LICENSE AGREEMENT

 

This AGREEMENT is made as of this ______ dayof _____________, 1997, between Unique Mobility, Inc., a corporation organizedand existing under the laws of the State of Colorado, with its principal officesat 425 Corporate Circle, Golden, Colorado 80401 ("Unique"), andInvacare Corporation, an Ohio corporation, with its principal office at899 Cleveland Street, Elyria, Ohio 44036-2 125 ("Invacare").

 

RECITALS

Unique owns or possesses and has the right to disclose andlicense certain Licensed Technology relating to Licensed Motors that may proveuseful in medical products.

 

Invacare desires to enter into a Supply Agreement with UniquePower Products, Inc. ("UPP") pursuant to which Invacare intends topurchase and UPP intends to sell Licensed Motors incorporating LicensedTechnology for use in wheelchairs produced by Invacare.

 

Subject to the terms of this Agreement, Invacare and Uniquedesire to provide for Invacare to be granted a license so that Invacare maymanufacture and sell Medical Products incorporating such Licensed Motors.

 

NOW, THEREFORE, in consideration of the premises and themutual promises herein contained and for other good and valuable considerationthe receipt and sufficiency of which is hereby acknowledged, Unique and Invacarehereby agree as follows:

 

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SECTION ONE

DEFINITIONS

As used herein the following terms shall have the meaningsset forth below:

 

1.1 "Affiliate" shall mean a Person that, directlyor indirectly through one or more intermediaries, controls, is controlled by, oris under common control with, a party to this Agreement.

 

1.2 "Confidentiality Agreement" shall mean theConfidentiality Agreement between Invacare and Unique and UPP of even dateherewith.

 

1.3 "Medical Products" shall mean all medical andhealth care products including but not limited to motorized wheelchairs andother mobility products and equipment for use by persons with disabilitiesand/or for home health care.

 

1.4 "Licensed Patents" shall mean any and allpatents and patent applications with respect to the Licensed Technology.

 

1.5 "Licensed Technology" shall mean all ofUnique's trade secrets, confidential know-how and technical information inwhatever form, whether or not patentable including all of the same embodied inthe Licensed Patents, now known or that becomes known to Unique from whateversource during the term of this Agreement (provided that Unique has the right touse and disclose such information) and related to the development, design,manufacture, use or sale of Licensed Motors for use in Medical Products.

 

1.6 "Licensed Motors" shall mean electric motorsmade pursuant to Licensed Technology for use in Medical Products.

 

1.7 "Person" shall mean an individual, firm, trust,partnership, joint venture, association, company, an unincorporated associationor a government or any department or agency thereof

 

1.8 "Supply Agreement" shall mean the SupplyAgreement between Invacare and UPP of even date herewith.

 

 

SECTION TWO

 

GRANT OF LICENSE

 

2.1 Effective Date. The license rights granted toInvacare by Unique pursuant to this Agreement shall become effective on the datethe Supply Agreement and the Confidentiality Agreement are effective.

 

2.2 License to Invacare.

 

(a) Unique grants to Invacare, and Invacare accepts, aroyalty bearing license to undertake any and all of the following activitiesworldwide during the term and in accordance with the provisions of thisAgreement: (i) to use and practice Licensed Technology in the manufactureof Licensed Motors as part of Medical Products, (ii) to sell, offer tosell, ship, distribute, advertise and promote the Licensed Motors manufacturedor incorporated pursuant to clause (i), and (iii) to subcontract anyof the activities described in clause (i) of this Section 2.2(a) toUPP. Invacare may subcontract the activities described in clause (I) ofthis Section 2.2(a) to another supplier or perform them itself providedthat: (1) Invacare shall have complied with its obligation to purchase the"Minimum Quantity" from UPP as provided in Section 2.1 of theSupply Agreement, if it is in effect, and (2) Invacare shall pay to Uniqueroyalties (the "Royalties") as provided in Section 2.3 below. Inaddition, such other supplier shall be required to enter into a confidentialityagreement containing terms substantially the same as the terms of theConfidentiality Agreement prior to disclosure to such supplier of anyconfidential information of Unique. A copy of any such confidentiality agreementshall be delivered to Unique immediately after it is signed.

