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EXHIBIT 10.2
CONSULTING ORDER
OCTOBER 1, 1996
To: Xxxx X. Xxxxxxxx
NeuroPhysics Corporation
Xxxx X. Xxxxxxxx
From: Somanetics Corporation
Re: Request for Consulting Services Pursuant to the Consulting Agreement,
dated February 28, 1983
Pursuant to the Consulting Agreement, dated as of February 28, 1983,
as amended (the "Consulting Agreement"), between Somanetics Corporation (the
"Company") and Xxxx X. Xxxxxxxx ("HFS"), the Company desires to execute and
deliver to HFS, Xxxx X. Xxxxxxxx ("HAS") and NeuroPhysics Corporation ("NPC",
and together with HFS and HAS, the "Consultants") this Consulting Order (the
"Order") requesting consulting services in connection with the Company's
existing products and the development of new products. With respect to the
development of the new products, the Company desires to become NPC's
"commercialization partner", which for purposes of this Order means an entity
with the rights and obligations of the Company with respect to such new
products as set forth in this Order.
This Order is made on the terms and conditions contained in this Order
and in the Consulting Agreement, which Consulting Agreement is incorporated
into this Order by reference. For purposes of this Order, HAS and NPC agree to
be bound by, and NPC shall cause its directors, officers, employees and agents
to comply with, the terms and conditions of the Consulting Agreement as if they
were the "Consultant" as defined in the Consulting Agreement. HFS shall
continue to be bound by the Consulting Agreement as the Consultant.
1. New Products and Other Consulting Services.
a. New Products. Consultants will conduct research into the
feasibility of the following potential new products (the "New Products"):
i. Liver Monitor. A non-invasive, near-infrared,
portable, liver oxygenation monitor for assessing and controlling
hemorrhagic shock (the "Liver Monitor").
ii. Subdural Hematoma Detection Device. A non-invasive,
near-infrared, portable device for locating and assessing subdural
hematomas in trauma patients with head injuries (the "Subdural
Hematoma Device").
iii. Blood Gas Monitor. A non-invasive, near-infrared,
portable, in vivo blood gas monitor for quickly estimating O2, CO,
met-hemoglobin and other potential variables in vivo (the "Blood Gas
Monitor").
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iv. Fetal Monitor. A non-invasive, near-infrared, device
for measuring the oxygen saturation of the blood in the brain of a
fetus during birth (the "Fetal Monitor").
b. New Product Development Activities. For each of the proposed
New Products, Consultants shall do the following:
i. Develop Prototypes. Develop and engineer
experimental apparatus or product prototypes of the New Product
suitable for validation testing to determine whether the New Product
can be used to perform the functions described in paragraph 1.a., for
example, monitoring changes in liver oxygenation, detecting and
assessing subdural hematomas in the head, measuring blood gasses in
vivo and monitoring fetal cerebral blood oxygenation during birth.
ii. Validation Testing. In conjunction with the Company,
identify and work with leaders in the medical fields served by the New
Product at teaching hospitals and universities to determine the need
for the New Product and the required validation and clinical trials to
determine its feasibility and efficacy. Design and participate in
validation testing of the New Product, comparing its measurements to
existing techniques for obtaining the same or similar information to
determine whether the prototype device is able to perform the
functions described in paragraph 1.a.
iii. Assist in Developing Manufacturing Prototype. If the
Company determines to continue to develop the New Product after
reviewing the results of the validation testing, assist the Company in
the development and engineering of a production version of the New
Product and manufacturing and assembly processes and procedures for
the New Product.
iv. Assist in Designing and Executing Clinical Tests. If
the Company determines to continue to develop the New Product, assist
the Company in designing and executing preliminary and definitive
clinical tests necessary to demonstrate the efficacy of the New
Product and to obtain regulatory approvals (including in connection
with applications under Section 510(k) of the Federal Food, Drug and
Cosmetics Act) for commercial sales of the New Product, and assist the
Company in identifying and engaging independent researchers to conduct
such tests.
v. Assist in Obtaining Regulatory Approvals and
Intellectual Property Protection. If the Company determines to sell a
New Product commercially, assist the Company in preparing and
defending any applications for regulatory (or self-regulatory)
approvals necessary for such sales, including 510(k) applications
submitted to the United States Food and Drug Administration. Also, if
the Company determines to sell a New Product commercially, assist the
Company in preparing patent and other intellectual property
applications and registrations.
