**Exhibit 10.12**

 

**LICENSE AGREEMENT**

 

Effective March 31, 1999 (“Effective Date”), the University of VirginiaPatent Foundation (“UVAPF”), a Virginia not-for-profit corporation, having aprincipal place of business at 1224 West Main Street, Suite 1-110, Charlottesville,Virginia, 22903, and MedQuest Products, Inc. (“MedQuest”), a Utah corporation,having a principal place of business at 825 North, 300 West, Suite NEI07, SaltLake City, Utah, 84103, agree as follows:

 

**ARTICLE I: RECITALS**

 

1.             In the course of research at the University of Virginia, theUniversity of Utah, and MedQuest Products, Inc., Paul Allaire, Eric Maslen, RonFlack, Don Olsen, Gill Bearnson, Pratap Khanwilkar, James Long, B. Ajit Kumar,and Mary Sinnott have made certain inventions relating to an implantable bloodpump (“Inventions”).

 

2.             The research at the University of Virginia was sponsored, in part,by the United States Government. As such, any rights granted herein are subjectto a non-exclusive, royalty-free license held by the United States Governmentto practice the Inventions.

 

3.             Certain patent applications covering the Inventions have been filed.

 

4.             UVAPF, MedQuest, and the University of Utah Research Foundation arejoint owners of the entire interest in the Inventions and any patentapplications relating thereto.

 

5.             MedQuest desires to obtain exclusive rights to the Inventions andany patent applications relating thereto in order to develop and commercializethe Inventions. To this end, MedQuest desires to exclusively license UVAPF’srights with respect to the Inventions and any patent applications relatingthereto.

 

6.             UVAPF is willing to grant such a license under the terms andconditions set forth in this Agreement, and wishes toreserve the right to practice the Inventions for educational and researchpurposes at the University of Virginia.

 

**ARTICLE II :DEFINITIONS**

 

7.             UVAPF’s Patent Rights means UVAPF’srights in and to:

 

(a)           theU.S. patent application having serial no. 08/850,598, filed May 2, 1997,entitled “Hybrid Magnetically Suspended and Rotated Centrifugal PumpingApparatus and Method,” and any patent issuing thereon;

 

(b)           the U.S. patent application havingserial no. 09/064,352, filed April 22, 1998, entitled “Implantable CentrifugalBlood Pump with Hybrid Magnetic Bearings,” and any patent issuing thereon;

 

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(c)           theU.S. patent application having serial no. 08/850,156, filed May 2, 1997,entitled “Electromagnetically Suspended and Rotated Centrifugal PumpingApparatus and Method,” and any patent issuing thereon; and

 

(d)           any patent application that is acontinuation, divisional, continuation-in-part, reissue, reexamination,renewal, foreign equivalent, or extension of any of the patent applicationslisted above, and any patent issuing thereon.

 

8.             Licensed Product means any device,product or apparatus that is covered by UVAPF’s Patent Rights, or uses, or ismade by practicing, any of the Inventions claimed under UVAPF’s Patent Rights.

 

9.             Licensed Territories means allterritories to which UVAPF’s Patent Rights extend.

 

10.           Affiliate means any third party that isdirectly or indirectly under the control of MedQuest, that is under commoncontrol with MedQuest, or that controls MedQuest. As used herein, the term “control”shall mean possession, direct or indirect, of the power to direct or cause thedirection of the management and policies of an entity, whether through theownership of voting securities, by contract, or otherwise, and the term “entity”shall include without limitation an individual, corporation, or other organization.

 

11.           Net Sales means gross sales by MedQuestor its Affiliates or Sublicensees of any product that incorporates orcompletely comprises a Licensed Product, less the following: at-cost andno-cost sales of Licensed Products for clinical trials or evaluations byMedQuest, its Affiliates, potential funding sources, or Sublicensees;above-cost sales of Licensed Products for clinical trials or evaluations byMedQuest, its Affiliates, potential funding sources, or Sublicensees, providedthat the above-cost revenues for such above-cost sales are paid out to thirdparties who carry out such clinical trials or evaluations and are not retainedby MedQuest; cash, trade, and quantity discounts actually allowed; sales, use,and excise taxes; tariffs and customs duties; outbound transportation costs;and allowances, credits, and write-offs for rejections, returns, or bad debts.

