Exhibit 10.19

 

EXCLUSIVE LICENSE AGREEMENT FOR

LOWER EXTREMITY EXOSKELETON TECHNOLOGY

UC Case Numbers: B04-002, B05-045, B05-093, B06-042;

US Patent App Numbers: 60/515,572; 10/976,652;60/645,417; 60/671,348

 

This license agreement (“AGREEMENT”) is entered into as of the date that this
AGREEMENT is fully executed by both parties (“EFFECTIVE DATE”), by and between
The Regents of the University of California, a California corporation, having
its statewide administrative offices at 1111 Franklin Street, 12th Floor,
Oakland, California 94607-5200 acting through its Office of Technology
Licensing, at the University of California, Berkeley, having its administrative
office at 2150 Shattuck Avenue, Suite 510, Berkeley, CA 94720-1620 (“REGENTS”),
and Berkeley ExoTech, Inc., d/b/a Berkeley ExoWorks (“LICENSEE”), a Delaware
corporation, having a principal place of business at 63 Potomac Street, San
Francisco, CA 94117. The parties agree as follows:

 

1.           BACKGROUND

 

1.1           REGENTS has an assignment of the intellectual property
characterized as: (a) Lower Extremity Exoskeleton as described in REGENTS Case
Number B04-002 and PATENT RIGHTS that was invented by Homayoon Kazcrooni, Andrew
Chu, Jean-Louis Racine and Adam Zoss, all employed by the University of
California, Berkeley at the time that the invention was made; (b) Lower
Extremity Exoskeleton with Design Improvements as described in REGENTS Case
Number B05-045 and PATENT RIGHTS that was invented by Homayoon Kazcrooni, Nathan
Harding and Russdon Angold, all employed by the University of California,
Berkeley at the time that the invention was made; (c) Lower Extremity
Exoskeleton that is Semi-Powered as described in REGENTS Case Number B05-093 and
PATENT RIGHTS that was invented by Homayoon Kazcrooni, Nathan Harding and
Russdon Angold, all employed by the University of California, Berkeley at the
time that the invention was made; and (d) Power Regenerative Lower Extremity
Prosthetic and Orthotic Systems as described in REGENTS Case Number B06-042 and
PATENT RIGHTS that was invented by Homayoon Kazcrooni, Nathan Harding and
Russdon Angold, all employed by the University of California, Berkeley at the
time that the invention was made (collectively “INVENTIONS”).

 

1.2           LICENSEE entered into a letter agreement (“PREVIOUS AGREEMENT”)
with REGENTS that was effective as of 2005 March 17 and terminates on 2005
September 17, for the purpose of granting LICENSEE an exclusive right to
negotiate an option or exclusive license in PATENT RIGHTS.

 

1.3           LICENSEE provided REGENTS with a marketing overview and financial
forecasts for the commercialization of the INVENTIONS in order to evaluate
LICENSEE’s capabilities as a LICENSEE.

 

Page 1 of 28

 

 

1.4           In accordance with Paragraph 3.3 of this AGREEMENT, the
development of the INVENTIONS was sponsored in part by various grants from U.S.
Government agencies, and as a consequence, REGENTS elected to retain title to
the INVENTIONS subject to the rights and regulations of the U.S. Government
under 35 USC 200-212 and implementing regulations, including REGENT’s grant back
to the U.S. Government of a non-exclusive, non-transferable, irrevocable,
paid-up license to practice or have practiced the INVENTIONS for or on behalf of
the U.S. Government throughout the world. These U.S. Government grants are DARPA
Contract No. DAD19-01-1-0509. The LICENSEE asked REGENTS about how to handle
royalties when LICENSEE SELLS its products to customers that in turn reSELL the
products to the U.S. Government; and REGENTS responded that in accordance with
Paragraph 6.7 of this AGREEMENT, LICENSEE does not pay a royalty to REGENTS (and
reduce the amount charged for LICENSED PRODUCT by an amount equal to the royalty
for such LICENSED PRODUCT otherwise due REGENTS) when either (a) LICENSEE’s
customers indicate that the products SOLD will be reSOLD to the U.S. Government,
or (b) LICENSEE knows or has reason to know that the products SOLD will be
reSOLD to the U.S. Government.

 

1.5           LICENSEE requested certain rights from REGENTS to commercialize
the INVENTIONS.

 

1.6           REGENTS wishes to respond to the request of the LICENSEE by
granting the following rights to the LICENSEE to enable the general public to
enjoy the products and other benefits derived from the INVENTION.

 

2.           DEFINITIONS

 

As used in this AGREEMENT, the following terms, whether used in the singular or
plural, have the following meanings:

 

2.1           “PATENT RIGHTS” means the PATENT CLAIMS of, to the extent assigned
to or otherwise obtained by REGENTS, (a) the U.S. patents and patent
applications, (b) the corresponding foreign patents and patent applications, and
(c) any reissues, extensions, substitutions, continuations, divisions, and
continuation-in-part applications (but only those PATENT CLAIMS in the
continuation-in-part applications that are entirely supported in the
specification and entitled to the priority date of the parent application) that
are based on the following patents and patent applications: Serial Numbers
60/515,572 (B04-002-1), entitled Lower Extremity Enhancer, filed on 2003 October
29 by Homayoon Kazcrooni, Jean-Louis Racine, Andrew Chu and Adam Zoss;
10/976,652 (B04-002-2), entitled Lower Extremity Enhancer, filed on 2004 October
29 by Homayoon Kazcrooni, Jean-Louis Racine, Andrew Chu and Adam Zoss;
60/645,417 (B05-045-1), entitled Lower Extremity Exoskeleton, filed on 2005
January 18 by Homayoon Kazcrooni, Nathan H. Harding and Russdon Angold; and
60/671,348 (B05-093-1), entitled Semi-Powered Lower Extremity Exoskeleton, filed
on 2005 April 13 by Homayoon Kazcrooni, Nathan H. Harding and Russdon Angold.
This definition of PATENT RIGHTS excludes any rights in and to NEW DEVELOPMENTS.

 

2.2           “PATENT CLAIM” means a claim of a patent or patent application in
any country that (a) has not expired; (b) has not been disclaimed; (c) has not
been cancelled or superseded, or if cancelled or superseded, has been
reinstated; and (d) has not been revoked, held invalid, or otherwise declared
unenforceable or not allowable by a tribunal or patent authority of competent
jurisdiction over such claim in such country from which no further appeal has or
may be taken.

 

Page 2 of 28

 

 

 

2.3           “NEW DEVELOPMENT” means inventions, or claims to inventions, which
constitute advancements, developments, or improvements, whether or not
patentable and whether or not the subject of any patent application, but if
patentable, are not sufficiently supported by the specification of a
previously-filed patent or patent application within the PATENT RIGHTS to be
entitled to the priority date of the previously-filed patent or patent
application.

 

2.4           “LICENSED PRODUCT” means any product, service, kit, material, or
apparatus the manufacture, use, SALE, offer for SALE, distribution, or import of
which, in the absence of the license granted in this AGREEMENT, would infringe,
or contribute to, or induce the infringement of, any PATENT RIGHTS were they
issued in a country at the time of the infringing activity in that country.

 

2.5           “LICENSED METHOD” means any process, service or method the use or
practice of which, in the absence of the license granted in this AGREEMENT,
would infringe, or contribute to, or induce the infringement of any PATENT
RIGHTS were they issued in a country at the time of the infringing activity in
that country.

 

2.6           “LICENSED FIELD-OF-USE” means the following applications or
markets: all applications and markets without limitation (“UNRESTRICTED”) for
the first five (5) years after EFFECTIVE DATE, and thereafter if LICENSEE SELLS
LICENSED PRODUCT for use in non-military applications within five years after
EFFECTIVE DATE, the LICENSED FIELD-OF-USE remains UNRESTRICTED, otherwise
LICENSED FIELD-OF-USE is military applications and markets.

 

2.7           “LICENSED TERRITORY” means jurisdictions where REGENTS has
obtained, or obtains PATENT RIGHTS, or filed corresponding patent applications
under PATENT RIGHTS.

 

2.8           “SUBLICENSEE” means the third parties, AFFILIATES or JOINT
VENTURES that, to the extent allowable by this AGREEMENT, are granted a
sublicense by LICENSEE to practice LICENSED METHOD, or to make, have made, use,
SELL, offer for SALE, distribute or import LICENSED PRODUCT.

 

2.9           “SALE” means the act of selling leasing or otherwise transferring,
providing, exploiting or furnishing for use for any consideration.
Correspondingly, “SELL” means to make a SALE or cause a SALE to be made, and
“SOLD” means to have made a SALE or caused a SALE to have been made.