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vi. Training. Train Company personnel in the technology
developed pursuant to this Order.
c. General and Ongoing Consulting. With respect to the Company's
Cerebral Oximeter and related SomaSensor and any of the New Products after
commercial sales have begun, Consultants will provide ongoing (i) technical and
general consulting and advice, and (ii) assistance with product designs, all at
the request of the Company. Such consulting, advice and assistance shall be in
connection with improvements to, or further developments or enhancements of,
such products, support for such products and product development efforts with
respect to such products. Examples of subjects of such consulting, advice and
assistance include additional algorithm development, additional sensor
development, proposed product enhancements, problem solving, research and
development planning for the Company, and advice and assistance regarding
interaction with, reports to, and responses to, the United States Food and Drug
Administration. At the request of the Company, Consultants shall also evaluate
papers regarding such products or competing products, Company or third party
patents relating to such products and the products themselves, including
complaints regarding alleged defects in such products. Consultants shall also
inform the Company of any developments or improvements relating to the
Company's products or technology.
d. Timing. The New Product development activities described in
this Order shall be performed within the time periods set forth in the Project
Schedule, attached as Exhibit A. The general and ongoing consulting activities
described in paragraph 1.c (the "General Consulting") shall be performed at
such places and times as are mutually acceptable to the Company and the
Consultants.
e. Reports. Consultants shall provide the Company with progress
reports within 10 business days after each milestone identified in the Project
Schedule, attached as Exhibit A, is reached and within 10 business days after
the end of each of the Company's fiscal quarters (currently ending at the end
of February, May, August and November each year). Such reports shall include
the status of the Consultants' product development and testing activities and
the results of such activities (including the efficacy of the tested products),
the milestones accomplished, any changes in the estimated timing of remaining
tasks and such additional information as shall be requested by the Company.
f. Company Assistance. The Company will assist Consultants in
the performance of their duties under this Order only to the extent it
determines it has the resources to do so and is willing to do so.
2. Technology Access and Ownership.
a. Existing Technology. The Company has provided and is
providing Consultants with access to its proprietary technology solely to
permit the Consultants to comply with their obligations under this Order and
the Consulting Agreement. The parties acknowledge and agree that the Company
remains the sole and exclusive owner of such technology.
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b. Technology Developed Pursuant to this Order.
i. Research and Development Product Ownership.
Consultants acknowledge and agree that the Company is the sole and
exclusive owner of the Research and Development Product, as described
in Section 6 of the Consulting Agreement and paragraphs 2.b.ii and
2.b.iii, subject only to (i) the rights of the United States Federal
Government pursuant to FAR 52.227-11 attached as Exhibit B ("FAR
227-11") in the "subject invention" (as defined in FAR 227-11) with
respect to NPC's agreements with the National Institutes of Health and
the United States Army relating to any of the New Products and this
Order (the "Government Rights"), (ii) the royalties provided in
paragraph 3.c, (iii) the potential license in favor of NPC described
in paragraph 2.d, (iv) any prohibition under NPC's agreements with the
National Institutes of Health and the United States Army relating to
any of the New Products and this Order (the "Government Agreements")
against NPC's assignment to the Company of all of its right, title and
interest in and to the "subject invention" (as defined in FAR 227-11)
with respect to such Government Agreements, in which case the Company
shall have the rights described in paragraph 2.c.ii with respect to
such "subject invention", and (v) the rights potentially retained by
the Consultants pursuant to paragraph 4.b.
ii. Covered Technologies Definition. Consultants
acknowledge and agree that for purposes of the Consulting Agreement
and this Order, "Covered Technologies" shall mean and include (i) the
electrical, mechanical and optical (visible and infrared) technologies
of in vivo optical spectrophotometry, spatially selective in vivo
optical spectrophotometry and optical imaging, whether by transmission
or reflection, involving or relating in any way to, or for use in
connection with, the examination and characterization of internal body
tissues, structures and/or composition, and (ii) any technologies
(including new technologies discovered or developed by Consultants)
discovered or developed in connection with, or included in, the
products described in this Order (including the New Products) or in
connection with any other work by any of the Consultants for the
Company or in connection with any of the Company's products or
technology.
iii. Research and Development Product Definition.
Consultants acknowledge and agree that for purposes of the Consulting
Agreement and this Order, "Research and Development Product" shall
include (in addition to the matters included in the definition of
Research and Development Product in the Consulting Agreement) anything
conceived, invented or developed by any of the Consultants in
connection with, or included in, the products described in this Order
(including the New Products) or in connection with any other work by
any of the Consultants for the Company or in connection with any of
the Company's products or technology, including any product concepts,
products, prototypes and breadboards.