 

12.           Fractional Multiplier. For Net Salesoccurring with respect to Licensed Products that are not sold separately, andare sold in combination with or as part of other products, the FractionalMultiplier shall be the ratio of the manufacturing cost of the includedLicensed Products (in the numerator) to the total manufacturing cost of thecombined or composite products (in the denominator). For Net Sales occurringwith respect to Licensed Products that are sold separately, the FractionalMultiplier shall be one (1).

 

13.           Royalty Rate. For Net Sales of LicensedProducts occurring in the Licensed Territories, the Royalty Rate shall be one-halfof one percent (0.5%), and for Net Sales of Licensed Products occurring outsidethe Licensed Territories, the Royalty Rate shall be one-quarter of one percent(0.25%).

 

14.           UVA shall mean the University ofVirginia, its governors, trustees, officers, agents, employees, faculty, staff,and students.

 

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**ARTICLE III :LICENSE**

 

15.           Grant. UVAPF hereby grants to MedQuestan exclusive license under UVAPF’s Patent Rights during the life of UVAPF’sPatent Rights to practice the methods, and to make, use, sell, offer to sell,and import the Licensed Product, throughout the Licensed Territories and allother territories of the world (“License”).

 

16.           Rights to Affiliates. The rightslicensed to MedQuest hereunder shall extend to Affiliates designated in writingby MedQuest, provided each such Affiliate agrees in writing to be bound by theterms and conditions of this Agreement. MedQuest agrees to be fully responsiblefor the performance of such authorized Affiliates hereunder.

 

17.           Agreement not to Otherwise License. UVAPFshall not grant any other license to practice the methods, or to make, use,sell, offer to sell, import or export the devices, thatare covered by the claims of UVAPF’s Patent Rights. Notwithstanding anythingherein to the contrary, any and all licenses and other rights granted hereunderare limited by and are subject to the rights and requirements of the UnitedStates Government that may attach as a result of Government sponsorship ofresearch in which one or more inventions or discoveries covered by UVAPF’sPatent Rights are conceived or first actually reduced to practice, as set forthin Title 37 of the Code of Federal Regulations (C.F.R.), Part 401, and in therelevant Government research contracts, and as such rights and requirements maybe amended or modified by law.

 

18.           Sublicensing. MedQuest shall have theexclusive right under UVAPF’s Patent Rights to grant sublicenses to thirdparties other than Affiliates (“Sublicensees”) in its discretion. Any suchsublicenses shall incorporate all of the terms and conditions of thisAgreement. Termination of this Agreement or the License shall act to terminateany such sublicenses; except that any Sublicensee whose sublicense is in goodstanding with MedQuest may elect to maintain its sublicense by advising UVAPF,within sixty (60) days of such Sublicensee’s receipt of written notice fromMedQuest or UVAPF of such termination, of its election and agreement to assumewith respect to UVAPF all the obligations contained in its sublicense withMedQuest.

 

19.           License Issuance Fee. MedQuest shall payto UVAPF a License Issuance Fee in the amount of Seventy-Five Thousand Dollars($75,000) within thirty (30) days after both this Agreement and an agreementbetween MedQuest and the University of Utah Research Foundation with respect tothe Foundation’s joint rights in the Inventions have been executed. Time is ofthe essence with respect to this payment.

 

20.           Pre-Sales License Maintenance Fee. MedQuestshall pay to UVAPF a Pre-Sales License Maintenance Fee in the amount ofOne-Thousand Dollars ($1,000) within forty-five (45) days of the issuance ofthe first-issued patent included within UVAPF’s Patent Rights and withinforty-five (45) days of each anniversary of such issuance until Net Sales ofLicensed Products occur. Notwithstanding the foregoing, MedQuest shall not haveless than forty-five (45) days from the date on which MedQuest receives actualnotice of the issuance of the first-issued patent to pay the first Pre-SalesLicense Maintenance Fee.