 

2.10         “COMBINATION LICENSED PRODUCT” means a LICENSED PRODUCT that is a
combination of one or more LICENSED PRODUCTS with one or more products that are
not LICENSED PRODUCTS (“NLPs”) where the combination is packaged and SOLD
together to a purchaser for a single price and where the purchaser can remove
the LICENSED PRODUCT from the NLP and use the NLP alone, and either of the
following:

 

2.10a   the removal and usage is obvious to the purchaser from the design or
operation of the combination; or

 

Page 3 of 28

 

 

 

2.10b   the removal and usage is described in the packaging, literature or
documentation accompanying the combination.

 

2.11        “NET INVOICE PRICE” means (a) the gross invoice price charged and
the value of any other consideration received for a SALE of a LICENSED PRODUCT
or the performance of a LICENSE METHOD when SOLD or performed by LICENSEE, (b)
the gross invoice price charged and the value of any other consideration
received for a SALE of a LICENSED PRODUCT or the performance of a LICENSE METHOD
when SOLD or performed by SUBLICENSEE, and in the above cases, less the
following items, but only to the extent that they actually pertain to the
disposition of LICENSED PRODUCT, LICENSED METHOD, COMBINATION LICENSED PRODUCT,
or both, and are separately billed:

 

2.11a   Allowances actually granted to customers for rejections, returns, prompt
payment or volume discounts;

 

2.11b   Freight, transport packing, or insurance charges associated with
transportation;

 

2.11c   Taxes, including DEDUCTIBLE VALUE-ADDED TAX, tariffs or import/export
duties based on SALES when included in the gross invoice price, but excluding
value-added taxes other than DEDUCTIBLE VALUE-ADDED TAX or taxes assessed on
income derived from SALES. “DEDUCTIBLE VALUE-ADDED TAX” means value-added tax
only to the extent that such value-added tax is actually incurred and is not
reimbursable, refundable, or creditable under the tax authority of any country;

 

2.11d   Discounts or rebates paid or credited to customers, third-party payers,
health-care systems, or administrators solely to promote the inclusion of
LICENSED PRODUCT in formulary programs;

 

2.11e   Wholesaler’s discounts or rebates to customers, third-party payers,
health-care systems, or administrators solely to promote the inclusion of
LICENSED PRODUCT in formulary programs; and

 

2.11f   Rebates or discounts paid or credited pursuant to applicable law.

 

2.12        “NET SALES PRICE” means the NET INVOICE PRICE except in the
instances described as follows:

 

2.12a   In those instances where LICENSED PRODUCT, or LICENSED METHOD is not
SOLD, but is otherwise exploited, the NET SALES PRICE for the purpose of
computing royalties for LICENSED PRODUCT and LICENSED METHOD are determined as
follows:

 

i.            If LICENSEE and/or any SUBLICENSEE are currently offering for SALE
products or services that are the same or similar to LICENSED PRODUCT or
LICENSED METHOD, then the NET SALES PRICE for LICENSED PRODUCT or LICENSED
METHOD otherwise exploited is the NET INVOICE PRICE of products or services of
the same or similar kind and quality, SOLD in similar quantities, currently
being offered for SALE by the LICENSEE and/or any SUBLICENSEE; or

 

Page 4 of 28

 

 

ii.         If LICENSEE and/or any SUBLICENSEE are not currently offering for
SALE products or services that are the same or similar to LICENSED PRODUCT or
LICENSED METHOD, then NET SALES PRICE for a LICENSED PRODUCT or LICENSED METHOD
otherwise exploited, is the average NET INVOICE PRICE at which products or
services of the same or similar kind and quality, SOLD in similar quantities,
are currently being offered for SALE by other manufacturers; or

 

iii.         If LICENSEE, SUBLICENSEE and/or any other companies are not
currently offering for SALE products or services that are the same or similar to
LICENSED PRODUCT or LICENSED METHOD, then NET SALES PRICE for a LICENSED PRODUCT
or LICENSED METHOD otherwise exploited, is the LICENSEE’s and/or any
SUBLICENSEE’s costs of manufacture of LICENSED PRODUCT or costs of performing
LICENSED METHOD, determined by the customary accounting procedures of the
LICENSEE and/or any SUBLICENSEE, plus one-hundred percent (100%) of those costs.

 

2.12b   Sales of COMBINATION LICENSED PRODUCTS: The applicable NET SALES PRICE
for any COMBINATION LICENSED PRODUCT will be calculated by:

 

i.            Multiplying the NET INVOICE PRICE of the COMBINATION LICENSED
PRODUCT by the ratio of the average NET INVOICE PRICE of the LICENSED PRODUCT
included in the combination (during the six-month period in which such
combination SALE occurred) to the sum of the average NET INVOICE PRICE of each
of the LICENSED PRODUCT and the NLPs included in the combination (during the
six-month period in which such combination SALE occurred); or

 

ii.           If an item included in the combination is not offered for SALE by
LICENSEE, then

 

a.           The NET INVOICE PRICE of the item will equal the average NET
INVOICE PRICE at which products of the same or similar kind and quality, sold in
similar quantities, are offered for SALE by other manufacturers (during the six
months in which such combination SALE occurred) to the extent such information
is readily available to LICENSEE; or

 

b.           If the items are not offered for SALE by LICENSEE or any other
company or cannot be reasonably ascertained by LICENSEE, then the NET INVOICE
PRICE of the item will equal LICENSEE’s cost of goods sold (“COGS”) related to
the manufacture of the item as determined by the customary accounting procedures
of LICENSEE.

 

Page 5 of 28

 

 

2.12c   For a REACQUISITION SALE OR EXPLOITATION, the NET SALES PRICE means the
NET INVOICE PRICE upon the SALE of LICENSED PRODUCT or LICENSED METHOD by
LICENSEE or SUBLICENSEE. “REACQUISITION SALE OR EXPLOITATION” means those
instances where the LICENSEE or a SUBLICENSEE acquires LICENSED PRODUCT or
LICENSED METHOD and then subsequently SELLS such LICENSED PRODUCT or LICENSED
METHOD;

 

2.12d   For any RELATIONSHIP-INFLUENCED SALE of LICENSED PRODUCT or LICENSED
METHOD, the NET SALES will be based on the NET INVOICE PRICE at which the
RELATIONSHIP-INFLUENCED SALE PURCHASER resells LICENSED PRODUCT.
“RELATIONSHIP-INFLUENCED SALE” means a SALE of LICENSED PRODUCT or LICENSED
METHOD, between LICENSEE and any SUBLICENSEE or between LICENSEE and/or
SUBLICENSEE and an AFFILIATE, a JOINT VENTURE, or a RELATED PARTY,
“RELATIONSHIP-INFLUENCED SALE PURCHASER” means the purchaser of LICENSED PRODUCT
or LICENSED METHOD in a RELATIONSHIP-INFLUENCED SALE.

 

2.13         “AFFILIATE” means any entity that, directly or indirectly, CONTROLS
LICENSEE, is CONTROLLED by LICENSEE, or is under common CONTROL with LICENSEE,
“CONTROL” means as follows: (a) having the actual, present capacity to elect a
majority of the directors of such affiliate; (b) having the power to direct at
least forty percent (40%) of the voting rights entitled to elect directors; or
(c) in any country where the local law will not permit foreign equity
participation of a majority, then ownership or control, directly or indirectly,
of the maximum percentage of such outstanding stock or voting rights permitted
by local law.

 

2.14         “JOINT VENTURE” means any separate entity established pursuant to
an agreement between a third party and LICENSEE and/or SUBLICENSEE to constitute
a vehicle for a joint venture, in which the separate entity manufactures, uses,
purchases, SELLS, or acquires LICENSED PRODUCT or LICENSED METHOD from LICENSEE
and/or SUBLICENSEE.

 

2.15         “RELATED PARTY” means a corporation, firm, or other entity with
which, or individual with whom, LICENSEE and/or any SUBLICENSEE (or any of their
respective stockholders, subsidiaries or AFFILIATES) have an agreement,
understanding, or arrangement (for example, an agreement providing LICENSEE
and/or SUBLICENSEE with an option to purchase stock or equity interest, or a
share of revenue or profits) that (a) is unrelated to the SALE of LICENSED
PRODUCT or LICENSED METHOD and without which such other agreement,
understanding, or arrangement, the amounts, if any, charged by LICENSEE or
SUBLICENSEE to such entity or individual for LICENSED PRODUCT, would be higher
than the NET INVOICE PRICE actually received, or (b) if such agreement,
understanding, or arrangement results in LICENSEE or SUBLICENSEE extending to
such entity or individual lower prices for LICENSED PRODUCT or LICENSED METHOD
than those charged to others without such agreement, understanding, or
arrangement buying similar products or services in similar quantities.

 

Page 6 of 28

 

 

 

2.16        “CURRENT CAPITALIZATION” means all the shares of outstanding Common
Stock, consisting of 0 shares, all shares of outstanding Preferred Stock,
consisting of 0 shares, and all shares of Common Stock authorized for issuance
to employees, consultants and directors pursuant to the LICENSEE’s Stock
Purchase Agreements, of which 776,000 are authorized.