 

(b) The license rights granted to Invacare pursuant toSections 2.2(a) shall be (i) exclusive (except as to UPP's right touse the Licensed Technology to manufacture Licensed Motors for Invacare) and(ii) non-transferable but with the right of sub-license in the area ofMedical Products to any Invacare Affiliate provided such Invacare Affiliatedelivers to Unique such written assurances as Unique may reasonably request toevidence the agreement of such Invacare Affiliate to be bound by the terms ofthis Agreement and to relinquish all of its rights as sublicensee in the eventit ceases to be an Invacare Affiliate.

 

(c) Notwithstanding the exclusivity provision contained inSection 2.2(b)(i), Unique reserves the right (i) to use and practiceLicensed Technology in the manufacture of Licensed Motors as part of MedicalProducts and (ii) to sell, offer to sell, ship, distribute, advertise andpromote the Licensed Motors manufactured or incorporated pursuant toclause (i), contingent upon Invacare's written consent, which shall not beunreasonably withheld. Prior to granting such consent, Invacare shall have thesole right to determine that such license, use or sale (A) will notdirectly or indirectly benefit a competitor of Invacare, (B) will not be acompetitive disadvantage to Invacare or (C) is not materially adverse toInvacare's best interest. Unique reserves the unrestricted right to sell,practice or license the Licensed Technology in applications other than theMedical Products area.

 

2.3 Royalties.

 

(a) Invacare shall pay Unique Royalties equal to (i) **[*MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENTREQUEST*]**%of the Net Sales Price (as defined below) of Medical Products incorporatingLicensed Motors obtained from any source other than UPP or any Unique Affiliateor (ii) in the case of Licensed Motors sold by Invacare withoutincorporation into Medical Products,**[* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENTREQUEST*]**% of the Net Sales Price of the LicensedMotors acquired from any source other than UPP or any Unique Affiliate.Notwithstanding anything contained in this Section 2.3 that may beinterpreted to the contrary, Royalties under this Agreement shall not apply toLicensed Motors purchased from UPP or any Unique Affiliate. References toLicensed Motors in this Section 2.3 shall mean Licensed Motors acquiredfrom any source other than UPP or any Unique Affiliate.

 

(b) The Net Sales Price in the case of Licensed Motors resoldby Invacare shall mean Invacare's entire gross receipts for Licensed Motors lessonly such of the following as may be included in such gross receipts(collectively, "Allowances"): (i) all normal trade discountsactually allowed; (ii) all sales, use and value added taxes, all import orexport duties and freight, insurance, shipping or transportation charges paid orpayable by Invacare in connection with the particular transaction involved andnot reimbursed or reimbursable by the purchaser or customer; and(iii) amounts actually credited or refunded to the purchaser or customerfor returned or defective goods. The Net Sales Price shall not be furtherreduced by any discount, allowance, deduction, rebate or franchise, income orother tax of any kind.

 

(c) The Net Sales Price in the case of Medical Products intowhich Licensed Motors are incorporated shall mean the entire gross receipts forsuch Medical Products, less only Allowances, multiplied by a fraction, thenumerator of which is the total cost to Invacare for the Licensed Motors, andthe denominator of which is the total cost to Invacare for manufacturing theMedical Products into which the Licensed Motors are incorporated. In calculatingInvacare's costs for the foregoing, Invacare may use any reasonable method itnormally uses to determine costs for other purposes, provided that any suchmethod shall be consistently applied to the numerator and denominator. For thepurposes of this paragraph, rebates shall be deemed to be an Allowance.

 

(d) Invacare may sell or transfer a Licensed Motor or MedicalProduct incorporating a Licensed Motor to an Affiliate for sale to a thirdparty, and such sale or transfer to an Affiliate shall not be subject to theRoyalties (provided that any subsequent sale or transfer by such Affiliate to athird party shall be subject to Royalties hereunder).

 

(e) During each Contract Year of the Renewal Term of theSupply Agreement, Invacare shall either pay a minimum royalty on**[* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENTREQUEST*]**Motors(as defined in the Supply Agreement) less the number of Motors manufactured byUPP or any of its affiliates multiplied by**[* MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO CONFIDENTIAL TREATMENTREQUEST*]**% of the Net Sales Price as definedin 2.3(b.) of this Agreement or revert to a non-exclusive license on the Motors.Royalties on other Licensed Motors manufactured or sold during the term of thisAgreement shall be mutually agreed upon by the parties to this Agreement.