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c. FAR 227-11.
i. Reports, Breadboards and Prototypes. The Company
acknowledges that NPC and the other Consultants are required by FAR
227-11 and the Government Agreements to submit reports and
breadboards, experimental apparatus or prototypes to the United States
Army or the National Institutes of Health, as the case may be, with
respect to the "subject invention" (as defined in FAR 227-11) in
connection with the research and development of the applicable New
Product funded, in part, by the applicable agency. The Company
consents to the provision of such reports, breadboards, experimental
apparatus and prototypes to the United States Army and the National
Institutes of Health, as the case may be, pursuant to FAR 227-11 and
the Government Agreements, provided that (i) the Consultants shall
meet periodically with the Company to discuss the status of the
development of the New Products and the confidential nature of such
reports, prototypes, experimental apparatus, breadboards and other
matters relating to the New Products, (ii) before submitting them to
the applicable agency, the Consultants shall mark such reports,
prototypes, experimental apparatus and breadboards, or such portions
of them as shall be designated by the Company, as confidential as
requested by the Company, (iii) the Consultants shall also use their
best efforts to mark all such reports, prototypes, experimental
apparatus and breadboards as confidential to the extent they reflect
Research and Development Product or other intellectual property of the
Company that is not otherwise explicitly, consciously, properly,
legally and generally known in any industry in which the Company is
engaged (other than by breach of this Order, the Consulting Agreement
or the Confidentiality Agreement), and (iv) the Consultants shall
submit a copy of such reports, prototypes, experimental apparatus and
breadboards to the Company within a reasonable time after submitting
them to the applicable agency.
ii. Title to Subject Invention. Upon request by the
Company, Consultants shall elect in writing to retain title to any
invention pursuant to FAR 227-11 and any similar requirement.
Consultants shall do all acts, execute and deliver all documents, and
obtain all consents, necessary or requested by the Company to transfer
to, or confirm in, the Company all right, title and interest in and
to, the Research and Development Product, subject only to (i) the
Government Rights, (ii) the royalties provided in paragraph 3.c, (iii)
the potential license in favor of NPC described in paragraph 2.d, and
(iv) the next sentence. To the extent any such right, title or
interest can not be transferred into the Company's name, the
Consultants (i) shall transfer or otherwise provide to the Company
whatever right, title and interest in such Research and Development
Product as can be transferred or provided to the Company to put the
Company as closely as possible into the same position it would have
been in if such right, title and interest could be, and had been,
transferred into the Company's name, and (ii) hereby grant the Company
an exclusive, irrevocable, worldwide, license, with the right to
sublicense and assign the license without consent, and use, make,
operate and practice such right, title and interest in such Research
and Development Product and to manufacture, make, use and sell the
related products, subject only to (i) the Government Rights, (ii) the
royalties provided in paragraph 3.c, and (iii) the potential license
in favor of NPC described in paragraph 2.d.
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Consultants will not enter into any subcontracts with respect to, or
assign, any of their rights or obligations under this Order without
the Company's prior express written consent.
d. Discontinued Development or Commercialization.
x. Xxxxx of License to NPC. The Company, in its sole
discretion, may terminate development of any or all of the New
Products at any time by notice to the Consultants pursuant to
paragraph 4.a, and the development of any or all of the New Products
may otherwise terminate pursuant to paragraph 4.a. If any of the
following occurs with respect to a New Product (each considered
separately):
(1) the project under this Order (and related
retainer fee provided in paragraph 3.a) relating to such New
Products is terminated pursuant to paragraph 4.a before the
development activities relating to that New Product are
completed ("Development Termination"), or
(2) within a reasonable time, determined by good
faith negotiation between NPC and the Company (but in no event
less than 18 months), after the Company receives clearance
from the United States Food and Drug Administration to market
such New Product in the United States (the "Commercialization
Deadline"), the Company has not begun commercial sales of that
New Product ("Commercialization Termination"), or
(3) the development activities relating to such New
Product have been completed and the Company notifies
Consultants in writing within 10 years after the first
commercial sale of such New Product that it has determined to
cease commercial sales of that New Product ("Sales
Termination"),
then, effective on the date (i) of termination pursuant to paragraph
4.a with respect to a Development Termination, (ii) of the
Commercialization Deadline with respect to a Commercialization
Termination, or (iii) set forth in the notice of Sales Termination, as
the case may be, the Company grants NPC the "License" (as defined in
paragraph 2.d.ii) with respect to the applicable New Product.