 

3.           GRANT OF LICENSE

 

3.1          Licensee Grant: Subject to the limitations set forth in this
AGREEMENT, including the license granted to the U.S. Government and rights
reserved for REGENTS as well as other educational and nonprofit institutions,
REGENTS hereby grants to LICENSEE an exclusive license under PATENT RIGHTS to
make, have made, use, SELL, offer for SALE, distribute and import LICENSED
PRODUCT and to practice LICENSED METHOD in LICENSED TERRITORY in LICENSED
FIELD-OF-USE, with LICENSED FIELD-OF-USE is subject to modification as specified
in Paragraph 2.6.

 

3.2          Reserved Rights: REGENTS expressly reserves the rights to (a)
publish any and all technical data resulting from any research performed by
REGENTS relating to the INVENTIONS, (b) make and use the INVENTIONS and related
technology for educational and research purposes, (c) disseminate tangible
materials associated with, or required to practice the INVENTIONS and/or PATENT
RIGHTS to researchers at nonprofit institutions for educational and research
purposes, and (d) allow other educational and nonprofit institutions to make and
use the INVENTIONS and related technology for educational and research purposes
only.

 

3.3          Government Obligations: The licenses granted in this AGREEMENT are
subject to the overriding obligations to the U.S. Government including:

 

3.3a   In accordance with 35 USC §200-212 and implementing regulations, REGENTS
has granted back to the U.S. Government a non-exclusive, non-transferable,
irrevocable, paid-up license to practice or have practiced INVENTIONS for or on
behalf of the U.S. Government throughout the world;

 

3.3b   In accordance with 37 CFR §401.14(h), REGENTS has an obligation to report
on the utilization of the INVENTIONS; and in order to fulfill this obligation,
LICENSEE has a continuing responsibility to keep REGENTS informed of the
large/small entity status (as defined in 15 USC §632) of LICENSEE and its
SUBLICENSEES;

 

3.3c   In accordance with PL 96-517 as amended by PL 98-620, to the extent
required by law or regulation, LICENSED PRODUCT that is exclusively SOLD in the
U.S. will be substantially manufactured in the US.

 

4.           GRANT OF SUBLICENSES

 

4.1          Sublicense Grant: REGENTS hereby grants to LICENSEE the right to
issue sublicenses to SUBLICENSEES to make, have made, use, SELL, offer for SALE,
distribute or import LICENSED PRODUCT and to practice the LICENSED METHOD in
LICENSED FIELD-OF-USE in LICENSED TERRITORY, provided that LICENSEE has
exclusive rights in the LICENSED FIELD-OF-USE (with modification as specified in
Paragraph 2.6) under this AGREEMENT on the effective date of the sublicense
agreement. For the avoidance of doubt, AFFILIATES and JOINT VENTURES do not have
licenses under the PATENT RIGHTS unless such AFFILIATES and JOINT VENTURES are
granted a sublicense.

 

Page 7 of 28

 

 

4.2          Terms: To the extent applicable, all sublicensees will include all
of the rights of, and will require the performance of all the obligations due to
REGENTS and, if applicable, to the U.S. Government, that are contained in this
AGREEMENT, including, but not limited to, at least the following terms:

 

4.2a   A statement setting forth the date upon which LICENSEE’s exclusive
rights, privileges, and license hereunder will expire;

 

4.2b   The same provision for indemnification of REGENTS as has been provided
for in this AGREEMENT;

 

4.2c   A statement such that, to the extent applicable, the obligations of this
AGREEMENT will be binding upon the SUBLICENSEE as if it were n place of
LICENSEE, except as follows:

 

i.          EARNED ROYALTY rates and MINIMUM ANNUAL ROYALTIES may be higher than
those specified in this AGREEMENT; and

 

ii.         SUBLICENSEES will be precluded from granting further sublicenses
unless agreed to in writing by REGENTS.

 

4.3          Notification: LICENSEE will notify REGENTS of each sublicense
granted pursuant to this AGREEMENT, and furnish to REGENTS a summary of the
material terms of each sublicense agreement.

 

4.4          Responsibilities: For purposes of this AGREEMENT, the operations of
all SUBLICENSEES are deemed to be the operations of LICENSEE, for which LICENSEE
is responsible. Also, LICENSEE will guarantee and deliver the payment of all
monies due REGENTS from SUBLICENSEES; and LICENSEE will collect and deliver all
reports due REGENTS from SUBLICENSEES.

 

4.5          Termination: Upon termination of this AGREEMENT for any reason,
REGENTS, at its sole discretion, will determine whether any or all sublicenses
that are granted pursuant to this AGREEMENT will be canceled or remain in effect
and assigned to REGENTS, but if REGENTS opts to assign sublicenses to REGENTS,
then REGENTS will not be bound to perform any duties or obligations set forth in
any such sublicenses that extend beyond the duties and obligations of REGENTS as
set forth in this AGREEMENT.

 

4.6          Sublicense Fees: LICENSEE will pay to REGENTS one percent (1%) of
any cash and of the cash equivalent of other consideration owed to LICENSEE for
the grant of rights under each sublicense agreement in addition to all other
payments by LICENSEE to REGENTS as specified in this AGREEMENT including EARNED
ROYALTIES as specified in Paragraph 6.2 of this AGREEMENT.

 

Page 8 of 28

 

 

4.7          Comprehensive Commercialization: If REGENTS (to the extent of the
actual knowledge of the licensing professional responsible for administrating
this AGREEMENT) or a third party discovers that the INVENTIONS are useful for an
application covered by the LICENSED FIELD-OF-USE, but for which LICENSEE and its
SUBLICENSEES have not developed or are not currently developing LICENSED PRODUCT
or LICENSED METHOD (“NEW APPLICATION”), then:

 

4.7a   REGENTS may give written notice to LICENSEE identifying the NEW
APPLICATION, except for the following: (a) information that is subject to
restrictions of confidentiality with third parties, or (b) information that
originates with REGENTS personnel who do not assent to its disclosure to
LICENSEE. If REGENTS gives such written notice to LICENSEE, then LICENSEE will
have ninety (90) days to give REGENTS written notice stating whether LICENSEE
elects to develop LICENSED PRODUCT or LICENSED METHOD for the application;

 

4.7b   If LICENSEE elects to develop and commercialize LICENSED PRODUCT or
LICENSED METHOD for the NEW APPLICATION, then LICENSEE will submit a
commercialization plan with performance milestones and PROGESS REPORT to REGENTS
in accordance with the Progress Report Article of this AGREEMENT;

 

4.7c   If LICENSEE elects not to develop and commercialize LICENSED PRODUCT or
LICENSED METHOD for the NEW APPLICATION, then REGENTS may seek third parties to
develop and commercialize LICENSED PRODUCT or LICENSED METHOD for the NEW
APPLICATION. If REGENTS is successful in finding a third party, it will refer
such third party to LICENSEE. If the third party requests a sublicense under
this AGREEMENT, then LICENSEE will report the request to REGENTS within thirty
(30) days from the date of such request:

 

i.          If such request results in a sublicense, then LICENSEE will report
it to REGENTS in accordance with this AGREEMENT;

 

ii.         If LICENSEE has not granted a sublicense to the third party within
six (6) months after receiving such request, then within thirty (30) days after
such refusal, LICENSEE will submit to REGENTS a report specifying the license
terms proposed by the third party and a written justification for LICENSEE’s
refusal to grant the proposed sublicense. If REGENTS, at its sole discretion,
determines that the terms of the sublicense proposed by the third party are
reasonable under the totality of the circumstances, taking into account
LICENSEE’s LICENSED PRODUCTS or LICENSED METHOD in development, then REGENTS
will have the right to grant to the third party a license to make, have made,
use, SELL, offer for SALE, distribute and import LICENSED PRODUCTS or LICENSED
METHOD for use in the LICENSED FIELD-OF-USE at substantially the same terms most
recently proposed to LICENSEE by that the third party and providing royalty
rates that are at least equal to those paid by LICENSEE.

 

Page 9 of 28

 

 

5.           FEES

 

5.1          Issue Fee: As partial consideration for all rights and licenses
granted by REGENTS to LICENSEE herein, LICENSEE will pay to REGENTS a license
issue fee of five thousand dollars ($5,000) due and payable at execution of this
AGREEMENT.