 

2.4 Examination of Records.

 

(a) Invacare shall keep full, complete and accurate businessrecords, files and books of accounting containing all the data reasonablynecessary for the accurate computation and verification of the Royalties to bepaid and the information to be provided by Invacare in this Section 2.Invacare shall maintain such records, files and books for a period of five (5)years from the making thereof

 

(b) Should Unique's examination of the reports disclose adiscrepancy in an amount greater than 5% of any Royalty payments, Unique shallhave the right to retain an independent auditor to conduct an audit ofInvacare's books and records, but only to the extent related to the LicensedMotors and/or Medical Products into which Licensed Motors are incorporated. Ifsuch audit discloses an underpayment, Invacare shall pay (i) all overdueamounts (plus late charges and interest as provided herein) and if suchunderpayment is in excess of 5% of the amount due (ii) all costs andexpenses of such audit.

 

2.5 Quarterly Reports. Within forty-five (45) daysafter the close of each calendar quarter ending after the quarter in whichInvacare makes its first sale of a Licensed Motor or Medical Product containinga Licensed Motor, Invacare shall deliver to Unique a written statement in formreasonably acceptable to Unique and certified as correct by Invacare showing thequantity and description of the Licensed Motors sold or incorporated intoMedical Products during the calendar quarter immediately preceding and shallcalculate the Net Sales Price of all such products sold during such calendarquarter and the amount of the Royalties payable to Unique with respect to suchsales. For the purpose of such reports the Licensed Motors or Medical Productscontaining such Licensed Motors shall be considered to be sold as of the date ofshipment.

 

2.6 Payment. Invacare shall, within 45 daysfollowing the end of each calendar quarter, submit the report and remit the fullamount of Royalties that are due for the preceding quarter. All late RoyaltyPayments shall (i) be subject to a late charge equal to 5% of the overdueamount

 

2.7 Patent Markings. Invacare shall mark the LicensedMotors in accordance with such reasonable instruction as may be given by Uniquefrom time to time during the term hereof in order to indicate that theyincorporate Licensed Motors which are protected by pending patents or theLicensed Patents.

 

 

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SECTION THREE

 

DISCLOSURE OF IMPROVEMENTS BY INVACARE

 

Invacare shall promptly disclose to Unique any improvementsto the Licensed Technology which are developed by Invacare or which come toInvacare's knowledge and which Invacare has the right to disclose. All saidimprovements shall be owned by Unique.

 

 

SECTION FOUR

 

PATENT INFRINGEMENT

 

4.1 Representation and Warranty. Unique represents andwarrants to Invacare that, to Unique's best knowledge, the Licensed Technologydoes not infringe on the patent or other intellectual property rights of anythird party.

 

4 2 Invacare Notification: If at any time during theterm of this Agreement, Invacare becomes aware that any Person is infringing anyof the rights of Unique which have been licensed to Invacare hereunder, Invacareshall promptly notify Unique as to such infringement and shall provide to Uniquethe name and address, if known, of the alleged infringer and a description ofthe alleged acts of infringement. Unique shall, at its own discretion andexpense, have the right to commence or prosecute any claim or suit against suchinfringer in its own name or in the name of Invacare as deemed necessary byUnique under the circumstances. Unique shall have the exclusive right to employcounsel of its own selection and to direct and control the litigation orsettlement of any such claim or suit and shall be entitled to retain all amountsawarded as damages in connection therewith. Should Unique choose not to pursuethe alleged infringer, or abandon any action, claim or suit it has commencedagainst any such infringer, Invacare shall, at its option, have the right underthis Agreement to pursue the claim in its or Unique's name as deemed necessaryor elect to pay royalties at 50%. Invacare shall, under these circumstances,have the exclusive right to employ counsel of its own selection and to directand control the litigation or settlement of any such claim or suit and shall beentitled to retain all amounts awarded as damages in connection therewith Eachparty shall cooperate with and give full assistance to the other in connectionwith any action taken pursuant to this Section 4.2.