ii. "License". For purposes of this Order, the "License"
means
(1) an exclusive, irrevocable, worldwide, license,
with the right to sublicense and assign the license, to use,
make, operate and practice all of the Company's right, title
and interest in the Research and Development Product used in
the New Product(s) subject to Development Termination,
Commercialization Termination or Sales Termination, but only
to the extent necessary to manufacture, make, use and sell the
New Product(s) subject to Development Termination,
Commercialization Termination or Sales Termination,
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(2) a non-exclusive, irrevocable, worldwide, license,
with the right to sublicense and assign the license, to use,
make, operate and practice all of the Company's right, title
and interest in the Research and Development Product used in
the New Product(s) subject to Development Termination,
Commercialization Termination or Sales Termination, and
(3) a non-exclusive, irrevocable, worldwide, license,
with the right to sublicense and assign the license, to use,
make, operate and practice all of the Company's right, title
and interest in the Company's other proprietary technology, if
any, used in the New Product(s) subject to Development
Termination, Commercialization Termination or Sales
Termination, but only to the extent necessary to manufacture,
make, use and sell the New Product(s) subject to Development
Termination, Commercialization Termination or Sales
Termination,
all on the terms and conditions set forth in this paragraph 2.d,
subject only to (i) the Government Rights, (ii) the royalties provided
in paragraph 2.d.iv, and (iii) the rights retained by the Company
where NPC is not given exclusive rights.
iii. Additional Terms and Conditions of Licenses. NPC may
not assign, or grant any sublicenses of, the License (or any part of
the License) without the Company's prior written consent, which
consent shall not be unreasonably withheld. In connection with the
License, any permitted assignment of the License and any permitted
sublicense, Consultants may not disclose or use any of the Company's
trade secrets or other secret, confidential or proprietary
information, or violate the Confidentiality Agreement described in
paragraph 5.a., without the Company's prior written consent, which
consent shall not be unreasonably withheld. The Company shall be
deemed to have reasonably withheld its consent to any such assignment
or sublicense of the License (or any part of the License) or any such
disclosure, use or violation, if it does not consent because it may
suffer any financial damage or harm if it consents. Financial damage
or harm shall not be the sole reason the Company may withhold consent,
but shall be in addition to any other reason the Company may have to
reasonably withhold consent.
iv. Company Royalty. The Consultants shall pay
Somanetics a royalty fee with respect to "net sales" of each New
Product received within 10 years from the later of the date of the
first commercial sale of such New Product or the granting of the
License to NPC, on the same terms and conditions as the royalty
payable to NPC and described in paragraph 3.c, except that (i) the
parties are reversed, (ii) there is no deduction for any retainer
fees, (iii) the royalty shall apply to the License pursuant to this
paragraph 2.d, and (iv) the royalty fee may be reduced as described in
the next sentence. The royalty fee shall be reduced as follows if a
Development Termination of the applicable New Product occurs before
phase II of the related Government Agreement with respect to the
applicable New Product is completed:
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(1) if the Development Termination of the applicable
New Product occurs within 12 months of the date the retainer
(described in paragraph 3.a) with respect to such New Product
begins to accrue, no royalty fee shall be payable by the
Consultants with respect to net sales of such New Product.
(2) if the Development Termination of the applicable
New Product occurs 12 or more months after the date the
retainer (described in paragraph 3.a) with respect to such New
Product begins to accrue, but before phase II of the related
Government Agreement with respect to the applicable New
Product is completed, the royalty fee payable by the
Consultants with respect to net sales of such New Product
shall equal 50% of the royalty fee otherwise payable under
this paragraph 2.d.iv.
(3) if the Development Termination of the applicable
New Product occurs on or after the date phase II of the
related Government Agreement with respect to the applicable
New Product is completed, the royalty fee shall be payable by
the Consultants with respect to net sales of such New Product
shall equal 100% of the royalty fee payable under this
paragraph 2.d.iv.
v. No Further Development Obligations; Product
Liability. If the Company terminates development of any or all of the
New Products at any time by notice to the Consultants pursuant to
paragraph 4, the Company shall not be responsible for any further
development of such New Product or any funding or assistance in
connection with any further development of such New Product undertaken
by any of the Consultants or any third party. In addition,
Consultants, and not the Company, shall be responsible for any product
liability or similar claims, including without limitation claims based
on the design or efficacy of such New Product, to the extent such New
Product is manufactured or sold by any of the Consultants, by any of
their distributors or by any sublicensee of any of the Consultants.