 

5.2          Equity: As partial consideration for all rights and licenses
granted by REGENTS to LICENSEE herein, and based upon the CURRENT
CAPITALIZATION, LICENSEE will provide and deliver to REGENTS 31,040 shares of
its Common Stock (“EQUITY”) representing four percent (4%) of CURRENT
CAPITALIZATION in accordance with the terms of a Shareholder’s Agreement by and
between REGENTS and LICENSEE. This Shareholder’s Agreement is subject to
approval by REGENTS, and if this approval is not received, then the parties will
negotiate alternate consideration. Within 30 days after execution by REGENTS of
this Shareholder’s Agreement, LICENSEE will deliver the EQUITY to REGENTS. Also,
as REGENTS holds any EQUITY, LICENSEE will grant REGENTS observer rights during
LICENSEE’s Board of Director meetings.

 

5.3          Fee Notes: The license issue fee is not refundable, not creditable,
and not an advance against any other payments by LICENSEE to REGENTS pursuant to
this AGREEMENT.

 

6.           ROYALTIES

 

6.1          Applicability: EARNED ROYALTIES will be payable on LICENSED PRODUCT
and LICENSED METHOD covered by PATENT RIGHTS.

 

6.2          Rate: As further consideration for all LICENSEE’s rights and
licenses granted herein, LICENSEE will pay to REGENTS an earned royalty based on
the NET SALES PRICE (“EARNED ROYALTY”) at the rate of one percent (1%) based on
the NET SALES PRICE of LICENSED PRODUCT or LICENSED METHOD.

 

6.3          Schedule: EARNED ROYALTIES accruing to REGENTS will be paid to
REGENTS semi-annually on or before the following dates of each calendar year:

 

·February 28 for the calendar six months ending December 31

 

·August 31 for the calendar six months ending June 30

 

6.4          Minimum Annual Royalty: LICENSEE will pay to REGENTS a minimum
annual royalty in the amounts as set forth below, by February 28 of the calendar
year in which payment is due, and each payment will be credited against the
EARNED ROYALTY due and owing for the calendar year in which each payment is
made.

 

·Beginning in the first calendar year after the first occurrence of NET SALES
PRICE that is royalty bearing (in other words, not SOLD or reSOLD to the U.S.
Government):

 

·Next calendar year:     $5,000

 

Page 10 of 28

 

 

·Next calendar year:      $7,500

 

·Next calendar year:      $10,000

 

·Next calendar year:      $12,500

 

·Every calendar year thereafter: $15,000 but subject to the following:

 

6.4a   If LICENSEE does not SELL LICENSED PRODUCT or LICENSED METHOD for use in
non-military applications within five (5) years after EFFECTIVE DATE, then
LICENSEE’s LICENSED FIELD-OF-USE will be modified as specified in Paragraph 2.6,
and minimum annual royalties will remain as specified above; or

 

6.4b   If LICENSEE does SELL LICENSED PRODUCT or LICENSED METHOD for use in
non-military applications within five (5) years after EFFECTIVE DATE, then
LICENSEE’s minimum annual royalties will increase as follows:

 

·In the calendar year following the calendar year in which minimum annual
royalty is $12,500:    $15,000

 

·Next calendar year:      $20,000

 

·Every calendar year thereafter:      $25,000

 

6.5          Sales Outside US:

 

6.5a   Charges: EARNED ROYALTIES on NET SALES PRICE received in any country
outside the U.S. will not be reduced by any taxes, fees, or other charges
imposed by the government of such country except those taxes, fees, and charges
allowed under the provision of the Definition of NET SALES PRICE as described in
this AGREEMENT. LICENSEE also will be responsible for all bank transfer charges;

 

6.5b   Conversion: When LICENSED PRODUCT or LICENSED METHOD is SOLD for monies
other than U.S. dollars, the EARNED ROYALTIES and any other consideration due to
REGENTS will first be determined in the foreign currency of the country in which
such LICENSED PRODUCTS or LICENSED METHOD were SOLD or other consideration was
received and then converted into equivalent U.S. dollars. The exchange rate will
be the average exchange rate quoted in the Wall Street Journal during the last
thirty (30) days of the reporting period.

 

6.6          Patent Expiration or Termination: In the event that any patent,
patent application, or any claim thereof included within PATENT RIGHTS expires
or is held invalid in a final decision by a court of competent jurisdiction and
last resort and from which no appeal has or can be taken, all obligation to pay
royalties based on such patent, patent application, or claim or any claim
patentably indistinct therefrom will cease as of the date of such final
decision. However, LICENSEE is not relieved from paying any royalties that
accrued before such final decision, and LICENSEE is obligated to pay the full
amount of royalties due hereunder.

 

Page 11 of 28

 

 

6.7          U.S. Government Obligation: No royalties will be paid or collected
on LICENSED PRODUCT or LICENSED METHOD distributed to or used by the U.S.
Government. LICENSEE and its SUBLICENSEES agree to reduce the amount charged for
LICENSED PRODUCT or LICENSED METHOD distributed to the U.S. Government by an
amount equal to the royalty for such LICENSED PRODUCT or LICENSED METHOD
otherwise due REGENTS.

 

7.          DUE DILIGENCE

 

7.1           Obligation: Upon execution of this AGREEMENT, LICENSEE will
diligently proceed with the development, manufacture, government approval,
marketing and SALE of LICENSED PRODUCT or LICENSED METHOD in quantities
sufficient to meet the market demands.

 

7.2           Performance Metrics: LICENSEE specifically commits, in accordance
with the obligation stated in paragraph 7.1 to achieving the following
objectives:

 

·By 2006 March 31: First beta unit shipped to a potential customer

 

·By 2006 December 31: First commercial order

 

·By 2007 June 30: First commercial shipment

 

7.3          Failure to Perform: If LICENSEE is unable to meet any of its due
diligence obligations as set forth in the Paragraph above, then REGENTS may
notify LICENSEE of its failure to perform.

 

7.3a   If REGENTS gives such written notice to LICENSEE, then LICENSEE may
extend the target date of any diligence obligation for an additional six (6)
months upon payment to REGENTS of an additional $5,000. Additional extensions
may be granted only by mutual written agreement of the parties to this
AGREEMENT. Such extension fees are in addition to all other payments by LICENSEE
to REGENTS pursuant to this AGREEMENT;

 

7.3b   If LICENSEE opts not to extend the obligation or fails to meet it by the
extended target date, then REGENTS will have the right and option either to
terminate this AGREEMENT or to reduce LICENSEE’s exclusive license to a
non-exclusive, royalty-bearing license. To exercise either the right to
terminate this AGREEMENT or to reduce the license to a non-exclusive license for
lack of diligence as specified in this Due Diligence Article, REGENTS will give
LICENSEE written notice of the deficiency. After receiving notice, LICNESEE will
have sixty (60) days to cure the deficiency or to request arbitration. If
REGENTS has not received a written request for arbitration or satisfactory
tangible evidence that the deficiency has been cured by the end of the sixty
(60)-day period, then REGENTS may, at its option, either terminate the AGREEMENT
or reduce LICENSEE’s exclusive license to a non-exclusive license by giving
written notice to LICENSEE;

 

Page 12 of 28

 

 

7.3c   This right to terminate the AGREEMENT or reduce LICENSEE’s exclusive
license to a non-exclusive license, if exercised will (a) supersede the rights
granted in Grant of License Article in this AGREEMENT, and (b) be REGENTS’ sole
remedy for breach of due diligence obligations.

 

7.4          Arbitration: At the request of either party, any controversy or
claim arising out of or relating to the diligence provisions of this Due
Diligence Article will be settled by arbitration conducted in San Francisco, CA
in accordance with the then current Licensing Agreement Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) will be binding on the parties and may be entered by either party
in the court or forum having jurisdiction. In determination of due diligence,
the arbitrator may determine solely the issues of fact or law with respect to
termination of LICENSEE’s rights under this AGREEMENT but will not have the
authority to award monetary damages or grant equitable relief.

 

8.           COMMERCIALIZATION, PROGRESS AND ROYALTY REPORTS

 

8.1          Report of Commercialization Plan: LICENSEE represents that the
marketing overview and financial forecast provided to REGENTS are, as of the
EFFECTIVE DATE of this AGREEMENT, consistent with the equivalent information
contained in LICENSEE’s business plan that LICENSEE has presented to its Board
of Directors and to entities that have or may invest capital in LICENSEE.

 

8.2          Progress Reports: In order to enable REGENTS to access LICENSEE’s
general progress on the development of LICENSED PRODUCT and LICENSED METHOD and
also determine whether or not LICENSEE has met its diligence obligations as set
forth in this AGREEMENT, beginning on February 28 in the year following the year
in which this AGREEMENT is executed, and semi-annually thereafter until the
first SALE of each LICENSED PRODUCT or LICENSED METHOD, LICENSEE will submit to
REGENTS a progress report as described hereunder covering activities by
LICENSESE and its SUBLICENSEES related to the development, testing, government
approval, and marketing of all LICENSED PRODUCT and LICENSED METHOD (“PROGRESS
REPORT”).