 

21            Royalties.

 

(a) Determination of Royalties Due. MedQuest shall pay to UVAPFRoyalties on all Net Sales of Licensed Products sold by MedQuest or itsAffiliates or Sublicensees under any 

 

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unexpired claim of any of UVAPF’s Patent Rights. Such Royalties shall be calculatedin accordance with the following equation:

 

Royalties = Net Sales x Royalty Rate x Fractional Multiplier

 

With respect to Sublicensees, the Royalty shall be paid on suchSublicensees’ Net Sales; in the event MedQuest sells or otherwise transfers LicensedProducts to an Affiliate for later resale, Royalties will be paid only on theNet Sales of such Licensed Products by such Affiliate, and not the Net Sales ofsuch Licensed Products by MedQuest to such Affiliates.

 

(b) Minimum Royalties. Notwithstanding the foregoing, beginningin 2009, or in the first calendar year in which Net Sales on Licensed Productsby MedQuest, its Affiliates and Sublicensees taken together exceed Two-MillionDollars ($2,000,000), whichever occurs first, MedQuest shall pay to UVAPFminimum Royalties of no less than Ten-Thousand Dollars ($10,000) per fullcalendar year. If this Agreement or the License is terminated during a calendaryear, the minimum Royalties due UVAPF in such calendar year shall be proratedbased on the number of days that have passed in such calendar year on the dateof termination.

 

(c) Deduction for Insurance Premiums. Any incremental increasein MedQuest’s insurance premiums, costs, and expenses that is attributable toMedQuest’s addition of UVAPF or UVA to its insurance policy in accordance withparagraph 53 of this Agreement shall be deducted from the Royalties due UVAPF.

 

22.           Reports and Payments. MedQuest shallprovide written reports to UVAPF-during the term of this Agreement withinforty-five (45) days after the first days of January, April, July, and Octoberof each year following 2008, or following the calendar year in which Net Salesof Licensed Products first occur, whichever occurs first. MedQuest shall statein each report the number of Licensed Products sold by MedQuest and itsAffiliates and Sublicensees, the corresponding Net Sales of products made andsold or otherwise disposed of under the License during the preceding calendarquarter, any deductions made from gross sales in determining such Net Sales,and the Royalties due thereon. MedQuest shall remit to UVAPF with each suchreport the Royalties then due.

 

23.           Records. MedQuest shall maintainaccurate records in sufficient detail to enable the Royalties due UVAPF to bedetermined, and shall permit the records to be examined from time to time byUVAPF at reasonable intervals, during normal business hours, and uponreasonable notice during the term of this Agreement.

 

24.           Rights Reserved by UVAPF. UVAPF herebyreserves the right for UVA to practice inventions claimed under UVAPF’s PatentRights for educational and research purposes at the University of Virginia.

 

25.           Non-Assertion. UVAPF agrees that withrespect to any U.S. or foreign magnetic bearing patent that, on the EffectiveDate of this Agreement, it owns or under which it has the right to grantlicenses, or with respect to any U.S. or foreign magnetic bearing patent thatmay later issue on a pending application for patent that, on the Effective Dateof this Agreement, it owns or under which it has the right to grant licenses,it shall not assert against MedQuest or its vendees, transferees, Affiliates,or Sublicensees any claims for infringement based on the 

 

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manufacture, use, sale, offer for sale, importation, or exportation ofany apparatus made or sold by MedQuest or its vendees, transferees, Affiliates,or Sublicensees under the License granted in this Agreement, or based on thepractice by MedQuest or its vendees, transferees, Affiliates, or Sublicenseesof any method, process, or procedure under the License granted in thisAgreement provided that a royalty on same has been paid hereunder; except thatUVAPF may assert any such claim of infringement if required to do so by a legalduty to a third party, or may advise a third party of such claim ofinfringement if required by a legal duty to such third party.

 

**ARTICLE IV: WARRANTIES ANDREPRESENTATIONS**

 

26.           Each party hereto acknowledges and agrees that no representation orpromise not expressly contained in this Agreement has been made by the otherparty hereto or by any of its agents, employees, representatives or attorneysconcerning the subject matter of this Agreement.