3. Fees. As full and exclusive compensation to the Consultants for the
performance of their services and duties under this Agreement, the Company
shall pay the following:
a. New Product Retainers. The Company shall pay NPC the
following monthly retainers in connection with the product development
activities described in paragraph 1.b for the following New Products:
New Product Monthly Retainer Amount
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Liver Monitor $2,500
Subdural Hematoma Device $2,500
Blood Gas Monitor $2,500
Fetal Monitor $3,500
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Such retainers shall be paid in advance on the first business day of each
calendar month for that calendar month and shall be pro rated for partial
months of service. Such retainers for the Liver Monitor, Subdural Hematoma
Device and Blood Gas Monitor shall begin accruing as of September 1, 1996.
Such retainer for the Fetal Monitor shall begin accruing as of October 1, 1996.
Such retainers shall continue to accrue until the related project is terminated
pursuant to paragraph 4 or otherwise ends.
b. General Consulting Retainer and Fees. The Company shall pay
NPC $2,880 a month in connection with the General Consulting services described
in paragraph 1.c. Such retainer shall be paid in arrears on the last business
day of each calendar month for that calendar month and shall be pro rated for
partial months of service. In addition, the Company shall pay NPC, within 30
days after receiving NPC's invoice for such services, $72 an hour for each
additional hour of General Consulting services described in paragraph 1.c
provided by HAS or HFS in excess of an aggregate of 40 hours of such General
Consulting services provided by the two of them pursuant to this Order in any
one calendar month. Consultants shall inform the Company if HAS's and HFS's
General Consulting services are expected to exceed 40 hours in any month, and
shall not perform such services in that month unless approved by the Company.
Such retainers shall continue to accrue until terminated pursuant to paragraph
4.b. The General Consulting and the retainer provided in this paragraph 3.b
supersede any written or oral agreement between the Company and any of the
Consultants relating to any of the General Consulting services and any related
fees, including Section 5(b) of the Consulting Agreement and any letter
agreement between any of the Consultants and the Company.
c. Royalties. The Company shall pay NPC a royalty fee with
respect to "net sales" of each New Product received within 10 years from the
date of the first commercial sale of such New Product, if commercial sales of
such New Product begin within five years of the date of this Order. Such
royalty fee for each New Product shall equal the following percentages of the
following cumulative "net sales" of the following New Products, less (i) the
amount of such royalty fee previously paid to NPC with respect to the
applicable New Product, and (ii) 50% of the retainer fee paid to NPC pursuant
to paragraph 3.a with respect to the applicable New Product:
Subdural Blood
Liver Hematoma Gas Fetal
Cumulative Net Sales Monitor Device Monitor Monitor
-------------------- ------- ------ ------- -------
Less than $25 million 1.50% 1.50% 1.50% 2.00%
$25 million to $50 million 1.25% 1.25% 1.25% 1.75%
$50 million to $75 million 1.00% 1.00% 1.00% 1.50%
$75 million to $100 million 0.75% 0.75% 0.75% 1.25%
Greater than $100 million 0.50% 0.50% 0.50% 1.00%
The royalty fee shall be payable quarterly within 60 days after the end of each
of the Company's fiscal quarters with respect to "net sales" of the New
Products through the end of such fiscal
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quarter. For purposes of this royalty fee, if the Company sells the New
Product, "net sales" means the net amount actually paid to, and collected by,
the Company for the commercial sale by the Company of the applicable New
Product, net of (i) any freight, packaging and crating, transportation
insurance, taxes or other charges collected by the Company, and (ii) any
subsequent payments by the Company for discounts, rebates, returns, allowances,
credits, reductions, or diminution of any nature whatsoever. For purposes of
this royalty fee, if a third party sells the New Product pursuant to a license
from the Company (not including licenses pursuant to paragraph 2.d) or a sale
of any Research and Development Product relating to the applicable New Product
by the Company or any other transfer by the Company of the right to
manufacture, make, use and sell the applicable New Product (not including
licenses pursuant to paragraph 2.d), "net sales" means, at the Company's
election, either (i) the same thing it means when the Company sells the New
Product, except that the third party shall be substituted for the Company in
the definition, or (ii) the same thing it means in the Company's agreement with
the third party, if any, as used to calculate the Company's royalty on such
sale. If a party assumes the Company's obligation to pay such royalties with
respect to such third party's sales of New Products, the Company shall be
relieved of its obligation to pay such royalties with respect to such third
party's sales of New Products. If the applicable New Product is incorporated
into a larger product sold as a unit, the portion of the "net sales" of the
unit that is deemed attributable to the New Product for purposes of this
royalty fee shall be the same as the portion of the Company's total cost of
goods sold with respect to such unit represented by the New Product (determined
in accordance with generally accepted accounting principles).