 

4.3 Prevention of Infringement. If Unique determines,in the absence of any notice, that the Licensed Technology infringes the claimsof the patent or other proprietary rights of third parties, then Unique has theright and will use its best efforts to avoid such possible infringement byattempting to alter the Licensed Motors or Licensed Technology to render themnon-infringing. Should Invacare or Unique receive any notice of an allegedinfringement on the claims or proprietary rights of third parties, then Invacareand Unique shall meet to discuss the response to such notice. Invacare shallcooperate with and assist Unique with respect to any such response but shallhave no obligation to participate in the defense against any claim or suitbrought by such third parties. Should any Licensed Patent be declared in wholeor in part invalid, unless specifically declared exempt as a Licensed Patent inwriting and signed by both parties, then Invacare's royalty underSection 2.3 shall be reduced by 50%.

 

4.4 Disclaimers; Indemnifications. Except as providedin Section 4.1, UNIQUE ASSUMES NO RESPONSIBILITY FOR ANY PRODUCTMANUFACTURED OR SOLD BY OR FOR INVACARE AND MAKES NO REPRESENTATION ORWARRANTIES CONCERNING THE LICENSED TECHNOLOGY, EXPRESS OR IMPLIED, INCLUDING,WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULARPURPOSE. Invacare shall indemnify Unique or UPP from and against any and allclaims, losses, damages, liabilities and expenses ("Losses") arisingout of or in connection with Invacare's sale of Medical Products except to theextent any such Losses are caused by design or manufacturing defects in theLicensed Motors, which are, in whole or in part, caused by the negligence orintentional acts of Unique or UPP.

 

 

SECTION FIVE

 

TERM; TERMINATION

 

5.1 Term. This Agreement shall become effective as ofthe date and year first above set forth and, Subject to the provisions ofSection 5.2,**shall continue in effect for five *(5)*years oruntil the Supply Agreement terminates, whichever is longer.

 

5.2 Termination.

 

(a) Each of the following shall constitute an "Event ofDefault" under this Agreement:

 

(i) Invacare shall have materially defaulted in theperformance or observance of any of the terms or provisions of this Agreementand such default

remains uncured for a period of thirty (30) days afterdelivery of written notice of default by Unique;

 

(ii) Unique shall have materially defaulted in theperformance or observance of any of the terms or provisions of this Agreementand such default remains uncured for a period of thirty (30) days after deliveryof written notice of default by Invacare;

 

(iii) Unique shall commence bankruptcy, insolvency or similarproceedings; or their creditors commence such proceedings against them and suchproceedings are not dismissed within ninety (90) days;

 

(iv) Invacare shall commence bankruptcy, insolvency orsimilar proceedings; or their creditors commence such proceedings against themand such proceedings are not dismissed within (90) ninety days;

 

(v) Invacare contests or otherwise challenges or attacks inany court of competent jurisdiction, the rights of Unique in or to the LicensedTechnology except in connection with a breach of this Agreement by Unique; or

 

(vi) The Supply Agreement is terminated by Unique as a resultof a material breach of the Supply Agreement by Invacare.

 

(b) If any Event of Default shall occur, the non-defaultingparty may, in

addition to all other rights and remedies available to it,terminate this Agreement by giving the defaultingparty written notice of termination.

 

(c) Any termination of this Agreement pursuant toSection 5.2 shall be effective immediately upon delivery of written noticeof termination pursuant to Section 6.1.

 

5.3 Effect ofExpiration. Upon the expirationof this Agreement as provided in Section 5.1, Invacare shall cease to havethe right to exercise the license granted in Section 2.2, except for thoseMotors already sold to Invacare but, not yet resold by Invacare, and shalldiscontinue use of the license technology provided that, at Invacare's request,Unique shall negotiate in good faith and an extension of the said License onmutually agreed terms.

 

5.4 Effect of Termination.

 

(a) If this Agreement is terminated by Invacare as a resultof an Event of Default pursuant to Sections 5.2(a)(ii) or 5.2(a) (iii),then Invacare shall, subject to the continued performance of its obligationshereunder, (including, without limitation, payment of Royalties), be permittedto continue to exercise its rights under Section Two hereof, except that theroyalties shall be reduced by 50%.

 

(b) Except as provided in Section 5.4(a), if thisAgreement is terminated by either party pursuant to Section 5.2(a), thenInvacare shall immediately upon such termination cease and desist from using anyof the Licensed Technology and the Trademark and from making, promoting orselling any products containing same.