 

27.           Each party warrants and represents that to the best of its knowledgeit has the full right and power to make the promises and grant the licenses setforth in this Agreement and that there are no outstanding agreements,assignments, licenses, or encumbrances in existence that are inconsistent withthe provisions of this Agreement.

 

28.           Nothing in this Agreement shall be construed as (i) a warranty orrepresentation by UVAPF as to the validity or scope of any of UVAPF’s PatentRights; (ii) a warranty or representation that anything made, used, imported,developed, promoted, offered for sale, sold, or otherwise disposed of under anylicense granted in this Agreement is not infringing, or will not infringe,patents, trade secrets or other proprietary rights of third parties; (iii) anobligation to bring or prosecute actions or suits against third parties forinfringement; (iv) conferring the right to use in advertising, publicity orotherwise any trademark, trade name, or names, or any contraction,abbreviation, simulation or adaptation thereof of MedQuest or UVAPF; (v)conferring by implication, estoppel or otherwise any license or rights underany patents of UVAPF other than UVAPF’s Patent Rights, except those rights ofnon-assertion provided for herein; (vi) any other representations orwarranties, either express or implied, unless specified in this Agreement;(vii) directly or indirectly operating or applying as a waiver of sovereignimmunity by the Commonwealth of Virginia; or (viii) imposing any obligation orany liability on any party contrary to applicable law.

 

29.           UVAPF DISCLAIMS AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OFMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO UVAPF’SPATENT RIGHTS OR ANY LICENSED PRODUCTS.

 

30.           MedQuest represents and warrants that it shall use commerciallyreasonable efforts to diligently pursue the development, manufacture, and saleof Licensed Products throughout the term of this Agreement.

 

31.           UVAPF represents and warrants that it is the ownerof all UVAPF’s Patent Rights, free and clear of any claims orencumbrances, and has the right to grant the exclusive License provided herein.

 

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**ARTICLE V: TERMINATION**

 

32.           Termination. The License shall terminateupon:

 

(a)           the failure by MedQuest to pay theLicense Issuance Fee when due;

 

(b)           notice given to MedQuest by UVAPF onthe failure by MedQuest to pay any Pre-Sales License Maintenance Fee or anyRoyalties when due, and failure by MedQuest to remedy such failure withinninety (90) days after receiving such notice;

 

(c)           to theextent permitted by applicable and prevailing law, MedQuest filing a petitionin bankruptcy or an equivalent proceeding and being adjudicated a bankrupt, ora petition in bankruptcy being filed against MedQuest, or MedQuest becominginsolvent or making an assignment for the benefit of creditors or any otherarrangement pursuant to any bankruptcy law, or MedQuest discontinuing itsbusiness relating to implantable blood pumps, or a receiver being appointed forMedQuest;

 

(d)           ninety (90) days notice given to UVAPF by MedQuest;

 

(e)           expirationof the last-to-expire of UVAPF’ s Patent Rights at a time when no applicationsare pending for patents that, if issued, would be included within UVAPF’sPatent Rights;

 

(f)            noticegiven to MedQuest by UVAPF of any material breach or default of any materialterm of this Agreement by MedQuest, and failure by MedQuest to remedy suchbreach or default within ninety (90) days after receiving such notice;

 

(g)           violation of the insurance provisionsof this Agreement as set forth in such provisions; or

 

(h)           failure of MedQuest to execute anagreement with the University of Utah Research Foundation as provided for inparagraph 33 of this Agreement.

 

33.           Effect of Agreement. The effect of thisAgreement is contingent upon the execution of an agreement between MedQuest andthe University of Utah Research Foundation with respect to the Foundation’sjoint rights in the Inventions. Such agreement shall be executed withintwenty-one (21) days of the Effective Date of this Agreement or this Agreementshall be null and void and without legal effect.