 

8.3          Contents of Progress Reports: Each PROGRESS REPORT submitted by
LICENSEE to REGENTS will include, but is not limited to, a detailed summary of
the following topics:

 

·Summary of work completed and in progress;

 

·Summary of actual and anticipated events and milestones;

 

·The date of first SALE, if any, of LICENSED PRODUCT or LICENSED METHOD; and

 

·Activities of SUBLICENSEES if any, including any change in their large/small
entity status (as defined in 15 USC §632).

 

Page 13 of 28

 

 

8.4          Royalty Reports: After the first SALE of LICENSED PRODUCT or
LICENSED METHOD, LICENSEE will provide semi-annually royalty reports (“ROYALTY
REPORT”) to REGENTS on or before each February 28 and August 31 of each year.

 

8.5          Contents of Royalty Reports: Each such ROYALTY REPORT will cover
the most recently completed calendar quarter (October through December, January
through March, April through June, and July through September) and will include,
but not be limited to, the following:

 

8.5a   Pricing: The gross invoice prices of LICENSED PRODUCT or LICENSED METHOD
that are SOLD by LICENSEE and its SUBLICENSEES;

 

8.5b   Revenue: NET SALES PRICE of LICENSED PRODUCT or LICENSED METHOD that are
SOLD by LICENSEE and its SUBLICENSEES;

 

8.5c   Volume: The quantity of LICENSED PRODUCT or LICENSED METHOD manufactured
and SOLD by LICENSEE and its SUBLICENSEES;

 

8.5d   Royalty: The EARNED ROYALTIES due REGENTS, in U.S. dollars, payable
hereunder with respect to NET SALES PRICE of LICENSEE and its SUBLICENSEES;

 

8.5e   Calculations: The method used to calculate EARNED ROYALTY, specifying all
deductions taken and the dollar amount of each such deduction as well as the
exchange rates used, if any;

 

8.5f   Non-cash Consideration: The amount of the cash and the amount of the cash
equivalent of the non-cash consideration as provided for in this AGREEMENT,
including the method used to calculate the non-cash consideration; and

 

8.5g   Sublicenses: The name and address of new SUBLICENSEES and their
large/small entity status (as defined by 15 USC §632) along with a summary of
the material terms of each new sublicensing agreement consummated.

 

8.6          No Sale: If LICENSED PRODUCT or LICENSED METHOD have not been SOLD
during any reporting period after the first SALE of LICENSED PRODUCT or LICENSED
METHOD, then the ROYALTY REPORT for that reporting period will contain a
statement to this effect.

 

9.           BOOKS AND RECORDS

 

9.1          Obligation: LICENSEE will keep books and records accurately showing
all payment due to REGENTS and all LICENSED PRODUCT or LICENSED METHOD
manufactured, used, SOLD, offered for SALE, distributed, imported, and/or
otherwise exploited under the terms of this AGREEMENT. Such books and records
will be preserved for at least five (5) years after the date of the payment to
which they pertain and will be open to examination by representatives or agents
of REGENTS at reasonable times to determine their accuracy and assess the
LICENSEE’S compliance with the terms of this AGREEMENT.

 

Page 14 of 28

 

 

9.2          Costs. The fees and expenses of representatives of REGENTS that
perform the examination will be borne by REGENTS. However, if an error in
royalties of more than five percent (5%) of the total royalties due for any year
is discovered or any other material term of this AGREEMENT is discovered to have
been breached, then LICENSEE will bear the cost of the examination. LICENSEE
will remit any underpayment to REGENTS within thirty (30) days of the
examination result.

 

10.         LIFE OF THE AGREEMENT

 

10.1        Duration: Unless otherwise terminated by operation of law or by acts
of the parties in accordance with the terms of this AGREEMENT, this AGREEMENT
will remain in effect in each country from the EFFECTIVE DATE until the
expiration or abandonment of the last of the PATENT RIGHTS licensed hereunder in
such country.

 

10.2        Surviving Rights. Any termination or expiration of this AGREEMENT
will not affect the rights and obligations set forth in the following Paragraphs
and Articles of this AGREEMENT:

 

·Article 2                  Definition

 

·Article 4                  Grant of Sublicenses

 

·Article 9                  Books and Records

 

·Article 10                Life of Agreement

 

·Article 12                Disposition of Products

 

·Paragraphs 14.6 and 14.7 Patent Prosecution and Maintenance

 

·Article 16                Limited Warranty

 

·Article 17                Limitation on Liability

 

·Article 18                Indemnification

 

·Article 19                Confidentiality

 

·Article 20                Notices

 

·Paragraph 21.3       Late Payments

 

·Article 22                Governing Laws, Venue and Attorneys’ Fees

 

·Paragraph 25.1       Use of Names and Trademarks

 

Page 15 of 28

 

 

10.3         No Relief: The termination or expiration of this AGREEMENT (a) will
not relieve LICENSEE of its obligation to make any payments pursuant to this
AGREEMENT that are owed to REGENTS at the time of such termination or
expiration, (b) will not impair any accrued right of REGENTS including the right
to receive EARNED ROYALTIES and other fees in accordance with this AGREEMENT,
and (c) will not relieve any obligation, of either party to the other party,
that was established prior to such termination or expiration.

 

10.4         Bankruptcy: This AGREEMENT will automatically terminate without the
obligation to provide any notice as set forth in this AGREEMENT upon the filing
of a petition for relief under the U.S. Bankruptcy Code by or against the
LICENSEE as a debtor or alleged debtor.

 

11.         TERMINATION

 

11.1         Termination by REGENTS: If LICENSEE violates or fails to perform
any term of this AGREEMENT, the REGENTS may give written notice of such default
(“NOTICE OF DEFAULT”) to LICENSEE. If LICENSEE fails to repair such default
within sixty (60) days after the date such notice takes effect, the REGENTS will
have the right to immediately terminate this AGREEMENT and the licenses
hereunder by providing a written notice of termination (“NOTICE OF TERMINATION”)
to LICENSEE.

 

11.2         Termination by LICENSEE: LICENSEE has the right at any time to
terminate this AGREEMENT by providing a NOTICE OF TERMINATION to REGENTS.
Moreover, LICENSEE is entitled to terminate its rights under PATENT RIGHTS on a
country-by-country basis by giving notice in writing to REGENTS. The termination
of this AGREEMENT will be effective no earlier than ninety (90) days from the
effective date of such notice.

 

12.         DISPOSITION OF PRODUCTS UPON TERMINATION

 

12.1         Termination: Within a period of one hundred and twenty (120) days
after the date of termination, LICENSEE can complete any partially made or
rendered LICENSED PRODUCT, and SELL all previously made or partially made
LICENSED PRODUCT, provided however, that the SALE of such LICENSED PRODUCT or
LICENSED METHOD is subject to the terms of this AGREEMENT including, but not
limited to, the payment of EARNED ROYALTIES at the times provided herein and the
rendering of ROYALTY REPORTS in connection therewith. LICENSEE cannot otherwise
make, SELL, offer for SALE, distribute or import LICENSED PRODUCT, or practice
the LICENSED METHOD after the date of termination.

 

12.2         Expiration. If applicable PATENT RIGHTS existed at the time of any
making, SALE, offer for SALE, distribution or import of a LICENSED PRODUCT or
LICENSED METHOD, then EARNED ROYALTIES will be paid at the times provided herein
and ROYALTY REPORTS will be rendered in connection therewith, notwithstanding
the absence of applicable PATENT RIGHTS with respect to such LICENSE PRODUCT or
LICENSED METHOD at any later time. Otherwise, no EARNED ROYALTIES will be paid
on such product.

 

Page 16 of 28

 

 

13.         PATENT MARKING

 

13.1         US: LICENSEE agrees to mark LICENSED PRODUCT (or their containers
or labels) made, SOLD, licensed or otherwise disposed of by LICENSEE in the U.S.
under the license granted in this AGREEMENT (a) with the words “Patent Pending”
prior to the issuance of patents under PATENT RIGHTS, and (b) with the patent
numbers of the PATENT RIGHTS following the issuance in the U.S. of one or more
patents under PATENT RIGHTS.

 

13.2         International: All LICENSED PRODUCT shipped to, manufactured, or
SOLD in countries outside of the U.S. will be marked in such manner as to
conform to the patent laws and practice of such countries.

 

14.         PATENT PROSECUTION AND MAINTENANCE

 

14.1         Obligations: REGENTS will diligently prosecute and maintain the
U.S. and foreign patents and patent applications comprising the PATENT RIGHTS
using counsel of its choice who will take instructions solely from REGENTS,
provided that the continued use of such counsel at any point in the patent
prosecution process subsequent to EFFECTIVE DATE is subject to the approval of
LICENSEE. If LICENSEE rejects five of REGENTS’ choices of prosecution counsel,
then REGENTS can select new prosecution counsel without LICENSEE’s consent.

