtaining complete
relief, all at CDI's expense.
XI. GENERAL PROVISIONS
11.1 This Agreement represents the entire understanding of the
parties. No modification, amendment or waiver shall be binding without the
written consent of the parties.
11.2 If any provision of this Agreement shall for any reason be
adjudged by any tribunal to be invalid or unenforceable, such judgment shall not
affect, impair or invalidate the remainder of this Agreement but shall be
confined in its operation to the provision of this Agreement directly involved
in the controversy in which such judgment shall have been rendered.
11.3 This shall not be assigned by DMD without the express written
consent of CDI except in the case of a transaction under the terms of which,
substantially all of the assets of DMD are being transferred.
11.4 This Agreement may be executed in counterparts, each of which
shall be deemed to be an original but all of which shall constitute the same
Agreement.
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Date: October 2, 1998
CHRYSALIS DENTAL, INC.
/S/ XXXX X. XXXXXXXX
--------------------------
XXXX X. XXXXXXXX, DDS
President
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
/S/ XXXXXXX X. XXXX
---------------------------
XXXXXXX X. XXXX
Chief Financial Officer