 

34.           Rights and Obligations Upon Termination. Upon termination of this Agreement or the License, the followingshall occur:

 

(a)           Allrights under the License and UVAPF’s Patent Rights shall revert to UVAPF,except that Sublicensees shall have the right to elect to maintain their sublicensesas specified in Article III.

 

(b)           Allpayment obligations of MedQuest toward UVAPF coming due prior to terminationshall remain due and payable, including any License Issuance Fee, any Pre-SalesMaintenance Fees, and any Royalties due;

 

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(c)           MedQuest’sduties to prosecute and maintain UVAPF’s Patent Rights shall cease;

 

(d)           Withrespect only to acts occurring prior to the date of termination, MedQuest andUVAPF’s respective rights and duties in regard to infringement suits,confidentiality, indemnification, and non-assertion of patent rights shallsurvive such termination; and

 

(e)           Ifsuch termination occurs under the insurance provisions of this Agreement,MedQuest shall have the right to reinstate this Agreement as provided for insuch provisions.

 

**ARTICLE VI: PATENTS &CONFIDENTIAL INFORMATION**

 

35.           Marking. MedQuest and its Affiliates andSublicensees shall mark, and shall require their respective subcontractors tomark, all products made under the License that are covered by any unexpiredclaims of any of UVAPF’s Patent Rights with a notice sufficient to satisfy therequirements of Section 287 of Title 35 of the United States Code and anysimilar marking provisions in other jurisdictions within the LicensedTerritories.

 

36.           Prosecution and Maintenance of UVAPF’s Patent Rights. MedQuest shall prosecute and maintain UVAPF’s Patent Rights atMedQuest’s expense. MedQuest may select, in its sole discretion, patent counselfor performing such prosecution and maintenance, which counsel shall jointlyrepresent the interest of MedQuest and UVAPF. Upon request, UVAPF shallcooperate with MedQuest in MedQuest’s prosecution and maintenance of UVAPF’sPatent Rights by causing the execution of any document and the taking of anyaction deemed necessary or desirable by MedQuest. MedQuest agrees that UVAPFshall bear no portion of the costs, expenses, and fees, if any, incurred byMedQuest prior to the Effective Date of this Agreement in prosecuting andmaintaining UVAPF’s Patent Rights.

 

37.           Infringement Suits. MedQuest may bringsuit in its own name and at its own expense against infringers of UVAPF’sPatent Rights. MedQuest shall notify UVAPF of any such infringers and of thecommencement of any such suit. At MedQuest’s expense, UVAPF agrees to join anysuch suit if required by law. MedQuest shall pay to UVAPF a share of any excessof recoveries over costs, expenses, and fees incurred by MedQuest in such asuit, with such share being determined as follows. If such recoveries areawarded based on lost Net Sales, UVAPF’s share shall equal such excessmultiplied by the applicable Royalty Rate. Thus:

 

UVAPF’s share= excess x Royalty Rate

 

If, instead, such recoveries are awarded based on a reasonable royalty,UVAPF’s share shall equal such excess multiplied by the ratio of the applicableRoyalty Rate to such reasonable royalty. Thus:

 

UVAPF’s share= excess x (Royalty Rate / reasonably royalty)

 

38.           Invalidation of Claims of Patents. If,in any proceeding in which the validity or priority of any claim of any patentincluded in UVAPF’s Patent Rights is in issue, a judgment or 

 

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decree is entered that becomes irrevocable through the exhaustion ofall permissible applications for rehearing or review by a superior tribunal, orthrough the expiration of the time construction placed on any such claim bysuch irrevocable judgment or decree shall thereafter be applicable to thisAgreement with regard to any acts occurring thereafter, and if any suchirrevocable judgment or decree holds any such claim invalid, MedQuest’s obligationstoward UVAPF under this Agreement based on such claim or any claim found by acourt to be patentably indistinct therefrom, including any of MedQuest’ spayment obligations toward UVAPF, shall cease as of the date on which suchjudgment or decree becomes irrevocable.