 

 

SECTION SIX

 

MISCELLANEOUS

 

6.1 Notices. All notices, requests, consents and othercommunications required or permitted hereunder shall be in writing and shall bepersonally delivered, electronically delivered by facsimile or telex, mailed byovernight mail service or mailed by certified mail, return receipt requested,postage prepaid to the following addresses or to such other addresses as theparties hereto may designate in writing:

 

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If to Unique:

 

Unique Mobility, Inc.425 Corporate CircleGolden, CO 80401Attention: Donald A. FrenchTelecopy No.: 303/278-7007

 

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If to Invacare:

 

Invacare Corporation899 Cleveland StreetElyria, OH 44036-2125Attention: Thomas R. MiklichTelecopy No.: 216/366-9008

 

All such notices, requests, consents and other communicationsshall be deemed to be properly given when delivered personally, or, if sent byU.S. mail, as of the date on the return receipt, or if sent by overnight mailservice, the next business day after delivery to the overnight mail service, orif sent electronically, upon verification of receipt.

 

6.2 Assignment. This Agreement shall inure to thebenefit of and be binding upon any permitted successor and assign of the partieshereto, provided that (a) Invacare may not, except as otherwise provided inSection 2.2(c), assign this Agreement or any rights or obligationshereunder without the prior written consent of Unique and (b) Unique mayassign or transfer its rights and obligations hereunder to (i) any of itsAffiliates, or (ii) with Invacare's written permission, to any purchaser ofsubstantially all the assets and business of Unique.

 

6.3 Entire Agreement. This Agreement, the SupplyAgreement and the Confidentiality Agreement constitute the entire agreement andunderstanding of the parties hereto with respect to its Subject matter andsupersede any and all prior written and oral agreements with respect thereto.This Agreement may not be changed, waived or discharged except by writteninstrument signed by duly authorized representatives of the parties.

 

6.4 Compliance with Applicable Law. Invacare shall atall times conduct its activities under this Agreement so as to ensure that itsactivities do not cause Unique or any of its Affiliates to be in violation ofany applicable laws or regulations. Invacare shall at all times (a) refrain fromany conduct, including specific sales, which, in the reasonable opinion ofUnique, might cause Unique or its Affiliates to be in violation of anyapplicable laws or regulations and (b) take such actions and cause Invacare'sagents, employees and representatives to take such actions as Unique mayreasonably request in order to ensure Invacare's compliance with its obligationsunder this Section 6.4.

 

6.5 Governing Law. This Agreement shall be construedin accordance with and governed by the laws of the State of Colorado.

 

6.6 Severability. Each section, subsection, phrase andsentence of this Agreement constitutes a separate and distinct undertaking,covenant and/or provision hereof. Whenever possible, each provision of thisAgreement shall be interpreted in such manner as to be effective and valid underapplicable law. In the event that any provision of this Agreement shall befinally determined to be unlawful, such provision shall be deemed severed fromthis Agreement, but every other provision of this Agreement shall remain in fullforce and effect, and in substitution for any such provision held unlawful,there shall be substituted a provision of similar import reflecting the originalintent of the parties hereto to the extent permissible under law.

 

6.7 Waiver. Any waiver by either party hereto of anybreach of, or failure to comply with or failure to enforce at any time, any ofthe provisions of this Agreement shall not be construed as or constitute acontinuing waiver of such provision or a waiver of any other breach of, orfailure to comply with, any other provision of this Agreement, nor shall it inany way affect the validity of' this Agreement or any part thereof or the rightof any party hereto thereafter to enforce each and every provision of thisAgreement.

 

6.8 Captions. The captions of the Sections andsubsections contained in this Agreement are provided for convenience orreference only and shall not be deemed to constitute a part hereof

 

6.9 Public Announcements. Neither party shall withoutprior written consent of the other party, make any public announcements or issueany press release except as may, in the opinion of counsel, be necessary tocomply with the requirements of any law, government order or regulation.

 

 

IN WITNESS WHEREOF, the following duly authorizedrepresentatives of the parties have executed this Agreement in two originals asof the date first above written and each party retains one fully executedoriginal.

UNIQUE MOBILITY, INC.

 

By: /s/Title:

 

INVACARE CORPORATION

 

By: /s/Title:

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