d. Sale of Technology Fee. The Company shall also pay the
following sale of technology fee in addition to any of the other fees described
in this paragraph 3:
i. When Payable. If the Company assigns all or any part
of this Order relating to a New Product to a third party pursuant to
paragraph 5.d, or sells or licenses to a third party any Research and
Development Product relating to a New Product and obtained pursuant to
this Order, or otherwise transfers to a third party the right to
manufacture and sell any New Products (each, a "Transaction"), all
before ten years after the date of this Order, the Company shall pay
NPC a sale fee equal to the "percentage" (defined below) of the "net
proceeds" (defined below) actually received by the Company as
consideration for the Transaction. The sale fee shall be payable
within 60 days after the Company actually receives any such net
proceeds. For purposes of this paragraph 3.d, a business combination
involving the Company (including any merger, share exchange, stock
sale or sale of substantially all of the Company's assets) shall not
constitute an assignment, sale, license or other transfer and no
Transaction will be deemed to have occurred as a result of such
business combination.
ii. "Percentage". For purposes of this sale fee, the
"percentage" means the percentage negotiated by the Company and NPC in
good faith before the consummation of the Transaction, which shall not
in any event exceed 1%.
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iii. "Net Proceeds". For purposes of this sale fee, "net
proceeds" means any cash and the fair market value of any property
actually paid to, and collected by, the Company as consideration for
the Transaction, less (i) any non-lump sum royalty or other non-lump
sum amounts paid to the Company based on the third party's sales of
the applicable New Product(s), and (ii) the Company's expenses of
engaging in the Transaction, including any taxes actually payable by
the Company as a result of such Transaction. If the Transaction is
part of a larger transaction, the Company shall in good faith allocate
the proceeds of the larger transaction between the Transaction and the
rest of the transaction.
e. Expenses. The Company shall pay or reimburse NPC for all
reasonable, ordinary and necessary business travel expenses, including meals
and lodging, incurred by Consultants in connection with performing their duties
under this Order, for which NPC will submit appropriate invoices and which
otherwise comply with Company policies concerning reimbursement of business
expenses. NPC will provide the Company with applicable receipts upon the
Company's request. The Company will not reimburse Consultants for any other
expenses they incur in the course of performing this Order or otherwise, unless
otherwise approved by the Company in advance in writing, and unless so
approved, Consultants shall bear all such expenses.
4. Term.
a. New Products. The Company may, in its sole discretion, at any
time and from time to time, upon at least 120 days prior written notice to NPC,
terminate any or all of the projects under this Order (and related retainer
fees provided in paragraph 3.a) relating to one or more of the New Products,
all without any future obligations of Company, except as otherwise provided in
paragraphs 2.d, 3.c, 3.d and 3.e. With respect to each New Product, considered
separately, if the Company fails to pay the retainer fee described in paragraph
3.a with respect to such New Product when due and such failure is not "Cured"
(as defined in paragraph 4.a.i) within the "Cure Period" (as defined in
paragraph 4.a.ii), the project under this Order (and related retainer fee
provided in paragraph 3.a) relating to that New Product shall terminate as of
the end of the "Cure Period" or, if earlier, 120 days after written notice from
the Company to NPC pursuant to this paragraph 4.a terminating the project under
this Order relating to that New Product, and the Consultants shall have the
rights described in paragraphs 2.d and 4.c with respect to that New Product.