 

39.           Extension of UVAPF’s Patent Rights. MedQuestand UVAPF agree that UVAPF’s Patent Rights shall be extended by all meansprovided by law or regulation including, without limitation, extensionsprovided under U.S. law at 35 U.S.C. §§ 154(b), 155A, and 156. UVAPF agrees toprovide MedQuest with all necessary assistance in securing such extensionsincluding, without limitation, providing all information regarding applicationsfor regulatory approval, approvals granted, and the timing of same. MedQuestacknowledges that, except as provided for under 35 U.S.C. § 156(d)(5), extensions under 35 U.S.C. § 156 must be applied forwithin sixty (60) days of the date that a Licensed Product receives permissionunder the provision of law under which the applicable regulatory review periodoccurred for commercial marketing or use, and that MedQuest’s failure to applyfor such extensions during such sixty (60) day period will cause serious injuryto UVAPF.

 

40.           Confidentiality. MedQuest and UVAPFshall each take reasonable precautions to maintain the confidential informationof the other in confidence. Such reasonable precautions shall involve at leastthe same degree of care MedQuest and UVAPF customarily use to maintain theirown confidential information in confidence. In recognition of the academicmission of UVA, MedQuest agrees that nothing herein shall prevent UVA or UVAPF,their officers, agents, employees or students from disclosing or publishing UVAor UVAPF information, or create any legal liability for doing so.

 

41.           Patent Terms of Art. As used herein inthe appropriate context, the terms “reasonable royalty,” “use,” “make,” “sell,”“offer to sell,” “import,” “life,” “practice,” “prosecute,” “maintain,” “validity,”“priority,” “claim,” “construction,” “patentably indistinct,” “cover,” “under,”and any other term having a well-known meaning in U.S. or foreign patent law,shall have the meaning attributed to such terms by U.S. or foreign patent law.

 

**ARTICLE VII :GENERAL PROVISIONS**

 

42.           Indemnification. Subject to the conflictresolution provisions provided herein, MedQuest and UVAPF shall each indemnify,hold harmless, and defend the other against all claims, suits, losses, damages,costs, fees (including reasonable attorneys fees), and expenses arising out oftheir own breach of this Agreement. In addition, MedQuest agrees to indemnify,hold harmless and defend UVA and UVAPF against any and all claims arising fromthe execution of this Agreement or from the exercise of any rights under thisAgreement including, without limitation, against any damages, losses orliabilities whatsoever for death, injury to person or damage to property, orfor the infringement of third-party intellectual property rights, as a resultof the making, use, importation, development, design, promotion, sale,possession, 

 

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operation, or other disposition of any Licensed Products or UVAPF’sPatent Rights by MedQuest, its Sublicensees, Affiliates, customers, assignees,or other transferees.

 

43.           Assignment. MedQuest and UVAPF shall notassign this Agreement without the prior written consent of the other, whichconsent shall not be unreasonably withheld, conditioned, or delayed.

 

44.           Governing Law. This Agreement shall begoverned in all respects by the laws of the state of Utah and the United Stateswithout regard to the conflicts of laws provisions of the state of Utah or anyother jurisdiction.

 

45.           Notice. Any notice, report, request,payment, remittance, reimbursement, or statement provided for in this Agreementis sufficiently given when delivered in person or sent by certified orregistered mail addressed to the party for whom intended at the address givenabove in the opening of this Agreement, or at an address specified by theintended party by written notice.

 

46.           Entire Agreement. This Agreement is theentire agreement and understanding between UVAPF and MedQuest on the subjectmatter of this Agreement and merges all prior discussions and supersedes allprior agreements between them relating to the subject matter. UVAPF andMedQuest shall not be bound by any conditions, definitions, warranties, orrepresentations with respect to the subject matter of this Agreement, otherthan as expressly provided in this Agreement or as set forth in a subsequentamendment to this Agreement.

 

47.           Waiver. The failure of either party tothis Agreement to insist in any one or more instances upon strict performanceby the other of its obligations hereunder shall not constitute a waiver orrelinquishment of any such obligation for the future, andthe obligation shall continue in full force and effect.

 

48.           Headings. The headings of the Articlesand Paragraphs of this Agreement are inserted for convenience only and are notintended to be a part of or to affect the meaning or interpretation of thisAgreement.