 

14.2         Interaction: REGENTS will promptly provide LICENSEE with copies of
all relevant documentation including itemized billing statements from REGENTS’
counsel (“PATENT DOCUMENTATION”) so that LICENSEE will be informed and apprised
of the continuing prosecution, and LICENSEE agrees to keep PATENT DOCUMENTATION
confidential in accordance with Confidentiality Article of this AGREEMENT.
LICENSEE and its patent counsel have the right to consult with the patent
counsel chosen by REGENTS. REGENTS agree to designate one of the named inventors
of INVENTIONS as the inventors’ point of contact with REGENTS’ counsel subject
to agreement with the investors. The inventor’s point of contact will provide
detailed input to REGENTS’ counsel subject to the approval by REGENTS’
representative who will be copied or included in all communications.

 

14.3         Comments: LICENSEE can comment on PATENT DOCUMENTATION sufficiently
in advance of any initial deadline for filing a response, provided, however, if
LICENSEE has not commented upon PATENT DOCUMENTATION in reasonable time for
REGENTS to sufficiently consider LICENSEE’s comments prior to a deadline with
the relevant government patent office, or if REGENTS will act to preserve PATENT
RIGHTS, then REGENTS is free to respond without consideration of LICENSEE’s
comments, if any.

 

14.4         Claims Requests: REGENTS will use reasonable efforts to amend any
patent application to include claims requested by LICENSEE and required to
protect LICENSED PRODUCT contemplated to be SOLD, or LICENSED METHOD to be
practiced, under this AGREEMENT.

 

Page 17 of 28

 

 

14.5         Foreign Filing Requests: At LICENSEE’s request, and if available,
REGENTS will file, prosecute, and maintain patent applications and patents
included under PATENT RIGHTS in foreign countries. REGENTS’ counsel will file
Patent Cooperation Treaty applications at the time of filing the U.S.
non-provisional applications. LICENSEE will notify REGENTS within fifteen (15)
months of the filing of the correspondence U.S. patent application of its
request for REGENTS to file foreign counterpart patent applications. This notice
concerning foreign filing will be in writing and will identify the countries
desired. The absence of such a notice from LICENSEE to REGENTS within the
fifteen (15) month period will be considered an election by LICENSEE not to
request REGENTS to secure foreign PATENT RIGHTS on LICENSEE’s behalf. REGENTS
has the right to file patent applications at its own expense in any country that
LICENSEE does not include in its list of desired countries, and such patent
applications and resultant patents, if any, will not be included in the licenses
granted hereunder.

 

14.6         Costs: LICENSEE will pay all costs of obtaining patentability
opinions, preparing, filing, prosecuting in whatsoever manner, and maintaining
all U.S. and corresponding foreign patent applications and resulting patents
specified under PATENT RIGHTS (“PATENT PROSECUTION COSTS”), including, but not
limited to, PATENT PROSECUTION COSTS incurred by REGENTS prior to the execution
of this AGREEMENT as well as interferences, oppositions, reexaminations, and
reissues. LICENSEE will reimburse REGENTS for all PATENT PROSECUTION COSTS
within thirty (30) days following receipt of an itemized invoice from REGENTS
for PATENT PROSECUTION COSTS except that only up to five thousand dollars
($5,000) in invoices will be due prior to 2006 June 30, and any remaining amount
will be due promptly thereafter. However, if REGENTS reduces the exclusive
licenses granted herein to non-exclusive licenses pursuant to the Due Diligence
Article of this AGREEMENT and REGENTS grants additional licenses, then the
PATENT PROSECUTION COSTS will be divided equally among the licensed parties from
the effective date REGENTS give written notice to LICENSEE of the reduction of
LICENSEE’s exclusive license to a non-exclusive license.

 

14.7         Termination: LICENSEE will pay any PATENT PROSECUTION COSTS
incurred during the three (3)-month period after receipt by either party of a
NOTICE OF TERMINATION, even if the invoices for such PATENT PROSECUTION COSTS
are received by REGENTS after the end of the three (3)-month period following
receipt of a NOTICE OF TERMINATION.

 

14.8         LICENSEE may terminate its obligations to pay PATENT PROSECUTION
COSTS with respect to any particular patent application or patent under PATENT
RIGHTS in any or all designated countries upon written notice to REGENTS.
REGENTS may continue the prosecution and/or maintenance of such patent
application or patent at its sole discretion and expense, provided, however,
that LICENSEE will have no further rights or licenses thereunder.

 

Page 18 of 28

 

  

15.         PATENT INFRINGEMENT

 

15.1         Obligations: In the event that REGENTS (to the extent of the actual
knowledge of the licensing professional responsible for the administration of
this AGREEMENT) or LICENSEE learns of infringement of potential commercial
significance of any patent licensed under this AGREEMENT, then the knowledgeable
party will provide the other with written notice of such infringement and any
evidence of such infringement available to it (“INFRINGEMENT NOTICE”). During
the period in which, and in the jurisdiction where, LICENSEE has exclusive
rights under this AGREEMENT, neither REGENTS nor LICENSEE will notify a third
party (including the infringer) of infringement or put such third party on
notice of the existence of any PATENT RIGHTS without first obtaining consent of
the other, which shall not be unreasonably withheld. If LICENSEE notifies a
third party of infringement or puts such third party on notice of the existence
of any PATENT RIGHTS with respect to such infringement without first obtaining
the written consent of REGENTS, then REGENTS will have the right to terminate
this AGREEMENT immediately without the obligation to provide early notice as set
forth in this AGREEMENT. Both REGENTS and LICENSEE will use their diligent
efforts to cooperate with each other to terminate such infringement without
litigation.

 

15.2         Licensee Initiated Suit: If within ninety (90) days following the
date that the INFRINGEMENT NOTICE takes effect, the infringing activity of
potential commercial significance by the infringer has not been abated, then
LICENSEE may institute suit for patent infringement against the infringer.
REGENTS may voluntarily join such suit as its own expense, but may not
thereafter commence suit against the infringer for the acts of infringement that
are the subject of LICENSEE’s suit or any judgment rendered in that suit.
LICENSEE may not join REGENTS in a suit initiated by LICENSEE without REGENTS’
prior written consent. In a suit initiated by LICENSEE, if REGENTS is
involuntarily jointed other than by LICENSEE, then LICENSEE will pay any costs
incurred by REGENTS arising out of such suit, including but not limited to, any
legal fees of counsel that REGENTS selects and retains to represent REGENTS in
the suit.

 

15.3         REGENTS Initiated Suit: If within a hundred and twenty (120) days
following the date that the INFRINGEMENT NOTICE takes effect (a) the infringing
activity of potential commercial significance by the infringer has not been
abated, and (b) LICENSEE has not brought suit against the infringer, then
REGENTS may institute suit for patent infringement against the infringer. If
REGENTS institutes such suit, then LICENSEE may not join such suit without
REGENTS’ consent and may not thereafter commence suit against the infringer for
the acts of infringement that are the subject of REGENTS’ suit or any judgment
rendered in that suit. In a suit initiated by REGENTS, if LICENSEE is
involuntarily joined other than by REGENTS, then REGENTS will pay any costs
incurred by LICENSEE arising out of such suit with respect to patent
infringement, patent validity, and patent enforceability, including but not
limited to, any legal fees of counsel that REGENTS selects and retains to
represent LICENSEE in the suit.

 

15.4         Allocation of Recovery: Any recovery or settlement received in
connection with any suit will first be shared by REGENTS and LICENSEE equally to
cover the litigation costs each incurred, and next will be paid to REGENTS or
LICENSEE to cover any litigation costs that either party incurred in excess of
the litigation costs of the other. Any recovery in excess of litigation costs
will be shared between LICENSEE and REGENTS as follows:

 

15.4a   In any suit initiated by REGENTS, any recovery in excess of litigation
costs will belong to REGENTS;

 

15.4b   In any suit initiated by LICENSEE, any recovery in excess of litigation
costs will be shared between LICENSEE and REGENTS as follows:

 

Page 19 of 28

 

 

i.          If REGENTS joins the suit, any recovery in excess of litigation
costs will be shared in proportion to the costs incurred by each party, but in
no event will REGENTS proportion be less than ten percent (10%);

 

ii.         If REGENTS do not join the suit, any recovery in excess of
litigation costs will belong to LICENSEE.

 

15.5        Binding: REGENTS and LICENSEE agree to be bound by all
determinations of patent infringement, validity, and enforceability (but no
other issue) resolved by any adjudicated judgment in a suit brought in
compliance with this Article.

 

15.6        Compliance: Any agreement made by the LICENSEE for purposes of
settling litigation or other dispute will comply with the requirements of the
Sublicense Article of this AGREEMENT.

 

15.7        Cooperation: Each party will cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party who initiated
the suit (unless such suit is being jointly prosecuted by the parties).

 

15.8        Control: The party bringing the suit will control any litigation
proceedings, except that REGENTS may be represented by counsel of its choice in
any suit brought by LICENSEE.