If not previously terminated by the Company, the retainer fees provided in
paragraph 3.a with respect to a particular New Product shall terminate when the
development activities relating to that New Product are completed.
i. "Cured". For purposes of this Order, "Cured" means
that through the date of the applicable payment the Company paid in
full (i) all of the expenses due pursuant to paragraph 3.e, (ii) any
sale of technology fee due pursuant to paragraph 3.d, (iii) any
royalties due pursuant to paragraph 3.c, (iv) all of the General
Consulting retainers and fees due pursuant to paragraph 3.b, and (v)
all of the retainers due pursuant to paragraph 3.a with respect to the
applicable New Product. If the Company's payments are sufficient to
pay in full the amounts described in clauses (i) through (iv) of this
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paragraph 4.a.i through the date of the applicable payment, but not
all of the retainers due pursuant to paragraph 3.a, for purposes of
determining whether the payment failure has been Cured with respect to
a particular New Product, the remaining amount paid shall be applied
to the retainers for the New Product(s) designated by the Company, or
if not designated by the Company, in the order in which the New
Products are listed in paragraph 3.a.
ii. "Cure Period". For purposes of this Order, the "Cure
Period" with respect to any particular failure to pay the retainer fee
due pursuant to paragraph 3.a with respect to a particular New Product
when due shall mean the period beginning on the date such fee was due
and ending on the later of (i) 120 days after that date, and (ii) 30
days after the date the Company receives notice from NPC stating (A)
that the Company has failed to pay retainer fees due pursuant to
paragraph 3.a (identifying the amount and nature of the fees not
paid), (B) the last day for making such payment without terminating
the project under this Order relating to the New Product(s) (i.e., the
end of the Cure Period), and (C) that if the Company fails to make
such payment by that date, the Consultants will have the rights
described in paragraphs 2.d and 4.c of this Order, including potential
transfer of rights in the applicable New Product(s) to NPC.
b. General Consulting. The term of the General Consulting under
this Order (and the related retainer fees provided in paragraph 3.b) shall
continue through the February 28th that is at least 30 days after the
Consultants give, or the Company gives, written notice to the other of the
termination of such General Consulting (the "General Consulting Termination
Notice"), unless sooner terminated at the option of the Consultants or the
Company if the other party shall fail, refuse or neglect to perform its
obligations under this Order and such default shall continue for ten days
following receipt of notice given by the terminating party to the defaulting
party. Notwithstanding anything in this paragraph 4.b to the contrary, neither
party may give the General Consulting Termination Notice until, for each of the
New Products, (i) the development activities relating to that New Product are
completed, (ii) the project under this Order relating to that New Product is
terminated, or (iii) the Company has given NPC notice of the termination of the
project under this Order relating to that New Product pursuant to paragraph
4.a. If the Company fails to pay the retainer fee described in paragraph 3.b
when due and such failure is not "Remedied" (as defined in paragraph 4.b.i)
within the "Remedy Period" (as defined in paragraph 4.b.ii), (i) the term of
the General Consulting under this Order (and related retainer fee provided in
paragraph 3.b) shall terminate as of the date it would have terminated if the
General Consulting Termination Notice were given on the first day otherwise
permitted under this paragraph 4.b and after such failure, and (ii) the
Consultants shall retain, and the Company shall not own, the new Research and
Development Product conceived, invented or developed by any of the Consultants
only in connection with the General Consulting and only during the period with
respect to which the Company does not pay the related retainer fee provided in
paragraph 3.b.
i. "Remedied". For purposes of this Order, "Remedied"
means that through the date of the applicable payment the Company paid
in full (i) all of the expenses due
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pursuant to paragraph 3.e, (ii) any sale of technology fee due
pursuant to paragraph 3.d, (iii) any royalties due pursuant to
paragraph 3.c, and (iv) all of the General Consulting retainers and
fees due pursuant to paragraph 3.b.
ii. "Remedy Period". For purposes of this Order, the
"Remedy Period" with respect to any particular failure to pay the
retainer fee due pursuant to paragraph 3.b when due shall mean the
period beginning on the date such fee was due and ending on the later
of (i) 120 days after that date, and (ii) 30 days after the date the
Company receives notice from NPC stating (A) that the Company has
failed to pay retainer fees due pursuant to paragraph 3.b (identifying
the amount and nature of the fees not paid), (B) the last day of the
Remedy Period, and (C) that if the Company fails to make such payment
by that date, the Consultants will have the rights described in
paragraph 4.b of this Order, including potential transfer of rights in
some General Consulting Research and Development Product.
c. Remedy for Early Termination. Consultants' sole and exclusive
remedies for any failure by the Company to pay the retainer fees provided in
paragraph 3.a when due, including with respect to the 120 days after the
Company has given NPC notice of termination pursuant to paragraph 4.a, shall be
(i) to collect such retainer fees that are due, and (ii) to receive any rights
provided in paragraph 2.d as and when provided in paragraph 2.d. Consultants'
sole and exclusive remedies for any failure by the Company to pay the retainer
fees provided in paragraph 3.b when due, shall be (i) to collect such retainer
fees that are due, and (ii) to receive any rights provided in paragraph 4.b as
and when provided in paragraph 4.b.