 

49.           Amendments in Writing. No amendment ormodification to this Agreement shall be valid or binding upon UVAPF or MedQuestunless made in a writing signed by both UVAPF and MedQuest.

 

50.           Agreement to Take Action to Achieve Purposes. UVAPF and MedQuest agree to execute and deliver all documents,provide all information, and take or forbear from taking all such action as maybe necessary or appropriate to achieve the purposes of this Agreement.

 

51.           Severability. The provisions of thisAgreement are severable, and in the event that any provision of this Agreementis determined to be invalid or unenforceable under any controlling body of law,such invalidity or unenforceability shall not affect the validity orenforceability of the remaining provisions of this Agreement.

 

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52.           Conflict Resolution.

 

(a)           Mediation. Except as to issues relating to the validity, construction, oreffect of UVAPF’s Patent Rights, and except for the right of either party toapply to a court for a temporary restraining order, a preliminary injunction,or other equitable relief to preserve the status quo or prevent irreparableharm, any dispute arising in connection with this Agreement that the partiesare unable to resolve within sixty (60) days shall be mediated. The partyraising such dispute shall promptly advise the other party of such dispute. Bynot later than five (5) business days after receiving notice of such dispute,each party shall select for itself a representative who shall have theauthority to bind such party, and shall advise the other party in writing ofthe name and title of such representative. By not later than ten (10) businessdays after receiving notice of such dispute, the party against whom the disputeis raised shall select a mediator in the Salt Lake City, Utah area, and suchparty’s representative shall schedule a date with such mediator for a hearing.The parties shall enter into good faith mediation and shall share the costs ofsuch mediation equally, including reasonable costs of travel.

 

(b)           Arbitration. If the representatives of the parties have not been able toresolve the dispute within fifteen (15) business days after such mediationhearing, then such dispute shall be resolved by final and binding compulsoryarbitration in Salt Lake City, Utah. Such arbitration shall be determined inaccordance with the Commercial Arbitration Rules of the American ArbitrationAssociation. The arbitrator(s) shall have no power to add to, subtract from, ormodify any of the terms or conditions of this Agreement, nor to award punitivedamages. All costs and expenses, including reasonable attorneys’ fees andreasonable travel, room, and boarding expenses, of the prevailing party in sucharbitration shall be borne by the other party.

 

(c)           Litigation. Any claim, dispute, or controversy concerning the validity,construction, or effect of any of UVAPF’s Patent Rights, and any award renderedin-arbitration, may be resolved or enforced by either party in either thecourts of the state of Utah or the United States District Court for theDistrict of Utah, to whose jurisdiction for such purposes MedQuest and UVAPFeach hereby irrevocably consent and submit. All costs and expenses, includingreasonable attorneys’ fees and reasonable travel, room, and boarding expenses,of the prevailing party in such litigation shall be borne by the other party.

 

53.           Insurance. MedQuest shall not (i) use orpermit the use of Licensed Products in humans as part of clinical trials orotherwise, or (ii) make, have made, use, import, develop, have developed,promote, have promoted or sell any Licensed Product, or engage in any other actinvolving any Licensed Product or UVAPF’ s Patent Rights, if such act couldpossibly give rise to a claim against UVAPF or UVA for damage for personalinjury or property damage, unless MedQuest shall have first provided UVAPF,unless otherwise agreed to between the patties in writing, with a certificateof insurance proving that MedQuest or a third party authorized in writing byUVAPF has in force, during the term of this Agreement, a policy of insurancethat will indemnify UVAPF, its directors, officers, agents, employees, and UVA,its governors, trustees, faculty, staff and students, against liability claimsfor injury or damages arising from such acts. Such insurance policy must: (i)be drawn in an amount not less than five million dollars ($5,000,000) for eachoccurrence as a combined single limit for bodily injury or death, and forproperty damage; (ii) be endorsed to name UVAPF, UVA, MedQuest, and their respectivegovernors, trustees, officers, directors, faculty, staff, employees, agents,and students as additional insureds under such policy of insurance, and suchinsurance shall be deemed primary; and (iii) contain a stipulation that therequired coverage will not be reduced, materially 