 

16.         LIMITED WARRANTY

 

16.1        REGENTS warrants to LICENSEE that REGENTS has the lawful right to
grant this license.

 

16.2        Except as expressly set forth in this AGREEMENT, the licenses and
the associated INVENTION, PATENT RIGHTS, LICENSED PRODUCTS, and LICENSED METHODS
are provided by REGENTS WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED.
REGENTS MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY THAT THE
INVENTION, PATENT RIGHTS, LICENSED PRODUCTS, OR LICENSED METHODS WILL NOT
INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHTS.

 

16.3        Nothing in this AGREEMENT is or will be construed as:

 

16.3a   A warranty or representation by REGENTS as to the validity,
enforceability, or scope of any PATENT RIGHTS; or

 

16.3b   A warranty or representation that anything made, used, SOLD, or
otherwise exploited under any license granted in this AGREEMENT is or will be
free from infringement of patents, copyrights, or other rights of third parties;
or

 

Page 20 of 28

 

 

16.3c   An obligation to bring or prosecute actions or suits against third
parties for patent infringement except as provided in the Patent Infringement
Article of this AGREEMENT; or

 

16.3d   Conferring by implication, estoppel, or otherwise any license or rights
under any patents or other rights of REGENTS other than PATENT RIGHTS,
regardless of whether such patents are dominant or subordinate to PATENT RIGHTS;
or

 

16.3e   An obligation to furnish any NEW DEVELOPMENTS, know-how, technology, or
technological information not provided in PATENT RIGHTS.

 

17.         LIMITATION OF LIABILITY

 

17.1        REGENTS WILL NOT BE LIABLE FOR ANY LOST PROFITS, COSTS OF PROCURING
SUBSTITUTE GOODS OR SERVICES, LOST BUSINESS, ENHANCED DAMAGES FOR INTELLECTUAL
PROPERTY INFRINGEMENT, OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE,
OR OTHER SPECIAL DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, OR
AFFILIATES ARISING OUT OF OR RELATED TO THIS AGREEMENT FOR ALL CAUSES OF ACTION
OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH
OF WARRANTY) EVEN IF REGENTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

 

18.         INDEMNIFICATION

 

18.1        Requirements: LICENSEE will, and will require its SUBLICENSEES to,
indemnify, hold harmless, and defend REGENTS and its officers, employees, and
agents, the sponsors of the research that led to the INVENTION, the inventors of
any invention claimed in patents or patent applications under PATENT RIGHTS
(including the LICENSED PRODUCT, and LICENSED METHODS contemplated thereunder)
and inventors’ employers against any and all claims, suits, losses, damage,
costs, fees, and expenses resulting from, or arising out of, the exercise of
this license or any sublicense. This indemnification will include, but will not
be limited to, any product liability. If REGENTS, in its sole discretion,
believes that there will be a conflict of interest or REGENTS will not otherwise
be adequately represented by counsel chosen by LICENSEE to defend REGENTS in
accordance with this Paragraph, then REGENTS may retain counsel of its choice to
represent it, and LICENSEE will pay all expenses for such representation.

 

18.2        Insurance: During the term of this AGREEMENT and for three (3) years
following its termination or expiration, LICENSEE, at its sole cost and expense,
will insure its activities in connection with any work performed hereunder and
will obtain and maintain insurance as follows:

 

Page 21 of 28

 

 

18.2a   Commercial Form General Liability Insurance (contractual liability
included) with limits as follows:

 

i  Each Occurrence  $1,000,000            ii  Products/Completed Operations
Aggregate  $1,000,000            iii  Personal and Advertising Injury 
$1,000,000            iv  General Aggregate  $1,000,000 

 

18.2b   The coverage and limits referred to in the Subparagraph above will not
in any way limit the liability of LICENSEE;

 

18.2c   LICENSEE will furnish REGENTS with certificates of insurance evidencing
compliance with all requirements. Such certificates will:

 

i.           Provide for thirty (30) days’ advance written notice to REGENTS of
any modification;

 

ii.          Indicate that REGENTS has been endorsed as an additional insured
under the coverage described above; and

 

iii.         Include a provision that the coverage will be primary and will not
participate with, nor will be excess over, any valid and collectable insurance
or program of self-insurance maintained by REGENTS.

 

18.3        Notification: REGENTS will promptly notify LICENSEE in writing of
any claim or suit brought against REGENTS for which REGENTS intends to invoke
the provisions of this Indemnification Article. LICENSEE will keep REGENTS
informed of its defense of any claims pursuant to this Indemnification Article.

 

19.         CONFIDENTIALITY

 

19.1        Obligation: LICENSEE and REGENTS will treat and maintain the other
party’s proprietary business, patent prosecution, software, engineering
drawings, process and technical information, and other proprietary information,
including the negotiated terms of this AGREEMENT, PROGRESS REPORTS, ROYALTY
REPORTS and PATENT DOCUMENTATION (“CONFIDENTIAL INFORMATION”) in confidence
using at least the same degree of care as the receiving party uses to protect
its own proprietary information of a like nature.

 

19.2        Disclosure: LICENSEE and REGENTS may use and disclose CONFIDENTIAL
INFORMATION to their employees, agents, consultants, contractors, and, in the
case of LICENSEE, its SUBLICENSEES, provided that such parties are bound by a
like duty of confidentiality as that found in this Confidentiality Article.
Notwithstanding anything to the contrary contained in this AGREEMENT, REGENTS
may release this AGREEMENT, including any terms contained herein, and
information regarding royalty payments or other income received in connection
with this AGREEMENT to the inventors, senior administrative officials employed
by REGENTS, and individual Regents upon their request. If such release is made,
REGENTS will request that such terms be kept in confidence in accordance with
the provisions of this Confidentiality Article.

 

Page 22 of 28

 

 

19.3        Marking: All written CONFIDENTIAL INFORMATION will be labeled or
marked confidential or proprietary. If the CONFIDENTIAL INFORMATION is orally
disclosed, it will be reduced to writing or some other physically tangible form,
marked and labeled as confidential or proprietary by the disclosing party and
delivered to the receiving party within thirty (30) days after the oral
disclosure.

 

19.4        General Exceptions: Nothing contained herein will in any way
restrict or impair the right of LICENSEE or REGENTS to use or disclose any
CONFIDENTIAL INFORMATION:

 

19.4a   That recipient can demonstrate by written records was previously known
to it prior to its disclosure by the disclosing party;

 

19.4b   That recipient can demonstrate by written records is now, or becomes in
the future, public knowledge other than through acts or omissions of recipient;

 

19.4c   That recipient can demonstrate by written records was lawfully obtained
without restrictions on the recipient from sources independent of the disclosing
party; or

 

19.4d   That is required to be disclosed pursuant to the California Public
Records Act or other applicable law.

 

19.5        Other Exceptions: LICENSEE or REGENTS may use or disclose
CONFIDENTIAL INFORMATION that is required to be disclosed:

 

19.5a   To a governmental entity or agency in connection with seeking any
governmental or regulatory approval, governmental audit, or other governmental
requirement; or

 

19.5b   By law, provided that the recipient uses reasonable efforts to give the
party owning the CONFIDENTIAL INFORMATION sufficient notice of such required
disclosure to allow the party owning the CONFIDENTIAL INFORMATION reasonable
opportunity to object to, and to take legal action to prevent, such disclosure.

 

19.6        Inquiry Exceptions: REGENTS also may disclose the existence of this
AGREEMENT and the extent of the grant of license and sublicenses herein to a
third party that inquires whether a license to the PATENT RIGHTS is available,
but REGENTS will not disclose the name of LICENSEE, unless LICENSEE has already
made such disclosure publicly.

 

19.7        Metric Exceptions: REGENTS can publicly identify LICENSEE’s
corporate name and contact information as an entity with which REGENTS has an
agreement that involves the commercialization of technology developed at the
University of California, Berkeley; however this exception does not cover other
information about this AGREEMENT including INVENTIONS and INVENTORS when used in
association with LICENSEE’s name.

 

Page 23 of 28

 

 

19.8        Termination: Upon termination of this AGREEMENT, LICENSE and REGENTS
will destroy or return any of the disclosing party’s CONFIDENTIAL INFORMATION in
its possession within fifteen (15) days following the termination of this
AGREEMENT. LICENSEE and REGENTS will provide each other, within thirty (30) days
following termination, with written notice that such CONFIDENTIAL INFORMATION
has been returned or destroyed. Each party may, however, retain one copy of such
CONFIDENTIAL INFORMATION for archival purposes in non-working files.

 

19.9        Expiration: The terms of this Confidentiality Article will expire in
five (5) years from the effective date of termination of this AGREEMENT.