5. Miscellaneous.
a. Confidentiality Agreement. Simultaneously with the execution
of this Order, each of the Consultants is executing and delivering to the
Company a Confidentiality Agreement. Consultants acknowledge and agree that
all matters relating to this Order and any activities performed pursuant to
this Order are deemed privileged, confidential, proprietary and/or secret
information pertaining to the Research and Development Product or pertaining to
the business of the Company for purposes of the Consulting Agreement, except to
the extent explicitly, consciously, properly, legally and generally known in
any industry in which the Company is engaged (other than by breach of this
Order, the Consulting Agreement or the Confidentiality Agreement).
b. Representations, Warranties and Covenants. The Consultants,
jointly and severally, represent and warrant to, and covenant with, the Company
that
i. the performance of this Order by each Consultant does not,
and will not, breach any agreement of such Consultant to keep
confidential any proprietary information acquired by any of the
Consultants before the date of this Order;
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ii. to the best of the Consultants' knowledge, the performance
of this Order by the Consultants does not and will not breach any term
of any agreement or arrangement any Consultant may have with others or
any court order, judgment, decree or other obligation of any
Consultant;
iii. to the best of the Consultants' knowledge, none of the
Consultants has entered into, or will enter into, any agreement or
arrangement of any nature which will be in conflict with this Order or
any of the duties, obligations or agreements of any of the Consultants
with the Company or the Company's ownership and exclusive control of
the Research and Development Product, except as described in paragraph
2.b.i in connection with the Government Agreements;
iv. to the best of the Consultants' knowledge, no consent or
approval of any third party, government or regulatory authority is
required for any of the Consultants to execute, deliver and perform
their obligations under this Order, except as set forth in FAR 227-11
and the Government Agreements;
v. Consultants will comply with all laws, regulations and
orders in connection with their performance of their obligations under
this Order;
vi. Consultants will comply with the Government Agreements,
FAR 227-11 and all other applicable regulations and obligations
relating to such contracts, the New Products, this Order or any
combination of the foregoing;
vii. to the best of the Consultants' knowledge, Consultants
and the products and technologies they develop, including the New
Products and the Research and Development Product they develop
pursuant to, or in connection with, this Order, do not and will not
infringe on the rights of any third party; and
viii. this Order has been duly authorized by each of the
Consultants and is a valid and binding obligation of each of them,
enforceable in accordance with its terms.
c. Copies of Funding Agreements. Consultants shall provide the
Company, as soon as practicable, with a copy of all funding proposals and
agreements received by them from third parties with respect to any of the
Company's products or technology, including the Government Agreements.
d. Binding Effect; Assignment. This Order shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
permitted successors and assigns. This Order is personal to each of the
Consultants, and none of the Consultants may assign or transfer any of their
rights or delegate any of their obligations under this Order without the prior
written consent of the Company, and any purported assignment or transfer by any
of the Consultants shall be void. The Company may assign its rights and
delegate its duties under this Order without the consent of any of the
Consultants, and the Company shall have no further
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obligations under this Order after any such assignment and delegation. Any
assignee of the Company shall be deemed to be the Company for all purposes of
this Order, and such assignment shall not be deemed to be a termination by the
Company of the development of any or all of the New Products.
e. Consulting Agreement Continues. Except as modified by this
Order, the Consulting Agreement shall continue in full force according to its
terms and is ratified. The terms of the Consulting Agreement shall apply to
this Order, but in the event of any conflict between the terms of this Order
and the Consulting Agreement, this Order shall control.
If this Order correctly expresses our agreement and you accept this
Order, please sign and date this Order in the spaces provided below.
SOMANETICS CORPORATION
By: /s/ XXXXXXX X. XXXX
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Xxxxxxx X. Xxxx
Its: Executive Vice President
The terms of this Order are accepted and agreed to:
NEUROPHYSICS CORPORATION
By: /s/ XXXX X. XXXXXXXX Dated: October 1, 1996
--------------------------------
Its: PRESIDENT
----------------------
/s/ XXXX X. XXXXXXXX Dated: October 1, 1996
-----------------------------------
Xxxx X. Xxxxxxxx
/s/ XXXX X. XXXXXXXX Dated: October 1, 1996
-----------------------------------
Xxxx X. Xxxxxxxx
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