 

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altered, orcanceled without first giving sixty (60) days prior written notice to theExecutive Director of UVAPF and the Director of Risk Management at UVA. Unlessexpressly waived in writing by UVAPF, MedQuest agrees that the above-describedliability insurance policy shall be maintained in force for so long as thisAgreement remains in effect. MedQuest must also provide insurance coverage forfive (5) years after termination or expiration of this Agreement. If such five-yearcoverage is furnished under the insurance policy obtained during the term ofthis Agreement, then MedQuest need not obtain any additional policy during thefive years after the Agreement between the parties has terminated or expired.Neither MedQuest nor any third party shall terminate, reduce the face value of,or otherwise materially modify such insurance coverage during theaforementioned five-year period, unless equal or greater coverage is providedunder another policy in compliance with the foregoing provisions and withoutany gap in coverage. This Agreement and the licenses granted herein to MedQuestshall immediately and automatically terminate without notice in the eventMedQuest, or a party acting under authority of MedQuest, violates any provisionof this paragraph. A termination occurring under this paragraph shall occur andbecome effective at the time of the violation that causes such termination.Notwithstanding the foregoing, MedQuest shall have the right to reinstate theeffectiveness of this Agreement by obtaining the required insurance, whereuponthis Agreement shall automatically become effective and shall be and shallremain in full force and effect without any further action of the partieshereto. MedQuest shall insert this paragraph in any sublicense in whichMedQuest grants to a third party the right to make, have made, use, import,develop, have developed, promote, have promoted or sell any Licensed Product,with the name of such Sublicensee substituted for the name of MedQuest therein.

 

54.           Non-Use of Names. MedQuest shall not usethe names of UVAPF or UVA or their employees, officers, or agents, or anyadaptation thereof, in any advertising, promotional or sales literature withoutprior written consent obtained from UVAPF in each case, except that MedQuestmay state that it is licensed by UVAPF under one or more of the patents and/orapplications comprising UVAPF’s Patent Rights.

 

55.           Technology Export Laws. It is understoodthat UVAPF is subject to United States laws and regulations controlling theexport of technical data, computer software, laboratory prototypes, and othercommodities (including the Arms Export Control Act, as amended, and the ExportAdministration Act of 1979), and that its obligations hereunder are contingenton compliance with applicable United States export laws and regulations. Thetransfer of certain technical data and commodities may require a license fromthe cognizant agency of the United States Governmentand/or written assurances by MedQuest that MedQuest shall not export data orcommodities to certain foreign countries without prior approval of such agency.UVAPF represents neither that a license shall not be required nor that, ifrequired, such a license shall be issued.

 

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| MedQuest                | UVAPF                                     |
|-------------------------|-------------------------------------------|
|                    |                                      |
| MedQuest  Products Inc. | University  of Virginia Patent Foundation |
|                    |                                      |
| By                      | “Pratap  Khanwilkar”            | By | “R.  MacWright” |
|                    | (signature)                               |   | (signature) |
|                    |                                      |   |   |
| Name                    | Pratap  Khanwilkar                        | Name | Robert S.  MacWright |
|                    |                                      |   |   |
| Title                   | President                                 | Title | Executive  Director |
|                    |                                      |   |   |
| Date                    | 4/1/99                                    | Date | 3/31/99 |
|                    |                                      |   |   |
|                    |                                      | By | “H. Wadley” |
|                    |                                      |   | (signature |
|                    |                                      |   |   |
|                    |                                      | Name | Haydn N.G.  Wadley |
|                    |                                      |   |   |
|                    |                                      | Title | President |
|                    |                                      |   |   |
|                    |                                      | Date | 4/1/99 |
|                    |                                      |   |   |
| Attest                  | “Jenny Love”                    | Attest | “Alan  Bentley |
|                    |                                      |   |   |
|                    | Jenny Love                                |   | Alan R.  Bentley |
| Date                    | 4/1/99                                    | Date | 3/31/99 |

 

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