 

20.         NOTICES

 

20.1        Addresses: Any notice or payment that is required to be given to
either party will be deemed to have been properly given when done in writing and
deposited in the U.S. mail, registered or certified, addressed as follows or to
another address as designated in writing by the party changing its address:

 

20.1a   To LICENSEE:

 

·Berkeley ExoTech, Inc.

·63 Potomac Street

·San Francisco, CA 94117

·Telephone: 415-533-8062

·Facsimile: 775-366-1783

·Email: info@berkeleyexoworks.com

·Attention: President

 

20.1b   To REGENTS:

 

·Office of Technology Licensing

·2150 Shattuck Avenue, Suite 510

·Berkeley, CA 94720-1620

·Attn: Director (REGENTS Case Number BO4-002, BO5-045, BO5-093)

 

20.2        Effective Date: Any such properly given notice or payment will be
deemed to be effective as follows:

 

20.2a   On the date of delivery if delivered in person;

 

20.2b   On the date of mailing if mailed by first-class certified mail; or

 

20.2c   On the date of mailing if mailed by any global express carrier service
that requires the signature of recipient to demonstrate the delivery of such
notice or payment.

 

Page 24 of 28

 

  

21.         PAYMENTS

 

21.1         Payment Method: All consideration due REGENTS will be payable in
U.S. dollars. LICENSEE will make all payments to REGENTS under this AGREEMENT by
check payable to “The Regents of the University of California” and forward it to
REGENTS in accordance with the Notices Article 20.

 

21.2         Late Payments: If any monies owed to REGENTS are not received by
REGENTS when due, then LICENSEE will pay to REGENTS interest at a rate of ten
percent (10%) simple interest per annum. Interest will be calculated from the
date payment was due until actually received by REGENTS. Accrual of interest
will be in addition to, and not in lieu of, enforcement of any other rights of
REGENTS due to late payment. Acceptance by REGENTS of any late payment from
LICENSEE under this Article will in no way affect the provision of the Waiver
Article of this AGREEMENT.

 

21.3         Foreign Money Restrictions: Notwithstanding the provisions of the
Force Majeure Article of this AGREEMENT, if at any time legal restrictions
prevent prompt remittance of any monies or other consideration owed to REGENTS
by the LICENSEE with respect to any country where a sublicense is issued or a
LICENSED PRODUCT or LICENSED METHOD is SOLD, then LICENSEE will convert the
amount owed to REGENTS into U.S. dollars and will pay REGENTS directly from
another source of funds in order to remit the entire amount owed to REGENTS.

 

22.         GOVERNING LAWS; VENUE; ATTORNEYS’ FEES

 

22.1         THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, excluding any choice of law rules that
would direct the application of the laws of another jurisdiction, but the scope
and validity of any patent or patent application will be governed by the
applicable laws of the county of such patent or patent application.

 

22.2         Any legal action related to this AGREEMENT will be conducted in San
Francisco, California.

 

22.3         The prevailing party in any suit related to this AGREEMENT will be
entitled to recover its reasonable attorneys’ fees in addition to its costs and
necessary disbursements.

 

23.         GOVERNMENT APPROVAL OR REGISTRATION

 

23.1         Obligation: If the law of any nation requires that this AGREEMENT
or any associated transaction be either approved or registered with any
government agency, then LICENSEE will assume all legal obligations to do so.
LICENSEE will notify REGENTS if it becomes aware that this AGREEMENT is subject
to a U.S. or foreign government reporting or approval requirement.

 

23.2         Costs: LICENSEE will make all necessary filings and pay all costs
including fees, penalties, and other out-of-pocket costs associated with such
reporting or approval process.

 

Page 25 of 28

 

  

24.         GOVERNMENT EXPORT AND IMPORT LAWS

 

24.1        LICENSEE will comply with all applicable international, national,
state, regional, and local laws and regulations in performing its obligations
hereunder and in its use, manufacture, SALE, or import of the LICENSED PRODUCT
or practice of the LICENSED METHOD.

 

24.2        LICENSEE will observe all applicable U.S. and foreign laws with
respect to the transfer or provision of LICENSED PRODUCT and related technical
data to foreign countries, including, without limitation, the International
Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.

 

24.3        When LICENSED PRODUCT is made outside the particular country in
which such LICENSED PRODUCT is used, SOLD, or otherwise exploited, then LICENSEE
will manufacture LICENSED PRODUCT or practice LICENSED METHOD in compliance with
applicable government importation laws and regulations of the particular
country.

 

25.         MISCELLANEOUS

 

25.1        Use of Names and Trademarks: Nothing contained in this AGREEMENT
will be construed as conferring any right to either party to use in advertising,
publicity, or other promotional activities any name, trade name, trademark, or
other designation of the other party (including a contraction, abbreviation or
simulation of any of the foregoing). LICENSEE is expressly prohibited from using
the name “The Regents of the University of California” or the name of any campus
of the University of California in advertising, publicity, or other promotional
activities, unless written consent is obtained by LICENSEE from REGENTS to do
so. LICENSEE may provide a copy of this AGREEMENT to investors and potential
investors. Notwithstanding the foregoing, without the consent of REGENTS,
LICENSEE and its AFFILIATES and SUBLICENSEES may state that it or they are
licensed by REGENTS under one or more of the patents and/or patent applications
comprising the PATENT RIGHTS, and that the REGENTS are an equity holder in
LICENSEE.

 

25.2        Assignment:

 

25.2a   LICENSEE: This AGREEMENT is personal to LICENSEE and assignable by
LICENSEE only with the written consent of REGENTS, except that LICENSEE may
freely assign this AGREEMENT to an acquirer of all or substantially all of
LICENSEE’s stock, assets or business;

 

25.2b   REGENTS: This AGREEMENT is binding upon and will inure to be the benefit
of REGENTS, its successors and assigns.

 

25.3        Waiver:

 

25.3a   No waiver by either party of any breach or default of any of the duties,
obligations, or agreements contained herein will be deemed a waiver as to any
subsequent and/or similar breach or default;

 

25.3b   No waiver will be valid or binding upon the parties unless made in
writing and signed by a duly authorized officer of each party.

 

Page 26 of 28

 

 

25.4        Force Majeure

 

25.4a   Responsibility: Except for LICENSEE’s obligation to make any payments to
REGENTS hereunder, the parties will not be responsible for any failure to
perform due to the occurrence of any events beyond their reasonable control
which render their performance impossible or onerous, including, but not limited
to: accidents (environmental, toxic spill, etc.); acts of God; biological or
nuclear incidents; casualties; earthquakes; fires; floods; governmental acts,
orders or restrictions; inability to obtain suitable and sufficient labor,
transportation, fuel and materials; local, national, or state emergency; power
failure and power outages; acts of terrorism; strike, and war;

 

25.4b   Termination: Either party to this AGREEMENT, however, will have the
right to terminate this AGREEMENT upon thirty (30) days’ prior written notice if
either party is unable to fulfill its obligations under this AGREEMENT due to
any of the causes specified in the Paragraph above for a period of one (1) year.

 

25.5        Severability: If any of the provisions contained in this AGREEMENT
are held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability will not affect any other provisions
hereof, and this AGREEMENT will be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.

 

25.6        Scope: This AGREEMENT embodies the entire understanding of the
parties and supersedes all previous communications, representations, or
understandings, whether oral or written, between the parties relating to the
subject matter hereof. The PREVIOUS AGREEMENT specified in the Background
Section of this AGREEMENT is hereby terminated.

 

25.7        Amendments: No amendment or modification of this AGREEMENT will be
valid or binding upon the parties unless made in writing and signed on behalf of
each party.

 

25.8        Parties: No provisions of this Agreement are intended or will be
construed to confer upon or given to any person or entity other than REGENTS and
LICENSEE any rights, remedies, or other benefits under, or by reason of, this
AGREEMENT.

 

25.9        Independence: In performing their respective duties under this
AGREEMENT, each of the parties will be operating as an independent contractor.
Nothing contained herein will in any way constitute any association,
partnership, or joint venture between the parties hereto, or be construed to
evidence the intention of the parties to establish any such relationship.
Neither party will have the power to bind the other party or incur obligations
on the other party’s behalf without the other party’s prior written consent.

 

25.10        Headings: The headings of the sections are inserted for convenience
of reference only and are not intended to affect the meaning or interpretation
of this AGREEMENT.

 

Page 27 of 28

 

 

In witness whereof, both REGENTS and LICENSEE have executed this AGREEMENT, in
duplicate originals, by their respective officers hereunto duly authorized, on
the date and year hereinafter written.

 

Berkeley ExoWorks   The Regents of the University of California           By /s/
Nathan Harding     By /s/ Veronica Lanier (Signature)   (Signature)            
Name Nathan Harding     Name Veronica Lanier (Please Print)   (Please Print)    
      Title Chief Financial Officer     Title Acting Director, Office of
Technology Licensing           Date November 2, 2005     Date November 15, 2005

 

Page 28 of 28