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EXHIBIT 10.31
LETTER OF INTENT FOR
EXCLUSIVE LICENSE AGREEMENT
THIS LETTER OF INTENT FOR EXCLUSIVE LICENSE AGREEMENT is by and between
DENTAL/MEDICAL DIAGNOSTIC 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 world wide 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;
THEREFORE the parties agree as follows:
X. XXXXX OF LICENSE AND RIGHT OF FIRST REFUSAL
1.1 CDI hereby grants to DMD the exclusive world wide 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.
1.5 DMD shall be responsible to ensure that appropriate patent and
trademark notices, numbers and/or registrations be prominently place 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:
a. 100,000 shares of the common stock of DMD;
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b. an advance against royalties of $[*];
c. an annual minimum royalty of $[*]; and
d. an earned royalty of [*] 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 [*].
2.2 DMD shall transmit the 100,000 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 [*] a nonrefundable advance at the time of
execution of this Agreement and the balance of [*] upon acceptance of the
Agreement by DMD.
2.4 The minimum annual royalty for the first year shall extend over a
period of fifteen (15) 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 thirty 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 thirty 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 thirty (30) days after
the close of each quarter after the advance royalty of [*] has been
recouped.
* Confidential information omitted and filed separately with the Securities and
Exchange Commission.
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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.
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 U.S. 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 U.S. 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.
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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.
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 a 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
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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 such 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 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: (000) 000 0000
e-mail: xxxxx00000@xxx.xxx
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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
with a copy to:
XXXXXX X. XXXXXXXXX
XXXXXXXXX & XXXXXX, LLP
0000 Xxxxxxx Xxxx X. #0000
Xxx Xxxxxx, 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 [*]. 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
[*] Confidential information omitted and filed separately with The Securities
and Exchange Commission
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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 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.
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11.2 If any provision of this Agreement shall for any reason by
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.
Date: September 16, 1998
CHRYSALIS DENTAL, INC.
/s/ XXXX X. XXXXXXXX
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XXXX X. XXXXXXXX, D.D.S.
President
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
/s/ XXXXXX X. XXXXXXXXX
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XXXXXX X. XXXXXXXXX
CEO
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